NorNickel GMK · RUS:GMKN
NorNickel GMK — Nornickel — Investor Day (November 2018)
80 slides from NorNickel GMK's investor day presentation, November 2018
Slide 1: Strategy Update 2018: Advancing on the path of sustainable growth
NORNICKEL STRATEGY UPDATE 2018 Advancing on the path of sustainable growth London, November 2018
Slide 2: Disclaimer
Disclaimer The information contained herein has been prepared using information available to PJSC MMC Norilsk Nickel (“Norilsk Nickel” or “Nornickel” or “NN”) at the time of preparation of the presentation. External or other factors may have impacted on the business of Norilsk Nickel and the content
Slide 3: CEO Vision
CEO Vision Vladimir Potanin President Chairman of the Management Board
Slide 4: 2013-2018: Key Performance Highlights
2013-2018: Key Performance Highlights Strategic Projects Delivery Selected Performance Highlights Complete revamp of Talnakh Concentrator (2017) Shutdown of Nickel Smelter TSR (2016) + 65% WC SO2 Release Emission US$ 3 bn - 11% LTIFR Launch of - 65% Bystrinsky project (2017-2018) Upgrade of Nadezhda
Slide 5: Strategic Priorities
Strategic Priorities Long-Term Production Growth Targets for the Focus on HSE Existing Asset Base Annual LTIFR reduction by 20% Long-term (2025 and beyond) metals production growth target Zero tolerance for fatalities of 15 to 25% Launch of Comprehensive Environmental Talnakh brownfield pr
Slide 6: Environmental Program – Key Pillar of the Strategy
Environmental Program – Key Pillar of the Strategy Comprehensive environmental program Kola Division for Norilsk region Total SO2 emissions in Norilsk Region CAPEX1 -75% Polar Division US$2.5 bn 2015 2023 Environmental initiatives aimed at material Nickel Smelter shut down in 2016 reduction of cross
Slide 7: Focus on Efficiency Improvement: Tangible Impact in 2019-2020
Focus on Efficiency Improvement: Tangible Impact in 2019-2020 Operational Efficiency Improvement Targets Drivers Production growth Improving utilization of the existing in 2019-2020 asset base throughout the entire 5-8% (by 2020 vs. 2017) value chain: from mining to refining Stringent controls over
Slide 8: Digitalization – Efficiency Improvement and Cultural Transformation
Digitalization – Efficiency Improvement and Cultural Transformation Short circuit diagnostics Excavator bucket Identification of elements Augmented during electrolysis teeth monitoring clogging the ore reality Investment in Advanced Digital Technology ~US$80 mln (2018 – 2021) Digital lab: Creation o
Slide 9: 2025+ Strategy: Scaling Up the Existing Assets
«2025+ Strategy»: Scaling Up the Existing Assets Mineral Resources Growth Opportunity of the existing assets in Norilsk for the Existing Assets Ore Production Metal Production Growth in the Norilsk Region, Mt (2025+ vs. 2017) Value of Resources Resources to in the Ground Production Ratio >45% >25 Ni
Slide 10: Potential Value Creation / Growth Opportunities: Blue Sky Projects
Potential Value Creation / Growth Opportunities: “Blue Sky” Projects and Cooperation Down the Value Chain Traditional Industry Segments for Nornickel Beyond Traditional Segments… Mining Smelting Refining Battery Materials Batteries 1 2 Upstream Opportunities Downstream Cooperation Opportunities Ea
Slide 11: Alignment of Nornickel's Strategy with Russia's Strategic Priorities
Alignment of Nornickel’s Strategy with Russia’s Strategic Priorities Russia’s Strategic Priorities Nornickel Government Support Favorable fiscal regimes Environmental #1 in environmental investments among for the new projects: Bystrinsky, Norilsk Fiber Optics Company, Kola MMC projects Russian met
Slide 12: Selected Social/Charity Projects
Selected Social/Charity Projects MURMANSK One of the highest social expenses/revenue Support of nature reserves ratios in the Russian natural resources sector (Lapland State Nature Biosphere Reserve, Pasvik Nature Reserve (the Kola Peninsula)) NORILSK MOSCOW Housing and relocation programmes C
