Rusal Questions Norilsk Plans for $600 Million Share Buyback

United Co. Rusal is questioning the need for OAO GMK Norilsk Nickel, in which it holds a 25 percent stake, to buy back as much as 2 percent of its stock as the Russian mining company considers spending cuts.

“Spending $600 million on a share buyback is a controversial decision at a time when Norilsk needs to curb investments and production costs to adjust to the market situation,” said Maxim Sokov, Rusal’s director for strategy, who has represented the aluminum producer on Norilsk’s board.

A slowing of commodities shipments from Russian ports is a “warning sign potentially resembling 2008,” Sokov told reporters today in Moscow after Norilsk’s annual general meeting. Metals sales and prices slumped in 2008 as the global economy slowed.

Norilsk’s board yesterday ordered management to study the possibility of buying back a stake as large as 2 percent in the Russian metals producer and to prepare a plan to retire 10 percent of the company’s stock, leaving only about 7 percent as quasi-treasury shares.

It would be “reasonable” to use Norilsk’s quasi-treasury shares as an acquisition currency, Sokov said today.

Projects such as billionaire Alisher Usmanov’s Metalloinvest’s Udokan copper deposit would be a good acquisition target for Norilsk, Sokov said.

A Metalloinvest official declined to comment on the suggestion or to be identified.

Norilsk shares advanced 0.5 percent to 5,383 rubles by the close of trading in Moscow.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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