Annual report • 2017
Investing
in sustainable
development
CONTENTS
2017 ANNUAL REPORT
PJSC “MMC “NORILSK NICKEL”
1
1
02
Company overview
04
06
08
10
12
Company profile
Key highlights
Business model
Chairman’s letter
President’s letter
2
2
16
20
22
26
28
Strategy overview
Environmental
programme
Key
investments
Shaping
growth areas
Efficiency improvement
programme
Reporting period from 1 January 2017
to 31 December 2017
The 2017 annual report of PJSC “MMC “Norilsk
Nickel” (MMC Norilsk Nickel, Nornickel,
the Company) incorporates the results
of MMC Norilsk Nickel and other operations
of the Norilsk Nickel Group (the Group).
For the purposes of this annual report, the
Norilsk Nickel Group shall refer to a group
of companies that includes MMC Norilsk Nickel
and its subsidiaries. The largest subsidiaries
of the Norilsk Nickel Group and their shares
in the capital of MMC Norilsk Nickel are
presented in the 2017 consolidated IFRS
financial statements.
The accuracy of information contained in this
report was confirmed by the Audit Commission
and approved by the Company’s Board
of Directors and Annual General Meeting
of Shareholders.
• Preliminarily approved
by the Board of Directors of MMC Norilsk Nickel
(Minutes No. GMK/18-pr-bd of 24 May 2018)
• Accuracy of information confirmed
by the Audit Commission of MMC Norilsk Nickel
(Opinion of 16 May 2018)
• Approved by the Annual General Meeting
of Shareholders of MMC Norilsk Nickel
(Minutes No. 1 of 28 June 2018)
Vladimir Potanin
President,
Chairman of the Management Board
PJSC “MMC “Norilsk Nickel”
Sergey Malyshev
Senior Vice President,
Chief Financial Officer
PJSC “MMC “Norilsk Nickel”
Company mission
Through the efficient use of natural
resources and equity, we supply
mankind with non-ferrous metals,
which make the world a more reliable
place to live in and help people realise
their aspirations for development and
technological progress.
Values
Reliability
an ability to address any
challenges to ensure success for
the business.
Growth
effective production ramp-
up and upgrade, leverage of
groundbreaking technologies
and development of our people.
Efficiency
delivering against our targets in
due time and at minimum costs.
Responsibility
a desire to honour our
commitments and take on
responsibility for our decisions.
Professionalism
a sustainably strong
performance.
Collaboration
an ability and desire to achieve
goals through team work.
3
3
30
Market overview
32
34
40
44
50
Metals in electric car production
Nickel
Copper
Palladium
Platinum
4
4
56
Business overview
58
58
62
66
87
94
97
100
103
105
108
108
128
132
147
The Group business
Mineral base
Geological exploration
Production assets and activities
Key investment projects
Gas and energy assets
Transportation assets
Products and sales
Research and development
Supply management
Corporate responsibility
HR and social policy
Occupational safety
Environment
Financial overview (MD&A)
5
5
160
Corporate governance
162
165
170
185
193
195
203
Deputy Chairman’s letter
Corporate governance framework
Board of Directors
President and Management Board
Remuneration
Risk management and internal controls
Independent audit
Online report
is avaiballe on website
https://ar2017.nornickel.com/
6
6
204
Information for shareholders
206
206
210
213
214
Authorised capital
Securities
Dividends
Shareholder rights
Transparency
7
7
218
Appendixes
220
267
268
270
272
292
294
295
Consolidated financial statements
The Group structure
History of production indicators
Minerals resources and reserves
Report on compliance with principles
and recommendations set forth in the
Corporate Governance Code
Glossary
Metric conversion table and currency
exchange rates
Сontacts
COMPANY
OVERVIEW
04
06
08
10
12
Company profile
Key highlights
Business model
Chairman’s letter
President’s letter
Company profile
The Norilsk Nickel Group’s core operations
The Norilsk Nickel Group (the Group) includes PJSC MMC
Norilsk Nickel (Nornickel, the Company) and its subsidiaries.
MMC Norilsk Nickel is the core (parent) company of the Norilsk
Nickel Group, having the biggest share in the subsidiaries’
authorised capital.
For more details on the Group’s structure
p. 267
The Norilsk Nickel Group is Russia’s
leading metals and mining company,
the largest palladium and refined nickel
producer in the world, and one of the
biggest platinum producers. In addition, the
Group produces copper, cobalt, rhodium,
silver, gold, iridium, ruthenium, selenium,
tellurium, and sulphur.
Mineral resources1
Nornickel operates the unique Talnakh Ore
Field on the Taimyr Peninsula. Its sheer size and
remarkably high content of metals in the ore make
the field’s resource base key contributor to the
Company’s long-term sustainable growth.
1 The Company’s reserves and resources as at
31 December 2017, including wholly owned overseas assets
and excluding deposits in Zabaykalsky Krai are reported
according to JORC standards.
The Company’s position in the global industry
Proven and
probable reserves
12.4 mt Copper
7.1 mt Nickel
3.9 kt PGM
(125 mln oz)
815 mt Ore
Measured and
indicated resources
23.8 mt Copper
15.5 mt Nickel
8.3 kt PGM
(264.7 mln oz)
2,220 mt Ore
For more
details on
the Company’s
reserves and
resources
p. 58
No. 1
palladium
producer
No. 1
high-grade
nickel producer
No. 4 No. 5
No. 13
producer
of platinum
cobalt
producer
copper
producer
Market
share
40%
22%
11%
5%
2%
For more
details on
the Company’s
position in
the industry
p. 30
In addition to the production facilities,
the Company owns:
The Group’s
production assets
Russia. Core businesses in Russia are vertically integrated and include
Polar Division, Kola MMC and Bystrinsky GOK.
a global sales network,
fuel and energy assets,
a wide range of R&D units,
river transport, port terminals,
a unique Arctic cargo fleet.
Finland. In Finland, Norilsk Nickel operates Norilsk Nickel Harjavalta,
a nickel refining facility that became part of the Group after its acquisition
in 2007. The plant is fully integrated into the Group’s production chain.
South Africa. In South Africa, the Company owns 50% of Nkomati, a nickel
mine developed jointly with African Rainbow Minerals.
Australia. In Australia, The Company holds a licence to develop
the Honeymoon Well Project.
The Company
supplying its
products to
34
countries
EXPLORATION
MINING AND
PROCESSING
OF MINERALS
SALES OF NON-
FERROUS
AND PRECIOUS
METALS
For more
details of sales
network
p. 100
EBITDA margin in 2017 // %
Company
No.1
Company
No.2
Company
No.3
Nornickel
52
46
45
44
Strong EBITDA margin ranking
among the highest in the global
metals and mining industry
Company
No.4
34
Company
No.5
28
Dividend yield in 2017 // %
Nornickel
The Company offers
the highest dividend yield
in the industry
Company
No.1
Company
No.2
Company
No.3
7.2
6.2
6.0
4.1
Company
No.4
3.0
Company
No.5
2.9
• 4 •
• 5 •
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017
Key highlights
Financial
stability
For more details on financial results, please see the
Financial Results (MD&A) section and IFRS Financial
Statements
p. 147, 220
Operating
efficiency
EBITDA margin // %
EBITDA // USD bn
CAPEX // USD bn
Net debt / EBITDA ratio
Net debt // USD bn
Net profit // USD bn
Dividend yield1 // %
Dividends paid in the reporting period // USD per share
50
4.3
3.9
47
4.0
44
1.7
1.7
2.0
2015
2016
2017
2015
2016
2017
In 2017, EBITDA increased by 2%
mainly due to higher metal prices.
Strong EBITDA margin remains among
the highest in the global industry.
CAPEX increased in 2017 due
to the active construction phase
of Bystrinsky GOK and upgrade
of refining capacities at Kola MMC.
PRODUCTION RESULTS
4.2
1.0х
2015
1.2х
4.5
2016
2.1х
8.2
1.7
2.5
2.1
18.1
14.0
2017
2015
2016
2017
2015
18.8
7.2
2017
7.8
7.3
2016
An increase in net debt by
31 December 2017 was caused
by dividend payments in the amount
of USD 3 bn and one-off changes
in the net working capital. The net debt
to EBITDA ratio used to calculate final
dividends for 2017 was at 1.88х.
In 2017, Nornickel’s net profit
amounted to USD 2.1 bn.
The Company paid the highest
dividend yield in the global metals
and mining industry.
1 Dividend yield was
calculated based
on the amount
of dividends
recommended
by the Board of
Directors and
the average ADR
price sourced from
Bloomberg for
the calendar year.
Nickel // kt
Copper // kt
Palladium // koz
Platinum // koz
2017
2016
2015
97%
217
83%
236
2017
2016
83%
266
2015
99%
401
96%
360
96%
369
2017
2016
2015
98%
2,780
2017
96%
2,618
96%
2,689
2016
2015
97%
670
95%
644
93%
656
From the Company's own Russian feedstock
From the Company's own Russian feedstock
From the Company's own Russian feedstock
From the Company's own Russian feedstock
After completion of the main of production reconfiguration
programme Talnakh Concentrator reached its design
capacity and achieved target recovery rates in 2017. This
also led to the normalisation of the work-in-progress
inventory levels and helped Nornickel to increase output of
all key metals from the Company’s own Russian feedstock
and meet the production targets for 2017. In addition, the
Company substantially decreased low-margin processing of
purchased from third parties.
For more details on production
outlook, please see the Strategy
Day presentation (slide 26)
available on the Company’s
website
For more details
on historical
production
p. 268
– 8%
2017/2016
+ 11%
2017/2016
+ 6%
2017/2016
+ 4%
2017/2016
High level
of social
responsibility
Use of renewable energy // %
Sulphur dioxide emissions // mt
Average headcount // thousand
of people
LTIFR
FIFR
Injury rates // accidents
40
36
38
2.01
1.88
1.79
98.8%
98.9%
97.6%
2017
2016
2015
2015
2016
2017
2015
2016
2017
Russia
Other countries
1.2%
1.1%
2.4%
78.95
82.01
83.62
0.62
0.12
2015
74
0.43
0.06
2017
43
51
19
14
18
13
15
7
2015
2016
2017
0.35
0.11
2016
Lost-time injuries
Fatalities
Among the contractors'
employees
Nornickel’s investment programme
for 2018–2020 includes several
large-scale energy projects aimed at
modernizing the Company’s captive
hydroelectric power plants and
enchancing the use of renewable
energy sources.
In 2017, sulphur dioxide emissions
decreased by 11% from 2015. The
decline came as a result of the Nickel
Plant shutdown, upgrade of Talnakh
Concentrator and the transition to hot
briquetting technology at Kola MMC.
The emissions within Norilsk city limits
dropped by 30–35%.
The decrease in headcount in
2017 resulted from the disposal of
noncore assets, implementation
of a programme to improve labour
productivity, and cost optimisation.
The 2017 LTIFR (Lost Time Injury Frequency Rate (non-fatal LTIs) / total number of
hours worked•1,000,000) is in line with the industry average. The number of fatal
injuries decreased by 46% thanks to the implementation of new safety standards
and launch of the Risk Control project. The number of accidents among the
contractors’ employees also declined.
• 6 •
• 7 •
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017
Business model
s
e
v
r
e
s
e
r
d
n
a
s
e
c
r
u
o
s
e
R
i
d
e
n
m
e
r
O
n
o
i
t
c
u
d
o
r
P
e
u
n
e
v
e
R
Proven and probable reserves
Measured and indicated resources
Ni
mt
7.1
14.3
Cu
mt
12.4
23.8
Pd
moz
94.4
197.4
Pt
moz
25.0
55.8
Kola MMC
Norilsk Nickel
Harjavalta
mt~25
Shipments
to end
consumers
Production
asset upgrade
projects
p. 87
217
kt
401
kt
2,780
koz
670
koz
Other
2.3
USD bn
2.3
USD bn
2.3
USD bn
0.6
USD bn
1.6
USD bn
17.4%
25.2%
6.8%
9.1
USD bn
p. 149
25.7%
24.9%
Net profit
2.1
USD bn
Investments
2.0
USD bn
• 8 •
Polar Division
Foreign assets
Operations
Krasnoyarsk Precious
Metals Refinery
(100% state-owned)
Australia
Honeymoon Well
(licence)
South Africa
Nkomati
Mining
Refining
Concentration
Logistics
Smelting
Bystrinsky GOK
Production assets structure
p. 66
Aid to nature
reserves
p. 141
Electric cars with
a new type
of batteries
p. 32
Catalysts
in exhaust gas
treatment
systems
p. 46
R&D
p. 103
Sulphur
Project
p. 90
In 2018–2022, Nornickel will become 'greener' and
help others to 'get greener'.
Vladimir Potanin
Product
applications
!
Positive
environmental
impact
Batteries
Catalysts
Electronics
Medicine
Coins
NI, Au, Ag, PGM
PGM
Cu, Au, Ag
NI, Cu, PGM, Au, Ag
Stainless
steel
Coatings
Pipes
Wire
Jewellery
Ni, Co, Mo, Fe
Ni, Au, Ag
Ni, Cu, Co,
Mo, Fe
Cu
Au, Ag, PGM
Metal sales geography
p. 100
The Group's
own global
sales network
spans over
countries34
• 9 •
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017
Chairman’s
letter
Dear Shareholders,
Year 2017 was rough and volatile from both macroeconomic and operating perspective,
but it nonetheless became a year of significant achievements and major decisions for our
Company.
Thanks to the hard work, commitment and professionalism of our 79,000 employees,
we continued to expand our leadership position by delivering on operating and financial
results, upgrading our assets, and enhancing safety, while generating significant value for
shareholders.
In the second half of 2017, synchronised global economic growth and optimism returned
to the metals and mining sector, positively affecting the price of our metal basket. With this
tailwind, we generated solid revenues of USD 9.1 billion and strong EBITDA of USD 4.0
billion with a strong margin of 44%.
To allow you, as shareholders, to benefit from our robust cashflow generation, we
continued paying dividends with an industry-leading yield. I would like to highlight that
the flexibility of our dividend policy allowed us to maintain a proper balance between a
conservative level of financial leverage and attractive cash returns, while still investing in
sustainable development and future growth.
During the year, we continued to deliver on our value-accretive investment agenda as the
expansion and modernisation of concentrating, smelting and refining facilities were largely
completed, allowing us to beat initial production guidance and minimize the low-margin
processing of third-party feed. Another big achievement was the launch of the Bystrinsky
greenfield project, which we have been actively investing in for the last few years. This is
positioned to provide a significant boost to our copper and gold output starting from 2018.
+11%
9.1
USD bn
Revenue in 2017
With regard to important decisions, I would like to highlight our announcement of a
new investment programme focused on environmental and large-scale infra-structural
expenditures that are crucial pre-requisites for long-term sustainable growth. The Company
is committed to allocating USD 2.5 billion to reduce sulfur dioxide emissions in the Polar
division by four times by 2023, in order to improve dramatically the quality of life in Norilsk.
During 2018-2022, we also plan to invest over USD 1 billion in renewal of infrastructure
including a gas transportation system, power generation and logistics. We understand
2.5
USD bn
CAPEX to Sulphur Project
that these investments may not generate immediate financial returns, but firmly believe
that our efforts will pay off and contribute to the growth of shareholder value in the long
run. We are witnessing the growing environmental awareness of the global investor
community which chooses long-term sustainable development to short-term gains,
and hence supports our strategic initiatives.
A year of major decisions will now be followed by the systematic implementation of
the measures initiated, with a positive impact on our operations. To ensure the delivery of
improved results and higher returns to shareholders, the Board will continue to be deeply
involved in oversight of performance, risk and financial efficiency and will keep a constant
scrutiny on safety. We have a bold vision for the future — an invigorated sense of what
we can accomplish as one team, one Nornickel.
Gareth Peter Penny
Chairman of the Board
of Directors
MMC Norilsk Nickel
• 10 •
• 11 •
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017 President’s
letter
Dear shareholders,
It was half a decade ago, back in 2013, when the Company’s new management team
launched a five-year strategic programme, so in addition to the last 12 months of 2017, I
would also like to speak about the performance over the last five years.
When we took the reins in 2013, we had our work cut out for us. We had to whip
the Company into shape, and we started by shoring up the budget and investment
discipline, reconfiguring our production chains, upgrading smelting capacities and
preparing integrated solutions for multiple environmental problems.
Today, I can say that we have followed through on each of these targets, even despite
the constant metal price fluctuations, capital markets uncertainty and geopolitical
challenges. Our operations were not the only field where we excelled: thanks to
consistently strong financial performance and well-organised dialogue with the
investment community, we were able to lock in a substantial dividend yield of more
than 60% over the last five years.
Completion of polar assets reconfiguration
and new launches
+7–15%
increased production from
own feedstock
In 2017, we completed a number of key development projects that were started back
in 2013–2014. Talnakh Concentrator reached full design capacity, marking a milestone
in Nornickel’s major investment project to upgrade equipment and reconfigure
processing capacities. Improved concentrate quality and expanded processing
capacities at Nadezhda Metallurgical Plant and the Kola MMC refining facilities fully
offset the discontinued smelting capacities following the shutdown of Nickel Plant. As
a result, the output of all our key metals from own feedstock grew by 7–15% compared
to 2016.
2
USD bn
CAPEX
In late October 2017, we launched Bystrinsky GOK in Zabaykalsky Krai, which was the
largest Russian greenfield project of the last decade. For us, Bystrinsky GOK is not
just another new asset, which is going to be outputting 70 kt of copper and 250 koz
of gold annually, but a platform to implement the most advanced technologies and
practices, both in the sphere of production, social policy, environment protection and HR
management.
Financial highlights
Inspired by the synchronised global expansion, investors showed renewed interest
in commodities, which supported the recovery of the non-ferrous and platinum group
metals prices in 2H 2017. As a result, Nornickel’s revenue grew by 11% to USD 9.1 bn,
while EBITDA stood at USD 4 bn with the margin of 44%. CAPEX amounted to USD
2 bn, the bulk of which was spent on continuing the production capacity reconfiguration
programme, executing high-margin mining projects and completing Bystrinsky GOK.
• 12 •
• 13 •
Continued
overleaf
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017 >100
USD mln
reduction of interest payments
1,087
bids
were received at a grant competition
for social projects over three years
–75%
cut is targeted for Polar Division’s
SO2 emissions by 2023
2.5
USD bn
CAPEX of Sulphur Project
Thanks to the favourable global market
environment and historically low interest rates,
we were able to decrease the cost of our debt.
During the last year, we repaid high interest rate
rouble loans in the amount of RUB 60 bn, placed
two Eurobond issues for USD 1.5 bn with record-
low coupon rates for Nornickel, made a downward
revision to the rates on our existing credit facilities
for a total amount of USD 2.5 bn, and raised a
syndicated loan of USD 2.5 bn from a pool on
international banks at an unprecedentedly low
interest rate for a Russian company. Together,
these achievements helped drive down the future
interest payments by over USD 100 mln.
Occupational safety and social
responsibility
The life and health of its employees remain
Nornickel’s top priority. The Company has put
in place a large-scale programme for prevention
of workplace injuries and accidents, carried out
behaviour audits and workplace certification,
and implemented the latest occupational safety
standards. We also started the digitisation of
production processes at underground mines.
Despite the human factor still causing some work-
related fatalities, we were able to almost halve
their number. No matter how small, that number is
unacceptable for us, and we are going to do all we
can to achieve a zero fatality rate.
The Company’s social work is not limited to its
production facilities. Across all regions of its
operation, Nornickel strives to better the urban
environment, improve living conditions, and
support public initiatives in the respective areas.
Since 2014, the Company has been hosting a
grant competition of social projects, which aims to
support public initiatives and facilitate sustainable
development. Over the last three years, the
competition drew 1,087 bids, out of which 294
were selected for funding, with the total of RUB
265.5 mln allocated by the Company.
Volunteering is becoming increasingly more
popular among Nornickel’s employees. For
example, the Let’s Do It environmental marathon,
which seeks to promote careful and responsible
attitudes to the regions of operation and ecology
on the whole among the Company’s staff,
has become a corporate tradition. In 2017, it
saw participation from thousands of Nornickel
employees, who are also part of the Plant of
Goodness corporate volunteer programme.
Another important development of 2017 was
the end of the fibre optic communication line
construction, which finally gave Norilsk residents
access to high-speed internet. It will make it
faster and easier for us to introduce IT solutions
at the production sites while also improving the
community’s living standard.
New strategic cycle’s
priorities – green Nornickel and
investments in growth
Despite the achievements of the last five years,
we realise there is still a lot of work ahead of us
and do not hesitate to set even more ambitious
targets. The absolute priority for us is the material
improvement of the environmental conditions
in the Norilsk Industrial District and the Kola
Peninsula. Last year, we initiated the so-called
Sulphur Project, which will enable the Company to
cut Polar Division’s sulphur dioxide emissions by
75% by 2023. This truly massive project will involve
the construction of major sulphuric acid production
capacities with subsequent neutralisation
capabilities and will cost up to USD 2.5 bn. We will
continue work on the Kola MMC production chain
upgrade, which will allow us to shut down part of
the smelting capacities and thus achieve a twofold
decrease in emissions.
We aim to make Nornickel a truly “green”
company, which will include not only decreasing
the harmful footprint of our facilities, but also
promoting our products as a means of ensuring
environmentally-friendly development of the
humankind. Nornickel is already recognised as
the largest global producer of metals used in
manufacturing of automotive catalysts, which help
improve urban air quality across many countries.
High-quality nickel is an indispensable component
of batteries for electric cars, which will dominate
our planet’s roads in the future.
To maintain Nornickel’s status of the industry
powerhouse long into the future, we are putting
together a portfolio of growth projects that include
development of the Southern Cluster (potential
to ramp up production from 2 to 6 mt of ore),
expansion of Talnakh Concentrator, and a project
to develop disseminated ore fields in the southern
part of the Norilsk Industrial District.
We are certain that successful execution against
our targets over the next five-year period will
ensure exponential growth of Nornickel and lay the
groundwork for generating long-term shareholder
value.
Vladimir Potanin
President,
Chairman of the Management
Board MMC Norilsk Nickel
• 14 •
• 15 •
Company overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual Report • 2017 STRATEGY
OVERVIEW
20
22
26
28
Environmental programme
Key investments
Shaping growth areas
Efficiency improvement programme
Nornickel’s strategy
The Company has embarked on a new investment cycle to secure its sustainable development and
establish a platform for future growth. President’s priorities include implementing the second stage of the
unprecedented environmental programme, completing the production reconfiguration project, developing
the Company’s mining assets, reaching target performance levels for the Chita project, and delivering on the
extensive infrastructure renewal programme, which, together with comprehensive efficiency improvement
efforts, is helping to lay foundation for sustainable shareholder value growth.
President’s
priorities
„
The 2023 development
programme is designed
to renew all production
capacities and, ultimately,
make Nornickel one of
the most advanced and
environmentally responsible
companies in the industry.”
Vladimir Potanin
Environmental programme
• Implementing environmental projects that lead to
a many-fold decrease in SO2 emissions across the
Company’s footprint
• Working with the “green” industries, including by
manufacturing catalysts and electric transport
Mining development and the new
asset replacement cycle
• Consistently renewing the infrastructure and key
production facilities
• Upgrading and refurbishing the production assets
(reconfiguration project)
• Developing the Talnakh ores and maintaining
a stable production level
Shaping growth areas
Consistent process efficiency
improvement
• Comprehensive cost reduction and efficiency
improvement programme
• Introducing ERP / automated control systems
• Introducing industrial automation systems
Annual report • 2017
THE MAP TO ADVANCED, EFFICIENT,
AND ENVIRONMENTALLY FRIENDLY
PRODUCTION
Kola
MMC
5
1
9 8 7
4 3 2
Polar Division
Chita
6
2018–2020 key strategic investments
Average annual investment // USD bn p.a.
USD 1.4–1.6 bn
1
Optimising the smelting shop
capacity utilisation rates to
decrease SO2 emissions
2
Implementing
the comprehensive
environmental programme
Potential growth projects
Framework investment
programme
2.0–2.5
USD 4.4–4.8 bn
3 Infrastructure development
and maintenance
5 Completion of the current
reconfiguration programme
1.5
4 Intensive development of the
Talnakh ore mining base
6 Chita Project
7
8
Potential construction of
the third stage of Talnakh
Concentrator
9
Greenfield PGM production
project in the Norilsk Industrial
District
Development of the Southern
Cluster
Search for new growth areas in
other Russian regions
USD 0.3–0.5 bn
Efficiency improvement initiatives covering IT, automation, R&D,
machinery productivity
2013–20171
2018–2020
1 Excluding Chita Project.
• 18 •
• 19 •
Strategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes –75%
target reduction of SO2
emissions in the Norilsk
Industrial District by 2023
–50%
target reduction of SO2
emissions in the settlement of
Nickel (Kola MMC) by 2019
Environmental
programme
The integrated environmental programme expected to receive
ca. USD 2.5 bn in investments by 2023 is one of the priority
focus areas of Nornickel’s strategy. The programme is designed
to decrease SO2 emissions by 75% in the Norilsk Industrial
District and by 50% on the Kola Peninsula.
„
We are launching the
second stage of our
environmental programme,
the Sulphur Project, on a
scale that is unprecedented
not only in Russia but
worldwide.”
Vladimir Potanin
Environmental programme 2.0
Kola Peninsula
Kola MMC
Objective
Cut emissions in the Kola Peninsula by 50%
Goal
Optimise the smelting shop capacity utilisation
rates in the settlement of Nickel by separating
the concentrate produced at Kola Concentrator
Taimyr Peninsula,
Polar Division
Sulphur Project
Objective
Goals (Stage 2)
Cut sulphur dioxide emissions by 75% (as compered
to 2015) by 2023 leveraging the most effective
technological solution
The programme includes two stages
Stage 1 was completed in 2016 as a part of the
downstream reconfiguration programme that
included upgrade of concentrating and smeltting
capacities as well as the shutdown of Nickel Plant,
the oldest and least environmentally friendly site in
the Polar Division, to substantially reduce emissions
in the residential area of Norilsk. At present, the
Company is working to achieve Stage 2 goals.
Copper plant
• Reconstruct copper production chain, including
the shutdown of environmentally harmful
conversion operations
• Expand and upgrade the existing sulphur
production
Nadezhda Metallurgical Plant
• Launch a new continuous copper matte
converting facility
• Implement a comprehensive SO2 capture
solution including production of sulphuric acid
and its subsequent neutralisation with natural
limestone
More details on the Sulphur Project
p. 90
Investing in pure metal
Providing the growing electric vehicle industry
with critically important metals
Providing catalyst producers with critically
important metals
Ni, Cu, Co
More details
p. 34
Pt, Pd
More details
p. 44
• 20 •
• 21 •
Improvement of environmental conditions across Russian operations and globallyStrategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual report • 2017 Key
investments
USD 4.4–4.8 bn
Investments in core projects, 2018–2020
The framework investment programme provides for large-scale
modernisation and expansion of the production capacities,
consistent renovation and upgrade of the infrastructure,
development of the Talnakh ores, and maintaining a stable
production level. The Chita project, one of the largest greenfield
projects in Russia’s mining industry, is also part of the framework
investment programme.
„
Over the next three years, we
will be going through a higher
CAPEX stage which will allow
us to both maintain stable
production levels and establish
a strong foundation for new
high-potential projects.”
Vladimir Potanin
Mining projects
Taimyr Peninsula
Polar Division
In the mid-term, the investment programme
will ensure a stable level of production
• Increased rich ore production at Skalistaya
mine will preserve metal content in commercial
ore at the current level.
• The resource base of the Talnakh Ore Cluster
has a strong potential for further development.
In 2018–2019, the Company will make decisions
on expanding the production capacities at the
Oktyabrskoye and Talnakhskoye Fields.
Production volumes at Talnakh Ore Cluster // mt
Production without additional investment
Production growth at Skalistaya mine
Production growth driven by other Talnakh projects
11.3
13.7
13.5
2020
2017
2014
2.3
1.8
1.8
1.0
USD 1.5 bn
investments in Talnakh mines
development in 2018–2020
Development project
Chita Project
GRK Bystrinskoye
Achieving target financial indicators is one of the
MMC’s key priorities
• Hot commissioning started in November 2017.
• Planned processing capacity post-2021 – 10 mt.
• Target metal output in concentrates:
~70–75 kt of copper,
~250–260 koz of gold,
~2,900 kt of magnetite concentrate.
• Life of the project – over 30 years.
More details on the
project
p. 93
The reserves are estimated at
336 mt of ore
Au
Cu
Fe
295 t
2.3 mt
73 mt
Project investments
~ USD 1.7 bn
• 22 •
• 23 •
Large-scale asset modernization and development of the mining baseStrategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual report • 2017 Reconfiguration of the processing
capacities
Infrastructure
upgrades
Project highlights
Kola Peninsula
Kola MMC
Establishment of a nickel refining hub at
Severonickel Plant
Works are underway to expand nickel
refining capacities from 165 ktpa to 190 ktpa
and to switch nickel electrolysis shop-2 to
a new chlorine leaching technology.
Taimyr Peninsula
Polar Division
Upgrade and ramp-up of Talnakh
Concentrator
The capacity of Talnakh Concentrator
increased from 7.5 mtpa in 2015 to 10.2 mtpa
in 2018. Nickel content in nickel-pyrrhotite
concentrate increased by more than 60%.
Upgrade of the flagship Nadezhda
Metallurgical Plant
We have upgraded and ramped up smelting
capacities of Nadezhda Metallurgical Plant,
which has become the smelting hub for all
nickel feedstock of Polar Division. Compared
to 2014, the capacity grew by 26%.
Nickel Plant shutdown
In August 2016, the Company shut down
Nickel Plant, which had been in operation
since 1942. The shutdown involved
providing strong social guarantees to
the plant workers. The project resulted
in 30–35% reduction of SO2 emissions in
the residential area of Norilsk.
+25 ktpa
nickel refining capacity
expansion at Kola MMC
+2,7 mt
concentration capacity expansion
at Talnakh Concentrator by 2018
As part of its strategy, Nornickel will allocate USD 1.1–1.2 bn to infrastructure
renewal and upgrades during 2018–2020. The projects include a large-
scale infrastructure renewal: renovation of worn out gas transportation and
hydropower facilities, replacement of power units, and reconstruction of
critical production assets, transport infrastructure, and power grid.
USD 1.1–1.2 bn
investments in infrastructure projects,
2018–2020
2018–2022 targets
Power supply
• Gradual replacement of six retiring
power units with the total capacity of
550 MW
Auxiliary operations
• Replacing the required resources,
including construction of a new
limestone quarry
Core operations
• Replacing core types of equipment to
enhance its overall performance
• Transition to new rock bolting systems
to improve safety
Transport infrastructure
• Reconstruction of critical facilities
Power and utilities
• Parts of the comprehensive programmes:
(airport, seaport, oil depot, warehouses,
etc.)
power line replacement (30 km), gas
distribution networks (111 km), drinking
water supply to Dudinka, etc.
More on gas and power assets
p. 94
Scheduled for replacement in 2018–2022 are:
six power units with the
total capacity of
550 MW
gas distribution networks
with the total length of
111 km
• 25 •
a power line with the total
length of
30 km
• 24 •
Strategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual report • 2017
Shaping growth
areas
Development driven by Tier 1 assets is the Company’s long-term
strategic goal.
What are Tier 1 assets?
Target annual
revenue
>USD 1 bn
EBITDA margin
Reserves-to-
production ratio
40%
>20 years
Potentially, growth areas will be centred around the existing
assets of Polar Division, with a possibility of initiating a new
copper project in Russia’s Far East.
„
We believe in stronger demand
for our products going forward
and deem it necessary to put
together a portfolio of growth
projects. During the next few
years, we will be exploring
potential development
of the Southern Cluster,
further expansion of Talnakh
Concentrator, and the joint
project with Russian Platinum to
develop disseminated ore fields
in the southern part of the Norilsk
Industrial District.”
Vladimir Potanin
Optional projects
Talnakh
Concentrator–3
Talnakh
Northern part
Norilsk-1
Norilsk
Southern part
Norilsk-1
Maslovskoye
Field
Chernogorskoye
Field
Fields made part of
the new JV
Strategic partnership with Russian
Platinum
The southern part of the Norilsk
Industrial District
Nornickel is considering a strategic joint venture
with Russian Platinum, of a calibre comparable
to Polar Division in terms of scale of PGM
production. The joint venture is set to become
one of the largest global PGM producers.
Target PGM output of the new JV
70–100
mtpa
Southern Cluster
Investment decision – 2018
Talnakh Concentrator–3
Investment decision – 2018
• Potential to become a Top 5 global PGM
• Efficient disseminated ore processing
producer.
• Optimal capacity utilisation at Norilsk
Concentrator (post Talnakh Concentrator–3).
• Potential to raise project financing.
technologies deliver greater metal recovery
rates.
• Opportunity to utilise the economies of scale
by using several existing facilities of Talnakh
Concentrator.
• Opportunity to optimise costs of transporting
Talnakh ores to Norilsk Concentrator.
More details on the project
p. 87
Russian Far East
Looking for Tier 1 assets for long-term
development in the Far East, a poorly developed
region with a vast resource potential and
proximity to Asian markets.
• 26 •
• 27 •
Boosting Tier I asset potentialStrategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual report • 2017
Target outcome – costs reduced, since 2020, by
USD 200–300 m
Efficiency
improvement
programme
The comprehensive programme was enabled by the platform
created in the past, including industrial automation and
automated control systems, ongoing ERP deployment, and new
production processes and standards.
„
We must ensure that all our
process chains are built in the
most efficient manner aligned
with our objectives.”
Vladimir Potanin
Base programmes
Upgrading
production
assets
Developing
and integrating
new
production
processes and
standards
Reconfiguring
and shutting
down
outdated
production
facilities
Introducing
ERP /
automated
control
systems
Introducing
industrial
automation
systems
Introducing
new
approaches to
management
IT infrastructure upgrade as a tool for achieveing
operational excellence
SAP ERP deployment
• Pilot project completed
• 2017 –Chita project, 2018 – Polar Division
New DCP architecture
• Upgraded server infrastructure and data storage
systems according to the Company’s needs
• Upgraded data network
Underground radio communications and
positioning systems at the mines
• 369 km of optic fibre cable
• 1,052 Wi-Fi spots
• Real-time control of mining personnel and
machinery
MES layer (Manufacturing Execution System)
• Machinery control system pilot project in Norilsk
• Completed 3D modelling of one mine’s shafts;
now the system is rolled out to other mines
• Talnakh Concentrator successfully piloted the
metal balance project; the system is rolled out to
other plants and mines
Norilsk
Faber cable
956 KM
Novy Urengoy
Optic fibre line to Norilsk
• The 956 km 40 Gbps line is now live
• Unprecedentedly challenging line construction
environment
• Enabling the use of advanced IT systems
• Better living standards in Norilsk
More details on the project
p. 119
• 28 •
• 29 •
Shaping a comprehensive cost reduction ecosystemStrategy overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixesAnnual report • 2017
MARKET
OVERVIEW
32
34
40
44
50
Metals in electric car production
Nickel
Copper
Palladium
Platinum
Market overview
Metals in electric car
production
For the Company, this project is an opportunity to carve a niche in
the attractive and rapidly growing market for rechargeable battery
materials. Cooperation with BASF is part of Nornickel’s strategy to
develop environmentally-friendly technologies and make an active
contribution towards improving the environment globally. Today,
the Company provides manufacturers of automotive catalysts with
essential chemicals capable of capturing dangerous exhaust fumes
generated by petrol engines. By expanding the supply of metals
for the automotive industry with its strong potential, the Company
makes another step towards sustainable development.
KEY TREND IN THE GLOBAL AUTOMOTIVE INDUSTRY
The electric vehicle industry is clearly facing a period of intensive
growth, which will boost long-term demand for key metals. However,
so far experts have not come to a consensus on market growth
projections. Sales forecasts for electric and hybrid cars vary from
2 mln cars to 11 mln cars per year by 2025.
Market outlook for 2035 is much more optimistic. BP projects the
total number of EV and hybrids to grow to at least 100 mln globally.
According to analysts from Carbon Tracker Initiative and Imperial
College London, electric vehicles are expected to account for
one third of the automotive market by 2035 and for more than
a half by 2040. One of the most likely drivers of EV expansion will
be government policy in many developed countries committed
to introducing a broad range of incentives to promote the production
of green cars, up to imposing an ultimate ban on the sale of cars
with internal combustion engines. Still, this is unlikely to happen
before 2025.
2 0 1 7 M I L E S TO N E
In July 2017, Nornickel signed a memorandum
with BASF and began negotiations on a project
to increase sales to manufacturers of batteries for
electric vehicles.
„
This is a pilot project. If it is successful,
we can launch commercial production by
2020.”
“Today, markets are taking a new look at
our products. The demand for palladium
is growing. Cobalt and nickel are also
benefitting from a positive trend supported
by the production of batteries for electric
vehicles. Accordingly, we are considering
ways to increase shareholder value by
adjusting our product portfolio to the
requirements of new industries and new
demand. We see current market expectations
as somewhat inflated and do not commit
ourselves to large-scale investments. Still, we
are trying to be proactive in our marketing
policy and proceed with what we call fine-
tuning of our product lines.”
“We are an industrial company, not a
venture one. For us, a responsible decision
is to invest in successful technologies only.”
Vladimir Potanin
President of Nornickel
Annual report • 2017
NORNICKEL’S POSITION
Over a short-term horizon, the Company is not planning any investments
in large-scale production of materials for the electric vehicle industry,
as the EV technology is still in the development phase. However, the
Company is prepared to reconsider its position should the trend change.
Nornickel expects demand for nickel from manufacturers
of rechargeable batteries for EV production to increase dramatically
in the mid-term, but this will not be the case before 2020, when the
automotive industry is ready to shift to electric vehicles. By 2025, the
Company forecasts the demand for nickel in the EV market to grow to
420 kt from the current 43 kt, in addition to demand from stainless steel
manufacturers, historically the largest consumers of nickel. In the mid-
term, the key trend in the EV market will also be the production of hybrid
vehicles that rely on both an internal combustion engine (ICE) and an
electric engine. Per unit PGM consumption in hybrid cars is higher than
in traditional vehicles with the same ICE volume; accordingly, we expect
palladium consumption to increase by 3 mln oz by 2025.
USE OF NORNICKEL METALS IN ELECTRIC VEHICLE
MANUFACTURING
Source: Company estimates,
LMC Automotive, Bloomberg.
Incremental average annual output by
powertrain, 2017–2025 // m units
1.2
0.7
0.4
0.2
Hybrids
BEV
PHEV
HDD
–0.1
ICE-only
The demand for nickel in the EV market // t
2025Е
2016
2025Е
2016
348
+
3
6
%
255
Palladium
106
106
+
0
%
Platinum
1%
FCEV
● Ni 2–3 kg
● Cu 70–75 kg
● PGM 25–35 g
3%
BEV
● Ni 30–110 kg
● Cu 75–801 kg
9%
17%
Diesel
● Ni 3–4 kg
● Cu 20–25 kg
● PGM 3–6 g
68%
Gasoline
● Ni 3–4 kg
● Cu 20–25 kg
● PGM 2–5 g
Hybrid
● Ni 5–15 kg
● Cu 45–50 kg
● PGM 2–6 g
x10
Consensus in Bullish on Long-term Outlook of Electric Vehicle Sales
Market
Share2
Total BEVs consensus forecast
Total Hybrids consensus forecast
Range of forecasts (BEV)
2
2016
4
2
2020E
8
5
2025SE
10
5
0
• 32 •
• 32 •
As compared to petrol and diesel engines, the consumption of metals
produced by Nornickel in the manufacturing of EV engines is much
more intensive. The process requires 2 to 27 times more of nickel, 2 to
4 times more of copper, and 12 to 17 times more of PGM (the latter are
particularly important for fuel cell vehicles).
1 Excluding additional infrastructure demand of 1–8 kg per charger.
2 Expected market share in 2025 based on production.
• 33 •
• 33 •
By 2025, the demand for
nickel in the EV market to
grow to
to 420 kt
Market overview
Nickel
Ni
Nickel
Vale
13%
No.2
in nickel
market
10%
9%
7%
7%
5%
4%
3%
3%
3%
Nornickel
Tsingshan Group
Jinchuan
Glencore
Sumitomo MM
Xinhai
Sherritt
Anglo American
BHP Billiton
Other
Primary nickel consumption by region
Key industry developments and nickel price // USD/t
China
Other Asia
Europe and Africa
Americas
2.15
mt
36%
55%
20%
17%
8%
16,867
15,004
15,000
11,807
10,411
12,000
9,609
2
3
4
5
1
7
6
9
8
9,000
6,000
Source: Company data
Source: LME, Company data
2013
2014
2015
2016
2017
01.01
01.02
01.03
01.04
01.05
01.06
01.07
01.08
01.09
01.10
01.11
01.12
Key trends in the nickel market
In Q1 2017, the nickel price was highly volatile in the
range of USD 9,380–11,045 per tonne reflecting a
mixed news background from Indonesia and the
Philippines. In early Q2 2017, it started to decline after
the Indonesian government issued permits for the
export of unprocessed nickel ore and Regina Lopez,
Secretary of Environment and Natural Resources of
the Philippines, was not re-appointed for a new term of
office, which challenged the decisions made after the
environmental audit of the country’s mining industry.
This trend was intensified by a reduction in stainless
steel output in China. However, starting Q3 2017,
prices began to recover backed by the news about
the growth of stainless steel production in China and
the launch of a large stainless steel plant in Indonesia.
Early Q4 2017 saw a positive price performance amid
considerable enthusiasm of the investment community
about the potential increase in nickel consumption
in electric cars, peaking at USD 12,830 per tonne –
the highest level since June 2015. However, by
the year-end 2017, there was a price correction to
USD 12 thousand per tonne.
Market balance
Following several years of surplus, the nickel market
recovered the balance in 2016, with consumption
outstripping production by 20 kt. In 2017, nickel
shortage went up to 108 kt. The demand was mainly
driven a 7% y-o-y increase in metal consumption
primarily attributable to the Asian producers of
stainless steel and batteries. In turn, primary nickel
output gained as little as 2%. High grade nickel
2017
Market deficit widened; demand increased in line with higher production
of stainless steel in China and Indonesia and cathode materials for Li-
ion batteries; production slightly went up driven by NPI output growth
in Indonesia and China, which was almost entirely offset by declining
production of high grade nickel.
Outlook: cautiously optimistic.
In 2018, the market deficit may go down a result of a much greater availability
of high grade lateritic nickel ore.
production declined by 6% (60 kt) largely triggered
by the reconfiguration of the Company’s production
facilities, shutdown of sulphide ore mines in Canada,
and the shortage of hydrometallurgy semi-products
and sulphide concentrates on the market after the
closure of loss-making mines in 2015–2017, with the
Ravensthorpe shutdown coming as the last of those.
Only nickel production from lateritic ore was on the
rise. In 2017, low grade nickel production increased
by 11%, or 100 kt y-o-y, mainly due to the Chinese and
Indonesian NPI output growth.
During the year, total exchange warehouse stocks at
the LME and the SHFE decreased by 55 kt to 411 kt,
which is about 10 weeks of global consumption.
1 Leaked data on possible
easing of the ban to
export ore from Indonesia
and uncertainty in
the Philippines after
environmental audits of
the mining industry;
2 Lower stainless steel
output in China;
3 Permit issued by the
5 Permits by the Indonesian
Indonesian government to
PT Antam to export up to
2.7 million wet tonnes of
unprocessed nickel ore;
4 R. Lopez’s failure to be
re-appointed as Secretary
of the Philippines'
Department of
Environment and Natural
Resources;
government issued
to Fajar Bhakti Lintas
Nusantara to export up to
1.06 million wet tonnes of
unprocessed nickel ore;
6 Relaunch of Delong's
stainless steel plant
(China);
7 Launch of a stainless
steel production line
at Tsingshan plant
(Indonesia):
8 Recovery of stainless
steel output in China;
9 LME Week that aroused
investor interest in
nickel on the back of the
expected electric car
market growth.
Surplus/deficit in the nickel market // kt
–108
2017
2016
–20
Source: Company data
+7%
growth of consumption
of primary nickel
+2%
growth of primary nickel output
in 2017
• 34 •
• 35 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Nickel
Consumption
Stainless steel comes to the market in various grades
from all over the world, whereas its smelting structure
ultimately determines the primary nickel consumption
patterns.
Austenitic stainless steel comprising the 200 series
and 300 series steel is the most widespread type
of that product (over three quarters of the global
production).
The 300 series steel has a higher nickel content
(normally 8–12%, or up to 20% in a number of select
grades). Nickel added in this proportion improves
the steel’s corrosion resistance and robustness in
a wide range of temperature conditions, boosts its
ductility and durability in aggressive environments,
and enhances its non-magnetic properties. This
series enjoys the highest demand, as it is applied in
various industries, including construction, food and
chemicals manufacturing, energy, transportation, etc.
The 200 series steel cannot serve as a full substitute
for the high nickel content grades, as it has a lower
nickel content due to the addition of manganese.
The 200 series steels are susceptible to surface
(pitting) corrosion and non-resistant to heat and
aggressive environments. Due to the lower price,
this steel grade is often used in the production of
consumer goods, such as home appliances. China
and India account for over 90% of the total 200
series steel output.
Austenitic-ferritic (duplex) stainless steels also use
nickel and are characterised by a higher content of
chromium (18–25%) and molybdenum (1–4%), but
they account only for 1–2% of the global smelting
output. For statistical purposes, these steels are
usually grouped with the 300 series.
Ferritic and martensite stainless steels (400 series)
usually do not contain nickel, while their properties
are similar to those of low-carbon and highly
corrosion-resistant steels. However, their mechanical
properties are inferior to those of austenitic stainless
steels. These steels are mainly used to manufacture
automotive exhaust systems, cargo container
frames, water heaters, washing machines, utensils
and cutlery, kitchenware, home decor items and
razor blades.
Primary nickel consumption in 2017 by industry // %
2017
2016
Stainless steel
73
Electroplating
7
Batteries
5
Alloys
8
Special steels
7
Other industries
1
Source: Company data
Nickel consumption is predominantly
driven by the stainless steel industry
(over 70% in 2017).
In 2017, the total stainless steel output increased by
6% and hit a record high of 48 mt.
China (with a share of over 50% of the global output)
and Indonesia accounted for the most part of
production growth. Smelting output growth in China
ensued from the re-launch of Delong’s capacities
(over 1.1 mtpa) previously suspended after more
stringent environmental controls had been imposed.
Indonesia is a new steel market player with a robust
growth outlook, sufficient reserves of high grade
lateritic ore, growing NPI capacities and, hence, low
cash cost of austenitic stainless steel.
• 36 •
Except for Europe, where stainless steel smelting
stayed flat, nickel consumption in stainless steel
making was steadily growing in 2017 across all
regions. The USA was leading the charge in this
segment with an 8% rise, according to our estimates.
Consumption of primary nickel by the global
stainless steel producers rose by 7% to 1.57 mt
as a result of an increase in the 300 series and
200 series global output by 7% and 5%, respectively,
and a flat share in the use of scrap y-o-y. However,
the use of high grade nickel in stainless steel
smelting has not changed vs 2016 mostly due to the
growing availability of low-grade nickel.
Nearly all types of nickel feedstock are used in
stainless steel production (except for a number
of specific products, including nickel powder and
compounds). Since the quality of nickel barely
affects the quality of conventional stainless steel
grades, the manufacturers opt for the cheapest
nickel feedstock, turning to high grade nickel as their
last resort. This is the reason why high grade nickel
share has been declining in the structure of nickel
units consumed in stainless steel production in
recent years with higher volumes of NPI, ferronickel
and metallised products with a lower nickel content.
In 2017, primary nickel consumption in alloy
production increased by 2%, which was mainly
attributable to the recovery of demand from the
oil and gas industry, and high demand from the
aerospace industry.
Except for Europe nickel
consumption in stainless steel
making was steadily growing
in 2017 across all regions.
Nickel is widely used in decorative and protective
platings with their thickness ranging from 1 to
100 microns. Nickel electroplating is highly
corrosion-resistant, hard and pleasing aesthetically.
It is used for corrosion protection, and as an
alternative to chromium plating. In 2017, primary
nickel consumption in the electroplating industry
grew by 5% (4 kt), mainly due to demand in Asia.
In recent years, China has been the leading
manufacturer of nickel electroplating products. Since
2012, though, the electroplating industry has started
to develop in other Asian countries, and the Chinese
businesses are now transferring their production to
achieve cost savings.
The battery industry uses nickel as a major
component of the active material for battery cells.
The extent of nickel utilisation depends on the
battery type.
Stainless steel production by grade series // mt
300 series
200 series
400 series
26.5
24.7
2017
2016
10.1
11.2
9.6
10.8
48
45
Source: Company data
+6%
Primary nickel consumption in 2017 // mt
48
mt
record stainless steel output
in 2017
2017
2016
• 37 •
+7%
2.14
2.02
Source: Company data
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Nickel
Battery
Nickel-cadmium
Ni-Cd
The first nickel-cadmium batteries were developed in
1899. Currently, their use is restricted, since cadmium
is prohibited as a toxic substance under the EU ban.
Nickel-metal hydride
Ni-MH
Ni-MH batteries were developed in 1989 as a
substitute for Ni-Cd batteries to avoid using cadmium.
Producers use nickel to manufacture this type of
batteries. Currently, though, the nickel-metal hydride
battery market is growing at a slow pace (with
hybrid vehicles being its only growth driver) and
faces considerable competition from the lithium-ion
batteries.
Lithium-ion
Li-Ion
Li-Ion batteries were first commercially released in
1991 and became fairly widespread due to their high
energy capacity and reliability (capacity is retained
after many recharge cycles).
The key driver behind Li-Ion battery growth is electric
vehicles gaining ground. Since 2014, CAGR of electric
cars (hybrid and battery electric cars) has been
around 46%.
The key factors driving electrification of the transport
system are:
• incentives offered by the state;
• transformation of the consumer mindset;
• improved technical specifications of batterie.
For instance, Norway (where electric cars account
for 30% of all sales) grants tax exemptions (one-off
registration tax and VAT) to buyers. Also, annual
electric car tax is six times lower than that for a car
powered by an internal combustion engine. Buyers of
electric cars in a number of other European countries,
including Belgium, Germany, the UK and France, enjoy
considerable subsidies (ranging from EUR 4,000 to
EUR 10,000) and fiscal incentives.
LFP
Lithium Iron
Phosphate
LiFePO4
LMO
Lithium
Manganese
Oxide
LiMn2O4
LCO
Lithium Cobaltite
LiCoO2
NCA
Niсkel Cobalt
Aluminium
LiNixCoyAlnO2
(49–54% Ni)
NCM
Niсkel
Manganese
Cobalt
LiNixCoyMnnO2
(20–48% Ni)
There are several types of lithium-ion batteries
depending on the cathode materials: LCO, LFP, LMO,
NCM, NCA.
LCO is largely used in portable devices. This type of
the cathode material is not applied in electric cars
as a result of high cobalt prices, limited capacity,
and technical issues of making a high-capacity
battery safe for operation. However, other types of
Li-Ion batteries are widely applied in the industry.
LFP and LMO tend to be replaced with other Li-Ion
battery types containing nickel as a result of a higher
gravimetric and volumetric capacity of NCM and NCA.
It helps to increase mileage and shrink battery volume
and weight. The share of nickel compounds in the
total cathode material output used in Li-Ion batteries
went up from 32% in 2012 to 51% in 2017.
Growing nickel consumption in Li-Ion batteries comes
not only on the back of increasing share of NCM/
NCA containing nickel, but also higher average nickel
content in the cathode material triggered by the need
to substitute expensive cobalt units. While in 2016
NCM 1:1:1 (with nickel mass fraction of 20%) accounted
for the lion share of nickel-magnesium compounds
of the cathode material, in 2017 Li-Ion batteries with
NCM cathodes 6:2:2 (with nickel mass fraction of 36%)
and NCM 5:3:2 (30%) took the lead. Going forward,
batteries are expected to switch to NCM 8:1:1 (with
the nickel mass fraction of 48%), and some producers
announce plans to launch commercial production of
LNO, a nickel-based cathode material.
Further development of the automotive industry, the
growing popularity of electric and hybrid cars, along
with the evolution of the cathode technology towards
nickel-intensive NCM lay the groundwork for major
expansion of primary nickel consumption in this
industry in the long run.
Production
Primary nickel can be split into two major groups:
High grade nickel
(cathodes, briquettes, carbonyl nickel and
compounds) is produced from both sulphide and
lateritic nickel ore. In 2017, the major high grade
nickel producers included Nornickel, Vale, Jinchuan,
Glencore and Sumitomo Metal Mining.
Low grade nickel
(ferronickel, NPI and nickel oxide) is only produced
from lateritic ore. In 2017, the major low grade nickel
producers included Chinese and Indonesian NPI
companies and also ferronickel producers: Eramet,
Anglo American, South 32, Pamco and Posco (SNNC).
In 2017, primary nickel production grew by 2%, or 48 kt
y-o-y, driven only by an increase in low grade nickel
output, which more than offset the decline in high
grade nickel production that continued into 2017.
In 2017, high grade nickel output dropped by 5%, with
production cuts coming from the following producers:
• Vale's Canadian refining operations after the
shutdown of its Birchtree (Thompson) and Stobie
(Sudbury) mines;
• Nornickel due to ongoing capacity reconfiguration;
• Chinese refined nickel producers as a result of nickel
feedstock shortage following the closure of loss-
making mines in 2016–2017;
• Ambatovy (Madagascar).
Production of nickel forms for cathode use saw a
substantial decline, which entailed their shortage in
the market.
This was coupled with greater output of nickel
sulphate that serves as a key feedstock for the
precursors of the cathode material in Li-Ion batteries.
In 2017, low grade nickel production gained 10%
globally. This was driven by NPI output increase in
China and Indonesia, along with ferronickel in all
major regions except Europe.
The key driver behind NPI production growth was the
easing of the ban on exports of unprocessed nickel
ore from Indonesia in March 2017 contributing to the
availability of rich nickel ore.
The total amount of Chinese ore imports reached the
level of 2015 and exceeded 35 million wet tonnes,
considering that the total nickel ore export quota
issued by the Government of Indonesia exceeded 24
million wet tonnes by the end of 2017. In 2018, a major
growth of NPI output is expected in China.
Primary nickel production // mt
High grade nickel
Low grade nickel
1.0
1.05
2017
2016
1.05
0.95
+2%
2.04
2.0
Source: Company data
NPI production // kt
China
Indonesia
388
366
386
489
2017
2016
2015
2014
87
173
29
453
415
561
489
Source: Company data
Nickel ore and concentrate imports to China // mt
2015
2016
2017
6
5
4
3
2
1
0
Jan
Feb
March
Apr
May
Jun
Jul
Aug
Sept.
Oct
Nov
Dec
Source: Company data
• 38 •
• 39 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Copper
Cu
Copper
Cu
Codelco
Freeport
BHP Billiton
Glencore
Southern Copper
Antofagasta
KGHM
MMG
Anglo American
First Quantum
Rio Tinto
Vale
Nornickel
Others
9%
9%
7%
6%
4%
3%
3%
3%
3%
3%
2%
2%
2%
Refined copper consumption by region
China
Europe
Other Asia
Americas
Africa and Oceania
No.13
in copper
market
44%
23
mt
48%
18%
21%
12%
1%
Key industry developments and copper price // USD/t
7,322
6,862
8,000
6,166
5,495
4,863
7,000
2
3
1
4
6
5
7
6,000
5,000
2013
2014
2015
2016
2017
01.01
01.02
01.03
01.04
01.05
01.06
01.07
01.08
01.09
01.10
01.11
01.12
Source: Company data
Source: LME (settlement)
Key trends in the copper market
Early 2017 saw a strike at the largest Chilean
mine Escondida and a ban on copper concentrate
exports from Indonesia driving copper prices up to
USD 6,145 per tonne as at mid-February.
By early May, they plunged to USD 5,470 per tonne
as a result of growing exchange inventories, data on
decreased copper imports to China and the end of
the strike, with the bounce-back starting in mid-May.
Despite the short-term correction in mid-September
and late November, copper prices peaked at
USD 7,216 per tonne by year-end, the highest since
February 2014.
The price growth was supported by the analytical
agencies forecasting the copper market deficit in
2018 due to reduced production along with a high
demand for copper coming from the booming sector
of electric vehicles and EV infrastructure, as well as
the upward trend in the construction industry.
In 2017, the average copper price stood at USD 6,166
per tonne (up 27% y-o-y).
2017
The prices surged in the second half of the year with copper trading well
above the cost curve due to a slump in production triggered by strikes along
with a steady demand from the automotive and construction industries.
Outlook: neutral.
In the mid-term, the market will remain balanced; the upcoming wage talks
in Chile and Peru may lead to a short-term uptick in copper prices.
Market balance
In 2017, the refined copper market that had been
somewhat oversupplied for the past six years moved
into a slight deficit. It stood at as little as 0.2% of the
total market volume, or 50 kt vs a 220 kt surplus in
2016.
Total exchange warehouse stocks remained virtually
unchanged from late 2016 at 544 kt (548 kt as at the
end of 2016), or nine days of global consumption,
with off-exchange inventories going slightly down.
1 Outset of a strike at the
3 Strike at the Cerro Verde
Escondida mine;
mine (Peru);
2 Ban on the concentrate
exports from Indonesia;
4 End of a strike at the
Escondida mine;
5 Permit to export copper
from Indonesia issued to
Freeport;
6 Data on production
cuts by BHP and Anglo
American;
7 WBMS reporting the
market's shift to a deficit.
Surplus/deficit in the copper market // kt
–50
2017
2016
220
Source: Company data
+27%
6,166
USD per tonne
the average copper price
in 2017
7,216
USD
copper prices peaked by year-
end, the highest since February
2014
• 40 •
• 41 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Copper
Consumption
Given its high electrical and thermal conductivity,
ductility and corrosion resistance, copper is
widely used in various industries. Some three
quarters of refined copper produced globally are
used for manufacturing electrical conductors,
including various types of cable and wire.
Key copper-consuming industries include
construction, electrical and electronic equipment
manufacturing, power supply, transport,
engineering, machine building and consumer
goods production.
In 2017, global consumption of refined copper
totalled 23.0 mt (up 2.0%, or 0.46 mt y-o-y),
primarily owing to stronger demand from
cable and wire manufacturers. Consumption in
pipe, flat rolled products and billet production
segments saw moderate growth.
China remains the key copper consumer globally,
with its market share reaching 48% in 2017 due
to the demand growth of 3.2%, or 0.3 mt. During
the year, it kept cutting imports of refined copper
while bringing in more copper feedstock. In 2017,
Chinese refined copper imports dropped by 5%
to 4.7 mt, while copper concentrate and scrap
imports went up by 2% and 6% to 17.4 mt and 3.6
mt, respectively. China’s growing consumption
needs were mainly met through the local
production ramp-up.
The demand for copper in developed economies
saw only a slight increase in 2017, with Europe
up (the Company’s key market for copper
cathodes) by 0.2%, North America by 0.7%, and
Asia (excluding China) by 2.3%. Russian domestic
copper cathode consumption in 2017 was
moderately down.
+2.0%
23.0 mt
total global consumption of
refined copper in 2017
Refined copper consumption by industry // %
First use product
Wire rod
74
Pipe
10
End product
Consumer goods
and equipment
24
Rolled products
12
Billets
4
Construction
31
Power grids
24
Transport
11
Heavy engineering
10
Source: Company data, Wood Mackenzie
Production
In 2017, global production of refined copper increased
by 0.8%, or 0.19 mt, compared to 2016, totalling 22.9 mt.
China remains the key driver behind that growth, with the
national government firmly committed to the expansion
of domestic smelting and refining capacities. In 2017,
refined copper production in China grew by 8% to 8.9
mt, while its share in global output was 36%. Only 20% of
Chinese production is local extraction, with another 80%
coming from imported copper concentrates and scrap.
Changes in refined copper consumption in 2017 by industry // mt
0.33
0.04
0.07
0.03
23.0
+
2
%
22.5
23
21
2016
Wire rod
Pipe
Flat rolled products
Billets
2017
Source: Company data, Wood Mackenzie
• 42 •
In the rest of Asia (excluding China), production
growth was 1.4% (going slightly up in India and
South Korea along with a slump in Japan). In North
America, it shrank by 5.8% (marginally up in Mexico
and down in the USA and Canada) and in South
America – by 8.6% due to lower output in Chile. In
Europe, copper production soared by 4.6% with
Germany, Bulgaria and Sweden acting as the main
contributors. According to preliminary estimates,
Russia saw its production grow by 4% in 2017 after a
2% drop in 2016.
In 2017, global copper mine production slipped by
1.5% to 19.8 mt.
Some 3.1 mt of refined copper was produced from
accumulated concentrate stockpiles and scrap on
the back of higher scarp collection driven by higher
copper prices.
The decline in copper production came as a result of
Chilean strikes and technical issues experienced by
the US producers.
In Peru, production was below the expectations
due to strikes at the Cerro Verde, Cuajone
and Toquepala mines in early 2017. However,
higher copper output at the new Las Bambas
mine operated by China's MMG drove Peruvian
production up by 3%.
China, which is currently developing smaller
mines, saw its production grow by 6% to 1.5
mt. In Kazakhstan, commissioning of the new
Bozshakol and Aktogay mines by KAZ Minerals
drove the output up by 15%. A 4% growth in African
production was mainly backed by Kolwezi mine in
the Democratic Republic of the Congo and Sentinel
mine in Zambia.
Chile, the top global supplier of copper, saw a drop
in production due to a 1.5-month strike at BHP’s
Escondida, the world’s largest copper mine, causing
over 100 kt of production losses from February
to March, coupled with lower output by the state-
owned Codelco driven by declining copper content
at its oldest fields.
In North America, production dropped by 4% due
to some technical issues at the US and Canadian
mines. Australia reported reduced output at the
Mount Isa and Olympic Dam mines. Indonesia saw
its copper output shrink by 7% following a ban on
copper concentrate exports at the beginning of
2017, which made Freeport limit its operations at the
Grasberg mine.
Russian copper production grew marginally in 2017.
The actual refined copper production was above
the analyst forecasts issued early in 2017 thanks to
the production surge in the second half of the year.
It was also backed by the increased use of scrap.
At the same time, consumption growth was slightly
above the expectations driving the global deficit
down by 0.1 mt as compared to the initial estimates.
–1.5%
19.8 mt
global copper mine production
in 2017
+0.8%
22.9 mt
refined copper production
in 2017
Copper production // mt
20,5
0.09
0.08
20.1
0.07
–0.16
–0.08
–0.07
–0.05
19.8
–0.18
–
1
.
5
%
18,5
2016
DR Congo
Kazakhstan
Peru
USA
Australia
Chile
Indonesia
Other
2017
25
• 43 •
Source: Company data, Wood Mackenzie
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Palladium
Pd
Palladium
Industrial consumption of palladium by region
Key industry developments and palladium price // USD/oz
No.1
in palladium
market
40%
24%
13%
Nornickel
Anglo Platinum
Impala Platinum
Sibanye-Stillwater
Lonmin
Vale
NAP
Others
6%
5%
3%
3%
6%
North America
China
Europe
Japan
Other
331
t
28%
24%
21%
14%
13%
803
725
691
613
1,200
869
2
1,000
1
6
7 8
10
9
3
4
5
11
12 13 14
15
800
600
Source: Company data
Source: LBMA, Company data
2013
2014
2015
2016
2017
01.01
01.02
01.03
01.04
01.05
01.06
01.07
01.08
01.09
01.10
01.11
01.12
Key trends in the palladium
market
In 2017, palladium prices went up by a staggering
42%, hitting a 16-year high of USD 1,058 per oz by
the end of the year. For FY 2017, palladium was one
of the strongest performing commodities in terms
of price appreciation. In late September, palladium
became more expensive than platinum for the first
time in 16 years, with the premium reaching as much
as 17% by the end of 2017.
During the year, palladium prices were primarily
driven by fundamentals, including the sustaining
market deficit that saw palladium production lagging
behind consumption. This was due to the expansion
in global car-marking (the key consumer industry) as
primary production and recycled output grew only
moderately.
Along with the fundamental factors, palladium prices
were supported by the environment on trading
exchanges, which in 2017 were lacking in palladium
available for spot purchases. In the futures market,
backwardation settled in, with leasing rates strongly
up. On the Chicago Mercantile Exchange (CME),
palladium inventories were going down.
2017
Impressive price growth on the back of strong demand from consumers and
limited supply.
Outlook: positive.
Market deficit is expected to persist amid stable production volumes and
upward trend in industrial consumption.
Throughout the year, prices were also driven by
the weak USD against other currencies and the
challenging geopolitical environment, including
concerns around North Korea’s nuclear programme.
Given the favourable trends described above, the
average annual palladium price for 2017 was at its
all-time high of USD 869 per oz.
Market balance
Since 2010, there has been a sustained undersupply
in the palladium market covered by the consumption
of accumulated reserves. In the reporting period, the
imbalance was partially offset by the outflow from
ETFs, which, however, slowed down almost twice
compared to 2016.
4 Demand for risky assets is
up; palladium market sees
strong backwardation settle
in; prices enter correction
as the markets wait for
new PGM statistics and
the results of the Platinum
Week in London;
5 South Africa’s Minister of
Mineral Resources said
that the country is planning
to raise the target for
black ownership in mining
companies to 30%
6 China moved the deadline
for quotas on electric cars
to 2019;
7 South Africa’s Bokoni mine
will be mothballed;
8 Lonmin announced
plans to raise cash from
selling surplus processing
capacity;
9 Chancellor Angela Merkel
announced Germany’s
plans to support the EU
initiative to ban internal
combustion engine cars;
11 Palladium markets tested
a major price level of USD
1,000 per oz;
12 South Africa’s Maseve mine
will be put on care and
maintenance;
13 US released strong car
production data;
10 US Fed Chair Jannet Yellen
said the regulator was
planning gradual increases
in its key interest rate until
the end of 2017;
14 Additional demand for
cars came in the aftermath
of the Irma and Harvey
hurricanes;
15 US Federal Reserve
increased the interest
rate; Sibanye-Stillwater
announced a takeover
offer for Lonmin.
1 On 23 December 2016,
China’s government
released the plan to
implement the China 6
emission standard, one
of the most stringent
regulations among those
in place or planned to be
introduced;
2 South African producers
announced a potential
decline in PGM output;
poor production data came
from Canadian assets;
Volkswagen revealed plans
to switch from small diesel
engines to mild hybrids;
3 City administrations
of London and Paris
announced plans to step
up measures to control
exhaust emissions into
the air;
Palladium market balance // t
–37
2016
Palladium production and
consumption balance
–26
20
ETF outflows
14
8
Destocking
–9
Demand
and supply balance
–15
–27
2017
Palladium production and
consumption balance
Outflow from ETFs and
retail investments
Reserve accumulation
Demand
and supply balance
Source: Company data
+2.4%
the expansion in global
car-marking
• 44 •
• 45 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Palladium consumption in 2017 by industry // %
Automobile exhaust
systems
80
Chemical catalysts
5
Jewellery
2
Electronics
8
Dental alloys
4
Other
1
Source: Company data
Palladium
Consumption
In 2017, industrial consumption of palladium increased
by 9 t (+3%) compared to the previous year, hitting
a new all-time high of 331 t.
Exhaust treatment systems account for nearly 80% of
total palladium consumption. In this sector, palladium
is used in catalytic converters to detoxify exhaust
fumes. In most countries, such converters are legally
required to be installed on all cars.
Due to its unique catalytic properties ensuring
effective chemical reactions throughout the entire
vehicle life cycle (at least 150,000 miles in the US),
palladium has almost no substitutes except for
platinum, which is used mostly in diesel cars, and
rhodium. Given the significant share of already
produced vehicles and small market size (global
production stands at only 24 t annually), rhodium
suffers from high price volatility and the risk of
physical metal deficit.
In 2017, palladium consumption by the car-making
industry went up by 8 t and reached a new record of
263 t. This was driven by three groups of factors:
1) Strong growth of global car production.
Last year, car production around the world expanded
by 3% vs the previous year. The strongest performers
were China (+3%), Europe (+3%), Japan (+5%), and
India (+6%), with Russia (+20%) and Brazil (+25%)
also demonstrating a healthy recovery. A major
contraction was seen in the US market (-8%), mainly
on the back of a natural slowdown (following the
+3%
331 t
Industrial consumption
of palladium in 2017
(a new all-time high)
record-high performance of 2016) that was the result
of high leverage among consumers, rising interest
rates, strong discounts previously secured by car
manufacturers, and weak demand from car rental
companies. The decline mostly affected passenger
cars; by contrast, production of SUVs and small trucks
(which are more reliant on PGM) is on the rise. The
optimistic economic environment in the US gives
hope that the domestic car market will soon recover
ground.
2) Changes in the transport structure.
The key markets for diesel cars (Western Europe
and India) are replacing light diesel vehicles with
petrol cars and hybrids (combining petrol and electric
engines), which make greater use of palladium-based
catalytic converters for exhaust gases.
3) Tougher regulations on pollutant emissions.
The marked increase in palladium consumption by
the car-making industry in China came on the back of
toughened environmental requirements as part of the
China 5 rollout across the country starting from the
end of 2017, followed by transition to China 6 in 2019
and beyond. China 6 regulations are based on best
practices in emission control as developed in the US
and EU, and in some aspects also add new enhanced
requirements. In the US, 2017 marked the rollout of
the Tier 3 standards designed to more than halve
the fleet-average NOx emissions. The EU nations are
phasing in Real Driving Emissions (RDE) tests for cars
and also made particulate filters mandatory for petrol
engines, which additionally helps to expand the use
of palladium in exhaust treatment systems.
+42%
869
USD per oz
the average annual palladium
price for 2017
Palladium consumption by application area // t
335
322
8.0
–0.4
–0.6
3.5
–0.7
–0.4
331
.
+
2
8
%
250
2016
Autocatalysts
Jewellery
Electronics
Chemicals
Medicine
Other
2017
Source: Company data
• 46 •
• 47 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Palladium
+3%
263 t
palladium consumption by
the car-making industry
in 2017
Palladium consumption in the electronics industry
continued a moderate downward trend in 2017
(-0.6 t): lower use of palladium in multi-layer ceramic
capacitors was partially offset by an absolute increase
in their production and increased use of palladium in
the connectors and lead frames.
or for wedding rings (in its pure form), mainly in the
European and US markets. Recently, palladium has
seen expanded use as a metal for electroplating (in
luxury accessories, clothing, car interior, furniture
fittings, etc.), but the overall negative trend still
persists.
The use of palladium in chemical catalysts went up by
3.5 t (+26%) in 2017 as a result of China’s new basic
polymer capacities coming on stream. The trend was
also supported by additional purchases of palladium
by chemical businesses, which had to move away
from the leasing model following price growth amid
backwardation.
In the healthcare sector, palladium demand continued
declining on the back of transition to alternative
composites and dental scrap processing.
While palladium has a number of advantages for
jewellery manufacturing, its consumption in the
industry dropped by 0.4 t (5%) in 2017 because it
does not have a strong brand as a jewellery metal.
Today, palladium is used mainly in white gold alloys
Investment demand for palladium kept shrinking
in 2017, albeit at a slower pace compared to 2016.
Withdrawals from ETFs totalled 12 t. This reduction
resulted from the profit taking that followed a
significant price surge, coupled with investor
migration to stocks and to more attractive palladium-
linked futures (net long positions in palladium on the
Chicago Mercantile Exchange rose by 72% last year,
reaching 2.6 moz).
Retail demand for palladium coins and bars was
negative in 2017 (-2 t) as a result of profit taking by
retail investors, above all in the US, as prices went
up. The unfavourable trend was partially offset by the
US Mint issuing its first ever palladium bullion coin, a
move that confirmed strong investor interest for this
instrument.
Production
In 2017, primary palladium production expanded by
3% against the previous year (214 t vs 207 t).
Russia, the metal’s major producer, saw a rise
in output driven by the processing of copper
concentrate purchased by the Company from the
state-controlled Rostec corporation. Other factors at
play included using up work-in-progress inventories
at Polar Division and the reduction in the work-
in-progress materials in transit following the now
completed reconfiguration of production facilities.
South Africa, the world’s No. 2 palladium producer,
demonstrated a strong rise in volumes in 2017.
Despite the challenging market conditions and a
considerable number of unprofitable facilities, 2017
delivered a moderate rise in primary palladium
production. The bulk of the growth came from
Anglo American Platinum, which among other
things boasted a 13% rise in palladium production
at its Mogalakwena mine in the northern limb of
the Bushveld Complex, which is richer in palladium
compared to the western and eastern limbs. South
Africa’s refined palladium production was under
pressure from the temporary closure of the Mototolo
concentrator in August to December 2017, furnace
maintenance at Impala Platinum’s mines, and
challenges in accessing the ore body at Northam
Platinum’s Zondereinde mine.
