UPDATE 1-Miner Stillwater stock up, options busy on sale talk

Thu Jul 15, 2010 2:21pm EDT

* Options trading 4.4 times higher

* Russia's Norilsk known mulling stake sale

* Stock rises 4 percent (Adds options movement, stock price)

NEW YORK, July 15 (Reuters) - Shares in Stillwater Mining Co (SWC.N) rose more than 3 percent and options trading was four times higher than usual on Thursday on market talk that the palladium and platinum miner was an acquisition target.

The sudden surge in interest comes a few months after Russian metals giant Norilsk Nickel (GMKN.MM) first revealed it was considering selling its majority stake in Stillwater.

There was no immediate comment from Montana-based Stillwater, the only producer of platinum and palladium outside Russia and South Africa.

On a day when the broad market was down and most mining stocks fell, Stillwater's shares rose 3.83 percent to $13 on the New York Stock Exchange in afternoon trading.

Overall option volume in Stillwater was 4.4 times greater than its normal level with about 7,081 calls and 4,898 puts traded by mid-afternoon, according to option analytics firm Trade Alert. August Stillwater $14 calls were bought at 65 cents per contract and August $15 calls were purchased at 40 cents apiece. An equity call option conveys the right to purchase shares at a fixed price anytime until expiration.

"Within the first 30 minutes of trading Stillwater's bullish call options were bought on expectations that this palladium and platinum miner would continue its upward move that started in July," said Pete Najarian, a co-founder of optionMonster.com, a Web information site in Chicago.

He noted that traders could be positioning for an upside when quarterly earnings are released on Aug. 6.

"There is also unconfirmed talk of more consolidation in the sector and Stillwater is one of the names that has been mentioned," Najarian said.

In April, Norilsk, which owns about 51.3 percent of Stillwater's common shares, said in a filing with the U.S. Securities and Exchange Commission it was exploring strategic options for its stake.

(Reporting by Steve James in New York and Doris Frankel in Chicago; editing by Gunna Dickson, Bernard Orr)

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