NorNickel GMK · RUS:GMKN
NorNickel GMK — Nornickel — Investor Day (December 2020)
102 slides from NorNickel GMK's investor day presentation, Dec 1, 2020
Slide 1: Enabling the Transition to a Greener World
ENABLING THE TRANSITION TO A GREENER WORLD MOSCOW, DECEMBER 2020
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: Nornickel – The Year of 2020
Nornickel – The Year of 2020 Robust Response to Safety and health of employees is our top priority – Unprecedented Global Russia’s #1 industrial company by COVID-19 spending(1) Challenges No material impact on operations/financial performance despite disruptions in end markets Ecological Inciden
Slide 5: Customer-Centric Perspective on Commodity Business of Tomorrow
Customer-Centric Perspective on Commodity Business of “Tomorrow” Fundamental Needs New Economy Imperatives Availability of Resources Responsible Production Customer Uninterrupted Supply Low Carbon Footprint Needs Quality Requirements Transparency and and Product Form Traceability 5
Slide 6: Customer-Focused Vision for Nornickel
Customer-Focused Vision for Nornickel: Crafting Value Proposition and Competitive Advantage of “Tomorrow” Addressing Striving to be on top of the fundamental needs agenda of “Tomorrow” Robust Production Volume ESG – Crucial Element of the Growth of “Green Economy” Investment Plan and Metals (+30-40%
Slide 7: Pursuing Balanced Financial Model to Support Long-Term Strategy
Pursuing Balanced Financial Model to Support Long-Term Strategy Rising requirements for the social license to operate: Contribution to regional development Social programs for employees and indigenous people Major Initiatives, e.g. Housing renovation program Charity & sponsorship Leading sha
Slide 8: Health & Safety and Physical Risk Mitigation Programme
Health & Safety and Physical Risk Mitigation Programme Sergey Dyachenko First Vice-President Chief Operating Officer
Slide 9: Health & Safety Update: Delivering Steady Improvements Since 2013
Health & Safety Update: Delivering Steady Improvements Since 2013 Accident Statistics Improved by Almost 75% LTIFR Reduced by Almost 80% since 2013 since 2013 LTIFR (1*10-6) Employees ~ 80% ~ 75% Fatal 0.8 Lost time injury 0.62 12 0.48 14 0.44 0.36 0.32 8 8 0.23 94 13 0.17 74 9 56 52 6 43 35 8 26 18
Slide 10: Health & Safety: Strong Performance Relative to Industry
Health & Safety: Strong Performance Relative to Industry LTIFR Remains Below the Global Mining Industry Assessment of Occupational Safety Culture: Score Average Significantly Improved Since 2014 LTIFR(1) per 200k Hours As of 1H 2020 Bradley Curve Indicator 0.69 Industry average 3.0 2.8 Industry aver
Slide 11: Selected Labour Safety Initiatives
Selected Labour Safety Initiatives Selected Initiatives to Improve Industrial Safety Strict Safety Rules were introduced in 2014 and Labour Protection 16 corporate standards have been implemented to Work at heights minimize the risks and improve occupational HSE • Implementation of corporate standar
Slide 12: 2020 Environmental Incidents: Delivering Prompt Responses
2020 Environmental Incidents: Delivering Prompt Responses May 29 June 28 July 12 Leakage of 21 kt diesel fuel from the Pumping out of recycled industrial Leakage of 44.5t of aviation fuel from emergency fuel storage at Heat and water from the technical water sump, the pipeline during the transfer of
Slide 13: HPP-3 Incident Overview
HPP-3 Incident Overview On May 29, 2020, an incident occurred whereby the containment of the emergency fuel storage at Heat and Power Plant № 3 (HPP-3) in the Kayerkan Norilsk neighborhood of Norilsk failed due to sudden sinking of piles, resulting in the fuel leakage Over a short period of time
Slide 14: Key Milestones of Clean-Up Program and Rehabilitation
Key Milestones of Clean-Up Program and Rehabilitation 2020 2020 2020-2023 Phases 1 & 2: Phase 3: Phase 4: Clean-up Collection of the residues, Rehabilitation / utilization (launched May 29th, completed by June) transportation and utilization (in-progress) (completed in October) 2020-2021 Over 90%
Slide 15: Area Rehabilitation and Restoration in Progress
Area Rehabilitation and Restoration in Progress Soil rehabilitation in the vicinity of HPP-3 in progress Replacing contaminated soil near HPP-3 Seeding grass at the impacted area Rehabilitation of the coastline of the Ambarnaya river A total of 489k sq m of land were treated with 121t of t