Primary palladium production in Canada declined
by 3 t as a result of dwindling output at the mines
of Vale and Glencore, mainly due to depletion. The
negative performance was to some extent offset by
the growth posted by North American Palladium. In
the US, production remained virtually flat compared
to 2016 (launched in 2017, the Blitz project is
expected to deliver volume growth starting from
2018).
The main sources of recycled palladium are used
exhaust gas autocatalysts, as well as jewellery
and electronic scrap. In 2017, recycled output
increased by 13 t, up to 91 t, primarily due to growing
collections of electronic scrap on the back of higher
palladium prices, recovery in steel prices, and also
implications of the Irma and Harvey hurricanes that
wiped out more than 1 mln cars in the US. Jewellery
and electronic scrap volumes remained flat.
The sources of previously accumulated palladium
stockpiles include trading companies, financial
institutions, government reserves, and surplus
inventories of consumers. In the 1990s and 2000s,
Russia's palladium supply came primarily from
the country’s government stockpiles. In recent
years, Russian stockpiles ceased to be part of the
palladium supply, which points to their depletion and
marks the transition towards a palladium market that
is completely market-driven.
In Zimbabwe, production was marginally up, driven
by the Zimplats and Mimosa mines. However,
planned maintenance at the Unki concentrator in Q4
2017 brought the overall performance slightly down.
In 2017, Nornickel’s Global Palladium Fund (GPF) built
Pd reserves of around 0.55 moz through purchases
from third parties and the Company
Annual primary palladium output // t
0.55 moz
Nornickel’s Global Palladium
Fund (GPF) Pd reserves in 2017
220
207
200
5.7
0.4
–2.9
–0.5
3.7
0.7
214
+
3
%
2016
South Africa
Zimbabwe
Russia
Canada
USA
Other
2017
Source: Company data
• 48 •
• 49 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Platinum
Pt
Platinum
Platinum consumption by region
Key industry developments and platinum price // USD/oz
40%
25%
Anglo Platinum
Impala Platinum
Lonmin
11%
No.4
in platinum
market
Nornickel
Northam
Others
11%
4%
9%
Europe
China
North America
Japan
Other
243
t
29%
24%
14%
13%
20%
1,486
1,385
1,053
989
949
1,200
1,000
800
2
3
1
5
4
8
9
6
7
10
11
Source: Company data
Source: LBMA price, Company data
2013
2014
2015
2016
2017
01.01
01.02
01.03
01.04
01.05
01.06
01.07
01.08
01.09
01.10
01.11
01.12
Key trends in the platinum
market
In 2017, platinum prices were trending sideways. Despite
several spikes to above USD 1,000 per oz during the
year, by the end of the reporting period the metal’s price
reverted to its starting point of USD 930 per oz.
The changes in platinum and gold prices in 2017 mostly
occurred in sync, indicative of platinum prices being
highly dependent on macroeconomic trends, which
were largely positive during the year. The weak US
dollar against other currencies and the challenging
geopolitical environment, including concerns around
North Korea’s nuclear programme, supported precious
metal prices. At the same time, they faced certain
pressure due to the rally in the US stock market, which
resulted in some investors migrating from metals to
equities.
In March–April and September, the platinum to gold
price spread was increasing, with platinum dragging.
The platinum price was 20% weaker compared to gold
at the year’s outset, and that became 30% by the end of
2017, driven by the platinum market’s fundamentals as
well as by speculation.
The main fundamental drivers included a drop in
platinum consumption by the automotive industry
due to reduced share of diesel passenger cars in the
key markets of Western Europe and India, no awaited
recovery in demand from Chinese jewellers, and
primary production not being too receptive to low
2017
The market was balanced on the back of decreasing consumption by
the automotive and jewellery industries, upward investor demand and
consumption trends in other industries, and primary production growth
fuelled by low prices.
Outlook: neutral.
In 2018, the market is expected to remain more or less balanced, with a
moderate recovery in demand and stable supply as the decrease in primary
production would be offset by higher recycling volumes.
prices. Speculation was another big negative factor,
with investors betting on a downward metal price trend.
They took twice as many short positions in platinum
(amounting to 2 mln oz) on the Chicago Mercantile
Exchange (CME) as the year before, while the number of
long positions increased only by a third.
The largely negative sentiment drove the average
annual platinum price for 2017 below the last year’s level
to its twelve-year low of USD 949 per oz.
Market balance
The platinum market was balanced in 2017.
Production of primary and recycled metal exceeded
industrial and jewellery consumption, but the surplus
was accumulated by ETFs and private investors in the
physical market.
• 50 •
1 On 23 December 2016,
China’s government
released the plan to
implement the China 6
emission standard, one
of the most stringent
regulations among those
in place or planned to be
introduced;
2 South African producers
announced a potential
decline in PGM output;
poor production data came
from Canadian assets;
Volkswagen revealed plans
to switch from small diesel
engines to mild hybrids;
3 City administrations
of London and Paris
announced plans to step
up measures to control
exhaust emissions into the
air;
4 US released weak statistics
on car production; South
Africa’s Minister of Mineral
Resources said that the
country is planning to
raise the target for black
ownership in mining
companies to 30%;
5 China moved the deadline
for quotas on electric cars
to 2019;
6 South Africa’s Bokoni mine
10 US released strong car
production data; additional
demand for cars came in
the aftermath of the Irma
and Harvey hurricanes;
11 Sibanye-Stillwater
announced a takeover
offer for Lonmin
will be mothballed;
7 Lonmin announced
plans to raise cash from
selling surplus processing
capacity;
8 Chancellor Angela Merkel
announced Germany’s
plans to support the EU
initiative to ban internal
combustion engine cars;
9 South Africa’s Maseve mine
will be put on care and
maintenance;
Platinum market balance // t
2016
2017
Platinum production and
consumption balance
1
Outflow from ETFs and
retail investments
Destocking
Demand
and supply balance
–13
1
–11
Platinum production and
consumption balance
Inflow from ETFs and
retail investments
Demand
and supply balance
1
10
–9
Source: Company data
• 51 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Platinum
Consumption
Industrial consumption of platinum in 2017
compared to the previous year rose slightly (by 1 t,
or 0.5%) and reached 243 t.
The automotive industry is the main consumer of
platinum. Over 70% of platinum in this industry
is used to manufacture exhaust gas catalysts for
diesel vehicles.
In 2017, platinum consumption in the automotive
sector decreased y-o-y by 0.9 t, or 1%, which mainly
had to do with a decreased share of diesel vehicles
in their key market – Europe. By December 2017,
the share of diesel sales in Germany dropped from
46% to 39% y-o-y, having hit its minimum level
since 2009 at 36% in September. France also saw
a continued decline in diesel vehicle sales, which
amounted to 47% compared to 52% in the previous
year. Five years ago, that share was three quarters
of the market.
India, which is a key market that had been viewed
as a bastion for diesel vehicle production, was
also on the decline over the recent years, with the
share of diesel sales in the country’s car market
having decreased twofold (from 47% to 23%) during
2012–2017.
Diesel engines are giving way to petrol-based
solutions, and more expensive vehicles utilise
hybrids (combining petrol and electric engines).
Petrol engine being a component of a hybrid
necessitates wide use of palladium-based catalysts.
Having the same displacement as the internal
combustion engine, the hybrid uses more of the
metal than a traditional petrol engine due to more
frequent cold starts.
+0.5%
243 t
Platinum consumption
in 2017
Platinum consumption in 2017 by industry // %
Catalytic converters
for exhaust gases
45
Jewellery
30
Chemical catalysts
9
Electronics
3
Glass
4
Other
9
Source: Company data
The second biggest platinum consumer is the
jewellery industry, accounting for a third of the
demand. The reporting period saw a sustained
declining trend of platinum consumption in the
industry that set in during the previous year, albeit
with a lower rate (1.7 t less, or 2%). The decrease
was primarily driven by lower jewellery demand in
China due to consumers switching to other forms
of investing. Still, China retains its high potential,
especially when it comes to sales in cities with
populations ranging from 150 thousand to 3 mln
people.
Lower platinum consumption by passenger
car producers was partially offset by increased
manufacturing of heavy-duty vehicles, catalytic
devices of which still rely on this metal. Diesel
engines, together with hybrids, are the key and
most cost-efficient solutions to achieve the EU’s
targets for reducing CO2 emissions to 95 g/km by
2020. New diesel cars comply with the existing
environmental requirements, but the Volkswagen
emissions scandal served to ingrain the public’s
and authorities’ negative attitudes towards diesel
transport, especially in the EU, where many cities
are now planning to introduce a ban on old diesel
cars. This gives reason to expect further declines
in the share of passenger diesel cars. However,
in absolute terms manufacturing of this type of
vehicles will continue to show a positive trend
in the near term thanks to overall growth of the
automotive industry.
>70%
of platinum in automotive
industry is used to
manufacture exhaust gas
catalysts for diesel vehicles.
Platinum consumption by application area // t
245
242
–0.9
–1.7
0.9
1.9
0.5
0.6
243
.
+
0
5
%
• 52 •
• 53 •
200
2016
Autocatalysts
Jewellery
Electronics
Glass
Chemicals
Other
2017
Source: Company data
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Platinum
Despite the overall decline, the global platinum
demand from jewellers was supported by India’s
market recovery after the roll-out of its tax reform
(according to the preliminary PGI data, the country’s
platinum jewellery market grew by over 20%).
Although not quite enough to offset the negative
trend in the larger Chinese market, this did
somewhat mitigate it.
In 2017, primary platinum consumption for industrial
catalyst manufacturing increased by 0.5 t, following
the ramp-up of oil and shale gas processing in
North America, growth of chemicals production in
Western Europe, and launch of plants in China to
produce paraxylene (used for paint and varnish
manufacturing and propane dehydrogenation
purposes) as well as silicone and other basic
chemicals. Nitric acid production slowdown put a
damper on growth.
The glass industry needs platinum to produce
glass fibre and optical glass used in the LCDs
of the majority of electronic products. In 2017,
the industry’s demand grew significantly by 1.9 t,
or 20%, supported by active expansion of LCD
production capacities.
The electronics industry saw a modest growth
in platinum consumption (by 0.9 t) triggered by
the increase in the platinum-based hard drive
component production due to the expansion of
remote data storage capacities. The following years
will see the advent of the new MAMR and HAMR
hard drive technologies, which will greatly increase
the amount of data that can be stored on a hard
disk drive, breathing new life into the technology
lately beleaguered by competition from solid-state
drives (SSDs).
Platinum is also widely used as an investment
instrument. Physical investments may vary from
coins and smaller bars to investments in ETFs that
accumulate large amounts of platinum in the form of
standard-sized bars. The 2017 y-o-y retail demand
was somewhat lower (6 t), which was driven by
the neutral platinum price trend and a sustained
discount to gold. During the year, the investments in
platinum ETFs increased by 3 t.
+2%
+20%
194 t
global production of primary
platinum in 2017
1.9 t
growth of the glass industry’s
demand for platinum in 2017
• 54 •
Production
Global production of primary platinum in 2017 rose
by 4 t (or 2%) y-o-y and reached 194 t.
South Africa, the metal’s major producer, was
affected by the mothballing of the Bokoni and
Maseve mines, furnace maintenance at Impala
Platinum’s mines, process-related closure of the
Mototolo concentrator, and challenges in accessing
the ore body at the Zondereinde mine. Despite
these factors, the country saw a 6.1 t rise in output
driven by greater production volumes at other
sites, especially at the Mogalakwena mine – Anglo
American Platinum's largest asset. Sibanye-
Stillwater also boasted a rise in production.
Canada sustained a significant drop in production
(by 1 t, or 15%) due to lower platinum output by the
Vale and Glencore assets, which was partially offset
by volumes from the North American Palladium
mine. In the USA, Sibanye-Stillwater’s production
demonstrated moderate growth, which will be
bolstered by the volumes from Blitz project that was
launched in 2017.
The main sources of recycled platinum are used
exhaust gas catalysts and jewellery scrap. Recycled
output in 2017 amounted to 6 t (up to 59 t), chiefly
due to higher automotive and jewellery scrap
volumes.
Collection of autocatalyst scrap increased amid the
growth of prices on steel and other PGMs, as well
as due to higher recycling volumes of European
diesel cars with a high platinum content in the
catalysts.
The sources of previously accumulated platinum
stockpiles include trading companies, financial
institutions, and surplus inventories of consumers,
while the movement of these inventories is non-
transparent.
As the market walks the surplus line and prices
remain low, putting the margins of many projects
at risk, South African producers are being lax
on curbing the supply and continue to ramp up
production to achieve even lower unit cost of
platinum and boost revenues.
Russia saw a moderate increase in output, as
lower production at Far Eastern mines was offset
by higher volumes from Norilsk Nickel, which
it achieved by processing copper concentrate
purchased from the state-controlled Rostec
corporation, using up work-in-progress inventories
at Polar Division, and reducing the work-in-progress
materials in transit following the now completed
reconfiguration of its production facilities.
In Zimbabwe, production was marginally up, driven
by the Zimplats and Mimosa mines. However,
planned maintenance at the Unki concentrator
in Q4 2017 brought the overall performance slightly
down.
–4%
949
USD per oz
the average annual platinum price
for 2017
Primary platinum production // t
3.5
0.5
0.9
0.1
–1.0
–0.3
194
+
2
%
South Africa
Zimbabwe
Russia
Canada
USA
Other
2017
Source: Company data
195
190
180
2016
• 55 •
Annual report • 2017Market overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
BUSINESS
OVERVIEW
58
58
62
66
87
94
97
100
103
105
108
108
128
132
147
The Group business
Mineral base
Geological exploration
Production assets and activities
Key investment projects
Gas and energy assets
Transportation assets
Products and sales
Research and development
Supply management
Corporate responsibility
HR and social policy
Occupational safety
Environment
Financial overview (MD&A)
The Group business
Mineral base
The Group business
Mineral base
Nornickel boasts a unique mineral resource base due to its Tier 1 assets on Russia's Taimyr and Kola
Peninsulas, in Zabaykalsky Krai. The continued expansion of the resource base secures the Company’s
long-term development.
RESERVES AND RESOURCES1
Measured
and indicated resources
2,220 mt
Ni
15.5 mt
Cu
23.8 mt
PGM
8.3 kt
(265.1 mln oz)
Geography of metals
produced by Norilsk Nickel
Taimyr Peninsula
Ni, Cu, Au, Pt, Pd, Rh, Ru, Os, Ur, Co
Kola Peninsula
Ni, Cu, Au, Pt, Pd, Rh, Ru, Os, Ur, Co
Zabaykalsky Krai
Cu, Au, Ag, Fe
Australia
Ni
South Africa
Ni, Cu, Co, Rh, Ru, Os, Ur, Pt, Pd
Proven
and probable reserves
815 mt
Ni
7.1 mt
Cu
12.4 mt
PGM
3.9 kt
(125 mln oz)
1 The Company’s reserves and resources as at 31 December 2017, including wholly owned
overseas assets and excluding fields in Zabaykalsky Krai. Data regarding the mineral
resources and ore reserves of the deposits of the Taimyr and Kola peninsulas were classified
according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC
code), created by the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists,
and the Minerals Council of Australia, subject to the terminology recommended by the Russian Code for Public
Reporting of Exploration Results, Mineral Resources, Mineral Reserves (NAEN Code). The six platinum group metals
(PGMs) are platinum, palladium, rhodium, ruthenium, osmium, and iridium.
Taimyr Peninsula (Polar Division and Medvezhy Ruchey)
Norilsk Nickel’s Polar Division develops copper-
nickel sulphide deposits at the Talnakhskoye and
Oktyabrskoye Fields (the Talnakh Ore Cluster).
Medvezhy Ruchey develops copper-nickel sulphide
deposits at the Norilsk-1 Field (part of the Norilsk Ore
Cluster).
The Company has a strong potential to maintain
the high level of ore reserves given the significant
mineral resources available within the existing
mining operations. The depleted rich and cuprous
ore reserves at the existing mines are mainly replaced
through inferred resources on the flanks of the fields
under exploitation. The Company plans to ramp up its
mining operations by tapping into new rich ore deposits
and focusing on the gradual and active development of
disseminated and cuprous ore horizons. The Company
will leverage the approved projects to develop new
deposits and horizons in the Talnakh Ore Cluster
and promising geological exploration data to ensure
a sustainable mineral resource base going forward.
Balance reserves of the
Talnakh and Norilsk Ore2
Proven and probable
ore reserves
Measured and indicated
mineral resources
2,160 mt
690 mt
Ni 15.8 mt
Cu 30.4 mt
PGM 10.7 kt
Ni 6.4 mt
Cu 12.07 mt
PGM 3.9 kt
1,714 mt
Ni 12.0 mt
Cu 22.7 mt
PGM 8,2 kt
(124.8 mln oz)
(over 264.2 mln oz)
Depletion of balance metal reserves
15.0 mt
Ni — 250.5 kt, Cu — 434.5 kt,
PGM — 0.138 kt
Additional balance reserves3
5.4 mt
Average metal content
Ni — 2.87%, Cu — 7.02%, PGM — 17.04 g/t
Kola Peninsula (Kola MMC)
Kola MMC develops copper-nickel sulphide deposits
at the Zhdanovskoye, Zapolyarnoye, Tundrovoye,
Kotselvaara-Kammikivi and Semiletka Fields as
part of Pechenga ore fields. In addition to those,
Pechenga ore fields include the Sputnik, Bystrinskoye
and Verkhneye Fields, and Kola MMC also holds an
exploration and mining licence for them.
Balance reserves of
Pechenga ore fields2
Proven and probable
ore reserves
Measured and indicated
mineral resources
470.4 mt
Ni 3.16 mt
Cu 1.54 mt
125 mt
Ni 0.7 mt
Cu 0.36 mt
333 mt
Ni 2.3 mt
Cu 1.1 mt
Depletion of balance metal reserves
6.86 mt
Ni — 43.6 kt, Cu — 18.7 kt
Conversion of balance reserves4
6.7 mt
average metal content
Ni — 0.63%, Cu — 0.27%
2 Clusters (A + В + С1 + С2).
3 Operational and follow-up exploration, and re-estimation of reserves within the boundaries of the fields under exploitation.
4 Operational exploration.
• 58 •
• 59 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Mineral base
Zabaykalsky Krai (GRK Bystrinskoye and Bugdainsky Mine)
Bystrinskoye Field
GRK Bystrinskoye develops deposits of gold- iron-
copper ores at the Bystrinskoye Field.
Bugdainskoye Field
Bugdainsky Mine holds an exploration and mining
licence for the Bugdainskoye Field.
The exploration of the field resulted in B + С1 + C2
mineral reserves entered into the government books
in 2007. 2013 saw the launch of a development
project at the Bugdainskoye Field in accordance with
the duly approved design documents. In 2014, due to
the low international molybdenum prices, the subsoil
user suspended its right to develop the Bugdainskoye
Field for three years. In 2017, the suspension of the
right to develop the field was extended for another
five years, until 31 December 2022.
Balance reserves of the Bystrinskoye Field
(В + С1 + С2)
Balance reserves of the Bugdainskoye Field
(В + С1 + С2)
5.2 mt
Depletion of
balance ore
reserves in 2017
333 Ore, mt
Cu 2.27 mt
Au 9,265 koz
Ag 39,763 koz
Fe1 76 mt
1 Magnetite iron.
812 Ore, mt
Mo 600 kt
Au 360 koz
Ag 6,221 koz
Pb 41 kt
• 60 •
Australia (Norilsk Nickel Cawse)
The Group holds a licence to develop the Honeymoon
Well Project including:
• fields with disseminated nickel sulphide ores
(Hannibals, Harrier, Corella and Harakka);
• the Wedgetail Field hosting solid and vein ores.
The total measured and indicated mineral resources
of the Honeymoon Well Project are estimated at
173 mt of ore
Average nickel:
Ni — 0.68%
South Africa (Nkomati)
Nkomati is a 50/50 joint venture of the Norilsk Nickel
Group and African Rainbow Minerals. Nkomati's
performance is reflected in financial results using
proportional consolidation according to our stake
and not reflected in other totals.
bodies, the key ones being a solid sulphide ore
body (rich nickel ore) and the Main Mineral Zone
(MMZ). The field also contains a Peridotite Chromite
Mineralisation Zone (PCMZ) with a lower metal
content vs MMZ.
The Nkomati disseminated copper-nickel sulphide
ore deposit constitutes part of the Bushveld
Complex. Nkomati is comprised of several ore
The proven and probable ore reserves as
at the end of 1H 2017
Proven average content and
probable ore reserves2
88.6 mt of ore
Average content:
Ni — 0.31%
Cu — 0.11%
Co — 0.02%
PGM — 0.88 g/t
2 At the end of 1H 2017.
Measured and indicated mineral
resources2
182.4 mt of ore
Average content:
Ni — 0.35%
Cu — 0.14%
Co — 0.02%
PGM — 0.95 g/t
• 61 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Geological exploration
Geological exploration
Taimyr Peninsula (Polar Division)
Exploration and follow-up exploration of
copper-nickel sulphide ores are underway at
the Maslovskoye Field and deep horizons and
flanks of the Oktyabrskoye and Talnakhskoye
Fields pertaining to the Norilsk Industrial District.
Exploration of the Mokulaevskoye Field's industrial
limestone deposits has been completed.
Prospecting of sulphide ores in the Norilsk Industrial
District is in progress on the western flank of the
Oktyabrskoye Field and in the Lebyazhninskaya
Area, 20 km north-west of Norilsk, as well as in the
Razvedochnaya, Mogenskaya, Khalilskaya, Nizhne-
Khalilskaya and Nirungdinskaya Areas, 150 km
south-east of Norilsk.
Balance reserves of the Maslovskoye Field С1 + С2 mineral reserves
215 Ore, mt
Metal content in ore
Pd 32,262 koz
Pt 12,479 koz
Ni 728 kt
Cu 1,122 kt
Co 34 kt
Au 1,304 koz
Pd 4.56 g/t
Pt 1.78 g/t
Ni 0.33%
Cu 0.51%
Co 0.016%
Au 0.19 g/t
The southern part
of the Norilsk-1 Field
Maslovskoye Field
The northern part
of the Norilsk-1 Field
Ore-bearing intrusives
Norilsk
р. Заполярный
Norilsk
Maslovskoye Field
Ni
Cu
Pt
The field is located in the Norilsk Industrial District,
12 km south of the Norilsk-1 Field.
The Maslovskoye Field boasts some of the largest
reserves in the world.
The licence to explore and mine copper-nickel
sulphide ores at the Maslovskoye Field was
obtained by the Company in 2015 following its
discovery.
The Maslovskoye exploration project was reviewed
and approved by the authorised expert bodies in
2016. A feasibility study of permanent exploratory
standards is now in progress. In early February
2018, Nornickel and Russian Platinum signed a
memorandum of intent to set up a joint venture for
further development of disseminated ore deposits
in the Norilsk Industrial District. The memorandum
provides for the parity of JV partners, with
Nornickel and Russian Platinum set to hold a 50%
interest each. The partners’ contributions to the
authorised capital of the JV will come in the form
of a licence to develop the Maslovskoye Field held
by Nornickel and a licence to develop the southern
part of the Norilsk-1 Field and the Chernogorskoye
Field held by Russian Platinum.
Field boasts some of the
largest reserves in the world.
Mokulaevskoye Field
Eastern flank of the Oktyabrskoye Field
Oktyabrskoye Field
Talnakhskoye Field
Ore-bearing intrusives
Rich ore deposits
Talnakh Region and
Talnakh Concentrator
Geological exploration
of copper-nickel ores
Talnakh
Flanks and deep horizons of the
Talnakhsky Ore
Ni
Cu
The Group’s geological exploration of the
unregistered reserves at the Oktyabrskoye and
Talnakhskoye Fields focuses on the follow-up
exploration of rich and cuprous ores.
Geological exploration (follow-up exploration)
is underway on the flanks of the Oktyabrskoye
Field, southern flanks of the Talnakhskoye
Field and the southern flank of Mayak mine to
properly assess the boundaries of producing
deposits and convert С2 reserves to the С1
category. Exploration on the eastern flanks of
Skalisty mine and the flanks of the Severnaya
3 deposit has been completed. Following the
re-assessment of the Severnaya 4 deposit
copper and nickel ore reserves, 7,704.2 kt
of rich and cuprous ores were entered in the
government books.
In 2017, thanks to the follow-up exploration at
the Severnaya 4 deposit, part of the Talnakh
Ore Cluster, the Company registered additional
balance reserves of copper-nickel ores.
Reserves of the Severnaya 4 deposit (Oktyabrskoye
Field) were re-entered in the government books
in 2017
Rich:
1 .2 Ore, mt
Ni 45.5 kt
Cu 223.8 kt
Pt 11.4 t
Pd 33.9 t
Cuprous:
0.2 Ore, mt
Ni 0.7 kt
Cu 7.5 kt
Pt 0.4 t
Pd 1.5 t
G R O W T H P O I N T S :
T A L N A K H O U T L O O K
Maintaining a stable level of production at the Talnakh
Ore Cluster is a mid-term priority of Norilisk Nickel’s
new investment cycle launched in 2017 to secure The
Company’s sustainable development.
In 2018–2020, the Talnakh mines
are going to see investment of
USD 1.5 bn
Ore mining at the Talnakh cluster // mt
Ore mining without additional investment
Skalisty mine ramp-up
Talnakh brownfields under construction
11.3
13.9
13.5
2020
2017
2014
2.3
1.8
1.8
1.0
15.4
15.7
14.5
• 62 •
• 63 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Geological exploration
Prospecting and appraisal
of new copper-nickel sulphide ore areas
Limestone exploration
at the Mokulaevskoye Field
In 2014, the Company obtained subsoil exploration
licences for prospecting and appraisal of copper-
nickel sulphide ore deposits in the Lebyazhninskaya,
Razvedochnaya, Mogenskaya, Khalilskaya, Nizhne-
Khalilskaya and Nirungdinskaya Areas of the
Taimyrsky Dolgano-Nenetsky Municipal District
(Krasnoyarsk Territory). The respective prospecting
projects were reviewed and approved by the
authorised expert bodies, with prospecting currently
in progress, including exploration drilling to confirm
anomalies identified earlier.
In 2017, the Company obtained a licence for
geological exploration, including prospecting and
appraisal of mineral deposits on the western flank
of the Oktyabrskoye Field. The prospecting and
appraisal project was reviewed and approved by
the authorised expert bodies. Prospecting, including
drilling, is now in progress.
The field is located 10 km north and north-west of the
industrial facilities of Oktyabrsky and Taimyrsky mines.
The licence to explore and mine limestone at the
Mokulaevskoye Field was obtained in 2017 following
its discovery. The Mokulaevskoye exploration project
was reviewed and approved by the authorised expert
bodies. The feasibility study of permanent exploratory
standards has been completed, with the mineral reserves
estimation report submitted for state expert review.
Razvedochnaya,
Mogenskaya,
Khalilskaya,
Nizhne-Khalilskaya
and Nirungdinskaya
licence areas
Lebyazhninskaya
licence area
Natural outputs
of differentiated
intrusives
Ore-bearing intrusives
Norilsk
Norilsk
Kola Peninsula
(Kola MMC)
No geological exploration was carried out
on the Kola Peninsula in 2017.
Shakhtaminskaya Area
Chingitayskaya Area
Zabaykalsky Krai
(GRK Bystrinskoye)
Geological exploration in Zabaykalsky Krai is aimed
at developing and maintaining the mineral resource
base of both the Company and the Chita project.
Bystrinskoye Field
Au
Cu
Fe
The Bystrinskoye Field is located 16 km east
of Gazimursky Zavod settlement.
Aleksandrovsky
Zavod
Kalga
Bystrinsko-Shirinskoye Field
Bystrinskoye Field
р. Заполярный
Gazimursky
Zavod
In 2015–2016, to increase the volume of
development-ready reserves on the flanks and
deep horizons of the field, the Company launched
a follow-up exploration exercise, which resulted
in discovery of additional reserves. In 2017, the
identified skarn and gold ores were entered in the
government books in 2017.
Bystrinsko-Shirinskoye Field
Au
The Bystrinsko-Shirinskoye Field is islocated 24 km
south-east of Gazimursky Zavod lying in immediate
adjacency to the Bystrinskoye Field.
In 2017, the Company tested the in-situ chlorination
technology at the field.
Zapadno-Shakhtaminskaya and Tsentralno-
Shakhtaminskaya Areas
Au
Cu
Fe associated
minerals
In 2015, the Company obtained a subsoil exploration
licence to prospect for and appraise deposits
of copper, gold, iron and associated minerals in
the Zapadno-Shakhtaminskaya and Tsentralno-
Shakhtaminskaya Areas.
These areas are located in the south-eastern part
of Zabaykalsky Krai, 22 km away from the Borzya –
Gazimursky Zavod railway.
Increase in the Bystrinskoye Field
reserves
51.8 Ore, mt
Сu 254 kt
Au 61.5 t
Ag 198.6 t
Fe 9.1 mt
In 2017, the Company completed additional
geochemical and geophysical surveys and geological
traverses, with a number of potential gold-copper
mineralisation areas identified. Further prospecting is
currently underway.
Chingitayskaya Area
Au
Cu Mo
associated
minerals
In 2015, the Company obtained a subsoil exploration
licence to prospect for and appraise deposits of
copper, gold, molybdenum and associated minerals in
the Chingitayskaya Area located 25 km north-west of
Aleksandrovsky Zavod.
In 2016, the Company launched a comprehensive
prospecting exercise in the area, including geochemical
and geophysical surveys and geological traverses, which
showed no potential for discovering an iron-copper-
skarn field in the area. The prospecting was terminated,
with the Company intending to surrender the licence in
2018.
Australia (Norilsk Nickel Cawse)
Honeymoon Well Development Project
In 2017, geological exploration under the Company's
Australia licences focused on both the Honeymoon
Well Nickel Project (Wedgetail, Hannibals, Harrier,
Corella and Harakka Fields) and prospective Albion
Downs North and Albion Downs South Areas.
Geophysical ground surveys were conducted at the
Honeymoon Well Project.
The Wedgetail Field operations included the
assessment of options for mining solid sulphide ores
with subsequent third-party processing; drilling and
geophysical surveys at a previously identified area of
potential sulphide nickel mineralisation on the field’s
flanks and in its deep horizons; and reinterpreting of
the existing geological data to assess the potential of
the field’s deep horizons.
In 2017, the subsoil user suspended its right to develop
the Wedgetail Field for five years, until 7 October 2021.
Desktop studies at the Hannibals Field were
conducted to interpret geological data on tectonic
zoning. In 2017, drilling operations at Albion Downs
North and Albion Downs South were carried out to
verify geophysical anomalies of nickel and copper
identified earlier.
• 64 •
• 65 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Production assets
and activities
Mining
Production
Products
2 0 1 7 M I L E S T O N E S
Talnakh Concentrator reached the target
operating rates set by the upgrade
project. Its capacity increased by over
30% from 7.6 to 10.2 mtpa of ore. Metal
losses in tailings were reduced, and
target nickel and copper content in
the collective concentrate and target
quality of nickel-pyrrhotite and copper
concentrates were met.
A new tank-house section is being built
at Kola MMC. Deployment of the highly
efficient electrowinning technology
will see the smelting of nickel anodes
phased out. It will enable Nornickel to cut
operating costs, drive down metal losses
in the production process and improve
the quality of products.
In October, Bystrinsky GOK was
launched in Zabaykalsky Krai, with
hot commissioning progressing
as scheduled. The facility will be
developing the Bystrinskoye Field,
a polymetallic deposit in the Gazimuro-
Zavodsky District, and the Bugdainskoye
Field, a molybdenum deposit in the
Alexandrovo-Zavodsky District.
For more details, please see
Key investment projects
p. 87
y
e
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u
R
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z
e
v
d
e
M
d
n
a
n
o
s
v
D
i
i
i
l
r
a
o
P
C
M
M
a
o
K
l
e
y
o
k
s
n
i
r
t
s
y
B
K
R
G
Concentration
Norilsk
Concentrator
third-party feedstock
Cu
concentrate
Ni
concentrate
Cu
concentrate
Concentration
Talnakh
Concentrator
Ni+Po
concentrate
Pyrrhotite
concentrate1
Concentration
Zapolyarny
Concentrator
third-party feedstock
Briquettes
Cu, Ni
concentrate
Concentration
Bystrinsky GOK
• Fe,Cu: saelble concentrate
• Au: concentrate for processing
Mines
• Taimyrky
• Oktyabrsky
• Komsomolsky
• Zapolyarny
• Mayak
Disseminated and
cupriferous ore
High grade and
cupriferous ore
Mines
• Severny
• Kaula-Kotselvaara
Disseminated ore
Open pits
• Verkhneildikansky
(launch in 2018)
• Bystrinsky-2 (launch in 2018)
• Medny Chainik (planned)
• Yuzhno-Rodstvenny (planned)
Ores for processing
„
Cu refining
Cooper Plant
slime from the tank-house
• Cu: cathodes
• Commercial
lump sulphur
• Sulphuric acid
Metallurgical
Shop
Cooper Plant
• Precious metall
concentrates
• Technical selenium
Ni & Cu
refining
Monchegorsk
• Ni: cathodes, carbonyl,
saleable concentrate
• Cu: cathodes, saleable
concentrate
• Co: electrolytic concentrate
• Precious metall concentrates
• Sulphuric acid
With the key stage of our
reconfiguration effort completed,
Talnakh Concentrator delivered
stronger recovery rates and reached
its design capacity while work-in-
progress inventory levels normalised,
allowing us to meet production
targets for 2017. Our own feedstock
metals production increased by
7–15% vs 2016, with copper and
platinum output beating targets
by 4% and 6%, respectively. In
2018, Kola MMC will adopt chlorine
leaching, with the refining capacities
upgrade and expansion entering the
active phase. Copper production is
also expected to increase during the
year, driven by both Bystrinsky GOK
and the existing capacities.”
Smelting
Cu
Cooper Plant
Cu
blister
Smelting
Ni
Nadezhda
Metallurgical Plant
converter matte
Smelting
Ni
Smelting Shop
Ni
converter matte
Sergey Dyachenko
First Vice President – Chief
Operating Officer at Nornickel
• Ni: cathodes,
briquettes, salts,
solutions
• Сo: sulphates,
solutions
• Cu: saleable cake
a
t
l
a
v
a
j
r
a
H
Ni
matte/crushed
converter matte
Nickel refining
Nickel refinery in
Finland
l
i
e
k
c
N
k
s
l
i
r
o
N
Ni
matte/converter matte
from third parties
1 Pyrrhotite concentrate from Kayerkansky Open Pit
Coal Mine
Ore mined across Russian assets // mt
Metals production in 2017 – breakdown by asset // % from the overall Group production
Polar Division and Medvezhy Ruchey
Kola MMC
17.4
17.2
17.3
2017
2016
2015
• 66 •
7.6
7.6
8.0
25.0
24.8
25.3
28
3
20
2
63
Polar Division
Kola MMC
Norilsk Nickel Harjavalta
Ni
72
Cu
77
PGM
35
• 67 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Operating performance for 2017
Ore mined across the Group // mt
Asset
Russia
Polar Division and Medvezhy Ruchey
Kola MMC
Total
South africa
Nkomati (50%)1
Average metal content
Asset
Russia
Polar Division and Medvezhy Ruchey
Kola MMC
South Africa
Nkomati
Metals recovery in concentration // %
Asset
Russia
Polar Division and Medvezhy Ruchey
(ore to concentrate)
Kola MMC
(ore to concentrate)
South Africa
Nkomati
(ore to concentrate)
2015
17.3
8.0
25.3
4.2
2016
17.2
7.6
24.8
2.8
2017
17.4
7.6
25.0
3.5
Nickel, %
Copper, %
PGM2, g/t
2015
2016
2017
2015
2016
2017
2015
2016
2017
1.27
0.62
1.23
0.53
1.29
0.54
2.06
0.25
2.09
0.22
2.17
0.23
6.85
0.07
6.81
0.08
6.83
0.07
0.34
0.36
0.31
0.14
0.13
0.12
–
–
–
2015
2016
Nickel
2017
Copper
2015
2016
2017
2015
2016
PGM
2017
81.3
77.1
82.4
95.5
94.2
95.5
79.3
77.7
81.5
72.7
69.0
69.8
76.0
73.6
75.4
74.1
70.6
70.7
86.1
89.5
90.9
–
–
–
–
–
–
Metals recovery in smelting // %
Asset
Russia
Polar Division and Medvezhy Ruchey
Kola MMC
(up to converter matte)
Kola MMC
(in refining)
Finland
Harjavalta
2015
2016
93.1
96.5
93.4
96.8
Nickel
2017
93.9
96.5
Copper
2015
2016
2017
2015
2016
94.2
96.3
94.1
96.6
94.0
96.2
93.8
–
95.0
–
PGM
2017
95.6
–
97.8
98.2
98.2
97.3
97.1
97.4
96.3
93.4
96.7
97.8
98.3
98.5
99.6
99.7
99.7
99.6
99.4
99.3
Saleable metals production across the Group
Metal
Group total
Nickel, t
from own Russian feed
Copper, t
from own Russian feed
Palladium, koz
from own Russian feed
Platinum, koz
from own Russian feed
Russia
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
Finland
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
South Africa3
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
2015
2016
2017
266,406
220,675
369,425
352,766
2,689
2,575
656
610
222,016
355,706
2,606
622
43,479
13,048
78
33
11,350
5,301
53
20
235,749
196,809
360,217
344,482
2,618
2,526
644
610
182,095
350,619
2,554
622
53,654
9,598
64
22
8,486
4,007
40
15
217,112
210,131
401,081
397,774
2,780
2,728
670
650
157,396
387,640
2,738
660
59,716
13,441
42
10
8,006
4,504
46
20
1
2
Volumes based on the 50% ownership (not included in the totals).
The five following metals are included: palladium, platinum, rhodium, ruthenium and iridium.
3
Saleable concentrate production based on the 50% ownership (not included in the totals).
• 68 •
• 69 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Production chain
Mining
N E W T E C H N O L O G I E S
Automation and improvement of production
processes, including through the introduction
of simulation modelling for underground mining
planning at Polar Division, helps boost output in the
real-time mode and reduce costs.
1
● Stripping
Provides access from the surface to the
deposit through underground workings used to
transport mined ore, people, etc.
● Development workings
The deposit is divided into separate sections,
including mining levels, blocks, sublevels,
stoops, etc.
● Stoping
• separation of ore from the rock;
• delivery of ore from the mine face to the
haulage level;
• maintenance of the excavated area.
● Rock mass removal
Ore is removed by load-haul dumpers and
delivered to the surface by conveyor, railway
and motor vehicles, or through skip shafts.
3
2
4
5
8
6
7
9
Ore to be transported
to the concentrators
Mine
Ore body setting profile
Inclined shaft
Ramp
Crosscut
Skip shaft
Cage shaft
Haul roadway
Ventilation shaft
1
2
3
4
5
6
7
8
9
Concentration
● Ore dressing
● Crushing
N E W T E C H N O L O G I E S
Briquetting of copper-nickel concentrate (mechanical pressing of feedstock with
a binder material) replaced the obsolete pelletisation and roasting technology
(using heat to remove significant portions of sulphur from the concentrate).
The introduction of the new feedstock preparation technology helped substantially
reduce sulphur dioxide emissions (by 35 -40 ktpa at Polar Division alone).
As briquettes have a higher sulphur content than pellets, during conversion
the smelting shop produces gases that are richer in sulphur dioxide and are
therefore easier to capture and recycle.
● Screening
● Thickening
● Sizing
● Grinding
● Flotation
Cu
Сoncentrate
to be used in copper
production
Ni
Сoncentrate
to be used in nickel
production
Tailings to be transported
to the tailing dump
• 70 •
• 71 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Production chain (continued)
Nickel production
Ni
N E W T E C H N O L O G I E S
Saline effluent disposal process at the tank house
● Concentrate
● Matte smelting
● Conversion
● Preparation of high-grate matte
Saline effluent is a by-product of nickel refining
operations that has to be disposed of. In
Monchegorsk, the process is designed in the form
of a closed cycle. The steam and condensate
resulting from evaporation are then reused in the
tank-house to heat solutions and operate heat
exchangers.
The treatment facility for saline effluents also ensured
a more advanced treatment of industrial discharges,
with chemical agents, specifically boric acid, flowing
back to the production circuit. Now, instead of having
to deal with harmful waste, the Company produces
additional saleable goods - sodium sulphate and
chloride. Those are widely used by the chemical
industry (production of synthetic detergents) and
utility companies (as de-icing agents).
State-of-the-art electrowinning technology
The technology has been piloted at Kola MMC and
is to be rolled out across the Group. Removal of the
anode electric arc furnace from the production chain
will help reduce emissions. Nickel powder produced
in tube furnaces is used as the feedstock. This
technology is less labour-intensive (the cells no longer
need to be taken offline and cleaned after each
loading cycle thanks to the use of insoluble anodes)
and ensures zero losses of both precious and non-
ferrous metals. On top of that, the resulting metal has
maximum purity.
● Thickening
● Concentrate drying
● Flash smelter
● Basic oxygen furnace
● Casting mould
Polar Division
Matte
Cu, Ni
High-grade
matte to Kola MMC
● Basic oxygen furnace
● Preparation
of high-grate matte
● Anode electric furnace
● Casting wheel
● Casting mould
t
l
e
m
l
e
k
c
N
i
C
M
M
a
o
K
l
● Filtration
● Conversion
● Grinding
● Fruid-bed furnace
● Electrolysis baths
● Anode smelting
● Electrolysis
● Concentrate drying
● Ore-thermal furnace
● Flotation
● Separation
of high-grade matte
e
t
a
r
t
n
e
c
n
o
c
l
e
k
c
N
i
Pellets and briquets production
● Smelting of matte
• 72 •
Copper
concentrate
to Copper shop
• 73 •
Nickel
cathodes for
sale
Pt, Pd, Au, Ag
Slime to be used
in precious metals
production
Nickel slame
to Polar Division
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Production chain (continued)
Copper production
Cu
N E W T E C H N O L O G I E S
Сontinuous converting technology
The technology is being rolled out at NMP's
continuous copper matte converting facility (as part
of two Vanyukov furnaces – the basic oxygen and
slag cleaning ones) to improve its blister copper
production cycle. The new process uses a cutting-
edge technology to dispose of smelting gases,
with sulphur being taken into a continuous stream
of highly concentrated gases ready for disposal.
Gas
Coal
Waste slag
Copper-nickel alloy
Matte
Gas
Matte
● Concentrate
● Thickening
Copper matte
● Reverberatory furnace
● Electrolysis
● Electrolysis baths
s
e
d
o
n
a
r
e
p
p
o
C
● Filtration
● Casting wheel
Copper slame to Polar
Division
● Concentrate drying
Copper matte
● Conversion
● Anode electric furnace
Pt, Pd, Au, Ag
Slime to be used
in precious metals
production
● Basic oxygen furnace
Slug to dump
Blister
copper
● Smelting
of matte
● Vanyukov furnace
● Anode smelting
● End product
This technology will help
reduce sulphur-rich gas
emissions by at least
30%
Kola MMC
Polar Division
• 74 •
Blister copper
Polar Division
Nickel slag to Nadezhda
Metallurgical Plant for nickel
production
• 75 •
Copper cathodes for sale
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Taimyr Peninsula (Polar Division and Medvezhy Ruchey)
2 0 1 7 M I L E S T O N E
In 2H 2017, Nornickel established Medvezhy Ruchey, a subsidiary that operates part of the assets of Polar Division,
including Zapolyarny mine, Norilsk Concentrator, tailings pit No. 1 and Lebyazhye tailing pit. The carve-out was done
to create separate Talnakh and Medvezhy Ruchey sites with a view to ramping up the new unit’s capacities by raising
investments.
1
2
3
Taimyrsky mine
Oktyabrsky mine
Komsomolskaya mine
4
5
6
Mayak mine
Skalistaya mine
Zapolyarnaya mine
Nadezhda Metallurgical Plant
Lake
Pyasino
Yenisei
River
Dudinka
Talnakh
Concentrator
2
1
3
4
5
Talnakh
Copper Plant
Kayerkan
Alykel airport
Norilsk Concentrator
Norilsk
6
Medvezhy
Ruchey
The Talnakhskoye and Oktyabrskoye Fields are
developed by Taimyrsky, Oktyabrsky, Komsomolsky
(including Komsomolskaya and Skalistaya mines) and
Mayak mines. Ores are extracted through slicing and
chamber mining with flowable backfilling.
The Norilsk-1 Field is developed by Zapolyarny
mine through open-pit and underground mining.
Underground mining is carried out through level caving
using single-stage excavation and front ore passes.
Polar Division and Medvezhy Ruchey are the Group’s
flagship subsidiaries featuring a full metals production
cycle that embraces operations ranging from ore
mining to the shipment of end products to customers.
Operating the Company’s largest fields, they mine ca.
17 mtpa of ore. In 2017, Polar Division and Medvezhy
Ruchey accounted for 77% and 35% of copper and
PGM output, respectively.
They are located beyond the Arctic Circle on
the Taimyr Peninsula in the north of the Krasnoyarsk
Territory, Russia. The sites are linked to other regions
by the Yenisey River, the Northern Sea Route and
by air.
Mining
Mining facilities
Field/mine
Oktyabrskoye Field
Mine type
Ores1
1 High grade ores are characterised by a higher content of non-
Oktyabrsky mine
underground
copper-nickel sulphide
high grade, cupriferous and
disseminated
Taimyrsky mine
underground
high grade
Talnakhskoye Field
Komsomolsky mine2,3, including
copper-nickel sulphide
Komsomolskaya mine4
underground
cupriferous and disseminated
Skalistaya mine
Mayak mine5
Norilsk-1 Field
Zapolyarny mine6, including
Zapolyarny open pit
Zapolyarnaya mine
Ore mined // t
Ore type
High grade
Cupriferous
Disseminated
TOTAL
underground
high grade
underground
high grade and disseminated
copper-nickel sulphide
open pit
underground
disseminated
disseminated
2015
6,541,541
5,403,755
5,382,273
2016
6,191,831
7,080,627
3,971,752
2017
6,593,208
7,165,500
3,618,576
17,327,569
17,244,210
17,377,284
Ore mined – breakdown by mine // %
Oktyabrsky
Taimyrsky
Komsomolsky
Mayak
Zapolyarny
30.0
30.9
30.0
2017
2016
2015
21.0
20.6
21.0
33.5
31.0
29.0
6.1
9.4
5.7
11.8
6.0
14.0
Ore mined – breakdown by metal // %
Oktyabrsky
Taimyrsky
25.8
42.4
38.4
Nickel
Copper
PGM
Komsomolsky
Mayak
39.6
Zapolyarny
26.2
31.8
27.2
2.2
1.6
2.8
1.4
18.3
32.2
3.3
7.8
2
3
ferrous and precious metals; cupriferous ores are characterised
by a higher copper content vs nickel; disseminated ores are
characterised by a lower metal content.
In 2010, the Talnakh Mining Administration was transformed into
Komsomolsky mine consisting of Komsomolskaya, Skalistaya and
Mayak mines.
In 2015, Mayak mine was spun off from Komsomolsky mine
(consisting of Komsomolskaya, Skalistaya and Mayak mines) to
become an independent operation. Komsomolsky mine was left
with Komsomolskaya and Skalistaya mines.
5
4 Komsomolskaya mine is responsible for the development
of the Talnakhskoye Field and the eastern part of the
Oktyabrskoye Field.
In 2013–2014, part of Komsomolsky mine.
In 2010, the Norilsk-1 Mining Administration was transformed
into Zapolyarny mine. Medvezhy Ruchey mine was integrated
into Zapolyarny mine as Zapolyarny open pit. On 14 July 2017,
Zapolyarny mine became a standalone unit of Medvezhy Ruchey.
6
In 2017, Polar Division’s total ore output stood at
17.4 mt, up 133 kt, or 0.8% y-o-y. The production
of high grade and cupriferous ores increased by
6.5% and 1.2% y-o-y, respectively, driven by the
performance of Taimyrsky mine and Skalistaya
mine demonstrating a 40% growth y-o-y.
Cupriferous ore production was higher thanks to
Oktyabrsky mine’s results. In 2017, disseminated
ore production was down by 9% – primarily due to
lower output at Zapolyarny mine. The change in the
volumes of ore mined was in line with the annual
production plan.
+0.8%
17.4 mt
Polar Division and Medvezhy
Ruchey total ore output in 2017
• 76 •
• 77 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Concentration
Smelting
Concentration facilities
• Talnakh Concentrator
• Norilsk Concentrator (now part of Medvezhy Ruchey)
Talnakh Concentrator processes high grade and
cupriferous ores from the Oktyabrskoye Field to
produce nickel-pyrrhotite and copper concentrates
and metal bearing products. The key processing
stages include crushing, breaking, flotation and
thickening.
Norilsk Concentrator processes cupriferous and
all disseminated ores from the Talnakhskoye and
Oktyabrskoye Fields and Copper Plant’s low grade
ores to produce nickel and copper concentrates.
The key processing stages include crushing,
breaking, gravitation and flotation enrichment, and
thickening.
Thickened concentrates are transported via
a pipeline from Talnakh and Norilsk Concentrators
to smelting facilities for further processing.
In 2017, Polar Division’s Production Association
of Concentrators processed a total of 18 mt of
feedstock (including high grade, cupriferous and
disseminated ores).
18.0 mt
of feedstock (including high grade, cupriferous and disseminated
ores) was processed by Polar Division’s Production Association of
Concentrators in 2017
In 1H 2017, Talnakh Concentrator operated against
the backdrop of implementing and fine-tuning a new
technology, moving on to reach the design capacity
in 2H 2017 and beat the 2016 ores processing
volume by 1.5 mt in the full year (10.0 mt vs 8.6 mt).
Nickel recovered into collective flotation concentrate
from ore processed increased by 2.2% y-o-y (81.7%
vs 79.5%).
In 2017, volumes of ore processed at Norilsk
Concentrator were 0.6 mt lower (7.5 mt vs 8.1 mt in
2016) – in line with the mining plan. Nickel recovered
into collective concentrate was 0.8% higher (71.7%
vs 70.9% in 2016). During the year, the facility
processed significant volumes of Copper Plant’s low
grade ores.
Talnakh Concentrator
Norilsk Concentrator
Sulphide ore processed // mt
Sulphide ore processed // mt
2017
2016
+15.5%
10.0
8.6
2017
2016
Nickel recovery // %
Nickel recovery // %
2017
2016
+2.2 p. p.
81.7
79.5
2017
2016
1
In 2017, volumes of ore processed decreased in line with the mining plan.
• 78 •
7.5
–7.4%1
8.1
+0.8 p. p.
71.7
70.9
Smelting facilities
• Nadezhda Metallurgical Plant
• Copper Plant (CP)
• PGM Concentrator (part of Copper Plant)
In 2017, Polar Division and Medvezhy Ruchey accounted for1:
Nadezhda Metallurgical Plant produces converter
matte and elemental sulphur from the following:
• Talnakh Concentrator’s nickel-pyrrhotite concentrate
and metal bearing products;
• Norilsk Concentrator’s nickel concentrate;
• pyrrhotite concentrate previously stored at
Kayerkansky Open Pit Coal Mine (KUR-1).
77%
Cu
35%
PGM
1 % from the overall Group production.
Pyrrhotite concentrate from Talnakh Concentrator
and stored pyrrhotite concentrate from
Kayerkansky Open Pit Coal Mine is further leached
in Hydrometallurgical Shop to produce steam
cured sulphide concentrate. Concentrate from
Talnakh Concentrator, steam cured sulphide
concentrate and stored pyrrhotite concentrate
from Kayerkansky Open Pit Coal Mine are
delivered to the flash smelting furnaces. The matte
is then blown into high grade converter matte.
Copper Plant processed all of the copper
concentrate from Norilsk and Talnakh
Concentrators, as well as third-party feedstock,
to obtain copper cathodes, elemental sulphur
and sulphuric acid for production needs of Polar
Division.
PGM Concentrator (part of Copper Plant)
recycles sludge from the tank-house to produce
concentrates of precious metals and technical
selenium.
Precious metals produced by Polar Division are
refined at Krasnoyarsk Precious Metals Refinery
under a tolling agreement.
At Polar Division, metals are produced from its
own feedstock. Since Q4 2016, all nickel converter
matte from Nadezhda Metallurgical Plant has been
processed at Kola MMC due to the Nickel Plant
shutdown.
Metals output
Metal
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
Product offering:
2015
96,916
2016
50,860
2017
0
292,632
280,347
306,859
1,935
488
1,703
449
956
259
• copper cathodes;
• nickel converter matte for Kola MMC;
• precious metal concentrate;
• commercial lump sulphur;
• technical selenium.
• 79 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Kola Peninsula (Kola MMC)
Kola Mining and Metallurgical Company (Kola MMC)
is Norilsk Nickel's 100% subsidiary and an important
production asset.
Located on the Kola Peninsula in Russia's Murmansk
Region, Kola MMC is fully integrated into the transport
infrastructure of the Northwestern Federal District.
In 2017, Kola MMC accounted for1:
72%
Ni
20%
Cu
63%
PGM
1 % from the overall Group production.
Norway
Nickel
Zapolyarny
Enrichment Plant
The Barents
Sea
Briquetting section
Severny mine
Murmansk
Refining Shop
Monchegorsk
Mine type
Underground
Underground
Underground
Ores
Copper-nickel sulphide
Disseminated
Copper-nickel sulphide
Disseminated
Copper-nickel sulphide
Disseminated
Smelting Shop
Mining
Mining assets
Field / mine (section)
Zhdanovskoye Field
Severny underground section
Zapolyarnoye Field
Severny underground section
Kotselvaara and Semiletka Fields
Kaula-Kotselvaara mine2
Ore mined // t
Ore type
Disseminated
Kola MMC is currently developing the Zhdanovskoye,
Zapolyarnoye, Kotselvaara and Semiletka Fields.
Kola MMC’s total ore output amounted to 7.6 mt, up 0.4%
(28 kt) y-o-y owing to the development of flank deposits
at the Zhdanovskoye Field.
Severny mine (including Kaula-Kotselvaara mine)
produces disseminated sulphide ores containing
nickel, copper and other saleable components.
Severny mine leverages various ore mining methods:
• the Zhdanovskoye Field uses sublevel longwall
caving with front ore passes, block caving (limited
scope of application), and open-pit mining (at Yuzhny
open pit) methods;
• the Kotselvaara and Semiletka Fields primarily use
stoping from sublevel drifts and sublevel caving,
as well as room-and-pillar short-hole and long-hole
stoping (limited scope of application).
+0.4%
7.6 mt
Kola MMC’s total ore output
in 2017
Concentration
Concentration facilities
• Zapolyarny Concentrator
The change in the volumes of ore mined was in line with
the annual production plan.
Breakdown of ore production at Severny mine // %
Severny open-pit section (off-balance ores)
Severny underground section (Zhdanovskoe Field)
Severny underground (Zapolyarnoye Field)
Kaula-Kotselvaara mine
3.4
85.7
6.0
82.9
7.0
77.6
2017
2016
2015
1.8
9.1
1.8
9.3
6.2
9.2
Ore production at Severny mine in 2017 – breakdown by metals // %
Severny open-pit section (off-balance ores)
Severny underground section (Zhdanovskoe Field)
Severny underground (Zapolyarnoye Field)
Kaula-Kotselvaara mine
1.5
86.9
1.8
84.7
69.4
Nickel
Copper
PGM
2.3
9.3
2.5
11.0
9.8
21.1
In 2017, Kola MMC's Concentrator processed
7,600 mt of ore, up 32 kt y-o-y.
The Concentrator produces briquetted copper-nickel
concentrate. Nkomati concentrate also undergoes
briquetting. Briquettes are delivered to the Smelting
Shop to produce converter matte.
In 2017, the rate of metals recovery in bulk
concentrate was above the 2016 level due to a lower
content of hard-to-process and talcose ores in the ore
mixture.
2015
7,962,226
2016
7,615,518
2017
7,643,224
• 80 •
2
In December 2013, Kaula-Kotselvaara mine was
merged with Severny mine and incorporated
therein.
• 81 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Smelting
Smelting facilities:
• Smelting Shop (Nickel)
• Briquetting section (Zapolyarny)
• PGM Concentrator (Monchegorsk)
• Refining Shop (Monchegorsk)
• Tank-Houses 1 and 2 (Monchegorsk)
Dissolved Tube Furnace Nickel Powder with the
Production Volume of 145 ktpa of Electrolytic Nickel.
Kola MMC’s refining facilities in Monchegorsk process
converter matte from Nickel's Smelting Shop and
Polar Division.
In 2017, Kola MMC continued improving production
processes and proceeded with the maintenance of
key production equipment at its smelting facilities.
Precious metals produced by Kola MMC are refined
at Krasnoyarsk Precious Metals Refinery under a
tolling agreement.
In Q1 2017, it commissioned a disposal facility for
saline effluent from nickel refining operations at Tank-
House 2. Tank-House 2 saw further implementation
of the project for Nickel Electrowinning from Chlorine
In 2017, Kola MMC achieved a higher metal output
compared to 2016. The growth was primarily driven
by larger converter matte supplies from Polar Division
after production reconfiguration.
Product offering:
• nickel cathodes;
• carbonyl nickel;
• saleable nickel concentrate;
• copper cathodes;
• electrolytic cobalt;
• cobalt concentrate;
• precious metal concentrates;
• sulphuric acid;
• crushed converter matte for Harjavalta;
• saleable copper concentrate.
Metals output
Metal
Nickel, t
including from the Company's Russian
feedstock
Copper, t
including from the Company's Russian
feedstock
Palladium, koz
including from the Company's Russian
feedstock
Platinum, koz
including from the Company's
Russian feedstock
2015
125,100
123,335
63,075
60,134
671
640
134
122
2016
131,235
126,937
70,272
63,542
851
815
173
159
2017
157,396
155,110
80,781
78,586
1,782
1,731
401
385
2 -fold
In 2017, palladium and platinum output
increased in Kola MMC
+ 20%
Increased nickel production
in Kola MMC in 2017
+ 15%
Increased copper production
in Kola MMC in 2017
Zabaykalsky Krai (GRK Bystrinskoye)
GRK Bystrinskoye (Bystrinsky GOK) is the Company’s
50.01% subsidiary.
This new Nornickel
project is the largest in the
metals industry in Russia,
as its operations include
ore mining, concentration
and shipment of end
products to customers.
The volume of ore mined
and processed is expected
to exceed 10.0 mtpa.
Chita
Bystrinsky
project
Sretensk
Gazimursky
Zavod
Borzya
Aleksandrovsky
Zavod
Mongolia
China
The construction of Bystrinsky GOK started in 2013.
In October 2017, the Company embarked on the
pre-commissioning phase. The facility is expected
to switch to normal operation by the end of 2018
reaching its design capacity after 2021.
Bystrinsky GOK is located in the Gazimuro-
Zavodsky District of Zabaykalsky Krai, south-east
of Gazimursky Zavod in the Ildikan valley (350
km from Chita). The closest residential areas are
Novoshirokinsky, 14 km north-east of the facility, and
Gazimursky Zavod, a district capital 25 km to the
north-west.
The Naryn – Gazimursky Zavod rail line was built
to facilitate mining in the south-east of Zabaykalsky
Krai. In 2012, the railway became operational,
allowing traffic to Gazimursky Zavod.
Mining
Mining facilities
Field/mine
Mine type
Ores
Bystrinskoye Field
Gold-copper-iron
Verkhneildikansky open-pit mine
Open pit
Gold-copper-iron
Bystrinsky-2 open-pit mine
Medny Chainik open pit mine
Open pit
Open pit
Yuzhno-Rodstvenny open pit mine
Open pit
Bystrinsky GOK leverages the vast copper, gold and iron ore reserves
of the Bystrinskoye Field.
333 mt
ore reserves at the
Bystrinskoye Field
10 mtpa
Bystrinsky GOK’s planned
ore processing capacity
• 82 •
• 83 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
Concentration
Concentration facilities
• Concentrator
The construction began in 2015. The Concentrator is
intended to process rich and cupriferous ores of the
Bystrinskoye Field to produce copper, magnetite, and
gold concentrates. The key processing stages include
crushing, grinding, flotation, thickening, filtration and
packaging.
The Concentrator is designed to have two separate
processing streams. The first stream is now at the pre-
commissioning stage. Its launch will enable the facility
to reach 50% of its design capacity.
In 2018, the second stream will be commissioned for
the Concentrator to unlock its full design capacity.
Сu
Au
25–31 kt
90–110 koz
The 2018 production targets for the Chita project
Product offering:
Copper concentrate is expected to be exported to
China, while magnetite and gold concentrates will be
delivered to the Company’s other facilities for further
processing.
• copper concentrate;
• gold concentrate;
• magnetite concentrate;
• silver.
Finland (Norilsk Nickel Harjavalta)
Norilsk Nickel Harjavalta became part of the Group
in 2007. It focuses on processing the Company's
Russian feedstock and nickel-bearing raw materials
sourced from third-party suppliers.
Norilsk Nickel Harjavalta has a total nickel processing
capacity of 66 ktpa.
The facility uses sulphuric acid leaching, the world
best-in-industry solution with the metal recovery rates
of above 98%.
Founded in 1960, Harjavalta is the only nickel refinery
in Finland and one of the largest similar facilities in
Europe.
Harjavalta
Plant
Finland
Helsinki
St. Petersburg
Baltic Sea
the Gulf
of Finland
In 2017 Harjavalta accounted for1
28%
Ni
3%
Cu
2%
PGM
1 % from the overall Group production.
Olderferey Holdings Ltd1
UC Rusal Plc1
Crispian Investments Ltd
Прочие акционеры
• 84 •
Process flowsheet of Norilsk Nickel Harjavalta
Russian nickel-bearing
feedstock from Kola MMC
NORILSK NICKEL HARJAVALTA REFINERY
Matte/
converter
Ni
Co
Cu
cathodes
sulphate
briquet
salts
solutions
solutions
(semi-product)
for Kokkola
(Finland)
cakes (semi-
product) for
Kola MMC and
third parties
Nickel-bearing feedstock
from other companies
In Q2 2017, the refining facilities in Monchegorsk (Russia)
started to gradually increase their nickel feedstock
supplies to Harjavalta in line with the nickel production
reconfiguration strategy. Third-party feedstock supplies
included matte and converter matte from Boliden
Harjavalta (Finland) (sourced in Q1 only) and nickel salts
from other companies (sourced throughout 2017).
Nickel and copper recovery rates improved on the back
of a drop in losses of nickel and copper with ferrous
cakes.
In 2017, Norilsk Nickel Harjavalta produced 59.7
kt of saleable nickel, up 11% y-o-y. The growth was
driven by the reconfiguration of refining facilities and
increased nickel feedstock supplies from Kola MMC.
The third party sales of copper in copper cake totalled
13.4 kt, up 40% y-o-y. This was mainly due to the
increased processing of Russian feedstock under the
production reconfiguration programme.
The production of saleable palladium and platinum
in copper cake dropped by 34% and 55% y-o-y,
respectively, after imported feedstock had been
replaced with Russian raw materials with a lower
content of precious metals.
Utilisation of refining capacities // % of max
2017
2016
2015
+8 p. p.
91
83
67
Breakdown of saleable nickel produced at Harjavalta // %
2
14
24
59.7
kt
59
Briquettes
Cathodes
Salts and
solutions
Powder
Process flowsheet of Norilsk Nickel Harjavalta
Metal
Saleable nickel, t
including from the Company's Russian feedstock
Copper in copper cake, t
including from the Company's Russian feedstock
Palladium in copper cake, koz
including from the Company's Russian feedstock
Platinum in copper cake, koz
including from the Company's Russian feedstock
2015
43,479
424
13,048
0
78
0
33
0
2016
53,654
19,012
9,598
593
64
8
22
2
2017
59,716
55,021
13,441
12,329
42
35
10
6
• 85 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
South Africa (Nkomati)
Nkomati is a 50/50 joint venture of the Norilsk Nickel
Group and African Rainbow Minerals. Nkomati's
performance is reflected in financial results using
proportional consolidation according to our stake and
not reflected in other totals.
Nkomati is located 300 km east of Johannesburg,
Mpumalanga Province, South Africa.
It is the only South African company to produce
nickel concentrate, which also contains copper,
cobalt, chrome and PGM.
Botswana
Nkomati Plant
Mine
Johannesburg
South Africa
Indian Ocean
Mining
Nkomati has a substantial resource base represented
by disseminated copper-nickel sulphide ores with
several major ore bodies. The Main Mineral Zone
(MMZ) is comprised of a solid sulphide ore body with
a relatively high nickel content. The field also contains
a Peridotite Chromite Mineralization Zone with a lower
metal content vs MMZ and a relatively high chromium
content.
The feedstock produced by open-pit and
underground mining operations is processed at
concentrators using sulphide floatation. The produced
concentrates are then further processed at Kola MMC
and third-party companies.
In 2017, total ore mined by Nkomati reached 3.5 mt
(attributable to the Group’s 50% shareholding) with an
average nickel content of 0.31%.
Concentration
Concentration facilities
• MMZ Concentrator with installed capacity of
375 ktpm.
• PCMZ Concentrator with installed capacity of
250 ktpm.
The Norilsk Nickel Group accounted for 8.0 kt of nickel
concentrate produced, which is lower than a year ago
owing to reduced mining volumes and nickel content
in ore processed.
Output at Nkomati1
Metal
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
2015
11,350
5,301
53
20
2016
8,486
4,007
40
15
2017
8,006
4,504
46
20
1 Metal in concentrate for sale assuming 50% ownership
Key investment projects
C A P A C I T Y U P G R A D E A N D R A M P - U P A T
T A L N A K H C O N C E N T R A T O R
Norilsk Industrial District, Krasnoyarsk Territory
(Polar Division)
In April 2014, massive reconstruction of Talnakh Concentrator entered its main stage.
In January 2015, Stage 1 was commissioned, followed by the launch of Stage 2 in May 2016.
Decision on launching Stage 3 will be made in 1H 2018.
Highlights
Stage 1
Stage 2
Stage 3
ͽ Maintaining existing capacity at 7.5
ͽ Ramping up capacity from 7.5 mtpa
ͽ Ramping up capacity from 10.2 mtpa
mtpa;
to 10.2 mtpa
to 18 mtpa;
ͽ Reconstructing existing floatation
ͽ Upgrading equipment;
ͽ Building the second phase of the
capacities and replacing flotation
ͽ Increasing nickel content in nickel-
tailings pit.
machines tha are beyond their
pyrrhotite concentrate from 5.8%
ͽ Investment decision on launching
useful lives and building a new
to 9.5%;
Stage 3 expected in 1H 2018.
tailings pit (first phase)
ͽ Total CAPEX of ca. RUB 33.7 bn
(USD 671 mln)
PROJECT
SCHEDULE
● 2015
Launch and
commissioning of
Stage 1
● 2016
ͽ Launch of Stage 2
ͽ Pilot-launched of
new tailings pit
● 2017
ͽ Full commissioning
of Stage 2
ͽ 2017 CAPEX of
total project of ca.
RUB 5.2 bn (USD
89 mln)
● 2018
ͽ Decision on
commissioning
Stage 3
ͽ Output of key
assets of new
tailings pit (first
phase)
• 86 •
• 87 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
M I N I N G P R O J E C T S
Skalistaya mine
Taimyrsky mine
Oktyabrsky mine
Komsomolsky mine1
Norilsk Industrial District, Krasnoyarsk Territory
(Polar Division)
Norilsk Industrial District, Krasnoyarsk Territory
(Polar Division)
Norilsk Industrial District, Krasnoyarsk Territory
(Polar Division)
Norilsk Industrial District, Krasnoyarsk Territory
(Polar Division)
Increasing ore production from 1.8 mtpa to 2.2 mtpa in
2018 and to 2.4 mtpa by 2024 by stripping and extracting
rich cupriferous ore reserves of the Talnakhskoye and
Oktyabrskoye Fields.
Increasing ore production from 3.6 mtpa to 3.8 mtpa
by 2020 by stripping rich copper-nickel ores at the
Oktyabrskoye Field.
Increasing ore production to 5.2 mtpa by 2023 by
stripping high-grade, disseminated and сupriferous ores
at the Oktyabrskoye Field.
Increasing ore production to 3.8–4.0 mtpa before 2020.
1 excluding Skalistaya mine.
Highlights
Ore reserves
2017 CAPEX of ca.
2018–2024 CAPEX of ca.
Highlights
65.9 mt
Ore reserves of
RUB 13 bn
(USD 216 mln)
RUB 65 bn
(USD 1.1 bn)
2017 CAPEX of ca.
2018–2023 CAPEX of over
63.0 mt
RUB 5.4 bn
(ca. USD 93 mln)
RUB 22 bn
(ca. USD 371 mln)
Highlights
Ore reserves of
2017 CAPEX of ca.
2018–2025 CAPEX of ca.
Highlights
96 mt
Ore reserves of
RUB 4 bn
ca. USD 69 mln
RUB 6.0 bn
(ca. USD 95 mln)
2017 CAPEX of ca.
2018–2022 CAPEX of over
22.9 mt
RUB 1.2 bn
(ca. USD 18 mln)
RUB 14 bn
(ca. USD 234 mln)
Average metal content
Average metal content
Average metal content
Average metal content
Ni
2.7%
Cu 3.1%
PGM 8.0 g/t
Ni
2,3%
Cu 3,5%
PGM 7.3 g/t
Ni
1,0%
Cu 3,1%
PGM 7,6 g/t
Ni
1,5%
Cu 1,8%
PGM 5,5 g/t
PROJECT SCHEDULE
PROJECT SCHEDULE
PROJECT SCHEDULE
PROJECT SCHEDULE
● 2017
ͽ Production ramp-up to 1.75 mt
● 2016
300 kt capacity commissioning
ͽ 152 m sinking of ventilation shaft–10 (total of 1.9 km out of 2.1 km)
ͽ 322 m sinking of skip-cage shaft–1 (total of 1.7 km out of 2.1 km)
● 2017
ͽ Drifting of 4,519 m
1.8 km of underground workings completed and 100 kt of new
● 2018
ͽ 500 kt capacity commissioning
ͽ Completion of ventilation shaft
● 2019
capacity completed
● 2018
ͽ Capacity commissioning (500 kt of rich ore)
ͽ Upgrading the hoist system at skip shaft No. 3
Completion of skip-cage shaft–1 construction
● 2019
Capacity commissioning (200 kt of rich ore)
● 2020
Completion of infrastructure construction
● 2020
● 2024
Production ramp-up to 2.4 mt
Capacity ramp-up to 3.8 mt
● 2021
Capacity commissioning (400 kt of rich ore)
● 2017
● 2017
ͽ 7 km of underground workings completed,
ͽ Power supply system completed at the southern ventilation shaft
ͽ Capacity ramped up by 250 kt of disseminated ore and 100 kt of
ͽ Сa. 3 km of underground workings completed
rich ore
● 2019
ͽ 100 kt of rich ore capacity commissioned
● 2018
Capacity commissioning (150 kt of rich ore and 700 kt of сupriferous
ͽ Completion of the western backfilling shaft reconstruction
disseminated ore)
● 2020–2025
ͽ capacity commissioning (200 kt of сupriferous ore)
● 2019
Capacity commissioning (300 kt of сupriferous ore)
ͽ Capacity commissioning (175 kt of rich ore)
● 2020
Capacity commissioning (225 kt of rich ore and 200 kt of
disseminated ore)
• 88 •
• 89 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
S U L P H U R P R O J E C T
Copper Plant and Nadezhda Metallurgical Plant (NMP), Norilsk
Industrial District, Krasnoyarsk Territory
Washing tower
Sulphur dioxide content
in feed gases of 25–30%.
The Sulphur Project is the umbrella
name for an environmental programme
to achieve a reduction in aggregate
sulphur dioxide emissions across Polar
Division by 75% by 2023 vs 2015
Reduction of SO2
concentration to
12–14%
Primary
cleaning
Fine
cleaning
A
Sulfuric acid
preparation
The method of double
contacting (double
absorption)
B
Sulfuric acid
neutralization
Wet gypsum
is disposed
of to waste dumps
Developed by a Russian
engineering company and
based on domestically
produced equipment and
technologies
Venturi device
Oxidation of sulphur
dioxide to sulphur
trioxide over catalyst, and
absorption of sulphur
trioxide to produce
sulphuric acid
Limestone grinding
Feeding sulphuric acid
to the lime slurry
The resulting gypsum slurry
is then vacuum-filtered
• 90 •
1Nadezhda Metallurgical Plant will have new facilities capturing
Nadezhda
Metallurgical Plant
sulphur-rich gases, while sulphur acid will be neutralised with
natural limestone, with waste gypsum produced as a result. In
addition, a revolutionary continuous copper matte converting unit
will be built. Its emissions will also be used to produce sulphur
acid.
