Norilsk Nickel to buy 1.5 million tons of Soviet copper concentrate from Rostec

Raw materials, which have been kept in the State Fund since 1980, will cost the company 67.5 billion rubles.
 "Norilsk Nickel" buys "Rostec" 1.5 million tons of copper concentrate for 67.5 billion rubles. ($ 1.1 billion at current exchange rates), said general director of state corporation, Sergei Chemezov, the same is confirmed by a representative of "Norilsk Nickel". This is a win-win deal, said a representative of "Norilsk Nickel". It is a concentrate that was produced in the Soviet years, and placed in a strategic reserve of the state. In 2016 Rosrezerv passed this stock "Rostec".

"Norilsk Nickel" plans to pay for the purchase of approximately equal installments over four years, the company said, - "as the processing of raw materials and sales of products." Additional raw material is already included in the company's production plan for the 2017-2018 biennium., According to the "Norilsk Nickel" message. In May, the company reveals that by 2018 plans to increase copper production by 28% to 440 000 tonnes per year (based on 2016 plans to produce at least 342 000 tonnes). The increase may occur, including by launching Bystrinsky project (will bring the company after reaching the estimated capacity of additional 65,000 tons of copper per year).

 The company at the end of June, total debt was $ 8.1 billion, while cash and cash equivalents were $ 3.4 billion debt load - 1,4 EBITDA.

Extraction of copper raw materials, "Norilsk Nickel" is not going to stop, said a company spokesman. At the Copper Plant in Norilsk have spare capacity that "Norilsk Nickel" can load, says a company spokesman. What is the loading of production at the moment, he did not specify.

For the first nine months of 2016 at the "Norilsk Nickel" fell not only production of nickel (8% to 177 357 tons), but also copper and palladium and 4% (up to 264 047 tonnes and 1.9 million ounces, respectively), as well as 5% platinum on (to 489,000 ounces) to the company's message. "Norilsk Nickel" explains this low in precious metals in the processed raw materials, as well as the reconfiguration of production facilities. In the first nine months of 2016, the company produced from own raw materials 253,250 tons. Total copper for sale at the "Norilsk Nickel" has to 24.2% of revenue, or $ 862 million, the company said in a report for the half year.

 In Norilsk, the company produces polymetallic ore containing copper, nickel and platinum group metals in 2015, mining at the Polar Division was 17.3 million tons of ore (68% of the company's overall production). Over time, the ore, "Norilsk Nickel" exhausted: in 2015 the copper content was 2% in the ore, despite the fact that ten years ago - 3% in the late 1980s. content could be above 4%, suggests director of metallurgy and mining Prosperity Capital Management Nick Sosnowski.

PGMs and copper content in concentrate "Rostec" above the current, the director of corporate ratings ACRA Maxim Khudalov. This could allow the company to save on mining operations in the period of low prices, as the effect of the investment in the rocks can be seen immediately, but in the procurement of raw materials - is obvious, he said. Capex for 2017, "Norilsk Nickel" is projected at $ 2 billion, the company said. But there is a risk that after the exhaustion of concentrate would be that the front of mining operations and ore are not prepared will be less than expected, or working out is economically inefficient in the new environment, warns Khudalov.

Use of the concentrate may affect the cost of production, will depend on the quality of the concentrate, said analyst "Aton" Andrew Lobazov. How much is the production of one ton of copper and nickel, the company does not disclose.

Processing of copper ore company is on the Norilsk and Talnakh concentrators, then concentrate enters the Copper Plant for melting, there, in the Taimyr Peninsula, the company refines copper and produces copper cathodes. To improve the environmental performance the company intends to reconfigure the production chain: to build a plant at the Nadezhda converter smelting production and anode, and the corresponding conversion stages at the Copper Plant, which are sources of emissions of sulfur dioxide into the atmosphere, to close.