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Nornickel to grow production of base, PGM metals by up to 50% over next 10 years

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Nornickel to grow production of base, PGM metals by up to 50% over next 10 years

Highlights

Production plans reflect changes to metals revenue shares

15%-50% output hikes need 70% increase in ore volume

London — Russia's Nornickel is targeting production growth of up to 15% for nickel, 20% for copper and 50% for platinum group metals by the early 2030s from the company's 2020 levels to insure supply availability, the company has said.

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Nornickel's long-term targets are to be achieved via organic growth, mainly brownfield assets redevelopment, with no acquisitions in the pipeline so far, the company's management said during Capital Markets Day on Dec. 1.

To carry out its major expansion projects, Nornickel will at least double its capital expenditures to $3.5 billion-$4 billion over 2022-2025 from $1.7 billion over 2013-2020. Capex will then reduce to below $2 billion/year in 2026-2030.

Nornickel envisages its annual nickel production to grow by 15% from 2019-20 levels to reach 250,000-270,000 mt in 2030 and the following years. Over the same decade, it aims to grow copper production by 15%-20% to 490,000-530,000 mt and hopes to grow platinum and palladium 45%-50% to 150-160 mt.

The ever-increasing palladium-attributed contribution to Nornickel's overall revenue -- largely conditioned by the 220% spike in palladium prices between November 2013 and November 2020 – is what prompts the company to consider ramping up PGM production more than any other metal.

Over the last seven years, the share of revenues from palladium in Nornickel's sales doubled to 39% in 2019 from 19% in 2013. In monetary terms, palladium-generated revenue jumped by 143% to $5.3 billion in 2019 from $2.2 billion in 2013.

Nickel contribution to the total, on the contrary, halved to 26% in 2019 from 42% in 2013, which corresponded to a 27% drop in dollar terms from $4.8 billion to $3.5 billion between 2013-2019.

Palladium and platinum are the only metals in Nornickel's basket, whose global supply is seen in deficit this year. 2020 has seen palladium deficit maintained stable year on year at 400,000 oz, while platinum plunged into 100,000 oz deficit from 500,000 oz surplus in 2019.

Nornickel in 2021 expects the global palladium market to balance out, while platinum is likely to revert to surplus with supply exceeding demand by just over 1 million oz.

Copper and nickel global supplies have swung into surplus (108,000 mt for Ni and 180,000 mt for Cu) this year, from small deficits in 2019, and are expected to remain in surplus through 2021.

Production growth over decade

To deliver on the above output targets, Nornickel will ramp up polymetallic sulphide ore extraction in the Norilsk region to 30 millon-32 million mt/year by 2030. The volume represents a 70% growth from 2019, when the region contributed 18.4 million mt, or 70%, of Nornickel's 26.3 million mt ore output, excluding the tonnage from Bystrinsky Mining and Enrichment Plant in Zabaykalsky Krai, Eastern Siberia, in which Nornickel holds a 50.01% stake.

Beyond 2030, ore volumes will be sustained via projects aimed at securing Talnakh deposit redevelopment. In the medium term, mined volume growth will be driven by the ramp-up of Skalisty, the deepest nickel ore mine in Eurasia, that will be fully commissioned in mid-2021. Around the same time, Nornickel will start open-pit ore mining at South Cluster Project -- a large-scale, long-life (25+ years) brownfield open pit, Medvezhiy Ruchey (Bear Creek), at the bottom of the global PGM cost curve. Once ramped up to its upgraded capacity, Ruchey, which in 2019 produced 1.6 million mt, will deliver 9 million mt/year of ore processed into 750,000-850,000 oz of PGMs, 13,000 mt of nickel and 20,000 mt of copper.

To allow for enlarged processing volume, the company is expanding its Polar Division's Talnakh concentrating capacity to 18 million mt/year from 10 million mt by 2023. This may not be enough, however, and Nornickel is conducting a scoping study for new Norilsk concentrator or an upgrade/expansion of the existing one, which last year processed 7.5 million mt of ore.

In 2021, Nornickel will make a final investment decision for the construction of 150,000 mt/year Kola Copper Refinery that could replace the existing 75,000 mt/year obsolete copper line, due to be phased out soon, once on line in 2025.

A final investment decision is also expected that year for the expansion of Norilsk-based Nadezhda Metallurgical Plant through the installation of the third furnace that will increase Nadezhda's nickel concentrate smelting capacity by 850,000 mt/year after its installation provisionally scheduled for 2025.

Nornickel is also targeting full modernization and scale up of nickel refining facilities at the Kola Division, including Monchegorsk-based and those at the Harjavalta nickel processing plant in Finland. The company will complete scoping studies to define specific projects to this end in 2021.