(Recasts with Norilsk news briefing)
By Aleksandras Budrys
MOSCOW, Nov 21 (Reuters) - Russia's Norilsk Nickel said on Thursday it hoped its purchase of U.S. company Stillwater Mining would stabilise supply and promote demand for the precious metal palladium.
"We believe a decline in palladium demand has been partly caused by U.S. consumers' uncertainty of stable supplies of the metal," Leonid Rozhetskin, Norilsk's deputy chief executive told a news briefing.
"Under the current deal we are investing $340 million as a proof of the seriousness of our intentions to provide regular and increasing supply of palladium to the U.S. market," he said.
The two companies said on Wednesday Norilsk, the world's largest producer of nickel and palladium, was buying a 51 percent stake in Stillwater Mining Company for $341 million in the Moscow-based company's first investment in North America.
Of this, $100 million will be paid in cash and $241 million by 876,000 ounces of palladium. Norilsk also has the right to buy an extra 10 percent of shares.
The two firms have also agreed that Stillwater will buy at least one million ounces of palladium annually from Norilsk to be resold to Stillwater customers.
Rozhetskin said the deal would give Norilsk the possibility to use Stillwater's sales facilities in the United States to sell palladium it had stockpiled in the course of 2002.
ANALYSTS UPBEAT
Analysts said Norilsk would benefit from boosting its presence in the U.S., a key consumer of platinum group metals, and the deal would help to stabilise the palladium market.
"Norilsk has acquired a marketing vehicle, which may facilitate its access to end-users on the American market, the largest platinum group metals market," said Vasily Nikolayev, an analyst with Troika Dialog investment bank.
The deal was also seen reassuring consumers there would be a reliable flow of palladium, which is mainly used to make catalytic converters in automobiles, said another analyst.
"I believe the deal will positively influence the palladium market in general, restoring the confidence of end-users in consistent supply of the metal to the market," added Slava Smolyaninov of Nikoil investment bank.
Norilsk stopped selling palladium on the spot market in 2001 and has pledged not to resume spot palladium sales in 2002 and 2003 in a bid to sell all the palladium it produces through long-term contracts to end users.
So far Norilsk has announced a deal with General Motors , the world's largest automobile maker, and with Japan's Mitsubishi . It said it had contracts with other consumers of palladium but gave no names.
Russian palladium shipments have been extremely erratic in recent years due to the country's red tape. Prices rose to all-time highs near $1,100 an ounce in January 2001 as auto makers competed to procure the metal and build inventories.
But the metal's price has since fallen sharply due to a slowdown in industrial demand in a weak economy, and increasing use of platinum in car exhaust cleaners. Palladium was fixed at $277 per ounce in London on Thursday afternoon, $2 up from the morning fixing.