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Russian mining giant announces major investment programmes for this year
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14th January 2011
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OJSC MMC Norilsk Nickel is to invest $2,8-billion this year into its core production assets and infrastructure in Russia. The intent is to overhaul, restore and modernise essential production facili- ties and infrastructure, including power generation, transport and gas extraction and pumping. The aim is to reduce opera- tional risks, make certain that machinery and equipment will operate reliably, and optimise costs.

Norilsk will also invest more than $30- million this year in installing an internal information technology system, which will create a unified information network within the group, and in optimising its business processes. In addition, it plans to increase the output of its Russian mines in order to maintain its primary metal production at the same levels as last year (the company’s mines are now exploiting differently struc- tured zones of their orebodies). Further, the company will invest more than $45-million in exploration programmes in Russia.

Norilsk forecasts that 2011 nickel production will reach up to 235 000 t, copper production up to 358 000 t, palladium production up to 84 t and platinum production up to 21 t. The group predicts that its revenues this year will be about the same as those for 2010.

On the environmental front, it will accelerate its already initiated programme to reduce sulphur pollution. Regarding its workforce, Norilsk plans to increase the salaries and wages of its production personnel in Russia.

The group will also continue to develop its social programmes. These include cooperative programmes with the Russian federal and regional governments regarding the resettlement of retirees and the development of the infrastructure of the city of Norilsk. (The mining complex which now forms the core of Norilsk Nickel and the town developed in parallel – the town is a few years older than the mining operation, which produced its first copper/nickel matte in March 1939.)

Norilsk will also seek to curb the price increases, driven by inflation, of goods and services bought by the group. These measures will include the setting up of a company that will undertake maintenance of the utility and housing infrastructure, and the taking over of the regional airline company, Nordavia. Last month, it was announced that Russian flag carrier Aeroflot would sell 51% of Nordavia to Norilsk. The deal is known to be in its final stages.

Nordavia operates 11 Boeing 737-500 and four Antonov An-24 airliners and carries more than one-million passengers annually. It is based at Arkhangelsk and its destina- tions include Moscow and St Petersburg and, since December, has operated a Moscow–Norilsk service.

Norilsk already owns Taimyr Airlines, which operates under the name NordStar Airlines and is equipped with five Boeing 737-800s. It seems that Nordavia will now fall under the aegis of Taimyr, which was founded by Norilsk in 2009. (While Nordavia is a scheduled operator, NordStar is apparently a charter concern.)

In addition, Norilsk has agreed to a deal with the predominantly State-owned Russian power company OJSC Inter RAO UES, in which Norilsk will swap its 65,16% shareholding in electricity utility OJSC OGK-3 for a 13% to 15% stake in Inter RAO. This deal is expected to be concluded in May or June and will result in Inter RAO owning some 85% of OGK-3. OGK-3 has six thermal power plants with a total generating capacity of 8 357 MW.

Inter RAO, which is 57,3%-owned by State-owned companies Rosatom and Energoatom, has a total capacity of some 18 000 MW. Both Rosatom and Energoatom are nuclear energy companies; Energoatom must not be confused with a Ukrainian nuclear energy company of the same name.

Norilsk is Russia’s biggest diversified mining and metals company, and has two operating assets in Southern Africa, these being Tati Nickel, in Botswana, in which Norilsk holds an 85% stake (the remaining 15% belongs to the Botswana government) and Nkomati Nickel, in South Africa, which is a 50:50 joint venture with South African group African Rainbow Minerals, with the latter responsible for managing the operation.

Edited by: Martin Zhuwakinyu


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