2Meanwhile, Copper Plant will see its elemental sulphur
Copper Plant
production capacities ramped up and the entire converter
section shut down.
PROJECT STATUS
● 2016–2017
Nadezhda Metallurgical Plant:
ͽ design specifications developed and approved, feasibility
study prepared and approved;
ͽ first long lead equipment arrangements made;
ͽ design documents developed under a contract with
Kazgiprotsvetmet
Copper Plant:
ͽ design specifications developed, feasibility study prepared;
ͽ engineering surveys required to develop key technical
solutions to bring project up to date completed.
New volume of the Maximum Permissible Emission Rates
for the period until 2023 approved. Project approved and
presented at Strategy Day in November 2017.
● 2018 targets:
Nadezhda Metallurgical Plant:
ͽ launching the Implementation stage to prepare engineering
documents;
ͽ obtaining the State Expert Review Board's approval for the
project;
ͽ start tender procedures for long lead equipment and select
an EPC contractor for the project.
Copper Plant:
ͽ Gipronickel Institute preparing engineering documents for
non-standardised equipment;
ͽ launching the Implementation stage to prepare engineering
documents;
ͽ arranging a tender to select a contractor for further
implementation of the project, with on-site preparations.
Highlights
2017 CAPEX of ca.
Less sulphur dioxide emissions
Estimated project costs of ca.
(according to the feasibility study)
Completion scheduled for
RUB 2.2 bn
(ca. USD 37 mln)
75% by 2023
Continuous copper converting facility:
ͽ Obtaining the State Expert Review Board’s approval for
the NMP project; launching the Implementation stage to
prepare engineering documents, start tender procedures
USD 2.6 bn
for long lead equipment and select an EPC contractor for
2022
the NMP project.
Video about the Sulphur
Project
• 91 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production assets and activities
TANK-HOUSE
REFUR BISHMEN T
Severonickel Plant, Monchegorsk, Murmansk Region
(Kola MMC)
Tank-House 1 saw refurbishment of buildings,
equipment, and utility and ventilation
systems. The project was completed in 2016.
Tank-House 2 is to be transformed into
an advanced, cost-efficient cathode nickel
facility by introducing the technology of nickel
electrowinning from chlorine dissolved tube
furnace nickel powder.
Highlights
Tank-House 1
Capacity commissioning of
CAPEX of ca.
Project completed in 2016.
45 ktpa
RUB 0.8 bn
Tank-House 2
Increasing the capacity from
Increasing the nickel recovery rate for
converter matte by
2017 CAPEX of ca.
CAPEX outstanding of ca.
Progress:
120 ktpa to 145 ktpa of
nickel
more than 1%
RUB 7 bn
(ca. USD 120 mln)
RUB 14 bn
(ca. USD 236 mln)
~ 40%
CONSTRUCTION OF A COPPER-NICKEL ORE
CONCENTRATE SHIPMENT FACILITY
Zapolyarny, Murmansk Region
(Kola MMC)
Highlights
Dried high-grade concentrate unit with
a capacity
2017 CAPEX of
Outstanding CAPEX of
of 150 ktpa
RUB 0.8 bn
(ca. USD 14 mln)
RUB 4 bn
(ca. USD 71 mln)
The new facility will enable the Company to
split its copper-nickel concentrate into low-
grade and high-grade.
No low-grade concentrate processing will
lead to significant cuts in sulphur dioxide
emissions in Nickel. By re-arranging
shipments of low-grade concentrate from
Kola MMC to a third-party processor, the
Company will be able to decommission ore-
thermal furnace No 3 in the smelting shop
and cut the operating costs.
• 92 •
PROJECT
SCHEDULE
● 2017
42 electrolysis
cells upgraded at
Tank-House 2 to
support chlorine
leaching
● 2018
Gradual capacity
commissioning
● 2019
Reaching
the design
capacity
and performance
targets
PROJECT STATUS
● September 2017
ͽ Contract for
engineering and
equipment supplies
signed with Outotec;
ͽ Check-ups and
surveys completed,
preparation for utility
systems dismantling
and relocation in
progress.
● Q4 2018
Constraction works
of the project to be
completed
● Q2 2019
Output of key
equipment
BYST RINSKY GOK
(CHITA PR OJECT)
Gazimuro-Zavodsky District, Zabaykalsky Krai
(GRK Bystrinskoye).
PROJECT
SCHEDULE
● 2017
ͽ Naryn-1
(Borzya) –
Gazimursky
Zavod railway
commissioned
ͽ 220 kV
power lines
commissioned
ͽ Mining and
processing
plant pilot-
launched
ͽ Camp for 1,047
people built
● 2021
Plant reaching
the design
capacity
Constructing an open pit and a mining and
processing plant to utilise untapped reserves,
constructing a railway and power lines, building
a camp.
Average metal content
Cu
0,7%
Fe 23%
Au 0,9%
Highlights
Output of
Ore reserves of
2017 CAPEX of over
Project CAPEX of over
New jobs for
Annual production volumes at design capacity (2021+)
Cu (concentrate)
Fe (magnetite concentrate)
Au (concentrate)
• 93 •
10 mtpa
333 mt
RUB 26 bn (ca. USD 449 mln)
RUB 89 bn (USD 1.6 bn)
3 thousand employees
~65 kt
2.1 mt (Fe — 66%)
220 koz
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Gas and energy assets
Gas and energy assets
2 0 1 7 M I L E S T O N E S
Norilskgazprom and Taimyrgaz (Nornickel’s gas producers) completed an investment project to build 12 production
wells at the Pelyatkinskoye Gas Condensate Field. When commissioned, the wells will fully cover the peak demand for
natural gas from the Norilsk Industrial District in winter.
At Ust-Khantayskaya hydropower plant (HPP), a new hydroelectric unit was put in operation as part of the third phase
of an extensive programme to replace hydroelectric equipment. In 2012, Nornickel made a decision to replace seven
adjustable blade hydroelectric units that had been operating for over 40 years. Improved reliability and service life of
at least 50 years are among the key advantages of the new machinery. The first phase of the replacement programme
was completed in November 2015, followed by the second phase in January 2016 and the third phase in August 2017,
a month ahead of schedule.
Gas assets
1
2
3
4
Pelyatkinskoye Gas Condensate Field
Severo-Soleninskoye Gas Condensate Field
Yuzhno-Soleninskoye Gas Condensate Field
Messoyakhskoye Gas Field
2
1
3
4
CHPP-3
CHPP-1
Norilsk
CHPP-2
Dudinka
Oil storage
depot
Ust-Khantayskaya
HPP
Kureyskaya
HPP
Power
line
The Company's gas assets operate as a stand-alone business unit focusing
on sustainable development of the entire Norilsk Industrial District.
• 94 •
Taimyrgaz
Norilsktransgaz
Taimyrgaz operates the Pelyatkinskoye Field,
which has Taimyr's largest hydrocarbon reserves.
Currently, it is a primary source of natural gas fully
covering the needs of the Norilsk Industrial District.
In 2017, Taimyrgaz worked on expanding its gas and
gas condensate production and treatment capacity
while improving the reliability of its core equipment:
• drilling of sidetracks No. 410, 411 and 846
completed;
• wells and a gas gathering system constructed and
put in operation at well pad No. 4 followed by an
increase in gas output by 1.2 mcm per day;
• well pads No. 5 and 6 installation completed and
automatic controls introduced at wells No. 100
and 102 of the Pelyatkinskoye Field to remotely
monitor their performance; additional equipment
went online to protect the system against pressure
drops;
• fire alarm and protection system designed for the
Norilsktransgaz transports natural gas and
condensate to consumers in the Norilsk Industrial
District.
The company was established as a result of
Norilskgazprom's reorganisation in 2016 through
the spin-off of the gas transportation system. In
2017, Taimyrtransgaz was liquidated, with its gas
transportation assets and personnel transferred to
Norilsktransgaz.
Natural gas and gas condensate reserves as at 31 December 2017
Field
Norilskgazprom
Pelyatkinskoye Gas Condensate Field.
Messoyakhskoye Gas Field
Norilskgazprom
Norilskgazprom operates the Messoyakhskoye
Gas Field and Yuzhno-Soleninskoye and Severo-
Soleninskoye Gas Condensate Fields.
In 2017, the company focused on expanding its
gas and gas condensate production and treatment
capacity while improving the reliability of its core
equipment:
• construction of a gas distribution compressor
station completed in Tukhard; the facility will be
later handed over to Norilsktransgaz;
• condensate and methanol storage tanks
and bunding around them repaired at the
Messoyakhskoye Gas Field and Severo-
Soleninskoye Gas Condensate Field;
• technical inspections and industrial safety
assessments performed, with over 150 machinery
units, buildings and structures certified as safe.
Yuzhno-Soleninskoye Gas Condensate Field
Severo-Soleninskoye Gas Condensate Field
Taimyrgaz
Pelyatkinskoye Gas Condensate Field
Total residual reserves
Natural gas production // mcm
Taimyrgaz
Norilskgazprom
2,086
2,408
2,164
2017
2016
2015
2014
2013
Gas condensate production // kt
Taimyrgaz
Norilskgazprom
98
113
109
2017
2016
2015
2014
2013
• 95 •
Residual hydrocarbon reserves at licence
blocks (A+B categories)
Free gas, bcm
Recoverable
condensate, mln t
6.807
52.8
44.0
185.7
289.3
–
0.5
0.5
6.8
7.9
928
994
1 100
3,014
3,402
3,264
2
100
2
115
2
111
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Gas and energy assets
Energy assets
NTEK (Norilsk-Taimyr Energy Company)
NTEK engages in power and heat generation,
transmission and distribution using the facilities of
Norilskenergo (MMC Norilsk Nickel’s branch) and
Taimyrenergo. The energy sources include renewables
(hydropower) and gaseous hydrocarbons (natural gas).
NTEK supplies electric power, heat and water to
Norilsk and all facilities in the Norilsk Industrial District.
By its location and operational mode, the local power
grid is isolated from the national grid (Unified Energy
System of Russia), which means stricter reliability
requirements. The company operates five generating
facilities: three thermal power plants (TPP-1, TPP-2 and
TPP-3) and two hydropower plants. Installed electricity
generation capacity of the thermal power plants is
1,205 MW, while the total installed capacity of all the
plants is 2,246 MW.
In 2017, thermal power plants generated 4,360 million
kWh of power; hydropower plants produced 3,069
million kWh, up 139.5 million kWh against 2016. NTEK
managed to bring headwater levels in the water
storage reservoirs of its hydropower plants to their
multi-year average to match the peak loads during the
2017–2018 heating season.
Ust-Khantayskaya and Kureyskaya HPPs (441 MW and
600 MW of installed capacity, respectively) are the two
renewable power generation facilities operated by
NTEK.
In 2017, renewables accounted for 38% of total power
consumed by the Norilsk Nickel Group and 44% of
power consumption in the Norilsk Industrial District.
The investment programme of the Norilsk Nickel Group
includes several large-scale priority projects to fully
unlock the potential of renewable power sources:
• replacement of obsolete hydroelectric units at Ust-
Khantayskaya HPP to make better use of water
resources, increase total power output, and improve
the reliability of energy supplies to the Norilsk Industrial
District;
• retrofitting at TPP-2 units 1 and 2;
• replacement of wooden poles with steel poles (a 5 km
section at the plant's phase 1);
• introduction of an automated dispatch system at Ust-
Khantayskaya HPP;
• construction of a hydrogen generation unit at TPP-2.
In 2017, extensive efforts were invested in improving
energy efficiency. As a result, NTEK achieved savings of
100,116 tonnes of reference fuel (units), 44.9 million kWh
of electricity and 177,732 Gcal of heat against plan. With
49 initiatives introduced to save on fuel and energy, fuel
consumption at the thermal power plants decreased to
281.4 g/kWh in 2017, down by 13.9 g/kWh against plan
and 27.7 g/kWh year-on-year.
Bystrinsk Electric Grid Company
Bystrinsk Electric Grid Company was established in 2015
as a construction management business to carry out the
investment project of building overhead Kharanorskaya
GRES – Bugdainskaya – Bystrinskaya 220 kV power line
from the 220 kV Bystrinskaya substation.
In 2017, the company:
• completed construction and installation activities;
• performed individual and integrated systems tests;
• obtained commissioning certificates;
• registered title to the facilities.
In late 2017, the overhead line and substation were
formally transferred to FGC UES in accordance with the
contract for the sale of power grid facilities.
Power generation in the Norilsk Industrial
District in 2017 // %
44
56
Hydrocarbons (natural gas)
Renewable energy sources
(hydropower)
• 96 •
Transportation assets
2 0 1 7 M I L E S T O N E S
Nornickel Group increased its stake in Krasnoyarsk River Port to 88.77% of the company’s shares. The transactions
were part of the strategy of Nornickel’s transportation and logistics function, which focuses on boosting the efficiency
and streamlining the management of the Group's transportation assets.
In March 2017, the second berth was put in operation at the transfer terminal in Murmansk, taking its container handling
capacity to 1.5 mtpa. According to Marina Kovtun, Governor of the Murmansk Region, “one and a half million tonnes is a
large transshipment volume that contributes to new jobs and the overall development of Murmansk Sea Port, helping to
attract investors to the region and enhancing Murmansk's position as a key port in the Arctic Zone”.
In late 2017, MMC Norilsk Nickel’s Board of Directors decided to establish Bystrinsky Transport Division to deliver
products from, and supplies to, Bystrinsky GOK. The new unit will be operating a 227 km private railway line, which was
built under a public private partnership to connect Naryn (Borzya) and Gazimursky Zavod.
Transportation and logistics assets
6
6 heavy-duty ice-class
vessels
Murmansk
Transport Division
Murmansk
Polar Transport
Division
Dudinka port
helicopters
18
aircrafts
15
Arkhangelsk
Transport Division
Norilsk Airport
(100% stake)
118
container
flatcars
1
Yermak electric locomotive
diesel locomotive
Lesosibirsk Port
(51% stake)
Yenisey River Shipping Company
(81,99% stake)
555
river vessels
• 97 •
Krasnoyarsk River Port
(88,77% stake)
and Krasnoyarsk
Transport Division
Bystrinsky
Transport Division
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Transportation assets
Given the exceptional location of our production facilities in relation to key supply bases
and distribution markets, transport infrastructure and freight logistics are a primary focus for
Nornickel.
Capitalising on their reliability and sophistication,
the Company is well-positioned to address the most
difficult tasks in freight deliveries and to ensure
undisrupted operations across its facilities.
Nornickel's transportation and logistics assets
use various means of transportation and freight
forwarding services, responding to freight logistics
challenges faced by the Company and its customers.
The Company has a unique Arctic fleet comprising
five Norilsk Nickel container vessels and one Yenisei
heavy-duty ice-class tanker (ARC 7 under the PMPC
classification). The vessels are able to break through
1.5 m thick Arctic ice without icebreaker support.
The Yenisey tanker is used to transport gas
condensate from the Pelyatkinskoye Gas Condensate
Field to European ports and other destinations. The
Company's dry cargo fleet provides year-round freight
shipping services between Dudinka, Murmansk,
Arkhangelsk, Rotterdam, and Hamburg sea ports
while also covering other destinations. In 2017, 66
voyages were made from Dudinka (vs 69 voyages in
2016), including 12 direct voyages to European ports
(vs 11 voyages in 2016).
Cargo transportation in 2017
Norilsk Avia responds to industrial and social needs
of the Norilsk Industrial District and the Dolgano-
Nenets Municipal District of the Taimyr Peninsula. The
company provides air transportation services related
to operations of the Norilsk Nickel Group, emergency
air medical services, search-and-rescue operations,
and local passenger traffic..
NordStar Airlines is a rapidly developing aviation
project launched on 17 December 2008, when the
Board of Directors of Taimyr Air Company (a wholly
owned subsidiary of MMC Norilsk Nickel) resolved
to establish Moscow Branch of Taimyr Air Company
along with the NordStar Airlines brand.
The company's fleet comprises 15 aircraft: nine
Boeings 737-800, one Boeing 737-300 and five ATRs
42-500. With passenger traffic in excess of 1 million
people per year, NordStar Airlines annually reaffirms
its status of a major air carrier in the Siberian Federal
District and nationwide. The air company's current
route network covers over 30 cities in Russia and the
CIS. Each year, NordStar operates seasonal charter
flights from Moscow, St Petersburg and other cities.
Dry cargo transportation by the Company's fleet // mtpa
Transportation by Yenisey tanker // ktpa
Nornickel
Third-party customers
Nornickel
Всего
Third-party customers
1.1
1.1
1.0
2017
2016
2015
2014
2013
0.2
0.1
1.3
1.2
0.1
1.1
102
115
114
2017
2016
2015
2014
2013
60
80
49
162
163
195
Waterway cargo traffic at Murmansk terminal // mtpa
Waterway cargo traffic at Dudinka port // mtpa
Northern Sea Route
Yenisey
2017
2016
1.1
0.9
1.2
1.2
2017
2016
2.0
2.7
3.2
3.9
In the reporting year, waterway cargo traffic at the
Dudinka port saw a decline, mainly on the back of
lower river sand shipments. In 2018, cargo volumes are
expected to remain flat at the 2017 level.
Waterway cargo traffic at the Company's transfer
terminal in Murmansk (Murmansk Transport Division)
was 1.1 mt (vs 0.9 mt in 2016), with 162 vessels handled
(vs 139 vessels in 2016), including 113 vessels on coastal
voyages (vs 91 vessels in 2016) and 49 vessels on export
and import voyages (vs 48 vessels in 2016). The increase
in cargo traffic at the transfer terminal is driven by the
changes in transshipment volumes of raw materials and
end products after Polar Division's Nickel Plant was shut
down. In 2018, the upward trend is expected to persist.
In 2017, the Company's own rail car and locomotive fleet
carried 526.2 kt of cargo (vs 456.7 kt in 2016). In the
reporting period, the terminal handled 14.3 thousand
rail cars (vs 12.8 thousand in 2016) and 10.7 thousand
road vehicles (vs 10.9 thousand in 2016). The increase
in freight transportation by the Company's own rail car
and locomotive fleet was due to the growing volumes
of converter matte and, consequently, return traffic of
empty cars.
During the upgrade of the Norilsk Airport in the
summer of 2017, NordStar Airlines managed to
ensure uninterrupted air services to passengers in the
Norilsk Industrial District. Thanks to a professional and
structured approach to the airport modernisation, the
air carrier:
• organised transfer of passengers and their baggage;
• introduced a ticketing scheme to minimise anti-trust,
transportation and social risks;
• developed a pricing methodology to make multi-
flight air transportation with light aircraft more
affordable to passengers.
Всего
The cost growth in 2017 was driven by investments in
the modernisation of the Norilsk Airport as part of a
nationwide target programme, acquisition of a portal
crane for Polar Transport Division and machinery
for the modernised terminal in Murmansk, along
with scheduled repairs of sea vessels in Murmansk
Transport Division and helicopters operated by
Norilsk Avia.
Investments in transportation
and logistics assets
The cost growth in 2017 was driven by investments
in the modernisation of the Norilsk Airport as part of a
nationwide target programme, acquisition of a portal
crane for Polar Transport Division and machinery for the
modernised terminal in Murmansk, along with scheduled
repairs of sea vessels in Murmansk Transport Division
and helicopters operated by Norilsk Avia.
In 2017, Murmansk Transport Division completed the
reconstruction of its transfer terminal. The programme
provided for capital repairs of Berth No. 1, which are to
be completed in 2018. Its scope also covers construction
and fit-out of safety facilities to be continued in
2018. The Company purchased new cargo handling
equipment and hoisting gear and also retrofitted
some of its vessels. Solvo.TOS, a new process control
system, was commissioned to optimise container
handling procedures at the terminal. An information
system for automation was also introduced to manage
repairs of port machinery and equipment. Murmansk
Transport Division plans to continue its IT improvement
programme in 2018.
+15%
traffic growth of the Company's
own rail car and locomotive fleet
in 2017
Investments in transportation and logistics assets
Cost item
USD mln
RUB bn
USD mln
RUB bn
2016
2017
Investments in
transportation and logistics
assets, including:
Capital construction
New equipment
Other costs
34.3
2.3
46.2
2.7
17.9
10.4
6.0
1.2
0.7
0.4
22.2
15.4
8.6
1.3
0.9
0.5
• 98 •
• 99 •
Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production and sales
At Polar Transport Division (Dudinka port), the
Company completed the first phase of repairs at Berths
No. 4 and 5 and engineering surveys for the repair of
Berth No. 3 in 2017. The repair programme to prevent
the moorage wall destruction is scheduled to be
completed in 2018. The Company modernised a fire
water line at the log yard and introduced an integrated
safeguarding system at port facilities. Additionally, two
Liebherr mobile cranes and a mobile crane boom were
repaired, two Liebherr crane booms were purchased
for replacement in 2018, and a hangar was acquired to
repair mobile cranes. The Company also purchased 10
units of road vehicles and cargo handling equipment.
In 2017, Yenisey River Shipping Company continued
working on shipbuilding at Krasnoyarsk Ship Repair
Yard and engineering design of new shipbuilding
facilities. The project was launched in 2017 to provide
the Company with its own river vessels to replace
retiring ships. The USD 3.4–5.1 mln (RUB 0.2–0.3
bn) project is expected to be completed in 2019. An
automatic fire extinguishing sprinkler system was
installed in the administrative building. The work is
ongoing to improve onshore infrastructural facilities
and increase the level of traffic safety by installing
CCTV and fuel monitoring systems on vessels.
In 2017, the Company continued improving logistics
processes in its transportation facilities and units. For
Krasnoyarsk River Port and Lesosibirsk Port, it was the
first navigation period to use the Automated Cargo
Logistics Management System (ACLMS) as a master
management system. Despite certain challenges, the
introduction of ACLMS improved coordination between
transshipment ports, carriers and end customers
and provided a single reporting platform for freight
transportation by river. These efforts will continue.
Production and sales
In 2017, Nornickel maintained its reputation as a reliable supplier of high quality products.
The integrated index of customer satisfaction with the Company's products and services
matched the criterion for positive performance.
Product range
One of the Company’s objectives is to make sure its
product range is in line with the current and prospective
metals demand.
Over the last three years, Nornickel increased nickel
supplies to segments other than stainless steel
production by 32% (the 2017 supplies exceeded 100
kt of nickel), which was achieved by leveraging a focus
strategy to boost sales to Chinese and Russian alloy
and special steels makers, as well as by strengthening
positions on China's electroplating market through the
product range optimisation and extensive customer
training. The Company also fostered cooperation with
world-leading companies in the batteries segment.
Norilsk Nickel Harjavalta is considered one of world’s
foremost producers of nickel used to make precursors
(semi-products essential for manufacturing the
cathode material that forms part of batteries). Norilsk
Nickel Harjavalta is uniquely flexible when it comes to
manufacturing, which enables it to factor in consumer
preferences in developing its product portfolio.
Norilsk Nickel Harjavalta's nickel sulphate is rightly
considered the industry benchmark and is widely
used in battery manufacturing. The Company plans to
proactively market briquettes, which are traditionally
supplied to stainless steel manufacturers, among battery
and precursor producers.
In response to strong growth of demand by battery
manufacturers, the Company is upgrading its nickel
powder packaging capacities in order to broaden the
range of packages and create individual solutions based
on consumer preferences.
The Company considers joint ventures to produce
nickel- and cobalt-bearing value-added products for
the battery segment to be a promising direction for
expanding the product range and increasing production
volumes.
Construction: Cu
Transport: Cu
Electroplating: Ni, Co
Investments: Au
Li-ion/Ni-MH batteries: Ni, Co
Photovoltaics and thermoelectrical materials: Te
Heavy engineering: Cu
Additives and catalysts: Co
Rubber industry: Te
Key consumer industries
Production of steel and non-ferrous metal alloys:
Te, Ni, Co
Stainless steel (200 and 300 series): Ni
Non-ferrous metallurgy: Te, Na2SO4, NaCl
Power grids: Cu
Electronics manufacturing: Pt, Pd, Ru, Ag
Electrical engineering: Se, Co, Rh, Ir, Ag
Rubber vulcanising: S
Spark plugs: Ir
Pharmacology: Na2SO4, NaCl
Medicine equipment: Pt
Jewellery manufacturing: Pt, Pd
Machine building and consumer goods
production: Cu
End product manufacturing
Animal feed and fertilisers: Se, S, H2SO4
Glass industry: Se, Te, Rh
Synthetic detergents production: Na2SO4, NaCl
Pulp and paper, textile, leather industry: Na2SO4,
NaCl
Chemical industry: Se, S, Co, H2SO4, Pt, Pd, Rh,
Ir, Ru
Polar
Division
Kola MMC
Norilsk Nickel
Harjavalta Oy
Gulidov Krasnoyarsk
Non-Ferrous Metals 1
Types of products
Te
Se
Cu
Ni
NaCl
Pt
Ir
S
Co Cu
Na2SO
4
H2SO4
Ni
Co
Pd Rh
Ru
Ag
Au
● Copper ● Tellurium, Selenium ● Sulfur ● Nickel, Cobalt ● Copper ● Sodium sulfate and chloride ● Sulfuric acid ● Nickel ● Cobalt
● Platinum, Palladium ● Iridium, Rhodium ● Ruthenium ● Silver, Gold
Sales markets
1 Refining of precious metals manufactured from Polar Division's and Kola MMC's feedstock under a tolling agreement
• 100 •
• 101 •
Annual report • 2017Business overviewAsiaAmericasEuropeRussiaCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Production and sales
Sales strategy
Sales, along with production, have traditionally been
a key value adding line of Nornickel’s business.
When it comes to nickel products, the sales strategy
focuses on achieving a balance between supplies to
stainless steel manufacturers and to other industries.
As the world’s largest producer of palladium, the
Company continues to implement the strategy
of entering into direct long-term contracts with
end consumers to ensure sustainable and strong
demand for platinum group metals.
One of Nornickel’s priorities is stable supply amid
the growing demand for PGM:
• The Company refused to launch a marketing
programme aimed at promotion of palladium in
jewellery manufacturing in order to make it clear
to the market that it intends to focus on supplying
palladium for the automotive industry;
• In 2016, the Company established the Global
Palladium Fund (GPF). In 2017, the GPF built Pd
reserves of around 0.55 mln oz to safeguard
supplies for the increasing demand from key
consumers that are the Company’s customers in
2018 and onwards (mostly from the automotive
industry). The reserves were formed from purchases
of metal from third parties and the Company itself
in accordance with consumer requirements to the
product range.
To boost sales premiums and liquidity, Norilsk
Nickel registers its products on the world’s major
exchanges, including the London Metal Exchange
and Shanghai Futures Exchange.
Sales by region // %
7
14
23
56
Europe
Asia
North and South America
Russia and CIS
The Company supplies its products to
34 countries
Company Sales
Polar Division of MMC Norilsk
Nickel Russia
Kola MMC,
Russia
NORMETIMPEX,
Russia
Norilsk Nickel
Harjavalta Oy Finland
Metal Trade
Overseas AG
Switzerland
• 102 •
Customers
in Russia and
the CIS
Customers
in Europe
Norilsk Nickel Asia,
Hong Kong
Customers
in Asia
Norilsk Nickel Metals Trading,
КНР
Customers
in China
Norilsk Nickel
USA, USA
Customers
in the USA
Research and development
2 0 1 7 M I L E S T O N E
Nornickel is one of the smartest companies in Russia. It ranked first among the Top 15 Russian companies by value of intellectual
capital (USD 22.4 bn), according to the Baker Tilly accounting and consulting firm.
The Group's main R&D facility is Gipronickel Institute,
one of Russia's largest research and engineering
hubs for mining, metallurgy, concentration and
processing of minerals that develops a wide range of
research and technology products.
In 2017, in addition to Gipronickel Institute, the
Company used over 35 domestic and foreign
research and engineering companies and also
Russian universities, including: IPKON (Moscow),
Siberian Federal University (Krasnoyarsk), VNIMI
(St Petersburg), Outotec (St Petersburg), Norilsk
State Industrial Institute (Norilsk), Mekhanobr
Engineering (St Petersburg), NPO Atmosfera (Perm),
VNIIR (Kazan), MIPT (Moscow), Institute of Chemistry
and Technology of Rare Elements and Mineral Raw
Materials (Apatity), SPb-Giproshakht (St Petersburg),
St Petersburg Mining University (St Petersburg),
Uralmekhanobr (Yekaterinburg), RZD Logistics
(St Petersburg), etc.
Nornickel's R&D activities mainly focused on
research, technological development, and feasibility
studies under the Company's updated strategic
development plan.
The Company also carried out its operating
efficiency programme for 2015–2017 aimed at
finding unique solutions to streamline the mining
planning process, increase overall recovery rates
for nickel, copper, cobalt and PGM, re-process
secondary resources (tailings, copper slags, and
nickel bearing pyrrhotite with a low nickel content),
and optimise the work-in-progress inventory levels.
Other programmes included upgrade of nickel
and cobalt production technologies at Kola MMC,
improvement of product quality and optimisation of
production costs.
R&D and feasibility studies financing // USD mln
+9.8%
4.5
4.1
3.0
2017
2016
2015
2014
2013
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Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Research and development
Results in key R&D areas in 2017
Company Development
Strategy
Production
• feasibility study to choose the optimal design for the Company’s copper
refining facilities (stage 2);
• operating procedures for a feasibility study on refining non-ferrous and
K E Y D E V E L O P M E N T S I N 2 0 1 7
precious metals.
Supply management
Mining:
• adjusted design documents at the mines;
• feasibility study on building an underground crushing section at Skalistaya
mine;
• audit of mechanical earth models of Polar Division mines (stage 1);
• feasibility study on using tailings for backfilling on Talnakh mines and on
providing Polar Division with limestone and cement.
Concentration:
• project on producing high-grade and low-grade concentrate at Kola MMC’s
concentrator and organising shipments of the high-grade concentrate to be
accepted and processed at Nadezhda Metallurgical Plant of the Company's
Polar Division;
• adjusted operating procedures for ore enrichment at the Bystrinskoye Field;
• adjusted operating procedures for simultaneous processing of disseminated
and cuprous ore mixture at Stage 3 of the Talnakh Concentrator.
Smelting:
• adjusted operating procedures to design nickel production facilities at Kola
MMC based on the chlorine leaching technology, which will improve the tank-
house-2 capacity to 145 ktpa of cathode nickel;
• adjusted operating procedures to design continuous converting facilities at
Nadezhda Metallurgical Plant;
• development of operating procedures to design the upgrade of copper
production based on the new roast–leach–electrowin technology at Kola
MMC;
• development of operating procedures and feasibility study for the process to
neutralise sulphuric acid with natural limestone.
In 2017, Nornickel became Company of the Year in competitive procurement and won the Grand Prix at the Procurement
Leaders Awards, with its project for an end-to-end transformation of the procurement function receiving the highest
commendation from the expert community. Supply management is going to play the key role as the Company’s 2020
Programme for Improving Performance and Reducing Per Unit Costs unfolds.
The Company's supply management units are tasked
with ensuring timely, adequate and comprehensive
supplies as required for uninterrupted operations,
which means procurement on the best possible
terms.
With its diverse businesses (from construction of
Bystrinsky GOK to reconstruction of Norilsk Airport
in the Far North) and geography of operations, the
Company faces many challenges it has to address in
terms of procurement.
The procurement plan covers 48 aggregated
categories – from construction and installation
services and equipment to food supplies. For
purchases of general-purpose industrial machinery
and equipment only, the Group has set up some
200 sub-categories.
The supplies are shipped along the Yenisey River
and the Northern Sea Route using the Company’s
own fleet during the navigation season, as well as
by air. There is no railway or motorway connection
between the Taimyr Peninsula and mainland
Russia, which makes delivery by land to the Norilsk
Industrial District impossible.
Supply management operations include:
• requirements planning and supply management;
• procurement.
Requirements planning and
supply management
Accurate planning and availability of stock are key to
uninterrupted operations at Nornickel. At the same
time, the Company needs to focus on optimising
inventory, to minimise its working capital. Idle
inventory, if any, is assessed based on production
needs. Depending on the results, the Company
decides whether it is going to be:
• used in production as and when needed;
• sold;
• written off and disposed of.
Overall, 2017 saw the Company implement a set of
optimisation measures with respect to requirements
planning and meeting the needs of its key productions
sites. Changes in the structure of production assets
had an impact on the volume and composition of the
Company’s inventory. At the same time, Polar Division
and Kola MMC, the Company's major productions sites,
decreased their inventory for core operations by 3.06%
to an absolute level of USD 380 mln (RUB 22.2 bn),
while also fully meeting the needs of their production,
repair and other units.
The Company needs to focus on
optimising inventory, to minimise its
working capital. Idle inventory.
Environmental
protection
• development of operating procedures and feasibility study to produce
elemental sulphur;
• inventory of air emissions and development of draft limits for maximum
permissible emission at Polar Division’s core production facilities;
• comparison of the technology for producing sulphuric acid and neutralising
it with natural limestone vs elemental sulphur production technology used at
Nadezhda Metallurgical Plant.
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Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
The Group business
Supply management
Despite an increase in production assets, the Group's
inventory as per the RAS statements also dropped by
3.5% y-o-y to USD 701 mln (RUB 42.5 bn).
At the planning stage, the Company defines health,
safety and environment, as well as other mandatory
and optional product requirements, including
availability of certificates, permits, and licenses.
Further on, when procurement procedures are
under way, suppliers’ proposals are checked for
compliance with the Company's requirements.
Procurement
All procurement activities in the Company rely on
the regulated procedures and policies and are
in full compliance with Federal Law No. 223-FZ
On Procurement of Goods, Work and Services By
Certain Types of Legal Entities dated 18 July 2011, as
well as Business Ethics Code, Anti-Corruption Policy,
Regulation on the Product Procurement Procedure,
as amended in 2016, and other regulatory
documents of the Company.
The Company develops procurement policies
for select materials and supplies that establish
binding principles and approaches to procurement
in specific product groups. In 2017, the Company
purchased ca. 33% of supplies for core operations
based on category procurement policies (24% in
2016, 17% in 2015).
Procurement activities can be either centralised
or organised independently by the Head Office,
branches or Group enterprises. Depending on the
expected purchase price, procurement can be
organised either as a bidding procedure (tender),
simple procurement, or simplified procurement.
Procurement procedures may involve collective
procurement bodies, such as the tender
committee, tender commissions of the Head
Office, procurement and tender commissions
of the branches and Group companies. In 2017,
the tender committee and tender commissions
of the Head Office that are in charge of the most
expensive procurement items, full-cycle projects
and IT products, carried out procurement for over
USD 325 mln (RUB 19 bn). The Company’s tender
committee focuses on improving procedures for
identifying reliable suppliers of quality products at
a fair market value.
Nornickel provides support to tenders run by the
Company's Russian subsidiaries and branches. In
2017, the Company oversaw tender procedures to
purchase services for over USD 343 mln (RUB 20 bn).
In 2017, the Company signed over 4,000 contracts
for centralised procurement of materials and
equipment worth around USD 1.6 bn, with a total
price decrease of 5%, which is below the levels
recorded by the Federal State Statistics Service.
At Nornickel, the procurement process is certified
for compliance with ISO 9001 and ISO 14001.
In the reporting year efforts focused on developing
and implementing procurement guidelines, and
harmonising the regulatory procurement framework
across Russian subsidiaries and branches, including
services procurement, were continued.
Всего
701
USD mln
the Group's inventory in 2017
–3.5%
Number of the Company's suppliers and contractors
domestic
foreign
37
38
40
513
540
505
2017
2016
2015
2014
2013
• 106 •
• business or technical and business proposals
of qualified suppliers are compared based on
objective and measurable criteria approved prior to
the request of proposals stage;
• the results of the qualification-based selection
and the winner are approved by the collective
procurement body comprising representatives from
various functional units of the Company.
The purchases made by certain subsidiaries of
Nornickel are subject to Federal Law No. 223-FZ On
Procurement of Goods, Work and Services By Certain
Types of Legal Entities dated 18 July 2011. As part of
anti-corruption efforts undertaken by the Company,
these subsidiaries must disclose additional details in
the unified information system, including:
• annual volume the customer is required to procure
from small and medium businesses; and
• the number and total price of contracts awarded
to small and medium businesses.
Procurement automation and
stronger competition
Nornickel has put in place SAP SRM, an automated
solution for supplier relationship management. The
Company also widely uses independent bidding
platforms, such as Fabrikant.Ru or B2B-Centre.
These solutions help improve the supplier selection
transparency and competitive environment when
procurement procedures are under way.
Nornickel pays close attention to fostering ties with
reliable domestic suppliers and contractors. Foreign
suppliers are mainly engaged for delivering unique
equipment or systems that do not have Russian
alternatives.
As at the end of 2017, domestic suppliers
outnumbered foreign ones by 14 to 1.
Preventing corruption and other
misconduct
Nornickel’s Corporate Security Unit evaluates the
business reputation, reliability and solvency of
potential counterparties to mitigate risks.
To prevent potential procurement misconduct and
secure maximum benefit through unbiased selection
of the best proposal, Nornickel adheres to the
following rules:
• procurement relies on the role allocation principle
(procurement owner, customer and secretary of a
collective procurement body);
–5%
total price decrease in the
procurement of materials and
equipment
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Annual report • 2017Business overviewCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
Corporate
resposibility
HR and social policy
2 0 1 7 M I L E S T O N E
In its rating HeadHunter recognised Nornickel as Russia’s top employer in the metals and mining industry.
This high ranking came as a result of the Company's efforts to build a strong team of professionals.
On top of that, MMC Norilsk Nickel was named the fourth most popular employer with job seekers.
Strategic focus
One of the Company’s focus areas is to nurture
corporate culture aimed at boosting employee
performance and commitment to delivering against
targets.
We view our people as the Company's key asset
and keep investing in their professional and
personal development to make sure we are on
track with the accomplishment of our mission.
To further increase the efficiency of the corporate
culture development programme, we integrated our
values into the key HR management processes:
• recruitment (we used values to set targets
and train the managers and HR staff in job
interviewing);
• assessment (we launched a 360-degree review
for top executives involved in value-based
management);
• development (we developed an Our values
training module, Program of the Workshop on the
Application of the White Paper1 and conducted
a number of value assignment business games
and a hands-on training session in Value-Based
Management);
• succession planning (we aligned the training
programme with our values).
„Our key value is reliability. Throughout the Company's
history, we have delivered on our commitments in production
and social areas. Today, Nornickel is working hard to develop
social infrastructure and digital economy, provide support
to indigenous peoples and national minorities of the North,
and markedly improve the environment across its footprint –
from Taimyr to the Kola Peninsula and Zabaykalsky Krai.
We joined forces with local authorities and communities to
support the volunteer movement, provide grants to socially
important projects, and aide charitable foundations, sports
organisations and artistic associations. Over the last years,
the unique expertise and know-how we have acquired
have gained wide recognition from the Russian expert
community. I hope that this annual report will help us share
this experience with the industry and contribute to the
enhancement of best domestic practices in corporate social
responsibility”.
Larisa Zelkova
Senior Vice President for HR, Social Policy and Public Relations
1 The White Paper is a corporate publication that tells us what kind of culture we are building; what our common values are and what do they mean; how we achieve
our goals. It is a desk assistant to the Company's management, a basic guide to corporate culture, a collection of techniques and practices, motivating examples.
In 2017, more than 3,500 managers, specialists and
workers from the Group's 60 facilities took part in the
corporate culture development training sessions and
forums designed and organised by the Social Policy
Department. The Company established working
groups to develop and roll out business initiatives
on improving systems and processes. In 2018, the
programmes are set to have a wider coverage.
In the reporting year, the Company launched a
series of personnel engagement management
initiatives, which included:
• providing employees with an opportunity
to maintain an ongoing dialogue with the
management;
• assessing the staff motivation to achieve targets
and approving changes in the business processes
and working conditions based on objective data;
• identifying tools to enhance the competitive edge
in human resources and boost the Company's
appeal as an employer.
Over 73,000 employees from the Company's 32
facilities and Russian subsidiaries took part in the
personnel engagement survey.
Our social and HR policy prioritises social stability
of the workforce deployed across the Group’s
companies and geography.
Staff composition
In 2017, the Norilsk Nickel Group's average
headcount totalled 78,000 people in Russia and
1,000 people abroad.
Most of the Russia-based employees (69%) work
in Norilsk and the Taimyrsky Dolgano-Nenetsky
Municipal District. Another 17% of the Group's Russian
headcount work on the Kola Peninsula.
Evolution of the Norilsk Nickel Group’s
average headcount
Region/country of operation
Russia
Africa
Europe
Asia
North America
Australia
Total
2015
81,637
1 650
307
14
10
6
2016
81,081
586
311
13
10
5
2017
77,991
605
326
13
10
5
83,624
82,006
78,950
A decrease in the average headcount in 2017 was due to the disposal of
non-core assets and implementation of a programme to improve labour
productivity and reduce costs.
Headcount breakdown by
Russian operations // %
Gender breakdown across Russian
operations // %
73
thousand of employees
from the Company's 32 facilities and Russian
subsidiaries took part in the personnel
engagement survey
5
4
5
17
29
69
71
Taimyr Peninsula
Kola Peninsula
Krasnoyarsk Territory (excl. Taimyr
Peninsula)
Zabaykalsky Krai
Moscow and other Russian regions
Male
Female
Manifesto of our values
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
Recruitment
In 2017, the Company focused mainly on increasing
its visibility as an employer and staffing GRK
Bystrinskoye.
GRK Bystrinskoye, Russia's largest mining and
processing facility, successfully completed its
ambitious recruitment exercise.
As part of the large-scale recruiting campaign, we
informed over 9 million people from 26 Russian
regions about the launch of GRK Bystrinskoye
providing advice on the working conditions and
available jobs. To stay in touch with the job seekers,
the Company set up a dedicated toll-free hotline. In
nine months, we hired 1,900 highly qualified workers,
engineering service officers (ESOs) and managers.
Partnerships with universities
To make jobs in the metals and mining industry
more attractive for young people and help develop
skills in personnel, Nornickel pays special attention
to collaboration with Russia universities. In 2017,
the Company invited 400 students from dedicated
universities to take part in its Career Start-Up
programme. Nornickel was the first company in the
Russian mining industry to engage students and
graduates in solving real business tasks.
The students obtained practical skills as part of their
apprenticeship at the Company's major facilities
along, while also gaining unique knowledge by taking
part in the Conquerors of the North business game.
In the span of two summer months, the programme
participants were offered to take a hands-on training
experience and compete in a multi-stage business
game with a focus on team work to try and tackle
some of the Company’ real tasks. The Company
engaged 20 of its top experts to provide mentorship
support to the participants.
Nornickel places a strong emphasis on engineering
education in Russia and partakes in the promotion
of relevant professions among school graduates and
university students. In 2017, we supported Cup MISIS
Case and Cup Technical, case-solving championships
among students of Russian technical universities.
During the contest, students dealt with cases related
to Nornickel's operations gaining insights into the
Company's business processes.
Assistance programme
Due to the remote location of MMC Norilsk Nickel's
industrial sites, the Company is actively engaging
employees from other Russian regions. To help them
settle in faster, we launched a programme called
Assistance to New Employees in Adapting to the
New Place of Residence in Norilsk and the Taimyrsky
Dolgano-Nenetsky Municipal District. The programme
does not only target highly qualified specialists and
managers, but also focuses on attracting young
talents and skilled workers to fill positions on the
skills shortage list. Today, the programme covers
1,715 of the Company's employees, including 267 new
participants who joined in 2017. With this programme
the Company seeks to provide comfortable living
conditions for the invited employees and reimburse
their relocation and resettlement costs.
In order to identify and recruit the best candidates
to fill open vacancies and reduce staff turnover, in
2017, the Company started using the latest methods
of employee evaluation and capacity assessment.
Those help measure abilities and risk appetite of
each individual, which are important in recruiting
candidates to positions with a high level of exposure
to occupational hazards. They are also helpful
in obtaining information about each employee’s
motivating and demotivating factors. The project was
first piloted at GRK Bystrinskoye where 100% of new
employees (all the way up from workers to managers)
were recruited following successful assessment.
The Company selected candidates based on their
learning curve, teamwork skills and low risk appetite,
which are essential for all staff categories, from top
management to workers. Experience shows that this
method helps reduce onboarding time for employees
and minimise occupational safety risks.
Financing under the Assistance
programme // USD mln
+18.6%
5.1
4.3
3.3
2017
2016
2015
2014
2013
• 110 •
Personnel development
Respect for employees and their rights lies at
the heart of Nornickel's business. The protection
of human rights is reflected in a number of the
Company's documents, including Business Ethics
Code, Personal Data Policy, Anti-Embezzlement
Regulation and Human Rights Policy.
Talent pool
In 2017, the Company continued rolling out its talent
pool management system to include the process
of recruiting lower and middle line managers.
The relevant approaches are set out in the Talent
Pool Regulation of MMC Norilsk Nickel. In 2017,
the Company primarily focused on designing and
implementing training and development programme
for the talent pool and their mentors, with 99
mentors fully trained during the year. Also, the
Company set up a new programme for the talent
pool. The comprehensive training system offers
a combination of classroom and online sessions
to enable transition from easy-to-follow on-the-
job programmes to a free choice of resources for
professional development.
In 2017, the Company started assessing the capacity,
current performance and development prospects of
its middle and top managers, with 81 managers from
Kola MMC, Pechengastroy, Norilsknickelremont and
Norilsk Support Complex listed as those with a high
career growth potential in 2017.
To define priority development areas for its
management, at the end of 2017, the Company ran
a 360-degree competency review using an updated
competency model built around values and
management competencies. Based on the review
results and relevant feedback, each participant
could choose the right path for development and
select required tools and methods using a dedicated
roadmap for development activities. In 2018, the
training programme for the Head Office’s managers
will be based on their individual development plans.
In 2017, we proceeded with our project to automate talent pool
management using SAP HCM. The new system will help standardise
talent pool management methods across the Company's operations,
consolidate relevant data into a shared database, boost efficiency
and streamline approaches to talent pool building. Its other
advantages include:
• reduced labour input required to collect and consolidate data and
control talent pool building across our key production assets;
• reduced labour input required to timely identify and recruit
candidates to fill positions with the highest priority in succession
planning;
• standardised talent pool building process at Russian subsidiaries,
an option to transfer the process to the shared service centre,
procedure compliance control within the system;
• full and reliable information available at every stage of the talent pool
building cycle;
• engagement of mentors and unit heads, streamlined talent pool
assessment and data collection procedure;
• shared information environment for all stakeholders, additional
feedback opportunities for employees;
• timely planning of talent pool development, increased hiring from the
talent pool.
The reporting year saw the Company complete
its project to assess professional competencies of
managers in the Power and Mechanics functional units.
As part of the assessment, 250 managers took specially
designed tests that helped identify areas for their
professional development.
In 2018, Nornickel will partner with Russia’s leading
universities and institutions to organise training for
all unit managers giving them an opportunity to
learn more about the cutting-edge technologies and
best practices. The training programmes will enable
managers to enhance their managerial and professional
competencies at the leading business schools.
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Business overview
Corporate resposibility
HR and social policy
The operating efficiency training
In September 2017, 55 managers embarked on
the operating efficiency training at Moscow's
Skolkovo School of Management. The project seeks
to develop key management competencies with
a focus on operating efficiency, a new approach
to production management, better understanding
of business and business environment, wider
planning horizon, enhanced vision of the Company's
prospects, analysis of the latest technologies,
approaches and best practices in production
management, and also their possible use and roll-
out across the Group. At the end of the session, the
trainees will have to come up with target strategic
projects to boost operating efficiency of the
Company's facilities.
An area of special attention is the introduction of
modern technologies to assist in the training of
various personnel categories. In 2017, we developed
interactive training in occupational safety.
Social partnership
Russian operations of Norilsk Nickel have established
a social partnership framework aimed at reconciling
the interests of employees and employers on matters
pertaining to the regulation of social and labour
relations.
The Company meets all obligations under the Labour
Code of the Russian Federation, collective bargaining
agreements and joint resolutions.
Enhancing professional excellence
Social partnership framework
With our reconfigured production cycle, modernised
operations, new technologies and approaches,
and a rapidly changing operational environment,
we need to make sure our employees meet the
new expertise, skill and competency requirements.
The corporate training framework must provide
employees with a quick and easy access to new
knowledge, helping them master new professional
skills and receive training and development support
for horizontal and vertical job rotation.
In 2017, we proceeded with the diagnostics and
management of professional skill development
across our mining facilities, building a professional
competency model for lower and middle line
mine managers, defining knowledge and skills
requirements for each position, and developing
a set of test questions to assess professional
competencies of line managers at mining facilities.
This year, we will carry on with this work.
In 2017, we completed a large-scale programme
to retrain over 94,600 employees of the Group,
including more than 24,000 people aged below 30.
Over 52,000 employees were trained in corporate
training centres.
Employer
Social partnership
Trade union
organizations
Social and
labour councils
Employees of Norilsk Nickel’s
Russian operations
In regulating labour relations, employee interests
are represented by trade unions and social and
labour councils.
Trade union organizations
Social and labour councils
Trade unions of the companies located in Norilsk
and on the Taimyr Peninsula form a single Trade
Union Organisation of PJSC MMC Norilsk Nickel,
its Subsidiaries and Affiliates. Trade unions of the
companies operating in the Murmansk Region are
joined under two umbrella trade union organisations –
Regional Trade Union Organisation of Kola MMC
Employees and Primary Trade Union Organisation of
Kola Mining and Metallurgical Company.
As at the end of 2017, 10.9% of employees engaged in
Norilsk Nickel’s Russian operations were members of
trade union organisations.
Trade union organisations of Nornickel and its
subsidiaries, Kola MMC and its subsidiaries, GRK
Bystrinskoye, NordStar Airlines and Zapolyarye Health
Resort are all members of the Trade Union of MMC
Norilsk Nickel Employees, an interregional trade union
organisation. In the reporting year, the relationship
between the employer and the Trade Union was
governed by the Social Partnership Agreement signed
in 2014 to formalise implementation procedures for joint
initiatives ensuring sustainable performance, operating
and financial excellence, employee welfare, health and
safety, and enhancement of social benefits.
Membership in trade unions // %
The Group's companies located in the Norilsk Industrial
District, Taimyrsky Dolgano-Nenetsky Municipal District
and Murmansk Region established social and labour
councils back in 2006 to represent the interests of
employees who are not members of trade unions.
Chairs of the local councils make up the Social and
Labour Council of MMC Norilsk Nickel and the Social
and Labour Council of Kola MMC. To ensure regulation
of social and labour relations, negotiation, drafting and
signing of collective bargaining agreements, holding
of bilateral consultations, respect of the employees'
labour rights and participation of employee and
employer representatives in out-of-court settlements,
the Russian companies of Nornickel set up the
following collective decision-making bodies: collective
bargaining commissions, labour dispute commissions,
social benefits commissions/committees, social
insurance commissions, health and safety commissions/
committees, social and labour relations committees, etc.
In 2017, the share of employees represented by social
and labour councils across the Norilsk Nickel Group
stood at 82%.
Collective bargaining agreements
The collective bargaining agreements of Nornickel’s
Russian companies comply with the applicable laws
and meet the majority of employee expectations.
Company
Gipronickel Institute
Group’s operations in the Norilsk
Industrial District
GRK Bystrinskoye
Kola MMC and subsidiaries
NordStar Airlines
Zapolyarye Health Resort
Lesosibirsk Port
Yenisey River Shipping Company
Krasnoyarsk River Port
Employees
enrolled
in trade
unions
15
8
15
15
17
30
38
55
62
82%
of employees represented by social and labour
councils across the Norilsk Nickel Group
11%
of employees engaged in Norilsk Nickel’s
Russian operations were members of trade union
organisations at the end of 2017
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
In 2017, many of the Group’s Russian companies entered
into new collective bargaining agreements or extended
the expired ones. Collective bargaining commissions
also amended some of the agreements during the
reporting year. The need to make those amendments
was mostly related to adjustments in wage rates arising
from legislative changes, organisational structure
transformation and introduction of a new automated
HR management system. One of the key changes
was the review of the payroll system, which led to an
increase in the fixed (guaranteed) part of the salary. The
payroll adjustments were made in strict compliance
with the applicable laws subject to the consent of every
given employee. As a result, the Collective Bargaining
Commission of MMC Norilsk Nickel reviewed old wage
rates and salaries and approved the new ones which
came into effect on 1 April 2017.
There were no social or labour disputes during the
reporting period.
In 2017, the share of employees covered by collective
bargaining agreements stood at 80%.1.
The underlying principles of the remuneration policy
include:
• internal equity – remuneration management based
on HAY Group job description and evaluation
methodology;
• external competitiveness – remuneration level
determined based on the labour market data, with
adjustments made for the company's focus area,
business location and job grades;
• performance-based incentives – changes in the
pay level subject to the annual performance
assessment outcome;
• simplicity of the remuneration system – pay level
calculation and review procedures are clear for
every employee.
In addition to salaries, the Company’s employees
enjoy a variety of benefits. Reimbursements of
vacation travel expenses (round trip travel expenses
and baggage fees) for employees living in the Far
North and their families, and provision of discounted
tours for health resort treatment account for 69% of
total employee benefits.
Incentive programmes
Remuneration system
Nornickel's remuneration policy aims to:
• attract and retain employees;
• promote higher labour productivity;
• ensure administrative efficiency and streamlining;
• enforce compliance with legal requirements.
Average monthly salary across the Group’s Russian operations
Currency
USD2
RUB ’000
2015
1,393
84.9
2016
1,405
94.2
2017
1,784
104.1
Company's expenses on employee benefits across the Group's
Russian operations // USD '000
The remuneration package consists of the fixed and
variable components (70% and 30%, respectively)
paid based on the Company's operating
performance and achievement of relevant KPIs.
Indicators
Total expenses on employee benefits across
the Group's Russian operations
2015
2016
2017
102,000
103,000
122,539
including the amount spent per employee
1,300
1,300
1,571
80%
the share of employees covered by
collective bargaining agreements
1
Including entities that have no collective bargaining agreements in place but have
approved local regulations that make MMC Norilsk Nickel's Collective Bargaining
Agreement effective at these entities, including foreign assets.
2 based on the average annual USD/RUB exchange rates of 58.3529 in 2017,
67.0349 in 2016 and 60.9579 in 2015.
• 114 •
Efficiency improvement programmes
Social programmes for employees
The Company implemented its employee
performance management system back in 2014, with
assessment relying on a variety of key performance
indicators (KPIs), including occupational safety,
operating efficiency and capital management. In 2017,
some 4,326 people (employees of the Company’s
Head Office, branches and subsidiaries) took part
in the KPI-based assessment. The new system
helped develop uniform criteria for the evaluation of
employee performance enabling the management
and employees to align the current year's priorities
with performance indicators of the Company/
branches/subsidiaries and join their forces to find a
path for delivering on the tasks in hand. Moreover,
this system makes it possible to link an employee's
performance to his/her pay level.
In 2018, we will continue the roll-out with a focus
on SAP HCM-based performance assessment
automation across the Company's operations. In 2017,
the automated SAP Human Capital Management
system was implemented at Medvezhy Ruchey,
Nornickel – Shared Services Centre, NORMETIMPEX
and Bystrinsky Transport Division of MMC Norilsk
Nickel. On top of that, 2017 saw the roll-out of the
Talent Pool and Performance Assessment automated
management subsystems at Polar Division, Kola
MMC, Pechengastroy and GRK Bystrinskoye. The
performance assessment results are also used to
nominate employees for awards.
Health improvement programmes for employees
The harsh climate of the Far North and the heavy
working conditions of the mining facilities require
that the Company make an extra effort to protect its
employees’ health. Hence, health improvement and
health resort treatment programmes for employees
and their families are a key priority of the Company’s
social policy.
In 2017, more than 9,200 employees and their families
received recreational treatment in Zapolyarye Health
Resort (Sochi) owned by the Company. Some 15,500
people spent their vacations in other health resorts,
including approximately 5,000 employees who
travelled to Bulgarian resorts and over 2,000 staff
members who went to Hainan (China).
The health resort treatment programme is designed to
prevent the development of chronic diseases among
the employees' children and give them an opportunity
to take full advantage of their summer vacations. As
part of this programme, some 1,500 children spent
their holidays in Anapa and Loutraki (Greece).
Health improvement and health resort
treatment programmes for employees
and their families are a key priority of
the Company’s social policy.
Awards for outstanding operational achievements,
long track record and work commitment
Объем финансирования программ санаторно-курортного
Financing of health resort treatment and vacation programmes
лечения и отдыха работников и членов их семей, млн долл. США
for employees and their families // USD mln
37
223
245
1,160
1,924
Company's expenses // %
Employee's expenses // %
Internal awards
Awards from regional
and municipal
authorities
Corporate awards
Awards from ministries
and agencies
Government awards
85
86
84
2017
2016
2015
2014
2013
• 115 •
15
14
16
39.6
35.3
31.7
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
Sports programmes
Housing programmes
Sports programmes aim to promote a healthy lifestyle,
foster corporate solidarity, and develop corporate
culture.
The Company pays special attention to corporate
competitions, including in such popular sports
as futsal, volleyball, basketball, alpine skiing,
snowboarding and swimming. Family sports contests
are yet another focus area. In 2017, hockey became
the latest addition to that long list.
To ensure further development of amateur hockey
across the Company's footprint, the region of Norilsk
was included in Conference North of the Night
Hockey League in December 2017.
In July 2017, Nornickel staged its first corporate team
competition under the Hero Race franchise. Some
4,000 people (76 teams), including residents of the
Norilsk Industrial District and Murmansk Region, took
part in the race.
Events for local communities include annual
Spartakiads. In Norilsk, there are 14 sports on
Nornickel's Spartakiad list, with some 4,800 people
participating in the competition. In the Murmansk
Region, the Spartakiad of Kola MMC includes 16
sports ensuring participation of approximately 3,300
people.
One of Nornickel’s social policy highlights is the
support of amateur sports. In 2017, over 25,000
employees and local residents took part in Nornickel's
corporate mass sports events.
In 2017, the Company adopted a Housing Programme
Policy putting in place a single pool of principles
and approaches to developing, approving and
implementing housing programmes for employees with
the highest qualifications and most relevant expertise
as a way to boost long-term staff retention across the
Group's operations.
In the reporting period, the Company continued
implementing its Our Home and My Home corporate
social programmes launched back in 2010 and 2011,
respectively.
Our Home programme is intended for the employees of
Polar Division, Polar Transport Division and Kola MMC.
My Home programme covers 14 subsidiary-owned
facilities operating in Norilsk, the Taimyrsky Dolgano-
Nenetsky Municipal District and Murmansk Region.
Since the start of the programme, 3,397 apartments
have been granted to the Company’s employees. In
total, the Company has purchased 3,826 ready-for-
living housing units, including 422 apartments in 2017.
As part of the programmes, the Company purchases
ready-for-living apartments in various Russian regions
at its own expense, and provides them to eligible
employees under co-financing agreements. The
Company pays up to half the cost of the apartment
(but in any case no more than USD 35,000), with the
rest paid by the employee within a certain period of
employment with the Norilsk Nickel Group (from five to
ten years). The cost of housing remains unchanged for
the entire period of the employee’s participation in the
programmes. Ownership rights are registered at the
end of the programmes, but the employee may move in
immediately after receiving the apartment.
In 2014–2017, the apartments were purchased in the
Moscow and Tver Regions, as well as the Krasnodar
Territory, with the Company seeking to buy properties
located in close proximity to enhance the employees'
living standards by developing additional infrastructure
and optimising the scope of maintenance tasks
assigned to the property management company.
To boost the appeal of housing programmes for
employees and, consequently, increase the Group's
retention rate, Nornickel launched a new housing
programme based on mortgage subsidies – Temporary
Assistance Programme for Employees of Polar
Division and Kola MMC in Acquiring Residential
Property, in 2016–2017. The programme is designed
to provide a wider choice of residential locations,
with employees entitled to an interest-free loan to
make a down payment and partial reimbursement of
the mortgage interest. The programme has proved
efficient in retaining highly qualified specialists. Some
200 employees have already taken part in the pilot,
with over 110 people tapping into the allocated funds.
Hence, a decision was taken to roll out the programme
on an ongoing basis and transform it into Corporate
Social Subsidised Loan Programme for Employees of
Nornickel and its Russian Subsidiaries. The launch of
the programme is scheduled for Q1 2018.
Pension plans
Nornickel offers its employees non-governmental
pension plans.
Under the Co-Funded Pension Plan, the Company and
its employees make equal contributions to the plan.
The Complementary Corporate Pension Plan
provides incentives for pre-retirement employees
with considerable job achievements and an extensive
employment record.
Pension plans in 2017
Financing // USD '000
Participants // people
8,581
8,484
Co-Funded
Pension Plan
15,700
Complementary
Corporate
Pension Plan
718
Financing of Co-Funded Pension Plan // USD mln
2017
2016
2015
2014
2013
7.8
8.6
8.9
+87%
Financing of sports programmes // USD mln
2.8
USD mln
financing of sports programmes in 2017
2017
2016
2015
2014
2013
• 116 •
2.8
1.5
1.4
200
employees
have already taken part in the pilot housing
programme
In total 3,826 apartments
have been purchased under the housing programme
since 2010
• 117 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
Social investments
2 0 1 7 M I L E S T O N E S
In September 2017, Nornickel built a 40 Gbps broadband internet network in Norilsk, with the project costs amounting
to USD 43 mln (RUB 2.5 bn). The network is strong enough to support operations of the Norilsk Nickel Group, as well
as local mobile operators, government bodies and municipal authorities.
For more details, please see Infrastructure development
p. 119
Nornickel and Zabaykalsky Krai governmemt entered into a cooperation agreement providing for the local government
support of Nornickel’s investment projects, including Bystrinsky GOK. On its part, Nornickel undertakes to allocate at least
RUB 3.29 bn by 1 January 2027 to finance social projects of Zabaykalsky Krai's government and municipalities.
Development of social entrepreneurship is among the focus areas of Nornickel’s World of New Opportunities charitable
programme. In 2017 alone, the Company allocated some RUB 11.5 mln for five business projects focusing on the regional
social issues. The funds were provided in the form of interest-free loans for a period of two years.
For more details, please see World of New Opportunities
p. 120
Relocation programme results
1,137
39
Company contribution // USD mln
Total apartments purchased
1,013
1,012
1,038
28
27
26
718
22
2011
2012
2013
2014
2015
778
14
2016
729
14
2017
Relocation programme
In 2017, the Company and the Government
continued joint implementation of a long-term target
programme to relocate people living in Norilsk and
Dudinka (Krasnoyarsk Territory) to Russian regions
with more favourable climatic conditions. Introduced
in 2011, this ten-year programme provides for
11,265 families residing in Norilsk and Dudinka to
be relocated from these municipalities as entitled
to housing subsidies under Federal Law No. 125-FZ
On Housing Subsidies for Citizens Migrating from
the Far North Regions and Equated Territories
dated 25 October 2002. The Company acts as a
programme sponsor.
In 2017, the programme budget totalled RUB 8.3
bn. Since the programme launch, the Company has
transferred to the local budget a total of USD 169
mln (RUB 6.2 bn), including USD 14.2 mln (RUB 830
mln) in 2017. In 2011–2017, 6,515 families purchased
new homes on the “mainland” and moved there,
including 5,458 families from Norilsk and 1,057
families from Dudinka.
In 2017 alone, Krasnoyarsk Territory's Ministry of
Construction, Housing and Utilities issued 685 home
purchase certificates under the applicable housing quota.
Local development
The Company makes a significant contribution to the
development of local communities by implementing
a series of social programmes targeting current
and potential issues in its key regions of operation,
including the Krasnoyarsk Territory, Kola Peninsula
and Zabaykalsky Krai.
Support of indigenous peoples. Nornickel
recognises the right of indigenous peoples to
preserve their traditional way of life, stick to the age-
old environmental management practices and have
decent living conditions. The Company adopted the
Indigenous Rights Policy that defines Nornickel’s
key commitments towards the rights of indigenous
peoples. In 2017, there was no record of the Company
violating the rights of indigenous minorities.
For several years now, the Company has been
supporting initiatives to improve living standards of
the Taimyr Peninsula's indigenous people.
One of such initiatives is the Comfortable Taimyr project
launched in 2017. Under this ambitious programme, the
Company will invest USD 1.5 mln to construct 2,500
sq m of housing in the Tukhard settlement, where
indigenous people live. A trilateral agreement to this
effect was signed between the Company, Taimyr
Administration and Yenisey United Bank in April 2017
during the Krasnoyarsk Economic Forum.
In an attempt to preserve national traditions and
culture of indigenous Northern minorities, the
Company participates in staging annual professional
festivals for tundra inhabitants on the occasion of the
Reindeer Herder's Day and the Fisherman's Day and
provides presents and prizes for the winners
in various competitions. To that end, the Company
purchases items that enjoy the greatest popularity
among locals, including tents, gasoline power
generators, household equipment, outboard motors,
inflatable boats, GPS navigators, sleeping bags,
binoculars, etc. The Company also offers regular
financial help to public Taimyr-based organisations.
To ensure the sustainable development of the
Taimyr region, the Company provides assistance
to indigenous peoples of the North, including by
helping to organise air transportation and supplying
construction materials and diesel fuel.
Children of reindeer herders in the Tukhard tundra
are provided with comprehensive meals as part of
the Food Programme carried out in association with
the Dudinka Department of Education. In line with
the effective agreements, foods for the local hospital
and primary school are supplied by Norilskgazprom’s
Procurement Unit at below-market prices.
Infrastructure development. Nornickel is actively
involved in the development and renovation of
social infrastructure across its footprint, looking to
create accessible and comfortable environments for
work and life.
In September 2017, the Company completed the
construction of a fibre optic communication line
running through a permafrost zone between Novy
Urengoy and Norilsk to secure internet connection for
local businesses, institutions and individuals. The line
is 960 km long, with its most technically challenging
section laid under the Yenisey River bed. Along with
the Norilsk residents, people living in Dudinka also
got access to the broadband internet service. The
communication line will run in a pilot mode until Q2
2018 when all the tests are completed and the line
is put into commercial operation.
6,515
families
purchased new homes
on the “mainland” and
moved there in 2011–2017
169
USD mln
the Company's contribution
to the relocation programme
since 2011
1.5 USD mln
will be invested to construct 2,500 sq m
of housing in the Tukhard settlement
• 118 •
• 119 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
HR and social policy
As part of a public-private partnership, the
Company continues its work to upgrade the civil
section of Norilsk Airport in accordance with the
memorandum of intent signed by MMC Norilsk
Nickel and the Federal Air Transport Agency
under the Russian Transport Development Federal
Programme for 2014–2018. The Company will
allocate over USD 50 mln (RUB 3 bn) to finance
the project. The works are spread out over three
construction seasons to avoid airport closure. In
2016–2017, the focus was on the runway upgrade,
which is expected to be completed in 2018. In the
same year, we will achieve significant progress in
repairs of the apron for civil aircraft. The works will
be completed in 2019 and will not affect the flight
schedule.
Our support for sports is becoming more
consistent. It is not limited to the financing of
occasional sports events, as Nornickel strives
to develop a more comprehensive approach by
investing in sports facilities, new schools, sports
grounds and mass events promoting sports and
healthy lifestyles.
In 2017, the Company allocated USD 343,000
(RUB 20 mln) to finance the construction of a
sports facility in Monchegorsk (a prefab structure
with a football pitch). Its commissioning is
scheduled for March 2018.
Another project of Nornickel, which is supported
by the Krasnoyarsk Territory Government, is to
build a unique golf field in the northern city of
Krasnoyarsk to drum up people’s interest in the
game of golf.
The Norilsk residents and people living
in Dudinka got access to the broadband
internet service.
Nornickel is also helping Krasnoyarsk authorities to
put in place new smart bus stops. They are planned
to be installed in 2018 and will be fitted out with
safety and surveillance systems, mobile chargers,
wi-fi hotspots and other options. The Company
allocated some USD 120,000 (RUB 7 mln) to finance
the project.
World of New Opportunities. The Company
launched its World of New Opportunities charity
programme to encourage and promote sustainable
development of local communities, with the
programme primarily aiming to develop soft skills in
local communities, demonstrate and introduce new
social technologies, support and promote public
initiatives, and encourage cross-sector partnerships.
In 2017, after the commissioning of Bystrinsky GOK
in Zabaykalsky Krai, the World of New Opportunities
footprint expanded to cover local municipalities. In
Chita, the Company launched its Socially Responsible
Initiatives Competition, Arctic.PRO R&D marathon,
and School of Urban Competencies.
The World of New Opportunities programme has
three focus areas – Partnership, Innovations and
Development.
Благотворительная программа «Мир новых возможностей»
Расходы на благотворительность, млн долл. США
Financing of Charity Programmes // USD mln
2017
2016
2015
2014
2013
115
78.3
60.7
the Company completed the construction of
960 km long
a fibre optic communication line running through
a permafrost zone between Novy Urengoy and
Norilsk. The project investments amounting to
USD 43 mln.
P A R T N E R S H I P
This area focuses on supporting volunteer
initiatives of local activists, fostering new skills
and developing local expertise.
Key Partnership initiatives comprise:
• Academy for Social Partnership and Development (a series of
workshops on social project development, expertise building,
assessment of projects/programmes and monetisation of social
projects);
• Socially Responsible Initiatives Competition;
• Social Technologies Forum;
• Social Engineering Workshop;
• We Are the City! PicNick.
On the Company Day, Nornickel traditionally stages the
We Are the City! PicNick event in Norilsk, Monchegorsk
and Zapolyarny. PicNick is a festival "for a good cause"
organised by local activists and participants of the World
of New Opportunities programme (winners of the Socially
Responsible Initiatives Competition and socially minded
entrepreneurs) and Plant of Goodness corporate volunteer
programme. In 2017, it was staged as a street festival with a
projects fair, workshops, training sessions, etc.
All events organised by the Company served to raise
charity awareness in local communities and encourage
public-private partnerships. In 2017, the Socially
Responsible Initiatives Competition, which aims to support
public initiatives, received 489 project bids, 116 of which
were approved for funding. Grant funding amounted to
over USD 2 mln (RUB 125 mln).
In spring 2017, the Company initiated the We Are the
City! social technologies forum in Norilsk (Krasnoyarsk
Territory) and Zapolyarny (Murmansk Region) to bring
together local communities and tell them about new
trends and best practices in charity and volunteering,
and also share successes in solving social issues. In
the lead-up to the forum, locals got a chance to meet
a wide range of experts who shared their ideas on
upbringing children, finding a way in life, personal
development, etc. The forum venues were attended by
a total of 1,910 people.
The Company seeks to broaden local knowledge and
skills contributing to the build-up of regional expertise.
For the third year running, Nornickel organised a three-
day ‘social engineering’ workshop for local activists
that combined theoretical and practical aspects of
generating and implementing ideas. In three days,
138 participants from Norilsk, Dudinka, Monchegorsk
and Zapolyarny developed and staged 12 city events
reaching out to over 2,500 local residents.
Financing of Development and Renovation of Social
Infrastructure // USD mln
2017
2016
2015
2014
2013
64.9
45.8
83.7
• 120 •
>50 USD mln
allocated to reconstruct the civilian part
of Norilsk Airport
>2 USD mln
allocated as grant funding of the Socially
Responsible Initiatives Competition
489 bids
submitted, 116 projects approved
for funding
• 121 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Business overview
Corporate resposibility
HR and social policy
I N N O V A T I O N S
This area focuses on facilitating the
implementation of advanced technologies,
fostering R&D potential and encouraging
innovation in engineering. Its target audience
are schoolchildren, university students and
adult activists interested in science and frontier
technologies.
Key Innovations initiatives comprise:
• Arctic.PRO R&D marathon;
• Arctic Wave festival of R&D discoveries;
• FabLab R&D creativity laboratory;
• School of Urban Competencies.
The career guidance programme was built around
several areas of interest, including Biological
Engineering, Medicine and Healthcare, Taiga,
Digitalisation in Humanities, IT, Communications and
Aerospace Engineering, and Energy, Engineering and
Architecture, each featuring interactive presentations
made by local universities and businesses and
dedicated lectures enabling students to tap into real-
life experience, learn more from professionals, and
choose a personal development path for the next 5–10
years. About 15,000 students attended the two-day
festival.
In 2017, Nornickel’s School of Urban Competencies
won the first prize as the Best Charity Promotion
Programme (Project) at the 2017 Leaders of Corporate
Charity contest held by the Association of Sponsoring
Organisations. The School of Urban Competencies
aims to develop key social competencies in
schoolchildren, including in the realms of housing,
finance and career. Each year, at least 500 children
living in the Polar regions take part in the School’s
workshops and events.
Ist
prize
as the Best Charity Promotion Programme
(Project)
In autumn 2017, the Company staged Arctic Wave
R&D festivals in Norilsk and Monchegorsk to promote
research and development among the youth, support
creative engineering and innovative thinking among
schoolchildren, and demonstrate the latest scientific
achievements. Interactive sessions, contests and
scientific experiments of the largest R&D event in the
Polar Region were held under the motto "Augment
Reality". The festivals were attended by 4,500 children
and adults.
