Singapore 30/08/2016 - Nornickel – a recently rebranded Norilsk Nickel - reported a net profit of $1.3 billion in the first half of this year, down 13 percent from the same period last year amid a “challenging” period for the global metals and mining industry during the period, the Russian nickel producer said in its interim report on Monday.
Against the backdrop of persisting global macro uncertainty and ongoing slowdown of the Chinese economic growth rates, the nickel price in February this year fell below the levels last seen during the 2008 crisis, with copper and PGM prices also reaching multi-year lows, Vladimir Potanin, president of Nornickel, said in the report.
But Potanin noted that in the first half of this year, the company had posted the industry highest EBITDA margin of 47 percent and generated free cash flow of $600 million despite the above circumstances.
“We believe that our operating model focusing on tier-1 assets and production efficiency has yet again proven its high robustness and ability to generate industry-leading returns for our shareholders,” he said.
The company continues to modernise its production facilities, has shut down its obsolete nickel plant and entered into an active phase of construction at its Bystrinsky copper project in Chita in Russia.
Most projects related to the modernisation of Nadezhda metallurgical smelter in Russia has been completed and in May, it launched the phase-two upgrade of its Arctic-based Talnakh concentrator.
The development of its Bystrinsky copper project has progressed materially with the construction of the open pit, concentrator and powerlines on schedule, it said.
As part of de-risking the project, Nornickel has raised long-term project financing from Sberbank and sold a minority stake in the project to strategic equity investors from China. The project is expected to start production in 2017 with its capacity to be ramped up to 60,000-70,000 tonnes per year of copper.
“Overall, we believe that the metal markets have stabilised, while we are going cautiously optimistic on the current developments in the global nickel market, which for the first time in the past few years has entered into a deficit,” Potanin said.
Nornickel also said in its report that it is cautiously positive about the outlook of nickel given robust demand from the stainless steel sector and tighter supply from the Philippines, but warned of growing refined metal stocks and supply from Indonesia.
Nornickel's nickel metal production fell 9 percent year-on-year to 57,942 tonnes in the second quarter of this year. This took its nickel production in the first half of the year to 121,573 tonnes, down 7 percent from the same period last year.