OREANDA-NEWS. OJSC Mining and Metallurgical Company Norilsk Nickel (“Norilsk Nickel”) announced today that is has entered into a definitive agreement to purchase the nickel business (the “Nickel Business”) of OM Group, Inc. (“OMG”) for $408 million in cash, on a debt-free, cash-free basis.

The Nickel Business is made up of the following assets:

• OMG’s nickel refining operations in Harjavalta, Finland with total annual production capacity of 60,000 tons of nickel
• OMG’s Cawse nickel mining and leaching operations in Western Australia, which supplies nickel carbonate to the Harjavalta refinery
• OMG’s 20% stake in MPI Nickel Pty. Ltd. (“MPI”), which operates the Black Swan and Silver Swan nickel mines that supply nickel concentrate to the Harjavalta refinery, and is developing the Honeymoon Well project
• Up to 11.1% of OMG’s holding of the common shares and convertible debt in Talvivaaran Kaivososakeyhtiц (a biological heap-leaching project in the Kainuu district in Finland).

With this transaction, Norilsk Nickel continues to expand its operations internationally and strengthens its position in the global mining and metals industry. The company will gain access to best in class operational skills as well as synergy opportunities with the combination of hydrometallurgical processing and solvent extraction technologies that reside in Norilsk’s current operations and those being acquired abroad.

Norilsk Nickel will also gain access to laterite HPAL leaching technology and will participate in a bio-heap leaching project. The Norilsk Nickel Group will also extend its product line to include nickel salts and briquettes and increase its yearly production of attributable nickel by approximately 35,000 to 40,000 tons.

At the closing of this transaction, Norilsk Nickel will enter into five year supply agreements with OMG to supply up to 2,500 metric tons (mt) per year of cobalt metal, up to 2,500 mt per year of cobalt contained in cobalt hydroxide concentrate and up to 1,500 mt per year of cobalt contained in cobalt sulfate solution, along with various nickel-based raw materials used in OMG’s specialty chemicals business.

“This transaction represents an important step for Norilsk Nickel as it builds its international business and expands operations outside Russia,” said Mikhail Prokhorov, General Director of MMC Norilsk Nickel. 

The transaction, which has been approved by the boards of directors of both companies, is subject to approval by regulatory authorities and customary closing conditions, and is expected to close in the first quarter of 2007.

 Norilsk Nickel is committed to providing its high level of service to current cobalt customers during the transition period, and will work to develop the acquired nickel business and ensure continuity of operations.

As part of this transaction, OMG will continue to render certain services with respect to the Nickel Business during the transition period.

UBS Investment Bank is acting as the sole financial advisor, and Hogan & Hartson LLP is acting as legal advisor to Norilsk Nickel in this transaction.