Slide 13: Delivering Industry Leading Shareholder Returns
Delivering Industry Leading Shareholder Returns Nornickel Continues to Lead the Global …and Provides the Highest Dividend Yield Industry in Terms of Shareholder Returns… Compared to Global Peers TSR, 2013–2018 YTD, % Global Industry average dividend yield, 2013–2018 YTD, % x4 65 10.6 2.6 Industry -2
Slide 14: Operations and Projects Update
Operations and Projects Update Sergey Dyachenko First Vice-President Chief Operating Officer
Slide 15: Operations and Projects: Key Highlights and Priorities
Operations and Projects: Key Highlights and Priorities Focus on 65% LTIFR reduction in 2013-2018 Health & Safety Strategic focus on safety culture improvement and zero tolerance for fatalities SO2 emission reduction achieved: 11% for Polar Division, 30% for Kola Division Environmental 2023 s
Slide 16: Health & Safety: Steady Improvements
Health & Safety: Steady Improvements LTIFR: Improved to Record Low Levels Accident Statistics Improved LTIFR (1*10-6) Employees Fatal -65% Lost time injury 12 14 8 8 0.80 13 94 0.62 74 0.48 0.43 56 0.35 52 0.27 43 1 15 2013 2014 2015 2016 2017 1Н 2018 2013 2014 2015 2016 2017 1Н 2018 Company is co
Slide 17: Health & Safety: Strong Performance Relative to Industry
Health & Safety: Strong Performance Relative to Industry LTIFR (1) Remains Below the Global Mining Assessment of Occupational Safety Culture Industry Average Score Significantly Improved Since 2014 LTIFR per 200k hours Bradley Curve Indicator, DuPont Assessment 1.2 3.0 2.50 2.60 1.0 2.5 2.30 0.8 2.0
Slide 18: Environmental Program Track Record: Reduction of SO2 Emissions
Environmental Program Track Record: Reduction of SO2 Emissions Polar Division: Sulphur Dioxide Emissions Kola Division: Sulphur Dioxide Emissions Decreased by 11% since 2013 Decreased by ~30% since 2013 Polar Division SO2 Emissions, kt Kola Division SO2 Emissions, kt 1,950 160 ~ -30% 1,900 -11% 150
Slide 19: Strategic Roadmap for Key Production Assets
Strategic Roadmap for Key Production Assets Roadmap to Advanced, Efficient and Environmentally Friendly Production Processes 2019 Kola concentrator upgrade to Smelting Shop After 2022 achieve SO2 emission reduction in the region Polar Division Perspective growth projects: Severonickel South Cluste
Slide 20: Comprehensive Environmental Program
Comprehensive Environmental Program Nornickel Polar Division Phase 2 Launch of “Sulphur Project” Phase 3 Reconstruction of Sulphur production shop Shutdown of converting Comprehensive SO2 capturing solution operations with sulphuric acid production Construction of new converters Copper Smelter (repl
Slide 21: Sulphur Project at the Copper Smelter Launched
Sulphur Project at the Copper Smelter Launched Launch of the Sulphur project Copper Smelter Norilsk City 10 September 2018: Nornickel commenced the realisation of its Sulphur Project, the largest environmental initiative focused on radical environmental improvements in Norilsk 21
Slide 22: Current Status of Key Environmental Projects
Current Status of Key Environmental Projects Feasibility study Regulator Start of and key technical Contracting Site preparation approval construction solutions Reconstruction of the elementary Sulphur Plan Plan Plan production facilities at 2019 2019 2019 Copper Smelter Comprehensive SO2 capturing
Slide 23: Emissions Reduction Project at Kola Division
Emissions Reduction Project at Kola Division New Design Production Flows at Kola MMC from 3Q 2019 Environmental Impact Total SO2 Emissions in Nickel Town, ktpa Mining Concentration Smelting Sales -50% Production of saleable metals Metal Sales at Severonickel Ore from Production Kola mines High-grade
Slide 24: Phased Unlocking of Nornickel's Production Growth Potential
Phased Unlocking of Nornickel’s Production Growth Potential Operational Efficiency Improvement Program with Short to Medium-Term debottlenecking and productivity growth initiatives I 2018-2020 Execution of upstream projects (Skalisty Mine & other Talnakh brownfields) Completion of Nickel Refin
