Norilsk Nickel is the Gold Fields swing factor

NEW YORK ( -- Norilsk Nickel [NILSY] is assuming a commanding position amidst the hostile bid by Harmony [HMY] for Gold Fields [GFI], which friendly arrangement with Iamgold [IAG] has been endangered.

The first rule of corporate action is to be more mysterious than anyone else. It cultivates respect because failed secret plans can't be ridiculed and lucky breaks look calculated. It instils fear because competitors hate the unexpected and every move is startling.

NorNickel is enlarging the respect and fear competitors have for it by appearing especially skilful and stealthy; all against the backdrop of dark threats emanating from the state about privatised assets. Even so NorNickel employs Russia's commotion to its advantage. It has shrugged off or sidestepped all the kompromat intended to dethrone Mikhail Prokhorov, Vladimir Potanin and Leonid Rozhetskin.

There was surprise this March when NorNickel closed, almost overnight and with minimal due diligence, the purchase of a fifth of Gold Fields for $1.16bn. There was fear because nobody had a clue what NorNickel's intentions were or that it could lean on Citigroup for a loan the way it had.

It has traded that uncertainty right into the Harmony raid, turning on Gold Fields but not revealing how it has been wooed by the new suitor.

Three dominant strands are emerging to anticipate developments.

One school is wary of, or enthralled by, NorNickel's mystery factor. A Johannesburg source said it would be foolish to underestimate the Russian company which was "thinking two and three steps ahead."

That inclines toward a grand stategy along the lines of the Stillwater-as-final-destination we speculated about yesterday. Also, Harmony CEO Bernard Swanepoel has been treading a fine line in his criticism of Gold Fields for doing a deal prejudicial to South Africa; but he has refused to rule out taking a similar path to the Gold Fields International spin off.

The second school believes NorNickel is playing the game like the traders its bosses are.

NorNickel's investment in Gold Fields has appreciated about a fifth since March once fees and interest have been deducted. That is a big capital gain that seemed improbable to the other buyers who turned up their noses at Gold Fields because of country and currency risk among other issues. Yet NorNickel did not have to extensively rationalise its decision to picky investors worried about synergies, strategies and schemes.

They priced the deal very artfully and now have more than a quarter million dollars of profit to show for it. There is every temptation to cash out rather than hold an even smaller stake in Newco. How pleasing to the Kremlin it would be if that surplus was repatriated to Mother Russia.

What everyone wants to see is the fine print on NorNickel's "irrevocable offer". Having been shrewd thus far, why would NorNickel curtail its options?

A London source believes NorNickel has left itself free to entertain alternative offers, perhaps even from Gold Fields itself. If the undertaking between NorNickel and Harmony is watertight, then it remains to be seen what premium was extracted be it in cash or kind.

Rest assured NorNickel did not sell its title cheaply.

A third view dismisses NorNickel for petulance. In this scenario the Russian's pouting about not receiving deferential treatment as a major shareholder turns to vengeance.

There is certainly circumstantial evidence indicating that NorNickel thought it had a right to be privy to Gold Fields's most intimate decisions. That is unreasonable given the history of the laboured Anglo American involvement with Gold Fields. But did Gold Fields "defy" NorNickel? Only if NorNickel believed in an imaginary veto. A real veto required another 6% of Gold Fields.

The truth is probably a combination of many issues. Taking revenge when you're flush is always more satisfactory. Besides, the lessons of Anna Karenina are well understood - killing yourself as an act of revenge is failure's unfailing guarantee.

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