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By John Helmer, Moscow

Judge Galina Fedina ruled this morning, after a brief, open hearing, that she is postponing until June 6 her consideration of the injunction against Magnitogorsk Metallurgical Combine (MMK) finalizing its takeover of Flinders Mines. The action was confirmed by the judge’s spokesman at the Chelyabinsk Court of Appeal no. 18, Olga Tige.

The court website reveals that yesterday the phantom shareholder and plaintiff in the case, Elena Egorova, filed two new motions which the judge conceded today she isn’t ready to consider. The website does not allow the motions themselves to be read.

One of the new motions is titled a response to the appeal filing by MMK and Flinders Mines. It ought to have been argued at today’s court session.

The second is titled an application to dismiss proceedings pursuant to Art. 150 of the Arbitrazh Court rules. The sub-sections provide several grounds for dismissal, including the sub-section (6) possibility that Egorova, never having existed, has now died without leaving a successor. More likely is that the motion is a technical move to buy more time for an out of court settlement to be reached between Egorova and her alter ego, MMK’s owner Victor Rashnikov, and between Rashnikov and those in authority over the Russian steel industry.

Court spokesman Tige cautions that Egorova’s application to dismiss refers only to the appeal by MMK and Flinders Mines, not to Egorova’s injunction still under review in the lower court and due for its next hearing on July 2. Tige added that she cannot say what ground is cited in the new motion, and can provide no further information until after the June 6 hearing, “if a decision on the case will be made.”

Judge Fedina appears to have concluded that in such a sensitive case, involving big commercial stakes and high political decision-makers, her best bet is to allow the plaintiff and defendant to decide the matter without her having to decide between the claims that have been submitted.. Between now and June 6, Fedina is expecting to be put right on that score.

If Egorova is withdrawing from the case, this may mean that Rashnikov, the presumed initiator of Egorova’s claim against the Flinders Mines transaction, has decided with the Flinders Mines management to end their deal. Or else he has decided to complete the A$556 million transaction subject to conditions that remain as secret as Egorova’s existence. With whom Rashnikov is negotiating to make this fresh deal, he and MMK aren’t saying.

One precedent that is suggestive is Alexei Mordashov’s agreement with then Prime Minister Vladimir Putin ahead of his acquisition of the Putu iron-ore mining project in Liberia. Mordashov has told his associates that Putin approved the commitment of funds from Mordashov’s Severstal steel group on condition that it remained a hedge against a global increase in iron-ore prices and did not drain Severstal’s investible cashflow out of Russia. While the Putu project is still in the proving and feasibility stage, the costs have been relatively small. Acquisition of Putu from its original stakeholders has also been modest – US$12.5 million.

Mordashov recently told London investors that he intends to sell down his stake in the project and is looking for a strategic buyer who will be responsible for the several billion dollars required to bring the mine into production.

If Rashnikov has agreed to something similar, he will still have to borrow the A$556 million (US$554 million) to acquire all shares of Flinders Mines, according to the agreement signed last November. That much would be good news for the international hedge funds which own roughly half of the shares, and desperately want to sell them at the November 2011 deal price of 30 cents per share.

If Rashnikov has promised to sell 50% or more of his stakeholding within a year or two, this will cast a long shadow over the Flinders Mines asset price, and a future loss for the MMK balance-sheet. Rashnikov will have some explaining to do to the MMK board, if indeed he would acknowledge to anyone his negligence in failing to get Kremlin approval for the deal at the outset.

It is evident that whatever Rashnikov and those he is promising have agreed, their deal is so recent and so uncertain this morning, they need another week to tie up the loose ends, before telling the Chelyabinsk court how the matter should be wound up. But the court is giving Rashnikov what he wants. He’s winning that special type of victory associated since 279 and 280 BC with the name of Pyrrhus.

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