* Metalloinvest may trade Udokan stake for Norilsk stock
* Norilsk could help to finance copper project
* Morgan Stanley to value world's No.3 copper deposit
By Gleb Stolyarov and Polina Devitt
MOSCOW, Feb 14 Talks are under way on an asset swap through which Russia's Norilsk Nickel, the world's top nickel and palladium miner, would gain an interest in the vast, untapped Udokan copper deposit in Siberia.
As part of a deal, Metalloinvest - the Alisher Usmanov-owned mining company that controls the licence for the world's third-largest copper reserve - could raise its 4 percent stake in Norilsk, two sources familiar with the matter said on Thursday.
Usmanov, estimated by Forbes magazine to be Russia's richest man with a fortune of $18.1 billion, looked to have been sidelined by a recent ownership restructuring at Norilsk that laid to rest a long-running shareholder dispute.
Uzbek-born Usmanov may now be back in the mix, confirming Norilsk's status as a non-ferrous metals national champion in which three other powerful oligarchs - Vladimir Potanin, Oleg Deripaska and Roman Abramovich - all hold large stakes.
"It all depends on valuation," said one source close to Usmanov, speaking on condition of anonymity. "Udokan is a large deposit and Norilsk has experience in copper deposits, while Usmanov would like to have Norilsk shares."
Rostec, the rebranded Russian Technologies state conglomerate involved with Metalloinvest in the Udokan project, confirmed that Norilsk had been invited to join as a partner a couple of months ago.
"I believe it would be effective for Norilsk to acquire a stake in this deposit," Sergei Chemezov, the head of Rostec, told Reuters.
Metalloinvest won a tender to develop Udokan in 2008, shortly before the global financial crisis, agreeing to pay 15 billion roubles ($500 million).
However, a slide in the price of copper, regarded as one of the metals most sensitive to the fluctuations of the global commodities cycle, has undermined the economics of a project in which costs could run to an estimated $8 billion.
Metalloinvest is in less robust financial shape than Norilsk, having been hit hard by the 2008/09 slump. Analysts say that the transfer of Udokan to Norilsk would make it possible to commit the Arctic mining giant's prodigious cashflows to investing in the project or help to raise finance on reasonable terms from state development bank VEB.
Mineral resources at Udokan are estimated at 2.3 billion tonnes of ore with an average copper grade of 1.03 percent, according to estimates compliant with standards set by the Joint Ore Reserves Committee.
Copper amounted to 24.6 million tonnes, the Metalloinvest unit developing the project said last month, adding that it planned to mine Udokan predominantly through open-cast methods.
Investment bank Morgan Stanley has been hired to evaluate Udokan, the Kommersant daily reported, citing industry and banking sources.
Analysts said that it made sense for Metalloinvest to shift Udokan to Norilsk after Usmanov's earlier merger overtures came to nothing.
"Given the project's large size and high complexity, it was clear that Metalloinvest would seek a partner with a strong balance sheet," Sberbank Investment Research said in a note.
Sberbank also said that any possible award of Norilsk treasury stock to Usmanov as part of a deal would be negative to minority investors as it might result in the dilution of their holdings.
Norilsk shares were down 2.8 percent in Moscow at 1204 GMT, making them the weakest component of the MICEX index, which was down less than 1 pct. The company has a market value of $37 billion.
Under the recent peace deal, Kremlin-backed billionaire Abramovich will buy a 5.9 percent stake in Norilsk for $1.5 billion and be given voting control over about 20 percent.
Potanin's investment vehicle Interros would own 30.3 percent of Norilsk and Deripaska's Hong Kong-listed aluminium company UC RUSAL 27.8 percent after the planned cancellation of a 17 percent stake held in treasury.
Our top photos from the last 24 hours.