Slide 25: Efficiency Improvement Program Covering the Entire Value Chain
Efficiency Improvement Program Covering the Entire Value Chain I II III Mining Concentration Smelting Labor and equipment productivity Talnakh concentrator to reach design Debottlenecking initiatives across growth initiatives parameters and improve recoveries the entire production chain Impl
Slide 26: Key Upstream Project – Skalisty Mine Development
Key Upstream Project – Skalisty Mine Development I II III Project Description Production capacity: 2.4 Mtpa Ore reserves: 58 Mt CapEx 2013–2017: US$1.1 bn CapEx 2017–2020: ~US$0.9 bn Project Timeline Commissioned mining capacity in 2016-2018: 700 ktpa Expected launch in 2021: 1,000 ktpa
Slide 27: Kola Nickel Refinery Upgrade – Status Update
Kola Nickel Refinery Upgrade – Status Update I II III Project Description Flow sheet of Nickel Refinery at Kola MMC Process scheme: Fluidized Bed Furnace Existing Target Rotary Kiln Electric Arc Chlorine Leaching Smelting Reactor Semi-product Pd, Pt, Anode Casting Co, Au, Ag Tankhouse Cells Tankhous
Slide 28: Production Guidance for 2018-2020
Production Guidance for 2018-20201 I II III Ni Pt+Pd kt tonnes 220+ 105 105–110 209 210 210–215 100–105 95 2015-2016 2017 2018E 2019-2020E 2015-2016 2017 2018E 2019-2020E Cu Excluding Bystrinsky project Output increase due to operational efficiency improvement initiatives and commissioning of new
Slide 29: Development of Unique Talnakh Ore Base
Development of Unique Talnakh Ore Base I II III Location Growth Projection Mine Ore mining at the Talnakh cluster, Skalistaya Mt Mine Oktyabrsky >20% Mine Taimyrsky 16% Unique polymetallic deposit 13% with proven and probable ore reserves of more than Talnakh Mine 600 Mt and resources of more Conc
Slide 30: 3rd Stage of Talnakh Concentrator Upgrade
3rd Stage of Talnakh Concentrator Upgrade I II III Location Project Rationale Talnakh Cluster Unlocking Norilsk region resource potential requires concentrator capacity expansion Current Talnakh Concentrator design allows installation of additional equipment without construction of major new bui
Slide 31: South Cluster Development Update
South Cluster Development Update I II III Location Project Rationale Large PGM asset at the bottom of the global PGM cost curve South Cluster on the global PGM cost curve, Estimated resources for Operating Costs2, US$/4E oz new development1: PGMs – >13 Moz Cu – >300 kt Ni – >200 kt South Cluster
Slide 32: Strategic Targets for 2025+ Metal Production
Strategic Targets for 2025+ Metal Production1 I II III Ni Cu Pt+Pd kt kt t +25% +15% +15% 130 >240 >460 210 105 398 2017 2025+ 2017 2025+ 2017 2025+ Assuming the development of both Talnakh and South Cluster growth projects / subject to investment decisions Note: 1. Metals produced from own feedstoc
Slide 33: Assessment of New Growth Opportunity: Largest Greenfield PGM Cluster
Assessment of New Growth Opportunity: Potentially the Largest Greenfield PGM Cluster Globally I II III Location Overview Norilsk Resources (M&I) PGM (3E) in resources (M&I) of the largest global PGM Arctic Palladium deposits | groups of the deposits, Moz PGM ~3.9 g/t Talnakh & Norilsk-1 (N) 252 Moga
Slide 34: Bystrinsky Project Update
Bystrinsky Project Update Project Overview The project is ramping up – full operational capacity to be reached in 2020 Ore reserves: 341 Mt, grades: Cu – ~0.7%; Fe – ~21%; Au – ~0.9 g/t Site infrastructure completed: open pit, concentrator (grinding and flotation), camp, etc. External infras
Slide 35: CAPEX Program: New Investment Cycle in 2019-2022
CAPEX Program: New Investment Cycle in 2019-2022 Perspective growth projects (e.g. Talnakh concentrator, South Cluster) Commercial projects (incl. Bystrinsky Project) Environmental program Mandatory projects: infrastructure, equipment replacement & capitalized maintenance, social US$ bn 0.35-0.45 2.
