LONDON/MOSCOW – Russia's Norilsk Nickel plans to increase capital expenditure to an average of $2.3-billion to $2.5-billion a year in 2019 and 2020 from about $2-billion in 2018 due to an environmental project and infrastructure modernisation, it said on Monday.
Nornickel, part-owned by Russian businessman Vladimir Potanin and aluminium giant Rusal, is the world's top palladium producer and second-largest nickel producer.
"In the next three years, we are budgeting for an increase in capital investments that will allow us not only to maintain metal production volumes, but also put a solid foundation under new perspective projects," Potanin, also Nornickel's president, told an Investor Day in London.
The environmental project aims to reduce sulphur dioxide emissions in Nornickel's Russian assets by 75% by 2023. The assets are based near the city of Norilsk, which has a reputation as one of the most-polluted places in the world.
COO Sergey Dyachenko also told Reuters the company planned to cut costs by $200-million to $300-million a year by 2020 through modernising its assets, shutting down outdated capacity and implementing automation systems. The company's management confirmed its medium-term target level of net working capital of $1-billion, with the ratio of net debt to earnings before interest, taxation, depreciation and amortisation expected in the range of 1.5-2.5. However, a number of one-off initiatives to improve working capital structure could lead to a temporary increase of its net debt by the end of 2017 due to a rise of net working capital, which is expected to normalise in 2018.
Nornickel also said a feasibility study was in progress on its South Cluster growth project, which is located near Norilsk and has the potential to join world's top five producers of platinum group metals (PGMs) in six to seven years based on its reserve base. The final investment decision for the project is expected to be considered in the first half of 2018, the company said.
In October, Nornickel launched a greenfield copper, iron and gold Bystrinsky mine in the country's remote Far East, near the Chinese border.
"Nornickel will consider the possibility of the IPO (initial public offering) of the project in the medium term," it said.
The Russian mining giant, which competes with Brazil's Vale SA for the ranking of the world's top nickel producer, updated its production forecast for 2018-2020, which will see its nickel and PGMs output stable compared with 2017. Its copper output, however, will rise due to processing of copper concentrate and higher grade of copper in ore. Nornickel agreed to buy 1.5-million tonnes of copper concentrate from state conglomerate Rostec in late 2016.
Nornickel's current 2017-2020 production guidance from Russian feedstock:
|Metal||2017 output||2018 - 2020 forecast|
|Nickel||206 000 t - 211 000 t||210 000 t - 215 000 t|
|Copper||377 000 t - 387 000 t||400 000 t - 420 000 t|
|Palladium and platinum||100 000 t - 105 000 t||100 000 t - 105 000 t|