Norilsk Nickel: 5 lean years, focus on incomes

The new strategy of Norilsk Nickel, published on October 4th, has finally got past the investment superfluity and princely gestures on the increase of the production.

In the next five years, Norilsk Nickel plans minimal growth of metal production, stably modest investments in the amount of $2 billion every year and full withdrawal from foreign and non-core assets.

“Our improved strategy will allow the company to be on firm ground in any market conditions,” – the General Director and co-owner of Norilsk Nickel, Vladimir Potanin stated, presenting the strategy to investors.

How it was and how it is now

The former development strategy intended the diversification into the power industry and coal, a rich assortment of foreign assets, full vertical integration and inactive geological exploration. The new plan of Norilsk Nickel is a renunciation of the vertical integration, the focus on the first-class mining assets in Russia and the development of geological exploration as a certain efficient business. At the same time, the management is sure that the new model will ensure confidence in Norilsk Nickel for the next 20 years.

Earlier the company emphasized the volumes of commercial metal, and now it focuses on mining. On the assumption of its capabilities, plans on concentrate production will be formed – taking into account the market situation it will be supplied to the market or will be used in their own production.

The return of capital will become the main criteria for choice of investment projects. The strategy intends that all industrial assets of the company must correspond to criteria of the first-class ones by 2015. Norilsk Nickel finds assets first-class if they are large-scale, to give income in the amount of over $1 billion, have the EBITDA profitability in the amount of over 40% and if their lifespan is over 20 years.

The company plans to present update of the strategy every year. The next one is scheduled for the second quarter of 2014.