Based on the materials from the company’s official web-site.

On September 28th, 2006 the ALROSA Market Committee met to discuss the update on the situation in the diamond market and forecasts for its short-term development. Meeting the sales targets for 9 months of 2006 and the outlook for meeting the targets for the entire 2006 were also discussed.

The slowdown in the market registered in the last quarter of 2005 has continued. The growing supply of rough diamonds in the world market in 2005 and in the first half of 2006 has led to the growth in rough and polished diamond stocks in the world’s major diamond manufacturing centres. Together with an increase in interest rates and disproportionate growth of rough and polished diamond prices it has resulted in lower profitability of diamond manufacturing world-wide and, consequently, in weaker demand from diamond manufacturers and rough diamond dealers. The situation in the main diamond manufacturing centres in the past months of 2006 generally was characterized by the reduction in volumes of export-import polished diamond operations, with the growth of their bank indebtedness now estimated at USD 12-14 billion.

Along with that in the late August - early September of 2006 a certain revival of activity in the main diamond manufacturing centres took place related to the end of summer vacation period and preparation for the Hong Kong jewellery fair in Hong Kong, the region seen as one of the most promising and stable zones of the diamond and diamond jewellery circulation.

The Market Committee also pointed out to the fact that in spite of the continuing slowdown in the diamond market, especially in the ‘Indian goods’ segment, ALROSA has retained stability of its sales, also through encouraging rough diamond demand by means of the review of price parameters and composition of standard boxes to match demand in the regional markets, the development of the system of customer long-term contracts.

For 9 months of 2006 rough diamond sales by ALROSA Group amounted to USD 1 963 million, or 101.2 per cent compared with the plan. The growth is due to the increase in volumes of domestic sales by 10 per cent compared with the target figure up to USD 921 million, while export sales dropped by 6 per cent against the target figure to USD 1 042 million.

The Market Committee decided that the Company’s customer list and distribution of rough goods among different channels in Q4 of 2006 be revised. Current selling prices will remain effective.