Bloomberg reported that OAO GMK Norilsk Nickel, Russia’s largest mining company, plans to add copper, coal and iron ore assets in Indonesia and Latin America as it seeks to overcome a reliance on nickel and triple its market value to USD 150 billion.
Mr Vladimir Strzhalkovsky CEO of Norilsk Nickel said that “It’s dangerous to depend on nickel, in which we already control a quarter of the global market. Copper, where Norilsk has just 3% share in global production, provides more room to expand.”
While nickel output may rise about 68% by 2025, Mr Strzhalkovsky is targeting an almost threefold jump in copper and a doubling in production of platinum group metals. That’s intended to help the company, which produces 80 percent of its metals at Soviet era Russian plants, triple its market value in 14 years as it pursues the diversification model of global competitors Vale SA, BHP Billiton Limited and Rio Tinto Group.
Norilsk is the world’s biggest producer of nickel, which accounts for two fifths of its sales. Prices of the metal, used to make stainless steel, have fluctuated between USD 9,000 and USD 51,600 per tonne in the past 3 years on the London Metal Exchange. As much as 80% of Norilsk’s profit has come from its polar division which extracts ores from mines north of the Arctic Circle, as deep as 1.3 kilometers.
Mr Dmitriy Kolomytsyn Moscow based analyst at Morgan Stanley said that “Norilsk should diversify its business in terms of geography and products, as its nickel reserves in Russia are becoming poorer. While the company generates good cash it should buy new nickel or other mining assets overseas.”
Mr Strzhalkovsky said that by 2025, Norilsk Nickel plans to increase nickel output to 500,000 tonnes per year and copper production to 1 million tonnes. In 2010, Norilsk produced 297,329 tonnes of nickel, 388,872 tonnes of copper, 2.86 million ounces of palladium and 693,000 ounces of platinum.
He said that Indonesia is attractive to Norilsk because the country is rich in mineral resources and cheap labor. Norilsk said May 6 it signed a memorandum of understanding to build a copper smelter in the Southeast Asian country with capacity of 400,000 tonnes of the metal a year.
Mr Strzhalkovsky said that in Latin America, Norilsk is evaluating possible acquisitions in Brazil, Argentina, Peru, Mexico and Cuba. We are analyzing this market very seriously, though there is no goal to expand abroad immediately without evaluating the long term outcome. We won’t necessarily strike any deals this year or in 2012.
He said that Norilsk will study buying mining projects valued at USD 100 million as well as companies. He declined to give any targets for iron ore and coal production by 2025, or for foreign investment. Norilsk plans to spend USD 34 billion by 2025.
(Sourced from Bloomberg.net)
