OAO GMK Norilsk Nickel (GMKN), the largest nickel and palladium producer, plans to focus on developing its operations in northern Russia over international assets after installing a new chief executive officer and management team.
“We will be looking at opportunities to optimize our portfolio of assets, including our international operations, with a key strategic focus on the sustainable increase of the firm’s return on capital,” Norilsk Deputy CEO Pavel Fedorov, head of strategy and business development, said in an interview in Moscow. “Enhancing the efficiency and capitalization of our key Polar Division would be at the heart of the new strategy.”
The division has seven mines north of the Arctic Circle, producing nickel, copper, platinum, palladium, cobalt and gold above the 69th parallel. Plants processing ore from these mines achieve an extraction rate of 83 percent of nickel from each ton of ore after the first phase of enrichment, compared with 70 percent and below for Norilsk’s assets in Africa and Australia, according to its annual report.
Billionaire Vladimir Potanin replaced Vladimir Strzhalkovsky as CEO at the end of 2012 as part of a truce to end a conflict between Norilsk shareholders Interros and United Co. Rusal over how the company was run. In April, Potanin hired Fedorov, a former mergers-and-acquisitions banker, for the 12-member management board among nine newly appointed executives.
Strzhalkovsky pushed the company to diversify, adding copper, coal and iron ore assets in Indonesia and Latin America to purchases in Africa and Australia. The reorganized executive team is due to present a new development plan to investors in the fourth quarter, subject to board approval.
“The resource potential of the Polar Division is enormous and we will aim to take full advantage of it,” said Fedorov, 38, who served as a Russian deputy energy minister for a year before joining Norilsk. He also worked as first vice president for economy, strategy and finance at oil producer OAO Rosneft, and held positions at Morgan Stanley and UBS AG.
Norilsk gained most of its international assets in 2007 after buying LionOre Mining International Ltd. They include an 85 percent stake in the Tati Nickel project in Botswana and 50 percent of the Nkomati nickel mine in South Africa. The company also controls four units in Australia, all of which are idled because of a drop in prices and increased production costs.
“Norilsk has better opportunities at home due to a lower cost of production,” George Buzhenitsa, a Deutsche Bank analyst, said by phone from Moscow. “The former LionOre assets have no chance of performing well at current prices so a decision to sell would be the correct one.”
Nickel prices have fallen almost 20 percent in 2013 to $13,700 a ton in London, the lowest level in three years. Palladium has dropped more than 7 percent and platinum in excess of 13 percent.
Norilsk shares rose as much as 1 percent after Fedorov’s comments on strategy and traded up 0.3 percent at 4,715 rubles at 3:29 p.m. in Moscow.
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