Slide 36: US$10.5-11.5bn CAPEX Plan for 2019-2022
US$10.5-11.5bn CAPEX Plan for 2019-2022 CAPEX 2019-2022, US$ bn Base Investment Program Perspective Growth Projects US$6.5 – 7.5 bn ~US$1.3 – 1.5 bn Talnakh mining projects 16% 12% (Skalisty and brownfields) Projects: Talnakh Concentrator Upgrade, South Cluster and other Equipment replacement
Slide 37: Finance and IT: Delivering Efficiency
Finance and IT: Delivering Efficiency Sergey Malyshev Senior Vice-President Chief Financial Officer
Slide 38: Profitability Boosted By Metal Prices And Productivity
Profitability Boosted By Metal Prices And Productivity Industry Leading EBITDA Margin Through Leading EBITDA Margin in Global the Cycle Metals and Mining Industry US$ bn 53% 53% 52% 50% 48% 48% 47% 46% 44% 40% 37% 5.7 30% 28% 4.3 3.9 4.0 4.2 3.1 2013 2014 2015 2016 2017 1H 2018 Norilsk Peer 1 Peer 2
Slide 39: Successfully Delivered on Short-term Financial Targets
Successfully Delivered on Short-term Financial Targets Targets 2018 Expected Results 2020: US$200-300 mln of Over US$300 mln of additional EBITDA additional EBITDA per in 2018 thanks to the increase in annum through higher production volumes and labour volumes, lower unit costs productivity 2018
Slide 40: On Track to Deliver on Long-term Operating Efficiency Targets
On Track to Deliver on Long-term Operating Efficiency Targets Efficiency improvement programme to achieve annual cost reductions of US$200-300 mln from 2020 2020 Target 1H2018 EBITDA Impact (ex. FX, inflation) Unchanged or lower total cash costs1 US$36 mln in real terms on the back of Labour costs (
Slide 41: Modernized IT Platform Enables Digitalization Of Core Business
Modernized IT Platform Enables ‘Digitalization’ Of Core Business Infrastructure Automation Productivity Analytics Digitalization 956km High- Mine dispatching SAP ERP for all SAP-based Pilot projects in speed fiber cable Metal accounting production sites analytics for computer vision, to
Slide 42: Net Working Capital: On Track To A Long Term Sustainable Level
Net Working Capital: On Track To A Long Term Sustainable Level US$ mln 4,044 213 2,149 39 480 129 257 1,719 96 1,3701 ~1,000 31 Dec 2012 31 Dec 2017 FX Macro Accumulation Decrease in Optimization Other 30 Jun 2018 30 Sep 2018 31 Dec 2018 of metal Pd stock of capital (est.) inventory structure The
Slide 43: Balanced Debt Portfolio And Solid Credit Ratings
Balanced Debt Portfolio And Solid Credit Ratings Optimised Debt Repayment Profile Diversified Debt Structure US$ bn Debt Maturity Debt Currency Debt Type YE2017 2.8 Floating rate 38% Current Non- 46% RUB 2.3 LT 91% 85% 100% 97% 2.1 2.1 2.0 1.9 Fixed rate 62% 54% ST 9% 0.2% RUB 15% 3% 1.3 2017 Curren
Slide 44: Interest Cost Savings
Interest Cost Savings Cost of Debt Decreased… …Despite Higher LIBOR Rates % Estimate Estimate 5.1% 5.3% 5.0% 5.0% 4.8% 4.6% 4.7% 4.6% 4.6% Average cost of credit portfolio 2.3% 2.3% 2.1% 1.9% 1.5% 1.6% 1.2% Libor 1m 1.0% 0.8% 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2016 2017 2017 2017
Slide 45: Financial Model Allows For Sustainable Leverage, High Dividend Payout
