According to the source closeto the negotiations, ALROSA conducted a trial sale of two stones,valued at $500,000 through Sotheby’s jewelry division,Kommersant newspaper reported.”Now the stones are being prepared, one weighing over 40carats, and the other – about 60 carats, which are going to be soldby Sotheby’s,” said the source. The transaction will take placein New York, Geneva, or Hong Kong midyear and will be sanctioned bythe Gemological Institute of America.The auction is considered a win for ALROSA as they received ahigher price than they would have through a third party. The trialtransaction is the first of what is expected to be a long-termpartnership between the two companies.The source said ALROSA will not only sell raw gems, but is alsolooking into marketing its stones in jewelry retail.”If Sotheby’s offer to sell them in jewelry form, ALROSA isready for this.”Sotheby’s declined to comment.According to experts in the field, ALROSA’s American marketambitions may be curtailed by a Russian law which prohibits theexport of unique stones.The company will have to reach an agreement with Gokhran, theRussian State Precious Metals and Gems Repository.Another hang up in the deal may stem from old Soviet tradition.In Soviet times, stones extracted domestically weighing over 50carats were given special commemorative names, for example, ‘The26th Congress of the Communist Party of the Soviet Union’ or ‘AGreat Beginning’. ALROSA will have to shed this branding traditionif they want to appeal to the modern precious stones market.The company’s closest competitor is De Beers, the diamondconglomerate jointly owned by Britain’s Anglo American and theGovernment of Botswana.ALROSA is likely to go private in 2014, as the Russiangovernment is looking to reduce its role in state-owned companies.The government plans to sell 7% of ALROSA, according to a Feb. 5statement by the nation’s property management agency. Currently theKremlin owns 51% of ALROSA holdings. Other Russian companies peggedfor privatization in 2014 are VTB Group and Russian Railways.Goldman Sachs, JPMorgan and Morgan Stanley were among the 23foreign and domestic banks selected to advise on the1 trillionrouble ($32.5 billion), three-year asset sale program. The threebanks also were consulted on last year’s Sberbank asset sale.ALROSA operates in the Russian Yakutsk region, as well as inAngola and Namibia. The company will infuse an estimated $2billion in capital into its geographical exploration efforts in thenext seven years, according to Rough and Polished.ALROSA accounts for about 25% of world diamond production and97% in Russia. The company is valued between $14-15 billion. In2012, the company increased revenues by 9.9%, profit by 34.3%, andthe stock climbed 6.3%.