Nornickel lifts up investment plans by billions of dollars

Russia’s Nornickel, the world’s largest supplier of refined nickel and palladium, has raised its investment guidance for the coming years by billions of dollars adding fuel to its plans of upgrading energy and production assets in the harsh Arctic.

Nornickel develops complex metal ore deposits around the Arctic city of Norilsk and refines them at its factories scattered across Russia’s extreme North. The company’s top managers presented an updated strategy outlook on Monday in a hybrid event held in Moscow.

Overall Nornickel extends its capital expenditure program by $5 billion compared to the previous assessment published with the first half of 2021 financial report earlier this year, its senior vice president for strategy Sergey Dubovitsky said at the investor-focused Capital Markets Day.

“First factor for increase is related to construction cost inflation for projects in execution. This factor accounts for $1 billion uplift that we have already communicated in August. Another $5 billion relates to scope expansion and prolongation of the modernization programs for energy and production assets. So we expect our investment cycle to exceed beyond 2025,” said Dubovitsky.

In response to the growing demand for green metals, such as palladium, platinum, nickel, copper and cobalt, Nornickel has set out strategic expansion projects. These include the third phase of the Talnakh Concentrator, the new Norilsk Concentrator, the expansion of the Nadezhda Smelter, and a new copper production facility in Monchegorsk.

Higher spending will be achieved by expanded contractor forces, Dubovitsky added.

“As result of activities conducted in the past two years we managed to attract a much wider pool of contractors with their number doubling and several major construction companies having mobilized in the region already. This process is continuing,” he said.

Another supporting factor would be an increase in logistics capacity in the Arctic to accommodate for a higher traffic via the Arctic ports that Nornickel operates. The company has presented a logistics development program with a throughput debottlenecking by 50%.

“Building the right organization and internal capabilities to manage the investment program is absolutely critical. We followed the route of what became already a standard in our and other industries and concentrated resources in dedicated organization focused on full cycle management of major projects – Nornickel development; and we are now in the process of beefing it up and recruiting for project offices and dedicated support functions,” said Dubovitsky.