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. Last Updated: 07/27/2016

LionOre Goes to Norilsk

Norilsk Nickel was cleared to buy LionOre Mining International for 6.8 billion Canadian dollars ($6.41 billion) after Xstrata said Sunday that it would not increase its offer price for the Canadian miner.

Xstrata notified LionOre's board of directors that it would not match Norilsk's latest offer, Swiss-based Xstrata said in an e-mailed statement.

Norilsk bid 27.50 Canadian dollars per share on May 23 to trump Xstrata's offer of 25 Canadian dollars per share of May 15, 28 percent more than Norilsk's original bid of 21.50 Canadian dollars, made on May 3. Xstrata CEO Mick Davis opened the bidding with an offer of 18.50 Canadian dollars on March 26.

Buying Toronto-based LionOre will give Norilsk, led by CEO Denis Morozov, access to mines in countries such as Australia, South Africa and Botswana. It will also help Norilsk compensate for stalling production growth at home, where its output rose less than 0.5 percent last year and was unchanged in 2005.

Nickel is the best-performing metal this year on the London Metal Exchange, more than doubling in price in the past year on rising Chinese demand for the ingredient used in stainless steel.

LionOre trimmed its forecast for 2007 nickel output by 2.9 percent on May 26 after delays at an Australian mine. The group will produce 43,000 tons, down from an earlier estimate of 44,300 tons. Production will rise to 80,000 tons by 2012, LionOre said in its 2006 annual report.

Buying LionOre would have made Xstrata the third-largest nickel producer, after Norilsk and Brazil's Vale do Rio Doce, based on last year's production, according to London-based metals consultant CRU.

Claire Divver, a London-based spokeswoman for Xstrata, declined to comment on the statement by telephone Sunday.

Global nickel production will rise 5 percent to about 1.48 million tons in 2007, according to the Lisbon-based International Nickel Study Group. Norilsk produced 224,000 tons in 2006.