Financial Model Allows For Sustainable Leverage, High Dividend Payout Leverage Expected to Remain Well Controlled Long Term Balance Sheet Drivers Net Debt/EBITDA, x Balance sheet will be supported by higher 2.2 2.2 operating efficiency and profitability “Activation" range 2.0 Dividend flexibilit
Slide 46: Sensitivity of Financial Model to Macro Risks – Currency Exposure
Sensitivity of Financial Model to Macro Risks – Currency Exposure FCF and EBITDA Sensitivity per 1 RUB of Change in Capex and Opex Structure Exchange Rate by Currency US$ mln OPEX1 80 Non-RUB Non-RUB 14% 10% 67.0 60.9 1H 2017 1H 2018 60 55.8 53.4 47.8 86% 90% 43.5 44.6 RUB RUB FCF 39.6 40 36.3 34.7
Slide 47: Markets Update
Markets Update Anton Berlin Head of Strategic Marketing
Slide 48: Trade War Sentiment Overrides Strong Macro Environment
Trade War Sentiment Overrides Strong Macro Environment … but Metals Sell-off on Trade War Healthy Economic Growth Forecasts… Headlines… IMF Forecast for 2018 GDP growth, % US$/t points 6.6 100 7,300 80 6,800 60 40 6,300 20 5,800 0 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 3.7 LME Cu price "Trade War" Googl
Slide 49: Reduced Commodity Volatility and Strong US Dollar
Reduced Commodity Volatility and Strong US Dollar … while Strengthening Trade-Weighted Stable Macro Environment Decreases US Dollar Maintains Downward Pressure Commodity Price Volatility… on Commodities Bloomberg Commodity Index 120 150 150 110 125 125 100 90 100 100 80 75 75 70 60 50 50 J F M A M J
Slide 50: Metal Markets Outlook – View on Fundamentals
Metal Markets Outlook – View on Fundamentals Metal Ni Cu Pd Pt kt kt Moz Moz -247 -70 -1.7 +0.7 Other Stocks, Non- Non- elastic days of exchange exchange Other Other consumption 80 non-elastic Exchange 37 Exchange 9 7 ETF 56 30 ETF 114 117 Jan-17 Dec-18 Jan-17 Dec-18 Jan-17 Jan-18 Jan-17 Jan-18 kt D
Slide 51: Nickel Exchange Stocks Rapidly Normalizing
Nickel Exchange Stocks Rapidly Normalizing Total Nickel Exchange Inventories: …Have More than Halved from Peak Levels Down 43% or 177kt (1) YTD vs. 76kt in 2017 of Early 2016, back to Historical Averages… Ni, kt Days of consumption 92 486 45 37 37 15 410 15-25 (2) 44 12 3 197 Cu Ni Normal Ni Histori
Slide 52: Record NPI Production: Volumes Driven by Indonesia
Record NPI Production: Volumes Driven by Indonesia Ni Ore Export from Indonesia Ramping Up Quickly and Expected to Reach 18 mln wMt Nickel Ore Supply to China Rising on in 2018 Increasing Ore Exports from Indonesia Ore, mln wMt Ni unites, contained kt Ore, mln wMt 34.2 342 71 +34% +4% +10 % 30 47 47
Slide 53: Medium Term Nickel Market Outlook: Decreasing Deficit
Medium Term Nickel Market Outlook: Decreasing Deficit Nickel Market Balance: Decreasing Deficit in Ni Consumption: Strong Growth in Stainless 2019 Due to Lower Demand Steel in Indonesia and the Battery Sector kt kt Demand Demand Demand +5% Supply Supply Supply 2018E 2019E 2016 2017 (16) (60) +8% 19
Slide 54: Medium Term Nickel Market Outlook: Limited Growth Potential of Class 1
Medium Term Nickel Market Outlook: Limited Growth Potential of Class 1 …Nickel Production Increase is Mostly Underinvestment Negatively Impacting Driven by Low-grade Ni Products from Class I and Battery Grade Ni Production (1)… Laterite Ores US$ mln kt of Ni units kt of Ni 12,000 -60% 1,100 +9% 10,0