For the fourth year in a row, the Company organised
the Arctic.PRO R&D marathon aiming to encourage
R&D creativity, innovations in engineering and thirst
for knowledge among children and young people.
1,300 students aged 12 to 15 took part in the marathon.
20 more children attended the Winter R&D School in
Kazan.
For the third year running, the Company was a general
partner of the All-Russian Science Festival held by
Lomonosov Moscow State University. In Krasnoyarsk,
the festival took place in December 2017. It was the
first festival to feature the City of Discoveries. City
of Professions programme giving Krasnoyarsk high
school students an opportunity to take a career
guidance test, have their interests and skills analysed,
and receive career recommendations.
D E V E L O P M E N T
This area focuses on engaging active citizens
and SMEs to address social issues of local
communities using available business
technologies.
One of the Company's initiatives was to provide
training in Social Entrepreneurship. With assistance
and guidance from experienced coaches (active
businessmen), trainees are expected to develop
business plans and present them at the Investment
Session.
In 2017, Norilsk hosted the first Convention of Social
Entrepreneurs from the North, which provided a
platform to discuss trends, prospects and measures to
support social entrepreneurship in the Polar regions
and analyse relevant national and international best
practices. In the lead-up to the Convention, experts
and participants from other regions had an opportunity
to take part in the Entrepreneurial Norilsk quest to learn
more about social entrepreneurship in Norilsk.
RUB 11.5 mln
allocated in 2017 for social business projects
Government relations
The Company interacts with federal legislative and
executive authorities, and civil society institutions. The
Company is represented and expresses its interests in
26 committees, councils, commissions, expert teams,
and working groups established by government
bodies in association with the business community,
thus supporting socially important projects. Currently,
the Company mainly cooperates with the working
groups and councils of the State Commission for
Arctic Development and the Government Commission
on the Use of Natural Resources and Environmental
Protection. The Company also actively participates
in the activities of regional authorities’ expert boards
across its geographies, including the Governor’s
Council for Strategic Development and Priority Projects
of the Krasnoyarsk Territory.
Representatives of the Company take part in
parliamentary sessions and round table discussions
organised by the Federation Council and State Duma
of the Federal Assembly of the Russian Federation,
Government of the Russian Federation, Russian
Union of Industrialists and Entrepreneurs, Chamber
of Commerce and Industry of the Russian Federation,
Association of Managers (an interregional public
organisation), etc.
The Company's experts participate in draft regulation
discussions held by the Open Government and
by community councils of the federal executive
bodies, as well as in anti-corruption due diligence
and regulatory impact assessments. All of that helps
maintain a constructive dialogue with the government,
cut administrative red tape and improve the nation’s
business climate.
• 122 •
• 123 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate resposibility
Business overview
Спонсорство
Объем финансирования спортивных проектов, млн долл. США
Sponsorship
HR and social policy
Financing of Sporting Projects // USD mln
2017
2016
2015
2014
2013
21.9
21.0
17.1
International University Sports Federation
The Company will remain a Partner of
the International University Sports Federation
(FISU) until May 2019 and will continue to support
the development of international university sports
movement. The first-ever international forum of
the Federation – FISU Volunteer Leaders Academy –
was organised in July 2017 with the backing
from Nornickel and was attended by leaders of
volunteering associations from over 90 FISU member
states, as well as university sports delegations and
officials. The forum was held in the run-up to the
2019 Winter Universiade to facilitate communication
between volunteers and national university sports
federations, and share knowledge and experience in
organising large international sports events.
Rosa Khutor Ski Resort
XXIX International Winter Universiade in Krasnoyarsk
As a General Partner of the 2019 International
Winter Universiade in Krasnoyarsk, the Company
keeps on track with preparations for this upcoming
international sports event in accordance with the
agreement signed in 2015.
healthy lifestyles and mass sports, and enhance
living standards in the region.
According to current estimates, the Company will
spend nearly RUB 2 bn on the preparation and
holding of the 2019 Winter Universiade.
Promotion of the XXIX Winter Universiade will bring
about improvements in the local sports infrastructure
and the international image of the Krasnoyarsk
Territory and its capital, increase popularity of
One of the major commitments made by
the Company for the Universiade was to prepare the
Bobrovy Log Fun Park for alpine competitions.
In 2016–2019, Nornickel is going to invest USD
250.5 mln in the development of Rosa Khutor ski
resort as part of Russia’s Mass Sports Support
Programme. These funds will be used to transform
Olympic facilities into a year-round tourist attraction,
develop new ski pistes and lifts and build new
recreational and sports facilities. By way of
consideration, Nornickel was granted a minority
stake in the Rosa Khutor project.
Russian Olympic Committee
As a Partner of the Russian Olympic Committee and
the Russian Olympic team, Nornickel allocated over
RUB 1 bn to support youth and high performance
sports, including the implementation of Olympic
educational programmes developed by the Russian
International Olympic University.
Another area of cooperation between the Company
and the Russian Olympic Committee is the inclusion
of Nornickel’s regions of operation in the pan-
Russian Olympic Patrol project. In 2017, the Olympic
Patrol visited Krasnoyarsk and Norilsk, giving local
children a chance to meet renowned athletes who
shared their personal Olympic experiences, took
part in autograph and photo sessions, and held
workshops and fitness tests.
Football Union of Russia and Russia's national football team
In line with the sponsorship agreement, Nornickel
remains an official partner of the Football Union
of Russia and Russia's national football team.
The Company is also an exclusive partner of Russia’s
Football Union in the metals sector.
CSKA professional basketball club
Nornickel continues to provide support to Russia’s
most successful and well-known basketball club.
In 2017, CSKA came out as a winner in the VTB United
League and took part in the EuroLeague's Final Four.
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Corporate resposibility
HR and social policy
In 2017, Nornickel proceeded with the construction
of a new athletic training facility equipped with a
broadcasting system, expansion of the ski pistes,
development of an integrated security system,
upgrade of the artificial snow machinery, and
preparation of an ambulance helicopter pad.
On top of that, a volunteer team was formed by
employees of the Company and members of their
families. A dedicated training programme developed
by the Siberian Federal University was completed
by 95 volunteers who will seek to maximise popular
engagement in the run-up to the event.
In addition to the Bobrovy Log Fun Park, the
Company plans to establish a park along the
Bazaikha River with sports and playgrounds,
walkways, bike lanes, recreation areas, and a foot
and bike bridge across the Bazaikha to make the
park accessible for people with limited mobility. An
agreement to this effect was signed between the
Company and Krasnoyarsk municipal authorities.
With the backing from Nornickel, the Russian
International Olympic University and the Siberian
Federal University organised training for mid-level
and top-level managers and leaders of volunteer
teams involved in the Winter Universiade.
As a General Partner of the 2019 Winter Universiade,
Nornickel strives to ensure extensive promotion
to inform the public about the event.
In 2017, three NordStar aircraft were redesigned
to feature the symbols of the Universiade. They
made nearly 2,000 flights during the year and
carried over 265,000 passengers who learnt about
the upcoming event while on board. Information
about the Universiade is also available in the
NordStar inflight magazine.
Branded pavilions of the Company were constructed
in Moscow parks, with over 15,000 visitors receiving
information about the Universiade, Bobrovy Log
Fun Park and other sports-related projects through
games and interactive presentations. The pavilions
also served as a platform for cultural, educational
and sports events involving famous athletes,
sports workshops, flash mobs, and prize-winning
competitions for park visitors.
The Company also sponsored the 500 Days
until Universiade event that linked two cities –
Krasnoyarsk (Bobrovy Log Fun Park) and Moscow
(Lomonosov Moscow State University) – via
a teleconference.
U-Laika, the mascot of the upcoming university
games, travelled with the Russian cosmonauts
to the international space station and addressed
the audience of the Universiade from the orbit.
Norilsk Nickel Futsal Club
In 2016, the team and administrative personnel of
Norilsk Nickel Futsal Club moved to Norilsk. The team
takes part in the Russian Super League Championship
and Russian Futsal Cup. Relocation of the club gave
a powerful boost to the development of futsal in the
local community. The Russian Futsal Association
and MMC Norilsk Nickel work closely to ensure the
success of the Futsal to Polar Region Schools project.
As part of this nationwide initiative, the Club's futsal
players hold master classes for schoolchildren and
special workshops for trainers.
All Russian Federation of DanceSport and Acrobatic Rock'n'Roll
In 2017, Nornickel and the All Russian Federation
of DanceSport and Acrobatic Rock'n'Roll started
cooperation to support and promote these sports.
One of the partnership's objectives is to establish a
corporate acrobatic rock’n’roll club in Norilsk.
XIX World Festival of Youth and Students
Large international events should be viewed as
important milestones in the Russian tradition of
sponsorship and public-private partnerships. As part
of the 2017 World Festival of Youth and Students
(attended by nearly 25,000 people from 188
countries), the Company set up an Athletic Nornickel
venue which turned into a major point of attraction
during the Festival. The venue was divided into
two zones, the 2019 Winter Universiade General
Partner Pavilion and the CSKA streetball ground. The
Company's contribution to the Festival was highly
appreciated by the Russian President Vladimir Putin.
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Corporate resposibility
Occupational safety
Occupational safety
2 0 1 7 M I L E S T O N E
Bystrinsky GOK implemented an advanced
system for monitoring mining machinery and
personnel positioning designed to improve
mining operations safety, ensure better
coordination of rescue teams in emergencies,
and enhance production process management.
Occupational safety is one of the core
aspects of the Company’s corporate social
responsibility, with Nornickel seeking to ensure
zero workplace fatalities and reduce its lost
time injury frequency rate.
The Company’s Occupational Health and Safety
Policy gives precedence to the life and health
of employees over operational performance
while also demonstrating the management’s
commitment to creating a safe and healthy
environment and fostering sustainable
employee motivation for safe workplace
behaviour.
In 2017, Nornickel's Board of Directors approved
the Working Conditions Policy available on the
Company's corporate website
• 128 •
The Board’s Audit and Sustainable Development
Committee oversees occupational health and
safety matters, reviewing relevant reports by
the management on a quarterly basis. First Vice-
President – Chief Operating Officer is responsible for
the development of an action plan and enforcement
of compliance with the applicable occupational safety
requirements.
He also chairs the Company’s Health, Safety
and Environment Committee (HSE Committee)
charged with:
• improving health and safety performance at
the Company and its subsidiaries in Russia;
• toughening responsibility of Nornickel’s executives
for ensuring operational health and safety.
In 2017, the committee was engaged in considering
improvements to the existing health and safety
management system, as well as monitoring the
implementation of the scheduled activities aimed
at reducing injury rates and enhancing the system’s
effectiveness. To that end, a series of video conferences
and meetings were held with representatives of the
Company's branches and Russian subsidiaries.
All the production facilities have job- and operation-
specific regulations and guidelines containing
dedicated health and safety sections. Moreover,
Nornickel's collective bargaining agreements also have
occupational health and safety provisions. The Company
and most of its subsidiaries have joint health and safety
committees made up of management, employee and
trade union representatives.
As all maintenance and construction operations at the
existing production facilities are classified as high-
hazard, the contractors’ workers are required to attend
induction and target briefings on health and safety prior
to the commencement of works. Work permits also
contain information on occupational safety requirements
to be followed during the performance of works or in the
immediate run-up to them.
Corporate standards
The Company keeps improving its occupational
health and safety management system, including by
developing and implementing corporate standards.
The HSE Department monitors the implementation of
the standards across Nornickel’s branches and Russian
subsidiaries, including through second-party audits.
In 2017, a total of 38 audits were held in accordance
with the approved schedule.
As part of the Risk Control project (launched in 2016
to implement the STO KISM 121-211-2014 occupational
health and safety management standard), 2017 saw
further adjustments to the risk registers to be piloted
directly at the production sites, risk register-based
employee briefings, and drafting of data sheets for high
and material risks.
HSE certifications
Kola MMC and Norilsk Nickel Harjavalta – OHSAS 18001
(international certificate)
Polar Division and Pechengastroy – GOST R 54934-2012
(Russian standard identical to OHSAS 18001)
Norilsknickelremont – GOST 12.0.230-2007 (interstate standard
identical to ILO-OSH 2001)
Expenses on occupational safety initiatives
Expenses on occupational safety initiatives // USD mln
Expenses per employee // USD '000
127
1.6
2016
149
2.0
2017
176
2.2
2015
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Business overview
Corporate resposibility
Occupational safety
Following the certification of 484 conveyors at Polar
Division, work is underway to improve occupational
safety at the production facilities: fencing and drive
and tension stations were repaired, including the
installation of new blocking devices, replacement of
wiring and painting of equipment (in 2017, a total of
309 conveyors were fully repaired).
In 2017, pilot testing (assessment of knowledge and
skills) of managers in charge of mines and mining
facilities at Polar Division and Kola MMC was held
as part of a project to develop and roll out a model
of professional competencies for line managers of
mining facilities. Testing was used to assess the
competency model.
To benefit from the opportunities offered by
interactive safety briefings, comprehensive
programmes were put in place, enabling remote
briefings for employees and testing capabilities for
the key mining jobs.
External health and safety audit
In order to define priority paths for further
improvement of the corporate health and safety
management system and mitigate injury and accident
risks at Nornickel's key assets, DuPont Science and
Technologies has been assessing the level of the
Company's industrial safety culture every year since
2014.
Improvements in the safety culture metrics came
on the back of greater personnel involvement in
occupational health and safety, a sharper focus
on HSE on the part of the production facilities'
management (management training completed, a
team of in-house experts built) and enhancement of
risk assessment and management expertise.
In 2017, the Technological and Organisational Change
Management project was launched, resulting in:
• development and approval of a standard for
the Management of Technical, Technological,
Organisational and HR Changes;
• training sessions for process owners and change
leaders;
• implementation of a change management process
at pilot units;
• building of a team for the standard to be rolled out.
Special-purpose underground machinery across
Norilsk Nickel's mines was equipped with protective
covers (a total of 83 units of machinery).
In 2017, radio communications and positioning
systems were installed and commissioned
at Komsomolsky, Taimyrsky, Zapolyarny and
Kayerkansky mines of Polar Division and Severny
mine of Kola MMC.
The Company’s branches and Russian subsidiaries
have health and safety monitoring systems in place
with the following prevention and control functions:
• safety behaviour audits;
• multi-stage health and safety control;
• ad hoc health and safety inspections;
• on-the-spot health and safety inspections;
• comprehensive health and safety inspections.
• In addition, 2017 saw the launch of regular Risk
Hunting sessions which use visual reports for
information purposes.
Health and safety performance indicators
In 2017, the Company failed to improve its LTIFR1 due to
a group accident at Zapolyarny mine in July 2017, when
a methane explosion in the mine opening claimed the
lives of four people. An ad-hoc investigation followed
to enforce compliance with the safety rules set out
in the Special Requirements for Mining Operations
in Hazardous Gas Conditions. The investigation
gave the Company an opportunity to take a series of
organisational, technical and disciplinary actions to
prevent similar accidents going forward.
Investigation of production accidents and occupational
diseases is carried out in accordance with the Labour
Code of the Russian Federation, industry regulations, and
the Accident Investigation corporate standard. All fatal
accidents were reported on to the Board of Directors
and thoroughly investigated to avoid them in the future.
Nornickel's management views occupational safety and
zero workplace fatalities as its key strategic objective
and keeps running dedicated programmes to prevent
workplace accidents and injuries.
In 2017, the implementation of core occupational safety
standards, rollout of video information systems and
launch of the Risk Control project (development of risk
mitigation initiatives) resulted in a 46% decrease in the
number of fatal accidents.
Safety performance indicators
Indicators
FIFR2
LTIFR
Production-related accidents, including:
fatalities
lost-time injuries
Minor injuries
Accidents among the contractors' employees, including:
fatalities
2015
0.12
0.62
88
14
74
411
19
5
2016
0.11
0.35
56
13
43
719
18
8
2017
0.06
0.43
58
7
51
719
15
1
Safety culture as per the Bradley curve
2.1
2.3
2.5
1.4
2.63
+
8
6
%
Total number of accidents // people
106
88
64
56
58
Report of corporate social
responsibility for 2017
March 2014
March 2015
December 2015
November 2016
December 2017
2013
2014
2015
2016
2017
number of hours worked * 1,000,000).
1 LTIFR stands for Lost Time Injury Frequency Rate (LTIFR = non-fatal
LTIs / total number of hours worked * 1,000,000).
2 FIFR stands for Fatal Injury Frequency Rate (FIFR = FIs / total
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Business overview
Corporate resposibility
Environment
Environment
„
In 2017, the Company completed the first stage of its environmental programme, with Talnakh Concentrator
reaching the design processing capacity and recovery rates. According to our estimates, in 2017, given the
Nickel Plant shutdown in 2016, the total sulphur dioxide emissions reduced by 5% across Polar Division
and by 30–35% within the city of Norilsk. Last year we announced the launch of the second stage of our
environmental programme, which includes the Sulphur Project in Norilsk and optimisation of the smelting
capacity at Kola MMC. As a result, we plan to cut the sulphur dioxide emissions by 75% in Norilsk by 2023
and by 50% at Kola MMC as soon as in 2019”.
Sergey Dyachenko
First Vice President and Chief Operating Officer of Nornickel
2 0 1 7 M I L E S T O N E S
Nornickel successfully passed an independent recertification audit of its Corporate Integrated Quality
and Environmental Management System (CIMS). The auditors of Bureau Veritas Certification confirmed
CISM compliance with the ISO 14001:2015 and ISO 9001:2015 requirements and praised its strengths.
Kola MMC completed a project designed to dispose of saline effluent from nickel refining operations
in Monchegorsk preventing liquid nickel production waste from polluting the environment.
As 2017 marked the Year of Environment in Russia and 100th Anniversary of the Russian Nature Reserves,
Nornickel launched Let’s Do It, an environmental marathon organised across the Company’s footprint
as a corporate volunteering project.
At the end of 2017, Nornickel’s Polar Division
completed a project to redirect emissions from
slag and matte mixers and other aspiration gases
from low-height sources to Copper Plant’s flue-
gas stack DT-1. This created better conditions for
the dispersion of emissions and reduced ground-level
concentrations of pollutants in the residential area
of Norilsk.
Nornickel’s management team considers
environmental protection an integral part of
the production process. The Company complies with
the applicable laws and international agreements
and is committed to reducing emissions, on a phased
basis, and sustainable use of natural resources.
Nornickel’s environmental policy focuses on the
following priorities:
• phased reduction of pollutant air emissions,
primarily sulphur dioxide and solids;
• consistent reduction of wastewater discharges
into water bodies;
• development of waste disposal sites to reduce
human impact on the environment;
• zero pollution in maritime cargo transportation
and vessel operation;
• sustainable use of natural resources and
introduction of eco-friendly technologies;
• involvement with environmental public-private
partnership projects;
• conserving biodiversity across geographies of
our production operations.
Environmental
Management System
In 2017, the environmental management system (EMS)
continued to operate as part of the Corporate Integrated
Quality and Environmental Management System (CIMS).
This enabled the Company to harmonise environmental
and quality management initiatives with the operations
of other functions (such as production management,
finance, health and safety). With this approach, the
Company is better fit to streamline its environmental
efforts and enhance overall performance.
With the EMS, Nornickel benefits from:
• secured priority funding for environmental initiatives;
• higher environmental awareness among employees;
• better public perception;
• stronger competitive edge in the domestic and
international markets;
• demonstrating a global standard of environmental
compliance to customers and other stakeholders, and
winning the trust of customers who require the supplier
to have an effective EMS;
• additional opportunities for recognition in the
international context and in global markets;
• improved investment case.
Nornickel’s management
team considers
environmental protection
an integral part of
the production process.
–30%
reduction of sulfur dioxide emissions
within the city of Norilsk in 2017
Throughout 2017, the Company carried out internal
audits as part of the CIMS. In line with international
standards and Norilsk Nickel’s by-laws, internal
audits were conducted by specially trained and
competent personnel:
• 18 EMS internal audits were held at the Company’s
Head Office (as part of the CIMS internal audits);
• 66 internal audits were held at Polar Division, Polar
Transport Division and Murmansk Transport Division
(17, 25 and 24 audits, respectively);
• 40 EMS internal audits were held at Kola MMC
(as part of the CIMS internal audits).
To confirm compliance of the EMS with ISO 14001,
the Company engages Bureau Veritas Certification
(BVC) to conduct surveillance audits once a year
and recertification audits once every three years.
In November 2017, an EMS recertification audit
was held as part of the CIMS at the Company’s
Head Office in Moscow, Polar Division's production
sites in Norilsk, Polar Transport Division (Dudinka)
and Murmansk Transport Divisions (Murmansk).
18 EMS internal audits
were held at the Company’s Head Office in 2017
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Corporate resposibility
Environment
The audit confirmed that MMC Norilsk Nickel’s EMS
complies with ISO14001:2015 (Compliance Certificate
No. RU228136 QE-U of 4 December 2017). Based
on the audit findings, BVC issued recommendations
on potential improvement areas and highlighted the
overall strengths of the Company’s EMS.
In 2017, the EMS operated in accordance with the
new version of ISO 14001:2015. To comply with
this international standard, among other things, the
Company revised its Environmental Policy approved
by MMC Norilsk Nickel’s Board of Directors
(resolution No. GMK/33-pr-sd of 5 October 2017).
In line with ISO 14001 and principles of
environmental openness and transparency, the
Company cooperates with the legislative and
executive authorities, control and supervision
agencies, international and public organisations,
mass media, shareholders, investors, local
communities and other stakeholders.
Nornickel’s environmental
projects
High sulphur dioxide emissions resulting from
sulphide ore smelting is one of the Company’s key
environmental issues. Nornickel’s strategic plan
is to transform the Company into a cleaner and
environmentally safe enterprise. To this end, the
Company is gradually upgrading its production
capacities.
Расходы, млн долл. США
Expenses // USD mln
Current expenses
Environmental expenses
358
230
259
2017
2016
2015
2014
2013
143
128
84
442
373
387
Key environmental projects:
• Nickel Plant shutdown (completed in 2016);
• Sulphur Project (to be completed by 2023);
• transition to a concentrate briquetting technology
(completed in 2017) and retrofit of the Zapolyarny
Concentrator (to be completed by 2019).
Nickel Plant shutdown: what does it mean
for the environment?
The shutdown of Nickel Plant and transfer of
all nickel smelting operations to Nadezhda
Metallurgical Plant helped to upgrade the production
chain and improve environmental situation in the city
as a result of:
• discontinued emissions of air pollutants
(approximately 370 ktpa);
• eliminating 600 sources of air pollution, of which
458 had no purification facilities;
• closure of two wastewater discharge points
previously discharging approximately 37 kt of
pollutants per annum;
• discontinued generation of ca. 1,400 kt of
production waste, including coal processing
products, metallurgical slag, and ferrous cake;
• transfer of smelting emissions from Nickel Plant
337 ktpa by 2023. This will guarantee that Norilsk
air meets the air quality requirements regardless of
wind speed or direction.
As part of this project, Nadezhda Metallurgical
Plant is going to see construction of installations
for capturing sulphur-rich gases and production of
sulphuric acid (with subsequent neutralisation with
natural limestone and production of gypsum), as
well as principally new continuous copper matte
converting facilities built, whose emissions will also
be used for sulphuric acid production.
At Copper Plant, additional capacities for
elemental sulphur production are expected to
be commissioned, while converting operations
are going to be completely discontinued, which
will eliminate low-height emissions of low grade
converter gases that have a pronounced effect
on ground level concentrations of sulphur dioxide
during unfavourable weather conditions. The total
capacity for recovering sulphur from gases at
Copper Plant is expected to reach ca. 280 ktpa of
sulphur by 2022. The total CAPEX for the Sulphur
Project is estimated in the range of USD 2.5 bn.
to Nadezhda Metallurgical Plant, that is 7 km farther
away from the residential area;
Kola MMC
• 30% less exposure time as compared to how long
the air of Norilsk was exposed to Nickel Plant
emissions (approximately 265 hours in the course
of 73 days (based on 2015 data)).
Sulphur Project
Sulphur project is an umbrella term of the second
stage of Nornickel’s environmental programme
designed to reduce the total volume of sulphur
dioxide emissions at Polar Division by 75% down to
At Kola MMC, a separate action plan has been
developed and partially implemented to reduce
sulphur dioxide emissions from smelting operations
at the Nickel site by upgrading the equipment
(reconstruction of feeding and sealing systems
of ore-thermal furnaces, gas duct replacement,
preparation of furnace charge for smelting, etc.) and
lowering smelting shop utilisation while selling part
of the concentrate to third parties. This project is
expected to reduce sulphur dioxide emissions down
to 40 ktpa by 2019.
– 5%
reduction of sulphur dioxide emissions
across Polar Division in 2017
– 75%
reduction of sulphur dioxide emissions
in the Polar Division as a result of the
Sulphur project by 2023
– 9%
reduction of sulphur dioxide emissions
across Kola MMC in 2017
– 40 ktpa
reduction of sulphur dioxide emissions in the
Kola MMC by 2019
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Business overview
Corporate resposibility
Environment
Environmental impact across Norilsk Nickel’s Russian operations
Air
Air pollutant emissions across the Group // kt
Item
Amount of pollutants, across the Group, including:
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Solids
Other
Amount of pollutants, total for Polar Division, including:
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Solids
Other
Amount of pollutants, total for Kola MMC, including:
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Solids
Other
Amount of pollutants, total for other branches and subsidiaries, including:
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Solids
Other
2015
2,063.5
2,009.1
9.8
20.7
23.9
1,883.2
1,853.9
1.6
9.0
18.7
169.8
155.1
1.2
10.6
2.9
10.5
0.1
7.0
1.1
2.2
2016
1,936.4
1,878.0
10.1
14.3
34.1
1,787.6
1,758.2
1.5
6.2
21.7
132.9
119.7
1.1
7.4
4.7
16.0
0.1
7.5
0.7
7.7
2017
1,846.8
1,785.0
11.5
14.0
36.3
1,705.0
1,675.9
1.6
6.1
21.5
121.9
109.1
1.2
6.9
4.7
19.9
0.1
8.7
1.1
10.0
In 2017, gross emissions of Norilsk Nickel’s Russian
operations exceeded 1,847 kt, which is 90 kt lower
than in 2016 (–4.6% y-o-y). The reduction was due
to lower sulphur dioxide emissions (down 5.0%)
primarily resulting from the liquidated emission
sources at Nickel Plant and discontinued pellet
production at the pelletisation and roasting section
of Kola MMC's Zapolyarny site and other initiatives.
With the launch of a unit to produce sulphite/
bisulphite reagents in 2017, the Company is now
able to produce this reagent at a new facility using
state-of-the-art technologies. Besides, recycling
of off-gases helped to reduce sulphur dioxide
emissions by another 11.5 ktpa.
Sulphur dioxide emissions // kt
2,033
1,948
2,009
–11.2%
–5.0%
1,878
1,785
2013
2014
2015
2016
2017
In 2017, gross emissions of harmful pollutants in
general across Polar Division have dropped by
82.6 kt (down 4.6% y-o-y) mostly as a result of
a reduction in sulphur dioxide emissions by 82.3 kt
(down 4.7%). Lower sulphur dioxide emissions
are attributable to the shutdown of Nickel Plant
and migration of smelting operations to modern
technologies of Nadezhda Metallurgical Plant.
Analysis of actual emissions for 2017 demonstrated
that pollutant emissions at Polar Division as a whole
are 160,998 kt (down 8.6%) below the permitted
level (with NO rebased to NO2), including sulphur
dioxide emissions that are below the statutory
maximum as temporarily approved at 149 kt (down
8.2%).
In 2017, further steps were taken to reduce air
emissions with a view to gradually achieving
maximum permissible emission rates. The sulphur
projects rolled out at Copper Plant and Nadezhda
Metallurgical Plant are at different completion
stages.
For more details, please see Key investment projects.
p. 90
At Kola MMC's Zapolyarny site, a cold briquetting
technology was introduced in recent years instead
of pellet roasting. Two new briquetting lines are
now in operation, and the briquetting technology
is being fine-tuned to meet the required quality
standards. Sulphur dioxide emissions generated
by the production processes reduced from 4.8 kt
in 2016 to 1.6 kt in 2017.
In Monchegorsk, we are implementing the project –
Electrowinning of Chlorine Dissolved Tube Furnace
Nickel Powder for the Production Volume of 145
ktpa of Electrolytic Nickel. The project includes
reconstruction of cathode nickel facilities in the
tank-house to replace the existing electrorefining
technology (using soluble anodes) with
electrowinning of nickel from chlorine solutions. The
new technology will help to reduce air emissions
thanks to elimination of anode smelting.
Nornickel has completed its project to produce
3,000 t of electrolytic cobalt fully replacing flame-
synthesised cobalt production at the shut down
Nickel Plant in Norilsk.
In 2017, gross pollutant emissions from Kola MMC
amounted to 121.9 kt, which is 11 kt lower than in
2016 (down 8.3% y-o-y). Sulphur dioxide emissions
also reduced by almost 11 kt (down 8.9%), as well
as solid (dust) emissions dropping by 480 t (down
6.5%). Lower pollutant emissions as compared to
2016 are attributable mainly to the discontinued
pellet production at the Zapolyarny site, along
with increased production of sulphuric acid and
decreased content of sulphur in the products used
for smelting purposes.
Nornickel controls emissions during unfavourable
weather conditions to lower concentration of
pollutants in residential areas based on timely
weather forecasts. In the reporting period, a total
of 182 emission control cases were held at Polar
Division’s metallurgical operations. To inform the
local community of the environmental impact of
its metallurgical operations on the quality of air
in Norilsk, the Company maintains an automatic
toll-free enquiry service line offering environmental
forecasts for the city area to anyone dialling 007 or
420 007.
At the moment, Russian legislators are working
to introduce statutory requirements for greenhouse
gas (GHG) emissions reporting. The Company is
monitoring all legislative developments on this front
to ensure compliance with the regulations.
In accordance with the applicable guidelines
and regulations, Nornickel has assessed its GHG
emissions. Based on the current estimates, the
Company emits around 10 mtpa of GHG1 (10,031 kt in
2016). In addition, in 2017, the Company reported, on
a voluntary basis, its GHG emissions to the Russian
Ministry of Natural Resources and Environment.
Solid emissions // kt
23.1
20.6
20.7
–2.0%
14.3
14.0
2013
2014
2015
2016
2017
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Business overview
Corporate resposibility
Environment
Water
Nornickel uses a closed water circuit at its mining and
metals operations. In general, 85% of all water used
by the Company is recycled and reused.
All sources of water used by the Company are subject
to government-approved surveillance programmes
for water and water protection zones.
Pollutants discharged in wastewater amounted to
217 kt, which is 24 kt more than in 2016 (up 12%).
The increase was caused by a natural inflow of
snow melt and rain water, large-scale processing
of metal-containing feedstock and ramping up
of pyrometallurgical capacities at Nadezhda
Metallurgical Plant after the shutdown of Nickel Plant.
In 2017, the Company continued to work on reducing
discharges by gradually achieving the approved limits
on the back of:
• optimised water cycle at Polar Division's
concentration facilities;
• efforts made to purify production wastewater in
the combined storm water collector and utility
tunnel of Nadezhda Metallurgical Plant, as well as
production wastewater from Lebyazhye tailings pit
at Norilsk Concentrator;
• technologies developed to treat mine water at some
mines;
• completion of pre-commissioning stage at the
cement plant to implement a closed water circuit
and local treatment facilities.
Monchegorsk site received a treatment facility for
saline effluent from nickel refining operations for a
more integrated treatment of industrial effluents. This
technology is unique for Russia, as chemical agents,
specifically boric acid, flow back to the production
circuit. So the Company produces sodium sulphate
and chloride instead of harmful waste. The resulting
steam and condensate are then reused in the
nickel tank-house to heat solutions, operate heat
exchangers. At Zapolyarny site, work is in progress
to design a mining water treatment plant for Severny-
Gluboky Mine.
Water consumption
Water used // m cu m
Water re-used // %
1,348
92
1,418
92
1,421
93
1,464
86
1,342
85
2013
2014
2015
2016
2017
Wastewater discharges // mln cubic meters
Insufficiently treated
Untreated
Treated to standard quality
Standard clean
28
30
30
31
30
2017
2016
2015
2014
2013
34
27
30
26
26
7
79
5
82
6
77
4
84
2
88
148
144
140
146
146
1 The Group's direct GHG emissions were stated based on the earlier estimates (ca. 10 mt of CO2 equivalent) made as part of a project to pilot the Guidelines and
Instructions approved by Order of the Russian Ministry of Natural Resources No. 300 dated 30 June 2016. The quantitative estimates include carbon dioxide (CO2 )
and methane (СН4 ) emissions only. Pursuant to the above guidelines and instructions, reporting of other types of GHG emitted by the Company's facilities is not
required. Indirect energy-related GHG emissions were not assessed by the Company. There are currently no binding legal requirements in place on reporting GHG
emissions, including the indirect energy-related ones.
In 2017, Kola MMC
received a treatment
facility for saline
effluent.
Production waste
For more details on the
modernization of the Kola MMC
For more details in an interview
with the General Director of
Kola MMC
Norilsk Nickel’s waste management efforts
seek to ensure the repeated use of waste in its
production cycle along with meeting statutory waste
disposal limits. In 2017, the Company generated
approximately 32 mt of production and consumption
waste, and around 96% of such waste is deemed
virtually non-hazardous for the environment and
classified as hazard class 5 waste. This is mostly
waste from the mining and smelting operations
(rock and overburden, tailings, and metallurgical
slags). Nearly 65% of all waste generated across the
Company’s operations in 2017 was reused, with the
rest of waste disposed of at special facilities.
For safe waste disposal, the Company completed
the construction of a new tailings pit for Talnakh
Concentrator, 6 km farther to the north-west of the
Talnakh District. The facility was built using the most
advanced technologies to reduce environmental
impact.
Nornickel has designed a new waste dump for
industrial waste generated by Polar Division that
leverages environmentally safe technologies to
dispose of waste of hazard classes 3–5. The site
selected for the waste dump is located 2 km south
of Nadezhda Metallurgical Plant site, at a significant
distance from the residential areas of Norilsk.
The Company continues reusing waste for
preparation of compounds to fill mined-out spaces
(granulated slag from melting of non-ferrous metals,
overburden and hard rocks, mill tailings) and as flux
for melting of metal in smelting furnaces.
In 2017, the Company’s waste disposal did not
exceed the limits. Waste is mostly reused in the
processes related to the extraction of ore mineral
resources, including crushing, backfilling of
mined-out areas and pits, and construction and
strengthening of tailings pits.
The Company’s waste management efforts are
focused on the following:
• development of waste disposal sites to reduce
human impact on the environment;
• waste reuse maximisation;
• reclamation of disturbed areas;
• landscaping and improvement projects.
Waste generation by hazard class // kt
Hazard class
Hazard class 5
Hazard class 4
Hazard class 3
Hazard class 2
Hazard class 1
Total
2016
32,118.4
1,113.5
29.9
5.8
0.07
33,267.7
2017
30,721.8
1,189.9
12.7
2.4
0.06
31,926.9
• 138 •
• 139 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
Environment
Environmental impact across
Norilsk Nickel’s foreign operations
Norilsk Nickel Harjavalta
Norilsk Nickel Harjavalta has all the necessary
environmental permits and operates a certified
integrated management system that meets
the requirements of ISO 9001, ISO 14001
and OHSAS 18001.
2–) and ammonia ions (NH4
Norilsk Nickel Harjavalta’s main environmental
impact consists in the emissions of ammonia (NH3)
and nickel (Ni), and discharges of nickel, sulphates
+). In 2017, Norilsk
(SO4
Nickel Harjavalta met all permit requirements for
emissions, discharges and waste disposal volumes.
Lower (by 1.5 kt) waste volumes are a result of
switching to the Company’s feedstock that is less
contaminated with impurities as compared to third
party materials.
Environmental impact metrics of Norilsk Nickel Harjavalta
Item
Industrial wastewater, '000 cu m
Pollutants in industrial wastewater, t
Ni
2–
SO4
NH4
+ (rebased to nitrogen)
Total water consumption, mln cubic meters
Total air pollutant emissions, t
Ni
NH3
Waste generation, kt
Waste disposal, kt
Norilsk Nickel Nkomati
2015
728
0.4
20,051
36.0
10.4
1.7
70
16.5
15.7
2016
771
0.4
22,457
49.5
10
1.6
70
7.0
0.8
2017
899
0.5
25,853
60.3
11.1
1.7
69
5.5
0.8
The company is required to comply with both national
environmental regulations and Norilsk Nickel Group's
corporate standards. Norilsk Nickel Nkomati pays
close attention to environmental safety, is certified
and regularly audited for compliance with ISO 14001.
The main reasons behind significantly lower
consumption of fresh water in 2017 was the use of
collected rain water. Waste generation reduced due
to the disposal of industrial rubber items and scrap
metals.
Environmental impact metrics of Norilsk Nickel Nkomati
Item
Total water consumption, mln cubic meters
Waste generation, t
Waste disposal, t
Environmental expenditures, USD mln
2015
0.088
1,386
634
0.57
2016
0.3327
921
1,611
0.42
2017
0.0636
431
845
0.27
Biodiversity conservation
2 0 1 7 M I L E S T O N E S
Nornickel acquired 235,000 salmon fingerlings and released them into the Umba River together with the Basin Authority
for Fisheries and Conservation of Aquatic Biological Resources (Glavrybvod). By helping to recover the population of the
Atlantic salmon, the Company makes up for its environmental impact. In addition to that, Nornickel provided assistance
in releasing 316,000 sturgeon fingerlings into the Yenisei River. This was the largest project on releasing valuable fish
species in the Company’s history.
As part of the Year of the Environment, Nornickel has signed the Cooperation Agreement with the Murmansk Region to
support a number of projects in the nature park of the Rybachy and Sredny Peninsulas. The Company will allocate over
RUB 7.5 mln to create nature trails and buy security equipment.
Zabaykalsky Krai Government and Nornickel signed the Cooperation Agreement to develop the Relict Oaks State
Reserve located in the region. The amount of funding for the project stands at RUB 10 mln.
Experts keep monitoring the environmental impact of
Nornickel’s production sites on the nature reserves’
ecosystems. Long-term observation results show that
environmental conditions are improving each year.
“Scientists report growing populations of plants and
animals along with the emergence of new species,”
said Alexander Tyukin, head of Kola MMC’s R&D and
Environmental Safety Department. – We have just
discovered a rare plant species, a northern orchid
that has not been seen since 2005. It speaks for
itself.”
Cooperation with nature reserves
For over a decade now, Nornickel annually provided
hundreds of millions of roubles to the nature reserves
adjacent to the Company’s production facilities on
the Taimyr and Kola Peninsulas for the purpose of
preserving the unique Arctic environment.
This is in line with Nornickel’s strategy set to embrace
green technologies in the next five years through
a new investment cycle to secure sustainable
development.
Kola MMC’s sites are only 10–15 km away from the
Pasvik and the Lapland Nature Reserves (Murmansk
Region). The Company’s Polar Division is located
some 80–100 km away from the buffer zone of the
Putoransky Reserve (Krasnoyarsk Territory).
Nornickel annually provided
hundreds of millions of
roubles to the nature
reserves.
• 140 •
• 141 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
Environment
T H E P U T O R A N S K Y
S T A T E N A T U R E
R E S E R V E
(Taimyr Peninsula)
Norilsk
Area
1,887 thousand ha
T H E P A S V I K
N A T U R E R E S E R V E
(Kola Peninsula)
Nickel
Area
14.6 thousand ha
In 2017, the Putoransky State Nature Reserve kept implementing projects selected under Nornickel’s World
of New Opportunities charitable programme.
Save the Bighorn Together
Norilsk Lakes to Norilsk People
An ambitious programme to protect the endangered
species of the bighorn found in the Putoranа Plateau
only and listed on Russia’s Red Data Book. The
Company provides funding for volunteer training at
the Surveillance School, ground research to collect
data on the bighorn population, and Putorany.
Bighorn. People festival of friends. The project’s
funding totals some USD 86,000 (RUB 4.99 mln).
Norilsk Lakes to Norilsk People project implemented
since 2013 seeks to preserve the Big Norilsk
Lakes, a unique ecosystem of subarctic mountains.
During that time, Nornickel provided funding for the
recreational fisheries in the upper part of the Pyasina
River basin, tourist and trekking infrastructure,
construction of a camping station at Lama Lake and
a base station at Sobachye Lake. In 2017, as part of
the project, the Company allocated over USD 17,000
(around RUB 1 mln) to finance an environmental and
educational summer camp at Lake Lama for students
of the volunteer school.
• 142 •
The Pasvik Nature Reserve is home to rare species
listed on the international and Russia’s Red Data
Books. Since 2006, as part of the contract signed
with Kola MMC, the Pasvik Nature Reserve has been
carrying out an ecological assessment of the natural
environment in the area of Pechenganickel Plant
(Zapolyarny, Nickel and their suburbs, including the
Pasvik State Nature Reserve), and developing a long-
term environmental monitoring programme.
Nornickel supports scientific research carried out by
the nature reserve, its efforts to protect natural and
cultural heritage, promote tourism and environmental
education. The Company helps establish an
international natural historical open-air museum on the
Varlam island. Nornickel sponsored the book called
The Varlam Island – the Pearl of Pasvik.
Key projects of the Paskvik Nature Reserve supported by Nornickel
Visitor centre for tourists and researchers
Young scientist training course
The visitor centre of the Pasvik Reserve featuring a
permanent environmental exposition was officially
opened in January 2017 in the settlement of Nickel,
Pechengsky District. The visitor centre hosts ecological
seminars and conferences, serving as a modern
platform for discussing international cooperation
issues. In 2011–2016, the Company allocated over USD
1.3 mln (RUB 77 mln) to the project. The visitor centre
currently hosts ecological lessons for schoolchildren,
exhibitions, lectures, discussions, and forums of various
international organisations.
Over the last ten years, the reserve serves as a base
for a summer camp for schoolchildren involved in
various research projects (study of soil and water
composition, bird ringing, etc.). The project’s annual
funding is over USD 17,000 (some RUB 1 mln).
For more details on other projects of World of New
Opportunities programme
p. 120
• 143 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Business overview
Corporate resposibility
Environment
THE LAPLAND STATE
NATURE BIOSPHERE
RESERVE
(Kola Peninsula)
Monchegorsk
Area
278 thousand ha
The Lapland State Nature Biosphere Reserve is one
of the largest protected areas in Europe covering
278,000 ha. Established to save the wild reindeer
from extinction, it now boasts over 1,000 reindeer,
the largest reindeer herd in the Northern Europe.
The European beaver population has also been
successfully restored. Since 2002, the Lapland
Biosphere Reserve has entered into contracts to
reclaim disturbed natural environment in the areas
affected by multi-year emissions from Severonickel
Plant, and monitor areas adjacent to Monchegorsk
site and the Lapland Biosphere Reserve. The data
obtained during a scientific research provided a
basis for the subsequent contractual work to reclaim
disturbed lands, and bring about sanitary and fire
protection improvements in the forest areas. The
Company also provided financial aid for the Lapland
Biosphere Reserve to make a new nature trail and
publish books about Oleg Semyonov-Tyan-Shansky
and Herman Kreps, the reserve founders. In 2017, the
total funding of the nature reserve projects exceeded
USD 195,000 (RUB 11.4 mln).
• 144 •
Environmental recovery programmes
Aquatic bioresources
In 2017, to compensate for the damage done
to water bodies of the Yenisey River during the
implementation of the Talnakh Concentrator
upgrade and retrofit project and sand production at
the Seredysh Island deposit, the Company grew and
released over 316,000 Siberian sturgeon fingerlings
into the Yenisey River. To compensate for damage
to water bodies during the construction of a transfer
terminal in Murmansk, in 2017, Nornickel released
over 235,000 salmon fingerlings into the Northern
Fishery Basin.
a pilot project to restore damaged land adjacent
to the Company’s site together with the Kola
Science Centre of the Russian Academy of
Sciences. In 2017, the value of the contract signed
with the Lapland Biosphere Reserve was some
USD 60,000 (RUB 3.5 mln).
In summer 2017, the Company joined in the Norilsk
municipal authorities’ effort to revamp the city’s public
spaces doing some urban greening and sanitary
improvements. The Company also contributed to the
roadside clean-up, water body protection, waterfront
landscaping and facelift of several camping sites.
Landscaping
Sanitary clean-up
In 2017, Nornickel launched a pilot project utilising
new landscaping technologies to establish
sustainable grass cover in the disturbed areas.
Perennial grasses and mixed grass crops were
planted on the experimental 1 ha land plot close
toNadezhda Metallurgical Plant using a hydroseeding
technology and complex additives adapted to
northern conditions. The project’s financing amounted
to some USD 43,000 (RUB 2.5 mln).
Hydroseeding has a number of advantages over
traditional planting method, namely quick landscaping
and the possibility to cover remote locations, which is
especially useful for slopes and hard-to-reach areas.
Grass can be sown on virtually any surface featuring
a difficult terrain. Experiments proved successful even
for such technogenic surfaces as slag and concrete.
The Company regularly allocates funds for
landscaping in the regions of operation. Since
2003, Kola MMC, upon recommendation from the
nature reserves, has rehabilitated 100 ha of area
in Monchegorsk, Zapolyarny towns and Nickel
settlement. Kola MMC has had approximately
one million trees and bushes planted, including
In 2017, Nornickel carried out a clean-up, land
improvement, revamp of warehouses, and
improvement of territories assigned to the Company
by the order of the Dudinka Administration. Nornickel
also carried out post-flooding recovery to clean the
coasts and water protection zones along the water
bodies.
Environmental education
Other environmental developments in 2016 included
the Ecological Marathon launched by the Company
in Norilsk as part of its Plant of Goodness corporate
volunteer programme.
In 2017, Norilsk Nickel’s total expenditure in this area
exceeded USD 7,000. The Company’s volunteer
teams polled over 900 respondents about their
ecological habits, produced about 50 items from
recycled materials, designed 26 environmental
education posters, implemented clean-up initiatives
in the tundra and Dolgoye Lake, and ran a campaign
to care about trees planted in 2016 at the Zapolyarnik
stadium. Twelve nest boxes were put up on trees
during the trip to Lake Lama.
Intermediate energy consumption by the Group
Indicator
Electric power, TJ, including:
Electric power generated by the Company’s
enterprises from renewable energy sources
(HPPs), TJ
Heating and cooling energy, TJ
Steam, low-grade heat, TJ
Total
2015
42,943
17,027
25,721
8,692
77,356
2015, %
2016
2016, %
2017
2017, %
32,530
11,856
29,888
2,803
65,221
50
36
46
4
32,355
12,175
24,101
5,507
52
38
39
9
100
61,963
100
56
40
33
11
100
• 145 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Corporate resposibility
Environment
In October 2017, Nornickel initiated a seminar for
citizens on environmental volunteering under the
Plant of Goodness programme. The seminar provided
valuable ideas on how to plan an environmental
campaign, gain investor support and join volunteering
events.
Energy efficiency
Nornickel’s major production assets are located
beyond the Arctic Circle where the winter lasts eight
months a year. It is therefore critical for the Group
to ensure reliable and high-quality power supply to
its enterprises and population in the regions where
it operates.
In 2017, the Company implemented a number of
organisational arrangements and upgrades of its key
power equipment as part of the Energy Saving and
Energy Efficiency Programme.
These initiatives helped achieve savings of 100,116
tonnes of reference fuel (units) for CHPPs, 44.867 mln
kWh of electricity for internal needs and 177,732 Gcal
of heat against the targets.
In 2017, per unit fuel consumption at CHPPs
decreased to 281.4 g/kWh, down by 13.9 g/kWh
against the annual budget targets, 27.7 g/kWh vs
2016 and 9.7 g/kWh vs 2015.
Gas producers saved 17.574 mln cubic meters of
natural gas in 2017 by cutting gas consumption for
own technological needs and reducing technological
losses during transportation.
The Company also generates electric power
from renewable energy sources at NTEK’s Ust-
Khantayskaya and Kureyskaya HPPs (installed
capacity of 441 MW and 600 MW, respectively).
In 2017, the share of renewable energy stood at 38%
for Nornickel and 44% for its Polar Division.
In 2018–2020, the Company will continue to
renovate and upgrade the main power equipment
and transmission devices along with waste water
treatment systems.
38%
the share of renewable energy
in 2017
Energy consumption by Norilsk Nickel1
Type of energy resource
Heat power, Gcal
Electric power, thousand kWh
Motor fuel, t
Diesel fuel, t
Heating oil, t
Natural gas, thousand cubic meters
Coal, t
Kerosene and aviation fuel, t
2016
2017
Consumption
in volume terms
Consumption,
RUB ’000
Consumption
in volume terms
Consumption,
RUB ’000
5,587,849
5,158,974
344
58,671
40,479
545,712
49,760
115
4,702,584
5,272,779
17,797
2,657,599
582,489
1,363,718
20,612
5,008
4,737,249
4,489,188
268
52,684
40,360
497,141
17,359
124
4,393,019
4,854,566
15,348
2,730,795
566,985
1,458,756
4,204
6,122
1 No other types of energy resources were used besides those specified in the table
• 146 •
Financial overview (MD&A)
„
In 2017, Nornickel delivered excellent financial
results, with revenue increasing by 11% to USD
9 bn and EBITDA margin holding at 44%, one
of the best results among global mining peers.
On top of that, we succeeded in significantly
improving the Company's debt profile and
raising debt financing at record low interest
rates, which will help us save over USD 150
mln per annum in interest expenses.
In 2017, we launched highly ambitious
programmes to improve labour productivity.
Furthermore, automation of our IT and
production processes continues at a fast pace,
while all the support functions are currently
being transferred to and consolidated under
the Shared Services Centre in Saratov. Also,
we commissioned a fibre optic communication
line in Norilsk, which will enable us to
smoothly implement SAP ERP systems, while
also providing the city’s residents with access
to high-speed internet.
In 2018, we plan to release over USD 1 bn of
our working capital and reduce our leverage
(net debt to EBITDA ratio) to below 1.5x by
the year-end. We also confirm our CAPEX
guidance at ca. RUB 2 bn, including USD
200 mln of investments to complete the
construction of Bystrinsky GOK.”
Sergey Malyshev
The Company's Senior Vice President and Chief
Financial Officer
2017 Highlights
• Consolidated revenue increased 11% y-o-y to USD 9.1 billion on the
back of higher realized metal prices;
• EBITDA was up 2% y-o-y to a robust USD 4 billion owing to higher
metal revenue that was partly negatively offset by RUB appreciation
against USD, one-off increase in social-related expenses and
accumulation of palladium stock to deliver under the 2018 contracts;
• EBITDA margin amounted to an industry-leading level of 44%;
• CAPEX increased by 17% y-o-y to USD 2 billion as Bystrynsky copper
project (Chita) was in its final construction stage and the Bystrinsky
concentrator was launched into hot commissioning at the end of 2017,
while the upgrade of nickel refining facilities at Kola entered into
active construction;
• Reported net debt/EBITDA ratio increased to 2.1x as of the end of
2017 driven mostly by the payment of dividend for 2016 and interim
dividend for 2017 and one-off increase of working capital;
• Net debt/EBITDA ratio for the purposes of calculating final dividend
for 2017 amounted to 1.88x;
• Major refinancing activities were completed in 2017, with new funding
raised at record low interest rates, enabling a reduction of interest
cost by over USD 150 million;
• In October 2017, the Company paid interim dividend for 1H2017 in the
amount of RUB 224.2 per ordinary share (approximately USD 3.8 per
ADR);
• In December 2017, Nornickel signed a 5-year USD 2.5 billion
syndicated facility agreement with a group of international banks at
Libor +1.5%.
Recent Developments
On January 30, 2018 Moody’s rating agency has raised Nornickel
credit rating to the investment grade level “Baa3” and changed the
outlook from “Stable” to “Positive”. Therefore, Nornickel currently
has investment grade credit ratings from all three international rating
agencies Fitch, Moody’s and S&P Global.
• 147 •
• 147 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Key Corporate Highlights
Cash operating costs
Revenue
EBITDA¹
EBITDA margin
Net profit
Capital expenditures
Free cash flow²
Net working capital²
Net debt²
Net debt, normalized for the purpose of dividend calculation3
Net debt/12M EBITDA
Net debt/12M EBITDA for dividends calculation
Dividends paid per share (USD)4
Key Segmental Highlights5
USD million (unless stated otherwise)
Revenue
Group GMK
Group KGMK
NN Harjavalta
Other metallurgical
Other non-metallurgical
Eliminations
Consolidated EBITDA
Group GMK
Group KGMK
NN Harjavalta
Other metallurgical
Other non-metallurgical
Eliminations
Unallocated
EBITDA margin
Group GMK
Group KGMK
NN Harjavalta
Other metallurgical
Other non-metallurgical
2017
9,146
3,995
44%
2,123
2,002
(173)
2,149
8,201
7,495
2.1x
1.88x
18.8
2017
9,146
7,671
888
840
141
1,266
(1,660)
3,995
4,701
169
84
(53)
114
(377)
(643)
44%
61%
19%
10%
(38%)
9%
2016
8,259
3,899
47%
2,531
1,714
1,591
455
4530
n.a.
1.2x
n.a.
7.8
2016
8,259
6,194
664
727
84
1,699
(1,109)
3,899
3,883
117
45
(11)
119
112
(366)
47%
63%
18%
6%
(13%)
7%
Change,%
11%
2%
(3 p.p.)
(16%)
17%
(111%)
5x
81%
n.a.
0.9x
n.a.
141%
Change,%
11%
24%
34%
16%
68%
(25%)
50%
2%
21%
44%
87%
5x
(4%)
n.a.
76%
(3 p.p.)
(2 p.p.)
1 p.p.
4 p.p.
(25 p.p.)
2 p.p.
1 A non-IFRS measure, for the calculation see the notes below.
2 A non-IFRS measure, for the calculation see an analytical review document ("Data book") available in conjunction with Consolidated IFRS Financial Results on the
Company’s web site.
3 Normalized on interim dividends and deposits with maturity of more than 90 days.
4 Paid during the current period.
5 Segments are defined in the consolidated financial statements.
Revenue
In 2017, revenue of Group GMK segment increased
by 24% to USD 7,671 million. This was primarily
driven by higher realized metal prices and transition
of NN Harjavalta to the Company’s own Russian
feed. This positive effect was partly compensated by
lower sales volume in 2017 owing to accumulation of
palladium in 2017 and release of stock in 2016.
In 2017, EBITDA of Group GMK segment increased
by 21% to USD 4,701 million owing primarily to higher
realized metal prices partly offset by lower sales
volume in 2017 owing to accumulation of stock in
2017 due to Palladium fund activities and higher
base effect of release of stock in 2016 as well as
increased cash costs on the back of the Russian
rouble appreciation against US Dollar.
The revenue of Group KGMK segment increased by
34% to USD 888 million mainly due to the increase
in revenue from processing of the feed coming from
Polar division.
EBITDA of Group KGMK segment increased by 44%
to USD 169 million primarily owing to the increased
sales volume and higher margin of tolling operations.
Revenue of NN Harjavalta increased by 16% to
USD 840 million. This was primarily driven by
higher realized metal prices and increased metal
production from the Company’s own Russian feed.
EBITDA of NN Harjavalta increased by 87% to USD
84 million primarily due to higher revenue and
processing the Company’s own Russian feed instead
of low-margin third parties feed.
Revenue of Other metallurgical segment increased
by 68% to USD 141 million. This was primarily driven
by higher realized metal prices.
EBITDA of Other metallurgical segment decreased
five times to negative USD 53 million primarily due
to one-off expenses.
Revenue of Other non-metallurgical segment
decreased by 25% to USD 1,266 million. This
was driven primarily by changes of inter-segment
revenue streams driven by transition to Group’s
own Russian feed and accumulation of metal stock
in 2017.
EBITDA of Other non-metallurgical segment
decreased by USD 5 million to USD 114 million.
EBITDA of Unallocated segment decreased by
76% to negative USD 643 million primarily due to
increased social expenses of the Group.
Cash Operating Costs
METAL SALES
Group
Nickel, thousand tons1
from own Russian feed
from 3d parties feed
Copper, thousand tons1
from own Russian feed
from 3d parties feed
Palladium, koz1
from own Russian feed
from 3d parties feed
Platinum, koz1
from own Russian feed
from 3d parties feed
2017
2016
Change,%
215
206
9
368
365
3
2,405
2,353
52
657
639
18
271
229
42
374
369
5
2,779
2,758
21
669
661
8
(21%)
(10%)
(79%)
(2%)
(1%)
(40%)
(13%)
(15%)
148%
(2%)
(3%)
125%
• 148 •
• 149 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Gold, koz1
Rhodium, koz1
Cobalt, thousand tons1
Silver, koz1
Semi-products, nickel, thousand tons2
Semi-products, copper, thousand tons2
Semi-products, palladium, koz2
Semi-products, platinum, koz2
Semi-products, gold, koz2
Semi-products, silver, koz2
AVERAGE REALIZED PRICES OF METALS PRODUCED BY NORILSK NICKEL
Nickel (USD per tonne)
Copper (USD per tonne)
Palladium (USD per oz)
Platinum (USD per oz)
Cobalt (USD per tonne)
Gold (USD per oz)
Rhodium (USD per oz)
Revenue, USD million
Nickel
Copper
Palladium
Platinum
Semi-products
Other metals
Revenue from metal sales
Revenue from other sales
Total revenue
2017
141
68
3
2,469
17
28
138
48
8
528
10,704
6,202
858
949
41,977
1,259
1,085
2,304
2,281
2,346
623
424
437
8,415
731
9,146
2016
155
85
5
2,565
13
15
115
43
9
148
9,701
4,911
614
977
22,962
1,254
668
2,625
1,839
1,888
654
216
424
7,646
613
8,259
Change,%
(9%)
(20%)
(40%)
(4%)
31%
87%
20%
12%
(11%)
4x
10%
26%
40%
(3%)
83%
0%
62%
(12%)
24%
24%
(5%)
96%
3%
10%
19%
11%
Revenue from metals
Ni
Nickel
Nickel sales accounted for 27% of the Group’s total
metal revenue in 2017 down from 34% in 2016. The
decrease by 7 p.p. was driven by the reduction
of sales volumes following a decrease of metal
production from third party feed and stronger
performance of palladium and copper relative to
nickel price.
In 2017, nickel revenue decreased by 12% (or USD
321 million) to USD 2,304 million primarily due to
lower sales volumes (USD 593 million) owing to
decrease of Nickel production from third parties feed
and the higher base effect as temporary metal stock
was sold in 2016, which was partly offset positively
by higher nickel price (USD 267 million).
Additional USD 5 million to nickel revenue in 2017
was contributed by the re-sale of purchased metal to
fulfil the Company’s contractual obligations.
The average realized nickel price increased 10% to
USD 10,704 per tonne in 2017 from USD 9,701 per
tonne in 2016.
Sales volume of nickel produced by the Company
from its own Russian feed decreased by 10% (or 23
thousand tons) to 206 thousand tons. The decrease
was primarily driven by the sale of metal from a
temporary stock in 2016.
Sales volume of nickel produced from third parties
feed decreased by 79% in 2017 to 9 thousand
tons as Harjavalta started the processing of the
Company’s own Russian feed.
Cu Copper
In 2017, copper sales accounted for 27% of the
Group's total metal sales, increasing 24% (or USD
442 million) to USD 2,281 million primarily owing to
higher realized copper price (USD 483 million) that
was partly negatively offset by the decrease in sales
volume (USD 41 million).
The average realized copper price increased 26%
from USD 4,911 in 2016 to USD 6,202 per tonne in
2017.
Physical volume of copper sales from the Company’s
own Russian feed decreased by 1% (or 4 thousand
tons) to 365 thousand tons. The decrease owing to
the higher base effect as copper from temporary
metal stock was sold in 2016 was partly positively
offset by the copper sales, produced from
concentrate purchased from Rostec.
The volume of copper sales from purchased
semi-products decreased by 2 thousand tons to
3 thousand tons in 2017.
Pd Palladium
In 2017, palladium became the largest contributor
to the Group’s revenue, accounting for 28% of
the Group’s total metal revenue, up by 3 p.p. The
palladium revenue increased 24% (or USD 458
million) to USD 2,346 million. The positive impact
of higher realized price (USD 681 million) was partly
negatively offset by the reduction of sales volume
(USD 324 million) mainly owing to the higher base
effect as temporary metal stock was sold in 2016
and stock accumulation in 2017 in Palladium fund.
Additional USD 285 million to palladium revenue in
2017 was contributed by the re-sale of purchased
metal to fulfil the Company’s contractual obligations
(vs USD 184 million in 2016).
Pt
Platinum
In 2017, platinum sales accounted for 7% of the
Group’s total metal revenue and decreased by 5%
(or USD 31 million) to USD 623 million due to lower
volumes of platinum sales owing to the higher
base effect as metal stock was sold in 2016 (USD 11
million) and lower realized platinum price (USD 20
million) down 3% from USD 977 per oz in 2016 to
USD 949 per oz in 2017.
Other metals
In 2017, revenue from other metals increasing 3%
(or USD 13 million) to USD 437 million owing to the
increase in rhodium (up 30%) and cobalt (up 8%)
sales which was partly negatively offset by lower
gold (down 9%) and silver (down 5%) revenue.
1 All information is reported on the 100% basis, excluding sales of metals purchased from third parties.
2 Metal volumes represent metals contained in semi-products.
• 150 •
• 151 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Semi-products
Other sales
Labour
Third-party services
In 2017, semi-products revenue (primarily copper
cake and nickel concentrate) increased by USD 208
million (or 96%) to USD 424 million, and accounted
for 5% of the Group’s total metal revenue. This
increase was mainly driven by higher physical sales
to third parties instead of processing these semis at
the Company’s own refineries.
In 2017, other sales were up by 19% or USD 731 million
primarily owing to the Russian rouble appreciation
(USD 80 million) and revenue increase in real terms
driven by the increase of prices for services provided
to third parties (USD 13 million), and higher revenue
from transport and consumer services subsidiaries of
the Group, which was partly offset negatively by the
divestiture of non-core assets.
Cost of Metal Sales
Cost of metals sales
In 2017, the cost of metal sales increased by 9%
(or USD 335 million) to USD 3,968 million owing to:
• Increase in cash operating costs by 33%
(USD 965 million);
• Increase in depreciation charges by 38%
(USD 174 million);
• Change in metal inventories y-o-y (cost of metal
sales decrease by USD 804 million).
Cash operating costs
The negative effect of currencies appreciation
(RUB and ZAR) amounted to USD 312 million.
The inflationary growth of cash operating costs by
USD 115 million was exacerbated by an increase
in metal purchase costs (USD 346 million) and
increase of the mineral extraction tax (USD
83 million) resulting from the change in legislation
in 2017. Mineral extraction tax increased following
the cancellation of PGM export duties in September,
2016.
In 2017, total cash operating costs increased by 33%
(or USD 965 million) to USD 3,852 million.
Cash operating costs structure in 2017 and 2016 was
affected by consolidation of 50% of Nkomati joint
operation.
Cash operating costs
USD million
Labour
Purchases of metals for resale
Purchases of raw materials and semi-products
Materials and supplies
Mineral extraction tax and other levies
Third-party services
Electricity and heat energy
Fuel
Production costs related to joint operation
Transportation expenses
Sundry costs
Total cash operating costs
Depreciation and amortisation
(Increase)/decrease of metal inventories
Total cost of metal sales
• 152 •
2017
1,377
530
297
703
221
204
132
81
93
64
150
3,852
630
(514)
3,968
2016
1,145
184
292
520
122
170
101
60
79
71
143
2,887
456
290
3,633
Change,%
20%
188%
2%
35%
81%
20%
31%
35%
18%
(10%)
5%
33%
38%
n.a.
9%
In 2017, labour costs increased by 20% (or USD 231
million) to USD 1,377 million amounting to 36% of
the Group’s total cash operating costs driven by the
following:
• USD 162 million – cost increase owing to the Russian
rouble appreciation against US Dollar;
• USD 50 million – cost decrease following the
decrease of production staff headcount owing
primarily to the Nickel pant closure and ongoing
downstream reconfiguration program.
• USD 119 million – other increase in real terms
primarily driven by the indexation of RUB-
denominated salaries and wages.
Purchases of metals for resale
In 2017, expenses on the purchase of metals for
resale increased 3 times (or by USD 346 million) to
USD 530 million. Metal purchase increase is primarily
due to piling up metal stocks to meet additional
demand of the Company’s key clients, primarily
palladium.
Purchases of raw materials and semi-products
In 2017, expenses on the purchase of raw materials
and semi-products increased by 2% (or by USD 5
million) to USD 297 million driven by the following:
• USD 58 million – cost increase owing to higher semi-
products prices;
• USD 140 million – cost increase owing to the
processing of copper concentrate purchased from
Rostec;
• USD 82 million – cost increase owing to purchase of
semi-products from Nkomati for further resale to third
parties;
• USD 275 million – cost reduction resulting from the
decrease of purchased semi-products from third
parties for processing at NN Harjavalta as part of
ongoing downstream reconfiguration program.
Materials and supplies
In 2017, materials and supplies expenses increased by
35% (or USD 183 million) to USD 703 million driven by
the following:
• USD 62 million – negative effect of the Russian
rouble appreciation;
• USD 11 million – inflationary growth in materials and
supplies;
• USD 110 million – cost increase in line with the
ongoing downstream reconfiguration program.
In 2017, cost of third party services increased by 20%
(or USD 34 million) to USD 204 million.
The negative effect of the Russian rouble appreciation
amounted to USD 18 million.
The cost increase owing to higher volumes of repairs,
tolling services, and other production services (USD
37 million) was mostly offset by cost decrease due to
the termination of Nkomati concentrate processing
(USD 21 million).
Mineral extraction tax and other levies
In 2017, mineral extraction tax and other levies
increased by 81% (or USD 99 million) to USD 221
million.
The negative effect of the Russian rouble appreciation
amounted to USD 18 million.
Cash cost increase in real terms by USD 81 million
was primarily driven by the higher mineral extraction
tax resulting from the change in legislation (USD 83
million), resulting from cancellation of PGM export
duties in 2016 for metals, produced by the Company.
Сhange in mineral extraction tax rate in January 2017
was mostly compensated by cancellation of PGM
export duties in September 2016.
Electricity and heat energy
In 2017, electricity and heat energy expenses
increased by 31% (or USD 31 million) to USD 132 million
driven by the following:
• USD 10 million – negative effect of the Russian
rouble appreciation;
• USD 22 million – increase in expenses owing to
higher consumption of energy due to the ongoing
downstream reconfiguration program (Polar division
feed processing at Kola MMC, which purchases
electricity from third parties) and energy tariffs
inflationary growth.
Fuel
In 2017, fuel expenses increased by 35% (or USD 21
million) to USD 81 million driven by the following:
• USD 8 million – negative effect of the Russian rouble
appreciation;
• USD 15 million – higher fuel oil and other oil products
prices.
• 153 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Transportation expenses
(Increase)/decrease of metal inventories
General and Administrative Expenses
In 2017, transportation expenses decreased by 10%
(or USD 7 million) to USD 64 million driven by the
following:
• USD 7 million – negative effect of the Russian rouble
appreciation;
• USD 14 million – costs decrease driven by
transportation of Nkomati concentrate to third parties
instead of NN Harjavalta production facilities.
Sundry costs
In 2017, sundry costs increased by 5% (or
USD 7 million) to USD 150 million, driven by the
following:
• USD 19 million – negative effect of the Russian rouble
appreciation;
• USD 12 million – decrease in insurance expenses
owing to the renegotiation of property insurance
agreements on the same insurance cover terms.
In 2017, comparative effect of change in metal inventory
amounted to USD 804 million resulting in a decrease in
cost of metal sales, driven by the following:
• USD 729 million – sale of metal from temporary stock
in 2016 as part of reconfiguration programme, as well
as a built-up of palladium stock and accumulation of
metal stock in 2017 to meet additional demand of the
Company’s key customers.
• USD 75 million – comparative effect of change in work-
in-progress, primarily due to higher accumulation of
work-in-progress at Russian subsidiaries of the Group
in 2017 as part of ongoing downstream reconfiguration
program and due to start of Rostec copper concentrate
processing in 2017.
Сost of Other Sales
In 2017, cost of other sales increased by 24%
(or USD 124 million) to USD 632 million.
Production costs related to joint operation
Russian rouble appreciation amounted to cost of other
sales increase by USD 72 million.
In 2017, production costs related to joint operation
increased by 18% (or USD 14 million) to USD 93 million,
driven by the following:
• USD 8 million – negative effect of the South African
rand appreciation;
• USD 6 million – increase in expenses owing to the
higher sales volume of Nkomati concentrates..
Depreciation and amortisation
In 2017, depreciation and amortisation increased by
38% (or USD 174 million) to USD 630 million.
Russian rouble appreciation amounted to depreciation
and amortisation increase by USD 62 million.
Depreciation charges increased in real terms by
USD 112 million mainly due to additions to production
assets at the Company’s operating subsidiaries in
Russia in 2H2016 and in 2017.
Cost of other sales increased in real terms by
USD 52 million comprised of USD 96 million increase
in expenses resulting from higher transportation
services, indexation of RUB-denominated salaries and
wages and growth of other services, which were partly
offset positively by the sale of non-core assets resulting
in a cost reduction of USD 44 million.
Selling and Distribution Expenses
Selling and distribution expenses decreased 32%
(or USD 36 million) to USD 75 million due to the
cancellation of PGM export duties in September 2016
as part of Russian Federation’s WTO membership
terms (USD 60 million cost reduction), which was partly
negatively offset by increase of transportation expenses
primarily due to increase of semi-product sales.
USD million
Staff costs
Taxes other than mineral extraction tax and income tax
Third party services
Depreciation and amortisation
Rent expenses
Transportation expenses
Other
Total
2017
478
79
72
32
25
8
65
759
2016
376
58
55
20
19
6
47
581
Change,%
27%
36%
31%
60%
32%
33%
38%
31%
In 2017, general and administrative expenses
increased by 31% (or USD 178 million) to
USD 759 million. Rouble appreciation contributed
to USD 71 million cost increase. General and
administrative expenses increased in real terms due to
the following:
• USD 38 million – increase in staff costs mainly due
to salaries indexation;
• USD 30 million – increase of costs, resulting from the
automatization of production processes and roll out
of new IT systems, including USD 17 million of staff
costs;
• USD 20 million –higher property tax and amortisation
charges.
Other Net Operating Expenses
USD million
Social expenses
Change in allowance for doubtful debts
Change in allowaOce for obsolete and slow-moving inventory
Change in provision for reconfiguration of production facilities
Other
Total
2017
303
19
11
(4)
33
362
2016
Change,%
111
14
(2)
(33)
(6)
84
173%
36%
n.a.
(88%)
n.a.
4x
In 2017, other net operating expenses increased
by USD 278 million to USD 362 million owing to
one-off social expenses including an estimated
provisional cost of long-term social agreement with
the government of Zabaikalsky Krai and expenses
attributed to the development of skiing resort in
Sochi.
Other increase of other net operating expenses was
primarily driven by change in allowances for doubtful
debts, obsolete and slow-moving inventory and other
current assets in line with annual stock counts as
well as reversal of provision for reconfiguration of
production facilities in 2016.
USD million
Transportation expenses
Staff costs
Marketing expenses
Export duties
Other
Total
2017
2016
Change,%
38
13
14
1
9
75
23
13
7
61
7
111
65%
0%
100%
(98%)
29%
(32%)
Finance Costs
USD million
Interest expense on borrowings net of amounts capitalized
Unwinding of discount on provisions and payables
Other
Total
2017
386
133
16
535
2016
403
46
4
453
Change,%
(4%)
189%
4x
18%
• 154 •
• 155 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Increase in finance costs by 18% y-o-y to USD 535
million was mainly driven by increase of Unwinding of
discount on provisions and payables.
In 2017, the Company reduced the average cost of
debt to the level of 4.6% as of year-end 2017 from
5.1% as of year-end 2016 due to the consistent
implementation of financial policy targets that enabled
to partially offset the multiple increase of base rates
(Libor) in the current period.
Major factors of the decrease of the average cost of
debt:
• Reduction of funding cost of more expensive
Rouble denominated debt in credit portfolio by its
substitution by Dollar denominated debt in 1H2017,
together with the reduction of interest rate of the
bilateral Rouble denominated credit line in the
amount of RUB 60 billion in October 2017.
Income Tax Expense
In 2017 income tax expense decreased by 3% to USD
719 million driven mostly by the decrease of taxable
profit, partly offset by Russian rouble appreciation
against US Dollar in 2017.
