Norilsk Nickel Turns its Attention to the Environment and Tier 1 Assets – by Vladislav Vorotnikov (Engineering and Mining Journal – February 2014)

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Something happened on the road to the Voronezh project; environmental activists backed by Putin convinced Russian nickel miners to clean up their act

MMC Norilsk Nickel, the largest mining company in Russia and one of the world’s largest nonferrous base-metal miners, faces very serious pressure from the community and Russian environmental protection organizations. They claim that the company’s activity harms the health of surrounding citizens and nature. These pressures combined with weaker prices for metals are raising future performance standards for the company.

In terms of total world production, Norilsk Nickel mines palladium (41%), nickel (17%), platinum (11%), cobalt (10%, concentrate) and copper (2%). Domestically, the company accounts for all of the platinum production, most of the nickel (96%), cobalt (95%) and a majority of the copper (55%). As an industrial leader, it plays a crucial role in the Russian economy, accounting for about 4.3% of all Russian exports, 1.9% of GDP, 2.8% of total industrial output and 27.9% of output of the non-ferrous metallurgy industry.

Recently Norilsk Nickel updated its development strategy, which, as confirmed by top management, dramatically changes its course for the coming years. The primary focus of development in accordance with the new plan will be on large assets, possibly including Voronezh, the last large non-developed nickel deposit in Europe.

This project probably will be implemented jointly with the other Russian nickel-mining company, UMMC. During the tender process, it was selected over Norilsk Nickel, but has since proposed a joint venture to develop this deposit. Implementation, however, was halted for a while because of mass public protests. Some residents of Voronezh believe that the proposed processing facilities will be harmful to the surrounding environment.

Environmental groups opposing the project cite the results of recent studies that show that Norilsk has become the most polluted city in the world during the last 20 years. They claim the incidence of cancer is more than twice the national average for Russians (for some cancer there is more than eight times higher than the national average). The Voronezh protests became so active that the prospects for developing the deposit are unclear.

Charting a New Course

During October 2013 the Norilsk Nickel board of directors approved a new development strategy, which is very different from previous programs. The previous strategy, approved in October 2011, was canceled because of the significant drop in nickel prices.

Three years ago Norilsk Nickel was going to become a diversified mining company, according to statements re- leased by the company. The 2011 plan allocated $37.6 billion of investment through 2025, including $10.9 billion directed toward developing a resource base. At the time, the company thought this investment would propel its status to one of the five largest by market capitalization, doubling earnings compared to 2010 to $14.3 billion, and increasing the level of ore mining at the Russian mines by 150%.

“It was a production plan developed with little regard to the volatility of the market conditions,” said Pavel Fedorov, deputy director of Norilsk Nickel. “It should have withstood the most severe stress tests, including those that the market has faced in 2013: a 30% drop of prices for nickel.”

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