Slide 16: ERM Assessment of the HPP-3 Incident: Causes and Mitigation
ERM Assessment of the HPP-3 Incident: Causes and Mitigation Environmental Resources Management Limited (ERM) has prepared a report at the request of Nornickel’s BoD assessing the root causes, contributing factors and critical systems affecting the 29 May 2020 incident Nornickel response/initiatives
Slide 17: Comprehensive Physical Risk Mitigation Programme
Comprehensive Physical Risk Mitigation Programme Dismantling of fuel tanks #5 and #4 at HPP-3 and similar fuel tanks at HPP-2 Reassessment of Risks Upgrade of fuel tanks #2 and #3 at HPP-3: anticorrosion treatment, upgrade the bunding perimeter, installation of new gas detectors Related to Hazar
Slide 18: Physical Risk Mitigation Programme: Permafrost Thaw Monitoring
Physical Risk Mitigation Programme: Permafrost Thaw Monitoring Permafrost Map: Russia Norilsk Drilled Piles Foundation Monitoring Comprehensive analysis of permafrost thaw impact on foundations: Interferometric analysis of satellite images to identify both vertical and horizontal changes in founda
Slide 19: Maintaining Full Transparency, Utilizing Best Practices
Maintaining Full Transparency, Utilizing Best Practices Full information transparency: • Special live updates on the company’s website and social media • Ad hoc investor’s call and communication • Regular IR disclosures and Board updates • Regular Board reviews of the environmental matters occured i
Slide 20: Sustainable Development
Sustainable Development Andrey Bougrov Senior Vice-President
Slide 21: Strengthening Commitment to Sustainable and Responsible Mining
Strengthening Commitment to Sustainable and Responsible Mining Environment Social Corporate Governance • The Sulphur Programme 2.0 (air • Delivered improvement in LTIFR • Introduction of a new ESG-focused strategy) targeting major reduction and fatalities corporate governance structure of SO2 footpr
Slide 22: Holistic Environmental Strategy
Holistic Environmental Strategy Developing a comprehensive strategic focus Air Water Land Tailings & Waste Biodiversity NEW NEW NEW NEW Core strategic initiatives Environmental Rehabilitation Biodiversity Excellence in Operations reduce environmental rehabilitate legacy restore biodiversity footprin
Slide 23: Climate Change Strategy
Climate Change Strategy Climate change 2030 targets 1 Maintain absolute Scope 2 Maintain Scope 1&2 GHG emissions 1+2 GHG emissions from per t of Ni-equivalent in the bottom operations(1) below 10 Mt quartile of global metals and mining Key actions 2021+ CO2e industry GHG intensity curve(2) • Develop
Slide 24: Russia Is on Track to Meet Paris Agreement Targets
Russia Is on Track to Meet Paris Agreement Targets Russia is on Track to Deliver on IEA’s SDS 2040 Nornickel Has Significantly Reduced its Scope 1&2 Target Carbon Footprint from 2010 CO2 emissions change since 1990 Mt 3x+ 50%+ 350% 40 -70+% 300% 250% 30 200% 150% 20 100% 50% 10 0% -50% 0 China World
Slide 25: Competitive Position of Nornickel in GHG Emissions Levels
Competitive Position of Nornickel in GHG Emissions Levels: Well Ahead of Global Peers Scope 1&2 GHG emissions (CO2e) M tonnes 28.0 Peer average 17.7 18 50% 14.7 12.6 9.9(1) 2017-2019 average share of renewable energy in electric power consumption in the Norilsk region Peer 4 Peer 3 Peer 2 Peer 1 Sco
Slide 26: 2030 Climate Change Target: Scope 1&2 Below 10 Mt CO2e
2030 Climate Change Target: Maintain Scope 1&2 GHG Emissions from Operations Below 10 Mt CO2e Mt CO2e 11.8 11.3 9.9 10 2030 Target to Maintain Scope 1+2 Emissions from Operations Below 10 Mt CO2... …amid production growth and ramp-up of Sulphur Programme 2.0 2013 2019 2030 Residential consumption Ot
Slide 27: Environmental and Climate Change Performance and Targets
Environmental and Climate Change Performance and Targets Strong performance Targets NN vs. Peer avg.(1) CAPEX Minimize impact on climate change (reduce CO2 intensity Absolute emissions, Scope 1+2, Mt CO2e -38% emissions) and mitigate physical climate-related risks Absolute emissions, -138x Key next
Slide 28: Environmental Performance and Targets
