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Usmanov’s Metalloinvest Said to Seek Norilsk Shares for Udokan

Billionaire Alisher Usmanov’s Metalloinvest, Russia’s largest iron ore producer, is seeking to swap its Udokan copper deposit for shares in OAO GMK Norilsk Nickel, according to three people familiar with the matter.

Metalloinvest, which holds 4 percent of Norilsk, the world’s largest nickel producer, is in preliminary talks with other Norilsk shareholders about the proposal, the people said, asking not to be identified because the information is private.

Norilsk’s largest shareholders, billionaire Vladimir Potanin and Oleg Deripaska-controlled United Co. Rusal, signed an agreement in December on the management of Norilsk to end more than four years of conflict. Udokan contains 14.4 million metric tons of copper, making it one of the world’s five largest deposits, according to Metalloinvest.

Norilsk fell 0.9 percent to 5,833 rubles, heading toward a five-week low, at 11:32 a.m. in Moscow. Kommersant newspaper reported Usmanov’s interest in swapping Udokan for Norilsk shares earlier today. Norilsk’s market value is about $37 billion.

Metalloinvest may get as much as 2 percent of Norilsk for Udokan, Barry Ehrlich, a metals analyst at Alfa Bank, said in report today. Such a deal would be bad for Norilsk investors because it would contradict the company’s stated goal of “minimum capex and maximum dividends,” he said.

Metalloinvest, Rusal and Potanin’s Interros all declined to comment on a possible deal.

Metalloinvest won the bidding for Udokan in 2008 for 15 billion rubles ($499 million) and last year estimated total development costs at $8 billion. Norilsk, Russia’s No. 2 producer of copper, which accounts for a quarter of its sales, dropped of the bidding amid another shareholder dispute.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

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

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