Slide 55: Long Term Nickel Supply Outlook: Supply from Sulphide Ores to Stagnate
Long Term Nickel Supply Outlook: Supply from Sulphide Ores to Stagnate Current Nickel Market Paradigm: Growth of …As Spot Nickel Prices Only Incentivize Ni Units of Non-Battery Quality… Investments into New NPI Projects kt US$/t 2,000 23,000 1,600 18,500 Predominately non-battery grade 1,200 8,000-
Slide 56: Nickel Demand: Positive Long Term Outlook to Keep Market in Deficit
Nickel Demand: Positive Long Term Outlook to Keep Market in Deficit Ni Demand: Growing Stainless Consumption to Compete for Ni Units with Ni Market Balance: the Battery Sector Apparent Deficit Sustained Through 2025E kt Battery CAGR 19% kt хх% % of global demand (2018-2025E) 6% 3% 430 140 (110) (134
Slide 57: Growing Supply of Low Grade Ni Feed Unlocks Class 1 Ni
Growing Supply of Low Grade Ni Feed Unlocks Class 1 Ni for Other Applications Source of Ore 2018 Production/Consumption Flow Ni units, Mt Ni units, Mt Exchange stocks(1) 60 Ni Feed Ni Products 173 Ni Consumption Briqs Other forms 0.1 Batteries Cathode/Briqs/ Alloys/ Suphide Ore 0.7 0.5 Special Steel
Slide 58: Short-term Copper Outlook: Demand Concerns Add to Supply Disruptions
Short-term Copper Outlook: Demand Concerns Add to Supply Disruptions Copper Supply Disruptions: 2018 LME Copper Price 2018 YTD – Well Below Expectations Declines as US-China Trade Tensions Rise Mt US$/t Announcement of US$34 bn of Tariffs 3 9% 7,500 on Chinese imports 8% Announcement of 8% further U
Slide 59: Implications for China Copper Consumption
Implications for China Copper Consumption: Concerns Over Trade War Implications Look Overrated China’s Cu Consumption: Actual Copper Imports to China 2018 YTD Domestic vs. Export Oriented Remained Strong… Mt Mt 5.1 30.0 +10% 25.0 20.0 15.0 10.0 5.0 0.0 2015 2016 2017 9M 2017 9M 2018 … as Majority of
Slide 60: Long-term Copper Consumption Outlook: Growth Rates Normalize
Long-term Copper Consumption Outlook: Growth Rates Normalize Uncertain Long-term Global Consumption … as China Copper Consumption Growth Outlook… Rates are Rapidly Normalizing Mt CAGR 2018-2025E CAGR 2018-2025E CAGR 2.1% 6.9% 27.3 CAGR 1.6% 1.1 Mt 26.2 2025E (Base case) 2025E (Bull case) … Leading t
Slide 61: Long-term Copper Outlook: Risk of Underestimating Supply
Long-term Copper Outlook: Risk of Underestimating Supply … as High Copper Prices Justify Investments Supply Addition: 4 Mt to be Added by 2022E into New Lower Graded Mines Mt Kt % 1.1 2.7 25.0 1.4 2.0 2.0 1.2 20.0 1.0 15.0 0.8 22.5 20.1 10.0 0.6 0.4 5.0 0.2 0.0 0.0 2017 New Increase in Probable Prod
Slide 62: Key Auto Trends Impacting Metals Demand
Key Auto Trends Impacting Metals Demand Demand Implications Ni Pd PGMs Pt Sustainable global automotive production growth Substitution of diesel for gasoline vehicles Growth of hybrid market share Growth of SUV market share and engine downsizing termination Increasing emissions legislation
Slide 63: Environmental Regulations Significantly Impact Powertrain Evolution
