LionOre Says Norilsk's Higher Bid Beats Xstrata's

LionOre Mining International Ltd. (LIM) said a C$5.3 billion ($4.8 billion) takeover bid from Russia's OAO GMK Norilsk Nickel is superior to an earlier offer the company accepted from Xstrata Plc. (XTA)

Xstrata's agreement allows it to increase its offer by May 14, Toronto-based LionOre said today in a statement. Norilsk's May 3 cash offer of C$21.50 is 16 percent more than the C$18.50 per-share bid Xstrata made March 26.

LionOre, which expects to produce 44,300 tons of nickel this year, is being pursued for mines in Australia and Africa as the metal used in stainless steel soars. Nickel has more than doubled in the past year and closed at a record $51,600 a ton on the London Metal Exchange May 4.

Vladimir Potanin, who plans to buy a stake from fellow Russian billionaire Mikhail Prokhorov to become Moscow-based Norilsk's largest shareholder, wants to buy Lionore to keep production ahead of Brazilian rival Cia. Vale do Rio Doce.

Buying Lionore would help Xstrata Chief Executive Officer Mick Davis in his drive to make the company one of the world's three largest nickel producers.

Ore from LionOre's two mines in Botswana and South Africa is processed at Xstrata's Nikkelverk refinery in Norway. LionOre also operates three nickel mines and one gold mine in Australia and owns the undeveloped Honeymoon Well nickel deposit in Western Australia.

Zug, Switzerland-based Xstrata's offer is due to close on May 25 and carries a breakup fee of C$131 million. It also has the right to match any superior offer. Xstrata said in March it had secured an irrevocable ``lock-up'' arrangement with shareholders including directors for 19 percent of the company.

Shares of LionOre rose 19 cents, or 0.8 percent, to C$24.04 at 4:10 p.m. in Toronto today. The shares have gained 81 percent this year.

To contact the reporter on this story: Choy Leng Yeong in Seattle at clyeong@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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