Norilsk Considers Spinning Off Some Arctic Platinum Group Assets

Pavel Fedorov
Pavel Fedorov, First Deputy Chief Executive Officer of Norilsk Nickel. Photographer: Andrey Rudakov/Bloomberg

OAO GMK Norilsk Nickel is studying spinning off some of its aging platinum group metal assets in the Arctic into a separate company as the world’s biggest producer of palladium focuses on longer-life mines in Russia.

The new company’s output of palladium and platinum, making up 70 percent of its revenue, would represent less than a 10th of Norilsk’s production if the proposals go ahead, First Deputy Chief Executive Officer Pavel Fedorov said in an interview.

“A deal would create a world-class platinum group-of-metals player, among the top-10 largest producers globally, with attractive growth options,” Fedorov said in Moscow. He said the new company would have a similar “listing profile” to Norilsk, which is traded in Moscow and London.

Norilsk switched focus in 2013 to developing its longest-life and most profitable mines in Russia and selling its less lucrative international holdings. The Moscow-based producer, after completing the sale of African and Australian assets last year, is deciding what to do with smaller and older operations at home it said in May, suggesting an overhaul of operations.

“These tail assets still could represent a material value upside for Norilsk’s shareholders as a standalone-growth and PGM-focused investment proposition,” Fedorov said on Friday, even though they don’t fit with the company’s current strategy. They “will create additional value for Norilsk shareholders.”

The assets are in the so-called south cluster of the Polar division, including a nickel concentrator in Norilsk city, the nearby Medvezhy Ruchey open-pit mine, the Zapolyarny mine and Lebyazhye tailings dam. They were built in the 1940s and have more than 20 years of “reserve-based” life, Norilsk said in May.

Their value may be $500 million to $700 million, according to Kirill Chuyko, BCS Financial Group equity research chief.

Ore grades are low for nickel and copper but their platinum group metal content of 6 grams (0.2 ounce) a ton “is quite appealing,” Deutsche Bank AG said in a report in May.

The cluster generated about $600 million in revenues last year and $200 million in earnings before interest, taxes, depreciation and amortization, according to Norilsk.

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