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ALROSA will obtain independence

20 march 2014

(Kommersant) – For the first time ever, ALROSA may see representatives of its minority shareholders on the Supervisory Board. According to the Kommersant Daily, Lazard Asset Management, acting on behalf of their customers owning about a 3-percent stake in ALROSA, proposes to include Tav Morgan of Baring Vostok Capital Partners, the former chief strategist at MMC Norilsk Nickel, and Thomas J. O'Neill, ex-president of Harry Winston Diamond Corporation. ALROSA does not comment on new candidates, but the market believes the two figures are quite “passable.”

The news that Lazard Asset Management nominated Ralph Tavakolian (Tav) Morgan and Thomas John O'Neill as independent directors to ALROSA was told to the Kommersant by a source close to the diamond mining company. “Lazard is acting on behalf of clients, including own funds, holding a total of 2.963% of ALROSA shares,” the source said, recalling that under to the law “On Joint Stock Companies” shareholders owning more than 2% have the right to nominate their representatives to the board of directors. ALROSA received the appropriate application fr om Lazard late last week, the source added. Officially, ALROSA does not comment on this information.

The daily’s another source close to the other minority group, argues that these candidates were supported by the majority of overseas shareholders who purchased the miner’s equities during the IPO held by ALROSA last year. According to Bloomberg as of March 6, major stakeholders in the Russian diamond monopoly include American investment funds, such as Oppenheimer Funds Inc (2.2%), Lazard Ltd (1.63%), Capital Group (1%), New World Fund (0.4%) and Lazard Global Active (0.1%). Their total stake does not exceed 10%. ALROSA’s free float is 22%.

The Kommersant’s source in ALROSA knows that the minority candidates were shortlisted in the beginning of this week. Earlier, the largest shareholders of ALROSA – Russia and Yakutia (holding 43.9 % and 25% plus one share, respectively) each nominated ten candidates. The list of candidates fr om the state, approved by the Government decree on March13, includes two new persons - Igor Lozhevsky, Deputy Chairman of Deutsche Bank in Eastern Europe, and Andrey Sharonov, Rector of the Skolkovo School of Management. Thus, there are 22 candidates who are vying for 15 seats. The list has already been submitted to the Supervisory Board of ALROSA, and its meeting will be held in the coming days. The composition of the Board will finally be approved at a shareholders meeting in June.

The 45-year-old American Tav Morgan made quite a good career in Russia. The Yale and Oxford graduate started it in the mid-1990s in the Moscow office of McKinsey. In 2004-2008, he worked at MMC Norilsk Nickel, including the position of deputy general manager (responsible for mining and metallurgical production and business development strategy). In 2009-2012, he was the Managing Director of Goldman Sachs in Russia and the CIS. Since 2012, Tav Morgan is a partner at Baring Vostok Capital Partners.

The 61-year-old Thomas John O'Neil is not as well known in Russia, but he has a wealth of experience in the diamond business. In the mid-1980s he began his career at Tiffany & Co., moving to the jewelry division of LVMH in 1997 (to be later put in charge of the entire fashion concern). Later on, Thomas John O'Neil joined Harry Winston Diamond Corporation, where he worked in 2002-2010, first heading jewelry and watches retail and later the whole group. After the luxury brand was sold in 2013, the group decided to focus on diamond mining and changed its name to Dominion Diamond Corporation. In 2013, Thomas John O'Neil was appointed chairman of the board at C&J Clark Ltd (British footwear manufacturer and retailer) and currently is on the board of Aurum Holdings Ltd (the largest retailer of jewelry and luxury goods in the UK).

Rough&Polished expert Sergey Goryainov called the minority stakeholders’ proposal “logical and quite passable.” “One of the candidates has an extensive experience in the mining industry in Russian and the other - in the world jewelry industry,” the expert explained. According to him, the independent directors seated on the Supervisory Board of ALROSA can help the company solve the problem of transparency for the new minority shareholders and obtain a new scope of functions required for the development of its own marketing strategy.