Environmental Performance and Targets Strong performance Targets NN vs. Peer avg.(1) CAPEX Maintain safe operation of tailings facilities and minimize Non-mineral waste environmental impact of mineral and non-mineral waste recycled and reused 1.4x Key next steps: US$ 0.6bn ratio, % Tailings & Build
Slide 29: Major Legacy Waste Collection and Land Reclamation Programme
Major Legacy Waste Collection and Land Reclamation Programme in Norilsk Area Targets Cleaning of unused objects: 467 abandoned 2+ M tons buildings and of waste structures 1.3+ M tons of straits and 600+ K tons traces of production of scrap activity metal Planned actions • Collection and utilization
Slide 30: Great Norilsk Expedition
Great Norilsk Expedition: Inputs into Water, Land and Biodiversity Strategies Expedition targets: Norilsk • Development of recommendations on minimization of environmental impact of operations in the Arctic • Development of viable, sustainable solutions to address local environmental issues and area
Slide 31: Social Strategy: Employees, Communities, Indigenous People, Charity
Social Strategy: Employees, Local Communities, Indigenous People, Sponsorship & Charity Employees Local Communities Indigenous People Sponsorship & Charity • №1 rated employer • Agencies for Urban • Strong legacy • Supporting local among Top-50 largest Development in Norilsk engagement and infrastru
Slide 32: Social Strategy: Ethnological Expedition
Social Strategy: Ethnological Expedition – Assessing Impact on Indigenous People 100 5 670 Interviews with local Key local ethnic groups Local residents indigenous people held covered by the survey impacted (Dolgans, Nenets, Evenks, Enets and Nganasans) Permanent settlements of Indigenous settlement
Slide 33: Social Strategy: Engagement with Indigenous People
Social Strategy: Strong Legacy of Engagement with Indigenous People Strong legacy of engagement On September 25th, Norilsk Nickel signed a 5-year RUB2 billion and support of local indigenous cooperation agreement(1) with 3 associations of indigenous people, communities representing the prevailing ma
Slide 34: Social Strategy: Response to Coronavirus
Social Strategy: Response to Coronavirus – Safeguarding Employees and Supporting Local Communities $120 mln(1) Coronavirus-related spending in 9M 2020, including purchases of medical supplies and equipment Employees New processes & benefits, Local communities procedures health & safety • 100% of sal
Slide 35: Corporate Governance: New Organizational Structure
Corporate Governance: New Organizational Structure – Responding to New Challenges New Independent Board of Directors Environmental Task Risk Management Increased focus on strategic initiatives; Team of the Board strong commitment to the environmental agenda of Directors Committee chaired by the Pres
Slide 36: Independent Assessment by ESG Rating Agencies
Independent Assessment by ESG Rating Agencies • ESG rating 61/100 as of June’20 • ESG rating «B» confirmed as of (33% score improvement since 2015) July’20 in line with peers (improvement from CCC since • ESG Risk Rating «High» Reiterated 2015) • Industry position -27/57, Average • Industry average
Slide 37: Advancing ESG Agenda Towards Best Practices
Advancing ESG Agenda Towards Best Practices Progress in 2020 2021 Targets • New long-term sustainable development strategy with • Roll-out of ad-hoc strategies at the divisional level specific targets • Setting environmental 2030 targets, development of • New climate change strategy with specific ta
Slide 38: Operations Update
Operations Update Sergey Dyachenko First Vice-President Chief Operating Officer
Slide 39: Unlocking the Resource Base Potential
Unlocking the Resource Base Potential – Growth Targets Reconfirmed Ore Mining: 2020-2030 Long-Term Development Projects: 2030+ The potential of Nornickel’s unique resource base New ore mining projects set to secure reconfirmed. Ambitious growth targets maintained Talnakh deposit development well bey
Slide 40: Skalisty Mine Development Update
Skalisty Mine Development Update The deepest mine in Eurasia Main shaft sinking completed (2 051 m depth) Full commissioning of the main shaft scheduled for mid-2021 Feasibility study for autonomous mining at 2-2.5km depth in progress First ore from the deep mine (Skalisty Gluboky) is sche
