INTERVIEW-Nornickel aims to boost output to tap electric car boom
By Polina Devitt and Christian Lowe
MOSCOW, Nov 19 (Reuters) - Russian nickel and palladiumproducer Norilsk Nickel (Nornickel) plans to ramp upoutput over the next five years to tap an expected boom indemand from electric vehicle makers, its CEO and top shareholderVladimir Potanin told Reuters.
The company, which vies with Brazil's Vale to bethe world's largest nickel producer, has been profitable foryears thanks to its resource-rich Arctic operations, but outputhas been relatively stable due to a decline in metal content inore and as it focused on revamping production facilities.
Now, with nickel set to benefit from its use in batteriesfor electric vehicles, Potanin thinks the time is right to stepup production, he said in an interview.
The firm could lift nickel and copper output by 15 percent,and production of platinum group metals (PGMs) by 25 percent, by2025 from 2017 levels if it launches two new projects.
Nickel output alone could rise to 240,000 tonnes by 2025from 210,000 tonnes in 2017. This 30,000 tonnes equates to abouta third of Nornickel's estimate of the world's nickel deficitfor 2019.
The two projects being considered by Nornickel, whichcurrently accounts for 23 percent of global high-grade nickeloutput and is the world's top palladium producer with the shareof 40 percent, are the third stage of its Talnakh concentratorupgrade and South Cluster, which may start PGM production.
These projects would require the company to raise capitalexpenditure (capex) by $1.3-1.5 billion to $10.5-11.5 billion in2019-2022, Potanin said, adding he hoped Russia would supportsome of Nornickel's projects as part of the list of strategicprojects which metals and mining companies are discussing withthe government.
Nornickel's current capex plan includes $6.5-7.5 billion forits base investment programme and $2.5 billion for itsenvironmental programme. These programmes remain a priority, andare expected to add $1 billion to core earnings in 2019-2020 aswell as boosting output of nickel and PGMs by up to 5 percent.
If Nornickel goes ahead with the two new projects, Potaninsaid he would like to make sure the company's dividend paymentsare evenly distributed in the years of high investment, whileremaining the same in total over the next 4-5 years. Theenvironmental programme will peak in 2020-2021.
He said there were no immediate plans to discuss dividendswith aluminium giant Rusal, which holds 28 percent in Nornickel.Potanin owns a 34 percent stake.
PARTNERSHIPS
Potanin also said he planned to introduce the maximum amountof digital technology into Nornickel, which could help it get abigger slice of the market to supply electric vehicles (EV).
The company recently agreed to join forces with Germany'sBASF in the European EV battery market, and could domore such partnerships in other markets, Potanin said, addingthere were no concrete negotiations underway. Nornickel is also betting on palladium, used inemissions-reducing auto catalysts for gasoline cars, amidstricter emissions limits. Prices for palladium hit a recordhigh in London on Friday. Nornickel and Russian Platinum, a company backed by Russianbusinessman Musa Bazhaev, are considering a joint project calledArctic Palladium, which could become one of the world's largestproducers of PGMs.
The cost - subject to a feasibility study which is not readyyet - could potentially reach $6 billion, and so it couldrequire other partners, Potanin said. A decision is expected inthe second half of 2019.
(Reporting by Polina Devitt, Christian Lowe and KatyaGolubkova; Editing by Mark Potter)
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