Income Tax Expense
USD million
Current income tax expense
Deferred tax expense
Total
• Partial refinancing of more expensive bilateral credit
lines by proceeds of 5-year syndicated facility in the
amount of USD 2.5 billion under which Nornickel
has achieved one of the lowest interest rates of
Libor 1M+1.50% per annum available for Russian
corporates on international syndicated market since
2008 for the transactions of such size and term. In
addition, Nornickel managed to reduce interest rates
under the rest Dollar denominated bilateral credit
lines within the Group’s portfolio.
• In July 2017, the Company reached an agreement
with PJSC Sberbank to reduce interest rate
under GRK Bystrinskoye LLC project financing by
issuing guarantee on behalf of PJSC MMC Norilsk
Nickel to secure performance obligations of
GRK Bystrinskoye LLC.
The effective income tax rate in 2017 of 25.3% was above
the Russian statutory tax rate of 20%, which was primarily
driven by non-deductible social expenses, as well as an
increase in provisions for impairment of property, plant
and equipment.
The breakdown of the current income tax expense by tax jurisdictions
USD million
Russian Federation
Finland
Rest of the world
Total
2017
686
35
721
2017
672
8
6
686
2016
686
59
745
2016
679
5
2
686
Change,%
0%
(41%)
(3%)
Change,%
(1%)
60%
3x
0%
EBITDA
In 2017, EBITDА increased by 2% (or USD 96 million)
to USD 3,995 million with the EBITDA margin
amounting to 44% (down from 47% in 2016). Increase
in metal prices was almost offset by lower sales
volume in 2017 owing to accumulation of stock in
2017 and release of temporary metal stock in 2016
as well as increased cash costs on the back of the
Russian rouble appreciation against US Dollar and
one-off increase in social expenses.
USD million
Operating profit
Depreciation and amortisation
Impairment of non-financial assets
EBITDA
EBITDA margin
2017
3,123
645
227
3,995
44%
2016
3,281
557
61
3,899
47%
Change,%
(5%)
16%
4x
2%
(3 p.p.)
Net Profit
Before Non-Cash Write-Offs and Foreign Exchange Differences
USD million
Net profit
Impairment of non-financial assets
Foreign exchange gain
(Gain)/loss from disposal of subsidiaries and assets classified as held for sale
Net profit before non-cash write-offs and foreign exchange differences
Statement of Cash Flows
USD million
Cash generated from operations before changes in working capital and income tax
Movements in working capital
Income tax paid
Net cash generated from operating activities
Capital expenditure
Other investing activities
Net cash used in investing activities
Net cash used in financing activities
Effects of foreign exchange differences on balances of cash and cash equivalents
Net decrease in cash and cash equivalents
2017
2,123
227
(159)
(20)
2,171
2017
4,103
(1,670)
(670)
1,763
(2,002)
66
(1,936)
(2,237)
(63)
(2,473)
2016
2,531
214
(491)
4
2,258
2016
3,958
83
(530)
3,511
(1,714)
(206)
(1,920)
(2,399)
35
(773)
Change,%
(16%)
6%
(68%)
n.a.
(4%)
Change,%
4%
n.a.
26%
(50%)
17%
(132%)
1%
(7%)
n.a.
3x
In 2017, net cash generated from operating activities
decreased by 50% y-o-y to USD 1.8 billion primarily
driven by the increase in working capital in 2017
following the optimisation of trade financing terms,
partial payment of payables due to Rostec and
increase of metal stock.
Reconciliation of the net working capital changes
between the balance sheet and cash flow statement
is presented below.
• 156 •
• 157 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Business overview
Financial overview (MD&A)
Change of the net working capital
USD million
Change of the net working capital in the balance sheet
Foreign exchange differences
Change in income tax payable
Other changes, including reserves
Change of working capital per cash flow
Capital investments breakdown by projects
USD million
Polar Division, including:
Skalisty mine
Taymirsky mine
Komsomolsky mine
Oktyabrsky mine
Talnakh Concentrator
Reconstruction/modernisation of production facilities related to closing of Nickel plant
Kola MMC
Chita (Bystrinsky) project
Other production projects
Other non-production assets
Intangible assets
Total
2017
(1,694)
115
(7)
(84)
(1,670)
2017
860
216
93
18
69
89
11
228
449
391
12
62
2016
884
153
68
40
59
253
24
89
269
421
4
47
2,002
1,714
2016
575
38
(161)
(369)¹
83
Change,%
(3%)
41%
37%
(55%)
17%
(65%)
(54%)
156%
67%
(7%)
3x
32%
17%
In 2017, CAPEX increased by 17% to USD 2.0 billion.
The growth was mainly due to the completion
of construction and start of hot commissioning
of Bystrinsky mining and concentration complex
(Bystrinsky project) in Zabaykalsky region, as
well as to the ramp-up of projects related to the
modernisation of nickel refining facilities at Kola MMC
in line with the Company’s reconfiguration program.
Debt and Liquidity Management
USD million
Long-term
Short-term
Total debt
Cash and cash equivalents
Net debt
Net debt /12M EBITDA
Net debt /12M EBITDA for dividend payments
As of 31 December 2017
As of 31 December 2016
Change,
USD million
Change, %
8,236
817
9,053
852
8,201
2.1x
1.88x
7,276
579
7,855
3,325
4,530
1.2x
n.a.
960
238
1,198
(2,473)
3,671
0.9x
n.a.
13%
41%
15%
(74%)
81%
–
–
As of December 31, 2017, the Company’s total debt
amounted to USD 9,053 million which represents
15% increase (USD 1,198 million) compared to year-
end 2016. The Company’s debt portfolio remains
predominantly long-term. As of December 31,
2017, the share of long-term debt in the total debt
portfolio amounted to 91% (or USD 8,236 million) as
compared to 93% (or USD 7,276 million) as of the
year-end 2016.
Net debt/EBITDA ratio increased to 2.1x as of the
year-end 2017 from 1.2x as of year-end 2016. Such
increase was caused by the growth of Net debt by
81% to USD 8,201 million as a result of 74% decrease
in Cash and cash equivalents to USD 852 million.
Substantial decrease of Cash and cash equivalents
was mainly caused by the increase of working
capital, in particular due to the early repayment
of advances from off-takers in the amount of USD
650 million, as the margin under these advances
at the end of the year was twice as higher than
the one under the bank loans available for the
Company. By the beginning of 2018 the Company
reached agreements with a number of its off-takers
on new terms of the advances. In February 2018,
Nornickel entered into a new advance transaction
for the amount of USD 300 million with one of
its counterparties. The Company also continues
to balance its liquidity cushion with more flexible
and cost efficient financial instruments such as
committed reserved credit lines. As of December
31, 2017, the Group maintained additional liquidity
sources in form of committed reserved credit lines in
the total amount of more than USD 3 billion.
In 2017, Nornickel continued to optimize its debt
portfolio in order to improve its profile, further reduce
average cost of debt and maintain its average
maturity profile in line with the year-end 2016.
In 2017 Nornickel reduced the share of more
expensive Rouble denominated debt in its portfolio
from 29% as of the year-end 2016 to 15% as of
December 31, 2017, by prepayment of Rouble
denominated credit facilities in the amount of RUB
60 billion and successful placement of two Eurobond
issues totaling USD 1.5 billion. In April 2017,
Nornickel issued USD 1 billion Eurobond maturing in
2023 with an annual coupon rate of 4.10% that was
inside the Company’s outstanding Eurobonds’ curve.
In June 2017, the Group closed a USD 500 million
Eurobond offering maturing in 2022 with an annual
coupon rate of 3.849%. The coupon was fixed at the
lowest level ever for the Company’s issuances on
international debt capital markets.
In December 2017, the Company signed a 5-year
syndicated facility in the amount of USD 2.5 billon
with 15 international banks from America, Europe
and Asia. The funds were used to partially refinance
the existing bilateral credit lines and provide for
liquidity reserve to address the Company’s funding
needs in 1H2018, in particular for repayment of
Eurobond issue maturing in April 2018. Such strategy
enabled the Company to eliminate refinancing risks
for the next two years in 2018-2019.
In 2017, the Company’s credit ratings assigned by
S&P Global and Fitch remained at investment grade
level of “BBB-“ with “Stable” outlooks. As of the year-
end 2017, the Company’s credit rating assigned by
Moody’s remained at the level of “Ba1” with “Stable”
outlook capped by Russia’s sovereign country
celling. On January 29, 2018, Moody’s rating agency
raised Nornickel credit rating to the investment
grade level “Baa3” with “Positive” outlook
following the change of Russia's country ceiling for
foreign currency debt to “Baa3” and the outlook
on sovereign rating to “Positive” from “Stable”.
Therefore, currently Nornickel has investment grade
credit ratings from all three international rating
agencies Fitch, Moody’s and S&P Global.
1
Includes one-off effect of copper concentrate purchase from Rostec.
• 158 •
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
CORPORATE
GOVERNANCE
162
165
170
185
193
195
203
Deputy Chairman’s letter
Corporate governance framework
Board of Directors
President and Management Board
Remuneration
Risk management and internal controls
Independent audit
Corporate governance
Deputy Chairman’s letter
Deputy
Chairman’s
letter
Corporate governance is key to the success of MMC Norilsk Nickel as a public company.
The Corporate Governance, Nomination and Remuneration Committee works hard
alongside the Board of Directors to implement best corporate governance practices and
procedures across the Company.
This goes beyond the pragmatics of investor
appeal and shareholder confidence, and becomes
an essential tool to improve the efficiency of
our operations and maintain our competitive
edge. In 2017, we approved the new version of
the Company’s Charter while also introducing
a number of by-laws (regulations and policies)
to make sure we are aligned with global best
practices and retain our leadership in the global
market to enhance trust with our shareholders and
investors.
The Corporate Governance Excellence Programme
launched by the Corporate Governance,
Nomination and Remuneration Committee
has been in place since 2014. In line with that
programme, in 2014–2017, the Board of Directors
approved several by-laws designed to improve
our corporate governance. Those included: Code
of Conduct and Ethics for Members of Board of
Directors, Professional Development Policy for
Members of Board of Directors, Performance
Evaluation Policy for Board of Directors,
Policy on Development and Approval of Vote
Recommendations on Candidates Nominated
to Board of Directors, Dividend Policy, and new
versions of regulations on the Board committees.
In 2017, the Company continued to enhance its
corporate governance framework following the
standards set out in the Corporate Governance
Code, which was endorsed by the Bank of
Russia. Special focus was given to planning
and implementing sustainable development
and corporate social responsibility initiatives,
greater efficiency of the Board of Directors and
its committees, strengthening of the internal audit
function, enhanced transparency and disclosure
levels.
Throughout 2017, the Audit and Sustainable
Development Committee reviewed reports on
key strategic and operational risks and also the
current status of the Company’s risk management
framework. As part of its assessment of internal
controls, the committee engaged in regular
analysis of reports prepared by the Internal Control
Department. Health, safety, and environment
remained a priority for us. On a quarterly basis, the
Audit and Sustainable Development Committee
reviewed reports on the Company’s progress in
pursuing its health and safety strategy, along with
environmental projects and initiatives.
Environmental matters (primarily the Sulphur
Project aiming to cut sulphur dioxide emissions
in Polar Division) were at the centre of attention
for the Board’s Strategy Committee. The
committee was heavily involved in developing
recommendations for directors when drafting the
Company’s updated strategy (showcased at the
Strategy Day in November 2017) and a number
of functional strategies (on project management,
construction, repairs, long-term production
planning, exploration and prospecting, sales,
marketing and IT). Another focus area were
the matters directly linked to our operations.
Those included progress of major investment
projects, production reconfiguration, Technology
Breakthrough initiative, and programme on
efficiency improvement and cost reduction.
• 162 •
• 163 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Deputy Chairman’s letter
In 2018, the Audit and Sustainable Development
Committee will continue its hard work to promote
independence and avoid bias in the Company’s
internal and external audits while also fostering
the reliability and enhancing performance of
the corporate risk management universe. The
committee will also go on with the programme to
instil a culture of occupational safety and prevent
irresponsible work practices that can potentially
lead to accidents.
In 2017, the Corporate Governance, Nomination
and Remuneration Committee prioritised matters
related to long-term projects under the programme
to enhance corporate governance. The committee
reviewed progress of initiatives that are part of
the Human Capital Development Programme,
along with the Company’s mid-term Charity Policy.
On top of that, the Board of Directors approved
a number of by-laws covering corporate and
social matters, including Human Rights Policy,
Freedom of Association Policy, Equal Opportunities
Programme, Working Conditions Policy, Local
Community Relations Policy, Environmental Policy,
Quality Policy, and Renewable Energy Sources
Policy. Also, as a way to strengthen corporate
efforts aimed at fighting corruption and ensuring
compliance with antitrust regulations, in 2017, the
Board of Directors approved the Anti-Corruption
Policy and Antitrust Compliance Policy.
The Company’s improvements in environmental protection, social
responsibility and governance (ESG) were recognised by independent
agencies, with MSCI ESG upgrading Nornickel’s rating from CCC to B
and the score by Sustainalytics going up from 49 to 58 (compared
to 46 in 2015).
In its relations with shareholders and investors,
we seek to ensure compliance with applicable
laws and principles of openness and transparency.
With a view to improving its transparency and
enhancing information security and confidentiality,
the Company approved the amended version of
the Information Policy Regulations of PJSC MMC
Norilsk Nickel. The new Regulations expand the
Company’s disclosure commitments and provide
further guidance on the mandatory disclosure
required by regulators.
We will remain committed to continuous
improvement of our corporate governance
practices in 2018. The Board of Directors and its
committees and the management are well aware
of the areas where we can excel further, and
recognise the importance of these efforts.
Corporate governance
framework
Letter from the Board of Directors
In line with best practices, the Board of Directors
of MMC Norilsk Nickel reaffirms the Company’s
commitment to the highest corporate governance
standards, and confirms its compliance with key
material principles of the Corporate Governance
Code as recommended by the Bank of Russia.
The Board of Directors views compliance with key
principles and recommendations of the Corporate
Governance Code as an efficient tool to improve
corporate governance and ensure long-term
sustainable growth.
Principles
Nornickel's corporate governance framework is
designed to take into account and balance the
interests of shareholders, the Board of Directors,
managers and employees, as well as other
stakeholders.
Nornickel is guided by the applicable laws of the
Russian Federation and principles set forth in the
Corporate Governance Code that has become a key
source of information for the development of the
Company's internal regulations and a guidance to
nurture best corporate governance practices.
Nornickel's corporate governance framework relies
on the following principles:
• equitable and fair treatment of every shareholder;
• professionalism and leadership of the Board of
Directors;
• accountability of the Board of Directors and
executive bodies;
• corporate social responsibility;
• transparent and timely disclosure;
• anti-corruption measures.
These principles are reflected in Nornickel’s official
documents available on its website. Those include
the Charter, Regulations on the Board of Directors,
Information Policy Regulations, and Anti-Corruption
Policy.
Andrey Bougrov
Senior Vice-President,
Deputy Chairman of the Board of Directors,
MMC Norilsk Nickel
Internal Documents and Policies
• 164 •
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Corporate governance framework
Governance structure
Independent
Auditor
Approval
Provision
of a statement
General Meeting
of Shareholders
Election
Reporting
Audit
Commission
President —
Chairman
of the Management Board
Election
Reporting
Management
Board
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Corporate Governance,
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and Remuneration
Committee
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Board
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Audit and Sustainable
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Internal Control
and Risk Management
Unit
General Meeting of Shareholders
• splitting and/or consolidating the Company's shares;
• electing the Company's President and members of
This is the supreme corporate body of the Company.
the Board of Directors and Audit Commission;
Its authority includes:
• amending and restating the Charter;
• approving the revised Charter;
• restructuring and liquidating the Company;
• increasing and/or decreasing the authorised capital;
• approving the Company’s auditor;
• approving annual reports, accounting/financial
statements, and by-laws on the Company's corporate
bodies;
• distributing annual profit;
• paying dividends.
• 166 •
The General Meeting of Shareholders is convened on
an annual basis. It takes place no sooner than three
and no later than six months following the end of the
preceding financial year.
Extraordinary General Meetings of Shareholders
may be convened by the Board of Directors or at the
request of the Audit Commission, the Company’s
auditor or shareholders owning at least 10% of the
Company’s voting shares.
Except for the cumulative voting to elect members of
the Board of Directors, each voting share is counted
as one vote at the General Meeting of Shareholders.
Board of Directors
This is a collegial governance body in charge of
strategic management of the Company and oversight
of its executive bodies' activities.
Pursuant to the Charter, the Board consists of
13 directors.
Independent directors
Independent directors are directors having sufficient
professional skills, experience and independence to
act on their own and make impartial and reasonable
decisions that are not influenced by the Company's
executive bodies, particular groups of shareholders or
other stakeholders.
The Company adheres to international standards and
recommendations set out in the Corporate Governance
Code of the Bank of Russia relating to the required
number of independent directors. As at 31 December
2017, four of the Company's Board members (i.e. 30.8%)
met the director’s independence criteria as defined by
the Moscow Exchange.
For more details on members of the Independent directors.
p. 171
Committees of the Board
of Directors
Members of the Board are elected at the Annual
General Meeting of Shareholders for a period
extending until the next Annual General Meeting of
Shareholders.
Committees are ancillary bodies set up by the Board
of Directors. Their function is to provide preliminary
review of critical matters and advise the Board on
relevant decisions.
For more details on members of the Board of Directors.
p. 175
Chairman of the Board
of Directors
The Chairman is responsible for day-to-day operation
of the Board of Directors, convening and chairing its
meetings, making arrangements for minute-taking,
and chairing the General Meetings of Shareholders.
For the last four years, the Board has been chaired by
Gareth Peter Penny, an independent director.
For more details on members of the Chairman of the Board
of Directors.
p. 170
The Board of Directors has set up four committees:
• Audit and Sustainable Development Committee;
• Strategy Committee;
• Budget Committee;
• Corporate Governance, Nomination and Remuneration
Committee.
For more details on members of the Committees
p. 181
President
The President is the sole executive body in charge
of the day-to-day operations of the Company.
The President is elected at a General Meeting of
Shareholders for an indefinite period and acts as the
Chairman of the Management Board.
The President reports to the Board of Directors and
the General Meeting of Shareholders.
Since 2015, this position has been held by Vladimir
Potanin (CEO of the Company in 2012–2015).
For more details on members of the President.
p. 185
• 167 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Corporate governance
Corporate governance framework
Management Board
This is a collegial executive body in charge of the
day-to-day management of the Company within
its scope of authority as set out in the Charter and
the implementation of resolutions approved by the
General Meeting of Shareholders and the Board of
Directors.
Members of the Management Board are elected by
the Board of Directors for an indefinite period. As at 31
December 2017, the Management Board consisted of
13 members.
For more details on members of the Management Board
p. 185
Corporate Secretary
This is a corporate officer whose duties include
managing shareholder relations, making the necessary
arrangements to protect their rights and interests, and
providing efficient operating support to the Board of
Directors. The Corporate Secretary reports to the Board
of Directors.
Pursuant to the Charter, the Corporate Secretary is
appointed by the Board of Directors for a three-year
term.
Since 2011, this position has been held by Pavel Platov.
For more details on members of the Corporate Secretary
p. 184
Audit Commission
not simultaneously serve on the Company’s Board
of Directors or hold other positions in the Company's
corporate bodies.
For more details on members of the Audit Commission.
p. 200
Independent Auditor
This is an audit firm commissioned to audit accounting/
financial statements of the Company and provide an
independent opinion regarding their accuracy.
The auditor is approved by the Annual General Meeting
of Shareholders.
In 2017, the Annual General Meeting of Shareholders
approved JSC KPMG as the Company's auditor for both
IFRS and Russian accounting standards.
For more details on members of the Independent Auditor.
p. 203
Internal Control and Risk
Management Unit
This unit is in charge of improving the risk management
and internal control framework, detecting and
preventing any waste, misuse or misappropriation of
funds or assets of the Company and its subsidiaries,
as well as any other wrongdoings and theft, ensuring
accuracy of metrics and measurement standards and
combating illegal activities, such as money laundering
and terrorism financing.
For more details on members of the Internal Control and Risk
The Audit Commission controls the Company's financial
and business transactions.
Management Unit.
p. 195
It performs annual internal audits of the Company’s
financial and business operations, as well as other
internal audits as it may see fit or as requested by
the General Meeting of Shareholders, the Board of
Directors or any shareholders owning at least 10% of
the Company’s stock.
Members of the Audit Commission are elected at an
Annual General Meeting of Shareholders for a period
extending until the next Annual General Meeting of
Shareholders. Members of the Audit Commission shall
Internal Audit Department
This department is in charge of independent audits,
including assessment of the risk management and
internal control framework of the Company and its
subsidiaries.
For more details on members of the Internal Audit Department
p. 195
Achieving excellence
in corporate governance
Corporate governance
assessment
Nornickel introduced annual performance
assessments of the Board of Directors in 2014
in order to improve its corporate governance
framework. All directors must fill out an online
questionnaire following a schedule approved by
the Board of Directors. The questionnaire contains
76 questions, divided into three parts and 15 sections.
All questions are graded on a scale from 1 to 10. For
each question there is a text field where directors may
enter additional comments. Answering all questions
is mandatory.
Such evaluation of the Board of Directors helps us
identify gaps, their root causes and opportunities for
improvement.
Corporate governance
improvements
Nornickel continuously improves its corporate
governance framework to enhance efficiency
and ensure compliance with global best practices.
The Company adheres to recommendations set
out in the Corporate Governance Code of the
Bank of Russia.
Our Corporate Governance Framework Improvement
Programme was approved and adopted by the
Corporate Governance, Nomination and Remuneration
Committee back in December 2013. In 2017, the
Programme was enhanced with a set of initiatives
aimed at improving performance of the Board and its
committees. Some of the key corporate governance
improvement initiatives in 2017 included:
• approving the revised Charter;
• approving the revised Regulation on Audit and
Sustainable Development Committee of the Board of
Directors;
• approving the revised Information Policy Regulations;
• approving the revised Anti-Corruption Policy.
The ESG analysts welcomed our new/updated
environmental and social responsibility policies,
boosting the Company's position in the rankings
provided by the leading global agencies.
MSCI ESG upgraded our rating from ССС to B,
while Sustainalytics raised our score from 49
to 58 (industry average).
In 2018, the Company plans to gradually implement
the principles and procedures set out in the approved
regulations in order to improve the performance of
the Company’s Board of Directors and its committees.
For more details on compliance with the Corporate Governance
Code of the Bank of Russia
p. 272
• 168 •
• 169 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Board of Directors
Board of Directors
Functions of the Board of Directors
Meetings of the Board of Directors (in person or in
absentia) are held as and when required, but at least
once every six weeks. The procedure for convening
and holding meetings of the Board of Directors is
specified in the Company’s Regulation on the Board of
Directors.
The Board of Directors sets the fundamental
principles of business conduct and is responsible
for nurturing our business and social culture.
The scope of powers of the Board of Directors
includes:
• setting priority goals and defining Company’s
development strategy;
• approving the Company’s Dividend Policy and
providing recommendations on dividend per share;
• approving the internal control system and
procedures, identifying key risks associated with
the Company’s operation, and implementing risk
management initiatives and procedures;
• approving, electing and terminating powers of
members of the Management Board, setting
remuneration payable to the Company’s President,
members of the Management Board, Corporate
Secretary, and Head of Internal Audit;
• acting on other matters as provided for by the
Federal Law No. 208-FZ On Joint Stock Companies
dated 26 December 1995, and the Company’s
Charter.
Chairman of the Board of Directors
The Chairman of the Board of Directors is elected
among the members of the Board of Directors by
themselves by a majority vote from the total number
of members of the Company’s Board of Directors. The
Board of Directors is entitled to elect a new Chairman of
the Board of Directors at any time. When the Chairman
of the Board of Directors is unavailable, the respective
responsibilities are assumed by a member of the Board
of Directors appointed by the Board of Directors.
The key goal of the Chairman of the Board of Directors
is to ensure high levels of trust at Board meeting and
constructive cooperation between the members of the
Board and corporate management.
Pursuant to the Regulation on the Board of Directors
approved by the Annual General Meeting of
Shareholders of MMC Norilsk Nickel held on 30 June
2009, the key responsibilities of the Chairman of the
Board of Directors are as follows:
• ensuring high efficiency of the Board of Directors and
its committees;
• convening the Board of Directors meetings and
preparing their agendas;
• chairing the Board of Directors meetings or organising
absentee voting;
• making arrangements for minutes to be taken
at meetings of the Board of Directors and signing
the same;
• preparing reports of the Board of Directors for the
year to be included in the Company’s Annual Report.
Since March 2013, the Board of Directors has been chaired
by independent non-executive director Gareth Peter
Penny. The Company believes that to fully meet the best
global practices. The independent Chairman of the Board
of Directors of the Company ensures the most efficient
interaction between the Board of Directors, shareholders
and other stakeholders. During the year the Board, under
his leadership, approved several crucial resolutions dealing
with the Company’s growth strategy, long-term production
planning, marketing and sales strategy, strategic health and
safety issues, environmental projects and human capital
development, and took steps to preserve the Company's
competitive edge. Simultaneous participation of the
Chairman of the Board of Directors in other companies’
boards of directors did not affect his performance in
respect of the Board of Directors of MMC Norilsk Nickel.
Independent directors
In accordance with global corporate governance
practices and recommendations of the Bank of
Russia’s Corporate Governance Code, no less than
one third of the Board of Directors should consist
of independent directors. Moreover, the Company
believes that independent directors are key to
efficient operation of the Board of Directors and
thoughtful decision-making.
All independent directors meet the independence
criteria recommended by the Corporate Governance
Code and requirements established by the current
version of the Listing Rules of the Moscow Exchange,
which state that an independent director is one who is
not related to:
• the Company;
• any of the substantial shareholders of the Company;
• any of the substantial counterparties
of the Company;
• any competitor of the Company;
• federal (Russian Federation or its constituent entities)
and regional governments or municipal entities.
The Company sees independent directors as very
valuable contributors to the efficiency of the Board, in
particular, in terms of ensuring that the matters on the
agenda of the Board are treated fairly, and reinforcing
shareholders’ and investors’ confidence in actions
taken by the Board of Directors.
In the lead-up to the Annual General Meeting
of Shareholders in April 2017, the Corporate
Governance, Nomination and Remuneration
Committee of MMC Norilsk Nickel’s Board of
Directors reviewed the compliance of nominees to
the Board of Directors with independence criteria.
The current directors on the Board were elected in
the annual general meeting on 9 June 2017. As at
the end of 2017, four (30.8%) out of 13 directors were
recognised as independent.
30.8%
Share of Independent directors
in the Board of Directors
Directors’ liability
insurance
Since 2003, the Company has had its directors’
liability insured. The insurance aims to cover potential
damages arising from unintended erroneous actions
of the Company's directors in their management
activities.
The terms and conditions of the agreement, as welas
the amount of insurance coverage, are consistent
with the worid’s best practices for such risks.
• 170 •
• 171 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Board of Directors
Performance of the Board of Directors
For MMC Norilsk Nickel, 2017 was the year of
sustainable and rapid growth that helped us
deliver strong results and reinforce our leadership
both domestically and globally. Tight cooperation
between the Board of Directors and the Company’s
management enabled us to achieve target KPIs.
To support shareholder value and ensure
comprehensive protection of shareholder rights and
interests in the reporting period, the Company kept
working on the strategy and priority areas of business,
improving corporate governance and boosting social
responsibility.
In 2017, we approved the new version of the
Company’s Charter while also introducing a number
of by-laws (regulations and policies) to make sure we
are aligned with global best practices and retain our
leadership in the global market to enhance trust with
our shareholders and investors.
In the reporting period, the Company also focused on
driving innovations and the use of new technology to
achieve operating excellence. As part of the dedicated
programme, we took steps to improve production
efficiency and cut operating costs, and implemented
a number of security and health and safety initiatives
across our footprint. An effective strategy and an
in-depth market analysis helped us achieve an
entirely new level of efficiency and confirm our status
as a company with one of the most compelling
investment cases in Russia.
Over the last three years, the Company has been
conducting an internal assessment of the Board
of Directors’ performance, with the methodology
developed with assistance of an independent
consultant and the best global practices. An external
assessment is planned to be organised following 2018.
In 2017, the Board of Directors held 42 meetings,
including 7 in person, and considered a total
of 199 matters.
A reduction in the number of matters considered by
the Board of Directors is due to the amendments to the
Federal Law On Joint-Stock Companies effective from
1 January 2017 and pertaining to the regulation of major
and related-party transactions
Number of matters considered
Number of Board of Directors meetings
In absentia
In person
199
2017
2016
2015
2014
2013
1,024
864
7
9
42
7
50
47
35
43
38
2017
2016
2015
2014
2013
• 172 •
Directors’ participation in meetings of the Board of Directors and its committees
Full name
Title
Participation / number of meetings
Meetings of the
Board of Directors
Strategy Committee
Budget Committee
Audit and Sustainable
Development
Committee
Corporate Governance,
Nomination and
Remuneration Committee
Gareth
Peter Penny
Gerhardus
Prinsloo
Independent director /
Chairman
Independent director /
Chairman of the Audit and
Sustainable Development
Committee
Robert Edwards
Independent director
Sergey Bratukhin
Independent director /
Chairman of the Corporate
Governance, Nomination and
Remuneration Committee
Sergey Skvortsov
Non-executive director
Andrey Bougrov
Executive director
Marianna
Zakharova
Executive director
Sergey Barbashev Non-executive director
Alexey Bashkirov
Maxim Sokov
Non-executive director /
Chairman of the Budget
Committee
Non-executive director /
Chairman of the Strategy
Committee
Vladislav Soloviev Non-executive director
Всего
Stalbek Mishakov
Non-executive director
Rushan
Bogaudinov
Non-executive director
42/42
42/42
42/42
42/42
24/42
42/42
42/42
42/42
42/42
42/42
42/42
42/42
42/42
8/10
10/10
–
10/10
–
–
–
–
9/10
10/10
–
–
–
–
5/5
–
5/5
–
–
–
5/5
5/5
–
–
5/5
–
–
10/10
10/10
10/10
–
–
–
–
10/10
–
–
–
10/10
–
15/15
15/15
15/15
–
–
–
15/15
–
–
–
15/15
–
>90%
of meetings of the Committee
of the BoD were held with 100%
turnout
96.7%
attendance of Board meetings
• 173 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Corporate governance
Board of Directors
Composition of the Board of Directors
Composition of the Board of
Directors // %
Breakdown by years served on
the Board of Directors // %
Breakdown by age // %
15.4
30.8
53.8
53.8
15
8
23
85
85
85
69
Non-executive directors
Independent directors
Executive directors
> 3 years
1–3 years
40-60 years old
below 40 years old
above 60 years old
Неисполнительные директора
Исполнительные директора
Независимые директора
As at 31 of December 2017 the Board of Directors
was made up of 13 members, including four
independent, seven non-executive and two executive
directors. Following the Annual General Meeting of
Shareholders held on 9 June 2017, Sergey Skvortsov
was elected to the Board of Directors, replacing
Andrey Korobov.
Key competencies of the Board of Directors
Years on the
Board of Directors
Track record as
a member of the Board
of Directors
Strategy
Law and corporate
governance
Finance and audit
Mining and
engineering
International
economic relations
Name
Gareth Peter
Penny
Gerhardus
Prinsloo
4 years
Since 2013
5 years
Since 2012
Robert Edwards
4 years
Sergey Bratukhin 4 years
Since 2013
Since 2013
Sergey Skvortsov 2 years
2014–2015 Since 2017
Andrey Bougrov
15 years
7 years
Since 2002
Since 2010
6 years
Since 2011
Marianna
Zakharova
Sergey
Barbashev
Alexey Bashkirov 4 years
Maxim Sokov
9 years
Since 2013
Since 2008
7 years
2008–2011 Since 2013
5 years
Since 2012
2 years
Since 2015
Vladislav
Soloviev
Stalbek
Mishakov
Rushan
Bogaudinov
Total
+
+
+
+
+
6
+
+
+
+
+
+
+
+
+
9
+
+
+
+
+
+
6
+
+
+
+
+
+
+
+
+
+
10
+
+
+
+
+
+
6
Biographies of members of the Board of Directors
Education:
Bishops Diocesan College, Cape Town
Eton College, UK
Oxford, Rhodes Scholar, UK
Master of Arts in Philosophy, Politics and Economics
PENNY
Gareth Peter
Born in: 1962
Nationality: UK
Chairman of the Board of Directors since 2013
Independent director
Member of the Strategy Committee
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record:
2007–present: Non-Executive Director at Julius Bär Holding Ltd
2012–2016: Executive Chairman at New World Resources plc, Executive
Director at New World Resources NV
2012–2016: member of the Board of Directors at OKD
2016–present: Non-Executive Chairman of the Board of Directors
at Pangolin Diamonds Corp.
2017–present: Non-Executive Chairman of the Board of Directors
at Edcon Holdings Limited
2017–present: Director at Amulet Diamond Corporation
BOUGROV
Andrey
Born in: 1952
Nationality: Russia
Deputy Chairman of the Board of Directors since 2013
Executive director (2002-2013 member of the
Board of Directors)
Member of the Management Board since 2002
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow State Institute of International Relations (MGIMO), degree
in International Economic Relations PhD in Economics
Track record:
2002–present: member of the non-governmental Council on Foreign
and Defence Policy
2006–present: member of the Management Board of the Russian
Union of Industrialists and Entrepreneurs
2010–2013: member of the Management Board and Deputy CEO at
Interros Holding Company
2011–2013: Chairman of the Board of Directors at MMC Norilsk Nickel
2013–2014: member of the Board of Directors of the Federal Hydro-
Generating Company RusHydro
2013–present: Vice President at Interros Holding Company LLC
(Interros Holding Company CJSC until 2015)
2013–2015: member of the Management Board, Deputy Chairman of
the Board of Directors, Deputy CEO at MMC Norilsk Nickel
2013–present: Vice President of the Russian Union of Industrialists and
Entrepreneurs
2014–present: member of the Board of Directors at Inter RAO UES
PJSC (Inter RAO UES OJSC until 2015)
2014–present: member of the Expert Committee of the Russian
President’s Anticorruption Office
2015–present: member of the Management Board, Deputy Chairman of
the Board of Directors at MMC Norilsk Nickel
2015–2016: member of the Investment Committee at the Federal
Hydro-Generating Company RusHydro
2015–present: Senior Vice President at MMC Norilsk Nickel (formerly
Vice President until 2016)
2016–present: member of the Expert Council on Corporate Governance
at the Bank of Russia
2016–present: Chairman of the Issuer Committee at the Moscow
Exchange
2018 – present: Chairman of the Board of non-financial reporting at
RUIE, vice-present and member of the Management Board at RUIE
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Corporate governance
Board of Directors
BARBASHEV
Sergey
Born in: 1962
Nationality: Russia
Member of the Board of Directors since 2011
Non-executive director
Member of the Corporate Governance, Nomination
and Remuneration Committee
Share in the Company’s authorised capital: 0.0%1
Share in the common stock: 0.0%1
Education:
Moscow Higher School of Militia of the Ministry of Internal Affairs of
the USSR, degree in Law
Track record:
2008–present: CEO and Chairman of the Management Board
at Interros Holding Company LLC (Interros Holding Company
CJSC until 2015)
2008–present: member of the Board at the Vladimir Potanin Charitable
Foundation
2011–present: Chairman of the Board of Directors of Rosa Khutor Ski
Resort Development Company
2015–present: Branch Director at Olderfrey Holdings Ltd.
2016–present: member of the Board of Endowment for Education,
Science and Culture
2016–present: Director at Olderfrey Holdings Ltd.
Education:
Moscow State Technological University “Stankin”, degree
in Engineering
BASHKIROV
Alexey
Born in: 1977
Nationality: Russia
Member of the Board of Directors since 2013
Non-executive director
Chairman of the Budget Committee, member of
the Audit and Sustainable Development Committee
and the Strategy Committee
Share in the Company's authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow State Institute of International Relations (MGIMO), degree
in International Economic Relations
Track record:
2009–2015: Executive Director, Head of the Investment Department,
Deputy CEO for Investments at Interros Holding Company
2009–2013: member of the Board of Directors at Rosa Khutor Ski
Resort Development Company
2009–2014: member of the Board of Directors at Prof-Media
Management
2011–2015: member of the Management Board at Interros Holding
Company
2012–2014: member of the Board of Directors at SP Holding, Cinema
Park
2014–present: member of the Board of Directors at Petrovax Pharm
and Zaodno
2015–present: member of the Management Board, Deputy CEO for
Investments at Interros Holding Company
2016–present: trustee of the Night Time Hockey League, a non-profit
amateur hockey foundation
2016–present: member of the Board of Directors at iGlass
Technology Inc.
2016–present: Managing Director at Winter Capital Advisors
2016–present: CEO at Translaininvest
BOGAUDINOV
Rushan
Born in: 1977
Nationality: Russia
Member of the Board of Directors since 2015
Non-executive director
Member of the Audit and Sustainable Development
Committee
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record:
2010–present: member of the Institute of Internal Auditors (IIA)
2012–2015: Head of the Control and Audit Department at RUSAL
Global Management B. V.
2012–2016: member of the Board of Directors at Aughinish Alumina Ltd
2012–2016: member of the Board of Directors at Limerick Alumina
Refining Ltd
2015–present: Function Head at RUSAL Global Management B. V.
BRATUKHIN
Sergey
Born in: 1971
Nationality: Russia
Member of the Board of Directors since 2013
Independent director
Chairman of the Corporate Governance, Nomination
and Remuneration Committee, member of the Strategy
Committee, the Budget Committee and the Audit
and Sustainable Development Committee
Share in the Company's authorised capital: 0%
Share in the common stock: 0%
Education:
Mendeleev University of Chemical Technology of Russia, degree
in Engineering;
Finance Academy under the Government of the Russian Federation,
degree in Banking and Insurance;
Warwick Business School, degree in Business Management
Track record:
2007–2017: member of the Board of Directors at Dallesprom
2007–2014: member of the Board
of Directors at Amur Shipping Company
2011–present: President at Invest AG (CIS Investment Advisers LLC)
2014–2016: member of the Board of Directors at AKB
International Financial Club
1 On 10 April 2017, Mr Sokov's share in the Company's authorised capital changed from 0.000088% to 0% following the gift of his stake.
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Board of Directors
Education:
Peoples’ Friendship University of Russia (RUDN), Master’s degree
in Law
ZAKHAROVA
Marianna
Born in: 1976
Nationality: Russia
Member of the Board of Directors since 2010
Executive director
Member of the Management Board since 2016
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record:
2010–2015: member of the Management Board, Deputy CEO for Legal
Affairs at Interros Holding Company (Interros Holding Company CJSC
until 2015)
2010–2015: member of the Board of Directors at ProfEstate
2015–present: First Vice President for Corporate Governance, Asset
Management and Legal Affairs at MMC Norilsk Nickel
MISHAKOV
Stalbek
Born in: 1970
Nationality: Russia
Member of the Board of Directors since 2012
Non-executive director
Member of the Corporate Governance, Nomination and
Remuneration Committee and the Budget Committee
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow State Institute of International Relations (MGIMO), degree
in International Law; University of Notre Dame (USA), Master’s degree;
Diplomatic Academy of the Russian Foreign Ministry, PhD in Economics
Track record:
2010–present: advisor to the CEO at RUSAL Global Management B. V.
2013–2016: member of the Board of Directors at United
Company RUSAL Plc
2013–present: deputy CEO at EN+ Management
PRINSLOO
Gerhardus
Born in: 1965
Nationality: Germany
Member of the Board of Directors since 2012
Independent director
Chairman of the Audit and Sustainable Development
Committee, member of the Strategy Committee, Budget
Committee, and the Corporate Governance, Nomination
and Remuneration Committee
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
University of Pretoria (South Africa), Bachelor of Commerce
Track record:
2012–present: CEO of Natural Resource Partnership
SOKOV
Maxim
Born in: 1979
Nationality: Russia
Member of the Board of Directors since 2008
Non-executive director
Chairman of the Strategy Committee
Share in the Company’s authorised capital: 0.0011%
Share in the common stock: 0.0011%
Education:
Russian State Tax Academy under the Russian Ministry of Taxes,
degree in Law; New York University, Master's degree in Law, lawyer
(USA)
Track record:
2008–2013: CEO of OK RUSAL – Investment Management
2012–present: member of the Board of Directors at United
Company RUSAL Plc
2012–2013: Director of Strategic Investment Management at RUSAL
Global Management B. V.
2013–2014: Advisor on Strategic Investment Management at RUSAL
Global Management B. V. and First Deputy CEO at En+ Group Ltd
2013–present: CEO at En+ Management
2013–2017: member of the Board of Directors at En+ Group Limited and
Eurosib Energo Plc
2014–2017: CEO at En+ Group Limited
2017–present: CEO and member of the Board of Directors at En+
Group Plc
2017–present: member of the Board of Directors at FESCO
2017–2018: CEO at En+ Group Plc
2018–present: president at En+ Group Plc
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Board of Directors
Education:
Moscow State Institute of International Relations (MGIMO), degree in
International Economic Relations, PhD in Economics
Track record:
2006–present: member of the Board of Directors at KAMAZ
2008–2016: member of the Board of Directors at AVTOVAZ
2009–2013: Managing Director at CJSC CIB Financial Broker
2013–2014: Managing Director for Investments at Rostec State
Corporation
2014–2016: Deputy CEO at Rostec State Corporation
2014–2017: member of the Board of Directors at OPK Oboronprom
2014–present: member of the Board of Directors at Russian Helicopters
SKVORTSOV
Sergey
Born in: 1964
Nationality: Russia
Member of the Board of Directors in 2014–2015 and
since 2017
Non-Executive director
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
2014–2015: member of the Board of Directors at
OJSC MMC Norilsk Nickel
2014–present: Non-Executive Chairman of the Board of Directors
at RT-Invest JSC (formely, until 2017, RT-Invest LLC)
2016–2017: Adviser to CEO at Rostec State Corporation
2016–present: member of the Association of Russian Automakers, non-
profit partnership
2016–present: Chairman of the Board of Directors at PJSC AVTOVAZ
2016–present: member of the Board of Directors
at Alliance Rostec Auto B.V.
SOLOVIEV
Vladislav
Born in: 1973
Nationality: Russia
Member of the Board of Directors in 2008–2011 and
since 2013
Non-executive director
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Graduate School of Management of the State Academy of
Management; Moscow State Technological University “Stankin”;
University МВА
Track record:
2007–present: member of the Board of Directors at United Company
RUSAL Plc
2008–2015: member of the Board of Directors at En+ Group Limited
2010–2014: First Deputy Director at CJSC RUSAL
Global Management B. V.
2014–2018: CEO of CJSC RUSAL Global Management B. V. and United
Company RUSAL Plc
2018–present: member of the Board of Directors and CEO at En+ Group
2018–present: president at United Company RUSAL Plc and CJSC
RUSAL Global Management B. V.
EDWARDS
Robert
Born in: 1966
Nationality: UK
Member of the Board of Directors since 2013
Independent director
Member of the Corporate Governance, Nomination and
Remuneration Committee, and the Audit and Sustainable
Development Committee
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record:
2013–2014: Senior Advisor at Royal Bank of Canada (Europe)
Capital Markets
2013–present: CEO at Highcross Resources Ltd
2014–2018: Non-Executive Director at GB Minerals Ltd
2016–2016: Non-Executive Chairman at Sierra Rutile Limited (SRX)
Education:
Camborne School of Mines, degree in Mining Engineering
Committees of the Board of Directors
Committees established by the Board of Directors
are in charge of review of the most important matters
and preparation of recommendations to the Board of
Directors.
To ensure efficiency and proper fulfilment of their
functions, the committees may discuss matters with the
Company's management bodies and seek opinions
of external consultants. The Company set up four
committees of the Board of Directors, each made up of
five persons:
• Audit and Sustainable Development Committee,
• Strategy Committee,
• Budget Committee,
• Corporate Governance, Nomination and Remuneration
Committee.
Audit and Sustainable
Development Committee
As per the resolution of the Board of Directors dated
16 October 2017 (Minutes No. GMK/34-pr-sd), the
Board of Directors’ Audit Committee is renamed as the
Audit and Sustainable Development Committee. The
Board of Directors also approved the new version of
the Regulation on Audit and Sustainable Development
Committee of the Board of Directors.
The Audit and Sustainable Development Committee
deals with matters related to financial statements, risk
management and internal controls, internal and external
audits, prevention of wrongdoings by employees
and third parties, as well as matters related to the
environment and health and safety.
In the reporting year, the committee held ten meetings,
including eight in person and two joint meetings (joint
meetings of the Audit and Sustainable Development
Committee and the Budget Committee on 14 March
2017 and 14 August 2017).
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Board of Directors
The committee is made up of five directors, three of
which are independent, including its Chairman. No
executive directors are members of the Audit and
Sustainable Development Committee. On average,
members of the Audit and Sustainable Development
Committee of the Company’s Board of Directors have
more than 10 years of experience in finance.
Members of the Audit and Sustainable
Development Committee in 20171
Gerhardus Prinsloo (Chairman, independent director)
Robert Edwards (independent director)
Alexey Bashkirov
Rushan Bogaudinov
Sergey Bratukhin (independent director)
The Audit and Sustainable Development Committee
plays an important role when it comes to controls and
accountability and has become an effective interface
between the Board of Directors, the Audit Commission,
independent auditor, the Internal Audit Department and
management of the Company.
During the reporting year, the committee has
developed for the Board of Directors a number
of recommendations dealing with the accuracy,
completeness and validity of the Company's financials,
health, safety and environment, improvement of
accounting for metal bearing products, and approval
of the Company’s auditors. The Audit and Sustainable
Development Committee also considered and took
note of the results achieved in identifying, assessing
and managing technical and production risks across
the Norilsk Nickel Group’s operations and assets,
and results of audits conducted by the Internal Audit
Department.
Strategy Committee
The Strategy Committee was established to support
the Board of Directors by conducting preliminary
reviews of the matters pertaining to sustainable
business development, investment planning, business
restructuring, and interaction with capital markets and
government authorities.
In the reporting year, the committee held ten meetings,
including six in person, one in absentia, two joint
meetings (one with the Corporate Governance,
Nomination and Remuneration Committee on 17 May
2017, and the other with the Budget Committee on 6
December 2017), and one conference call.
The Strategy Committee is made up of five directors,
including three independent directors. All directors are
recognised as non-executive.
Members of the Strategy Committee in 20172
Maxim Sokov (Chairman)
Gerhardus Prinsloo (independent director)
Alexey Bashkirov
Gareth Peter Penny (independent director)
Sergey Bratukhin (independent director)
The Strategy Committee’s focus is on supporting
the Board of Directors in developing, implementing
and revising the corporate strategy and preparing
recommended updates thereto. During the year, the
Strategy Committee issued recommendations to
the Board of Directors to facilitate decision-making
on updating the Company’s development strategy,
along with fuel and energy and sales strategies. The
committee reviewed the updates on the progress
and status of major investment projects, prepared a
progress report on production reconfiguration, and
noted the relevant management efforts in implementing
the Technology Breakthrough initiative. For strategic
planning purposes, the Committee reviewed
production reports and results of the programme
designed to improve production efficiency and reduce
operating costs.
Budget Committee
The Budget Committee is in charge of preliminary
review and issue of recommendations pertaining to
finance, budgeting, business plans and monitoring of
their implementation.
In the reporting year, the committee held five meetings,
including two in absentia and three joint meetings (two
with the Audit and Sustainable Development Committee
on 14 March 2017 and 14 August 2017, and one with the
Strategy Committee on 6 December 2017).
The Budget Committee is made up of five directors,
including two independent director. All directors are
recognised as non-executive.
Corporate Governance,
Nomination and Remuneration
Committee
The Corporate Governance, Nomination and
Remuneration Committee supports the Board of
Directors by way of:
• assessing, controlling and improving the Company's
corporate governance framework;
• ensuring succession planning for the Board of
Directors and the Management Board of the
Company;
• providing incentives, assessing the performance
of the Company's Board of Directors, Management
Board, President and Corporate Secretary, and
setting applicable remuneration policies;
Members of the Budget Committee in 20171
• supervising the development and implementation of
Alexey Bashkirov (Chairman)
Sergey Barbashev
Sergey Bratukhin (independent director)
Gerhardus Prinsloo (independent director)
Stalbek Mishakov
The key role of the Budget Committee throughout
the year was to issue recommendations to the Board
of Directors in order to facilitate decision-making on
the amount of dividends and the record date to be
suggested by the Board of Directors. The Budget
Committee also prepared information on cobalt
sales policy and, following the discussion with the
management, issued recommendations to further
develop the same. The committee approved the
Company’s 2018 budget and recommended the
continuation of the capital expenditure reduction
initiatives.
the Company's information policy.
In the reporting year, the committee held 15 meetings,
including 14 meetings in absentia and one joint meeting
(on 17 May 2017, with the Strategy Committee).
The committee is made up of five directors, including
three independent directors, one of whom chairs the
committee. All directors are recognised as non-executive.
Members of the Corporate Governance,
Nomination and Remuneration Committee in 20172
Sergey Bratukhin (Chairman, independent director)
Sergey Barbashev
Stalbek Mishakov
Robert Edwards (independent director)
Gerhardus Prinsloo (independent director)
The committee issued recommendations to the Board
of Directors in order to facilitate decision-making on
the convocation, preparation and running of annual
and extraordinary general meetings of shareholders,
and on the matters reserved to the General Meeting
of Shareholders (remuneration and reimbursement of
expenses of the members of the Board of Directors
and the Audit Commission, liability insurance and
indemnification of the members of the Board of
Directors and the Management Board).
1
2
In 2017, there were no changes to the committee’s composition.
In 2017, there were no changes to the committee’s composition.
1
2
In 2017, there were no changes to the committee’s composition.
In 2017, there were no changes to the committee’s composition.
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Board of Directors
Additionally, the Corporate Governance, Nomination
and Remuneration Committee approved the revised
Regulation on Audit and Sustainable Development
Committee of the Board of Directors and advised
the Board of Directors on approval of the Company's
policies and regulations, and evaluation of directors’
performance in 2017. The committee reviewed
management updates on implementation of the Our
Home and My Home programmes, corporate social
subsidised loan programme, and the charitable
policy of the Company, and noted the management's
achievements in implementing the Human Capital
Development Programme.
Corporate Secretary
PLATOV
Pavel
Born in: 1975
Nationality: Russia
Corporate Secretary since 2011
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Dobrolyubov Linguistics University of Nizhny
Novgorod, Russian Presidential Academy of
National Economy and Public Administration
Track record:
2011–present: Corporate Secretary at MMC
Norilsk Nickel (formerly, until 2015, JSC Norilsk
Nickel)
In the reporting year, the Company Secretary was
renamed Corporate Secretary as per the new version of
the Charter approved by the Annual General Meeting
of Shareholders (Minutes No. 1 of 9 June 2017) and
the resolution of the Board of Directors (Minutes No.
GMK/24-pr-sd of 14 July 2017).
The mission of the Corporate Secretary is to ensure
compliance with the procedures for the protection
of shareholders’ rights and legitimate interests, as
prescribed by the applicable laws and the Company’s
by-laws, and to monitor such compliance.
Pursuant to the Charter, the Corporate Secretary is
appointed by the Board of Directors for a three-year
term. The Board of Directors may terminate the powers
of the Corporate Secretary prior to their expiration.
The Corporate Secretary is responsible for:
• preparation and running of the General Meeting of
Shareholders as provided for by the applicable Russian
laws, the Company's Charter and by-laws,
• making arrangements for and running meetings of the
Board of Directors and its committees as provided for
by the applicable Russian laws, Company’s Charter and
by-laws;
• providing ongoing support and assistance to the Board
of Directors, its committees and members;
• contributing to the improvement of the Company's
corporate governance framework and practices;
• managing the operations of the Secretariat;
• other functions as per the Company's by-laws.
In accordance with the Regulation on the Corporate
Secretary of MMC Norilsk Nickel approved by the
Board of Directors on 20 April 2015 (Minutes No.
GMK/14-pr-sd), the Company’s Corporate Secretary has
an administrative reporting line to the President and is
accountable to the Board of Directors.
At this time, the Corporate Secretary is Mr. Pavel Platov.
President and
Management Board
The President and the Management Board are
executive bodies in charge of day-to-day operations.
The President serves as the Chairman of the
Management Board.
The executive bodies are a key element in the
Company’s management system ensuring enactment
of resolutions adopted by the Board of Directors
and the General Meetings of Shareholders and
implementation of Nornickel's core corporate plans
and programmes, and maintaining the efficiency of
risk management and internal control functions.
The President and members of the Management
Board are elected for an indefinite period. The Board
of Directors may at any time dismiss any member
of the Management Board. Since 1 July 2016, the
General Meeting of Shareholders has the authority to
elect and dismiss the President.
Responsibilities of the President:
• acting on behalf of the Company without the power
of attorney, including by:
representing the Company’s interests;
–
– executing transactions;
– approving staff profiles;
–
issuing orders and instructions that are binding on
all of the Company’s employees;
– approving the Company’s by-laws on production,
technology, finance, accounting, business, HR,
social support, health, safety and document
management;
resolving on any other operational matters which,
pursuant to the Company's Charter, are not
reserved to the remit of the General Meeting of
Shareholders, Board of Directors or Management
Board.
–
Responsibilities of the Management Board:
• conducting a preliminary review of materials
prepared for the meetings of the Board of Directors
focusing on definition of the Company’s business
priorities, determination of its development concept
and strategy, and approval of plans and budgets;
• drafting proposals on amendments to the Company’s
Charter;
• drafting proposals on transactions that require
approval by the General Meeting of Shareholders or
the Board of Directors;
• analysing and assessing the Company’s financial and
business performance;
• drafting proposals on the Company’s reserve fund;
• resolving on other matters as stipulated by
the Company’s Charter.
Management Board in 2017
In 2017, the Management Board held 35 meetings
in absentia and one joint meeting.
Participation in Management Board
meetings in 2017
Vladimir Potanin
Elena Bezdenezhnykh
Sergey Batekhin
Larisa Zelkova
Nina Plastinina
Alexander Ryumin
Sergey Malyshev
Onik Aznauryan
Andrey Bougrov
Sergey Dyachenko
Vladislav Gasumyanov
Elena Kondratova
Marianna Zakharova
36
34
36
36
36
35
33
35
36
36
36
36
36
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President and Management Board
Composition of the Management Board
In 2017, the composition of the Company’s
Management Board remained unchanged. The last
change in the membership was approved by the
Board of Directors on 27 April 2016.
On 12 February 2018, the Board of Directors resolved (Minutes No. GMK/
5-pr-sd) to dismiss Alexander Ryumin, member of the Management Board,
and terminate his employment contract, while also approving the new
Management Board made up of 12 members starting from 13 February 2018.
Biographies of the Management Board members
POTANIN
Vladimir
Born in: 1961
Nationality: Russia
The Company’s President since 2015 (the Company’s CEO
in 2012– 2015)
Chairman of the Management Board since 2012
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow State Institute of International Relations (MGIMO), degree
in International Economics
Track record
1995–present: member of the Presidium of the International Foundation
for the Unity of Orthodox Christian Nations
2000–present: member of the Bureau and Management Board of
the Russian Union of Industrialists and Entrepreneurs
2001–present: member of the Board of Trustees of the Solomon R.
Guggenheim Foundation (New York)
2003–present: Chairman of the Board of Trustees of the State
Hermitage Museum
2004–present: Chairman and member of the Presidium of the National
Council on Corporate Governance
2005–present: member of the Council of Trustees and the Board of the
Russian Olympians Foundation
2006–present: Deputy Chairman of the Board of Trustees of the
Moscow State Institute of International Relations (MGIMO), member
of the Board of Trustees of the Graduate School of Management
(St Petersburg University), and member of the Bureau of the All-
Russian Association of Employers (Russian Union of Industrialists and
Entrepreneurs)
2007–present: member of the Board of Trustees of St Petersburg State
University and Deputy Chairman of the Board of Trustees of the MGIMO
Endowment Fund
2007–2014: member of the Supervisory Board of the Sochi 2014
Steering Committee
2008–present: member of the Board of Vladimir Potanin Charitable
Foundation
2009–2016: Chairman of the Supervisory Board of the Russian
International Olympic University
2009–present: Deputy Chairman of the Board of Trustees of the
Russian International Olympic University
2010–present: member of the Board of Trustees of the Russian
Geographical Society
2011–present: member of the Board of Trustees of the State Hermitage
Museum Endowment Fund and the Moscow Church Construction
Foundation
2012–2015: CEO and Chairman of the Management Board of
OJSC MMC Norilsk Nickel
2013–2014: member of the Board of Directors of OJSC Inter RAO UES
2013–2015: President of CJSC Interros Holding Company
2014–present: Chairman of the Board of Trustees of the ROZA Club
for Sport Development and Support
2015–present: President of LLC Interros Holding Company
2016–present: member of the Board of the Endowment Fund for
Education, Science and Culture, and Chairman of the Board of
Trustees of the Night Hockey Foundation for the Development of
Amateur Hockey
2017–present: Chairman of the Supervisory Board of the Norilsk
Development Agency
DYACHENKO
Sergey
Born in: 1962
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Plekhanov Leningrad Mining Institute, degree in Mining Engineering;
University of Pretoria (South Africa), master’s degree
Track record
2010–2013: COO at Kazakhmys Group
2013–2014: Deputy CEO and Head of Operations
at OJSC MMC Norilsk Nickel
2014–2015: First Deputy CEO and COO at OJSC MMC Norilsk Nickel
2015–present: First Vice President and COO at PJSC MMC
Norilsk Nickel
2016–present: member of the Board of the Non-Profit Russian Mining
Council Partnership
2017–present: member of the Board of Directors at MPI Nickel Pty
Ltd, Norilsk Nickel Cawse Pty Ltd, Norilsk Nickel Avalon Pty Ltd,
Norilsk Nickel Wildara Pty Ltd, Norilsk Nickel Harjavalta Oy, Norilsk
Nickel Africa (Pty) Ltd, Norilsk Nickel Mauritius, and also member
of the Executive Committee at Nkomati
Education:
Peoples’ Friendship University of Russia (RUDN), master’s
degree in Law
ZAKHAROVA
Marianna
Born in: 1976
Nationality: Russia
Member of the Management Board since 2016
Member of the Board of Directors since 2010
Executive Director
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record
2010–2015: member of the Management Board and Deputy CEO for
Legal Affairs at LLC Interros Holding Company (CJSC Interros Holding
Company until 2015)
2010–2015: member of the Board of Directors at ProfEstate
2015–present: First Vice President for Corporate Governance,
Shareholdings and Legal Affairs at PJSC MMC Norilsk Nickel
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President and Management Board
AZNAURYAN
Onik
Born in: 1970
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Yerevan State Polytechnic University;
University of Pittsburgh (USA), Master of Business Administration
Track record
2013–2013: member of the Board of Directors at OJSC Norilskgazprom
2013–2016: Chairman of the Board of Directors at OJSC
Norilskgazprom
2013–2015: Deputy CEO for Non-Industrial Assets and Energy
at OJSC MMC Norilsk Nickel and Head (on a part-time basis)
of Norilskenergo, branch of OJSC MMC Norilsk Nickel
2015–present: Senior Vice President, Head of Non-Industrial Assets
and Energy at PJSC MMC Norilsk Nickel (Vice President until 2016),
and Head (on a part-time basis) of Norilskenergo, branch of
PJSC MMC Norilsk Nickel
BATEKHIN
Sergey
Born in: 1965
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Krasnoznamenny Military Institute of the USSR Ministry of Defence,
degree in Foreign Languages; Plekhanov Russian Academy of
Economics, degree in Finance and Credit; Moscow International Higher
Business School (MIRBIS), Master of Business Administration
Track record
2009–2015: member of the Board of Directors of the Continental
Hockey League
2010–2013: Vice President of CJSC Interros Holding Company
2012–2015: Chairman of the Board of Directors at Interport
Management Company
2013–2015: member of the Management Board, Deputy CEO, Head of
Sales, Commerce and Logistics at MMC Norilsk Nickel, and member of
the Board of Directors at Metal Trade Overseas Sa and Norilsk Nickel
Marketing (Shanghai) Co., Ltd
2013–2014: member of the Board of Directors, Chairman of the Board
of Directors at Yenisey River Shipping Company and member of the
Board of Directors at Norilsk Nickel (Asia) Ltd
2015–present: Senior Vice President, Head of Sales, Commerce and
Logistics at MMC Norilsk Nickel (Vice President until 2016)
BOUGROV
Andrey
Born in: 1952
Nationality: Russia
Member of the Management Board since 2002
Deputy Chairman of the Board of Directors since 2013
Executive Director
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow State Institute of International Relations (MGIMO), PhD
in Economics
Track record
2002–present: member of the Public Council on Foreign and Defence
Policy
2006–present: member of the Management Board of the Russian
Union of Industrialists and Entrepreneurs
2010–2013: member of the Management Board and Deputy CEO of
CJSC Interros Holding Company
2011–2013: Chairman of the Board of Directors of OJSC MMC
Norilsk Nickel
2013–2014: member of the Board of Directors of RusHydro Federal
Hydroelectric Generating Company
2013–present: Vice President at LLC Interros Holding Company (CJSC
Interros Holding Company until 2015)
2013–2015: member of the Management Board, Deputy Chairman of
the Board of Directors, and Deputy CEO at OJSC MMC Norilsk Nickel
2013–present: Vice President of the Russian Union of Industrialists and
Entrepreneurs
2014–present: member of the Board of Directors at PJSC Inter RAO
UES (OJSC Inter RAO UES until 2015)
2014–present: member of the Expert Committee of the Russian
President’s Anticorruption Office
2015–present: member of the Management Board and Deputy
Chairman of the Board of Directors at PJSC MMC Norilsk Nickel
2015–2016: member of the Investment Committee at RusHydro Federal
Hydroelectric Generating Company
2015–present: Senior Vice President at PJSC MMC Norilsk Nickel
(Vice President until 2016)
2016–present: member of the Board of Experts on Corporate
Governance at the Bank of Russia
2016–present: Chairman of the Issuer Committee at the
PJSC Moscow Exchange
2018–present: Chairman of the Board of non-financial reporting at RUIE,
vice-present and member of the Management Board at RUIE
Education:
Kirov Urals Polytechnic Institute, degree in Metallurgical Engineering
RYUMIN
Alexander1
Born in: 1956
Nationality: Russia
Member of the Management Board from 2013 to February 2018
Share in the Company’s authorised capital: 0.003%
Share in the common stock: 0.003%
Track record
2008–2012: Director of Production Management Department at MMC
Norilsk Nickel
2012-2015: CEO of Polar Division at MMC Norilsk Nickel
2015–2018: Vice President, CEO of Polar Division at MMC Norilsk
Nickel
2017–present: member of the Supervisory Board of the Norilsk
Development Agency
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1 On 12 February 2018, the Board of Directors resolved to terminate his employment contract
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
President and Management Board
ZELKOVA
Larisa
Born in: 1969
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
2012–present: member of the Russian Presidential Council for Culture
and Art
2013–2014: member of the Board of Directors at Prof-Media
Management LLC
2013–2015: member of the Management Board and Deputy CEO for
Social Policy and Public Relations at OJSC MMC Norilsk Nickel
2014–present: President, Chair of the Board at Vladimir Potanin
Charitable Foundation
2015–present: member of the Board of Trustees at the Hermitage
Foundation UK and member of the Board of Trustees at the Russian
Federal Public Academy of Education
2015–present: Senior Vice President for HR, Social Policy and Public
Relations at PJSC MMC Norilsk Nickel (Vice President until 2016)
2016–present: member of the Board of Trustees at the Endowment
Fund for Education, Science and Culture
2017–present: member of the Supervisory and Management Boards of
the Norilsk Development Agency
Education:
Moscow State University, degree in Journalism
Track record
1998–2013: Deputy CEO and PR Director at CJSC Interros Holding
Company
1999–2014: CEO of Vladimir Potanin Charitable Foundation
2007–present: member of the Presidium of the MGIMO Endowment
Fund
2009–present: member of the Board of Trustees at Pavlovsk
Gymnasium Private Non-Profit School
2010–2013: member of the Management Board at CJSC Interros
Holding Company
2011–2013: Chair of the Board of Directors at Prof-Media Management,
member of the Board of Directors at OJSC MMC Norilsk Nickel
2011–present: member of the Board of Directors at LLC Rosa Khutor Ski
Resort Development Company, Chair of the Management Board at the
State Hermitage Museum Endowment Fund
2011–2016: member of the Supervisory Board at the Russian
International Olympic University
Education:
Finance Academy under the Government of the Russian Federation,
degree in Finance and Credit; Russian Presidential Academy of
National Economy and Public Administration, degree in Public and
Municipal Administration;
A.N. Kosygin Russian State University, degree in Mechanical
Engineering
MALYSHEV
Sergey
Born in: 1969
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record
1998–2009: Deputy CEO for Economics and Finance at CJSC
LUKOIL-Neftekhim, managing company for domestic and international
petrochemical assets of OJSC LUKOIL
2009–2013: Deputy CEO for Economics and Finance, First Deputy CEO at
OJSC Energostroyinvest-Holding
2013–2015: Deputy CEO, Head of Economics and Finance at OJSC MMC
Norilsk Nickel.
2015–2016: Senior Vice President, Head of Economics and Finance
at PJSC MMC Norilsk Nickel (Vice President until 2016)
2016–present: Senior Vice President and CFO at PJSC MMC Norilsk Nickel
BEZDENEZHNYKH
Elena
Born in: 1973
Nationality: Russia
Member of the Management Board since 2012
Share in the Company’s authorised capital: 0.0011%1
Share in the common stock: 0.0011%1
Education:
Krasnoyarsk State University, degree in Law
Track record
2011–2013: member of the Board of Directors at the Sport Projects
Management Company, LLC
2012–2013: Chair of the Board at Norilsk Nickel Non-State Pension
Fund and Chair of the Board of Directors at OJSC RAO Norilsk Nickel
2012–2015: Deputy CEO and Head of Corporate Governance, Asset
Management and Legal Affairs at OJSC MMC Norilsk Nickel
2015: Vice President for Corporate Governance, Asset Management
and Legal Affairs at PJSC MMC Norilsk Nickel
2015–present: Vice President / State Secretary, Head of Government
Relations at PJSC MMC Norilsk Nickel
2016–present: member of the Supervisory Board at the Siberian
Federal University (independent public college)
2017–present: member of the Board of Trustees of the Charitable
Foundation for Support of Indigenous Peoples of the North, Siberia
and Far East
GASUMYANOV
Vladislav
Born in: 1959
Nationality: Russia
Member of the Management Board since 2014
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
2015–present: Vice President, Head of Corporate Security
at PJSC MMC Norilsk Nickel
2017–present: member of the Board of Directors of Dynamo Moscow
Football Club
2017–present: Head of the Department of Corporate Security at
MGIMO's International Institute of Energy Policy and Diplomacy
(MIEP MGIMO)
2017–present: member of the Board of Directors at Norilsk Nickel Africa
(Pty) Ltd and Norilsk Nickel Mauritius, and member of the Executive
Committee at Nkomati
Education:
Kiev Civil Aviation Engineering Institute; North-West Academy
of Public Administration
Track record
2012–2015: Director of Corporate Security and Head of Security
at OJSC MMC Norilsk Nickel
2014–2015: member of the Management Board at OJSC MMC
Norilsk Nickel
2014–2016: member of the Board of Directors at OJSC Yenisey
River Shipping Company
2015–2015: Vice President, Director of Corporate Security and Head
of Security at PJSC MMC Norilsk Nickel
1 On 4 December 2017, Ms Bezdenezhnykh increased her share in MMC Norilsk Nickel’s authorised capital
from 0.0010% to 0.0011% after coming into possession of an inheritance
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
President and Management Board
KONDRATOVA
Elena
Born in: 1972
Nationality: Russia
Member of the Management Board since 2014
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Education:
Moscow Pedagogical State University, degree in Psychology
Track record
2009–2013: Head of the President’s Office at CJSC Interros Holding
Company
2013–2015: Chief of Staff at OJSC MMC Norilsk Nickel, Advisor to
the President of CJSC Interros Holding Company (on a part-time basis)
2014–2015: member of the Management Board at OJSC MMC
Norilsk Nickel
2015–2015: Chief of Staff at PJSC MMC Norilsk Nickel
2015–present: Vice President and Chief of Staff at PJSC MMC Norilsk
Nickel, Advisor to the President of LLC Interros Holding Company
(on a part-time basis)
Education:
Moscow Chemical Machinery Construction Institute, degree in
Mechanical Engineering;
Bauman Moscow Technical Institute, degree in Economics and
Production Management
PLASTININA
Nina
Born in: 1961
Nationality: Russia
Member of the Management Board since 2013
Share in the Company’s authorised capital: 0%
Share in the common stock: 0%
Track record
2008–2013: Director of Financial Department at CJSC Interros Holding
Company
2013–2015: Director of Internal Control Department at
OJSC MMC Norilsk Nickel
2015-2016: Vice President for Internal Audit at PJSC MMC Norilsk Nickel
2016–present: Vice President for Internal Controls and Risk
Management at PJSC MMC Norilsk Nickel
Remuneration
Key performance indicators
The key performance indicators adopted by
Nornickel serve to build a transparent incentive and
performance assessment system. The Company
believes that the remuneration framework put in
place has proved its efficiency. KPIs are linked to
performance metrics approved for different types
of jobs, with employees consistently exceeding the
targets. The Company's KPIs embrace achievements
in social responsibility, occupational safety, operating
efficiency and capital management.
The Company's President approved an
Implementation Plan for the Employee Performance
Management System at Nornickel providing for:
• review and approval of documents governing
employee performance assessment procedures;
• approval of individual KPIs;
• preparation of individual development plans;
• assessment of performance by team and individual
KPIs.
To improve performance at the Head Office, the
CEO issued an order approving the Procedure for
Assessing Head Office Employee Performance and
the Regulation on Annual Performance Bonuses for
Head Office Employees.
The Procedure primarily seeks to align the results
of performance assessment with remuneration,
development, and promotion of employees, whereas
the Regulation on Annual Performance Bonuses for
Head Office Employees is used to assess employee
performance in the reporting period based on team
and individual KPIs.
To boost employee performance across its Russian
subsidiaries, the Company has developed the
Procedure for Assessing Performance of the
Group’s Management. The Procedure prescribes
that management performance be managed by
establishing KPIs and assessing achievement thereof.
Remuneration of governance bodies
Principles and mechanics of remunerations
(reimbursements) due to executives are set out in
the Charter, Regulations on the Management Board,
and other by-laws of the Company. The system
of remunerations applicable in the Company is
continuously and directly monitored by the Board
of Directors. Responsibilities of the Corporate
Governance, Nomination and Remuneration
Committee include development, supervision over
adoption, implementation and regular revision of
the Remuneration Policy for the Company's Board of
Directors, Management Board and the Company's
President.
In 2014, the Remuneration Policy for Members
of the Board of Directors was approved by the
General Meeting of Shareholders and published on
the Company’s website
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Remuneration
The Remuneration Policy for Members of the Board of
Directors sets forth the following annual remuneration
for non-executive directors:
• base remuneration of USD 120,000 for the Board
membership;
• additional remuneration of USD 50,000 for
membership in a committee of the Board of Directors;
• additional remuneration of USD 150,000 for chairing
a committee of the Board of Directors;
• reimbursement of expenses incurred by directors
while discharging their duties.
The base remuneration for the Chairman of
the Board of Directors is USD 1 mln. Subject to a
special resolution adopted by the General Meeting
of Shareholders, the Chairman of the Board of
Directors may be entitled to additional remuneration
and benefits.
To clearly differentiate the principles and structure of
remuneration payable to non-executive and executive
directors, the following items are excluded from the
remuneration payable to non-executive directors:
• bonuses linked to the Company’s operating results;
• stock options;
• additional benefits, including all forms of insurance
other than directors' liability insurance;
• severance pay and any payments related to the
change of ownership;
• pension plans and schemes.
As an additional benefit, directors are entitled to certain
insurance protections, such as:
• liability insurance;
• reimbursement of losses incurred due to the election
to the Board of Directors.
As per the Company's Charter, decisions on
remuneration and reimbursement payable to
the Company’s President and members of the
Management Board are reserved to the Board of
Directors. The total remuneration of the President
and members of the Management Board consists of
the base salary and bonuses (a variable part of the
remuneration). Bonuses are linked to the Company’s
performance, including both financial metrics (EBITDA,
free cash flow) and non-financial indicators (lower
workplace injury rates, stakeholder involvement, etc.).
The variable part of the remuneration payable to
the members of the Management Board is based on
key performance indicators updated and approved
annually by the Corporate Governance, Nomination
and Remuneration Committee of the Board of
Directors. The dismissal policy for top executives does
not differ from that for other employees.