Slide 41: South Cluster Project Update
South Cluster Project Update Large-scale, long life (25+ years) brownfield asset at the bottom of the global PGM cost curve O/P and U/G operations leverage synergies from existing infrastructure FS and detailed engineering completed. Open-pit ore mining to commence in Q2, 2021 Pre-stripping
Slide 42: Kola Concentrate Loading Points – Project Update
Kola Concentrate Loading Points – Project Update The project enables re-direction of Kola concentrate flows to other facilities post shutdown of nickel smelter in Russia-Norway border zone as part of Sulphur Programme 2.0 Construction of the first loading point for low-grade concentrate complete
Slide 43: Kola Nickel Refinery Upgrade – Status Update
Kola Nickel Refinery Upgrade – Status Update The project envisages an upgrade of Tankhouse-2 facility to a more efficient and environment-friendly electrowinning technology Construction completed Production of high quality nickel cathodes commenced Current production capacity is at 85% from
Slide 44: Bystrinsky Project: Target Capacity Achieved
Bystrinsky Project: Target Capacity Achieved One of the largest completed greenfield projects in the Russian mining industry Ore reserves: 316 Mt @ Cu ~0.7%; Fe ~23%; Au ~0.9 g/t(1) Full ramp-up achieved in 2Q 2020 1H 2020 EBITDA: US$277 mn Operating Performance Outlook 2020E 2021E Ore Mt(2)
Slide 45: Technological Breakthrough 2.0: Towards Digital Mining
Technological Breakthrough 2.0: Towards Digital Mining Key achievements in 2015-2020 Technological Breakthrough 100% mine plans digitalized in 3D 100% ore reserves digitalized 80% of mine development 50 IT-projects operations are monitored via a Communication network & positioning system dedic
Slide 46: Efficiency Improvement Programme Results
Efficiency Improvement Programme Results: 2017 Targets Achieved Targets Announced in 2018 Delivery in 2020 Programme Initiatives NiEq production(1) Reduced haul distance Production growth +6% Roll-out of best drilling practices Improved equipment 5-8% utilization rates Application of digital
Slide 47: Production Guidance for 2020-2023
Production Guidance for 2020-2023(1) Ni Pt+Pd Cu Excluding Bystrinsky project kt t kt 225 225-235 113 455 220-230 215-225 105-111 420-440 208 103 103-106 100-110 399 390-410 380-410 2016-2018 2019 2020E 2021E 2022- 2016-2018 2019 2020E 2021E 2022- 2016-2018 2019 2020E 2021E 2022- 2023E 2023E 2023E P
Slide 48: Strategic Ambitions for 2030+ Metal Production
Strategic Ambitions for 2030+ Metal Production(1) Ni Cu Pt+Pd kt kt t +20-30% +20-30% +40-50% 250-270 490-530 150-160 240-260 480-520 140-150 210 398 105 2017 Strategic 2017 Strategic 2017 Strategic ambition 2030+ ambition 2030+ ambition 2030+ Targets set in 2019 Note: 1. Metals produced from own fe
Slide 49: The Strategy of Sustainable Growth
The Strategy of Sustainable Growth Sergey Dubovitskiy Senior Vice-President Strategy, Strategic Projects, Logistics & Procurement
Slide 50: Nornickel's Strategic Framework
Nornickel’s Strategic Framework Mining Volumes Growth Resource base potential reconfirmed, 2030 production growth targets moderately increased to 20-30% for base metals and 40-50% PGMs(1) Downstream Upgrade Fit-to-size upgrade and expansion of downstream capacities, positioning to address evolving m
Slide 51: Crafting Long-Term, Efficient & Reliable Downstream Configuration
Crafting Long-Term, Efficient & Reliable Downstream Configuration Resource Base Potential & Production Targets Confirmed Downstream Development Rationale Ore mining in Norilsk region, Mtpa up to 1.8х Leveraging off existing production sites 30-32 24-26 17 Balancing the entire production value chain
Slide 52: Downstream Development Roadmap
Downstream Development Roadmap: Towards Scaled-Up, Balanced, Modern and Sustainable Production Value Chain Mining Concentration Smelting Refining Upgrade of Talnakh concentrator in progress (from 10 to 18 Mtpa by YE2023) Norilsk Copper Smelter Copper Refinery New Norilsk concentrator in Division
Slide 53: 3rd Stage of Talnakh Concentrator
