UPDATE 1-Russian Usmanov selling Mt Gibson stake-sources

By Denny Thomas

SYDNEY, April 3 (Reuters) - Russian billionaire Alisher Usmanov is looking to sell a 19.5 percent stake in Australian miner Mt Gibson Iron Ore Ltd (MGX.AX) in a deal worth up to A$459 million ($421 million), two fund managers who bid for the shares told Reuters on Thursday.

Mt Gibson shares were placed on a trading halt earlier pending an announcement about a transaction in its shares.

Earlier this week, the Australian securities regulator had blocked Chinese steel maker Shougang from acquiring the stake from Gazmetall, a steel firm owned by Usmanov.

Merrill Lynch MER.N is the sole book runner for the deal. The shares are being offered in range of A$2.60-A$2.93 each, the fund managers said. Mt Gibson shares last traded at A$2.93.

"We have bid for it as we are pretty positive on the iron ore outlook," said one fund manager, who wished not to be indentified. "It will be well bid and I think it will go pretty close to the top of the range," he added.

The final settlement price would be determined after the offer closes at 5:00 p.m. (0600 GMT), the sources said.

Mount Gibson last month asked the regulator to block the sale after Shougang's Hong Kong-listed subsidiary, Shougang Concord International Enterprises Co Ltd (0697.HK), agreed to buy the stake in the Australian firm from Gazmetall.

Mount Gibson said the sale should be blocked as Shougang had not informed it that it planned to launch a takeover as required under Australia takeover rules.

Shougang, China's sixth-largest steel maker, also owns 18 percent of APAC Resources Ltd (1104.HK), which in turn holds 20.22 percent of the Australian miner.

Any institution holding over 20 percent of the stock of one company is required under Australian regulations to make a formal takeover bid.

Investment banks are looking to cash in on slightly more upbeat market sentiment in the past few days to get some deals done. The benchmark Australian share index .AXJO rose 1.6 percent to a five-week high in Thursday afternoon trade. ($1=A$1.09) (Editing by James Thornhill)