Environmental Regulations Significantly Impact Powertrain Evolution Europe: Modern Diesels Satisfy CO2 China: China 6 Regulation Pushes OEMs to Emission Targets Increase PGM Loadings g/km Tightening NOx and CO Targets in China 0.2 China 5 EU CO2 Emission Limits & Current Emission by (nationwide in 2
Slide 64: Fleet Electrification Targets to be Achieved by Hybridization
Fleet Electrification Targets to be Achieved by Hybridization Automakers’ Plans: Hybrids and Internal Industry Expectations: Hybrids to Dominate Combustion Engines to Dominate in the Electric Vehicles Mix in the Long-term LV production ‘000 (%) hybrids share in global LV production 30,000 +18% Toyot
Slide 65: Long-term Palladium Demand to Remain Strong
Long-term Palladium Demand to Remain Strong Significant Uncertainty in the Long-term Outlook of Auto Mix Drives Wide Range of …However Palladium Market Remains in Market Expectations Apparent Deficit Under Any Scenario CAGR 2017-2025E Palladium Market Surplus/ (Deficit), Moz BEV+PHEV Hybrids BEV Hyb
Slide 66: Palladium Market Balance: Additional Supply is Needed
Palladium Market Balance: Additional Supply is Needed to Cover the Long Term Deficit Autocatalysts Will Remain Key Source of Demand in the Next 10 Years Palladium Market – Structural Deficit to (>80% Consumption) Continue in 2025E (1) Moz Moz +18% (0.7) (1.2) 1.8 +0.1 2.1 (1.8) +1.8 11.1 8.8 (0.9) +
Slide 67: Premium of Palladium to Platinum is Sustainable in the Mid-Term
Premium of Palladium to Platinum is Sustainable in the Mid-Term Palladium Established a Sustainable Premium to Platinum on Stronger … as Pd Loadings in Gasoline Vehicles are Fundamentals… Supported by Higher Fair Value-in-Use US$/oz 2,500 Palladium is more efficient than platinum in exhaust gas afte
Slide 68: Auto Driven Metal Demand Growth in 2017-2025E
Auto Driven Metal Demand Growth in 2017-2025E Metal Pd Ni Cu Moz kt kt 353 1,670 2.8 0.9 46 420 0.4 47 1.6 860 260 390 0.7 ICE only Hybrids PHEV HDD Total BEV PHEV Hybrids Total Charging Hybrids BEV Total stations inc PHEV Cu in electric engines Consumption Ni in batteries and generators Ni in stain
Slide 69: Nornickel's Metal Basket Content by Light Vehicle Type
Nornickel’s Metal Basket Content by Light Vehicle Type Hybrid Gasoline Diesel incl. PHEV BEV FCEV CAGR1 0% 0% +27% +26% +21% Market Share2 61% 17% 17% 6% <1% Stainless Steel & Parts +Batteries Ni 2–3 kg 2-4 kg 2-4 kg 5–15 kg 30–110 kg Wires & Parts +Electric Motor, Generator Winding Cu 20-25 kg 20-2
Slide 70: Maintaining Focus on Diversification of Ni Sales
Maintaining Focus on Diversification of Ni Sales Priorities of Ni Marketing Strategy Progress Track Record Sales Team Product Focus Sales to Non-STS sectors, kt Batteries: Portfolio ‒ Support the development of diversification +50% EV market and related across STS and value chains non-STS sectors
Slide 71: Strong Product Offering to Service Rapidly Growing Battery Materials Industry
Strong Product Offering to Service Rapidly Growing Battery Materials Industry Search for Optimal Feed for Battery Material Industry Nornickel Offering Expensive Nickel Supply is expected to surge sulphate World’s largest producer of Class I in the near term nickel, leading producer of cobalt
