Norilsk Nickel Presents Its Annual Strategy Update

MMC Norilsk Nickel (hereinafter, Norilsk Nickel or the Company), the world’s largest nickel and palladium producer, hosted today its annual strategy update providing the investor community with a comprehensive review of its progress on the new strategy approved in 2013.

The new approach to managing the business with its focus on the return on capital produced results already in 2013 as Norilsk increased its year-on-year cash flow by a factor of five despite an unfavorable commodity market environment and declining nickel prices.

Today the company unveiled the reconfiguration program for its downstream assets. The program entails modernizing processing facilities, consolidation of smelting and refining capacity to maximize the economies of scale for the operations and a corresponding shutdown of outdated facilities, including the Nickel Plant in the city of Norilsk. Capital investment in the program of downstream restructuring will amount to $1.5bn and will cover upgrading Talnakh concentrator facility and expansion of Nadezhda smelter in the Polar division as well as upgrading and scaling up the Monchegorsk refinery by 2016-17.

With regard to the planned shutdown of its Nickel Plant in Norilsk by 2016, the company is engaged in the dialogue with the Government of Russian Federation in order to define a co-investment approach for this important social and environmental project.

The company has also developed and implemented operational improvement "roadmaps", which are expected to have a material impact on profitability already in 2014. Efficiency gains and investments into modernization should result in additional EBITDA of more than $650 million per annum starting from 2018.

As a part of the ongoing strategic portfolio review, Norilsk Nickel received an independent technical assurance for Bystrinsky project confirming the viability of its financial model. The Company approved the project at its Investment Committee and is considering project finance options for Bystrinsky GOK aiming to launch it in 2017.

Important constituents of the new strategic plan are corporate initiatives targeting additional shareholder value over the period of 2013-2016, which is expected to be equivalent to an annual EBITDA. The initiatives include halving of working capital (from $4 bn to $2 bn), release of more than $1 bn of nonproductive capital via exit from non-core and low margin assets, and a reduction of SG&A and purchasing costs.

Over the 2014-2017 period, the Company is guiding its total capital investments to be around $9.5 bn. The Company is considering non-recourse funding sources, in particular, $1 bn project financing for Bystrinsky GOK project, which is included in the total capex.

The Company is taking its dialogue with the government to a new level. The Company is engaged into public-private partnership to develop large infrastructure projects. Jointly with the Government of the Russian Federation, the Company is preparing accelerated development programs for Taymyr region, improvements into legislation to stimulate exploration and long-term growth of non-ferrous and precious metals mineral resources as well as initiatives for the development of infrastructure.

The CEO, Vladimir Potanin commented: "We are delighted to provide investment community with an updated development strategy for Norilsk. Last October we defined the main principles of our strategic vision, and laid down the foundation for our sustainable development. Our 2013 results confirmed that we are progressing well towards our strategic goals. We believe that the delivery on our next three-year targets will require an absolute focus of the management on our objectives and a lot of hard work. I believe that in the coming years, the world’s best mineral resource base and a highly experienced management team will enable us to open a new chapter in Norilsk Nickel’s history”.

ABOUT MMC NORILSK NICKEL:

MMC Norilsk Nickel, a company incorporated under the laws of the Russian Federation, is the largest diversified mining and metals company in Russia, the world's largest producer of nickel and palladium and one of the world's largest producers of platinum, rhodium, copper and cobalt. In addition to this, MMC Norilsk Nickel produces a large number of other by-products, including gold, silver, tellurium, selenium, iridium and ruthenium.

The key production units of the Company’s group in Russia are at the Polar and Kola Peninsulas. MMC Norilsk Nickel international assets include operations in Finland, Australia, Botswana and South Africa.

MMC Norilsk Nickel’s shares are traded on the Moscow Exchange. ADR’s on the Company’s shares are traded on the other the counter market in the US and on the London and Berlin stock exchanges.