EXPANDING
THE HORIZONS
OF SUSTAINABLE
GROWTH
ANNUAL REPORT | 2019
ANNUAL
REPОRT
2019
MMC NORILSK NICKEL
REPORTING PERIOD
FROM 1 JANUARY 2019 TO 31 DECEMBER 2019
The 2019 annual report of PJSC "MMC "Norilsk Nickel"
incorporates the results of MMC Norilsk Nickel and other
operations of the Norilsk Nickel Group (MMC Norilsk Nickel,
Nornickel, the Company, Group). The Group’s interests
in the entities are shown as stakes in their authorised capital
(direct shareholding), except for GRK Bystrinkoye, for which
the Group’s effective shareholding is shown.
APPROVED
by the Board of Directors
of MMC Norilsk Nickel
Minutes No. GMK/10-pr-bd of 7 April 2020
ACCURACY OF INFORMATION CONFIRMED
by the Audit Commission
of MMC Norilsk Nickel
Opinion of 7 April 2020
APPROVED
by the Annual General Meeting of Shareholders
of MMC Norilsk Nickel (minutes No. 1 of 13 May 2020)
Vladimir POTANIN
President,
Chairman of the Management Board
MMC NORILSK NICKEL
Sergey MALYSHEV
Senior Vice President —
Chief Financial Officer
MMC NORILSK NICKEL
We are pleased to present to you the
2019 Annual Report of MMC No-
rilsk Nickel. The key theme of this
report is Sustainable Development
Strategy. This strategy unveils the
management’s long-term vision for
the development of Nornickel’s
unique resource base and operational
efficiency improvements, both of
which will be backed by the rollout
of our ambitious comprehensive
environmental programme. This
“ecological growth” strategy not only
lays out long-term ore production and
capital investment targets but also
sets out concrete action plans aiming
at the reduction of the Company’s
environmental footprint in the regions
of its operations. Furthermore, the
Company believes firmly that it is well
positioned to be the key facilitator in
meeting some of the world’s major
challenges such as transport electri-
fication and reduction of pollution.
This Annual Report has been prepared
by the Company’s Investor Relations
Department in line with best practices
in information disclosure and in
accordance with the requirements of
Bank of Russia’s Regulation No. 454-P
from 30 December 2014.
Vladimir ZHUKOV
Vice President for Investor Relations
MMC NORILSK NICKEL
CONTENT
1
COMPANY OVERVIEW
Company profile
4
Performance highlights
6
Key 2019 events
8
Business model
10
Producton flow
16
4
BUSINESS OVERVIEW
64
73
89
94
96
102
Mineral base
Operational performance
Sales and distribution
Energy assets
Transport assets
Research and development
innovations
Financial performance
(MD&A)
108
2
STRATEGIC REPORT
Chairman’s letter
20
President’s letter
22
Our strategy
24
Key investment projects
30
5
SUSTAINABLE
DEVELOPMENT
Human resources
124
Health and safety
134
Environment
140
Climate change
146
Social and charity initiatives
154
3
COMMODDITY MARKET
OVERVIEW
44
51
55
59
Nickel
Copper
Palladium
Platinum
6
CORPORATE
GOVERNANCE
170
Letter from Deputy Chairman
of the Board of Directors
Governance structure
Remuneration
Control system
176
205
208
7
RISK REPORT
220
224
Risk management
Key risks
8
SHAREHOLDER
INFORMATION
238
242 Dividend policy
245 Debt instruments
Investor relations
247
Share capital
9
IFRS FINANCIAL
STATEMENTS
10
APPENDIX
321
The Group structure: main
assets
The interactive
version of the
2019 Annual report
322 Operating performance
for the past 10 years
326 Mineral resources and ore
reserves
330 Measurement units
and currency exchange rates
Glossary
Contacts
331
334
COMPANY OVERVIEW
om
pany
Overview
4
6
8
10
16
Company profile
Performance highlights
Key 2019 events
Business model
Production flow
С Nornickel's share of the global
metals market2
#1
Pd
#1
Ni
#4
Pt
#4
Rh
#8
Co
#11
Cu
Palladium
(41%)
High-grade nickel
(24%)
Platinum
(11%)
Rhodium
(9%)
Cobalt
(3%)
Copper
(2%)
COMPANY
PROFILE
The Norilsk Nickel Group (the Group, Nornickel, or the Company) includes MMC Norilsk Nickel
(parent) and its subsidiaries.