Slide 72: Navigating in the Emerging Industry through Extensive Global Client Network
Navigating in the Emerging Industry through Extensive Global Client Network Evolving Battery Industry Structure Nornickel Offering Battery Metals Materials Batteries OEMs Captive / in-house Sales platform OEMs are driving the demand with a global reach Industry Structure Long track record of dir
Slide 73: Responsible Leadership in the Global Palladium Market
Responsible Leadership in the Global Palladium Market Global Palladium Fund Status update on Global Pd Fund A tool to support global demand by creating a bridge over mid-term deficit in the market and increasing palladium availability for key Objectives consumers above the current production level
Slide 74: Sustainable Development
Sustainable Development Andrey Bougrov Deputy Chairman of the Board Senior Vice-President
Slide 75: Strong Corporate Governance – Focus on Sustainable Development
Strong Corporate Governance – Focus on Sustainable Development Balanced Board Led by Gareth Peter Penny - Independent Chairman of the Board Independent Board includes 6 independent directors (out of 13) Chairman All Board Committees comprise a majority of independent(1) directors Roger Munnings
Slide 76: Shareholder Structure and Dividend Targets
Shareholder Structure and Dividend Targets Nornickel's Current Dividend Target Dividend Payout as % of EBITDA 32.0% 33.8% 60% 6.4% 30% 27.8% Interros UC Rusal Crispian Investments Limited or its affiliates (1) Net debt/EBITDA Other shareholders 1.8х 2.2х Major Shareholders Agreement: Valid until J
Slide 77: Independently Verified Commitment to Sustainable Development
Independently Verified Commitment to Sustainable Development Recognition of the Company’s ESG Efforts Signatory to UN Global Compact since 2016 Rating updated in June 2018 Upgraded to Average performer Governance score 5/10(1) from Underperformer Score of Environmental score 4/10 58/100 (up from 49
Slide 78: Assessment of Controversies: Country Matters? It depends…
Assessment of Controversies: Country Matters? It depends… «South Africa's platinum miners said Tuesday the two-month Fact Check: International Labor Organization strike is severely damaging the sector, which has lost nearly a Data – Russia Had the Lowest Number of billion dollars in revenue to date.
Slide 79: Assessment of Controversies: Country Matters? Not Really…
Assessment of Controversies: Country Matters? Not Really… Average ESG Score of the SA Corporates Unchanged Despite Sharply Deteriorating …But so Is the Average ESG Score of the Russian Business Climate… Corporates Despite Major Improvements No change? No change! 64 63 64 62 60 52 53 52 53 54 38 40 3
Slide 80: IR Contact Details
IR Contact Details Vladimir Zhukov Mikhail Borovikov Vice-President Investor Relations Head of Investor Relations Department Deputy Head of Investor Relations MMC Norilsk Nickel MMC Norilsk Nickel Tel: +7 495 797 8297 Tel: +7 495 787 7662 E-mail: [email protected] E-mail: [email protected] 80