The remuneration paid to the members of governance
bodies in 2017 including salaries, bonuses,
commissions, benefits and reimbursement of expenses
totalled USD 90.1 mln (RUB 5.3 bn)1.
Board of Directors remuneration in 2017
Remuneration types
RUB mln
USD mln
Remuneration for membership in a governance body
228.1
3.9
Salary
Bonus
Commissions
Benefits
Reimbursement
Other types of remuneration
Total
0
0
0
0
0.3
0
228.3
0
0
0
0
0.004
0
3.9
Management Board remuneration in 2017
Remuneration types
RUB mln
USD mln
Remuneration for membership in a governance body
Salary
Bonus
Commissions
Benefits
Reimbursement
Other types of remuneration
Total
2.3
2,444.7
2,583.8
0
0
0
0
0.04
41.9
44.3
0
0
0
0
5,030.9
86.2
1 The amount of remuneration is different from that specified in the 2017 consolidated IFRS financial statements as it excludes non-cash
remuneration (insurance and VHI payments, and annual remuneration liabilities as at 31 December 2017). The remuneration accrued to the
members of governance bodies in 2017 under IFRS totalled USD 103 mln (RUB 6.039 bn).
Risk management
and internal controls
Risk management framework
The Company continuously manages risks that affect
its strategic and operational goals. These efforts
include identification and assessment of external
and internal risks in terms of their impact on key
financial and non-financial metrics, along with the
development and implementation of response and
minimisation measures.
To manage catastrophic production risks,
the Company develops and approves business
continuity plans that in case of emergency set out:
• interaction procedure for business units;
• operations support or resumption plan;
• rehabilitation or reconstruction plan for affected
assets.
The Company has developed and adopted all
relevant risk management documents, including:
• Corporate Risk Management Policy,
• Corporate Risk Management Framework
Regulations,
• Risk Management Regulations,
• Investment Project Risk Management Regulations,
• risk management regulations for specific processes
(management of tax, health and safety and
market risks).
Risk management embraces all business areas and
governance levels:
• strategic risks are managed by the Board of Directors
and the Company's senior management;
• key operational risks are managed by the Company's
senior management;
• other material operational risks are managed by
heads of business units and subunits.
The corporate risk management framework (CRMF)
implementation and improvement initiatives are
spearheaded by the Company’s Vice President
and Head of Internal Controls and Risk Management
and its Risk Management Service.
In 2018, key initiatives aimed at improving the CRMF
will include:
• continued integration of risk management practices
into strategic, budget and investment planning,
setting KPIs for the management and assessing
their achievement;
• deployment of risk management automation tools;
• improvement of technical and production risk
management, broadening of the analysis perimeter,
evaluation of technical and production risk impact
on human health and safety, and environment;
• introduction of quantitative assessment methods
and modelling to analyse technical and production
risks and risks associated with investment projects.
The Corporate Risk Management Policy sets out
the following key risk management objectives:
• increase the likelihood of achieving the Company's
Insurance
goals;
• improve the resource allocation efficiency; and
• boost the Company's investment case
and shareholder value.
The risk management framework relies on the
principles and requirements of Russian and
international laws, and professional standards,
including the Corporate Governance Code
recommended by the Bank of Russia, ISO 31000
(Risk Management) and COSO ERM (Enterprise Risk
Management – Integrated Framework).
Insurance is one of the most important tools for
managing risks and finances and protecting the
assets of the Company and its shareholders against
any unforeseen losses related to our operations,
including due to external hazards.
Nornickel has centralised its insurance function
to consistently implement uniform policies and
standards supporting a comprehensive approach to
managing insurance policies and fully covering every
risk at all times. The Company annually approves a
comprehensive insurance programme that defines
key parameters by insurance type and key project.
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Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Corporate governance
Risk management and internal controls
As part of our risk mitigation initiatives, we have
implemented a corporate insurance programme
that covers assets, equipment failures and business
interruptions across the Group. Our corporate
insurance policies are issued by major Russian
insurers in cooperation with an international broker.
This helps the Company make sure that its risks
are underwritten by highly reputable international
re-insurers.
The same principles of centralisation apply to our
freight, construction and installation, aircraft and ship
insurance arrangements. The Group, as well as its
directors and officers, carry business and third-party
liability insurance.
To optimise terms of coverage and better manage
covered risks, we follow the best mining industry
practices.
Key risks, risk factors and mitigants
Risk type
WORKPLACE INJURY RISK
Mitigants
Failure to comply with the Group’s health and safety
rules may result in threats to the employee's health and
life, temporary suspension of operations, and property
damage.
Key risk factors
• Unsatisfactory organisation and control of work safety
INFORMATION SECURITY RISKS
Potential cyber crimes may result in an unauthorised
transfer, modification or destruction of information
assets, disruption or lower efficiency of IT services,
business, technological and production processes of
the Company.
Key risk factors
• Growing external threats;
• unfair competition;
• rapid development and automation of IT infrastructure,
technological and business processes;
• employee and third party wrongdoing.
Pursuant to the Occupational Health and Safety Policy approved by the Company's Board of Directors, the
Company undertakes to:
• ensure continued control over compliance with the health and safety requirements;
• improve the working conditions for employees of the Company and its contractors deployed at the
Company's production facilities, including by implementing new technologies and labour saving solutions,
and enhancing industrial safety at production facilities;
• provide staff with certified state-of-the-art personal protective equipment;
• carry out preventive and therapeutic interventions to reduce the potential impact of hazardous and
dangerous production factors;
• regularly train and instruct employees and assess their health and safety performance, and conduct
corporate workshops, including by deploying special simulator units;
• enhance methodological support for health and safety functions, including through the development
and implementation of corporate health and safety standards;
• improve the risk assessment and management framework at the Group’s companies and production
facilities as part of the Risk Control project;
• analyse the competencies of line managers at the Company’s production facilities, develop health and
safety training programmes and arrange relevant training sessions;
• provide training for managers under the programme to determine root causes of accidents using the best
international practices (“Tree of Causes and Hazards”, 5-why, etc.);
• provide information about the circumstances and causes of an accident to all employees of the Company,
conduct ad hoc instruction sessions.
• introduce a framework to manage technical, technological, organisational and HR changes.
To manage this risk, the Company undertakes to:
• develop the Information Security Strategy and Programme, define roles and responsibilities in information
security at a corporate level;
• draft information security rules and regulations;
• comply with Russian laws and regulations with respect to personal data and trade secret protection,
insider information, and critical information infrastructure;
• categorise information assets and assess information security risks;
• raise awareness in information security;
• use technical means to ensure information security of assets;
• manage access to information assets and information security incidents;
• ensure information security of the process control system;
• monitor threats to information security and use technical protection means, including vulnerability
analysis, penetration testing, cryptographic protection of communication channels, controlled access to
removable media, protection from confidential data leakages, mobile device management;
• set up and certify the Information Security Management System.
Risk type
PRICE RISK
Mitigants
Potential decrease in revenues due to lower prices for
metals (nickel, copper, platinum, palladium, etc.) subject
to the actual or potential changes in demand and supply
on certain metal markets, global macroeconomic trends,
and the financial community's interest in speculative/
investment transactions in the commodity markets.
Key risk factors
• Lower demand;
• inventory liquidation by market participants;
• speculative price decrease.
FX RISK
USD depreciation against RUB, including due to changes
in the Russian economy and the policy of the Bank of
Russia, may adversely affect the Company's financial
performance, as most of its revenues are denominated in
USD, while most of its expenses are denominated in RUB.
Key risk factors
• Increase in Russia’s balance of payments, higher oil
exchange prices and lower imports;
• improved country macroeconomics;
• change in ratings;
• lower volatility in financial markets of Russia and other
developing countries.
TECHNICAL AND PRODUCTION RISK
Technical, production, or natural phenomena, which,
once materialised, could have a negative impact on the
implementation of the production programme and cause
technical incidents or reimbursable damage to third
parties and the environment.
Key risk factors
• Harsh weather and climatic conditions, including low
temperatures, storm winds, snow load;
• unscheduled stoppages of key equipment;
• release of explosive gases and flooding of mines;
• collapse of buildings and structures;
• infrastructure breakdowns.
COMPLIANCE RISK
The risk of legal liability and/or legal sanctions, significant
financial losses, suspension of production, revocation
or suspension of a licence, loss of reputation, or other
adverse effects arising from the Company’s non-
compliance with the applicable regulations, instructions,
rules, standards or codes of conduct.
Key risk factors
• Сhanges in legislation and law enforcement practices;
• discrepancies in rules and regulations;
• considerable powers and a high degree of discretion
exercised by regulatory authorities;
• potential violation of legal requirements by the
Company’s business units and Russian subsidiaries.
To manage this risk, the Company is continuously monitoring metal price (market) forecasts.
Should the risk materialise, the Company will consider cutting capital expenditures (revising the investment
programme for projects that do not have a material impact on the Company’s development strategy) as
part of the budget process.
To manage this risk, the Company undertakes to:
• maintain a balanced debt portfolio where USD-denominated borrowings prevail to ensure a natural
hedge;
• implement regulations that limit fixing of prices in foreign currencies in expenditure contracts.
To manage this risk, the Company undertakes to:
• properly and safely operate its assets in line with the requirements of the technical documentation,
technical rules and regulations as prescribed by the local laws across the Company's footprint;
• introduce ranking criteria and determine the criticality of key industrial assets;
• timely replace its fixed assets to achieve production safety targets;
• implement automated systems to control equipment's process flows;
• improve the maintenance and repair system;
• train and educate its employees both locally, on site, and centrally, through its corporate training centres;
• systematically identify and assess technical and production risks. The Company has developed and is
implementing a programme of organisational and technical actions aimed at reducing these risks;
• develop the technical and production risk management system, including by engaging independent
experts to assess the system efficiency and completeness of data;
• engage, on an annual basis, independent surveyors to analyse the Company's exposure to disruptions
in the production and logistics chain and assess related risks. In 2017, key technical and production risks
were insured as part of the property and business interruption (downtime) insurance programme, with
emphasis laid on best risk management practices in the mining and metals industry. The programme aims
to protect the assets of the Company and its shareholders against any catastrophic risks. In addition, the
Company insured production assets at its facilities that make up the key production chain.
To manage this risk, the Company undertakes to:
• make sure that the Company complies with the applicable laws;
• defend the Company's interests during surveillance inspections or in administrative offence cases;
• use pre-trial and trial remedies to defend the Company's interests;
• include conditions defending the Company's interests in the contracts signed by the Company;
• implement anti-corruption, anti-money laundering and counter-terrorist financing initiatives;
• take actions to prevent unauthorised use of insider information and market manipulation;
• ensure timely and reliable information disclosures as required by the applicable Russian and international
laws.
In addition to ongoing measures, the following documents were developed and approved in 2017:
the Norilsk Nickel Group's Legal Support Policy, Antitrust Compliance Policy (formalising interactions to
ensure legal protection of the Norilsk Nickel Group's interests), Regulations on Interaction of MMC Norilsk
Nickel's Business Units and Officers to Prevent Unlawful Use of Insider Information in Compliance with
the Market Abuse Regulation of the European Parliament and of the Council No. 596/2014, amended
version of MMC Norilsk Nickel's Information Policy Regulations (alignment with the applicable Russian
and international information disclosure laws).
• 196 •
• 197 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Risk management and internal controls
Risk type
Mitigants
RISKS RELATED TO CHANGES IN LEGISLATION AND LAW ENFORCEMENT PRACTICES
Adverse consequences arising from the Company’s non-
compliance with the applicable regulations, instructions,
rules, standards or codes of conduct.
Key risk factors
• Unstable legal environment;
• complicated geopolitical situation;
• significant budget deficit (government agencies and
authorities seeking to boost revenues).
To manage this risk, the Company undertakes to:
• continuously monitor changes in legislation and law enforcement practices in all business areas;
• perform legal due diligence of draft regulations and amendments;
• participate in discussions of draft regulations, both publicly and as part of the expert groups;
• engage its employees in relevant professional and specialist training programmes, corporate workshops,
and conferences;
• cooperate with government agencies to ensure that new laws and regulations take into account the
Company’s interests.
POWER BLACKOUTS AT PRODUCTION AND SOCIAL FACILITIES IN THE NORILSK INDUSTRIAL DISTRICT (NID)
The failure of key equipment at the generating facilities
of fuel and energy companies and transmission networks
may result in power, heat and water shortage at key
production facilities of the Company’s Polar Division /
Russian subsidiaries and social facilities in the NID.
Key risk factors
• The isolation of the NID's power system from the
national grid (Unified Energy System of Russia);
• harsh weather and climatic conditions, including low
temperatures, storm winds, snow load;
• length of power, heat and gas transmission lines;
• wear and tear of key production equipment and
infrastructure.
SOCIAL RISKS
Escalating tensions among the workforce due to the
deterioration of social and economic conditions in the
Company's regions of operation.
Key risk factors
• Headcount optimisation;
• rejection of the Company’s values by some employees
and third parties;
• limited ability to perform annual wage indexation;
• dissemination of false and inaccurate information about
the Company’s plans and operations among the Group’s
employees;
• lower spending on social programmes and charity.
To manage this risk, the Company undertakes to:
• operate and maintain generating and mining assets as required by the technical documentation, industry
rules, regulations, and laws;
• timely construct and launch transformer facilities;
• timely upgrade (replace) TPP and HPP power units' equipment;
• timely replace transmission towers;
• timely upgrade and renovate trunk gas and condensate pipelines and gas distribution networks.
To manage this risk, the Company undertakes to:
• strictly abide by the collective bargaining agreements made between the Group's companies and employees;
• actively interact with regional and local authorities, and civil society institutions;
• fulfil its social obligations under public-private partnership agreements;
• implement the World of New Opportunities charity programme aimed at supporting and promoting regional public
initiatives;
• implement the Norilsk Upgrade project to introduce innovative solutions for sustainable social and economic
development of the region;
• implement monitoring across the Group's operations;
• conduct opinion polls among Norilsk's communities to learn more about their living standards, employment,
migration trends and general social sentiment, and identify major challenges;
• implement social projects and programmes aimed at supporting employees and their families, as well as the
Company’s former employees;
• coordinate, over the year, the joint efforts of various participants and promptly address any issues arising during
the reconstruction of Norilsk Airport's runway, at the meetings of the task force involving the representatives of the
Norilsk Administration, regional and federal authorities, Norilsk Airport and NordStar Airlines;
• provide treatment at Chinese health resorts during winter (programme geography expansion) to compensate for
fewer summer packages due to runway reconstruction at Norilsk Airport;
• engage in dialogues with stakeholders and conduct opinion polls while preparing public CSR reports.
Internal control framework
The Company has an internal control system in
place intended to promote the achievement of the
Company's goals and enhance investor confidence
in its business and corporate bodies. The internal
control system is aimed at improving the effectiveness
and efficiency of activities, keeping reliable and
accurate financial and management accounts,
ensuring compliance with the requirements of
applicable Russian laws and the Company's by-laws.
The Company has the Internal Control Policy in place
adopted by resolution of the Board of Directors
in 2016. In addition, internal control requirements,
procedures, and processes are covered by the
procedure for “Internal Control Processes at MMC
Norilsk Nickel”, as well as by business unit regulations
and other internal guidelines.
All internal control processes, principles, mechanisms,
means, and procedures make up a system of
elements:
• control environment;
• assessment of risks to business processes;
• control procedures;
• information and communications;
• monitoring of the internal control system.
Entities that form the internal control system are
structured on a number of levels, which comprise
the Company’s and subsidiaries’ corporate bodies,
business units and employees as well as dedicated
control bodies:
• Internal Control and Risk Management Unit, including
the Internal Control Department, Risk Management
Service, and Financial Control Service,
• Internal Audit Department,
• Audit and Sustainable Development Committee,
• Audit Commission.
Internal Control Department
The Internal Control Department aims to create an
efficient internal control framework that represents
a combination of organisational processes, policies
and guidelines, control procedures, corporate culture
principles and actions that the internal control entities
perform to provide reasonable assurance that the
Company will achieve its targets. The department's
functions include:
• developing and boosting efficiency of the internal
control framework;
• ensuring a consistent approach to the design,
operation and development of the internal control
framework;
• detecting and preventing any waste, misuse or
misappropriation of funds or assets of the Company
and its subsidiaries, wrongdoings and theft;
• ensuring accuracy of metrics and measurement
standards for the control and accounting of metal
bearing products;
• arranging and implementing internal controls so as
to combat illegal activities, such as money laundering
and terrorism financing;
• managing the Corporate Trust Service operations.
Also, the Company has set up the Financial Control
Service that audits the financial and business
operations of the Company and its subsidiaries to
report and issue recommendations to the President
and directors of the Company. The head of the
Financial Control Service is appointed by a resolution
adopted by the Company’s Board of Directors.
Corporate Trust Service
In February 2010, the Company launched its
Corporate Trust Service, which helps the Company’s
management to promptly respond to reports
of abuses, embezzlement and other violations.
Employees, shareholders and other stakeholders
have an opportunity to report any actions that will or
might result in financial damages or be detrimental
to the business reputation of the Company. The key
principles underlying the Corporate Trust Service
include guaranteed confidentiality for whistleblowers,
timely and unbiased consideration of all reports. In no
circumstances does the Company impose sanctions
(including dismissal, demotion, deprivation of a bonus)
against the employee who submitted a report to the
Corporate Trust Service.
• 198 •
• 199 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Risk management and internal controls
To make a report, anyone is invited to call a toll-free
24/7 hotline: +7 800 700-1941, +7 800 700-1945, or
e-mail to skd@nornik.ru.
• compliance with health and safety requirements;
• technical and production risk management;
• compliance with corporate standards and policies.
Information on received and processed reports
is disclosed annually by the Company as part of
its CSR report.
Internal Audit Department
The Internal Audit Department is responsible for
the Company's internal audit. It was established to
assist the Board of Directors and executive bodies
in enhancing the Company’s management efficiency
and improving its financial and economic operations
through a systematic and consistent approach to
the analysis and evaluation of risk management
and internal controls as tools to provide reasonable
assurance that the Company will achieve its goals.
The Internal Audit Department conducts unbiased
and independent audits, assessing how effective the
internal controls and the risk management system
are. Based on the audits, the department prepares
reports and proposals for the management on
how to improve internal controls, and monitors the
development of action plans to eliminate violations.
In order to ensure independence and objectivity, the
Internal Audit Department functionally reports to the
Board of Directors through the Audit and Sustainable
Development Committee and has an administrative
reporting line to the Company's President. It
continuously monitors the implementation of
activities developed by the management. The Board
of Directors’ Audit and Sustainable Development
Committee regularly reviews the department's work
plan, audit reports, and monitoring analytics.
In 2017, the Department conducted the following
audits:
• planning and control of process equipment repairs;
• operation of motor vehicles;
• IT;
Based on these audits, the management developed
action plans which provide for a range of activities
aimed at improving internal control procedures and
mitigating risks.
In 2018, the Internal Audit Department plans to
conduct a comprehensive assessment of the risk
management and internal control system and its
performance, and submit the results to the Audit and
Sustainable Development Committee for review.
Audit Commission
The Audit Commission is a corporate body which
monitors the financial and business operations of the
Company. The commission audits the Company’s
financial and business operations on an annual
basis and at any time as decided by the commission,
resolutions of the General Meeting of Shareholders
and the Board of Directors or as requested by
shareholders who hold collectively at least 10% of the
Company's voting shares. Following the review of
financial and business results, the Audit Commission
issues an opinion. Business operations were last
audited in April–May 2017.
The Audit Commission works in the shareholders’
interests and reports to the General Meeting of
Shareholders, which elects members of the Audit
Commission until the next Annual General Meeting of
Shareholders. The Audit Commission is independent
from the officers of the Company’s governance
bodies, and its members do not hold positions in the
Company's governance bodies.
In the reporting year, the Audit Commission consisted
of five people as prescribed by the resolution of the
Annual General Meeting of Shareholders dated 9
June 2017.
No.
1.
2.
3.
4.
5.
Name
Vladimir Shilkov
Anna Masalova
Georgy Svanidze
Elena Yanevitch
Artur Arustamov
Primary employment and position
Chief Investment Officer at CIS Investment Advisers, Deputy Project Manager of the Financial
Control Service at MMC Norilsk Nickel
Chief Financial Officer, Moscow–McDonalds CJSC
Head of Financial Department, member of the Management Board at Interros Holding
Company
Chief Executive Officer, Interpromleasing
Director of Price Control and Commercial Operations Department, En+ Management
Remuneration payable to the members of the Audit
Commission was approved by the Annual General
Meeting of Shareholders on 9 June 2017. Members
of the Audit Commission employed by the Company
are remunerated throughout the year as per their job
description and employment terms.
Corruption control
The Company complies with Russian and international
anti-corruption laws. In its interaction with government
officials, the Company, as well as its employees and
corporate bodies, comply with the applicable laws
(including anti-corruption laws), thus boosting the
Company's reputation and building up trust towards
the Company from its shareholders, investors,
business partners and other stakeholders.
As part of its effective anti-corruption combat, the
Company has developed and approved the following
anti-corruption regulations:
• Business Ethics Code;
• Code of Conduct and Ethics for Members of the
Board of Directors;
• Anti-Corruption Policy;
• Regulation on the Product Procurement Procedure
for MMC Norilsk Nickel's Enterprises;
• standard anti-corruption agreement – appendix to
the employment contract;
• Regulation on Information Security;
• Regulation on the Prevention and Management of
Conflicts of Interest;
• Regulation on Business Gifts;
• Procedure for Anti-Corruption Due Diligence on
Internal Documents at the Head Office of MMC
Norilsk Nickel;
• Regulation on the Conflict of Interest Commission;
• Information Policy.
Having joined the Anti-Corruption Charter of the Russian
Business, the Company implements dedicated anti-
corruption measures based on the Charter and set forth
in the Company's Anti-Corruption Policy.
In January 2018, the Company confirmed compliance
with the Charter and secured its position on
the Charter’s Register.
In November 2016, the Company joined the United
Nations Global Compact, which aims to promote
recognition and practical application of ten basic
principles of human rights, labour, environment and
anti-corruption by businesses worldwide.
The Company’s personnel receive ongoing training
on anti-corruption matters. In December 2017, all
new employees at the Head Office completed online
Remuneration of the Audit Commission members in 2017
Remuneration types
thousand RUB
thousand USD
Remuneration for the membership in a control body
Salary
Bonus
Commissions
Benefits
Compensation
Other types of remuneration
Total
7,200
4,620
11,620
0
0
0
0
123
79
199
0
0
0
0
23,440
402
anti-corruption training and testing. An important
element of the Company's undertakings are corruption
prevention measures aimed at making employees
clearly aware of the possible consequences and the
“inevitability of penalty” not only for those who engage
in corruption, but also for those who become aware
of corruption and do not report it. Starting in 2015,
all of the Company employees sign an agreement
setting out their obligations in the anti-corruption
area. All of the Company's employees are familiarised
with the corporate Anti-Corruption Policy and related
regulations. The Company ensures functioning of
the Preventing and Fighting Corruption page on the
corporate website containing information on anti-
corruption regulations adopted, measures taken,
preventive procedures introduced, legal training
sessions organised and law-abidance promotion
efforts taken.
Regulating the conflict
of interest
One of the key anti-corruption measures is timely
prevention and management of conflicts of interest.
Procedures for assessing and settling conflicts
of interest are set forth in the Regulation on the
Prevention and Management of Conflicts of Interest
at MMC Norilsk Nickel. As part of the regulation, the
Company has approved the standard declaration
form for reporting conflicts of interest, to be filled in
by candidates applying for vacant positions or by the
Company's employees whenever required.
On top of that, the Company has undertaken
measures aimed at preventing potential conflict
of interest involving governance bodies and key
employees. From December 2016, members of
the Company's governance bodies are required to
annually submit information on relatives and family as
per the approved form.
• 200 •
• 201 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Corporate governance
Risk management and internal controls
Alongside with these measures, the Regulation
on the Prevention and Management of Conflicts
of Interest at MMC Norilsk Nickel extends to all
employees of the Company. It sets forth key
principles that include obligation of each employee to
disclose a conflict of interest, as well as non-retaliation
for reporting the conflict of interest.
The Company takes measures aimed at identifying
related-party transactions. All measures combined,
undertaken in order to identify and prevent conflicts
of interest, minimise the probability of negative
consequences for the Company.
Insider information
The Company implements initiatives to prevent
unauthorised use of insider information. In accordance
with Federal Law No. 224-FZ of 27 July 2010 On
Prevention of Unlawful Use of Inside Information and
Market Manipulation and on Amendments to Certain
Legislative Acts of the Russian Federation, as well
as the Market Abuse Regulation of the European
Parliament and of the Council No. 596/2014 of 16
April 2014, the Company keeps a list of insiders,
reviews by-laws and corporate events, to control
implementation of measures as provided for in the
Russian and international legislation, which includes
disclosure of insider information. The Company also
undertakes other measures aimed at preventing
unlawful use of insider information.
Comprehensive security
framework
In 2017, MMC Norilsk Nickel's corporate security
operations focused on regular updates and the
implementation of a comprehensive security system,
which drew heavily on the ongoing analysis of the
full range of the Company's modern-day challenges
and threats in a rapidly changing operating
environment. The ongoing implementation of the
MBO (Management by Objectives) principles in
the economic, corporate, information and physical
security systems has enabled the Company to
promptly and adequately respond to key risks, clamp
down on embezzlement, implement initiatives to
counter illicit trafficking of precious metals and metal
bearing materials, and efficiently prevent in-house
corruption.
The methodology boasts recognition from the
international forensic community and is widely used
not only for the Company's purposes, but also in
examinations as requested by law enforcement
authorities, to combat illicit trafficking of precious and
non-ferrous metals.
Office for Chemical Forensic Analysis
A powerful tool to combat embezzlement and illicit trafficking of
products containing precious metals is our Office for Chemical
Forensic Analysis unprecedented among metals and mining and
other industrial companies.
Its experts have developed an innovative comprehensive
methodology for products containing precious metals, which
can reliably trace their origin to the manufacturer, production
shop and even section.
public-private partnerships aimed at fighting illicit
transnational trafficking of precious metals. These
initiatives received the support of world’s major metal
producers.
Awards
The Institute for Modern Security Challenges, the
Company's subsidiary, has been developing new
corporate methods to protect the Company's
legitimate interests focusing on the analysis of best
international practices, introduction of acknowledged
standards and practices of secure development of
mining companies, expert reviews and preparation
of analytical materials. Their practical implementation
is aimed at optimising the Company's security costs
and more efficient process management.
MMC Norilsk Nickel received
an outstanding award
at InfoSecurity Russia 2017:
Global Initiatives in Industrial
IT Security
In an effort to take public-private partnership in the
field of security to a new level of quality, cooperation
was established with government law-enforcement
authorities, also in the Company's regions of operations.
This approach enables a balanced planning of
corporate security measures set to be an integral part
of the national economic security system. MMC Norilsk
Nickel pays special attention to complying with anti-
terrorism requirements and enhancing security of the
Company's strategic power and transportation facilities.
In 2017, the close cooperation with law enforcement
authorities helped the Company protect these facilities
from any potential unlawful intrusion.
The Company ensures 100% safety and confidentiality
of the employee and counterparty personal data,
taking steps to integrate information security processes
with other group-wide business processes and novel
IT solutions. It is also continuously upgrading its
comprehensive security system aimed at preventing
external cyber interference with production processes.
This made it possible for the Company, among other
things, to effectively neutralise WannaCry and Petya
virus attacks.
On top of that, Nornickel initiated the adoption of
the Information Security Charter for Critical Industrial
Facilities which defines corporate principles and
standards of safe cyber behaviour. Measures
undertaken in 2017 ensure a reliable protection of the
Company's IT infrastructure.
The Company has further fostered its international
activity in the field of industry-specific business
security. The Security Committee of the International
Platinum Group Metals Association is chaired by the
Company's representative who works together with
the United Nations Interregional Crime and Justice
Research Institute (UNICRI) to prepare and implement
practical recommendations in order to strengthen
• 202 •
Independent audit
The Company has approved the Procedure to Select
an Auditor for MMC Norilk Nickel's RAS and IFRS
Financial Statements, which requires first to establish
a tender commission to produce a list of auditors who
perform best in the Russian market of audit services.
The auditor whose conditions are recognised to be
the best following the procedure, is recommended to
the Audit and Sustainable Development Committee
which, in its turn, assesses the candidate for an
independent auditor and provides recommendations
to the Board of Directors. Under applicable laws and
Clause 7.1.9 of the Company's Charter, the auditor
shall be approved by an Annual General Meeting of
Shareholders.
In June 2017, the General Meeting of Shareholders,
following the recommendation of the Board of
Directors, approved JSC KPMG as the Company’s
auditor for RAS and IFRS 2017 accounts, as well as
IFRS accounts for 1H 2018.
The auditor receives a fixed fee as determined
in the technical and business proposal that sets
out the audit procedure for all material audited
facilities and calculates the labour input and travel
expenses required to conduct the audit, based
on the qualifications and hourly rates of experts
engaged. In 2017, the auditor's fee amounted to USD
4.2 mln, including overhead charges and VAT. The
share of non-audit services rendered to the Company
stood at 24% of the total fee.
The auditor receives in 2017
Type of services
Audit of consolidated IFRS financial statements for 2017
Audit of RAS financial statements for 2017
Review of interim IFRS financial statements for 6M 2017
Audit-Related Services
Non-audit services
Total
mln RUB
104.4
17.7
26.6
39.2
58.8
246.7
mln USD
1.8
0.3
0.5
0.7
1.0
4.2
• 203 •
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes INFORMATION
FOR SHAREHOLDERS
206
Authorised capital
206
Securities
210
213
214
Dividends
Shareholder rights
Transparency
Authorised capital
As at 31 December 2017, the authorised capital of
MMC Norilsk Nickel comprised 158,245,476 ordinary
shares with a par value of RUB 1 each.
Share capital structure,
31 December 2017 // %
Share and ADR split,
31 December 2017 // %
The Company placed no preferred shares.
As at 31 December 2017, there were registered
in the shareholder register:
39 473 persons
39,445 individuals
28 legal entities
3 nominal holders
37.6
4.2
158.2
million
shares
Olderferey Holdings Ltd1
UC Rusal Plc1
Crispian Investments Ltd
Other
30.4
40.9
27.8
158.2
million
shares
59.1
Shares
ADRs
Holders of MMC Norilsk Nickel’s shares and American depositary receipts (ADRs)
31 December 2015
31 December 2016
31 December 2017
Share in the authorised capital, %
30.4
27.8
5.5
36.3
30.4
27.8
4.2
37.6
30.4
27.8
4.2
37.6
Holders
Olderfrey Holdings Ltd1
UC Rusal Plс1
Crispian Investments Ltd
Other
1
Indirect control via controlled entities.
Securities
Stock exchanges trade in MMC Norilsk Nickel’s
shares and ADRs.
Ordinary shares
The Company's ordinary shares have been trading on
the Russian market since 2001.
They are included in the Moscow Exchange’s Blue
Chip Index (ticker symbol: GMKN) and rank among
liquid instruments in the Russian securities market.
MMC Norilsk Nickel’s registrar is Independent
Registrar Company. The registrar provides a full
scope of services to the Company’s shareholders.
Shareholders (individuals and legal entities) listed in
the Company's shareholder register have access to
the Shareholder’s Personal Account, where they can:
• view the number and price of their shares,
• check dividends accrued and paid,
• see the date of the upcoming General Meeting of
Shareholders,
• participate in General Meetings of Shareholders
through e-voting.
Access to the personal account can be obtained
at a branch of Independent Registrar Company.
For more details on the registrator, please see
the Contacts section.
p. 295
The Shareholder’s
Personal Account
Share price and trading volume on the Moscow Exchange in 2017
Trading volume // RUB mln
Average share price // RUB (RHS)
Disclosure of FY 2016
financial results
Disclosure of 1H 2017
financial results
Recommendation
on dividend
payment for FY
2016
Recommendation
on dividend
payment for 1H 2017
60
50
40
30
20
10
0
12
8
4
0
Jan
Feb
Mar
Ap
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Share price and MOEX Index in 2017 // %
Nornickel shares
MOEX Index
120
100
80
60
+6%
–8%
Jan
Feb
Mar
Ap
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg
Average monthly capitalisation in 2017 // USD bn
Share price and trading volume on the Moscow Exchange
As at 31 December 2017, the Company's capitalisation
stood at USD 29.7 bn , up 12% y-o-y.
26.18
26.63
24.70
24.73
26.50
24.28
23.32
22.65
21.88
28.91
29.84
28.44
+12%
USD 29.7 bn
Nornickel's capitalisation
Jan
Feb
Mar
Ap
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Date
2013
2014
2015
2016
2017, incl.
Q1
Q2
Q3
Q4
Min
4,105
5,150
8,590
8,050
7,791
8,807
7,791
8,197
9,876
Max
6,101
10,805
12,106
11,070
11,610
10,439
9,186
9,920
11,610
Share price, RUB
End of period
Volume, shares
Market cap
at end of period, RUB bn
5,399
8,080
9,150
10,122
10,850
8,929
8,068
9,920
10,850
72,088,571
75,215,906
58,018,280
48,275,360
49,456,624
11,081,179
10,419,785
14,867,898
13,087,762
854
1,279
1,448
1,602
1,717
1,413
1,277
1,570
1,717
• 206 •
• 207 •
Source: Bloomberg
Source: Moscow Exchange
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
ADRs
In 2001, MMC Norilsk Nickel issued ADRs for
its shares. Currently, shares are convertible into
ADRs at a ratio of 1:10. Depositary services for ADR
transactions are provided by the Bank of New York
Mellon, and custody services are provided by VTB
Bank.
ADRs are traded in the electronic trading system of
OTC markets of the London Stock Exchange (ticker
symbol: MNOD), on the US OTC market (ticker
symbol: NILSY), and on many other exchanges.
As at 31 December 2017, the total number of ADRs
issued against MMC Norilsk Nickel’s shares was
647,562,500, or 40.9% of the authorised capital.
The number of ADRs traded on stock exchanges
is not constant, and depositary receipt holders may
convert their securities into shares and vice versa.
ADR price and trading volume on the London Stock Exchange in 2017
Trading volume // USD mln
Average ADR price // USD (RHS)
2
1
0
20
15
10
5
0
Jan
Feb
Mar
Ap
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
ADR price and global indices // %
Nornickel's ADRs RTS Index Euromoney global diversified index
120
100
80
60
40
+38%
+10%
–3%
ADR price and trading volume on the OTC market of the London Stock Exchange
Jan
Feb
Mar
Ap
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg
Date
2013
2014
2015
2016
2017, incl.
Q1
Q2
Q3
Q4
Min
12.4
14.2
12.4
10.4
13.0
14.8
13.0
13.9
17.2
Max
20.3
21.5
21.6
18.2
20.2
17.6
16.3
17.2
20.2
ADR price, USD
End of period
Volume, shares
Market cap at end of
period,USD mln
16.6
14.2
12.7
16.8
18.7
15.7
13.8
17.2
18.7
1,021,589,603
1,162,822,466
724,594,769
647,017,484
737,658,803
182,345,505
144,255,268
211,593,420
199,464,610
26,300
22,503
20,042
26,569
29,655
24,876
21,838
27,242
29,655
Source: Bloomberg
Share and ADR trading volume by exchanges // %
Moscow Exchange
(shares)
London Stock Exchange
(ADRs)
New York Stock
Exchange (ADRs)
For more details on trading in the Company’s
shares and ADRs, please see our website
64
58
55
60
1
1
1
1
35
41
44
39
2017
2016
2015
2014
• 208 •
Bonds
In 2017, the Company successfully placed two
Eurobond issues for a total of USD 1.5 bn against
a favourable market backdrop: April saw us close
the offering of USD 1.0 bn Eurobonds due in 2023
with a coupon rate of 4.10% that was inside the
Company's outstanding Eurobond curve, followed
by a second USD 500 mln issue due in 2022 with
a coupon rate of 3.849% (the lowest among the
Company's outstanding bonds) placed in June.
In 2017, the Company had five Eurobond issues
outstanding for a total amount of USD 4,250 mln with
maturities in 2018, 2020, 2022 and 2023, and one
issue of rouble exchange-traded bonds for RUB 15 bn
due in 2026.
As at the end of 2017, the Company boasted credit ratings from
three leading international rating agencies:
Fitch Ratings: BBB– / Stable
Standard & Poor's: BBB– / Stable
Moody's: Ba1 / Stable
On 30 January 2018, Moody's upgraded Nornickel's credit rating to
Ваа3 (investment grade) and raised its outlook from stable to positive
following an increase in Russia's country ceilings for foreign currency
debt to the same Baa3 level and a change in the outlook on Russia’s
rating from stable to positive. The Company's credit ratings from all
the three rating agencies (Fitch, Moody’s and S&P Global) currently
qualify as investment grade.
Eurobonds
Instrument
Issuer
Issue size
Coupon rate
Offering date
Maturity date
Coupon dates
Issue rating
Rouble bonds
Instrument
Issuer
ISIN
Offering date
Maturity date
Issue size
Coupon rate
Coupon dates
Eurobonds
2018 (LPN)
Eurobonds
2020 (LPN)
Eurobonds
2022 (LPN)
Eurobonds
2022 (LPN)
Eurobonds
2023 (LPN)
MMC Finance D.A.C.
MMC Finance D.A.C.
MMC Finance D.A.C.
MMC Finance D.A.C.
MMC Finance D.A.C.
USD 750 mln
USD 1,000 mln
USD 500 mln
USD 1,000 mln
USD 1,000 mln
4.375%
5.55%
3.849%
6.625%
30 April 2013
28 October 2013
8 June 2017
14 October 2015
30 April 2018
28 October 2020
8 April 2022
14 October 2022
4.10%
11 April 2017
11 April 2023
30 October / 30 April
28 October / 28 April
8 October / 8 April
14 October / 14 April
11 October / 11 April
BBB-/Bаa3/BBB-
BBB-/Bаa3/BBB-
ВВВ-/ – /ВВВ-
BBB-/Bаa3/BBB-
ВВВ-/ – /ВВВ-
Exchange-traded bonds, BO-05
MMC Norilsk Nickel
RU000A0JW5C7
19 February 2016
6 February 2026
RUB 15 bn
11.60%
Each 182 days starting from the offering date
• 209 •
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Dividends
Dividend policy
MMC Norilsk Nickel’s Dividend Policy aims to balance the interests of the Company and
its shareholders, enhance the Company's investment case and market capitalisation,
and ensure respect of shareholder rights.
The Company has put in place the Regulations on
the Dividend Policy to ensure transparency on how
dividends are calculated and paid out.
Key principles of Nornickel’s dividend policy:
• Legality: compliance with the Russian law, the
Company's Charter and by-laws;
• Transparency: transparency on how dividends
are calculated and paid out;
• Balance: dividend payouts to shareholders
along with long-term business development
and capitalisation growth for the Company;
• When calculating dividends, MMC Norilsk Nickel
accounts for the cyclical nature of the metals
market and for the need to maintain a high level
of creditworthiness. As a result, the amount
of dividends may change depending on
the Company’s operating profit and leverage.
Under the Company’s dividend policy, in determining
the recommended dividend amount, the Board of
Directors seeks to make sure that annual dividends
on the Company’s shares make up at least 30% of
the Group's consolidated EBITDA.
The decision to pay dividends is made by
the General Meeting of Shareholders based
on recommendations of the Board of Directors.
The General Meeting of Shareholders also takes into
account the Board’s recommendations to determine
the dividend amount and record date, which shall be
set not earlier than 10 days before and not later than
20 days after the General Meeting of Shareholders.
Dividends to a nominee shareholder listed on
the shareholder register shall be paid within
10 business days, while dividends to other persons
listed on the shareholder register shall be paid within
25 business days after the record date.
Dividend report
Dividends are paid to individuals/entities whose rights
to shares are recorded in the shareholder register
by Independent Registrar Company, MMC Norilsk
Nickel’s registrar
Individuals/entities whose rights to shares are
recorded by a nominee shareholder are paid
dividends via their nominee shareholder.
In accordance with Clause 9 of Article 42 of Federal
Law No. 208-FZ On Joint-Stock Companies dated
26 December 1995, any person who has not received
the declared dividends due to the fact that their accurate
address or banking details were not available to the
company or the registrar as required, or due to any other
delays on the part of the creditor, may request payment
of such dividends (unpaid dividends) during the period
of three years from the date of the resolution to pay
the same.
Declared dividends per share1 // USD
On 24 May 2018 the Company's
Board of Directors recommended that
the General Meeting of Shareholders
approve final dividends for FY 2017 in the
amount of
2017
2016
2015
2014
13.7
14.8
13.6
30.3
RUB 607.98 per share
(~ USD 9.87 at the RUB/USD exchange rate the
Russian Central Bank as of May 24, 2018)
2013
1 Based on the total amount of dividends for 2017 recommended by the Board of
13.9
Directors for approval by the General Meeting of Shareholders. Declared dividends
based on the Bank of Russia's exchange rate as at the date of the Board of Directors’
meeting.
per share totalling
Dividend yield2
RUB 96.2 mln
(~ USD 1,562 at the RUB/USD exchange rate
the Russian Central Bank as of May 24, 2018)
Dividends per share paid for the reporting period // USD
Dividend yield // %
20.7
13.6
2014
18.1
14
2015
7.3
7.8
2016
18.8
7.2
2017
Dividends paid3
Period
2017
2016
2015
2014
Dividend history4
RUB mln
176,246
86,712
154,227
159,914
2 Dividend yield for the periods calculated based on the amount of dividends for the
USD mln
calendar year recommended by the Board of Directors and on the average ADR price
by Bloomberg.
2,971
1,232
2,859
3,281
Committed to developing Tier-1 assets, Nornickel has been able
to provide a consistently high dividend yield to its shareholders
over the last five years. We expect the trend to continue.
Period
Total for 2017
FY20176
6M 2017
Total for 2016
FY2016
9M 2016
Total for 2015
FY2015
9M 2015
6M 2015
Total for 2014
FY2014
9M 2014
RUB mln
131,689
96,210
35,479
140,894
70,593
70,301
135,642
36,419
50,947
48,276
226,668
106,031
120,637
Declared dividends5
USD mln
2,162
1,562
600
2,339
1,239
1,100
2,148
548
800
800
4,798
2,018
2,780
Dividend per share/ADR
USD
13.66
9.87
3.79
14.78
7.83
6.95
13.57
3.46
5.06
5.06
30.32
12.75
17.57
RUB
832
608
224
890
446
444
857
230
322
305
1,432
670
762
• 210 •
• 211 •
3 Dividend paid during the above periods, excluding treasury shares.
4 For dividend history covering earlier periods, please see our website.
5 Calculated at the Bank of Russia's exchange rate as at the date of the Board of Directors’ meeting.
6 On 24 May 2018, the Company's Board of Directors recommended that the General Meeting of Shareholders approve final dividends for 2017.
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Taxation
Income from securities is taxable pursuant to
the applicable tax laws of the Russian Federation1.
Reduced tax rates or exemptions may apply
to individuals and foreign entities who are not tax
residents of Russia pursuant to international double
tax treaties.
Starting from 1 January 2017, in order to apply for
tax benefits under international double tax treaties,
foreign organisations must confirm their permanent
residence in a state which has a double tax treaty
signed with Russia, and also provide the income
paying tax agent with a document confirming the
right of the organisation to receive such income
(Clause 1, Article 312 of the Russian Tax Code).
Should the organisation fail to provide such
confirmation by the date of the payout, the Russian
tax agent shall withhold the tax at the standard
rates stipulated by Clauses 2 and 3, Article 284 of
the Russian Tax Code.
Dividend tax formula2
AT=P×TR×(D1–D2)
AT — amount of tax to be withheld from the income of the recipient
of dividends;
P — proportion of the dividend amount payable to one recipient to
the total dividend amount to be distributed;
TR — tax rate for Russian entities (0% or 13%);
D1 — dividend amount to be distributed among all recipients;
D2 — dividend amount3, received by the entity paying dividends,
provided that previously these amounts were not included in
the taxable income.
Tax treatment of income from securities // %
Item
Individuals
Residents
Non-residents
Legal entities
Russian companies
Non-resident companies
Income from securities
transactions
Interest income
on securities
Dividend income
on securities
13
304
205
20
13
30
20
20
13
15
136
15
1 Chapter 23 (Personal Income Tax) and Chapter 25 (Corporate Income Tax) of the Russian Tax Code.
2 The formula is not applicable to dividends paid to foreign entities and/or individuals who are not tax residents of Russia.
3 Excluding the dividend amount eligible for a zero tax rate pursuant to Subclause 1, Clause 3, Article 284 of the Russian Tax Code.
4
If shares or other securities are sold in Russia.
5 Or 0%, if shares (interests) of Russian entities acquired on or after 1 January 2011 are sold, provided that as at the date of their sale the shares (interests) have
been owned for over five years and subject to one of the conditions stipulated by Clause 2, Article 284.2 of the Russian Tax Code.
6 Or 0%, if as at the date of the dividend payout resolution a Russian entity has been owning an interest of 50% (and more) in the authorised capital of the entity
paying dividends, for 365 days (and more).
Shareholder rights
Holders of MMC Norilsk Nickel's shares who
are registered in the shareholder register receive
a ballot from the Company and are entitled
to exercise their voting right by sending the ballot
sheet to the Company or by attending the General
Meeting of Shareholders (in person or by proxy).
Holders of MMC Norilsk Nickel's shares who are
clients of nominal holders can also participate in
the General Meeting of Shareholders by instructing
the nominal holders in accordance with the Russian
securities law.
Holders of MMC Norilsk Nickel's shares (individuals
and legal entities registered in the shareholder
register and clients of nominal holders) can participate
in the General Meeting of Shareholders through
e-voting using the Shareholder’s Personal Account
should such option be provided for by the Board
of Directors in the process of general meeting
preparation. Access to the personal account can
be obtained at a branch of Independent Registrar
Company.
ADR holders do not receive ballot sheets directly from
the Company. According to the depository agreement,
the Company notifies the depository, which as
soon as possible, and provided it is not prohibited
by the Russian law, notifies ADR holders about
the general meeting and encloses voting materials and
a document describing the voting procedure for ADR
holders. To exercise their voting rights, ADR holders
instruct the depository accordingly.
All shareholders, including minority and institutional
shareholders, enjoy equal rights and treatment
in their relations with the Company, in particular
the rights to:
• participate in General Meetings of Shareholders
and vote on all items within its competence;
• receive dividends should the General Meeting of
Shareholders pass the relevant resolution;
• receive part of the Company's property in case of
its liquidation;
• have access to information about the Company's
operations.
The Company has the Regulations on the General
Meeting of Shareholders in place that set forth
procedures to convene, prepare and conduct its
general meetings.
For more details on the registrator, please see
the Contacts section.
p. 295
The Annual General Meeting of Shareholders is held
on an annual basis not earlier than three months
before and not later than six months after the end of
the financial year. General meetings other than Annual
General Meetings of Shareholders are defined as
Extraordinary General Meetings of Shareholders and
are held as per resolution of the Board of Directors
at their discretion or at the request of the Audit
Commission, the Company’s auditor, or shareholders
who own at least 10% of the Company’s voting shares
as at the date of the request.
The notice of a General Meeting of Shareholders
is published in the Rossiyskaya Gazeta newspaper
and the Taimyr newspaper and posted on the
Company's website not later than 30 days prior to
the date of the general meeting. If a general meeting
is conducted in the form of absentee voting (by
ballot), the notice is given in the above mentioned
newspapers at least 30 days prior to the deadline
set for the collection of ballot sheets.
For more details on the Regulations on the General
Meeting of Shareholders, please see the Investor
Relations section on the Company’s corporate website
• 212 •
• 213 •
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
A General Meeting of Shareholders shall be
considered properly convened (having a quorum) if
the shareholders who own in aggregate more than
50% of the votes granted by the voting shares of
the Company are present at the meeting.
Shareholders owning at least 2% of the Company’s
voting shares may propose items to be included
in the agenda of Annual General Meetings of
Shareholders and may put forward candidates for
election to the Board of Directors and Audit
Commission of the Company as and when
prescribed by the Federal Law and the Company’s
Charter.
Voting at the General Meeting of Shareholders is
conducted in accordance with the "one share, one
vote" rule, unless otherwise provided for in the Federal
Law. Members of the Company’s Board of Directors
are elected through cumulative voting, i.e. the number
of votes held by each shareholder is multiplied by
the number of persons to be elected to the Board of
Directors.
Transparency
Nornickel corporate website
2 0 1 7 M I L E S T O N E
In September 2017, Nornickel launched a new corporate website, now operating on two domains –
www. nornickel.ru and www.nornickel.com for Russian and English speakers, respectively. The new
website will help streamline interaction with stakeholders, tackle existing and potential business challenges
and provide updates on key developments within the Company. Among other things, the website includes
the new ESG Strategy subsection. To create the website, the Company leveraged best-in-class web
technologies.
In 2017, the Company held
>350
meetings
with institutional investors
For more details on the events, please see
the IR Calendar on the Company’s website
In 2017, the Company's Board of Directors
approved the amended version of MMC Norilsk
Nickel's Information Policy Regulation s, which
primarily seeks to provide stakeholders with
full and reliable information on the Company's
operations and collect feedback.
In line with its key disclosure principles,
the Company strives to provide any information
on a regular and timely basis and make it available
to stakeholders on the basis of equal rights
and opportunities. We also work to ensure that
the information is reliable and complete while
maintaining a reasonable balance between
transparent operations and business considerations.
The Company provides updates in the media and
on its corporate website at https://www.nornickel.ru/.
The Company’s disclosure procedures comply with
the Russian law, the rules of the Moscow Exchanges
and international regulations.
MMC Norilsk Nickel also seeks to improve
transparency by releasing additional information
in excess of that required by the law. The Company
discloses information to shareholders and investors
through the following channels: press releases,
presentations, annual reports, CSR reports,
statements on material facts, disclosure feeds,
and RNS. The Company makes a point of parallel
disclosure in domestic and foreign markets.
The Company's quarterly disclosures include
operating indicators, the issuer’s quarterly reports,
RAS financial (accounting) statements, and affiliates
lists. IFRS statements are disclosed on a semi-
annual basis. The IFRS disclosures are followed by
conference calls and webcasts of the Company’s
senior management with analysts and investors
for the purpose of providing the market with the
required information and comments. In addition,
to enhance transparency, the Company makes
extensive use of all communication tools available,
including participation of senior managers in
conferences, speeches, presentations, investor days,
and production site visits for investors
The Company engages in an ongoing dialogue with
both existing shareholders and potential investors.
During the past year, the Company maintained
close interaction with the investor community and
shareholders, organising over 350 meetings with
institutional investors and an Investor Day in London
followed by a road show in Europe and the US.
• 214 •
• 215 •
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes ESG:
environmental protection, social responsibility
and corporate governance
Stakeholder
engagement
In recent years, the sustainable development
agenda has been gaining ground, with an increasing
number of investors and asset managers opting for
responsible investment.
In 2017, the Company held around 20 target
meetings with investors centred around
environmental protection, social responsibility and
corporate governance (ESG).
To improve interaction with investors and agencies
engaged in assessing the Company against ESG
criteria, Nornickel set up a dedicated section on its
website that features all the required information:
https://www.nornickel.com/investors/esg/
Also, it developed an ESG databook providing
information on ESG indicators starting from 2010.
Our key ESG achievements :
• In 2017, Nornickel earned a top position in the World Wildlife
Fund’s Environmental Responsibility Rating of Metals and Mining
Companies in Russia;
• In 2017, the Company moved up from the last year's 56th to the 35th
position in Sustainalytics's ESG rating, with a score of 58 against
49 in 2016;
• In January 2018, MSCI ESG Research upgraded Nornickel's rating to
a B level following a reduction in sulphur dioxide emissions by 6%
compared to 2015, and strong anti-corruption commitment;
• In December 2016, Nornickel was included in the FTSE4Good
Emerging Index, a leading CSR index;
• In November 2016, the Company joined the United Nations Global
Compact, also becoming member of the Association “National Global
Compact Network” in June 2017.
STAKEHOLDERS
KEY INTERESTS
OF STAKEHOLDERS
INTERACTION
MECHANISMS
KEY INTERACTION
EVENTS IN 2017
Shareholders
and investors
• Capitalisation growth
• Dividend payments
• Transparency of
information
• One-on-one meetings
• Conference calls
• Phone calls
• Emails
• Site visits
• Investor Day in London
• Conference calls and
a road show following
the disclosure of IFRS
financial statements
Investment banks
(brokers)
• Transparency
of information
• Stability
• Meetings
• Conference calls
• Phone calls
• Emails
• Investor Day in London
• Conference calls and
a road show following
the disclosure of IFRS
financial statements
ESG Strategy
is available on website
Internal documents
and policies are available
on website
In 2017, the Company held around
20
target meetings with ESG
investors
In 2017, the Company’s Board of Directors approved a number
of social and environmental policies available on the Company's
website, including:
Human rights policy
Freedom of association policy
Indigenous rights policy
Local community relations policy
Equal opportunities programme
Working conditions policy
Environmental policy (amended and supplemented)
Biodiversity policy
Environmental impact assessment policy
Renewable energy sources policy
Anti-corruption policy (amended and supplemented)
Nornickel's website won the Moscow Exchange's
award for the best design, navigation and
disclosure, and ARFI’s IR-cases contest.
The Company’s 2016 Annual Report won 10 awards
and diplomas at prestigious Russian and foreign
contests, including those hosted by the, Expert RA,
Vision Awards LACP, ARC and Moscow Exchange.
The report boasts eight LACP awards, including
top platinum in the printed version and silver in the
online annual reports in the mining category.
The Company’s 2016 Corporate Social
Responsibility Report won four awards in the
LACP's Vision Awards competition while also
ranking among Top 40 non-financial reports
globally and topping among CSR reports of Russian
metals and mining companies. CSR report also
received a special award at the Moscow Exchange.
• 216 •
• 217 •
Annual report • 2017Information for shareholdersCompany overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
APPENDIXES
220
267
268
270
272
292
294
Consolidated financial statements
The Group structure
History of production indicators
Minerals resources and reserves
Report on compliance with principles
and recommendations set forth in the
Corporate Governance Code
Glossary
Metric conversion table and currency
exchange rates
295
Сontacts
Appendixes
Сonsolidated financial statements
Сonsolidated financial
statements
INDEX
221
222
225
225
226
227
229
231
232
Statement of management’s responsibilities for the preparation and
approval of the consolidated financial statements for the year ended
31 December 2017
Independent Auditors’ report
Consolidated financial statements for the year ended 31 December
2017
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Statement of management’s responsibilities
for the preparation and approval
of the consolidated financial statements
for the year ended 31 December 2017
The following statement, which should be read in conjunction with the auditors’ responsibilities stated in the auditors’ report set out on pages 222–224,
is made with a view to distinguishing the respective responsibilities of management and those of the auditors in relation to the consolidated financial
statements of Public Joint Stock Company “Mining and Metallurgical Company Norilsk Nickel” and its subsidiaries (the “Group”).
Management is responsible for the preparation of the consolidated financial statements that present fairly in all material aspects the consolidated financial
position of the Group as at 31 December 2017 and consolidated statements of income, comprehensive income, cash flows and changes in equity for the year
then ended, in accordance with International Financial Reporting Standards (“IFRS”).
In preparing the consolidated financial statements, management is responsible for:
• selecting suitable accounting principles and applying them consistently;
• making judgements and estimates that are reasonable and prudent;
• stating whether IFRS have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and
• preparing the consolidated financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business for
the foreseeable future.
Management, within its competencies, is also responsible for:
• designing, implementing and maintaining an effective system of internal controls throughout the Group;
• maintaining statutory accounting records in compliance with local legislation and accounting standards in the respective jurisdictions in which the Group
operates;
• taking steps to safeguard the assets of the Group; and
• detecting and preventing fraud and other irregularities.
The consolidated financial statements for the year ended 31 December 2017 were approved by:
President
V.O. Potanin
Moscow, Russia
6 March 2018
Senior Vice President –
Chief Financial Officer
S.G. Malyshev
220
221
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
Сonsolidated financial statements
lndependent Auditors’ Report
То the Shareholders and Board of directors of
PJSC “Mining and Metallurgical Company Norilsk Nickel”
Opinion
We have audited the consolidated financial statements of PJSC “Mining and Metallurgical Company Norilsk Nickel” (the “Company”) and its subsidiaries
(the “Group”), which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated income statement, the consolidated
statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and
other explanatory information.
ln our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group
as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with lnternational
Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with lnternational Standards on Auditing (ISAs). Our responsibilities under those standards are further described in
the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance
with the independence requirements that are relevant to our audit of the consolidated financial statements in the Russian Federation and with the
lnternational Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with the requirements in the Russian Federation and the IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide а basis for our opinion.
Кеу Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the
current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Audited entity: PJSC “Mining and Metallurgical Company Norilsk Nickel”
Independent auditor: JSC “KPMG”, a company incorporated under the
Registration No. in the Unified State Register of Legal Entities 1028400000298
Laws of the Russian Federation, a member firm of the KPMG network of
Dudinka, Krasnoyarsk Region, Russian Federation
independent member firms affiliated with KPMG International Cooperative
(“KMPG International”), a Swiss entity.
Registration No. in the Unified State Register of Legal Entities
1027700125628.
Member of the Self-Regulated organization of auditors “Russian Union of
auditors” (Association). The Principal Registration Number of the Entry in
the Register of Auditors and Audit Organisations: No. 11603053203.
Nkomati Nickel Mine Measurement (losses from impairment of assets of Nkomati Nickel Mine)
Please refer to the Note 14 in the financial statements.
The Кеу Audit Matter
How the matter was addressed in our audit
As at 31 December 2017 the Group has а 50% interest in the joint operation
Nkomati Nickel Мinе (hereinafter “Nkomati”).
As at 31 December 2017 the Group performed an impairment test of Nkomati
property, plant and equipment and recognized an impairment loss for the excess
of their carrying value over value in use.
Given the value of property, plant and equipment and the significant judgment
involved in preparation of discounted cash flows model of Nkomati, we consider
the determination of recoverable amount to bе а key audit matter.
Our audit procedures included testing significant assumptions (metal prices and
forecasts of exchange rate of South African rand to US dollar, as well as discount
rate) and evaluating methodology used bу the Group. We involved KPMG valuation
specialists to assist us in evaluating the methodology used bу the Group and
analysis of key assumptions in terms of their reasonableness and relevance, taking
into consideration current macroeconomic conditions,historic performance results
and future plans. We compared:
• forecast metal prices, inflation rates in South Africa and the USA with publicly
available market information;
• discount rate calculation to our own assessment of key components of discount
rate calculation.
ln addition, we analyzed forecast cash flows, bу comparing production volumes to
reserves estimates and historical operating performance of Nkomati.
We also assessed appropriateness and completeness of the disclosures in the
financial statements in relation to significant assumptions used in determination of
recoverable amount.
Other lnformation
Management is responsible for the other information. The other information comprises the Financial Overview (MD&A), but does not include the consolidated
financial statements and our auditors’ report thereon, which we obtained prior to the date of this auditors’ report, and the information included in other
sections of Annual report for 2017, which is expected to bе made available to us after that date.
Our opinion оn the consolidated financial statements does not cover the other information and we do not аnd will not express аnу form of assurance
conclusion thereon.
ln connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to bе materially misstated.
lf, based оn the work we have performed оn the other information that we have obtained prior to the date of this auditors’ report, we conclude that there is
а material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibllities of Management and Those Charged with Governance for the Consolidated
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal
control as management determines is necessary to еnаblе the preparation of consolidated financial statements that аrе free from material misstatement,
whether due to fraud or error.
ln preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as а going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or
to cease operations, оr has nо realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
222
223
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes Appendixes
Сonsolidated financial statements
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as а whole are free from material misstatement,
whether due to fraud or error, and to issue аn auditors’ report that includes our opinion. Reasonable assurance is а high level of assurance, but is not а
guarantee that аn audit conducted in accordance with ISAs will always detect а material misstatement when it exists. Misstatements саn arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably bе expected to influence the economic decisions of users taken
оn the basis of these consolidated financial statements.
As part of аn audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
•
ldentify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and оbtain audit evidence that is sufficient and appropriate to provide а basis for our opinion. The risk of not detecting
а material misstatement resulting from fraud is higher than for оnе resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion оn the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bу management.
• Conclude оn the appropriateness of management’s use of the going concern basis of accounting and, based оn the audit evidence obtained, whether
а material uncertainty exists related to events or conditions that mау cast significant doubt оn the Group’s ability to continue as а going concern. lf we
conclude that а material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based оn the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Group to cease to continue as а going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events in а manner that achieves fair presentation.
• Оbtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express аn opinion
оn the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with а statement that we have complied with relevant ethical requirements regarding independence, and
communicate with them all relationships and other matters that may reasonably bе thought to bear оn our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that а matter should not bе
communicated in our report because the adverse consequences of doing so would reasonably bе expected to outweigh the public interest benefits of such
communication.
The engagement partner оn the audit resulting in this independent auditors’ report is:
Andrey Kim
JSC “KPMG”
Moscow, Russia
6 March, 2018
Consolidated income statement
for the year ended 31 December 2017
Consolidated income statement
for the year ended 31 December 2017
US Dollars million
Revenue
Metal sales
Other sales
Total revenue
Cost of metal sales
Cost of other sales
Gross profit
General and administrative expenses
Selling and distribution expenses
Impairment of non-financial assets
Other net operating expenses
Operating profit
Foreign exchange gain, net
Finance costs
Impairment of available-for-sale investments
Gain/(loss) from disposal of subsidiaries and assets classified
as held for sale
Income from investments, net
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Shareholders of the parent company
Non-controlling interests
EARNINGS PER SHARE
Basic and diluted earnings per share attributable to shareholders
of the parent company (US Dollars per share)
Notes
For the year ended 31 December 2017
For the year ended 31 December 2016
6
7
8
9
14
10
11
15
20
12
13
21
8,415
731
9,146
(3,968)
(632)
4,546
(759)
(75)
(227)
(362)
3,123
159
(535)
–
20
77
2,844
(721)
2,123
2,129
(6)
2,123
13.5
7,646
613
8,259
(3,633)
(508)
4,118
(581)
(111)
(61)
(84)
3,281
491
(453)
(153)
(4)
114
3,276
(745)
2,531
2,536
(5)
2,531
16.1
224
225
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
Сonsolidated financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2017
US Dollars million
Profit for the year
Other comprehensive income
Items to be reclassified to profit or loss in subsequent periods:
Effect of translation of foreign operations
Other comprehensive income to be reclassified to profit or loss
in subsequent periods, net
Items not to be reclassified to profit or loss in subsequent periods:
Effect of translation to presentation currency
Other comprehensive income not to be reclassified to profit or loss
in subsequent periods, net
Other comprehensive income for the year, net of tax
Total comprehensive income for the year, net of tax
Attributable to:
Shareholders of the parent company
Non-controlling interests
For the year ended
31 December 2017
2,123
For the year ended
31 December 2016
2,531
15
15
277
277
292
2,415
2,417
(2)
2,415
13
13
561
561
574
3,105
3,106
(1)
3,105
Consolidated statement of financial position
at 31 December 2017
US Dollars million
Notes
At 31 December 2017
At 31 December 2016
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Other financial assets
Other taxes receivable
Deferred tax assets
Other non-current assets
Current assets
Inventories
Trade and other receivables
Advances paid and prepaid expenses
Other financial assets
Income tax receivable
Other taxes receivable
Cash and cash equivalents
Other current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Capital and reserves
14
15
16
13
17
17
18
15
16
19
10,960
148
192
1
77
731
12,109
2,689
327
71
99
82
296
852
110
4,526
16,635
9,306
94
190
2
72
1,013
10,677
1,912
173
66
8
82
277
3,325
3
5,846
16,523
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
226
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Appendixes
Сonsolidated financial statements
Share capital
Share premium
Translation reserve
Retained earnings
Equity attributable to shareholders of the parent company
Non-controlling interests
Non-current liabilities
Loans and borrowings
Provisions
Trade and other long-term payables
Deferred tax liabilities
Other long-term liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Dividends payable
Employee benefit obligations
Provisions
Derivative financial instruments
Income tax payable
Other taxes payable
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
21
27
22
23
25
13
23
26
27
24
25
16
Consolidated statement of cash flows
for the year ended 31 December 2017
US Dollars million
At 31 December 2017
At 31 December 2016
For the year ended 31 December 2017
For the year ended 31 December 2016
6
1,254
(4,490)
7,557
4,327
331
4,658
8,236
464
402
407
116
9,625
817
783
6
377
189
24
9
147
2,352
11,977
16,635
6
1,254
(4,778)
7,340
3,822
74
3,896
7,276
441
523
355
50
8,645
579
1,613
1,164
301
183
1
2
139
3,982
12,627
16,523
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortisation
Impairment of non-financial assets
Impairment of available for sale investments
Loss on disposal of property, plant and equipment
(Gain)/loss from disposal of subsidiaries and assets classified as held for sale
Change in provisions and allowances
Finance costs and income from investments, net
Foreign exchange gain, net
Other
Movements in working capital:
Inventories
Trade and other receivables
Advances paid and prepaid expenses
Other taxes receivable
Employee benefit obligations
Trade and other payables
Provisions
Other taxes payable
Cash generated from operations
Income tax paid
Net cash generated from operating activities
INVESTING ACTIVITIES
2,844
645
227
–
9
(20)
41
458
(159)
58
4,103
(346)
(174)
10
(5)
9
(1,118)
(48)
2
2,433
(670)
1,763
3,276
557
61
153
16
4
13
360
(491)
9
3,958
(751)
(3)
13
(36)
44
835
(45)
26
4,041
(530)
3,511
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
228
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Appendixes
Сonsolidated financial statements
Purchase of property, plant and equipment
Purchase of other financial assets
Purchase of intangible assets
Purchase of other non-current assets
Loans issued
Proceeds from repayment of loans issued
Net change in deposits placed
Proceeds from sale of other financial assets
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of subsidiaries and assets classified as held for sale
Interest received
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayments of loans and borrowings
Financial lease payments
Dividends paid
Dividends paid to non-controlling interest
Interest paid
Proceeds from sale of a non-controlling interest in a subsidiary
Sale of own shares from treasury stock
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of foreign exchange differences on balances of cash and cash equivalents
Cash and cash equivalents at the end of the year
For the year ended 31 December 2017
For the year ended 31 December 2016
Equity attributable to shareholders of the parent company
Consolidated statement of changes in equity
for the year ended 31 December 2017
US Dollars million
Notes
Share capital
Share
premium
Treasury
shares
Translation
reserve
Retained
earnings
1,254
(196)
(5,348)
(1,940)
–
(62)
(88)
(18)
48
(80)
25
29
99
51
(1,936)
4,233
(3,140)
(10)
(2,971)
(1)
(642)
294
–
(2,237)
(2,410)
3,325
(63)
852
(1,667)
(150)
(47)
(31)
(103)
–
(10)
10
1
3
74
(1,920)
936
(1,741)
(5)
(1,232)
–
(591)
80
154
(2,399)
(808)
4,098
35
3,325
Balance at 1 January 2016
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income/
(loss) for the year
Dividends
Increase in non-controlling interest
due to decrease in ownership of a
subsidiary
Sale of own shares from treasury
stock
Decrease in non-controlling
interest due to increase
in ownership of a subsidiary
Balance at 31 December 2016
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income/
(loss) for the year
Dividends
Increase in non-controlling interest
due to decrease in ownership of a
subsidiary
Other effects related to
transactions with non-controlling
interest owners
Decrease in non-controlling
interest due to increase
in ownership of a subsidiary
Balance at 31 December 2017
27
22
27
22
6
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
1,254
–
–
–
–
–
–
–
1,254
–
–
–
–
–
196
–
–
–
–
–
–
–
–
–
–
–
570
570
–
–
–
–
(4,778)
–
288
288
–
–
–
–
Non-
controlling
interests
22
(5)
4
(1)
–
55
–
(2)
74
(6)
4
(2)
(1)
Total
2,261
2,531
574
3,105
(1,708)
80
158
–
3,896
2,123
292
2,415
(1,847)
Total
2,239
2,536
570
3,106
(1,708)
25
158
2
3,822
2,129
288
2,417
(1,846)
6,523
2,536
–
2,536
(1,708)
25
(38)
2
7,340
2,129
–
2,129
(1,846)
35
35
259
294
(100)
(100)
(1)
(1)
–
1
(100)
–
(4,490)
7,557
4,327
331
4,658
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
The accompanying notes on pages 232–266 form an integral part of the consolidated financial statements
230
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Appendixes
Сonsolidated financial statements
Notes to the consolidated financial statements
for the year ended 31 December 2017
US Dollars million
1. General information
Organisation and principal business activities
Public Joint-Stock Company “Mining and Metallurgical Company Norilsk Nickel” (the “Company” or “MMC Norilsk Nickel”) was incorporated in the Russian
Federation on 4 July 1997. The principal activities of the Company and its subsidiaries (the “Group”) are exploration, extraction, refining of ore and
nonmetallic minerals and sale of base and precious metals produced from ore. Further details regarding the nature of the business and structure of the
Group are presented in note 33.
Major production facilities of the Group are located in Taimyr and Kola Peninsulas of the Russian Federation, and in Finland.
BASIS OF PREPARATION
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The entities of the Group maintain their accounting records in accordance with the laws, accounting and reporting regulations of the jurisdictions in
which they are incorporated and registered. Accounting principles in certain jurisdictions may differ from those generally accepted under IFRS. Financial
statements of such entities have been adjusted to ensure that the consolidated financial statements are presented in accordance with IFRS.
The Group issues a separate set of IFRS consolidated financial statements to comply with the requirements of Russian Federal Law No. 208 On consolidated
financial statements (“208-FZ”) dated 27 July 2010.
Basis of measurement
The consolidated financial statements of the Group are prepared on the historical cost basis, except for:
• mark-to-market valuation of by-products, in accordance with IAS 2 Inventories;
• mark-to-market valuation of certain classes of financial instruments, in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
2. Changes in accounting policies
Reclassification
Information for the year ended 31 December 2016 was recasted in accordance with requirement of IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations since the criteria for classification of Nkomati as assets held for sale were no longer met as at 31 December 2017 (refer to note 20).
At 31 December 2017 management reassessed classification of some expenses of cost of metal sales and selling and distribution expenses in order to better
align cost of sales structure with management accounts and reporting (refer to notes 7 and 9). Information for the year ended 31 December 2016 has been
reclassified to conform with the current period presentation.
Standards and interpretations effective in the current year
In the preparation of these consolidated financial statements the Group has adopted all new and revised International Financial Reporting Standards and
Interpretations issued by International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for adoption in annual periods beginning
on 1 January 2017.
Adoption of amendments to the existing Standards detailed below did not have significant impact on the accounting policies, financial position or
performance of the Group:
• IFRS 12 Disclosure of Interests in Other Entities (amended);
• IAS 7 Statement of Cash Flows (amended);
• IAS 12 Income Taxes (amended).
Standards and interpretations in issue but not yet effective
At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations or amendments to them were in issue
but not yet effective and not early adopted:
Standards and Interpretations
Effective for annual periods beginning on or after
IFRS 1 First-time Adoption of International Financial Reporting Standards (amended)
IFRS 2 Share-based Payment (amended)
IFRS 4 Insurance Contracts (amended)
IFRS 9 Financial Instruments (amended)
IFRS 15 Revenue from Contracts with Customers
IAS 28 Investments in Associates and Joint Ventures (amended)
IAS 40 Investment Property (amended)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 17 Insurance Contracts
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2019
1 January 2021
Management of the Group plans to adopt all of the above standards and interpretations in the Group’s consolidated financial statements for the respective periods.
IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018, early adoption is permitted) replaces IAS 39 Financial
Instruments: Recognition and Measurement and introduces new classification and measurement, ‘expected losses’ impairment model for financial assets
and new rules for hedge accounting. The standard will not materially affect the consolidated financial statements of the Group.
IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018, early adoption is permitted) establishes
a comprehensive framework for accounting of revenue from customers. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11
Construction Contracts and certain interpretations. The standard introduces 5-step model for revenue from contracts with customers. According to IFRS 15,
revenue is measured in the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a
customer. Based on the performed assessment, the new standard is not expected to affect significantly the Group’s consolidated financial statements.
3. Significant accounting policies
Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate financial statements of the Company and its subsidiaries, from the date that control effectively
commenced until the date that control effectively ceased. Control is achieved where the Company is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-
controlling interests include interests at the date of the original business combination and non-controlling share of changes in net assets since the date of
the combination. Total comprehensive income must be attributed to the interest of the Group and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of
the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
All intra-group balances, transactions and any unrealised profits or losses arising from intragroup transactions are eliminated in full on consolidation.
Changes in the Group’s ownership interest in a subsidiary that do not result in the Group losing control are accounted for within the equity.