Modern Concentration Facilities: 3rd Stage of Talnakh Concentrator Concentration Smelting Refining Polar Division Talnakh Capacity expansion to Norilsk +8 Mtpa accommodate for ore production growth (“South Cluster”) +3 Mtpa Additional capacity: +8 Mtpa Targeting higher recoveries for all key m
Slide 54: Expansion of Nadezhda Smelter: New 3rd Production Line
Expansion of Nadezhda Smelter: New 3rd Production Line Concentration Smelting Refining Polar Division Nadezhda Smelter capacity Talnakh increase: New 3rd furnace +850 ktpa +30% of Ni conc. smelting Nadezhda Norilsk +850 ktpa Overall throughput increase and backup for shutdown maintenance New l
Slide 55: New Copper Refining: Modern Environmentally-Friendly Technology
New Copper Refining: Modern Environmentally-Friendly Technology 2025 Concentration Smelting Refining New Copper line Norway Kola Division 2022-2024 Finland New Cu refining hub to replace Production flows to be redirected to Polar Division, Murmansk existing obsolete Copper line with optionalit
Slide 56: Nickel Refining Strategy at Kola Division
Nickel Refining Strategy: Targeting Fully Modernized and Scaled up Refining Facilities at Kola Division (Kola and Harjavalta) Concentration Smelting Refining Kola Division Norway Strategic vision for Nickel Refining: Finland Murmansk 100% modernized Kola Nickel Refinery Nickel Refinery Monchegorsk
Slide 57: Energy Infrastructure Modernization
Energy Infrastructure Modernization: Interim Delivery and Plans 2013-2020 Delivery 1 P e l ya tki nskoye G as C o n densate F i el d 2 Severo -Soleninskoye Gas Condensate Field TPP-2 Replacement of 6 power- 3 Y u zh n o -S ol e ni n sko ye G a s C o n d e nsa te F i e l d generating units at hydro
Slide 58: Strategic Framework: Greener Metals
Nornickel’s Strategic Framework: …GREENER METALS… Climate Change Sulphur Programme 2.0 Maintaining the industry’s lowest Eliminating SO2 legacy impact carbon footprint & enhancing competitive position of “Tomorrow” ESG Strategy Holistic environmental programme with clear long-term targets 58
Slide 59: Lowest Quartile Emissions Intensity Base Metals Producer
Lowest Quartile Emissions Intensity Base Metals Producer. Targeting to Sustain Industry-Leading Position in the 1st Quartile Nornickel’s emissions (tCO2e/t Ni-eq.) for nickel 25% 50% 75% Combined leadership of Nornickel on both cost and CO2 intensity Emissions Intensity (t CO2e/t Ni-eq.) curves to e
Slide 60: Sulphur Programme 2.0: Environmental Roadmap
Sulphur Programme 2.0: Environmental Roadmap Smelter Nickel town Copper Plant Kola Division Copper line (Refinery) Norilsk Monchegorsk Nadezhda Smelter 2020 Polar Division Nickel Plant (Shut down in 2016) Optimization of smelting operations in Nickel town 2021 On track to cut SO2 emissions in
Slide 61: Sulphur Programme 2.0: Construction Status
Sulphur Programme 2.0: Construction Status Nadezhda Smelter Flagship project to capture furnace gases and establish acid neutralization facilities and infrastructure: CAPEX(1) - ~85% contracts legally binding ~$3.6 bn - Project design allows for expansion of the smelter (3rd Furnace) - Piling, ste
Slide 62: Developing Capabilities to Deliver on New Investment Cycle
Developing Capabilities to Deliver on New Investment Cycle Tackling challenges of Developing internal capabilities contractor labour force deficit Developing infrastructure for fly-in Establishing dedicated Major Projects construction workers (e.g. housing function capacity for 1000 persons by Y
Slide 63: CAPEX Guidance
CAPEX Guidance CapEx, US$ bn Growth projects Environmental projects Base investment program & other projects 3.5-4.0 3.0-3.4 up to 2.0 <2.0 2020F 2021F average 2022F-2025F average 2026F-2030F Guidance reiterated with incremental investments balanced by the effect of ruble depreciation 63
Slide 64: Financial Performance
Financial Performance Sergey Malyshev Senior Vice-President Chief Financial Officer
Slide 65: Financial Performance Highlights
Financial Performance Highlights EBITDA Margin Revenue Mix 50%+ Pd 48% of total metal sales Industry leading EBITDA margin through High profitability owing to naturally diversified the cycle owing to the lowest production metals’ basket and efficient cost control cash cost in the sector Cash Flow Yi
Slide 66: Strong Margins Through the Cycle Supported by Low Unit Cash Costs
