* Govt prices stake at minimal discount of 103 zlotys/share
* Sale raises $720 mln as copper trades off 16-month highs
* KGHM shares gain 0.4 percent after Thursday's sell-off
(Adds details from new treasury statement, updates share price)
By Agnieszka Barteczko and Adrian Krajewski
WARSAW, Jan 8 (Reuters) - Poland has sold 10 percent of KGHM , Europe's second biggest copper producer, for some $720 million, riding a buoyant metals market as it embarks on an ambitious plan to raise at least $8.8 billion from privatisations in 2010.
The shares changed hands on Friday in off-market transactions at 103 zlotys each, Reuters data showed - the price set by Poland's treasury after it completed bookbuilding for the deal, which the treasury said was oversubscribed by 50 percent.
The ministry added in a statement that 56 percent of the shares offered were obtained by local investors, including pension funds, which bought around a third of the stake.
The news helped KGHM's share price close Friday's session 0.4 percent up at 104.5 zlotys, after a 4.5 percent fall the previous day.
Reuters first reported on Thursday what was an unexpectedly early move to seek financial buyers for the stake - but one which analysts said reaped dividends for a government facing a ballooning budget deficit.
Fuelled by resurgent metal prices, the stock nearly quadrupled in price last year.
"The treasury picked a very good moment for the sale. Copper is at a 16-month high and the outlook for metals is varied," said Robert Maj, analyst at KBC Securities in Warsaw. "I thought (the price set by the ministry) would be a little lower."
Copper was steady on the London Metal Exchange on Friday, trading at $7,533 a tonne, having hit a 16-month high of $7,796 the previous day.
Thursday's report that the share sale was imminent contributed to a lowering of yields on Polish debt as the deal highlighted the commitment of the European Union's largest ex-communist member to limiting its borrowing in 2010 with funds from asset disposals.
Some investors were also betting that conversion of foreign cash to pay for KGHM shares would help the zloty, although dealers said the impact would be limited.
"Some players on the FX market speculated on this news but it seems like it was only small front-running," one Warsaw-based dealer said.
"The market still expects privatisation inflows to boost the FX market further on but ... sentiment is still mixed and right now most investors have a 'wait-and-see' approach," he said.
The zloty was trading 1.1 percent up at around 4.0680 against the euro.
The centre-right government, which expects its budget deficit to soar to 52.2 billion zlotys ($18.2 billion) in 2010, said last year it would sell as much as 10 percent of KGHM on the market in 2010 but retain control over the miner. ($1=2.866 zlotys) (Additional reporting by Dagmara Leszkowicz; Editing by John Stonestreet and Greg Mahlich)