LONDON – Russia's Nornickel has started replacing its old mining equipment with supplies from so called "friendly" countries - those that have not imposed sanctions on Moscow, it said on Monday, as it reported higher first-half palladium output.

Unlike many other Russian companies, Nornickel, the world's largest palladium producer and a major producer of high-grade nickel, have not been directly targeted by Western sanctions imposed on Moscow for its invasion of Ukraine in 2022.

However, decision by Western suppliers to stay away from the Russian market may pose operational challenges for Nornickel's production in the longer term.

"In the first half of the year we tested and began the gradual replacement of retiring mining equipment previously used by the company with equipment from new suppliers from friendly countries," Sergey Stepanov, Nornickel head of production, said in a statement.

"The successful implementation of our equipment replacement programme is essential to achieving our operational plans," he added.

Nornickel has warned the market earlier this year that some of its development projects planned for completion after 2024 face a two to three year delay as Western partners were refusing to supply some equipment.

For 2023, the company is on track to reach its 2023 production forecast, it said on Monday.

Its January-June palladium and platinum output rose by 5% year on year and 15%, respectively, to 1.48 million troy ounces and 367,000 ounces. Production of nickel fell by 9% to 91,326 metric tons due to scheduled repairs, while copper output was flat at 203,472 metric tons.

Nornickel's long-term development programme is passing the peak of the investment cycle this year with 2023 capital expenditures of $4.7 billion. The miner is reviewing its capex to calculate availability of suppliers and see if alternative design solutions were necessary.