Strong Margins Through the Cycle Supported by Low Unit Cash Costs Sustainably High EBITDA Margin…(1) …Supported by Unit Cash Production Costs US$ mln US$/tonne NiEq (2) 59% -4% 4,000 60% 53% 3,923 3,883 3,768 3,500 3,719 50% 3,344 3,000 41% 3,079 40% 2,500 27% 2,000 30% 1,744 1,838 1,500 1H 17 1H 18
Slide 67: Naturally Balanced Metal Mix: Palladium Almost 50% of Revenue
Naturally Balanced Metal Mix: Palladium Almost 50% of Revenue The Growing Share on PGMs: Palladium Price Increased Over 2x Since 2013 vs Palladium Contribution Up to Almost 50% Nickel Up Only Marginally Nov’13-Nov’20 100% 22,500 +11% 3,000 +220% 19,500 2,600 80% 16,500 2,200 60% 13,500 1,800 19% 20%
Slide 68: Investment Grade Ratings Maintained as Credit Metrics Remain Robust
Investment Grade Ratings Maintained as Credit Metrics Remain Robust Net debt/EBITDA, x 2.5 Credit ratings Baa2/stable BBB-/stable 2 BBB-/stable 1.5 1 0.5 Projected range based on recent broker estimates; current shareholder agreement set to expire in 2022 0 2012 2013 2014 2015 2016 2017 2018 2019 20
Slide 69: Debt Structure, Interest Rates Improved in 2020
Debt Structure, Interest Rates Improved in 2020 Liquidity and Debt Repayment Schedule(1) US$ bn 8.2 Landmark financing deals in 2020: Record-low coupon rate of 2.55% on a USD Eurobond by Russian / CIS issuer 2.8 US$4.15bn syndicated facility priced at LIBOR+140bp Average cost of debt down to 2.9
Slide 70: MET Hike to Bring Royalties In Line with Global Average
MET Hike to Bring Royalties In Line with Global Average 3.5x Mineral Extraction Tax hike on Royalties as % of Annual Revenue select Russian mining and fertilizer sub-sectors becomes effective on 4.6% 1 January 2021 4.4% For example, Polar Division ‘flat rate’ MET goes up from RUB 730/tonne of or
Slide 71: IT Infrastructure Enables Effective and Smooth Operation
IT Infrastructure Enables Effective and Smooth Operation In 2014-2019, IT infrastructure underwent complete overhaul, with industry standard IT systems for operations, accounting and reporting implemented throughout the company This enabled smooth transition to remote work during the COVID-19 pa
Slide 72: Key Sensitivities
Key Sensitivities Approximate estimated impact on 2020 EBITDA of a 10% change: Sensitivity, US$ mln Expected 2020 average RUB/US$ exchange rate 577 RUB 72.75 Palladium price 553 $2,161/Oz Nickel price 280 $13,424/t Copper price 294 $5,954/t 72
Slide 73: Markets Update
Markets Update Anton Berlin Vice President, Sales and Distribution
Slide 74: COVID-19: Major Distortion to Commodity Markets in 2020
COVID-19: Major Distortion to Commodity Markets in 2020 Global Supply: PGMs Impacted the Most due to Global Demand: PGMs Down Sharply on a Major Quarantine in SA, Little Impact on Base Metals Contraction of Autos, Base Metals More Resilient Supply 2020E vs 2019 Consumption 2020E vs. 2019 5% -1% -3%
Slide 75: Volatile Macro: Contraction Followed by V-shape Recovery
Volatile Macro: Unprecedented Contraction Followed by Fast “V-shape” Recovery Quarterly GDP Growth: Strong Rebound Expected in Global Economic Growth in Major Markets is 2021 to Above Pre-virus Growth Rates Temporarily Affected by COVID-19 Spread GDP Growth, % Y-o-Y IMF Forecast for 2020-2021 GDP Gr
Slide 76: Contraction in Industrial Consumption of Metals
Challenging Macro Environment: Contraction in Industrial Consumption of Metals Sharp Contraction in Global Industrial Production, China – the Largest Consumer of Base Metals, China Leading the Recovery Europe and US – Main PGM Consumers Manufacturing PMI, Monthly Data Breakdown of global consumption
Slide 77: Metal Markets Outlook — View on Fundamentals
Metal Markets Outlook — View on Fundamentals Metal Ni Cu Pd Pt 20% 4% Share of Nornickel metal sales 1H 2020 18% 48% Stocks, kt +81 kt +40 Moz -0.8 Moz +0.4 days of Other consumption Non- Non- elastic exchange exchange Other Other non-elastic Exchange 35 40 28 Exchange 8 ETF ETF 115 164 5 6 25 23 18
Slide 78: Nickel Exchange Stocks Back to Elevated Levels
Nickel Exchange Stocks Back to Elevated Levels Exchange Inventories Restored on Stock Nickel Inventories Declined by Over 50% from Reallocation and Market Surplus Peak Levels of 2015 But Still Above Normal Ni, kt Days of consumption +44 +78 kt YTD in 2020 (incl. off-warrant stocks reallocation excl.
