MMC Norilsk Nickel (hereinafter, Norilsk Nickel or the Company), the world’s largest refined nickel and palladium producer, hosts today its annual strategy day.
The management reports the main results of the completed strategic cycle of 2013-2015 and sets key goals and priorities for the next strategic cycle of 2016-2018.
In 2013-2015, a significant progress was achieved in transforming Norilsk Nickel into a worldclass run organization, having built an efficient business platform enabling full development of the Company’s best-in-class mining assets. The Company has successfully rolled out stringent investment governance discipline, refocused its asset portfolio on Tier-1 assets and executed on a large portion of non-core and non-Tier 1 asset disposals.
Over the past 3 years Norilsk Nickel delivered: 39% reduction of cash nickel-equivalent unit costs in USD terms;
• USD 3 billion release of unproductive capital;
• Optimization of mandatory capex to industry benchmark levels.
Over the same period, despite extremely challenging commodity markets Norilsk Nickel demonstrated a superior financial performance relative to its global peers, reporting one of the industry’s lowest leverage levels and highest profitability, while also being the only global mining major generating positive total shareholder return.
Having realized what the management considers as the ‘quick wins’, the Company sets its priorities for the next three years with a focus on further downstream modernization, identification of growth opportunities in upstream and a major effort to advance with an improvement of its environmental footprint.
HSE – On Top of Strategic Priorities Norilsk Nickel continues to strive for making its production assets clean and safe operations. An HSE strategy approved by the Board in 2014 has already resulted in a major progress in Health and Safety as independently verified by an international audit. Full elimination of workforce fatalities remains the key priority for the management.
In 2016, the Company is planning to complete the first phase of its environmental programme. The phased out shutdown of Nickel Plant is on track and scheduled for the full completion in October, that should result in a significant reduction of overall SO2 emissions (by 15%) and emissions within the Norilsk city boundaries by 35%.
The Company has also engaged into the second phase of the environmental program, having launched active preparations for the construction of the ‘Sulfur project’ with an ultimate goal to decrease the overall SO2 emissions by 75% at the Polar Division. The Sulphur project design for Nadezhda plant has been complete and approved by the Russia’s regulatory body (Rostechnadzor). Construction site preparations have started and one of the leading engineering and industrial construction firms, SNC Lavalin, has been commissioned to prepare a detailed engineering project
New Configuration for Copper Stream A new reconfiguration concept for copper stream at Polar Division is presented, that entails the transfer of converting and anode smelting operations from Copper Plant to Nadezhda Metallurgical Plant. The modernization of Copper stream in such a way enables the transfer of the most polluting facilities of Copper plant from the city of Norilsk and full utilization of the prospective Sulphur dioxide capturing facilities at Nadezhda plant.
Upstream Strategic Optionality and Investment Governance Update According to the current base case mine plan, mining volumes at Talnakh deposit developed by Polar Division to grow from 14.8 mtpa to 18 mtpa over the next decade. This mine output growth will secure stable and highly profitable metal production of Norilsk Nickel for the next several decades.
In addition, the Company has identified a growth option for Norilsk-1 deposit (South Cluster) that could potentially grow mine output to 6 mtpa by 2024. The Company will consider the potential development of the project also in a form of potential partnership. The feasibility study for the prоject has been commissioned and due for completion in 2H 2017.
All-in CAPEX target for 2016-2018 is forecasted at USD 2 billion per annum, with the base investment program necessary to maintain stable production is cumulatively set at USD 4.4 billion over the period, with the remainder allocated for the completion of Bystrinsky project, the Phase-1 of Sulphur project and, potentially, growth options.
Progress on Bystrinsky Project The construction of Bystrinsky copper-gold project in Chita region is on time and on budget with 45% completion rate as of May 2016 and the scheduled launch in 4Q 2017. De-risking of the project has progressed well with Norilsk Nickel having brought a minority equity investor from China and signed a project financing facility for up to USD 800 million with Sberbank.
Balanced Model and Superior Shareholder Returns The Company remains committed to maintaining industry-leading dividend yield while protecting its balance sheet during the downturn in commodity markets. The new dividend targets, with a variable payout EBITDA ratio (ranging from 60% to 30%) depending on the Company’s leverage, will be applied to dividend distributions for 2016 onwards. The management is confident that dividend flexibility is sufficient to sustain a balanced financial model of the Company, while maintaining its capital investment program and social obligations.
Commenting on the strategic update the Company’s President Vladimir Potanin said, “Since the adoption of a new corporate strategy in 2013 we have not only delivered on the industry leading shareholder return, but also on our commitments to stakeholders, including our employees, communities and the Russian government.
Over the last three years, we feel that operational and financial results achieved have been quite remarkable as Norilsk Nickel streamlined its asset portfolio, went through a major capex and opex optimization, release of excessive capital and rolled out a stringent investment governance discipline.
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ABOUT NORILSK NICKEL: Public Joint-Stock Company Mining and Metallurgical Company Norilsk Nickel is a diversified mining and metallurgical company, the world’s largest producer of refined nickel and palladium and a leading producer of platinum, cobalt, copper and rhodium. The Company also produces gold, silver, iridium, selenium, ruthenium and tellurium. The production units of Norilsk Nickel include Polar Division, located at the Norilsk Industrial District on Taymir Peninsula, and Kola Mining and Metallurgical Company located on the Kola Peninsula in Russia as well as Harjavalta nickel refinery in Finland. Norilsk Nickel’s shares are listed on the Moscow and on the Saint-Petersburg Stock Exchanges. Norilsk Nickel ADRs trade over the counter in the US and on the London and Berlin Stock Exchanges.