Fitch affirms Norilsk Nickel

Fitch Ratings said it affirmed OJSC MMC Norilsk Nickel's issuer default and senior unsecured ratings at BBB- and its short-term rating at F3 following its offer to purchase LionOre Mining International Ltd. for about C$5.3 billion in cash, trumping an earlier offer from Xstrata plc valued at around C$4.6 billion.

The outlook is stable.

Should Norilsk Nickel's offer be successful, Fitch believes an acquisition of LionOre would have several benefits for its business profile, including enhanced scale and increased geographic diversity. The proportion of group revenues generated within Russia would fall to around 78%, based on the agency's estimates, from 85% at the end o 2005.

The agency noted that Xstrata's existing bid has been recommended by LionOre's board of directors. While Norilsk Nickel's offer is pitched at around a 16% premium to that of Xstrata, the agency believes a further round of offers remains possible and said a significant increase in Norilsk Nickel's offer above the current level could trigger a review of the group's ratings.

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