Slide 79: Nickel in Stainless: Sustainable Recovery
Nickel in Stainless: 300 Series Production in China and Indonesia Showing Sustainable Recovery China: Growth in 300s Driven by Stimulus Package, Stainless Stocks in China: Significant Decline in 200s Impacted by Weak White Goods Demand(1) Q2-Q3 Due to the Recovery of Consumer Demand kt Y-o-Y % kt ST
Slide 80: Nickel in Batteries: Europe Leading the Growth
Nickel in Batteries: Europe Leading the Growth, China Struggling to Recover Global BEV Equivalent Sales(1) Rebounded Strongly China LFP Output Growing Amid Tesla’s Expansion, in Q3 Primarily Owing to Europe Stabilisation of NCM on the Recovery of NEV Sales `000 units Y-o-Y % t 1H 2020 Y-o-Y % 300 9M
Slide 81: Nickel Market Newly Emerged Surplus to Sustain Through 2021
Nickel Market Newly Emerged Surplus to Sustain Through 2021 Substantial Market Surplus in 2020 Exacerbated by Global Demand: Recovery Will Depend on the COVID Impact and Surge of Indonesian NPI Epidemic Impact on Consumer Demand in 2021 kt Surplus kt Y-o-Y % +6% 108 9 49 40 23 75+ (48) 9 –1% 61 (21)
Slide 82: Copper: Impacts of COVID-19 on Demand and Supply is Marginal
Copper: Impacts of COVID-19 on Demand and Supply is Marginal Global Consumption: Marginal Impact in 2020, Global Mined Copper: Production Cuts and Outlook Modest Recovery Expected in 2021 Downgrades Owing to COVID-19 in 2020 Mt Y-o-Y % Mt Y-o-Y % +5% +3% -3% -3% 23.6 21.5 23.6 21.0 22.9 20.4 2019 Ch
Slide 83: Copper Demand and Supply: Strongest Resilience Among Metals
Copper Demand and Supply: Strongest Resilience Among Metals to Coronavirus-Related Disruptions Copper Supply Disruptions: Market Balance: Marginal Surpluses Expected, But 2020 YTD Below Historical Average Resilience to Coronavirus to Be Further Tested kt 3 7% 5.9% 6% Surplus of 1% of 2.5 global cons
Slide 84: Global Light Vehicle Sales Are Recovering After COVID-Related Slump
Global Light Vehicle Sales Are Recovering After COVID-Related Slump Major Auto Markets Have Recovered… …But Global Light Vehicle Sales Are -17% YTD Million units Y-o-Y % 2019 2020 3 -17% World 2 1 China -7% 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Europe -23% 3 2 North 1 -18% America 0 Jan Feb Mar
Slide 85: Palladium Demand Drivers: Rising Loadings
Palladium Demand Drivers: Rising Loadings to Offset Partially Weaker Sales in 2020 Global Autos Outlook: Production to Rebound Pd Loadings in Autocatalysts Strongly in 2H2020 and 2021 Will Continue to Grow Light vehicles production, million units Average PGM loadings per vehicle, change in 2020 Laun
Slide 86: Palladium Market to Remain Balanced
Palladium Market to Remain Balanced as Auto Industry is Experiencing the Biggest Contraction in Decades Pd Deficit Remained in 2020 While 2021 is More Demand: Pd Among the Metals Impacted the Balanced Heaviest by COVID Moz Moz Y-o-Y % The 2021 surplus includes ~200 koz Pd +11% to be released from SA
Slide 87: Platinum Market Remained Oversupplied
Platinum Market Remained Oversupplied Amidst Falling Auto and Jewellery Demand Balanced Market in 2020 and Apparent Surplus Demand: Sharp Reduction on Weak Global Car in 2021 Sales and Jewellery Moz Moz Y-o-Y % 7.6 +8% The 2021 surplus includes ~300 koz Pt to (0.6) -15% 7.0 be released from SA WIP p
Slide 88: Long-Term Trends Supporting Consumption Growth for Metal Basket
Long-Term Trends Supporting Consumption Growth for Nornickel’s Metal Basket Fuel cells Vehicles electrification Increasing stainless steel demand Reducing diesel from China to support market share 10% construction, urbanization and 4% 20% living standards growth USD 6.4 bn Tightening of emission 1H
Slide 89: Global Decarbonisation per IEA SDS: Electrification of Light Vehicles
Global Decarbonisation per IEA Sustainable Development Scenario: Implied Electrification of Light Vehicles SDS Targets for the Reduction of CO2 Emissions by Implied Autos Mix by 2040: BEVs – 30%, ICE Light Vehicles: 20% by 2030 and 60% by 2040 (1) Containing Vehicles, Including Hybrids – 70% Light d
Slide 90: SDS Targets for Decarbonisation – Neutral Impact on PGMs