When the Group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the former subsidiary. Any gain or
loss is recognised in the consolidated income statement. Any investment retained in the former subsidiary is measured at its fair value at the date when
control is lost.
232
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Сonsolidated financial statements
Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and
obligations of each investor. The Group applies the following accounting to joint operations and joint ventures. The Group recognises in relation to its
interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its
revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation;
and its expenses, including its share of any expenses incurred jointly. The Group accounts for joint ventures using the equity method.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the
acquiree and the equity interests issued by the Group at the date of acquisition in exchange for control of the acquiree.
Where an investment in a subsidiary or an associate is made, any excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the fair value of the identifiable
assets acquired and the liabilities assumed at the acquisition date is recognised as goodwill. Goodwill in respect of subsidiaries is disclosed separately
and goodwill relating to associates is included in the carrying value of the investment in associates. Goodwill is reviewed for impairment at least annually.
If impairment has occurred, it is recognised in the consolidated income statement during the period in which the circumstances are identified and is not
subsequently reversed.
If, after reassessment, the net amounts of the identifiable assets acquired and liabilities assumed at the acquisition date exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognised in the consolidated income statement immediately as a bargain purchase gain.
Acquisition-related costs are recognised in the consolidated income statement as incurred.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are retrospectively adjusted during the measurement
period (a maximum of twelve months from the date of acquisition), or additional assets or liabilities are recognised, to reflect new information obtained
about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
Assets classified as held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered primarily through a sale transaction rather
than through continuing use. This condition is ordinarily regarded as met when sale is highly probable within one year from the date of classification and the
asset or disposal group is available for immediate sale in its present condition and management has committed to the sale.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.
Assets held for sale and related liabilities are presented in the consolidated statement of financial position separately from other assets and liabilities.
Comparative information related to assets held for sale is not amended in the consolidated statement of financial position for the prior period.
If criteria of classification as held for sale are no longer met, the Group ceases to classify non-current assets and disposal groups as held for sale. Such non-
current assets and disposal groups is measured at the lower of its carrying amount before the classification as held for sale, adjusted for any depreciation,
amortisation or revaluations that would have been recognised had the non-current assets and disposal groups not been classified as held for sale, and
its recoverable amount at the date of the subsequent decision not to sell. Financial statements for the periods since classification as held for sale shall be
amended accordingly if the disposal group or non-current asset that ceases to be classified as held for sale is a subsidiary, joint operation, joint venture,
associate, or a portion of an interest in a joint venture or an associate.
The translation of components of the consolidated statement of financial position, consolidated income statement, consolidated statement of cash flows into
presentation currency is made as follows:
• all assets and liabilities, both monetary and non-monetary, in the consolidated statement of financial position are translated at the closing exchange rates at
•
the end of the respective reporting period;
income and expense are translated at the average exchange rates for each quarter (unless this average rate is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in these cases income and expenses are translated at the dates of the transaction);
• all equity items are translated at the historical exchange rates;
• all resulting exchange differences are recognised as a separate component in other comprehensive income; and
•
in the consolidated statement of cash flows, cash balances at beginning and end of each period presented are translated at exchange rates at the respective
dates;
• all cash flows are translated at the average exchange rates for each quarter with the exception of borrowings, dividends and advances received, gains and
losses from disposal of subsidiaries, which are translated using the prevailing exchange rates at the dates of the transactions;
• resulting exchange differences are presented in the consolidated statement of cash flows as effects of foreign exchange differences on balances of cash and
cash equivalents.
Foreign currency transactions
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the exchange rates prevailing at the date of
transactions. All monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at each reporting date.
Non-monetary items carried at historical cost are translated at the exchange rates prevailing at the date of transactions. Non-monetary items carried at
fair value are translated at the exchange rate prevailing at the date on which the most recent fair value was determined. Exchange differences arising from
changes in exchange rates are recognised in the consolidated income statement.
Exchange rates used in the preparation of the consolidated financial statements were as follows:
At 31 December 2017
At 31 December 2016
Russian Rouble/US Dollar
31 December
Average for the year ended 31 December
South African Rand/US Dollar
31 December
Average for the year ended 31 December
Australian Dollar/US Dollar
31 December
Average for the period ended
Hong Kong Dollar/US Dollar
31 December
Average for the year ended 31 December
57.60
58.35
12.36
13.30
1.28
1.30
7.81
7.79
60.66
67.03
13.78
14.68
1.39
1.34
7.75
7.76
Revenue recognition
Metal sales revenue
Revenue from metal sales is recognised when the significant risks and rewards of ownership are transferred to the buyer and represents invoiced value of all
metal products shipped to customers, net of value added tax.
Functional and presentation currency
The individual financial statements of each Group entity are presented in its functional currency.
Revenue from contracts that are entered into and continue to meet the Group’s expected sale requirements designated for that purpose at their inception,
and are expected to be settled by physical delivery, are recognised in the consolidated financial statements as and when they are delivered.
The Russian Rouble (“RUB”) is the functional currency of the Company, all of its subsidiaries located in the Russian Federation and all foreign subsidiaries of
the Group, except for the following subsidiaries operating with a significant degree of autonomy. The functional currency of Norilsk Nickel Harjavalta Oy is
US Dollar, and the functional currency of Norilsk Nickel Africa Proprietary Limited is South African Rand.
Certain contracts are provisionally priced so that price is not settled until a predetermined future date based on the market price at that time. Revenue from
these transactions is initially recognised at the current market price. Provisionally priced metal sales are marked-to-market at each reporting date using the
forward price for the period equivalent to that outlined in the contract. This mark-to-market adjustment is recorded in revenue.
The presentation currency of the consolidated financial statements of the Group is US Dollar (“USD”). Using USD as a presentation currency is common practice for
global mining companies. In addition, USD is a more relevant presentation currency for international users of the consolidated financial statements of the Group.
The Group also issues consolidated financial statements to comply with 208-FZ, which use the Russian Rouble as the presentation currency (refer to note 1).
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Сonsolidated financial statements
Other revenue
Revenue from sale of goods, other than metals, is recognised when significant risks and rewards of ownership are transferred to the buyer in accordance
with the shipping terms specified in the sales agreements.
Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from profit for the year as reported in the consolidated income statement because it
excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Revenue from service contracts is recognised when the services are rendered and the outcome can be reliably measured.
Dividends and interest income
Dividends from investments are recognised when the Group’s right to receive payment has been established. Interest income is accrued based on effective
interest method.
Leases
Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance leases
are capitalised as property, plant and equipment at the lower of fair value or present value of future minimum lease payments at the date of acquisition.
Simultaneously, related lease obligation is recognised at the same value. Assets held under finance leases are depreciated over their estimated economic
useful lives or over the term of the lease, if shorter. If there is reasonable certainty that the lessee will obtain ownership at the end of the lease term, the
period of expected use is the useful life of the asset.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences, and deferred
tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if a temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent
that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
Finance lease payments are allocated using the effective interest rate method, between the lease finance cost, which is included in finance costs, and the
capital repayment, which reduces the related lease obligation to the lessor.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and adjusted to the extent that it is probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease
payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term, except where another systematic
basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating
and finance leases are expensed in the period in which they are incurred.
The measurement of deferred tax liabilities and assets reflects the tax consequences of the manner in which the Group expects at the reporting date to
recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority. The Group offsets deferred
tax assets and liabilities for the subsidiaries which entered into the tax consolidation group.
Finance costs
Finance costs mostly comprise interest expense on borrowings and unwinding of discount on decommissioning obligations.
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when the assets are substantially ready for
their intended use or sale.
Property, plant and equipment and mine development costs
Mining assets
Mine development costs are capitalised and comprise expenditures directly related to:
• acquiring mining and exploration licences;
• developing new mining operations;
• estimating revised content of minerals in the existing ore bodies; and
• expanding capacity of a mine.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
Mine development costs include interest capitalised during the construction period, when financed by borrowings.
Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and all conditions and requirements attaching to the
grant will be met. Government grants related to assets are deducted from the cost of these assets in arriving at their carrying value.
Employee benefits
Remuneration to employees in respect of services rendered during a reporting period is recognised as an expense in that period. Long term employee
benefits obligations are discounted to net present value.
Defined contribution plans
The Group contributes to the following major defined contribution plans:
• Pension Fund of the Russian Federation;
• Mutual accumulated pension plan.
The only obligation of the Group with respect to these and other defined contribution plans is to make specified contributions in the period in which they
arise. These contributions are recognised in the consolidated income statement when employees have rendered services entitling them to the contribution.
Income tax expense
Income tax expense represents the sum of the tax currently payable and deferred tax.
Income tax is recognised as an expense or income in the consolidated income statement, except when it relates to other items recognised directly in other
comprehensive income, in which case the tax is also recognised directly in other comprehensive income. Where current or deferred tax arises from the initial
accounting for a business combination, the tax effect is included in the accounting for the business combination.
Mine development costs are transferred to mining assets and start to be depreciated when a new mine reaches commercial production quantities.
Mining assets are recorded at cost less accumulated amortisation and impairment losses. Mining assets include cost of acquiring and developing mining
properties, pre-production expenditure, mine infrastructure, plant and equipment that process extracted ore, mining and exploration licenses and present
value of future decommissioning costs.
Depreciation of mining assets is charged from the date on which a new mine reaches commercial production quantities and is included in the cost of
production. Carrying value of mining assets is depreciated on a straight-line basis over the lesser of their remaining economic useful lives or remaining life of
mine that they relate to, calculated on the basis of the amount of commercial ore reserves. When determining the life of mine, assumptions valid at the time
of estimation may change in case new information becomes available. Useful lives are in average varying from 2 to 45 years.
Non-mining assets
Non-mining assets include metallurgical processing plants, buildings, infrastructure, machinery and equipment and other non-mining assets. Non-mining
assets are stated at cost less accumulated depreciation and impairment losses.
Non-mining assets are depreciated on a straight-line basis over their economic useful lives.
Depreciation is calculated over the following economic useful lives:
• buildings, structures and utilities
• machinery, equipment and transport
• other non-mining assets
5–50 years
3–30 years
2–20 years
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Appendixes
Сonsolidated financial statements
Capital construction-in-progress
Capital construction-in-progress comprises costs directly related to construction of buildings, processing plant, infrastructure, machinery and equipment, including:
• advances given for purchases of property, plant and equipment and materials acquired for construction of buildings, processing plant, infrastructure,
machinery and equipment;
irrevocable letters of credit opened for future fixed assets deliveries and secured with deposits placed in banks;
•
• finance charges capitalised during construction period where such costs are financed by borrowings.
Depreciation of these assets commences when the assets are put into production.
Research and exploration expenditure
Research and exploration expenditure, including geophysical, topographical, geological and similar types of expenditure, is capitalised, if it is deemed
that such expenditure will lead to an economically viable capital project, and begins to be amortised over the life of mine, when commercial viability of the
project is proved. Otherwise it is expensed in the period in which it is incurred.
Research and exploration expenditure written-off before development and construction starts is not subsequently capitalised, even if a commercial
discovery subsequently occurs.
Intangible assets, excluding goodwill
Intangible assets are recorded at cost less accumulated amortisation and impairment losses. Intangible assets mainly include patents, licences, software
and rights to use software and other intangible assets.
Amortisation of patents, licenses and software is charged on a straight-line basis over 1–10 years.
Impairment of tangible and intangible assets, excluding goodwill
At each reporting date, the Group analyses the triggers of impairment of its tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not practical to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less cost to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-
generating unit. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the consolidated income statement immediately.
Where an impairment loss subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of
its recoverable amount, but only to the extent that the increased carrying amount does not exceed the original carrying amount that would have been
determined had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the consolidated income statement.
Inventories
Refined metals
Main produced metals include nickel, copper, palladium, platinum; by-products include gold, rhodium, silver and other minor metals. Main products are
measured at the lower of net cost of production or net realisable value. The net cost of production of main products is determined as total production
cost, allocated to each joint product by reference to their relative sales value. By-products are measured at net realisable value, through a mark-to-market
valuation.
Work-in-process
Work-in-process includes all costs incurred in the normal course of business including direct material and direct labour costs and allocation of production
overheads, depreciation and amortisation and other costs, incurred for producing each product, given its stage of completion.
Materials and supplies
Materials and supplies are valued at the weighted average cost less provision for obsolete and slow-moving items.
Financial assets
Financial assets are recognised when the Group has become a party to the contractual arrangement of the instrument and are initially measured at fair
value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories:
• financial assets at fair value through profit or loss
• held-to-maturity investments;
• available-for-sale financial assets;and
•
loans and receivables.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including transaction costs and other premiums or discounts)
through the expected life of the financial asset, or, where appropriate, a shorter period.
Income is recognised on an effective interest basis for debt securities other than those financial assets designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss where the financial asset is either held for trading or it is designated as at fair value
through profit or loss.
A financial asset is classified as held for trading if:
•
•
•
it has been acquired principally for the purpose of selling in the near future; or
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in the consolidated income statement.
The net gain or loss recognised in the consolidated income statement incorporates any dividend or interest earned on the financial asset.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments which are not quoted in an active market are classified as loans
and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is
recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Available-for-sale financial assets
Available-for-sale financial assets may include investments in listed and unlisted equity securities, that are not classified in other categories.
Listed equity securities held by the Group that are traded in an active market are measured at their market value. Gains and losses arising from changes in
fair value are recognised in other comprehensive income in the investments revaluation reserve with the exception of impairment losses, interest calculated
using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the consolidated income
statement. Where an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investment
revaluation reserve is included in the consolidated income statement for the period.
Investments in unlisted equity securities that do not have a quoted market price in an active market are recorded at management’s estimate of fair value.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each statement of financial position date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been negatively impacted.
The Group has fully provided for all trade and other receivables which were due in excess of 365 days. Trade and other receivables that are past due for less
than 365 days are provided according to expected probability of repayment and the length of the overdue period.
Objective evidence of impairment for accounts receivable could include the Group’s past experience of collecting payments, an increase in the number of
delayed payments as well as observable changes in economic conditions that correlate with defaults on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the financial asset’s original effective interest rate.
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Сonsolidated financial statements
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables,
where the carrying amount is reduced through the use of an provision for doubtful debts. When trade and other receivables are considered uncollectible, it
is written off against the provision. Subsequent recoveries of amounts previously written off are credited against the provision. Changes in the provision are
recognised in the consolidated income statement.
With the exception of available-for-sale debt and equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through the consolidated income statement to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been recognised.
4. Critical accounting judgements and key sources of estimation uncertainty
Preparation of the consolidated financial statements in accordance with IFRS requires the Group’s management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires judgements which are based on
historical experience, current and expected economic conditions, and all other available information. Actual results could differ from these estimates.
The most significant areas requiring the use of management estimates and assumptions relate to:
• useful economic lives of property, plant and equipment;
•
impairment of assets, including fair value of assets held for sale;
When a decline in fair value of an available-for-sale investment has been recognised in other comprehensive income and there is objective evidence that
investment is impaired, the cumulative loss that had been recognised in other comprehensive income is reclassified from other comprehensive income and
recognised in the consolidated income statement even though the investment has not been derecognised. Impairment losses previously recognised through
consolidated income statement are not reversed. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.
• provisions;
• decommissioning obligations;
•
income taxes; and
• contingencies.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to
recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities
The Group classifies financial liabilities into loans and borrowings, trade and other payables. Such financial liabilities are recognised initially at fair value less
any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective
interest method.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where
appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, cash deposits in banks, brokers and other financial institutions and highly liquid investments with
original maturities of three months or less and on demand deposits, which are readily convertible to known amounts of cash and are subject to an
insignificant risk of changes in value.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events for which it is probable that an outflow of
economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking
into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows.
Decommissioning obligations
Decommissioning obligations include direct asset decommissioning costs as well as related land restoration costs.
Future decommissioning and other related obligations, discounted to net present value, are recognised at the moment when the legal or constructive
obligation in relation to such costs arises (generally when the related asset is put into operation) and the future cost can be reliably estimated. This cost is
capitalised as part of the initial cost of the related asset (i.e. a mine) and is depreciated over the useful life of the asset. The unwinding of the discount on
decommissioning obligations is included in the consolidated income statement as finance costs. Decommissioning obligations are periodically reviewed in
light of current laws and regulations, and adjustments are made as necessary.
Useful economic lives of property, plant and equipment
Carrying value of the Group’s mining assets, classified within property, plant and equipment, is amortised on a straight-line basis over the lesser of their
remaining economic useful lives or remaining life of mine. When determining the life of a mine, valid assumptions at the time of estimation may change in
case of new information becomes available.
The factors that could affect the estimation of the life of mine include the following:
• changes in proved and probable ore reserves;
• the grade of mineral reserves varying significantly from time to time;
• differences between actual commodity prices and commodity price assumptions used in the estimation and classification of ore reserves;
• unforeseen operational issues at mine sites; and
• changes in capital, operating, mining, processing and decommissioning costs, discount rates and foreign exchange rates could possibly adversely affect the
economic viability of ore reserves.
Any of these changes could affect prospective amortisation of mining assets. Useful economic lives of non-mining property, plant and equipment are
reviewed by management periodically. The review is based on the current condition of the assets and the estimated period during which they will continue
to bring economic benefit to the Group.
Impairment of assets
The Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets are impaired
or indication of reversal of impairment. In making the assessment for impairment, assets that do not generate independent cash flows are allocated to
an appropriate cash-generating unit. Management necessarily applies its judgement in allocating assets that do not generate independent cash flows to
appropriate cash-generating units, and also in estimating the timing and value of the underlying cash flows within the value-in-use calculation. Subsequent
changes to the cash-generating unit allocation or to the timing of cash flows could impact the carrying value of the respective assets.
Provisions
The Group creates provision for doubtful debts to account for estimated losses resulting from the inability of customers to make the required payments.
When evaluating the adequacy of a provision for doubtful debts, management bases its estimate on current overall economic conditions, ageing of the
accounts receivable balances, historical write-off experience, customer creditworthiness and changes in payment terms. Changes in the economy, industry
or specific customer conditions may require adjustments to the provision for doubtful debts recorded in the consolidated financial statements.
The Group also creates a provision for obsolete and slow-moving inventories. In addition, certain finished goods of the Group are carried at net realisable
value. Estimates of net realisable value of inventories are based on the most reliable evidence available at the time the estimates are made. These estimates
take into consideration fluctuations of price or cost directly relating to events occurring subsequent to the statement of financial position date to the extent
that such events confirm conditions existing at the end of the period.
The Group creates a provision for social commitments. The provision represents present value of the best estimate of the future outflow of economic
benefits to settle these obligations.
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Сonsolidated financial statements
Decommissioning obligations
The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates decommissioning obligations
based on management’s understanding of the current legal requirements in the various jurisdictions in which it operates, terms of the license agreements
and internally generated engineering estimates. Provision is made, based on net present values, for decommissioning and land restoration costs as soon as
the obligation arises. Actual costs incurred in future periods could differ materially from the amounts provided. Additionally, future changes to environmental
laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision.
Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining provision for income taxes due to the
complexity of legislation in some jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group
recognises provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made.
Deferred tax assets are reviewed at each statement of financial position date and adjusted to the extent that it is probable that sufficient taxable income will be
available to allow all or part of the deferred tax asset to be utilised. The estimation of that probability includes judgements based on the expected performance.
Various factors are considered to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plans,
expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in
future periods, the financial position, results of operations and cash flows may be affected.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently
involves the exercise of significant judgement and estimates of the outcome of future events.
5. Segmental information
The following tables present revenue, measure of segment profit or loss (EBITDA) and other segmental information from continuing operations regarding the
Group’s reportable segments for the year ended 31 December 2017 and 31 December 2016, respectively.
For the year ended 31 December 2017
GMK Group
KGMK Group
NN Harjavalta
Other metallurgical
Other non-metallurgical
Eliminations
Revenue from external customers
Inter-segment revenue
Total revenue
Segment EBITDA
Unallocated
Consolidated EBITDA
Depreciation and amortisation
Impairment of non-financial assets
Finance costs
Foreign exchange gain, net
Other income and expenses, net
Profit before tax
Other segmental information
Purchase of property, plant and
equipment and intangible assets
Depreciation and amortisation
Impairment of non-financial assets
7,064
607
7,671
4,701
357
531
888
169
840
–
840
84
1,225
508
101
228
63
3
16
25
–
34
107
141
(53)
469
73
122
851
415
1,266
114
–
(1,660)
(1,660)
(377)
64
23
1
–
(47)
–
Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the Management Board.
For the year ended 31 December 2016
GMK Group
KGMK Group
NN Harjavalta
Other metallurgical
Other non-metalurgical
Eliminations
Management has determined the following operating segments:
• “GMK Group” segment, which includes mining and metallurgy operations, transport services, energy, repair and maintenance services located at Taimyr
Peninsula;
• “KGMK Group” segment, which includes mining and metallurgy operations, energy, exploration activities located at Kola Peninsula;
• “NN Harjavalta” segment, which includes refinery operations located in Finland;
• “Other metallurgical” segment, which includes operations of Bystrinskoye project, other metallurgy operations and exploration activities located in Russia and
abroad;
• “Other non-metallurgical” segment, which includes metal and other trading, supply chain management, transport services, energy and utility, research and
other activities located in Russia and abroad.
Corporate activities of the Group do not represent an operating segment, include primarily headquarters’ general and administrative expenses and treasury
operations of the Group and are presented as “Unallocated”.
The amounts in respect of reportable segments in the disclosure below are stated before intersegment eliminations, excluding:
• balances of intercompany loans and borrowings and interest accruals;
•
intercompany investments;
• accrual of intercompany dividends;
intercompany refined metal sales.
•
Amounts are measured on the same basis as those in the consolidated financial statements. Information for the year ended 31 December 2016 has been
presented to conform with the current period presentation.
Revenue from external customers
Inter-segment revenue
Total revenue
Segment EBITDA
Unallocated
Consolidated EBITDA
Depreciation and amortisation
Impairment of non-financial assets
Finance costs
Foreign exchange gain, net
Other income and expenses, net
Profit before tax
Other segmental information
Purchase of property, plant and
equipment and intangible assets
Depreciation and amortisation
Impairment of non-financial assets
5,981
213
6,194
3,883
465
199
664
117
727
–
727
45
1,284
435
50
93
41
2
16
28
–
7
77
84
(11)
288
–
–
1,079
620
1,699
119
33
23
9
242
243
Total
9,146
–
9,146
4,638
(643)
3,995
(645)
(227)
(535)
159
97
2,844
2,002
645
227
Total
8,259
–
–
(1,109)
(1,109)
8,259
112
–
30
–
4,265
(366)
3,899
(557)
(61)
(453)
491
(43)
3,276
1,714
557
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Сonsolidated financial statements
The following tables present assets and liabilities of the Group’s reportable segments at 31 December 2017 and 31 December 2016, respectively.
7. Cost of metal sales
At 31 December 2017
Inter-segment assets
Segment assets
Total segment assets
Unallocated
Total assets
Inter-segment liabilities
Segment liabilities
Total segment liabilities
Unallocated
Total liabilities
At 31 December 2016
Inter-segment assets
Segment assets
Total segment assets
Unallocated
Total assets
Inter-segment liabilities
Segment liabilities
Total segment liabilities
Unallocated
Total liabilities
GMK Group
KGMK Group
NN Harjavalta
Other metallurgical
Other non-metallurgical
Eliminations
346
11,424
11,770
89
2,228
2,317
207
963
1,170
135
157
292
172
384
556
124
73
197
11
1,500
1,511
43
121
164
54
1,584
1,638
399
171
570
GMK Group
KGMK Group
NN Harjavalta
Other metallurgical
Other non-metallurgical
Eliminations
296
9,922
10,218
113
2,241
2,354
79
768
847
87
113
200
160
383
543
77
102
179
35
868
903
27
266
293
49
793
842
315
862
1,177
Total
–
15,430
(790)
(425)
(1,215)
15,430
1,205
16,635
(790)
–
–
2,750
(790)
2,750
9,227
11,977
Total
–
12,623
(619)
(111)
(730)
12,623
3,900
16,523
(619)
–
–
3,584
(619)
3,584
9,043
12,627
The Group’s non-current assets are primarily located in the Russian Federation and Finland.
6. Metal sales
The Group’s metal sales to external customers are detailed below (based on external customers’ locations):
Total
Nickel
Copper
Palladium
Platinum Semi-products
Other metals
For the year ended 31 December 2017
Europe
Asia
North and South America
Russian Federation and CIS
For the year ended 31 December 2016
Europe
Asia
North and South America
Russian Federation and CIS
4,753
1,939
1,166
557
8,415
4,394
1,723
737
792
1,067
2,098
709
313
215
6
–
177
736
762
807
41
2,304
2,281
2,346
1,143
1,104
222
156
1,544
1
–
294
1,839
821
478
488
101
1,888
441
97
–
85
623
420
26
–
208
654
85
331
–
8
424
123
92
1
–
216
326
34
46
31
437
343
22
26
33
424
7,646
2,625
244
Cash operating costs
Labour
Materials and supplies
Purchases of metals for resale
Purchases of raw materials and semi-products
Mineral extraction tax and other levies
Third party services
Electricity and heat energy
Production costs related to the joint operation
Fuel
Transportation expenses
Sundry costs
Total cash operating costs
Depreciation and amortisation
(Increase)/decrease in metal inventories
Total
8. General and administrative expenses
Staff costs
Taxes other than mineral extraction tax and income tax
Third party services
Depreciation and amortisation
Rent expenses
Transportation expenses
Other
Total
9. Selling and distribution expenses
Transportation expenses
Marketing expenses
Staff costs
Export duties
Other
Total
For the year ended 31 December 2017
For the year ended 31 December 2016
1,377
703
530
297
221
204
132
93
81
64
150
3,852
630
(514)
3,968
1,145
520
184
292
122
170
101
79
60
71
143
2,887
456
290
3,633
For the year ended 31 December 2017
For the year ended 31 December 2016
478
79
72
32
25
8
65
759
376
58
55
20
19
6
47
581
For the year ended 31 December 2017
For the year ended 31 December 2016
38
14
13
1
9
75
23
7
13
61
7
111
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Сonsolidated financial statements
10. Other net operating expenses
Social expenses
Change in allowance for doubtful debts
Change in allowance for obsolete and slow-moving inventory
Change in provision for reconfiguration of production facilities
Other
Total
11. Finance costs
Interest expense on borrowings net of amounts capitalised
Unwinding of discount on provisions and payables
Other
Total
12. Income from investments, net
Interest income on bank deposits
Realised gain on disposal of investments
Other
Total
13. Income tax expense
Current income tax expense
Deferred tax expense
Total
For the year ended 31 December 2017
For the year ended 31 December 2016
303
19
11
(4)
33
362
111
14
(2)
(33)
(6)
84
For the year ended 31 December 2017
For the year ended 31 December 2016
386
133
16
535
403
46
4
453
For the year ended 31 December 2017
For the year ended 31 December 2016
39
1
37
77
78
4
32
114
For the year ended 31 December 2017
For the year ended 31 December 2016
686
35
721
686
59
745
A reconciliation of theoretic income tax, calculated at the statutory rate in the Russian Federation, the location of major production assets of the Group, to
the amount of actual income tax expense recorded in the consolidated income statement is as follows:
Profit before tax
Income tax at statutory rate of 20%
Allowance for deferred tax assets
Non-deductible impairment of financial and non-financial assets
Non-deductible social expenses
Effect of different tax rates of subsidiaries operating in other jurisdictions
Tax effect of other permanent differences
Total
2,844
569
38
7
73
8
26
721
3,276
655
18
41
31
(27)
27
745
Deferred tax balances
Property, plant and equipment
Inventories
Trade and other receivables
Decommissioning obligations
Loans and borrowings, trade and
other payables
Other assets
Other liabilities
Tax loss carried forward
Net deferred tax liabilities
Property, plant and equipment
Inventories
Trade and other receivables
Decommissioning obligations
Loans and borrowings, trade and
other payables
Other assets
Other liabilities
Tax loss carried forward
Net deferred tax liabilities
At 31 December 2016
Recognised
in income statement
Disposed on disposal
of subsidiaries
Effect of translation to
presentation currency
At 31 December 2017
350
102
(12)
(79)
(33)
(10)
6
(41)
283
2
16
9
16
(35)
57
2
(32)
35
(4)
–
–
–
–
–
–
–
(4)
20
6
–
(6)
(1)
(1)
–
(2)
16
368
124
(3)
(69)
(69)
46
8
(75)
330
At 31 December 2015
Recognised
in income statement
Disposed on disposal
of subsidiaries
Effect of translation to
presentation currency
At 31 December 2016
251
91
(6)
(62)
(16)
(10)
4
(53)
199
58
(6)
(2)
(4)
(9)
(2)
–
24
59
–
–
–
–
–
–
–
–
–
41
17
(4)
(13)
(8)
2
2
(12)
25
350
102
(12)
(79)
(33)
(10)
6
(41)
283
Certain deferred tax assets and liabilities have been offset to the extent they relate to taxes levied on the Group’s entities which entered into the tax
consolidation group. Deferred tax balances (after offset) presented in the consolidated statement of financial position were as follows:
Deferred tax liability
Deferred tax asset
Net deferred tax liabilities
Deductible temporary differences
Tax loss carry-forwards
Total
At 31 December 2017
At 31 December 2016
407
(77)
330
355
(72)
283
At 31 December 2017
At 31 December 2016
104
219
323
90
214
304
Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which
the Group can utilise the benefits therefrom.
For the year ended 31 December 2017
For the year ended 31 December 2016
Unrecognised deferred tax assets
Deferred tax assets have not been recognised as follows:
The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 39%.
246
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Сonsolidated financial statements
At 31 December 2017 deferred tax asset in amount of USD 175 million related to tax loss arising on disposal of OJSC “Third Generation Company of the
Wholesale Electricity Market” (“OGK-3 (at 31 December 2016: USD 166 million) was not recognised as it was incurred by the Company prior to setting up of
the tax consolidation group. This deferred tax asset can be utilised only if the Company exits the tax consolidation group without expiry.
Unrecognised deferred tax assets in the amount of USD 44 million related to other tax losses will not expire and can be utilised according to specific rules
stated by art. 283 of the Tax code of the Russian Federation (31 December 2016: USD 48 million).
At 31 December 2017, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 1,459 million (31 December 2016:
USD 1,104 million) associated with investments in subsidiaries, because management believes that it is in a position to control the timing of reversal of such
differences and does not expect its reversal in foreseeable future.
14. Property, plant and equipment
Mining assets and mine
development cost
Buildings, structures
and utilities
Machinery, equipment
and transport
Other
Capital
construction-in-progress
Total
Non-mining assets
Cost
Balance at 1 January 2016
5,101
1,232
–
(18)
(59)
(49)
1,107
7,314
1,429
–
(7)
(124)
(40)
422
Additions
Transfers
Change in decommissioning
provision
Disposals
Other
Effect of translation to
presentation currency
Balance at 31 December
2016
Additions
Transfers
Change in decommissioning
provision
Disposals
Other
Effect of translation to
presentation currency
Balance at 31 December
2017
Accumulated depreciation
and impairment
2,002
–
450
5
(11)
7
402
2,855
–
247
(13)
(150)
42
153
2,319
–
363
–
(100)
(37)
431
2,976
–
477
–
(90)
(6)
150
106
–
59
–
(7)
26
31
215
–
84
–
(23)
2
11
1,308
674
(872)
–
(31)
53
255
1,387
840
(808)
–
(12)
2
75
10,836
1,906
–
(13)
(208)
–
2,226
14,747
2,269
–
(20)
(399)
–
811
8,994
3,134
3,507
289
1,484
17,408
Balance at 1 January 2016
(1,588)
(1,040)
Charge for the year
(213)
Disposals
Impairment loss
Other
Effect of translation to
presentation currency
47
(7)
(11)
(318)
(97)
7
(70)
2
(215)
(1,277)
(201)
90
(2)
14
(242)
248
(46)
(14)
3
–
(5)
(10)
(244)
–
19
18
–
(41)
(4,195)
(525)
166
(61)
–
(826)
Mining assets and mine
development cost
Buildings, structures
and utilities
Machinery, equipment
and transport
Other
Capital
construction-in-progress
Total
Non-mining assets
(2,090)
(1,413)
(347)
107
(154)
4
(120)
(97)
56
(87)
(18)
(78)
(1,618)
(264)
79
(7)
16
(82)
(72)
(24)
5
–
(1)
(4)
(248)
(5,441)
–
4
21
(1)
(15)
(732)
251
(227)
–
(299)
(2,600)
(1,637)
(1,876)
(96)
(239)
(6,448)
Balance at 31 December
2016
Charge for the year
Disposals
Impairment loss
Other
Effect of translation to
presentation currency
Balance at 31 December
2017
Carrying value
At 31 December 2016
At 31 December 2017
5,224
6,394
1,442
1,497
1,358
1,631
143
193
1,139
1,245
9,306
10,960
At 31 December 2017 capital construction-in-progress included USD 225 million of irrevocable letters of credit opened for fixed assets purchases
(31 December 2016: USD 87 million), representing security deposits placed in banks. For the year ended 31 December 2017 purchases of property, plant and
equipment in the consolidated statement of cash flows include USD 210 million related to these irrevocable letters of credit (for the year ended 31 December
2016: USD 78 million).
Capitalised borrowing costs for the year ended 31 December 2017 amounted to USD 263 million
(for the year ended 31 December 2016: USD 202 million). Capitalisation rate used to determine the amount of borrowing costs equals to 6.28% per annum (31
December 2016: 6.59%). At 31 December 2017 mining assets and mine development cost included USD 3,728 million of mining assets under development (31
December 2016: USD 2,994 million).
At 31 December 2017 non-mining assets included USD 55 million of investment property (31 December 2016: USD 136 million).
Impairment
At 31 December 2017 the Group reclassified Nkomati Nickel Mine from assets classified as held for sale and tested the assets for impairment. The value in use of USD
49 million was determined by the Group using a discounted cash flow model approach. The most significant estimates and assumptions used in determination of
value in use are as follows:
• Future cash flows were projected based on budgeted amounts, taking into account actual results for the previous years. Forecasts were assessed up to 2027.
Measurements were performed based on discounted cash flows expected to be generated by production assets.
• Management estimates metal concentrates market prices based on adjusted commodity price forecast for metals. Commodities price forecast was based on
consensus forecast.
• Production forecasts were primarily based on internal production reports available at the date of impairment test and management’s assumptions regarding
future production levels.
• Inflation forecasts were sourced from Economist Intelligence Unit report. Inflation used was projected within 2–5%. Forecast for exchange rates was made
based on expected ZAR and USD inflation indices.
• A pre-tax nominal ZAR discount rate of 21.6% was estimated by the reference to the weighted average cost of capital for the Group and reflects
management’s estimates of the risks specific to production units.
As a result, impairment loss in the amount of USD 129 million was recognised in impairment of non-financial assets in the consolidated income statement for
the year ended 31 December 2017.
During the year ended 31 December 2015 the Group revised its intention on the further use of the gas extraction assets. As a result, these assets were
assessed as a separate cash generating unit. The Group recognised impairment loss related to the gas extraction assets in the amount of USD 50 million in
impairment of non-financial assets in the consolidated income statement for the year ended 31 December 2016.
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Сonsolidated financial statements
At 31 December 2017 indicators of additional impairment of gas production assets have been identified. The most significant estimates and assumptions used in
determination of value in use are as follows:
• Future cash flows were projected based on budgeted amounts, taking into account actual results for the previous years. Forecasts were assessed up to 2030.
Measurements were performed based on discounted cash flows expected to be generated by gas production assets.
• Management estimates prices for natural gas and gas concentrate based on commodities price forecasts. Commodities price forecast was based on
consensus forecast.
• Production forecasts were primarily based on internal production reports available at the date of impairment test and management’s assumptions regarding
future production levels.
• The amounts and timing of capital investments were based on management’s forecast.
• Inflation indices and foreign currency rate forecasts were sourced from Economist Intelligence Unit report. Inflation used was projected within 4–7%. Forecast
for exchange rates was made based on expected RUR and USD inflation indices.
• A pre-tax nominal RUR discount rate of 15.8% was estimated by the reference to the weighted average cost of capital for the Group and reflects
management’s estimates of the risks specific to production units.
As a result, gas extraction assets were fully impaired. Impairment loss in the amount of USD 43 million was recognised in impairment of non-financial assets
in the consolidated income statement for the year ended 31 December 2017.
During the year ended 31 December 2017 additional impairment losses in the amount of USD 55 million were recognised in respect of specific individual
assets, primarily mining assets (for the year ended 31 December 2016: USD 11 million in respect of specific individual assets, primarily non-mining assets).
15. Other financial assets
Non-current
Loans issued and other receivables
Bank deposits
Available-for-sale investments
Total non-current
Current
Loans issued and other receivables
Bank deposits
Derivative financial instruments
Total current
At 31 December 2017
At 31 December 2016
190
2
–
192
1
94
4
99
176
10
4
190
6
–
2
8
16. Other taxes
Taxes receivable
Value added tax recoverable
Other taxes
Less: Allowance for value added tax recoverable
Total
Less: Non-current portion of other taxes receivable
Other taxes receivable
Taxes payable
Value added tax
Social security contributions
Property tax
Mineral extraction tax
Other
Other taxes payable
17. Inventories
Refined metals
Work-in-process and semi-products
Less: Allowance for work-in-process
Total metal inventories
Materials and supplies
Less: Allowance for obsolete and slow-moving items
Materials and supplies, net
Inventories
At 31 December 2017
At 31 December 2016
258
40
298
(1)
297
(1)
296
66
26
22
17
16
147
244
35
279
–
279
(2)
277
70
27
18
11
13
139
At 31 December 2017
At 31 December 2016
655
1,333
(4)
1,984
739
(34)
705
2,689
310
901
–
1,211
728
(27)
701
1,912
Available-for-sale investments in securities
During the year ended 31 December 2016, the Group fully impaired an interest in a related party which owns various real estate properties. Impairment loss
was recognised in the consolidated income statement for the year ended 31 December 2016.
At 31 December 2017 part of metal semi-products stock in the amount of USD 453 million (31 December 2016: USD 830 million) was presented in other non-
current assets according to Group’s production plans.
Bank deposits
Interest rate on long-term RUB-denominated deposits held in banks was 5.10% (31 December 2016: 5.10%) per annum.
18. Trade and other receivables
Interest rate on long-term EUR-denominated deposits held in banks was 0.30% (31 December 2016: no EUR-denominated deposits held in banks) per annum.
Interest rate on current ZAR-denominated deposits held in banks was in the range from 6.68% to 7.42% (31 December 2016: from 6.80% to 7.45%) per annum.
Trade receivables from metal sales
Other receivables
Less: Allowance for doubtful debts
Trade and other receivables, net
At 31 December 2017
At 31 December 2016
251
168
419
(92)
327
95
159
254
(81)
173
In 2017 and 2016, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest bearing.
At 31 December 2017 and 2016, there were no material trade accounts receivable which were overdue or individually determined to be impaired.
250
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Сonsolidated financial statements
The average credit period on sales of other products and services for the year ended 31 December 2017 was 33 days (2016: 32 days). No interest was
charged on these receivables.
Included in the Group’s other receivables at 31 December 2017 were debtors with a carrying value of USD 34 million (31 December 2016: USD 45 million) that
were past due but not impaired. Management of the Group believes that these amounts are recoverable in full.
The Group did not hold any collateral for accounts receivable balances.
Ageing of other receivables past due but not impaired was as follows:
Less than 180 days
180–365 days
Movement in the allowance for doubtful debts was as follows:
Balance at beginning of the year
Change in allowance
Accounts receivable written-off
Effect of translation to presentation currency
Balance at end of the year
19. Cash and cash equivalents
Current accounts
• foreign currencies
• RUB
Bank deposits
• foreign currencies
• RUB
Restricted cash and cash equivalents
Other cash and cash equivalents
Total
At 31 December 2017
At 31 December 2016
25
9
34
41
4
45
At 31 December 2017
At 31 December 2016
81
16
(9)
4
92
54
14
(2)
15
81
At 31 December 2017
At 31 December 2016
358
76
412
–
2
4
852
389
58
1,739
1,119
8
12
3,325
20. Assets classified as held for sale and disposal of subsidiaries
On 17 October 2014, the Group entered into binding agreements to sell its assets in South Africa, comprising its 50% participation interest in Nkomati Nickel
Mine (“Nkomati”) and its 85% stake in Tati Nickel Mining Company (together “African assets”) to BCL Investments (“BCL”). The total consideration for the
assets amounted to USD 337 million subject to certain adjustments under agreement. Under the terms of the agreements, the buyer assumed all attributable
decommissioning rehabilitation obligations related to the assets. On 2 April 2015, the Group sold its 85% stake in Tati Nickel Mining Company.
Finalisation of sale of Nkomati was subject to completion of conditions precedent, which was achieved in September 2016. However, BCL failed to meet its obligations
according to the agreement and was put into a voluntary liquidation. The Group has filed legal claims against BCL in Botswana and LCIA to enforce sale of Nkomati.
Management believes that the criteria for held for sale are no longer met for Nkomati as at 31 December 2017. At 31 December 2017 Nkomati is presented
as a joint operation and the Group recognises its share in assets, liabilities, income and expenses of Nkomati. Financial statements for the periods since
classification of Nkomati as held for sale have been amended accordingly. After reclassification Nkomati assets were tested for impairment (refer to note 14).
Information for the year ended 31 December 2016 has been reclassified to conform with the current period presentation:
Adjustments to the consolidated statement of financial position
As previously reported
Reclassification
Reclassified
At 31 December 2016
Property, plant and equipment
Other non-current financial assets
Deferred tax assets
Inventories
Trade and other receivables
Advances paid and prepaid expenses
Other taxes receivable
Cash and cash equivalents
Assets classified as held for sale
Non-current loans and borrowings
Non-current provisions
Deferred tax liabilities
Current loans and borrowings
Trade and other payables
Employee benefit obligations
Other taxes payable
Liabilities associated with assets classified as held for sale
9,099
187
56
1,895
170
65
276
3,301
206
7,274
435
303
578
1,609
299
138
2
207
3
16
17
3
1
1
24
(206)
66
2
6
52
1
4
2
1
(2)
66
9,306
190
72
1,912
173
66
277
3,325
–
7,276
441
355
579
1,613
301
139
–
Adjustments to the consolidated income statement
As previously reported
Reclassification
Reclassified
For the year ended 31 December 2016
Foreign exchange gain, net
Share of profits of associates
485
6
6
(6)
–
491
–
For the year ended 31 December 2016
Adjustments to the consolidated statement of cash flows
As previously reported
Reclassification
Reclassified
OPERATING ACTIVITIES
Adjustments to profit before tax for:
Foreign exchange gain, net
Share of profits of associates
Movements in working capital:
Trade and other payables
INVESTING ACTIVITIES
Purchase of property, plant and equipment
(485)
(6)
816
(1,648)
(19)
(6)
6
–
19
19
(19)
(491)
–
835
(1,667)
252
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Appendixes
Сonsolidated financial statements
On 6 April 2017, the Group sold its interest in a subsidiary which owns real estate for a consideration of USD 113 million. Proceeds from disposal of the
subsidiary in the amount of USD 95 million were recognised in the consolidated statement of cash flows, net of disposed cash and cash equivalents of USD
16 million and transaction costs of USD 2 million. Gain on disposal in the amount of USD 16 million was recognised in the consolidated income statement.
On 29 November 2016, the Group sold its 74.8% share in OJSC “Arkhangelsk Sea Commercial Port”, a subsidiary of the Group located in the Russian
Federation, for a consideration of USD 7 million. The carrying value of net assets at the date of disposal amounted to USD 8 million. Loss on disposal in the
amount of USD 1 million was recognised in the consolidated income statement.
On 15 April 2016, the Group sold its aircompany assets comprising 96.8% share in CJSC “Nordavia – Regional Airlines” (“Nordavia”), a subsidiary of the
Group located in the Russian Federation and related to Nordavia aircrafts and infrastructure, for a consideration of USD 10 million. The carrying value of
net assets at the date of disposal amounted to USD 14 million. Loss on disposal in the amount of USD 4 million was recognised in the consolidated income
statement.
21. Share capital
Authorised and issued ordinary shares
At 1 January
Sale of own shares from treasury stock
At 31 December
2017
158,245,476
–
158,245,476
2016
156,995,401
1,250,075
158,245,476
During the year ended 31 December 2016, the Group sold 1,250,075 treasury shares for a cash consideration in the amount of USD 158 million.
Earnings per share
Basic earnings per share (US Dollars per share):
13.5
16.1
For the year ended 31 December 2017
For the year ended 31 December 2016
The earnings and weighted average number of shares used in the calculation of earnings per share are as follows:
At 31 December 2017 and 31 December 2016 aggregate financial information relating to the subsidiary that has material non-controlling interest, before any
intra-group eliminations, is presented below:
At 31 December 2017
At 31 December 2016
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to non-controlling interest
Loss for the year
Other comprehensive income/(loss) for the year
Total comprehensive loss for the year
Loss attributable to non-controlling interest
Other comprehensive income attributable to non-controlling interest
Cash flows used in operating activities
Cash flows used in investing activities
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
1,281
117
(593)
(156)
649
325
741
114
(174)
(105)
576
61
For the year ended 31 December 2017
For the year ended 31 December 2016
(32)
31
(1)
(6)
5
(5)
82
77
(1)
9
For the year ended 31 December 2017
For the year ended 31 December 2016
(42)
(422)
459
(7)
(63)
(163)
239
13
Profit for the year attributable to shareholders of the parent company
2,129
2,536
For the year ended 31 December 2017
For the year ended 31 December 2016
23. Loans and borrowings
Currency
Fixed or floating
interest rate
Average nominal rate during
the year ended 31 December 2017, %
Maturity
At 31 December 2017
At 31 December 2016
Weighted average number of shares on issue
Effect of sale of own shares from treasury stock
Weighted average number of issued common shares outstanding
For the year ended 31 December 2017
For the year ended 31 December 2016
158,245,476
–
158,245,476
156,995,401
54,648
157,050,049
As at 31 December 2017 and 31 December 2016, the Group had no securities, which would have a dilutive effect on earnings per share of ordinary stock.
22. Non-controlling interest
In July 2016 the Group sold a 10.67% share in Bystrinskoye project for USD 80 million to a Chinese investor Highland Fund. In May 2017 the Group sold a
2.66% share in Bystrinskoye project for USD 21 million to Highland Fund. In October 2017 the Group sold a 36.66% share in Bystrinskoye project for USD 275
million to a related party.
USD
RUB
EUR
USD
RUB
USD
RUB
EUR
USD
ZAR
Unsecured loans
Secured loans
Total loans
Corporate bonds
Finance leasing
Total
floating
fixed
floating
floating
fixed
fixed
fixed
fixed
fixed
floating
3.38%
2017–2023
11.90%
2021
0.85%
2019–2028
6.72%
2019–2024
8.38%
2017–2022
5.05%
2018–2023
11.60%
2026
7.10%
4.20%
2026
2019
12.19%
2017–2019
254
255
Less: current portion due within twelve months and presented as short-term loans and borrowings
Long-term loans and borrowings
2,898
1,042
4
582
34
4,560
4,206
259
4,465
23
4
1
28
9,053
(817)
8,236
2,707
1,990
–
165
–
4,862
2,715
247
2,962
24
7
–
31
7,855
(579)
7,276
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
Сonsolidated financial statements
The Group is obliged to comply with a number of restrictive financial and other covenants, including maintaining certain financial ratios and restrictions on
pledging and disposal of certain assets.
Changes in loans and borrowings, including interest, for the year ended 31 December 2017 consist of changes from financing cash flows in the amount
of USD 441 million, effect of changes in foreign exchange rates of USD 103 million and other non-cash changes of USD 667 million (for the year ended
31 December 2016: changes from financing cash flows in the amount of USD (1,401) million, effect of changes in foreign exchange rates of USD 346 million
and other non-cash changes of USD 697 million).
At 31 December 2017 loans were secured by property, plant and equipment with a carrying amount of USD 15 million (31 December 2016: USD 752 million).
At 31 December 2017 and 31 December 2016 100% shares of the Group’s subsidiary LLC “GRK “Bystrinskoye” were under pledge.
24. Employee benefit obligations
Accrual for annual leave
Wages and salaries
Other
Total obligations
Less: non-current obligations
Current obligations
At 31 December 2017
At 31 December 2016
203
168
22
393
(16)
377
179
148
22
349
(48)
301
Defined contribution plans
Amounts recognised within continuing operations in the consolidated income statement in respect of defined contribution plans were as follows:
Pension Fund of the Russian Federation
Mutual accumulated pension plan
Other
Total
25. Provisions
Current provisions
Tax provision
Provision for social commitments
Decommissioning obligations
Other provisions
Total current provisions
Non-current provisions
Decommissioning obligations
Provision for social commitments
Other long-term provisions
Total non-current provisions
Total
For the year ended 31 December 2017
For the year ended 31 December 2016
311
8
5
324
273
7
5
285
At 31 December 2017
At 31 December 2016
134
28
26
1
189
396
68
–
464
653
124
19
–
40
183
397
43
1
441
624
Balance at 1 January 2016
Provision accrued
Settlements during the year
Change in estimates
Unwinding of discount
Effect of translation to presentation
currency
Balance at 31 December 2016
Provision accrued
Settlements during the year
Change in estimate
Unwinding of discount
Effect of translation to presentation
currency
Balance at 31 December 2017
Decommissioning
Social commitments
314
–
–
(13)
32
64
397
6
–
(38)
35
22
422
50
12
(16)
(1)
6
11
62
42
(21)
4
6
3
96
Tax
127
3
(5)
–
–
(1)
124
2
(2)
–
–
10
134
Other
77
4
(30)
(27)
5
12
41
2
(41)
–
–
(1)
1
Total
568
19
(51)
(41)
43
86
624
52
(64)
(34)
41
34
653
Decommissioning obligations
Key assumptions used in estimation of decommissioning obligations were as follows:
Discount rates Russian entities
Discount rates non-Russian entities
Expected closure date of mines
Expected inflation over the period from 2018 to 2037
Expected inflation over the period from 2038 onwards
At 31 December 2017
At 31 December 2016
6.9%9,1%
3%5%
up to 2071
3.0%4.9%
2.9%
8.5%8.6%
3%5%
up to 2059
3.1%4.7%
2.9%
Present value of expected cost to be incurred for settlement of decommissioning obligations was as follows:
Due from second to fifth year
Due from sixth to tenth year
Due from eleventh to fifteenth year
Due from sixteenth to twentieth year
Due thereafter
Total
At 31 December 2017
At 31 December 2016
202
23
39
77
55
396
265
44
10
26
52
397
In 2015 the Group approved a programme for reconfiguration of production facilities located in the Taimyr Peninsula. The programme started in 2016 and
also included activites related to closure of the Nickel plant. In 2016 changes in the provision estimates for the reconfiguration of production facilities were
recognised in Other net operating expenses in the consolidated income statement.
Social commitments
In 2010 the Group entered into several multilateral agreements with the Government of the Russian Federation, the Krasnoyarsk and the Trans-Baikal
Regional Governments for construction of pre-schools and other items of social infrastructure in Norilsk, Dudinka and Chita, and resettlement of families
currently residing in these cities to other Russian regions with more favorable living conditions during 2015–2020. The provision represents present value of
the best estimate of the future outflow of economic benefits to settle these obligations.
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Сonsolidated financial statements
26. Trade and other payables
Financial liabilities
Trade payables
Payables for acquisition of property, plant and equipment
Other creditors
Total financial liabilities
Non-financial liabilities
Advances received
Total non-financial liabilities
Total
The maturity profile of the Group’s financial liabilities was as follows:
Due within one month
Due from one to three months
Due from three to twelve months
Total
27. Dividends
At 31 December 2017
At 31 December 2016
426
186
140
752
31
31
783
602
146
147
895
718
718
1,613
At 31 December 2017
At 31 December 2016
194
244
314
752
189
209
497
895
On 29 September 2017, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 6 months ended 30 June 2017 in the
amount of RUB 224.20 (USD 3.84) per share with the total amount of USD 607 million. The dividends were paid to the shareholders in October 2017 in the
amount of USD 610 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.
28. Related parties transactions and outstanding balances
Related parties include major shareholders, associates and entities under common ownership and control of the Group’s major shareholders and key
management personnel. The Group defines major shareholders as shareholders, which have significant influence over the Group activities. The Company
and its subsidiaries, in the ordinary course of their business, enter into various sale, purchase and service transactions with related parties. Transactions
between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this
note. Details of transactions between the Group and other related parties are disclosed below.
Transactions with related parties
Entities under ownership and control of the Group’s
major shareholders
Joint operation of the Group
Total
Sale of goods and services and participating shares
Purchase of assets and services and other operating expenses
For the year ended
31 December 2017
For the year ended
31 December 2016
For the year ended
1 December 2017
For the year ended
31 December 2016
279
1
280
13
2
15
115
107
222
177
169
346
Outstanding balances with related parties
At 31 December 2017
At 31 December 2016
At 31 December 2017
At 31 December 2016
Accounts receivable
Accounts payable, loans and borrowings received
Entities under ownership and control of the Group’s
major shareholders
Joint operation of the Group
Total
–
–
–
–
1
1
2
9
11
2
20
22
Terms and conditions of transactions with related parties
Sales to and purchases from related parties of electricity, heat energy and natural gas supply were made at prices established by the Federal Tariff Service,
government regulator responsible for establishing and monitoring prices on the utility and telecommunication markets in the Russian Federation.
Compensation of key management personnel
Key management personnel of the Group consists of members of the Management Board and the Board of Directors. For the year ended 31 December
2017 remuneration of key management personnel of the Group included salary and performance bonuses amounted to USD 103 million (for the year ended
31 December 2016: USD 62 million).
On 9 June 2017, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2016 in the amount of RUB 446.10 (USD 7.83)
per share with the total amount of USD 1,239 million. The dividends were paid to the shareholders in July 2017 in the amount of USD 1,189 million recognised
in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.
29. Commitments
On 16 December 2016, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 9 months ended 30 September 2016 in
the amount of RUB 444.25 (USD 7.21) per share with the total amount of USD 1,141 million. The dividends were paid to the shareholders in January 2017 in the
amount of USD 1,172 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.
On 10 June 2016, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2015 in the amount of RUB 230.14 (USD
3.61) per share with the total amount of USD 571 million (including USD 4 million in respect of Treasury shares). The dividends were paid to the shareholders
in July 2016 in the amount of USD 567 million recognised in the consolidated statement of cash flows, using prevailing RUB/USD rates on the payment dates.
On 19 December 2015, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 9 months ended 30 September 2015 in
the amount of RUB 321.95 (USD 4.51) per share with the total amount of USD 714 million (including USD 6 million in respect of Treasury shares). The dividends
were paid to the shareholders in January 2016 in the amount of USD 665 million recognised in the consolidated statement of cash flows, using prevailing
RUB/USD rates on the payment dates.
Capital commitments
At 31 December 2017, contractual capital commitments amounted to USD 801 million (31 December 2016: USD 1,138 million).
Operating leases
The land plots in the Russian Federation where the Group’s production facilities are located are owned by the state. The Group leases land through
operating lease agreements, which expire in various years through 2066. According to the terms of lease agreements the rent rate is revised annually
subject to the decision of the relevant local authorities. The Group entities have a renewal option at the end of the lease period and an option to buy land at
any time, at a price established by the local authorities.
Future minimum lease payments due under non-cancellable operating lease agreements for land and buildings were as follows:
Due within one year
From one to five years
Thereafter
Total
At 31 December 2017
At 31 December 2016
36
103
138
277
29
78
109
216
At 31 December 2017, ten aircraft lease agreements (31 December 2016: ten) were in effect. The lease agreements have an average life of seven
(31 December 2016: five) years with a renewal option at the end of the term and place no restrictions upon lessees by entering into these agreements.
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Сonsolidated financial statements
Future minimum lease payments due under non-cancellable operating lease agreements for aircrafts were as follows:
Due within one year
From one to five years
Thereafter
Total
At 31 December 2017
At 31 December 2016
38
97
18
153
43
70
–
113
Social commitments
The Group contributes to mandatory and voluntary social programs and maintains social assets in the locations where it has its main operating facilities. The
Group’s social assets as well as local social programs benefit the community at large and are not normally restricted to the Group’s employees. The Group’s
commitments are funded from its own cash resources.
30. Contingencies
Litigation
At 31 December 2017 the Group is involved in other legal disputes in the ordinary course of its operations, with the probability of their unfavorable resolution
being assessed as possible. At 31 December 2017, total claims under unresolved litigation amounted to approximately USD 25 million (31 December 2016:
USD 25 million).
Taxation contingencies in the Russian Federation
The Russian Federation currently has a number of laws related to various taxes imposed by both federal and regional governmental authorities. Applicable
taxes include value-added (VAT), corporate income tax, mandatory social security contributions, together with others. Tax returns, together with other
legal compliance areas (for example, customs and currency control matters), are subject to review and investigation by government authorities, which are
authorised by law to impose severe fines, penalties and interest charges. Generally, tax returns remain open and subject to inspection for a period of three
years following the fiscal year.
While management of the Group believes that in the financial statements of the Group it has provided adequate reserves for tax liabilities based on its
interpretation of current and previous legislation, the risk remains that tax authorities in the Russian Federation could take differing positions with regard to
interpretive issues. This uncertainty may expose the Group to additional taxation, fines and penalties.
Transfer pricing legislation enacted in the Russian Federation starting from 1 January 2012 provides for major modifications making local transfer pricing
rules closer to OECD guidelines, but creating additional uncertainty in practical application of tax legislation in certain circumstances.
These transfer pricing rules provide for an obligation for the taxpayers to prepare transfer pricing documentation with respect to controlled transactions and
prescribe the basis and mechanisms for accruing additional taxes and interest in case prices in the controlled transactions differ from the market level.
Currently there is lack of practice of applying the transfer pricing rules by the tax authorities and courts, however, it is anticipated that transfer pricing
arrangements will be subject to very close scrutiny potentially having effect on the financial results and the financial position of the Group.
Russian Federation risk
As an emerging market, the Russian Federation does not possess a fully developed business and regulatory infrastructure including stable banking and
judicial systems which would generally exist in a more mature market economy. The economy of the Russian Federation is characterised by a currency
that is not freely convertible outside of the country, currency controls, low liquidity levels for debt and equity markets, and continuing inflation. As a result,
operations in the Russian Federation involve risks that are not typically associated with those in more developed markets. Stability and success of Russian
economy and the Group’s business mainly depends on the effectiveness of economic measures undertaken by the government as well as the development
of legal system.
31. Financial risk management
Capital risk management
The Group manages its capital structure in order to safeguard the Group’s ability to continue as a going concern and to maximise the return to shareholders
through the optimisation of debt and equity balance.
The capital structure of the Group consists of debt, which includes long and short-term borrowings, equity attributable to shareholders of the parent
company, comprising share capital, other reserves and retained earnings.
Management of the Group regularly reviews its level of leverage, calculated as the proportion of Net Debt to EBITDA, to ensure that it is in line with the
Group’s financial policy aimed at preserving investment grade credit ratings.
The Сompany maintains BBB- investment grade ratings, assigned by rating agencies Fitch and S&P’s. On 29 January 2018 Moody’s rating agency raised the
Company’s rating from Ba1 to the investment grade level Baa3 and changed the outlook from stable to positive.
Financial risk factors and risk management structure
In the normal course of its operations, the Group is exposed to a variety of financial risks: market risk (including interest rate and currency risk), credit
risk and liquidity risk. The Group has an explicit risk management structure aligned with internal control procedures that enable it to assess, evaluate and
monitor the Group’s exposure to such risks.
Risk management is carried out by financial risk management. The Group has adopted and documented policies covering specific areas, such as market risk
management system, credit risk management system, liquidity risk management system and use of derivative financial instruments.
Interest rate risk
Interest rate risk is the risk that changes in interest rates will adversely impact the financial results of the Group. The Group’s interest rate risk arises from
long- and short-term borrowings at floating rates.
The Group performs thorough analysis of its interest rate risk exposure regularly. Various scenarios are simulated. The table below details the Group’s
sensitivity to a 2 percentage points increase in those borrowings subject to a floating rate. The sensitivity analysis is prepared assuming that the amount of
liabilities at floating rates outstanding at the reporting date was outstanding for the whole year.
Loss
For the year ended 31 December 2017
For the year ended 31 December 2016
70
57
2% LIBOR increase impact
In 2017 the Russian tax authorities completed a transfer pricing audit of the Group’s metal export sales for the year ended 31 December 2013, which did not
result in significant additional tax charges.
Management believes that the Group’s exposure to interest rate risk fluctuations does not require additional hedging activities.
Environmental matters
The Group is subject to extensive federal, state and local environmental controls and regulations in the countries in which it operates. The Group’s
operations involve pollutant emissions to air and water objects as well as formation and disposal of production wastes.
Management of the Group believes that the Group is in compliance with all current existing environmental legislation in the countries in which it operates.
However, environmental laws and regulations continue to evolve. The Group is unable to predict the timing or extent to which those laws and regulations
may change. Such change, if it occurs, may require that the Group modernise technology to meet more stringent standards.
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Сonsolidated financial statements
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument denominated in foreign currency will fluctuate because of changes
in exchange rates.
The major part of the Group’s revenue and related trade accounts receivable are denominated in US dollars and therefore the Group is exposed primarily to
USD currency risk. Foreign exchange risk arising from other currencies is assessed by management of the Group as immaterial.
The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than functional currencies of the individual Group entities at
31 December 2017 and 31 December 2016 were as follows:
Cash and cash equivalents
Trade and other receivables
Other assets
Total assets
Trade and other payables
Loans and borrowings
Other liabilities
Total liabilities
USD
609
384
141
1,134
290
7,684
36
8,010
At 31 December 2017
Other currencies
49
8
312
369
94
5
23
122
HKD
100
–
–
100
–
–
–
–
USD
1,053
163
140
1,356
263
5,584
15
5,862
HKD
1,014
–
–
1,014
–
–
–
–
At 31 December 2016
Other currencies
57
7
101
165
74
–
24
98
Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if a risk for a potential loss is at an acceptable level. The Group calculates
the financial impact of exchange rate fluctuations on USD-denominated monetary assets and liabilities in respect of the Group entities where functional
currency is the Russian Rouble. The following table presents the decrease of the Group’s profit and equity before tax due to a 20% weakening of the Russian
Rouble against USD.
Loss
1,375
901
For the year ended 31 December 2017
For the year ended 31 December 2016
US Dollar 20% strengthening
Given that the Group’s exposure to currency risk for the monetary assets and liabilities is offset by the revenue denominated in USD, management believes
that the Group’s exposure to currency risk is acceptable. The Group does not apply hedge instruments.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit risk arises from
cash and cash equivalents, bank deposits as well as credit exposures to customers, including outstanding uncollateralised trade and other receivables.
The Group’s exposure to credit risk is continuously monitored and controlled.
Before dealing with a new counterparty, management assesses the creditworthiness of a potential customer or a financial institution. If the counterparty is
rated by major independent credit-rating agencies, this rating is used to evaluate creditworthiness; otherwise it is evaluated using an analysis of the latest
available financial statements of the counterparty and other publically available information.
The balances of ten major counterparties are presented below. The banks have a minimum of ВВ+ credit rating.
Cash and cash equivalents and bank deposits
Bank A
Bank B
Bank C
Bank D
Bank E
Total
At 31 December 2017
Outstanding balance
At 31 December 2016
224
143
125
102
80
674
1,014
653
521
381
226
2,795
Trade receivables
Company A
Company B
Company C
Company D
Company E
Total
At 31 December 2017
Outstanding balance
At 31 December 2016
66
41
23
18
16
164
11
9
7
7
6
40
The Group is not economically dependent on a limited number of customers because the majority of its products are highly liquid and traded on the world
commodity markets. Metal and other sales to the Group’s customers are presented below:
Number of customers
Turnover USD million
%
Number of customers
Turnover USD million
%
For the year ended 31 December 2017
For the year ended 31 December 2016
Largest customer
1
Next 9 largest customers 9
Total
10
Next 10 largest customers 10
Total
20
Remaining customers
Total
1,319
2,936
4,255
1,494
5,749
3,397
9,146
1
9
10
10
20
14
32
46
16
62
38
100
973
2,587
3,560
1,154
4,714
3,545
8,259
12
31
43
14
57
43
100
Management of the Group believes that with the exception of the bank balances indicated above there is no significant concentration of credit risk.
The following table provides information about the exposure to credit risk for cash and cash equivalents, loans, irrevocable letters of credit, bank deposits
and trade and other receivables:
Cash and cash equivalents
Loans, trade and other receivables
Irrevocable letters of credit
Bank deposits
At 31 December 2017
At 31 December 2016
852
518
248
96
3,325
355
101
10
Liquidity risk
Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due.
The Group has a well-developed liquidity risk management system to exercise control over its short-, medium- and long-term funding. The Group manages
liquidity risk by maintaining adequate reserves, committed and uncommitted banking facilities and reserve borrowing facilities. Management continuously
monitors rolling cash flow forecasts and performs analysis of maturity profiles of financial assets and liabilities, and undertakes detailed annual and
quarterly budgeting procedures.
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Fixed rate corporate bonds
Total
Carrying value
4,465
4,465
Loans and borrowings, including:
Carrying value
Floating rate loans and borrowings
Fixed rate loans and borrowings
Total
3,484
1,076
4,560
Carrying value
402
402
At 31 December 2017
At 31 December 2016
Fair value
Level 1
4,685
4,685
Fair value
Level 2
3,439
1,055
4,494
Fair value
Level 2
440
440
Carrying value
2,962
2,962
Carrying value
2,872
1,990
4,862
Carrying value
523
523
Fair value
Level 1
3,171
3,171
Fair value
Level 2
2,734
2,121
4,855
Fair value
Level 2
523
523
Appendixes
Сonsolidated financial statements
The following table contains the maturity profile of the Group’s borrowings (maturity profiles for other liabilities are presented in note 26) based on
contractual undiscounted payments, including interest:
Total
Due within
one month
Due from one to
three months
Due from three to
twelve months
Due in the
second year
Due in the
third year
Due in the
fourth year
Due in the
fifth year
Due there-
after
1
–
1
9
5
14
15
1
36
37
–
8
8
45
766
239
1,005
29
51
80
1,085
6
258
264
236
65
302
566
988
257
1,245
996
52
1,048
2,293
1,049
188
1,237
1,028
33
1,061
2,298
1,506
106
1,612
808
20
828
1,269
105
1,374
405
10
415
At 31 December 2017
Fixed rate bank loans and borrowings
Principal
Interest
5,586
1,189
6,775
4,996
1,882
6,878
Floating rate bank loans and borrowings
Principal
Interest
Total
3,510
246
3,756
10,531
At 31 December 2016
Fixed rate bank loans and borrowings
Principal
Interest
Floating rate bank loans and borrowings
Principal
Interest
Total
2,902
419
3,321
10,199
Total
Due within
one month
Due from one to
three months
Due from three to
twelve months
Due in the
second year
Due in the
third year
Due in the
fourth year
Due in the
fifth year
Due there-
after
Total
2,440
1,789
Trade and other long-term payables
–
–
–
11
4
15
15
–
76
76
134
18
152
228
5
357
362
431
71
502
864
741
417
668
394
1,158
1,062
445
83
528
556
73
629
1,348
306
1,654
222
63
285
976
137
1,258
195
1,113
1,453
609
43
652
494
64
558
1,686
1,691
1,939
1,765
2,011
The fair value of financial liabilities presented in table above is determined as follows:
• the fair value of corporate bonds was determined based on market quotations existing at the reporting dates;
• the fair value of floating rate and fixed rate loans and borrowings at 31 December 2017 was calculated based on the present value of future cash flows
(principal and interest), discounted at the best management estimation of market rates, taking into consideration currency of the loan, expected maturity and
risks attributable to the Group existing at the reporting date;
• the fair value of trade and other long-term payables at 31 December 2017 was calculated based on the present value of future cash flows, discounted at the
best management estimation of market rates.
33. Investments in significant subsidiaries and associates
Subsidiaries by business segments
Country
Nature of business
At 31 December 2017
At 31 December 2016
Effective % held
At 31 December 2017 the Group had available financing facilities for the management of its day to day liquidity requirements of USD 3,554 million (31
December 2016: USD 2,622 million).
Group GMK
JSC “Norilsky Kombinat”
Russian Federation
Rental of equipment
32. Fair value of financial instruments
Management believes that the carrying value of financial instruments such as cash and cash equivalents (refer to note 19), short-term accounts receivable
and payable approximates to their fair value.
Certain financial instruments such as other financial assets and finance leases obligations, were excluded from fair value analysis either due to their
insignificance or due to the fact that assets were acquired or liabilities were assumed close to the reporting dates and management believes that their
carrying value either approximates to their fair value or may not significantly differ from each other.
Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is
observable as follows:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability,
either directly or indirectly; and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable
market data.
• The information presented below is about loans and borrowings, trade and other long-term payables, whose carrying values differ from their fair values.
JSC “Taimyrgaz”
JSC “Norilskgazprom”
JSC “Taimyrenergo”
JSC “NTEK”
LLC “ZSC”
Russian Federation
Gas extraction
Russian Federation
Gas extraction
Russian Federation
Rental of equipment
Russian Federation
Electricity production and
distribution
Russian Federation
Construction
LLC “Norilsknickelremont”
Russian Federation
Repairs
LLC “Norilskgeologiya”
Russian Federation
Geological works
LLC “Norilskyi obespechivaushyi complex”
Russian Federation
Production of spare parts
Group KGMK
JSC “Kolskaya GMK”
LLC “Pechengastroy”
Norilsk Nickel Harjavalta
Russian Federation
Mining and Metallurgy
Russian Federation
Repairs
Norilsk Nickel Harjavalta OY
Finland
Metallurgy
Other metallurgical
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
LLC “GRK “Bystrinskoye”
Russian Federation
Mining
50.01
89.33
264
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Appendixes
Сonsolidated financial statements
Subsidiaries by business segments
Country
Nature of business
At 31 December 2017
At 31 December 2016
Effective % held
Other non-metallurgical
Metal Trade Overseas A.G.
Switzerland
Distribution
LLC “Institut Gypronickel”
Russian Federation
Research
JSC “TTK”
Russian Federation
Supplier of fuel
JSC “Enisey River Shipping Company”
Russian Federation
River shipping operations
LLC “Aeroport Norilsk”
JSC “AK “NordStar”
Russian Federation
Airport
Russian Federation
Aircompany
100
100
100
100
100
100
100
100
100
100
100
100
Effective % held
Joint operations by business segments
Country
Nature of business
At 31 December 2017
At 31 December 2016
Other metallurgical
Nkomati Nickel Mine
Republic of South Africa
Mining
50
50
34. Events subsequent to the reporting date
In January 2018 the Company borrowed the second tranche in the amount of USD 1,100 million under the USD 2,500 million syndicated loan, signed
in December 2017 with the syndicate of international financial institutions. The existing facility has been fully drawn down.
In January 2018 the Company made an early repayment of USD 120 million under the bilateral credit facility with JSC “Nordea Bank” with the total credit limit
of USD 220 million.
In February 2018 the Group signed metal sales agreement with Societe Generale under terms of USD 300 million prepayment.
During January and February 2018 the Company signed two confirmed credit lines with PJSC VTB Bank and JSC Gasprombank in the amount of RUB
30 billion and RUB 20 billion accordingly and an unconfirmed credit line facility with JSC Gasprombank in the amount of RUB 20 billion. At the publication
date there was no draw-down under these facilities.
The Group Structure:
main assets1
Mining and
Metallurgical assets
Geological exploration
assets
Energy assets
Transport assets
Research assets
Supporting business
Polar Division
Norilskgeologiya
(100% stake)
Norilskenergo Division PolarTransport Division
Institut Gypronickel
(100% stake)
Medvezhy Ruchey
(100% stake)
Vostokgeologiya
(100% stake)
Taimyrenergo
(100% stake)
Murmansk Transport
Division
Norilskyi
obespechivaushyi
complex
(100% stake)
ZSC
(100% stake)
Sales nd distribution
assets
NORMETIMPEX
(100% stake)
Metal Trade Overseas
A. G. (Switzerland,
100% stake)
Norilsknickelremont
(100% stake)
Norilsk Nickel Europe
Limited
(UK, 100% stake)
Pechengastroy
(100% stake)
Norilsk Nickel Asia
(Hong Kong, 100%
stake)
Nornickel — Shared
Services Centre
(100% stake)
Norilsk Nickel USA Inc.
