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. Last Updated: 07/27/2016

Norilsk Drops Suit Contesting Auction

Norilsk Nickel on Friday buried the hatchet with investor Uneximbank as bank officials professed themselves unconcerned with a government move to explore reversing the loans-for-shares deals.


Following a Thursday meeting where Uneximbank delegates took their first seats on the board of the giant metals company, Norilsk officials released a statement Friday dropping an appeal in a lawsuit contesting the auction where the powerful Moscow bank acquired a controlling stake in the company in exchange for a $170.1 million loan to the government.


"Now there is no doubt left as regards the lawful character of the auctions," Uneximbank chief spokesman Modest Kolerov said.


Commenting on the government's order to the State Property Committee to seek money that could be used to repay the loans to Uneximbank and other investors -- thus allowing the state to retain the stock -- Kolerov was dismissive.


"These ideas have been discussed for a long time. A discussion is not yet a decision," he said, adding that Uneximbank, as "a law-abiding bank," would accept any eventual decision by the government on repayment of the loan.


Moscow-based Uneximbank, which controls 51 percent of Norilsk voting stock, consolidated its hold over the company at the Thursday board meeting. Together with its sister bank the International Financial Company, or MFK, Uneximbank now has four seats on the new 12-person board of Norilsk, including MFK's Tatyana Khlystova as first deputy chairman.


Norilsk's old-style chairman Anatoly Filatov was sacked by a government decree last week and replaced by Committee for Metallurgy representative Vsevolod Generalov.


A general shareholders' meeting of Norilsk called for June 7 will elect a new board of directors, Alfred Kokh, the board representative of the State Property Committee, said Thursday.


Meanwhile, a British investment fund has purchased a 1 percent stake in Norilsk, triggering a spate of inquiries by the Russian media over foreign influence in a company with more than 150,000 employees. Norilsk also has been singled out by a Duma privatization review panel as an enterprise of "strategic interest" for Russia.


Managers at the World Mining Investment Trust in London expressed "surprise" that their purchase has been splashed over the pages of many Russian papers this week.


"We have invested ?3.5 million [$5.3 million]," said fund manager Graham Birch in a telephone interview. "That is not a massive holding."At current market prices this would be slightly more than 1 million Norilsk shares or approximately 1 percent of the company's stock.


World Mining Investment Trust is a sub-division of London-based Mercury Asset Management and has a worldwide portfolio of ?575 million, Birch said. It is the fund's first investment in the Russian mining industry. Last year foreign companies were barred from bidding in the loans-for-shares auction for Norilsk by the Russian government.


In an article Friday, Nezavisimaya Gazeta termed the purchase of the Norilsk stake by the British fund "scandalous."


"The management of the foreign company does not hide that the success of its speculative operations with the shares of this strategic enterprise is directly linked with pushing the Russian government out of Norilsk Nickel," the paper wrote in a front-page article.


One metals analyst said Norilsk stock could be undervalued by as much as 100 percent or 150 percent, but an estimate hinges on a number of political and financial conditions.


A State Duma report on the privatization of Norilsk, drafted by a commission headed by deputy Pyotr Romanov, could be published as early as next week, Romanov's office said Friday. It declined to give any details of the report.


A broader review of last year's loans-for-shares auctions has been bogged down by the amount of material involved, the panel's chairman said Friday.


"We expect to present our preliminary conclusions at a hearing by the end of June," Communist deputy Mullanor Ganeyev said.