Norilsk Approves $1 Billion Chita Copper Project on China Demand

OAO GMK Norilsk Nickel will proceed with plans to develop a $1 billion Siberian copper mine after test results by the world’s largest producer of nickel and palladium showed the high quality of the deposit.

“We have tested our Chita copper project - Bystrinsky mine construction - to see whether it could deliver us another Tier 1 asset,” First Deputy Chief Executive Officer Pavel Fedorov said. “The investment committee of Norilsk decided to proceed with its development” with output mainly going to China, he said.

Investment in the Bystrinsky copper mine from 2014 through to a planned startup in 2017 is estimated at $1 billion, Norilsk said in a presentation today to investors in London.

The Russian company last year switched focus to developing operations, mostly Arctic nickel and palladium projects, at home and plans to sell assets in Africa and Australia. It has also decided to focus on top-tier resources.

Twelve major copper projects were shelved globally in 2013, according to data compiled by Bloomberg Industries. Prices that are down about 6 percent this year, after a 7 percent drop in 2013, may curb spending by developers and supply, Kenneth Hoffman and Oliver Nugent, analysts for BI, said in a report last month.

Norilsk had agreed to develop Bystrinsky as soon as it got project finance, CEO Vladimir Potanin said in an interview last month, declining to say how much the project would cost. The mine will be able to produce 10 million metric tons of ore a year.

Project Funding

Norilsk reached a preliminary deal with “a key Russian development institution on funding the project on the basis of non-recourse project financing for the development phase,” Fedorov said.

Norilsk will invest about $2 billion a year on projects until at least 2017, with $1.5 billion over that period spent on restructuring assets including shifting a refinery to the Kola peninsula and modernizing operations, according to the presentation.

The company estimates investment in the Kola refinery at about $400 million, including an expansion to 170,000 tons of nickel a year from 125,000 tons, according to its presentation.

Norilsk has finished re-evaluating its assets under JORС standards, showing an increase in proven and probable resources by 50 percent from 2008. Its nickel reserves stand at 6.7 million tons, from 4.4 million tons in 2008, or enough for 30 years of operations.

The company is set to sell its peripheral and international assets and has raised more than $150 million by offloading some already. It is about to sell another asset in Australia after disposing of gold resources this month, Fedorov said.

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