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Norilsk Nickel may add $400 million to interim dividends

Russian metals giant Norilsk Nickel is considering a possibility of including about U.S. $400 million of net proceeds from non-core assets sale to interim dividend payments for January–September, First Deputy CEO Pavel Fyodorov said in an interview with TASS.

Additionally, the dividends will include 50% of EBITDA for January–June, as well as funds after working capital reduction. The company's EBITDA for January–June increased 8.6% on the year to U.S. $2.496 billion, under IFRS, while free cash flow almost tripled to $2.4 billion.

PALLLADIUM REPURCHASE FUND

Norilsk Nickel is considering participation in a palladium repurchase investment fund and is ready to finance no more than 10% of the purchases.

“We are holding negotiations with major palladium market participants on repurchasing of palladium stocks. Palladium will not be repurchased by Norilsk Nickel but by the investment fund, one of the participants of which Norilsk Nickel may become,” he said.

He also said that there is a number of market players, which have accumulated big palladium reserves on balance for the last years, and currently have no industrial model for its sale.

"We are, as a big and responsible player on this market, producing over 40% of the global palladium, and clearly understand out responsibility. We have distribution channels and the understanding of what the final buyers need. We are ready to provide smooth passage of this production through the distribution chain and do not want it to be thrown on the market in any form, as it was within the last 10 years", Fyodorov added.

Norilsk Nickel wants to buy $2 billion worth of the metal from the central bank to guarantee supplies to clients, CEO Vladimir Potanin said earlier. Palladium can be used as collateral against debt, Fyodorov said.

Norilsk Nickel estimates palladium deficit at 1.4 million ounces in 2016, while in 2013 it stood at 950 million ounces. Given the current prices, the company can purchase about 2 million ounces worth $2 billion.

SALE of NON-CORE ASSETS

"Norilsk Nickel plans to sell non-core assets by 2018, but this year any deals are unlikely, as the company wants the deals to be profitable for its shareholders. The work on the sale of non-core assets is in process, namely airline NordStar, a 13% stake in power holding Inter RAO, office building in Moscow, as well as a long list of other non-core assets," Fyodorov said..

Since 2013, Norilsk Nickel had already disposed foreign assets worth over $400 million. As a whole, the company plans to raise about $1 billion, which will be repaid to shareholders in the form of special dividends until 2018.

STRATEGY RENEWAL

Norilsk Nickel will present its investment program for the ore mining sector in March 2015, Fyodorov said. The company’s current 2014-2016 investment program envisages about U.S. $2 billion of annual investments, including spending $1.6-2 billion on the development of existing projects in the three years, $800 million–$1.2 billion on developing the Skalisty mine and $300-500 million on other projects. Additionally, the company plans $2.8-3.2 billion sustaining capital expenditures within the next three years.

"We have strictly defined the range of strategic priorities for our company", Fyodorov said adding that the company would like to keep its social and environmental responsibilities and focus the business on capital return. Taking into account these priorities, we have analyzed our investment portfolio, defined Tier-1 assets for us and are focusing our activities on these assets in order to increase return on capital for the shareholders. Within the last year, we have reached a high level of return on capital among our peers, which amounts to 20%", he added.

AFFECT OF SANCTIONS

Norilsk Nickel sees no problems in buying foreign equipment for its new projects, despite the introduced sanctions by the Western countries. "I do not think that there are some problems in this direction", Fyodorov said.

He also said that the company continues working on development of the Tier-1 assets.

"Certainly, there is an impact of the sanctions on the financial markets. But if we are talking specifically about our company, we are working rather efficient: we have self-financing business, a balanced debt portfolio, very good liquidity cushion and the best dividend yield among mining companies in the world", Fyodorov said.

Today, the company implements large project on construction of the Bystrinsky mining and processing plant in the Zabaikalsky Region. It is on the list of Tier-1 assets. The plant, which will be capable of processing 10 million tonnes of ore annually, is scheduled for launch in 2017. Investment in the project are estimated at $1.1 billion in 2014-2017.

SEARCH OF STRATEGIC PARTNERS IN CHINA

Norilsk Nickel is in talks to sell products from its future Bystrinsky ore mining and processing plant to China and possibly attracting investors for the plant from the country, Fyodorov said.

“The interest of our Chinese partners is multidimensional, it does not only imply buying the plant’s products, but also participation in its capital and provision of long-term project financing. These issues are more of a complex cooperation with Chinese partners,” Fyodorov said.

He declined to name the companies, but said they are the leading players on the Chinese market.

“They are end users of copper concentrate and large traders,” he said.

The Bystrinsky plant will produce almost 3 million tonnes of ore concentrate per year and about 66,000 tonnes of copper, he said.

Recently, Norilsk Nickel has received 12 proposals from Chinese investors to sign product off-take agreements, financing and strategic cooperation deals, which is why any postponement of the Bystrinsky Plant launch would be problematic, he added.

End

28.10.2014 19:58

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