NEW YORK MMC Norilsk Nickel does not expect its revised resource strategy, which emphasizes the companys Russian operations at the expense of international assets, will affect its nickel output "in the long run," chief operating officer Sergey Dyachenko told AMM during an Oct. 7 investors meeting in New York.
Moscow-based Norilsk announced details of the new strategy Oct. 4 after the companys board of directors approved the plans last month (amm.com, Oct. 4). The worlds largest producer of nickel and palladium is prioritizing upstream assets within its Polar and Kola divisions, with plans to offload operations in South Africa, Botswana and Australia by 2016.
Dyachenko highlighted Norilsks strategy of focusing on Tier 1 assetshigh-revenue, high-margin operations that provide a greater return on the companys investmentwhile divesting itself of international operations that constitute "a small part of (Norilsks) total production."
"Weve gone through the analysis on all our production, and it was quite obvious for us that we should focus on our main assets," Dyachenko said. "In the long run, I think its not going to affect production."
Norilsks revised strategy includes infrastructure development within its Polar division projects, which already meet Tier 1 criteria of more than $1 billion in annual revenue, earnings before interest, taxes, depreciation and amortization margins over 40 percent and a reserve life greater than 20 years. The company also plans to reduce operating costs and improve efficiency within the Kola division to help it reach targeted levels of profitability by the end of 2014.
Dyachenko said the companys potential for growth within those divisions is "why were divesting from the international assets," adding that Norilsk has "already started the process" of offloading its foreign operations. "Were looking at proposals from the market. Obviously, were not in a rush; those assets do produce. If we get a very attractive proposal, well sell those assets."
The new strategy also includes an increased focus on existing copper and platinum group metals (PGM) assets within Norilsks portfolioassets that Dyachenko said have helped shield the company from declining nickel prices.
"The uniqueness of the situation is we have several commodities in our portfolio," he said. "With copper and PGMs, our operating costs are actually backed well, so the nickel price decline hasnt affected us much. Even with the decline in the nickel price, our profit margin never got below 41 percent."
Dyachenko, who joined Norilsk in July after three years with London-based copper mining company Kazakhmys Plc, touted future growth within the copper sector, but added that Norilsks plans wouldnt constitute "a huge increase in production."
"Im a strong believer in the copper market," he said. "I think the demand for copper is going to grow. With Chinas organization and the movement of its people, each household will require copper."