The proposal to create a merger between struggling Russian miners and Norilsk Nickel has been dismissed by the Kremlin, Reuters reported on Friday (27th February).

A number of major firms have expressed their desire to create a mining champion which would see some of their debts given to the state in exchange for a stake in the world's largest nickel producer.

However, President Dmitry Medvedev met with Norilsk's largest shareholder Vladimir Potanin and Chief Executive Vladimir Strzhalkovsky, plus United Company RUSAL Chief Executive Oleg Deripaska, and reportedly vetoed the plans.

A source close to the meeting told the news provider: "A consensus was reached at the meeting that there is no need for a merger."

Proposals have included merging Norilsk with iron-ore firm Metalloinvest and creating a six-firm entity which would incorporate state-owned titanium company VSMPO-Avisma.

However, the Kremlin has previously indicated that it is unwilling to issue a bail-out to debt-laden miners as it attempts to focus on battling the ongoing effects of the economic downturn.

A statement on its website, kremlin.ru, read: "Issues of support to the metallurgical industry in the conditions of the global financial crisis were discussed."

"Separately, protecting the interests of workers in the sector was discussed."

Although Norilsk has yet to comment on the reported refusal, analysts from UralSib investment bank have declared that the companies will have to explore other avenues to ease their debts.

"The state's refusal to support this consolidation sends a clear signal that the core shareholders of the companies will have to decide their debt issues themselves," it said in a note quoted by Reuters.

Source:

UPDATE 1-Kremlin shuns Russia metals merger plan (27/02/09)

http://uk.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUKLR61774820090227?pageNumber=2&virtualBrandChannel=0