Nornickel Vladimir Potanin
JOHANNESBURG (miningweekly.com) – Nickel and palladium producer Norilsk Nickel (Nornickel) has posted a 16% drop in full-year net profit, as the miner realised a smaller foreign exchange gain.
Nornickel's net profit declined to $2.12-billion in the year ended December 2017, from $2.53-billion in 2016, the company reported on Tuesday.
Earnings before interest, taxes, depreciation, and amortisation (Ebitda) increased by 2% to $4-billion, with an Ebitda margin amounting to 44%, down from 47% in 2016.
Revenue rose by 11% to $9.15-billion, of which metal sales accounted for $8.42-billion. Palladium was the largest contributor to total metal sales at 28%, or $2.35-billion, followed by nickel at 27%, or $2.30-billion, copper at 27%, or $2.28-billion and platinum at 7%, or $623-million.
Nornickel said that palladium was the best performing commodity in its core metals basket, with the price rallying by 42% year-on-year to an average of $869 a troy ounce. The group is upbeat about the palladium market, noting in its financial report that the market deficit would widen this year on the back of continuing demand growth from the automotive sector and a lack of new primary supply. The company does not foresee an immediate threat from electric vehicles.
During 2017, Nornickel invested $2-billion on capital expenditure (capex), which was a 17% increase on the previous year. The higher capex figure was as a result of the Bystrynksy copper project, which was in its final construction stage, and the Bystrinsky concentrator, which was launched into hot commissioning at the end of 2017.
With the launch of the Bystrinsky project, in Zabaykalsky Kray, Nornickel completed the largest mining operation built in Russia from scratch for the last ten years.
“For us it is not just a new asset that will deliver an additional 70 000 t of copper and 250 000 oz of gold per annum, but also a perfect opportunity to implement the most advanced technological, social, human capital management and environmental solutions,” Nornickel president Vladimir Potanin commented in a statement.
He described 2017 as an “exceptionally important year” for the company, noting that it had marked the successful completion of a number of key developments that started in 2013/14.
Nornickel also took advantage of favourable market conditions on global capital markets and historically low interest rates to substantially decrease its cost of capital. During the last year, the company prepaid expensive rouble loans for the total amount of RUB60-billion, issued two Eurobonds for $1.5-billion with a historically low coupons for the company, renegotiated the terms of bilateral credit facilities for the total amount of $2.5-billion and signed a $2.5-billion syndicated facility with a group of international banks at the lowest rate available for Russian corporates.
Finance costs reduced by 18% year-on-year to $535-million.
At the end of December, Nornickel’s total debt amounted to $9.05-billion and its net debt/Ebitda ratio increased to 2.1 times at the end of 2017, from 1.2 times at the end of 2016.