(USA, 100% stake)
Norilsk Nickel
Marketing
(China, 100% stake)
Kola MMC
(100% stake)
GRK “Bystrinskoye
(50.01% stake)
Norilsk Nickel
Harjavalta
(Finland, 100% stake)
Nkomati Nickel Mine
(SA, 50% stake)
NTEK
(100% stake)
Arkhangelsk Transport
Division
Norilskgazprom
(100% stake)
Krasnoyarsk Transport
Division
Taimyrgaz
(100% stake)
Bystrinsky Transport
Division
TTK
(100% stake)
Yenisey River Shipping
Company
(81,99% stake)
Norilsktransgaz
(100% stake)
Krasnoyarsk River Port
(88,77% stake)
Arctic-Energo
(100% stake)
Lesosibirsk Port
(51% stake)
Norilsk Airport
(100% stake)
NordStar Airlines
(100% stake)
Norilsk Avia
(100% stake)
266
1 Ownership in subsidiaries are indicated from the authorized capital
267
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
History of production indicators
History of production
indicators
Norilsk nickel Group saleable metals production
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Norilsk nickel Group saleable metals production
2008
2009
2010
TOTAL METAL PRODUCTION
Nickel, t,
297,943 279,889 295,840 295,098 300,340 285,292
274,248 266,406
235,749
217,112
thereof from own Russian feed
230,550 232,813
235,518 234,906
223,153
219,273
223,224
220,675
196,809
210,131
thereof from 3d parties feed
67,393
47,076
60,322
60,192
77,187
66,019
51,024
45,731
38,940
6,981
Copper, t,
417,861 400,778
388,027
377,944
363,764
371,063 368,008
369,426
360,217
401,081
thereof from own Russian feed
400,344 382,443
365,698 362,854
344,226
345,737
345,897
352,766
344,482
397,774
Platinum, koz
Polar division
Kola MMC
thereof from own Russian feed
thereof from 3d parties feed
Norilsk Nickel Harjavalta (Finland)
thereof from 3d parties feed
17,517
18,335
22,329
15,090
19,538
25,326
22,111
16,660
15,735
3,307
Nickel, t,
Palladium, koz
2,807
2,794
2,855
2,806
2,732
2,662
2,752
2,689
2,618
2,780
thereof from own Russian feed
thereof from own Russian feed
2,701
2,676
2,723
2,704
2,624
2,529
2,582
2,575
2,526
2,728
Copper, t,
106
656
632
24
118
658
636
22
132
692
663
29
102
696
672
24
108
683
658
25
133
650
604
46
170
662
595
67
114
656
610
46
92
644
610
34
52
670
650
20
232,302 232,813
235,518
237,227 233,632
231,798
228,438
222,016
182,095
157,396
thereof from own Russian feed
Palladium, koz
thereof from own Russian feed
Platinum, koz
thereof from own Russian feed
Norilsk Nickel Australia (Australia)
122,000 124,250
124,200
124,000
124,000
122,700
122,390
96,916
50,860
0
Nickel, t
15,528
1,223
110,302 108,563
111,318
113,227
109,632
109,098
106,048
125,100
131,235
157,396
Norilsk Nickel Tati (Botswana) 1
thereof from 3d parties feed
Platinum, koz
thereof from own Russian feed
thereof from 3d parties feed
Polar division and Kola MMC (Russia)
Nickel, t
Polar division
Kola MMC
Copper, t
Polar division
Kola MMC
632
509
123
123
0
29,344
0
4,220
0
11
0
5
0
636
505
131
131
0
663
529
134
134
0
2011
672
536
136
136
0
2012
660
529
131
129
2
2013
627
504
123
100
23
2014
627
500
127
95
32
2015
2016
2017
622
488
134
122
12
622
449
173
159
14
660
259
401
385
16
28,452
49,159
48,525
45,518
44,252
42,603
43,479
53,654
59,716
0
0
0
0
0
0
424
19,012
55,021
4,983
11,279
5,681
1,006
6,549
10,629
13,048
9,598
13,441
0
18
0
5
0
0
48
0
15
0
0
0
34
0
12
0
0
21
0
9
0
0
39
0
16
0
0
8,975
2,826
0
74
0
31
0
0
0
78
0
33
0
0
911
671
5
1
593
12,329
64
8
22
2
0
0
0
0
0
42
35
10
6
0
0
0
0
0
thereof from own Russian feed
108,550 108,563
111,318
110,906
99,153
96,573
100,834
123,335
126,937
155,110
thereof from 3d parties feed
1,752
0
0
2,321
10,479
12,525
5,214
1,765
4,298
2 286
400,344 382,443
365,698 363,460 352,466
359,102
354,943
355,707
350,619
387,640
338,511 323,705 309,320 303,940
295,610 296,760
297,552 292,632
280,347
306,859
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
20,769
17,401
11,163
9,346
12,215
6,416
3,207
13,297
13,352
11,050
8,803
10,292
5,412
2,436
95
19
100
17
84
14
68
12
83
14
43
7
18
4
61,833
58,738
56,378
59,520
56,856
62,342
57,391
63,075
70,272
80,781
Norilsk Nickel Nkomati (South Africa) 2
thereof from own Russian feed
61,833
58,738
56,378
58,914
48,616
48,977
48,345
60,134
63,542
78,586
thereof from 3d parties feed
0
0
0
606
8,240
13,365
9,046
2,941
6,730
2,195
Palladium, koz
Polar division
Kola MMC
thereof from own Russian feed
thereof from 3d parties feed
2,701
2,676
2,723
2,704
2,628
2,580
2,660
2,606
2,554
2,738
2,054
2,010
2,053
2,038
1,989
2,006
2,065
1,935
1,703
647
647
0
666
666
0
670
670
0
666
666
0
639
635
4
574
523
51
595
517
78
671
640
31
851
815
36
956
1,782
1,731
45
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
2,642
3,005
5,528
5,815
9,624
11,920
11,359
11,350
8,486
8,006
1,347
1,436
3,082
2,927
4,594
5,034
4,938
5,301
4,007
4,504
13
5
11
3
23
7
24
9
32
12
46
20
48
19
53
20
40
15
46
20
268
269
1 The sale of the asset was closed on April 2, 2015.
2 Metal in concentrate for sale assuming 50% ownership. Nkomati’s performance is reflected in financial results using proportional consolidation according
to our stake and not reflected in other totals.
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
Minerals reserves and resources
Minerals reserves
and resources
Metal grade
Ore
kt
Ni
%
Cu
%
Pd
g/t
Pt
g/t
Au
g/t
6 PGM
g/t
Ni
kt
Cu
kt
Pd
koz
Pt
koz
Contained metal
Au
koz
6 PGM
koz
689,980
0.92
1.75
4.25
1.13
0.24
5.54
6,375
12,074
94,260
24,956
5,432
124,810
Talnakh ore field, including:
331,796
0.78
1.56
3.91
0.22
5.15
2,573
5,162
Rich
Cuprous
48,376
2.53
3.14
6.57
0.20
8.15
1,225
22,584
0.98
3.98
9.52
2.30
0.51
11.95
,221
1.04
1.26
Disseminated
260,836
0.43
1.05
2.94
0.89
0.20
4.01
1,127
2,746
24,618
41,751
10,221
6,912
1,517
899
11,095
1,962
1,667
7,466
2,319
309
369
1,641
54,951
12,675
8,675
33,601
Norilsk-1 deposit
(disseminated ore)
Probable reserves
22,353
0.35
0.51
3.97
1.60
0.17
5.91
78
113
2,856
1,149
126
4,215
Talnakh ore field
313,942
1.17
2.14
4.62
1.14
0.28
6.06
3,662
6,719
46,628
Rich
Cuprous
84,821
2.88
3.90
6.88
58,188
0.76
3.28
7.25
1.42
1.88
0.58
9.33
0.28
8.87
2,439
3,307
18,764
441
782
1,910
1,502
13,562
14,302
11,493
3,865
3,519
4,109
2,852
761
1,094
997
61,173
24,175
17,460
19,538
Disseminated
170,933
0.46
0.88
2.60
0.75
0.18
3.56
Region, deposit, ore type
TAIMYR PENINSULA
Proven and probable
reserves
Proven reserves
Norilsk-1 deposit
(disseminated ore)
Measured and indicated
resources
1,714,381
0.70
1.32
3.57
1.01
0.21
4.79
11,985 22,660
196,919
55,507
11,673
264,234
Talnakh ore field
1,566,469
0.74
1.41
3.56
0.97
0.22
4.73
11,545
22,096
179,339
48,652
10,942
238,382
Rich
Cuprous
115,466
3.23
3.90
7.96
1.60
0.29
10.12
3,733
4,917
29,537
68,345
1.00
4.24
9.61
2.43
0.69
12.27
685
2,898
21,116
5,939
5,349
1,092
1,510
37,550
26,957
Disseminated
1,382,658
0.52
1.03
2.89
0.84
0.19
3.91
7,127
14,281
128,686
37,364
8,340
173,875
Norilsk-1 deposit
(disseminated ore)
147,912
0.30
0.38
3.70
1.44
0.15
5.44
440
564
17,580
6,855
731
25,852
Inferred resources
445,642
0.86
1.75
4.24
1.10
0.25
5.57
3,852
7,786
60,658
15,642
3,580
79,553
Talnakh ore field
Norilsk-1 deposit
444,574
0.87
1.75
4.24
1,068
0.23
0.32
3.69
1.09
1.46
0.25
5.57
3,850
7,783
60,531
15,592
3,576
79,286
0.13
7.78
2
3
127
50
4
267
KOLA PENINSULA (DISSEMINATED ORE)
Proven and probable
reserves
125,253
0.58
0.29
0.02
0.03
0.01
0.05
Proven reserves
50,127
0.57
0.24
0.02
0.03
0.01
0.05
Probable reserves
75,126
0.59
0.32
0.02
0.03
0.01
0.06
730
285
445
359
122
237
Measured and indicated
resources
332,923
0.69
0.33
0.03
0.05
0.02
0.08
2,286
1,106
Inferred resources
137,502
0.63
0.31
0.03
0.04
0.01
0.07
873
431
123
46
77
497
178
88
34
54
322
119
42
14
28
180
57
219
81
138
879
312
Region, deposit, ore type
Ore
kt
Ni
%
Cu
%
Pd
g/t
Pt
g/t
Au
g/t
6 PGM
g/t
Ni
kt
Cu
kt
Pd
koz
Pt
koz
TOTAL RUSSIAN ASSETS AS AT 31.12.2017
Metal grade
Contained metal
Au
koz
6 PGM
koz
Total proven and probable
reserves
815,233
0.87
1.53
3.60
0.96
0.21
4.77
7,105
12,433
94,383
25,044
5,474
125,029
Total measured and indicated
resources
2,047,304
0.70
Total inferred resources
583,144
0.81
AUSTRALIA (NORILSK NICKEL CAWSE)
Honeymoon Well (nickel sulfide ores)
Measured and indicated
resources
173,300
0.68
Inferred resources
11,900
0.68
Honeymoon Well (nickel laterite ores)
Inferred resources
339,000
0.81
1.16
1.41
0
0
0
TOTAL RUSSIAN AND FOREIGN ASSETS AS AT 31.12.2017
Total proven and probable
reserves
815,233
Total measured and
indicated resources
2,220,604
Total inferred resources
934,044
–
–
–
–
–
–
3.00
0.85
0.18
4.03
14,271
23,766
197,416
55,829
11,853
265,113
3.25
0.84
0.19
4.27
4,725
8,217
60,836
15,761
3,637
79,865
0
0
0
–
–
–
0
0
0
–
–
–
0
0
0
–
–
–
0
0
0
–
–
–
1,180
81
2,746
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7,105
12,433
94,383
25,044
5,474
125,029
15,451
23,766
197,416
55,829
11,853
265,113
7,552
8,217
60,836
15,761
3,637
79,865
Metal grade
Contained metal
Ore
kt
Ni
%
Cu
%
Co
%
4 PGM
g/t
Ni
kt
Cu
kt
Co
kt
4 PGM
koz
SOUTH AFRICA (NORILSK NICKEL NKOMATI) AS AT 30.06.2017
Proven and probable reserves
Measured and indicated resources
Inferred resources
88,640
182,410
46,350
0.31
0.35
0.40
0.11
0.14
0.13
0.02
0.02
0.00
0.88
0.95
0.97
275
641
185
97
251
61
24
36
0
2,509
5,566
1,446
Notes:
1. Data regarding the mineral resources and ore reserves of the deposits of the Taimyr and Kola peninsulas were classified according to the Australasian Code for Reporting
of Mineral Resources and Ore Reserves (JORC code), created by the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists, and the
Minerals Council of Australia, subject to the terminology recommended by the Russian Code for Public Reporting of Exploration Results, Mineral Resources, Mineral
Reserves (NAEN Code).
2. Data regarding the reserves and resources is based on the balance-sheet reserves of A, B, С1 and С2, categories (according to the terminology of the State Committee for
Mineral Reserves) as of the end of the given calendar year.
3. Figures given as “Total” may differ from the sum of individual numbers due to rounding. Certain values may in some instances vary slightly from previously
published values.
4. The six platinum group metals (PGMs) are platinum, palladium, rhodium, ruthenium, osmium, and iridium. The 4PGMs are rhodium, ruthenium, osmium, and iridium.
Hereafter in the annual report, troy ounces are used as a weight measure for PGMS and gold.
5. Proven and probable ore reserves are included in mineral resources.
6. Ore losses applied ranged from 1.6 % to 26% and dilution from 6% to 31.9%.
7. Excluding fields in Zabaykalsky Krai.
8. The Company owns 50% of Nkomati, a nickel mine developed jointly with African Rainbow Minerals. Nkomati’s performance is reflected in financial results using
proportional consolidation according to our stake and not reflected in other totals.
21,889
0.28
0.37
4.30
1.73
0.19
6.35
62
80
3,025
1,219
135
4,471
Region, ore type
270
271
Annual report • 2017Company overviewStrategy overviewMarket overviewBusiness overview Corporate governanceInformation for shareholdersAppendixes
Appendixes
Report on compliance with the principles and recommendations set forth in the corporate governance code
Report on compliance
with the principles and
recommendations set
forth in the corporate
governance code
This report on compliance with the principles and recommendations set forth in the Corporate Governance Code was reviewed by the Board of Directors
of MMC Norilsk Nickel at the meeting held on May 24,2018 Munutes No. GMK/18-pr-bd.
The Board of Directors confirms that information in this report is a true and accurate reflection of the Company’s compliance with the principles
and recommendations set forth in the Corporate Governance Code in 20171.
№
1.1
1.1.1
Corporate governance
principles
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
The company shall ensure equitable and fair treatment of every shareholder exercising their rights of participation in managing the company.
The company provides its
shareholders with maximum
opportunities to participate
in the general meeting,
make grounded decisions,
coordinate activities, and
express opinions regarding
items on the agenda of the
general meeting.
1. Everyone has free access to an internal document that was
approved by the general meeting of shareholders and sets
out the procedure for holding such meetings.
2. The company provides its shareholders with multiple
communication channels, including hotline, email and
online forum, to express opinions and make questions
about the agenda during the preparation for the general
meeting. These channels were established in the lead-up
to each general meeting held in the reporting period.
Compliant
1.1.2 The procedure for notifying
shareholders of, and
providing them with materials
for, the general meeting
enables shareholders to duly
prepare for the same.
1. The notice of the general meeting of shareholders is
Compliant
published on the corporate website at least 30 days prior to
the date of the meeting.
2. The notice of the general meeting of shareholders specifies
the place of the meeting and documents required for
access to the venue.
3. Shareholders are given access to the information about
those who proposed the agenda and those who nominated
candidates to the company’s board of directors and audit
commission.
Corporate governance
principles
№
1.1.3 In the lead-up to, and
during, the general meeting,
shareholders had timely
and unrestricted access to
the information about, and
materials for, the meeting
and had an opportunity to put
questions to the company’s
executive bodies and
directors and communicate
with each other.
1.1.4 No unnecessary difficulties
prevented shareholders from
exercising their rights to
convene a general meeting,
nominate candidates to
executive bodies and
propose items for the agenda
of the general meeting.
1.1.5 Each shareholder had an
unrestricted opportunity
to exercise their voting right
in the simplest and most
convenient manner.
1.1.6 The procedure established
by the company gives every
shareholder present at
the general meeting equal
opportunities to express their
opinions and ask questions.
Compliance
status2
Compliant
Explanation of
non-compliance3
Compliant
Compliance assessment criteria
1. In the reporting period, shareholders had an opportunity
to put questions to the company’s executive bodies and
directors before and during the annual general meeting.
2. The directors’ opinion (including dissenting opinions
incorporated in the minutes) on each item on the agenda
of the general meetings held in the reporting period was
included in the materials for the respective general meeting.
3. The company provided the entitled shareholders with
access to the list of persons who have the right to
participate in the general meeting, starting from the date
when such list was received by the company, for each
general meeting held in the reporting period.
1. In the reporting period, shareholders were able to propose
items for the agenda of the annual general meeting during
at least 60 days after the end of the relevant calendar year.
2. In the reporting period, the company did not decline
proposals for the agenda or nominations for executive
bodies for the reason of misprints or other minor faults
in the shareholder’s proposal.
1. An internal document (corporate policy) of the company
Compliant
contains provisions enabling each shareholder present at
the general meeting to request, before the end of such
meeting, a copy of their voting ballot certified by the
counting board.
1. When general meetings of shareholders in the reporting
period were held as physical meetings (requiring joint
attendance of shareholders), sufficient time was provided
to report on, and discuss, items on the agenda.
2. Nominees to the company’s executive and control bodies
were available for shareholders’ questions at the same
general meeting at which such nominees were put to vote.
3. When deciding on the format of, and procedures for, the
general meetings of shareholders, the board of directors
considered the use of telecommunication channels
to enable shareholders to remotely participate in general
meetings held in the reporting period.
Partly compliant
The Company is partly compliant with Criterion 2.
In accordance with the Regulations on the General
Meeting of Shareholders of MMC Norilsk Nickel
approved by the General Meeting of Shareholders
(Minutes No. 1 of 6 June 2014), nominees to the
Board of Directors and the Audit Commission are
invited to the meeting. Most nominees are present
at the meeting. Questions are made in writing, and
answers are sent to shareholders.
1.2
Shareholders are given an equal and fair opportunity to have a share in the company’s profits by receiving dividends.
1.2.1
The company developed and
introduced a transparent and
clear procedure to determine
the amount of, and pay out,
dividends.
1. The company has developed and disclosed its dividend
Compliant
policy approved by the board of directors.
2. If the dividend policy provides for the company’s
performance indicators to be used in the calculation of
dividends, relevant provisions of the dividend policy require
the use of consolidated financial statements.
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Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
1.2.2 The company does not
1. The dividend policy of the company sets out clear
Compliant
decide to pay dividends if,
meeting formal requirements
set out in the applicable
laws, such decision is not
economically feasible and
can be misleading about
the company’s financial
performance.
1.2.3 The company ensures
no deterioration of the
dividend rights of its existing
shareholders.
1.2.4 The company strives
to rule out the possibility
of shareholders receiving
any income (profit) from
the company other than
dividends and liquidation
value.
instructions as to financial/economic circumstances when
dividends should not be paid.
1. In the reporting period, the company made no steps that
Compliant
could result in any deterioration of the dividend rights of its
existing shareholders.
Compliant
1. In order to rule out the possibility of shareholders receiving
any income (profit) from the company other than dividends
and liquidation value, internal documents introduce
controls enabling the company to timely identify and
properly approve transactions with persons affiliated with
(related to) substantial shareholders (persons authorised to
exercise voting rights granted by voting shares) when such
transactions are not formally recognised as related-party
transactions by the applicable law.
1.3
1.3.1
Principles and practices of corporate governance in the company provide for equal conditions for all holders of the same category (type) of shares,
including minority shareholders and foreign shareholders, and their equal treatment by the company.
1. In the reporting period, procedures to resolve potential
Compliant
conflicts of interest between substantial shareholders were
effective, and the board of directors paid due attention to
shareholder conflicts, if any.
The company has arranged
for fair treatment of each
shareholder by its executive
and control bodies,
including zero tolerance for
abuse of rights by majority
shareholders against minority
shareholders.
1.3.2 The company refrains
1. Quasi-treasury shares did not exist or did not take part in
Compliant
from any actions that will
or may result in artificial
redistribution of corporate
control.
voting procedures in the reporting period.
1.4
Shareholders have reliable and effective ways to register their rights to shares and an opportunity to dispose of such shares freely and easily.
1.4.1 Shareholders have reliable
and effective ways to register
their rights to shares and an
opportunity to dispose of
such shares freely and easily.
1. The company and its shareholders are satisfied with the
efficiency and reliability of securities register keeping
activities of the company’s registrar.
Compliant
Corporate governance
principles
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
The board of directors is responsible for strategic management, defines key principles of, and approaches to, risk management and internal controls,
exercises control over the company’s executive bodies, and performs other key functions.
№
2.1
2.1.1
1. Powers that the board of directors has in respect of
Partly compliant
appointment and dismissal of, and terms of labour contracts
with, the company’s executives are clearly defined in
the charter.
2. The board of directors considered a report (reports) by
the company’s sole executive body and collegial executive
body on progress in the company’s strategy.
The board of directors
is responsible for
making decisions on the
appointment and dismissal
of the company’s executives,
including appointments and
dismissals on the grounds
of misconduct. The board
of directors also supervises
activities of executive bodies
and ensures that they are
compliant with the approved
development strategy across
core business lines of the
company.
2.1.2 The board of directors sets
1. In the reporting period, the board of directors reviewed
Compliant
key long-term objectives,
estimates and approves key
performance indicators and
business goals, assesses
and approves the strategy
and business plans for the
company’s key lines of
business.
matters related to implementing and updating the strategy,
approving the financial plan (budget), and analysing
performance criteria and indicators (including interim
indicators) for the strategy and business plans of the
company.
2.1.3 The board of directors
1. The board of directors defined principles of, and
Partly compliant
determines risk management
and internal control
principles and approaches
of the company.
approaches to, the risk management and internal control
framework in the company.
2. The board of directors assessed the risk management
and internal control framework of the company during the
reporting period.
The Company is partly compliant with Criterion 1.
According to the Company’s Charter, appointment
of the President and termination of their powers
require approval of the General Meeting of
Shareholders
The Company is partly compliant with Criterion 2.
In the reporting period, the Board of Directors
regularly considered reports of the Management
Board on the Company’s most important lines of
operations. In the lead-up to the Annual General
Meeting of Shareholders, the Board of Directors
also pre-approved a report (as part of the Annual
Report) made by the President and Chairman
of the Management Board on the Company’s
performance.
The Company is partly compliant with Criterion 2.
In the reporting period, the Audit Committee
reviewed results of internal control tests carried
out by an external auditor (KPMG). Results are
presented in the Annual Report. In 2018, the
Internal Audit Department plans to conduct
a comprehensive assessment of the risk
management and internal control framework
and its performance, and submit the results
to the Audit and Sustainable Development
Committee for review.
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2.1.4 The board of directors
defines a policy on
remuneration and/
or reimbursements
(compensations) due
to directors, executives,
and other key managers
of the company.
Compliance assessment criteria
1. The board of directors approved and put into action a
policy (policies) on remuneration and reimbursements
(compensations) due to directors, executives, and other key
managers of the company.
2. In the reporting period, the board of directors considered
matters related to the above policy (policies) in its
meetings.
Compliance
status2
Explanation of
non-compliance3
Partly compliant
The Company is partly compliant with Criterion 1.
The Board of Directors approved and put into
action the Remuneration Policy for Members of
Board of Directors of MMC Norilsk Nickel.
Principles and mechanics of remunerations
(reimbursements) due to executives are set out
in the Charter, Regulations on the Management
Board, and other internal documents of the
Company.
The system (policy) of remunerations applicable
in the Company is continuously and directly
monitored by the Board of Directors.
Responsibilities of the Corporate Governance,
Nomination and Remuneration Committee
include development, supervision over adoption,
implementation and regular revision of the
remuneration policy for the Company’s Board
of Directors and Management Board and the
Company’s President.
The Company is partly compliant with Criterion 2.
In the reporting period, the Board of Directors
regularly reviewed matters related to the
remuneration policy for the top management,
including its updates, improvement, control over
implementation and performance assessment.
2.1.5 The board of directors plays
1. The board of directors plays a key role in preventing,
Compliant
a key role in preventing,
identifying and settling
internal conflicts among
the company’s bodies,
shareholders and employees.
identifying and settling internal conflicts.
2. The company introduced procedures to identify, and
measures to settle, conflicts of interest.
2.1.6 The board of directors
1. The board of directors approved an information policy
Compliant
plays a key role in ensuring
transparency of the
company’s operations, timely
and accurate disclosures,
and free access to the
company’s documents by
shareholders.
2.1.7 The board of directors
supervises corporate
governance practices and
plays a key role in material
corporate events.
regulation.
2. The company appointed persons responsible for putting
the information policy into action.
1. In the reporting period, the board of directors considered
Compliant
the matter of corporate governance at the company.
2.2
The board of directors is accountable to the company’s shareholders.
2.2.1
Information about the
activities of the board
of directors is disclosed
to shareholders.
2.2.2 The chairman of the
board of directors is
available to the company’s
shareholders
1. The company’s annual report includes information about
Compliant
attendance at the meetings of the board of directors and its
committees in the reporting period.
2. The annual report contains information about key results of
the board of directors’ assessment in the reporting period.
1. The company established a transparent procedure for
shareholders to contact the chairman of the board of
directors with questions and to express their opinions.
Compliant
№
2.3
Corporate governance
principles
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
The board of directors is an efficient and competent management body capable of making fair and independent judgements and decisions in line with the
interests of the company and its shareholders.
1. The procedure used in the company to assess performance
Compliant
of the board of directors includes assessment of
professional qualifications of individual directors.
2. In the reporting period, the board of directors (or its
nomination committee) assessed the board of directors’
nominees for the necessary experience, knowledge,
business reputation, potential conflicts of interests, etc.
2.3.1 The board of directors
is composed solely of
persons with an impeccable
business and personal
track record; directors have
sufficient skills, expertise
and experience to make
decisions falling within the
board’s remit and perform
their responsibilities
efficiently.
2.3.2 Directors are elected in
1. At each general meeting of shareholders held in the
Compliant
a transparent manner that
provides shareholders with
sufficient information on
nominees to get a clear
idea of their personal
and professional skills.
reporting period and voting on nominees for the board
of directors, the company provided shareholders with
biographies of all nominees to the board of directors,
results of their assessment performed by the board of
directors (or its nomination committee), and information
about the nominees’ compliance with independence criteria
in accordance with Recommendations 102–107 of the Code,
and written consents of the nominees to be elected to the
board of directors.
1. As part of the performance assessment of the board of
directors in the reporting period, the board of directors
analysed its needs for professional and business skills and
experience.
Compliant
1. As part of the performance assessment of the board of
directors in the reporting period, the board of directors
analysed whether the number of directors is sufficient to
meet the company’s goals and objectives and interests of
the shareholders.
Compliant
2.3.3 The board of directors is
well balanced in terms of
qualifications, experience,
knowledge and business
skills of its members, and
is trusted by the company’s
shareholders.
2.3.4 The number of directors
on the board of directors
makes it possible to
organise its activities in
the most efficient manner
and form committees, and
enables substantial minority
shareholders to elect a
director for whom they vote.
2.4
The board of directors has a sufficient number of independent directors.
1. In the reporting period, all independent directors met all
Compliant
independence criteria specified in Recommendations 102–
107 of the Code and were recognised as independent by
the board of directors.
2.4.1 An independent director is
a person with professional
expertise, experience and
independence sufficient
to have their own opinions
and make fair and unbiased
judgements that are
not influenced by the
company’s executive bodies,
shareholder groups, or other
stakeholders. Nominees
(elected director) related
to the company, any of its
substantial shareholders,
counterparties or competitors
or the government are not
normally considered an
independent director.
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2.4.2 Nominees for the board
of directors are assessed
for compliance with
independence criteria;
compliance of the current
independent directors
is reviewed on a regular
basis. Substance of such
assessment should prevail
over form.
Compliance assessment criteria
1. In the reporting period, the board of directors (or its
nomination committee) formed an opinion about the
independence of each nominee to the board of directors
and presented it to the company’s shareholders.
2. At least once in the reporting period, the board of directors
(or its nomination committee) assessed independence of
the current directors who were identified as independent in
the annual report.
3. The company developed measures to be taken by directors
who cease to be independent, including obligations to
timely inform the board of directors of such change in their
status.
Partly compliant
The Company is partly compliant with Criterion 2.
In the lead-up to the Annual General Meeting
of Shareholders in April 2017, the Corporate
Governance, Nomination and Remuneration
Committee of MMC Norilsk Nickel’s Board of
Directors reviewed the compliance of nominees to
the Board of Directors with independence criteria.
The current directors on the Board were elected
during the Annual General Meeting on 9 June
2017. According to the Charter of the Company,
“if after the election of an Independent Director
to the Board of Directors such director ceases to
be an independent director due to any changes or
new circumstances, such director shall promptly
notify the Board of Directors thereof (through
the Corporate Secretary) in writing and give a
detailed account of all such changes and new
circumstances”.
2.4.3 Independent directors make
1. Independent directors make up at least one third of the
Compliant
up at least one third of the
elected board members.
board members.
2.4.4 Independent directors play
2. Independent directors (those who have no conflicts of
Compliant
a key role in preventing
internal conflicts and making
material corporate actions by
the company.
interest) pre-estimate material corporate actions related
to potential conflicts of interest, with the estimates then
presented to the board of directors.
2.5
The chairman of the board of directors arranges for its functions to be performed in the most efficient manner.
2.5.1 The elected chairman of
the board of directors is
an independent director,
or independent directors
have appointed a senior
independent director who
coordinates the work of
independent directors and
interacts with the chairman of
the board of directors.
2.5.2 The chairman of the
board of directors ensures
constructive debate at its
meetings and free discussion
of items on the agenda and
supervises how decisions
made by the board are put
into action.
2.5.3 The chairman of the board
of directors takes necessary
measures to timely provide
other directors with
information required to make
decisions on the agenda.
1. The chairman of the board of directors is an independent
Compliant
director, or independent directors have appointed a senior
independent director4.
2. Functions, rights and responsibilities of the chairman
of the board of directors (or the senior independent
director, when applicable) are properly defined in internal
documents of the company.
The Chairman of the Board of Directors is an
independent director; the Company believes
that to fully meet best global practices.
The independent Chairman of the Board of
Directors of the Company ensures the most
efficient interaction between the Board of
Directors, shareholders and other stakeholders.
1. Performance of the chairman of the board of directors was
assessed as part of the board of directors’ performance
assessment in the reporting period.
Compliant
1. The responsibility of the chairman of the board of directors
to timely provide other directors with information about
the agenda items is set out in internal documents of the
company.
Compliant
Compliance
status2
Explanation of
non-compliance3
Corporate governance
principles
№
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
2.6 Directors are sufficiently informed and act reasonably and in good faith in the interests of the company and its shareholders, prudently and with due care.
2.6.1 Directors of the company
make decisions on the basis
of all available information,
subject to no conflict of
interest, equal treatment
of shareholders and usual
business risk.
Compliant
1. Internal documents of the company require that any director
informs the board of directors if a conflict of interest arises
with regard to any item on the agenda of the board of
directors or its committee before discussion of such item
begins.
2. Internal documents of the company require that a director
who has a conflict of interest refrains from voting on
the respective item.
3. The company has an established procedure for the board of
directors to seek professional advice on the matters within
its remit at the company’s expense.
2.6.2 Rights and obligations of
1. The company approved and published an internal document
Compliant
the directors are clearly set
out in internal documents of
the company.
2.6.3 Directors are given sufficient
time to perform their duties.
2.6.4 All directors have equal
access to the documents
and data of the company.
Newly elected directors
are provided with sufficient
information about the
company and activities of
the board of directors within
the shortest time possible.
clearly defining the directors’ rights and obligations.
1. Individual attendance at the meeting of the board of
Compliant
directors and committees and time spent to prepare for
such meetings were taken into account in the board of
directors’ performance assessment during the reporting
period.
2. In accordance with internal documents of the company,
directors must inform the board of directors of their
decision to be appointed to management bodies of other
organisations (except for subsidiaries and affiliates of the
company) and of such appointments.
1. In accordance with internal documents of the company,
directors have the right to access documents and make
request regarding the company and its subsidiaries, and
executive bodies of the company must provide such
information and documents.
2. The company has an established induction procedure for
newly elected directors.
Compliant
2.7
Preparations for, and attendance at, the meetings of the board of directors ensure efficient operations of the board of directors.
1. The board of directors held at least six meetings during
Compliant
the reporting period.
2.7.1 Meetings of the board of
directors are held when
necessary, subject to the
scale of operations and goals
of the company in a certain
period of time.
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2.7.2 The company’s internal
documents stipulate the
procedure to prepare for and
hold meetings of the board
of directors so that directors
have an opportunity to make
proper preparations.
2.7.3 The format of each meeting
depends on the importance
of items on the agenda. The
most important matters are
discussed at meetings held
in person.
2.7.4 Decisions on the most
important matters of
the company’s operations
are made at the meetings
of the board of directors
either by qualified majority
or by majority of all elected
directors.
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
Corporate governance
principles
№
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
1. The company approved an internal document setting out
Compliant
a procedure to prepare for and hold meetings of the board
of directors, particularly a rule to notify directors, usually
at least 5 days prior to the meeting.
1. The charter or another internal document of
Partly compliant
the company requires the most important matters (listed
in Recommendation 168 of the Code) to be discussed at
meetings of the board of directors held in person.
1. The charter of the company requires that decisions on the
most important matters listed in Recommendation 170 of
the Code are made at a meeting of the board of directors
by qualified majority (at least three fourths of votes) or by
majority of all elected directors.
Partly compliant
The Company is partly compliant with Criterion 1.
The Regulations on the Board of Directors of
MMC Norilsk Nickel contain the list of matters
that should be discussed at board meetings held
in person only.
This list is substantially in line with the list given
in Recommendation 168 of the Code and accounts
for specific aspects of corporate governance in
the Company.
The Company is partly compliant with Criterion 1.
The Charter of the Company requires that
decisions to increase the Company’s authorised
capital by issuing new stock be made by the Board
of Directors unanimously. Decisions on certain
material matters are made by positive vote of at
least ten (10) directors (which is equal to at least
3/4 of all directors’ votes). Such matters include
proposals for the General Meeting of Shareholders
to vote on amendments and addenda to the
Charter, reduction of the authorised capital,
approval of internal documents regulating
activities of the Company’s bodies, approval of,
and amendments to, the dividend policy, approval
of the Company’s internal documents, except
for internal documents referred by the federal
law to the competence of the General Meeting
of Shareholders, approval of, and amendments
to, the sales strategy of the Company, approval
of certain transactions, and other matters. No
amendments are planned to be made to the
Charter’s provisions that regulate decision-making
at meetings of the Board of Directors.
2.8.2 A remuneration committee
1. The board of directors set up the remuneration committee
Partly compliant
made up of independent
directors and chaired by an
independent director who is
not chairman of the board
of directors is set up for
preliminary consideration
of matters related to
efficient and transparent
remuneration practices.
made up of independent directors only.
2. The remuneration committee is chaired by an independent
director who is not chairman of the board of directors.
3. Internal documents of the company define responsibilities
of the remuneration committee, including the
responsibilities described in Recommendation 180 of
the Code.
The Company is partly compliant with Criterion 1.
The functions of the remuneration committee
and nominations committee are performed by
the Board of Directors’ Corporate Governance,
Nomination and Remuneration Committee. It is
made up of three independent directors and two
non-executive directors who are neither a sole
executive body nor members of the collegial
executive body of the Company. The Committee
is chaired by an independent director. Board of
Directors includes four independend directors. In
accordance with internal documents, the Company
set up four committees of the Board of Directors,
each made up of five persons. According to the
regulations on the committees, each committee
should include independent directors. Therefore,
if each committee is made up of independent
directors only, their workload will be excessive.
The Company is partly compliant with Criterion 3.
The Regulations on the Corporate Governance,
Nomination and Remuneration Committee of
the Board of Directors of MMC Norilsk Nickel
define the same responsibilities of the committee
as listed in Recommendation 180 of the Code,
except for Item 7 (preparing a report on the
implementation of executive remuneration
principles for inclusion in the Annual Report and
other internal documents of the Company). In the
reporting period, the Board of Directors regularly
reviewed reports of the Corporate Governance,
Nomination and Remuneration Committee on the
remuneration policy for the top management,
including its updates, improvement, control over
implementation and performance assessment.
2.8
The board of directors sets up committees for preliminary consideration of the most important matters of the company’s operations.
2.8.1 An audit committee made
1. The board of directors set up the audit committee made up
Partly compliant
up of independent directors
is set up for preliminary
consideration of any matters
related to the supervision of
the company’s financial and
business operations.
of independent directors only.
2. Internal documents of the company set out responsibilities
of the audit committee, including the responsibilities
described in Recommendation 172 of the Code.
3. At least one member of the audit committee who is an
independent director has knowledge and experience
in making, analysing, assessing and auditing accounting
(financial) statements.
4. Meetings of the audit committee were held at least once
every quarter during the reporting period.
The Company is partly compliant with Criterion 1.
The Company set up the Audit and Sustainable
Development Committee. It is made up of three
independent directors and two non-executive
directors who are neither a sole executive body
nor members of the collegial executive body of
the Company. The Committee is chaired by an
independent director. Board of Directors includes
four independend directors. In accordance with
internal documents, the Company set up four
committees of the Board of Directors, each made
up of five persons. According to the regulations
on the committees, each committee should
include independent directors. Therefore, if each
committee is made up of independent directors
only, their workload will be excessive.
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2.8.3 A nomination (appointment,
HR) committee whose
members are mostly
independent directors
is set up for preliminary
consideration of any matters
related to HR planning
(succession planning),
expertise and performance
of the board of directors.
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
1. The board of directors set up a nomination committee (or
Partly compliant
its responsibilities specified in Recommendation 186 of the
Code are performed by another committee*(5)), and most of
its members are independent directors.
2. Internal documents of the company define responsibilities
of the nomination committee (or another committee
performing its functions), including the responsibilities
described in Recommendation 186 of the Code.
The Company is partly compliant with Criterion 2.
The Regulations on the Corporate Governance,
Nomination and Remuneration Committee of
the Board of Directors of MMC Norilsk Nickel
defines the same responsibilities as listed in
Recommendation 186 of the Code, except for
Item 2 (relations with shareholders should not be
restricted to major shareholders only in nominating
candidates to the Board of Directors; such contacts
should be aimed at forming a board that will most
fully meet the goals and objectives of the Company)
and Item 4 (definitions of individual responsibilities
of the directors and Chairman of the Board of
Directors, including time to be spent on operating
matters both at and outside board meetings
during scheduled and unscheduled activities; such
definitions (separate for the directors and Chairman
of the Board of Directors) should be approved
by the Board of Directors and given for guidance
to each new director and Chairman after their
election).
Key responsibilities of the directors (including
Chairman of the Board of Directors) are defined
in the Regulations on the Board of Directors;
The composition of the Board of Directors is
relatively stable, with each director having
an established list of individual responsibilities;
an introductory course was developed for newly
elected directors, particularly to brief them on
working procedures in the Board of Directors.
Any additional definitions of directors’
responsibilities by the Committee would be
excessively formal. The Company does not plan to
include this task in the Committee’s responsibilities.
Compliance assessment criteria
1. In the reporting period, the board of directors analysed its
composition to make sure that it fully meets the goals and
objectives of the company. Additional committees were
either formed or recognised as unnecessary.
Compliance
status2
Compliant
Explanation of
non-compliance3
The Company set up four committees of the Board
of Directors6:
• Audit and Sustainable Development Committee;
• Corporate Governance, Nomination
and Remuneration Committee
• Budget Committee;
• Strategy Committee.
Corporate governance
principles
№
2.8.4 Subject to the scale of
operations and risk level,
the board of directors made
sure that its composition
fully meets the goals and
objectives of the company.
Additional committees were
either formed or recognised
as unnecessary (strategy
committee, corporate
governance committee,
ethics committee, risk
management committee,
budget committee, HSE
committee, etc.).
2.8.5 The committees are made
1. Committees of the board of directors are chaired by
Partly compliant
up so as to enable thorough
discussion of the matters
considered and take different
opinions into account.
independent directors.
2. According to internal documents (policies) of the company,
non-members may attend meetings of the audit committee,
nomination committee and remuneration committee at the
invitation of committee chairmen only.
The Company is partly compliant with Criterion 1.
The Board of Directors of the Company includes
four independent directors. The Company set
up four committees of the Board of Directors,
each made up of five persons. According to the
regulations on the committees, each committee
should include independent directors. If
independent directors are elected Chairmen of all
the committees, their workload will be excessive.
For this reason, the Budget Committee and the
Strategy Committee are chaired by non-executive
directors. The Committees are made up of two
independent directors and three non-executive
directors.
2.8.6 Committee chairmen
regularly inform the board
of directors and its chairman
of committee activities.
1. Committee chairmen provided the board of directors with
regular reports on committee activities in the reporting
period.
Compliant
2.9
The board of directors provides for assessing its own performance and the performance of its committees and individual members.
1. Self-assessment and external assessment of the board of
directors’ performance in the reporting period included
performance assessment of board committees, individual
directors and the board of directors in general.
2. Results of the self-assessment and external assessment of
the board of directors’ performance in the reporting period
were considered at the board meeting held in person.
Partly compliant
2.9.1 Assessment of the board
of directors’ performance
aims to estimate how
effective the board of
directors, its committees
and individual directors are
and whether their activities
meet corporate goals; it is
also designed to stimulate
the work of the board of
directors and identify areas
of potential improvement.
The Company is partly compliant with Criterion 1.
Performance of the Company’s Board of Directors
was assessed in accordance the Performance
Evaluation Policy for Board of Directors of MMC
Norilsk Nickel (the policy was developed with
assistance of an external consultant). In the
reporting period, self-assessment of the Board of
Directors, Committees and Chairman of the Board
of Directors was performed
by questionnaire.
The Company does not believe it to be reasonable
for the time being to assess the performance of
individual directors.
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Corporate governance
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№
2.9.2 Performance of the board
of directors, committees
and individual directors is
assessed regularly, at least
once a year. An external
organisation (consultant) is
engaged at least once every
three years to assess the
board’s performance on an
independent basis.
Compliance assessment criteria
1. An external organisation (consultant) was engaged at least
once over the last three reporting periods to assess the
board’s performance on an independent basis.
Compliance
status2
Not compliant
Explanation of
non-compliance3
The Company is not compliant with Criterion 1.
Over the last three years, the Board of Directors’
performance has been assessed internally.
The internal assessment procedure for the Board
of Directors was developed with assistance of an
independent consultant and best global practices.
An external assessment is planned to be organised
following 2018.
3.1
3.1.1
The corporate secretary is a corporate officer whose duties include managing shareholder relations, making necessary arrangements to protect their
rights and interests, and providing efficient operating support to the board of directors.
The corporate secretary
has skills, expertise and
qualifications to perform
their duties, has impeccable
reputation, and is trusted by
shareholders.
1. The company adopted and disclosed a corporate regulation
Compliant
on the corporate secretary.
2. The corporate website and annual report contain
the corporate secretary’s biography as detailed as those
of directors and corporate executives.
3.1.2 The corporate secretary is
sufficiently independent of
the company’s executive
bodies and has powers
and resources necessary
to perform their duties.
1. The board of directors approves the appointment and
Compliant
dismissal of, and additional remuneration for, the corporate
secretary.
4.1
Remuneration paid by the company is sufficient to recruit, motivate and retain employees with required competencies and qualifications. Remuneration
to directors, executives and other key managers of the company is paid in accordance with the remuneration policy adopted by the company.
1. The company adopted an internal document (documents) –
remuneration policy (policies) for directors, executives and
other key managers – that clearly set out approaches to
remuneration of such persons.
Partly compliant
4.1.1 Remuneration paid by
the company to its directors,
executives and other key
managers provides sufficient
motivation for efficient
performance, enabling
the company to recruit
and retain competent and
skilled professionals. The
company avoids higher-than-
necessary remunerations
and unreasonable gaps
between remunerations of
such corporate officers and
rank-and-file employees of
the company.
The Company is partly compliant with Criterion 1.
The Board of Directors approved and put into action
the Remuneration Policy for Members of Board of
Directors of MMC Norilsk Nickel.
Principles and mechanics of remunerations
(reimbursements) due to executives are set out in
the Charter, Regulations on the Management Board,
and other internal documents of the Company.
The system (policy) of remunerations applicable in
the Company is continuously and directly monitored
by the Board of Directors.
Responsibilities of the Corporate Governance,
Nomination and Remuneration Committee
include development, supervision over adoption,
implementation and regular revision of the
remuneration policy for the Company’s Board
of Directors and Management Board and the
Company’s President.
Compliance assessment criteria
1. In the reporting period, the remuneration committee
reviewed the remuneration policy (policies) and its
(their) implementation practices and, where necessary,
recommended that the board of directors make
amendments.
Compliance
status2
Explanation of
non-compliance3
Partly compliant
The Company is partly compliant with Criterion 1.
The Corporate Governance, Nomination and
Remuneration Committee of the Board of Directors
monitored implementation of the remuneration
policy (system) to make performance improvement
proposals.
1. The company’s remuneration policy (policies) sets (set)
out transparent procedures to determine the amount of
remuneration payable to directors, executives and other
key managers of the company, and governs (govern) all
types of payments, benefits and privileges available to the
above persons.
Partly compliant
Corporate governance
principles
№
4.1.2 The company’s remuneration
policy was developed by the
remuneration committee
and approved by the board
of directors of the company.
The board of directors
and its remuneration
committee ensures that the
remuneration policy is duly
adopted and implemented
in the company, as well as
reviews and amends it where
necessary.
4.1.3 The company’s remuneration
policy sets out transparent
procedures to determine
the amount of remuneration
payable to directors,
executives and other key
managers of the company,
and governs all types of
payments, benefits and
privileges available to the
above persons.
The Company is partly compliant with Criterion 1.
The remuneration system existing in the Company
provides for the procedure to determine
(calculate) the amount of remuneration payable
to the directors and executives. The remuneration
system in the Company meets general
transparency criteria.
The procedure to determine directors’
remuneration is set out in the Remuneration
Policy for Members of Board of Directors of MMC
Norilsk Nickel and is also approved by the General
Meeting of Shareholders.
The total remuneration of the President and
members of the Management Board consists
of the base salary and bonuses (a variable part
of the remuneration). The variable part of the
remuneration depends on the Company’s financial
and operating performance.
The variable part of the remuneration payable to
the members of the Management Board is based
on key performance indicators.
Key performance indicators are updated and
approved annually by the Corporate Governance,
Nomination and Remuneration Committee of the
Board of Directors.
The Company is partly compliant with Criterion 1.
The Remuneration Policy for Members of Board
of Directors of MMC Norilsk Nickel contains rules
of reimbursement for expenses incurred by the
Company’s directors.
Expenses of the Company’s executives are
reimbursed in the same manner as established
in internal documents of the Company and
applicable law.
4.1.4 The company has
1. The remuneration policy (policies) or other internal
Partly compliant
documents of the company define rules of reimbursement
for expenses incurred by directors, executives and other
key managers of the company.
devised a reimbursement
(compensation) policy
specifying the list of
reimbursable expenses and
level of service available to
the company’s directors,
executives and other key
managers. Such policy may
be part of the company’s
remuneration policy.
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Report on compliance with the principles and recommendations set forth in the corporate governance code
Corporate governance
principles
№
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
Corporate governance
principles
№
Compliance assessment criteria
Compliance
status2
Explanation of
non-compliance3
4.2
Remuneration payable to directors of the company aligns their financial interests with long-term financial interests of shareholders.
4.3
Remuneration of executives and other key managers is linked to the company’s performance and their personal contribution thereto.
1. The fixed annual remuneration was the only monetary
remuneration paid to directors for sitting on the board
in the reporting period.
Compliant
4.2.1 The company pays a fixed
annual remuneration to its
directors.
The company does not
remunerate directors for
attending certain meetings of
the board of directors or its
committees.
The company does not
employ any means of short-
term motivation or additional
incentives to stimulate its
directors.
4.2.2 Long-term ownership of the
1. If an internal document (documents) – a remuneration
Compliant
company’s shares is the
best tool to align financial
interests of directors
with long-term interests
of shareholders. At the
same time, the right to sell
shares is not conditional
on achieving certain
performance indicators, and
directors do not participate in
stock option plans.
4.2.3 The company offers no
additional remunerations or
reimbursements if directors’
powers are terminated early
after the change of control
over the company or for any
other reason.
policy (policies) – provides for the company’s shares to be
granted to directors, clear rules should be established and
disclosed as to how directors may hold shares and how to
incentivise long-term ownership of such shares.
1. The company offers no additional remunerations or
reimbursements if directors’ powers are terminated
early after the change of control over the company or for
any other reason.
Partly compliant
The Company is partly compliant with Criterion 1.
The remuneration policy (system) existing in the
Company does not provide for any additional
remunerations or reimbursements in case
directors’ powers are terminated early after the
change of control over the Company or for any
other reason.
The only exception is made for the current
Chairman of the Board of Directors. The General
Meeting of Shareholders decided to pay extra
remuneration to the current Chairman of the Board
of Directors if the above circumstances arise.
This privilege is explained by exceptional business
skills and professionalism of the current Chairman,
who is one of the most experienced and highly
qualified world class managers with an extensive
expertise in the mining industry.
Partly compliant
4.3.1 Remuneration paid to
executives and other key
managers of the company
consists of two reasonably
balanced parts: a fixed
part and variable part,
which depends on the
company’s performance and
the employee’s personal
(individual) contribution
thereto.
1. Performance indicators approved by the board of directors
were used in the reporting period to calculate the variable
part of remuneration paid to executives and other key
managers of the company.
2. During the last assessment of remuneration payable to
executives and other key managers of the company,
the board of directors (remuneration committee) made
sure that fixed and variable parts of remuneration were
effectively balanced.
3. The company established a procedure to claim bonuses
wrongfully received by executives and other key managers
of the company.
4.3.2 The company adopted a
1. The company adopted a long-term share-based incentive
Not compliant
long-term share-based
incentive plan for its
executives and other key
managers (an option plan or
another derivative plan with
the company’s shares as an
underlying asset).
plan for its executives and other key managers (an incentive
plan with the company’s shares as an underlying asset).
2. According to the long-term incentive plan for the company’s
executives and other key managers, the right to sell shares
or other derivatives used in this plan arises not earlier than
in three years after such right is granted. The right to sell is
also conditional on certain performance indicators.
The Company is partly compliant with Criterion 1.
Annual key performance indicators were used to
calculate the variable part of remuneration paid
to executives. These final (annual) indicators were
preliminarily analysed, revised and approved
by the Corporate Governance, Nomination
and Remuneration Committee of the Board of
Directors.
The Company is partly compliant with Criterion 2.
The Corporate Governance, Nomination and
Remuneration Committee of the Board of Directors
revises remuneration of the Company’s executives
on an annual basis. Following the last revision,
it was concluded that fixed and variable parts
of remuneration payable in the Company were
effectively balanced.
The Company is partly compliant with Criterion 3.
Applicable laws enable the Company to claim
bonuses wrongfully received by employees
(including executives) of the Company. This
legal mechanism is effective enough and can
be used regardless of whether it is included (by
reference or otherwise) into internal documents of
the Company.
The Company is not compliant with Criterion 1.
The Company considers the possibility of
introducing an option plan as a long-term incentive
for its executives.
However, the possibility is restricted by the
absence of specific provisions on corporate option
plans and relevant matters in the Russian civil and
corporate law.
1. Compensations (golden parachutes) paid by the company
to its executives and other key managers in case of early
termination of their powers at the company’s initiative
(provided there was no fraud on their part) did not exceed
two fixed parts of their annual remuneration in the reporting
period.
Not applicable
No such compensations were paid in the reporting
period.
4.3.3 Compensations (golden
parachutes) paid by the
company to its executives
and other key managers in
case of early termination
of their powers at the
company’s initiative
(provided there was no fraud
on their part) do not exceed
two fixed parts of their
annual remuneration.
5.1
5.1.1
The company has an efficient risk management and internal control system in place to provide reasonable assurance that it will achieve the goals set by
the management.
The board of directors
defined principles of, and
approaches to, the risk
management and internal
control system in the
company.
1. Risk management and internal control functions of
Compliant
management bodies and corporate divisions are clearly set
out in internal documents / relevant policies approved by
the board of directors.
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Report on compliance with the principles and recommendations set forth in the corporate governance code
Compliance assessment criteria
1. Executive bodies of the company arranged for proper
distribution of risk management and internal control
functions and powers between employees and managers
of business units / divisions.
Compliance
status2
Compliant
Explanation of
non-compliance3
1. The company adopted an anti-corruption policy.
2. The company established an easily accessible channel to
inform the board of directors or its audit committee about
breaches of the law, internal procedures and ethics code of
the company.
Compliant
Corporate governance
principles
№
5.1.2 Executive bodies of the
company establish and
maintain an efficient
risk management and
internal control system in
the company.
5.1.3 The risk management and
internal control system
gives accurate, fair and
clear representation of the
company’s current affairs and
prospects, ensures integrity
and transparency of financial
statements, as well as
rationality and acceptability
of the company’s risk
appetite.1
5.1.4 The board of directors
1. In the reporting period, the board of directors or its audit
Partly compliant
committee assessed performance of the risk management
and internal control system. Key results of this assessment
are included in the annual report of the company.
takes the steps required
to make sure that the risk
management and internal
control system existing in the
company meets principles
and approaches approved
by the board of directors and
functions effectively.
The Company is partly compliant with Criterion 1.
In the reporting period, the Audit Committee
reviewed results of internal control tests carried
out by an external auditor (KPMG). Results are
presented in the Annual Report. In 2018, the
Internal Audit Department plans to conduct
a comprehensive assessment of the risk
management and internal control framework
and its performance, and submit the results
to the Audit and Sustainable Development
Committee for review.
5.2
An internal audit is performed regularly to conduct a comprehensive assessment of reliability and efficiency of the risk management and internal control
system and corporate management practices.
5.2.1 A separate division is
1. A separate division, which is functionally accountable to
Compliant
the board of directors or its audit committee, is established
in the company or an independent external organisation
with the same accountability is hired to perform an internal
audit.
established in the company
or an independent external
organisation is hired to
perform an internal audit.
Functional and administrative
accountabilities of the
internal audit division are
separated. The internal
audit division is functionally
accountable to the board of
directors.
Corporate governance
principles
№
5.2.2 The internal audit division
assesses the efficiency of
the internal control, risk
management and corporate
governance systems. The
company applies generally
accepted internal audit
standards.
Compliance assessment criteria
1. Efficiency of the internal control and risk management
system was assessed in the reporting period as part of
internal audit.
2. The company uses generally accepted approaches
to internal control and risk management.
Compliance
status2
Explanation of
non-compliance3
Partly compliant
The Company is partly compliant with Criterion 1.
The Internal Audit Department is guided by
international professional standards of internal
audit. In the reporting period, the Internal Audit
Department assessed the efficiency of the
internal control and risk management systems
in certain processes and subsidiaries of the
Company as part of the audit engagement. In
2018, the Internal Audit Department plans to
conduct a comprehensive assessment of the risk
management and internal control framework
and its performance.
6.1
The company and its operations are transparent for shareholders, investors, and other stakeholders.
6.1.1
The company developed
and adopted an information
policy that ensures effective
exchange of information
between the company, its
shareholders, investors, and
other stakeholders.
1. The board of directors approved an information policy
developed in accordance with recommendations of
the Code.
2. The board of directors (or any of its committees) reviewed
matters related to the company’s compliance with its
information policy at least once in the reporting period.
Compliant
6.1.2 The company discloses
1. The company discloses information on its corporate
Compliant
information on its corporate
governance, including
details on its compliance
with the principles and
recommendations set out in
the Code.
governance practices and general principles of corporate
governance, including by way of publications on the
company’s website.
2. The company discloses information on its executive bodies,
board of directors, directors’ independence, and membership
in board committees (in accordance with the definitions
contained in the Code).
3. If there is a person controlling the company, the company
publishes a controlling person statement on the plans of such
person regarding corporate governance in the company.
6.2
The company timely discloses full, accurate and up-to-date information on the company to enable shareholders and investors to make
grounded decisions.
6.2.1 The company discloses
information in accordance
with the principles of
regularity, consistency,
timeliness, accessibility,
reliability, completeness
and comparability of
disclosed data.
Compliant
1. The company’s information policy defines approaches to, and
criteria of, identifying information that may have a material
influence on the value of the company and its securities,
as well as procedures ensuring timely disclosure of such
information.
2. If the company’s securities are traded on foreign organised
markets, disclosures of material information in Russia and such
markets are made simultaneously and to the same extent.
3. If foreign shareholders hold a material share in the company,
disclosures in the reporting period were made in Russian and
also in one of the most widely used languages.
6.2.2 The company avoids a formal
approach to disclosures and
discloses information about
its operations even if such
information is not required to
be disclosed by law.
1. The company disclosed its annual and semi-annual IFRS
financial statements in the reporting period. The annual
report of the company incorporates annual IFRS financial
statements and an audit opinion.
2. In accordance with Recommendation 290 of the Code, the
company discloses full information about its capital structure
in the annual report and on the company’s website.
Compliant
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Report on compliance with the principles and recommendations set forth in the corporate governance code
Corporate governance
principles
№
6.2.3 As one of the most important
information channels for
shareholders and other
stakeholders, the annual
report contains information
enabling them to assess
annual performance of the
company.
Compliance assessment criteria
1. The annual report contains information about key
operations and financial performance of the company.
2. The annual report contains information about
environmental and social aspects of the company’s
operations.
Compliance
status2
Compliant
Explanation of
non-compliance3
6.3
The company provides information and documents requested by its shareholders in accordance with the principle of equal and unhindered accessibility.
6.3.1 Access to information and
1. The information policy of the company defines an
Compliant
unhindered procedure of accessing information by
shareholders, including information about the company’s
subsidiaries at the request of shareholders.
1. The company did not refuse to provide information request
by shareholders in the reporting period, or such refusals
were justified.
2. In certain situation defined in the company’s information
policy, shareholders are properly informed that information
is confidential and undertake to keep it confidential.
Compliant
documents requested by the
company’s shareholders is
provided in accordance with
the principle of equal and
unhindered accessibility.
6.3.2 When providing shareholders
with information,
the company maintains
a reasonable balance
between the interests of
individual shareholders and
the interests of the company
as the latter strives to keep
confidential any sensitive
commercial information
that may have a material
influence on the company’s
competitive position.
7.1
Any actions that have or might have a significant influence on the shareholding structure and financial standing of the company and, consequently,
on the position of shareholders (material corporate actions) are taken under fair conditions that ensure rights and interests of shareholders and other
stakeholders.
Partly compliant
The Company is partly compliant with Criteria 1
and 2.
The decision-making procedure recommended
in the Code (decision-making by the Board of
Directors or the General Meeting of Shareholders
when required by the Charter or law) is followed in
most material corporate actions identified as such
in the Code.
1. The company’s charter includes the list of transactions or
other actions deemed to be material corporate actions,
and criteria of their identification. Decisions on material
corporate actions are referred to the remit of the board
of directors. If the law expressly refers such corporate
actions to the remit of the general meeting of shareholders,
the board of directors provides relevant guidelines to the
shareholders.
2. Material corporate actions identified as such in the
company’s charter include at least the following:
reorganisation of the company, acquisition of at least
30% of the company’s voting shares (takeover), material
transactions entered into by the company, increase or
reduction in the company’s authorised capital, and listing or
delisting of the company’s shares.
7.1.1 Material corporate actions
include reorganisation of the
company, acquisition of at
least 30% of the company’s
voting shares (takeover),
material transactions
entered into by the company,
increase or reduction in
the company’s authorised
capital, listing and delisting
of the company’s shares,
and other actions which may
result in material changes
in the rights of shareholders
or be against their interests.
The company’s charter
includes the list (criteria) of
transactions or other actions
deemed to be material
corporate actions and refer
them to the remit of the
board of directors.
Compliance assessment criteria
1. The company established a procedure for independent
directors to express their opinion on material corporate
actions prior to approval.
Compliance
status2
Compliant
Explanation of
non-compliance3
Corporate governance
principles
№
7.1.2 The board of directors plays a
key role in making decisions
or recommendations
regarding material corporate
actions, and relies on the
opinion of independent
directors.
7.1.3 When taking material
1. Subject to specific operations of the company, its charter
Compliant
provides for more stringent criteria of identifying transactions
as material corporate events than required by law.
2. All material corporate actions in the reporting period were
approved before taken.
corporate actions affecting
the rights and legal interests
of shareholders, the company
ensures equal conditions
for all shareholders of the
company and, when legal
mechanisms protecting
shareholders’ rights are
insufficient, arranges for
additional protection of
rights and legal interests of
shareholders. In doing so, the
company is guided by both
formal legal requirements
and corporate governance
principles specified in the
Code.
7.2
The company arranges for material corporate actions to be taken in such a way that shareholders have access to full information about these actions,
have an opportunity to influence these actions, and are guaranteed exercise and protection of their rights when these actions are taken.
7.2.1 Disclosed information
about material corporate
actions explains reasons,
terms and conditions, and
consequences of such
actions.
7.2.2 Rules of, and procedures
for, material corporate
actions are set out in internal
documents of the company.
1. In the reporting period, the company disclosed information
about material corporate actions timely and accurately,
including grounds for, and time frames of, such actions.
Compliant
Partly compliant
1. Internal documents of the company provide for a procedure
to hire an independent appraiser to estimate the value of
property sold or acquired in a major transaction or related-
party transaction.
2. Internal documents of the company provide for a procedure
to hire an independent appraiser to estimate the value of
the company’s shares to be acquired or bought back.
3. Internal documents of the company provide for an extended
list of criteria for directors and other persons specified in
the law to be recognised as interested in the company’s
transactions.
The Company is partly compliant with Criteria
1 and 2. The Company hires an independent
appraiser in each case provided for in the law. An
independent appraiser may also be hired at the
initiative of directors.
The Company is not compliant with Criterion 3.
Applicable laws provide for a sufficient list of
criteria for directors and other persons specified
in the law to be recognised as interested in the
company’s transactions.
1 Please indicate the reporting year or, if the report on compliance with the principles and recommendations set forth in the Corporate Governance Code contains
information for the period from the end of the reporting year until the date of this report, specify the date of this report.
2 The “compliant” status is indicated only if the company meets all compliance criteria for the relevant corporate governance principle. Otherwise a “partly compliant”
or “non-compliant” status is indicated.
3 Explanations are provided for each corporate governance compliance criterion if the company is only compliant with some of the criteria or is not compliant with any
of them. If the company indicates the “compliant” status, no explanation is needed.
4 Please specify which out of two options provided for in the principle is adopted in the company and explain reasons for selecting such option.
5
If functions of the nomination committee are performed by another committee, indicate the name of the committee.
6 Please specify the list of additional committees established.
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Glossary
Glossary
Acid leaching. Leaching with (solutions of) acids as
reagents.
Drying. Removal of moisture from concentrates
performed in designated drying furnaces (to a moisture
level below 9%).
Agglomerate. Sintered ore produced as a result of the
agglomeration process.
Agglomeration. A method for forming relatively large
porous blocks (agglomerates) by sintering (roasting)
fine or powder ore, where solid particles are joined
together by solidifying fusible compounds.
Anode. Crude metal (nickel or copper) obtained
from anode smelting and fed for electrolytic refining
(electrolysis) whereby it is dissolved.
Cake. Solid residue from filtering pulp during leaching
of ores, concentrates or metallurgical intermediates,
and purification of processing solutions.
Cathode. Pure metal (nickel or copper) obtained as
a result of electrolytic refining of anodes.
Concentrate. A product of ore concentration with a
high grade of the extracted mineral, which gives its
name to the concentrate (copper, nickel, etc.).
Concentration. Artificial improvement of metallurgical
feedstock mineral grades by removal of a major portion
of waste rock not containing any valuable minerals.
Conversion. An autogenous pyrometallurgical process
where ferrous and other detrimental impurities are
oxidised and removed as slag to produce blister
copper (in copper concentrate smelting) or converter
matte (in copper-nickel concentrate smelting).
Converter matte. A metallurgical intermediate
produced as a result of matte conversion. Depending
on the chemical composition, the following types
of converter matte are distinguished: copper, nickel
and copper-nickel.
Cuprous ores. Ores containing 20% to 70% sulphides,
with the following metal grades: 0.2–2.5% for nickel,
1.0–15.0% for copper, 5–50 g/t for platinum group
metals.
Disseminated ores. Ores containing 5% to 30%
sulphides, with the following metal grades: 0.2–1.5%
for nickel, 0.3–2% for copper, and 2–10 g/t for platinum
group metals.
Electrolysis. A series of electrochemical reduction-
oxidation reactions at electrodes immersed
in an electrolyte as a result of passing of an electric
current from an external source.
Filtration. The process of reducing the moisture level
of the pulp by forcing it through a porous medium.
Flash smelter. An autogenous smelter for processing
dry concentrates, where the smelted substance
is finely ground feedstock mixed with a gaseous
oxidiser (air, oxygen), which holds melted metal
particles suspended. The heat from oxidation reactions
is actively used in the process.
Flotation. A concentration process where specific
mineral particles suspended within the pulp attach to
air bubbles. Poorly wettable mineral particles attach
to the air bubbles and rise through the suspension
to the top of the pulp, producing foam, while well
wettable mineral particles do not attach to the bubbles
and remain in the pulp. This is how the minerals are
separated.
Leaching. Selective dissolution of one or several
components of the processed solid material in organic
solvents or water solutions of inorganic substances.
Matte. Intermediate product in the form of an alloy of
sulphides of iron and non-ferrous metals with a varying
chemical composition. Matte is the main product
accumulating precious metals and metal impurities
the feedstock contains.
Metal extraction. The ratio between the quantity
of a component extracted from the source material
and its quantity in the source material (as a percentage
or a fraction).
Metal grade. The ratio between the weight of metal in
the dry material and the total dry weight of the material
expressed as a percentage or grammes per tonne (g/t).
Mine. A mining location for extraction of ores.
Mineral deposit. A mass of naturally occurring mineral
material (near to the surface or deeper underground)
which is economically valuable in terms of quantity,
quality and conditions.
Ore mixture. A mixture of materials in certain
proportions needed to achieve the required chemical
composition of the end product. The ore mixture
for metallurgical production may include ores, ore
concentrates and agglomerates, return slag, dust from
dust collectors, and metals (mostly in the form of scrap).
Ore. Natural minerals containing metals or their
compounds in economically valuable amounts
and forms.
Oxide. A compound of a chemical element
with oxygen.
Proven ore reserves. Estimated based
on the economically mineable part of measured
mineral resources, including possible dilution
and losses during mining operations.
Probable ore reserves. Estimated based on
the economically mineable part of indicated and,
in some circumstances, measured mineral resources,
including possible dilution and losses during mining
operations.
Pulp. A mixture of finely ground rock with water or
a water solution.
Pyrometallurgical processes. Metallurgical processes
performed at high temperatures, including roasting,
smelting and conversion, which are distinguished
depending on their technological characteristics.
Refinement. The process of extracting high purity
precious metals through their separation and removal
of impurities.
Rich ores. Ores with high sulphide content (over
70%) and the following metal grades: 2–5% for nickel,
2–25% for copper, and 5–100 g/t for platinum group
metals.
Roasting. The process of removing volatile
components from and changing the chemical
composition of materials (ores, concentrates, etc.)
performed at elevated temperatures enabling various
gas-solid reactions but insufficient to cause melting of
the material’s solid compounds.
Shop area. A part of a (metallurgical) shop.
Slag. Melted or solid substance with a varying
composition that covers the surface of a liquid product
during metallurgical processes (resulting from ore
mixture melting, melted intermediate processing and
metal refining) and includes waste rock, fluxes, fuel ash,
metal sulphides and oxides, and products of interaction
between the processed materials and lining of melting
units.
Sludge. Powder product containing precious metals
settling during electrolysis of copper and other metals.
Smelting. A pyrometallurgical process performed
at high temperatures enabling the complete melting
of the processed material.
Sulphides. Compounds of metals and sulphur.
Tailings pit. A complex of hydraulic structures used to
receive and store mineral waste / tailings.
Tailings. Waste materials left over after concentration
processes and containing mostly waste rock with
a minor amount of valuable minerals.
Thickening. Separation of liquid (water) and solid
particles in dispersion systems (pulp, suspension,
colloid) based on natural gravity settling of solid
particles in settlers and thickeners, or centrifugal
settling of solid particles in hydrocyclones.
Underground (subsurface) mining. A set of stripping,
preparatory and stoping operations.
Vanyukov furnace. An autogenous smelter
for processing concentrates, where smelting is
performed in a bath of slag and matte, with intensive
injection of air-oxygen mixture. The heat from
oxidation reactions is actively used in the process.
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Metric conversion table and currency exchange rates
Metric conversion table and
currency exchange rates
Metric conversion table
Length
1 km
1 m
1 cm
1 mi
1 foot
1 in
0.6214 mi
3.2808 ft
0.3937 in
1.609344 km
0.3048 m
2.54 cm
1 sq m
1 sq km
1 ha
1 sq ft
1 sq m
1 acre
Area
10.7639 sq ft
0.3861 sq mi
2.4710 acres
0.09290304 sq m
2.589988 sq km
0.4046873 ha
1 kg
1 metric tonne
1 short tonne
1 troy ounce
Weigth
2.2046 lb
1,000 kg
907.18 kg
31.1035 g
1 lb
1 g
0.4535924 kg
0.03215075 oz t
Currency exchange in 2013–2017
This appendix provides currency exchange rates used to convert expenses denominated in RUB to USD.
Russian Rouble / US Dollar
Average rate for the year ended 31
December
2013
31.85
2014
38.42
2015
60.96
2016
67.03
2017
58.35
Contacts
Vladimir Zhukov
Vice President of the Investor
Relations Department
E-mail: ir@nornik.ru
Mikhail Borovikov
Head of the Investor Relations Department
E-mail: borovikovMA@nornik.ru
Phone: +7 (495) 786-83-20
Fax: +7 (495) 797-86-13
Marina Raichenko
Head of Share Capital Division
Phone: +7 (495) 797-82-44
E-mail: raychenkoma@nornik.ru
Andrey Kirpichnikov
Head of PR Department
Phone: +7 (495) 785-58-00
Fax: +7 (495) 785-58-08
E-mail: pr@nornik.ru
Address: 123100 Moscow,
1iy Krasnogvardeyskiy proezd, 15
Norilsk Branch
Address: 8 Bordan Khmelnytskui,
Norilsk, Krasnoyarsky Krai, 663305, Russia
Tel.: +7 (3919) 46-28-17
Helpdesk operating hours:
Monday – Friday from 10:00 to 14:00
Krasnoyarsk branch
Address: office center “Voskresensky”, office 314, 94
Prospekt Mira, Krasnoyarsk, 660017 Russia
Tel.: +7 (391) 216-51-01
Fax: +7 (391) 216-57-27
Helpdesk operating hours:
Monday – Friday from 9:00 to 13:00
ADR depositary
The Bank of New York Mellon
Depositary Receipts Division
Address: 101 Barclay Street,
22 nd Floor West, New York,
NY 10286
Tel.: +1 (212) 815-22-93
Fax: +1 (212) 571-30-50
Web-site: www.bnymellon.com
Registrar
JSC “Computershare Registrar”
Russian Federal Securities Commission license
number 045-13954-000001, dated September 6,
2002, valid indefinitely
Web-site: www.nrcreg.ru
Head office:
Address: 18 Stromunka Street, building 5B, Moscow,
107076, Russia,
Tel.: +7 (495) 989-76-50
Fax: +7 (495) 989-76-82
E-mail: info@nrcreg.ru
Auditor
JSC “KPMG”
Address: 3035, 18/1 Olympiysky prospekt,
Moscow, 129110 Russia
Post address: Naberezhnaya Tower Complex,
Block C, 31st Floor, Presnenskaya Naberezhnaya
Tel.: +7 (495) 937-44-77
Fax: +7 (495) 937-44-99
E-mail: moscow@kpmg.ru
Web-site: www.kpmg.com
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Disclaimer
This annual report (Annual Report) has been prepared based on the information available to MMC Norilsk
Nickel and its subsidiaries as at the issue date. The Company believes that the information provided in this
Annual Report is complete and accurate as at the Annual Report publication date. However, the Company
does not assert that this information will not be updated or corrected in the future.
This Annual Report may include certain forward-looking statements with respect to the Group’s operations,
economic indicators, financial position, results of operating and production activities, its plans, projects and
expected results, as well as trends related to commodity prices, production and consumption volumes, costs,
estimated expenses, development prospects, useful lives of assets, reserve estimates and other similar
factors and economic projections with respect to the industry and markets, start and completion dates of
certain geological exploration and production projects, and liquidation or disposal of certain entities.
The Company neither confirms nor guarantees that the results indicated in the forward-looking statements will
be achieved.
The Company accepts no responsibility for any losses that may be incurred by any individual or legal entity
acting in reliance on the forward-looking statements.