SDS Targets for Decarbonisation – Neutral Impact on PGMs Palladium: Deficits to Sustain, Balanced Market in • Modest LT demand outlook: ‘20-40 CAGR of 1-2% LT Subject to Flattening Demand Growth • …but significant incremental demand in the Moz medium term: +1.8 Moz by 2025, +0.9 Moz by 2030 Pd in ca
Slide 91: SDS Targets for Decarbonisation – Positive for Base Metals
SDS Targets for Decarbonisation – Positive for Base Metals • Strong demand outlook: ‘20-40 CAGR of >4% Nickel: Balanced with Deficits to Rise in Longer-term • Expected demand additions due to change in autos’ mix: Mt Ni in stainless steel, Ni in batteries +0.3 Mt, including 0.2 Mt from BEVs/hybrids
Slide 92: Global Decarbonisation – Risk Assessment for Nornickel's Metals
Global Decarbonisation – Risk Assessment for Nornickel’s Metals 2040: Ni PGMs Cu Growth of market share of BEVs Growth of hybrids Fuel cells Growth of renewables/low carbon fuel in power generation Storage and grid expansion to support growth of xEVs Net impact 92
Slide 93: A New Era in Metal Trade
A New Era in Metal Trade • Digitalization of metal sales contracts is opening new exciting prospects in physical metal trade and industrial value chain – a new and better ecosystem for industrial consumers throughout the value chain as well as traders and commodity investors • Digital assets (tokens
Slide 94: Tokenization Program Benefits for Norilsk Nickel
Tokenization Program Benefits for Norilsk Nickel • Additional source of physical metal liquidity through extended portfolio of industrial clients (especially in automotive industry) and investment demand • A tool for inventory management under unfavorable market conditions • Development of investmen
Slide 95: Tokenization Program Benefits for End-Users
Tokenization Program Benefits for End-Users • Unique opportunities to manage upstream value chain and supply risks – tokens can be transferred to upstream processors, sold to third parties or used as collateral • Safer, quicker transactions with lower costs • Responsible sourcing made easier as digi
Slide 96: Tokenization Program Benefits for Investors
Tokenization Program Benefits for Investors • Acquiring financial assets with no restrictions pertaining to using LME deliverable metal and issuing warrants • Acquiring financial assets with a competitive cost of ownership and transaction fees • Creation of financial products reflecting spot base me
Slide 97: Industrial and Investment Tokens
Industrial and Investment Tokens Bringing Additional Value For The Market (IT) Industrial Tokens Investment Tokens ABT IBT (Asset Backed Tokens) (Industry Backed Tokens) Description: A supply agreement specifying Competitive investment/ Low-cost investment product quality, delivery hedging instrumen
Slide 98: A Token-Backed ETC Product
A Token-Backed ETC Product • Ridgex Investment plc – a standalone Irish Section 110 Special Purpose Vehicle – a typical structure for issuing metals-backed Exchange Traded Commodities (ETCs) • Structure is ‘orphaned’, i.e. it is not owned by any other entity but has independent directors that provid
Slide 99: Appendices
Appendices
Slide 100: EV Sales Are Very Sensitive to Subsidy Policy: the Case of China
EV Sales Are Very Sensitive to Subsidy Policy: the Case of China Sales of NEV Decreased for 12 Consecutive Months Due to Tightening Subsidies and COVID Impact The Shift from Tax Subsidies to Dual Credit System Subsidy per BEV(1) '000 units Jan-Oct 2020, RMB YoY ∆% 180 90,000 -6% 60,000 -75% 160 30,0
Slide 101: Pd Substitution with Platinum in Gasoline-fired Vehicles
Pd Substitution with Platinum in Gasoline-fired Vehicles Tri-Metal Solution Currently tested for: SUV/Trucks Pd 20-30% Pt Potential loading share Rh for substitution Mostly in Potentially 200-400koz pa by 2023-2024 in the US market (if all models switch, but highly unlikely) Challenges: • High engin
Slide 102: Corporate Governance: Focusing on Long-term Value Creation
Corporate Governance: Focusing on Long-term Value Creation Board of Directors – 46% Independent Shareholder Structure 6 (46%) 4 (31%) As of September 30, 2020 INEDs Olderfrey 38.0% 34.2% Other Shareholders Olderfrey Holding(1) 13 Directors 3 (23%) UC RUSAL Board Committees Chaired by 27.8% Audit and