Five banks faced the prospect of losing one of the most prized European flotations of the year as Russian miner Metalloinvest began merger talks with London-listed miner Kazakhmys as an alternative to an initial public offering given the difficult market conditions.

Although Kazakhmys confirmed in a statement that it was in "very preliminary discussions about a possible combination of its business with a third party", the company created confusion this morning when it appeared to rule out a reverse merger.