Vladimir Potanin will pay Musa Bazhaev compensation

Norilsk Nickel may buy out a stake in Russian Platinum in a new joint venture.
Norilsk Nickel and Russian Platinum have no mutual obligations to buy each other's shares in the joint venture for the extraction of platinoids. This was told by the president and the largest co-owner of "Norilsk Nickel" Vladimir Potanin. According to him, in the joint-stock agreement there is no "no put or call option". The document provides an opportunity to make the shares liquid after the joint venture starts working, says the president of Norilsk Nickel. He admitted that one of the options might be the buyout by the company of the partner's stake in the project: "This may involve a strategic partner (which may be Norilsk Nickel), an IPO, or another form." The representative of "Russian Platinum" did not comment on the terms of the shareholder agreement.

Last week, Norilsk Nickel and Russian Platinum, Musa Bazhaev, signed an agreement on the creation of a joint venture to develop platinum deposits in the Taimyr Peninsula. Norilsk Nickel will contribute to its capital a license to develop the Maslovskoye field, and Russian Platinum will be licensed for the Chernogorskoye field and Norilsk-1. The total reserves of the new company will be about 4,300 tons of platinum group metals and 6.3 million tons of nickel - this is the largest project to develop deposits of platinum group metals in the world, said a representative of Norilsk Nickel. Processing of these ores will allow to produce 70-100 tons of platinum group metals annually (from 2.78 million to 3.31 million ounces). In comparison, Norilsk Nickel produced 670,000 ounces of platinum and 2.78 million ounces of palladium in 2017. Investments in the project are estimated at 250 billion rubles.

There will not be an additional revision of the dividend payment formula for Norilsk Nickel due to the project with Russian Platinum, Potanin said. "All these projects: the Maslovskoye field, Norilsk-1, Chernogorsk - were put into the model when we talked about the fact that the growth project will require investments. Our model for the next five to seven years provides for substantial investment in the growth program, "Potanin said.

Under the agreement of the shareholders of Norilsk Nickel (Interros, UC Rusal and Millhouse Capital), at least half of EBITDA is spent on dividends. Last year, after the fall in metal prices, shareholders agreed to change the policy. Now the company pays 60% of EBITDA, if the ratio of net debt and EBITDA is less than 1.8. If the indicator is equal to or above 2.2, then dividends may fall to 30% of EBITDA. The minimum payment is $ 1 billion. And in November, introducing the new strategy of Norilsk Nickel, Potanin said that this formula for paying dividends could be revised again - the company needs to invest in development.

Representatives of UC Rusal and Millhouse Capital declined to comment. A source close to one of the shareholders says that Potanin's partners are aware of the project with "Russian Platinum", but so far only are eyeing him - he is at an early stage.

According to Potanin, with such a favorable situation, it is impossible to force the payment of dividends, instead of developing such promising projects. "I described the logic, in which it would seem to me expedient to review the dividend policy, to the partners. She - I can not say that she was accepted on the move - she was heard. We are working on the logic of a mutually acceptable solution, "the president of Norilsk Nickel said. "It is necessary to convince shareholders that the proposed growth plan is in some ways better than accelerated payment of dividends," Potanin added, stressing that even with minimal payments of $ 1 billion, Norilsk Nickel's dividends still remain above the industry average.

Potanin did not rule out that the joint venture and Norilsk Nickel will have a single sales network. But even if this does not happen, the possible competition between the joint venture and the Norilsk Nickel of the businessman does not worry. He considers the deficiency of platinoids much more dangerous. One of the largest areas of their application - catalysts for cars with internal combustion engines. He notes that the negative factor for the platinum market now is the structural deficit of products. "This could lead to catalyst manufacturers starting a massive investment in finding a replacement for platinum and palladium," Potanin said. "Even if we assume that we [Norilsk Nickel and JV] will start competing for the customer - it's better than if these customers started looking for something else," the businessman continues. In his opinion, despite the growing share of electric vehicles, platinumides as a component of the exhaust gas purification system in internal combustion engines will be in demand for a long time due to the tightening of environmental requirements.

Potanin believes that platinoids can also be used as an element of accumulators. "The task of preserving energy, including that produced by renewable sources, is the most urgent issue now. And the most promising material that can hold energy is palladium and platinum, "the businessman said.

The classical prospects for platinum markets are associated with the development of the automotive industry, says Maxim Khudalov, an analyst with ACRA. "The declining share of diesel cars and the growth of the automotive industry will lead to higher prices for palladium (in the catalysts of diesel engines, platinum is used, in petrol - palladium). So, by 2025 the consumption of platinumides in autocatalysts will reach 3.1 million ounces. Against 1.7 million ounces today, "the expert notes. Platinum can be used to create a new fuel cell technology, where it is used as a catalyst, the three largest world producers of platinoids - Anglo American Impala and Lonmin have already invested in similar projects, Khudalov said.