UPDATE 1-Siberian court suspends Norilsk share buyback

(Adds details, quotes, background)

By Polina Devitt and Robin Paxton

MOSCOW, Oct 28 (Reuters) - A Siberian court on Tuesday froze a $2 billion share buyback planned by Norilsk Nickel (GMKN.MM), the world's largest nickel miner, pending a final ruling in a case brought by one-quarter shareholder United Company RUSAL.

UC RUSAL, controlled by billionaire Oleg Deripaska, opposes plans by Norilsk's management to buy back up to 4 percent of its shares at 6,167 roubles each -- more than 3-1/2 times what the stock was worth at the close of trade on Tuesday.

"It's disappointing for minorities, who expected Norilsk to pay a substantial premium," said Dmitry Smolin, mining analyst at UralSib Financial Corp. "But it's the right thing for the company."

Russia's metal billionaires have been struggling for greater say in the management of Norilsk, Russia's leading miner and supplier of one-fifth of the world's nickel, since UC RUSAL acquired its 25 percent-plus-two-shares stake in April.

Its shares, battered by falling nickel prices and investor flight from Russia, have fallen 77 percent from May peaks to close at 1,700 roubles on Tuesday.

UC RUSAL welcomed the court injunction, calling it an "important and necessary condition" pending a final decision.

"Some shareholders might prefer not to wait and may start selling Norilsk shares tomorrow," UralSib's Smolin said.

Norilsk's press service said it had not received any documents from the Krasnoyarsk arbitration court and declined further comment.

The share buyback is supported by billionaire Vladimir Potanin, the single largest shareholder in Norilsk and its chairman. The buyback price was at a 27 percent premium to the company's value when the offer was announced in August.

Potanin's investment company, Interros, could not be reached for comment.

Others have opposed the buyback, including Mikhail Prokhorov, the Norilsk board member who once shared control of the company with Potanin before selling his stake to UC RUSAL. Prokhorov said on Oct. 13 the buyback could put the company "on the verge of bankruptcy."

UC RUSAL said on Tuesday it would use "all legal remedies" to cancel the Norilsk board's decision on the buyback.

"The share buyback in the current market conditions, at the price determined by the board of directors, is not only in breach of shareholders' rights, but also a serious threat to the financial stability of Norilsk Nickel and the company's ability to stand up to the crisis on world markets," UC RUSAL said. (Reporting by Polina Devitt and Robin Paxton, editing by Gerald E. McCormick)