UPDATE 2-Norilsk shareholder Interros opposes new board vote

* Says RUSAL trying to cut its debt at Norilsk's expense

* Follows RUSAL call for big dividend, rejection of budget

* Analysts expect board re-election to be difficult

* Analysts say the two parties may buy shares before EGM

(Adds more analyst comments, updates share price)

By Aleksandras Budrys

MOSCOW, July 8 (Reuters) - A management spat between two key shareholders in Russian metals giant Norilsk Nickel (GMKN.MM) intensified on Thursday when investment vehicle Interros rejected calls for a new board vote from RUSAL (0486.HK)(RUAL.PA).

The shareholders, both of whom hold a 25 percent stake in Norilsk, have been battling since May over the strategic direction of the company and how to use its profits, and the disagreement has become increasingly fractious.

Analysts say the latest uncertainty could hurt operational activity at the world's biggest producer of nickel and palladium, especially if prolonged, although Norilsk stock could get a boost if it leads to a stake-building race.[ID:nLDE65S09A]

At the heart of the latest disagreement is RUSAL's loss of a seat after board elections for Norilsk.

RUSAL is now calling for fresh elections to try and recover the seat, but Interros believes the aluminium producer's Norilsk board members voted in their own firm's interest and at the expense of Norilsk and wants the result to stand.[ID:nLDE6660YZ]

Interros -- the investment vehicle of Russian tycoon, Vladimir Potanin -- said it believed the board elections took place in strict conformity with existing legislation and Norilsk's corporate rules.

The new board of Norilsk includes four representatives of Interros, three of RUSAL, three members of the management and three independent directors.

RUSAL, majority owned by Oleg Deripaska, formally requested that Norilsk provide the voting papers from the annual general meeting, saying it might file a lawsuit if violations are found.

Interros said RUSAL's representatives on the board had voted against approving Norilsk's budget for 2010 and had demanded a dividend which exceeded the company's net profit.

"It is evident that RUSAL is trying to solve its own debt problems at the expense of Norilsk Nickel," Interros said.

In May the Norilsk board rejected a request from RUSAL, whose debt stands at $12.9 billion, to pay 110 percent of its profit or some $3 billion in a dividend for 2009 and instead approved a dividend of $1.325 billion.

Interros also said that RUSAL had demanded another election after the independent directors voted against the merger between RUSAL and Norilsk. One of the independent directors, Brad Mills, told Reuters he saw no reason for the merger plans long nurtured by RUSAL shareholders. [ID:nLDE65N0X4]

BOARD RE-ELECTION MAY PROVE DIFFICULT

Analysts said that with the 25.13 percent of votes it will be difficult for RUSAL to get the board re-elected, as Interros holds almost a similar stake of 25.013 percent and the management another 8.5 percent in quasi-treasury shares.

Metalloinvest, controlled by another tycoon Alisher Usmanov, is believed to have 4 percent of Norilsk, while 30.7 percent of the stock is traded in the form of American Depositary Receipts.

"It is hard to foresee the outcome of the possible EGM," Metropol investment house said.

"We think that it will be difficult for RUSAL to get the majority of votes to cancel the current board and the situation may soon be in hands of the company's lawyers."

Alfa Bank said RUSAL would likely try to woo minority investors ahead of the EGM with various incentives:

"RUSAL may promise an increased dividend or point to suspected fraudulent activity in order to support its case."

Norilsk shares were down 0.24 percent at 4,774 roubles ($154.2) at 0940 GMT after rising 0.51 percent following the Interros statement. Broader Russian market index and its mining index .MCXMM were both broadly flat.

"While we continue to view the renewed conflict as disruptive and, on the balance sheet negative for Norilsk's near-term performance, we note that an EGM can also boost the stock, as the two main shareholders try to strengthen their positions ahead of the EGM," Deutsche bank said. ($1=30.96 Rouble) (Editing by Simon Jessop)