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For the second time in a month, the board of directors of Stillwater Mining Co. has rejected an alternative offer to a Russian bid to buy control of the only platinum and palladium mines in the United States.

That means investors will have one choice when they meet in Denver next month.

They can approve the offer by Moscow-based Norilsk Nickel, or reject it and face a future with no clear solutions to the company's money troubles.

Stillwater Chief Executive Frank McAllister agreed last November not to entertain other offers until investors approve or reject the Norilsk proposal. That vote will be taken June 16 during a special meeting in Denver.

"The board fully and unambiguously supports the pending Norilsk Nickel transaction and recommends that stockholders vote in favor," he said.

Backers of the alternative proposal wanted to issue more stock and use the proceeds to raise $100 million for the cash-strapped company.

'Rights offering' They say their plan is a "rights offering," which means investors get to buy more stock, but the American ownership doesn't change.

Stillwater attorney John Stark said the counteroffer still could be interpreted as a sale.

"It very may well be an acquisition proposal," Stark said. "That's the problem. If it is one, we can't negotiate."

John Andrews, Stillwater's former operating officer, now living in Georgia, along with at least one long-time shareholder in Connecticut, proposed the counteroffer.

Stillwater's board rejected the first offer April 11, three days after it was proposed. Andrews and the others resubmitted it April 23.

Board members meeting in Billings Thursday unanimously rejected the offer. News of the decision wasn't released until Monday morning.

Board members decided there were too many unanswered questions in the counteroffer.

Rejection not a surprise Andrews said the second rejection wasn't a surprise and said that the proposal needs a minor miracle to resurface before the June vote.

"I'm assisting the principals in this matter and if they ask for assistance, I'll provide what I can," Andrews said. "But it seems fairly final from what's written in this press release."

Andrews said the counteroffer required management to sit down with its bankers and cut a better deal for Stillwater investors and workers. That probably would mean a new management team, he said.

"I'm not sure the present management could re-negotiate again," Andrews said.

Meanwhile, more financial details have surfaced about the Norilsk deal.

As previously reported, half of the $100 million in cash must be given to the banks to repay debt. In addition, Stillwater must share the money from the 877,000 ounces of Russian palladium it will receive.

Stillwater executives did not lock in a price for the palladium last November. Since then, the price has dropped 56 percent to $155 per ounce.

Instead of getting $341 million from Norilsk as negotiated last fall, Stillwater gets only $232 million.

Of that $232 million, Stillwater has agreed to share half the cash and half the palladium's value when it is resold. At today's prices, that will allow Stillwater to pay down $116 million of its nearly $200 million in bank debt.

Stillwater also agreed to pay JP Morgan $5 million in finders fees for setting up the Norilsk deal.

Under the counteroffer, McAllister said Stillwater would net his company far less — just $35 million — after paying bank debt and JP Morgan.

With the vote just four weeks away, Stark said company executives will be trying to sell the Norilsk package to investors.

Since the Russian deal was announced, three large institutional investors have sold all or most of their stock in Stillwater.

Stark said about 500 shareholders currently own Stillwater stock. And the large investors, about 10 people, control 40 percent to 50 percent of the shares, he said.

So, how will the vote go next month in Colorado?

"It's way too early to poll them," Stark said. "You don't know until the end."

For more information on the Norilsk Nickel and Stillwater Mining deal, contact: MacKenzie Partners Inc. of New York City at: 1-(800) 322-2885.

Jan Falstad can be contacted at (406) 657-1306 or at jfalstad@billingsgazette.com

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