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Norilsk Shares Jump on Report Rusal May Buy a Stake

June 01, 2007

Shares (GMKN) of OAO Norilsk Nickel, the world's biggest miner of the metal, soared after Interfax reported that United Co. Rusal is interested in buying a stake.

Billionaire Oleg Deripaska's Rusal, the world's largest aluminum producer, is seeking permission from Russia's government to buy part of Norilsk, Interfax said today, citing an unidentified person familiar with the plan.

The report came a day after billionaire Mikhail Prokhorov said he may consider selling his 22 percent stake in Norilsk next year. A spokesman for Deripaska's Basic Element holding company, declining to be identified, said an acquisition would be logical for the billionaire's business and add to a portfolio of assets that includes machine building and construction.

``It's not confirmed, but it smells right,'' said James Fenkner, a managing director at Red Star Asset Management, which has $100 million in east European stocks, including shares of Norilsk. ``It makes sense given Prokhorov's exit and Deripaska's cash position.''

Separately, Interfax said diamond producer ZAO Alrosa, in which Prokhorov also owns a stake, started talks with OAO Polyus Gold shareholders to buy part of the company. Polyus, also based in Moscow, is the world's fifth-largest gold miner.

Shares of Moscow-based Norilsk rose 406.08 rubles, or 8.5 percent, to 5,177.41 rubles on the Micex Stock Exchange in Moscow, valuing the company at 987 billion rubles ($38 billion). Polyus's stock climbed 2.75 rubles, or 7.2 percent, to $41.05 on the Russian Trading System in Moscow.

Asset Split

Interest from Deripaska, married to the granddaughter of Russia's former President Boris Yeltsin, comes as Prokhorov prepares to split the assets he amassed over 15 years together with fellow billionaire Vladimir Potanin. In January, Interros Holding Co., which manages the two men's assets, said Prokhorov would sell his Norilsk stake to Potanin.

``Any asset swaps between the two of us will happen next year, after all the companies have been valued,'' Prokhorov said yesterday, declining to confirm his commitment to sell to Potanin. Interros will manage Prokhorov's and Potanin's assets until the valuation is complete.

Prokhorov has set up his own private holding Onexim Group, which will pursue investments in nanotechnology, mining and power generation.

Prokhorov's exit from Norilsk may net him less cash than he may have expected, given the company's $6 billion bid for Canadian nickel miner LionOre International Mining Ltd., said Eric Kraus, who manages the Nikitsky Russia Fund in Moscow.

`Reviewing Opportunities'

Rusal wants to diversify into other metals, Interfax said.

The company is ``indeed reviewing opportunities to diversify our business, but to speak of any concrete projects or acquisitions plans is preliminary,'' Vera Kurochkina, a spokeswoman for Moscow-based Rusal, said in an e-mailed statement today.

A purchase may not happen anytime soon, according to Vladimir Zhukov, an analyst at Alfa Bank.

``Rusal is a privately held company, so Deripaska doesn't have the share option or the cash to buy Norilsk,'' he said.

Dmitry Razumov, chief executive officer of Prokhorov's Onexim holding, denied there have been any talks about a sale.

``We haven't and we aren't holding sale talks and no offers from Rusal or anyone else have come in,'' he said by telephone from Moscow. Victor Borodin, a spokesman for Norilsk Nickel, declined to comment. Officials at Russia's antitrust service couldn't be reached for comment.

To contact the reporter on this story: Bradley Cook in Moscow at Yuriy Humber in Moscow at

To contact the editor responsible for this story: Malcolm Fried at

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