OAO GMK Norilsk Nickel, the world’s largest producer of nickel and palladium, plans to sell international assets to focus on profitable mines in northern Russia, according to a strategy review agreed by its board.
The company will prioritize operations with potential annual revenue exceeding $1 billion, profit margins of more than 40 percent and resource potential for more than 20 years of output, Pavel Fedorov, Norilsk deputy chief executive officer, told reporters in Moscow.
“Only the Polar division assets in Taimyr fully match the criteria,” he said. Assets in Australia and Africa don’t meet the standard and will be sold, he said. Norilsk is marketing those assets and has “received considerable interest.”
Norilsk has turned the focus on its operations and improving profitability after resolving a feud between shareholders. BHP Billiton Ltd., Rio Tinto Group, Glencore Xstrata Plc and Vale SA are among rival producers cutting costs, selling assets and reducing spending to counter lower prices and weaker earnings.
“The new approach to the strategy is logical, but it was expected,” Kirill Chuyko, head of equity research at BCS Financial Group, said by phone. “Investors are interested to hear concrete numbers on investments and output targets as well as plans on dividends.”
Details of the strategy will be presented to investors in London during the fourth quarter, Norilsk said in a statement today. The shares were little changed at 12:43 p.m. in Moscow at 4,610 rubles.
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 has hired Citigroup Inc. to help sell its Australian portfolio that includes four nickel mines currently idled because of a drop in prices and increased production costs.
Kola Peninsula assets, including those in Finland, will undergo “major efficiency initiatives” to improve profitability in 2014, Fedorov said.
Norilsk will move away from its long-held view of mandatory vertical integration and may start to sell semi-finished products, according to Fedorov.
The company also plans to put a “particular focus” on developing exploration as a key business unit and will double spending on exploration in its Polar division to ensure “a long-term sustainable competitive edge in the region with one of the world’s most valuable ore bodies,” Fedorov said.
Norilsk in December agreed to pay as much as $9 billion in dividends for 2012 through 2014 as part of an accord to end a four-year dispute between shareholders United Co. Rusal and billionaire Vladimir Potanin. The company declared about $2 billion of dividends for last year.