INDUSTRY RANKING
Nornickel is Russia’s leading metals
and mining company, the largest
palladium and high-grade nickel producer
in the world, and a major producer
of platinum and copper. Nornickel also
produces cobalt, rhodium, silver, gold,
iridium, ruthenium, selenium, tellurium,
and sulphur.
Shareholding structure as of 31 December 2019
37.6%
Other
34.6%
Olderfrey Holdings Ltd1
Global industry leadership
by 2019 EBITDA margin3
%
NN
Peer 2
Peer 3
Peer 4
Peer 5
58
54
46
31
28
27.8%
EN+ Group IPJSC1
1/ Indirect ownership via controlled entities.
THE GROUP’S ASSETS
IN RUSSIA
IN FINLAND
0.28% 7.2%
Nornickel share in the index
of MSCI Emerging Markets
as of the end of 2019
Nornickel share in the
index of MSCI Russia as
of the end of 2019
Nornickel’s shares are listed on the Moscow Exchange
and are included in its Blue Chip Index.
Its American Depositary Receipts (ADRs) are traded on
the US OTC market, as well as on the OTC markets of the
London, Berlin, and Frankfurt stock exchanges.
Polar Division
Medvezhy Ruchey
(100% stake)
Kola MMC
(100% stake)
GRK Bystrinskoye
(50.01% stake)
A nickel refinery facility
Norilsk Nickel Harjavalta
(100% stake)
Nornickel operations focuses
on the exploration, mining
and processing of minerals, as well
as the production and sale of base
and precious metals.
COMPETITIVE ADVANTAGES
C
10mines
>80years
of resources at the current
production rate
Nornickel boasts a world-class resource
base with unrivalled exposure to valuable
minerals and extremely rich in core metals
such as nickel, copper, and Platinum Group
Metals (PGMs).
PROVEN
AND PROBABLE
RESERVES
MEASURED
AND INDICATED
RESOURCES
757mln t
6.7 mln tNi
11.9 mln tCu
2,193
mln t
15.2 mln tNi
23.2 mln tCu
PGMs
120 moz
260 mozPGMs
For more details about our mineral resource base,
please see p. 64
Dividend yield
in 20194
%
NN
Peer 2
Peer 3
Peer 4
Peer 5
14.9
7.1
5.9
5.8
4.5
4/ Recommended dividend
to average ADR/share price
(Bloomberg) for the reporting
year. The peer group includes
Anglo American, BHP,
Glencore and Rio Tinto
2/ Based on refined metal (including
tolling) output for palladium, nickel,
platinum, and rhodium and based
on contained metal production
for copper and cobalt.
3/ The peer group includes Anglo
American, BHP, Glencore, Rio Tinto,
and Vale.
For more details on industry ranking,
please see p. 42
IN SOUTH AFRICA
The Group owns 50%
of Nkomati, which operates
a nickel mine of the same
name
For more details on assets, please see p. 94-101,
with the structure of core assets available on p. 320
R
А
4
5
2019 Annual reportNORNICKELCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix PERFORMANCE
HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
Key highlights
USD bn
‘19
‘18
‘17
‘19
‘18
‘17
‘19
‘18
‘17
‘19
‘18
‘17
6.0
13.6
3.1
11.7
2.1
9.1
7.9
6.2
4.0
1.3
1.6
2.0
7.1
7.1
8.2
Revenue
Net income
EBITDA
& EBITDA margin
USD bn
58%
53%
44%
EBITDA
EBITDA margin
Capital investments
USD bn
0.8
0.4 0.1
0.7
0.7
0.7
0.2
0.8
0.4
Stay-in-business
CAPEX
Growth
CAPEX
Bystrinsky
project
Debt
USD bn
0.9x
1.1x
2.1x
Net debt
Net debt/EBITDA
Dividends
USD
OPERATING
HIGHLIGHTS
(from own feedstock)
Nickel
kt
’19
‘18
’17
‘16
’15
’19
‘18
’17
‘16
’15
’19
‘18
’17
‘16
’15
’19
‘18
’17
‘16
’15
225
217
210
197
221
499
474
398
344
353
2,919
2,729
2,728
2,526
2,575
700
653
650
610
610
Copper
kt
Palladium
koz
Platinum
koz
‘19
‘18
‘17
26.3
21.3
18.8
14.9%
11.8%
7.2%
For more details on financial
highlights, please see p. 108
A production outlook is available
in the 2019 strategy update
presentation (page 27)
Dividend per share¹
Dividend yield²
6
1/ Dividends paid in the calendar year.
2/ Recommended dividend to average ADR price
(Bloomberg) for the calendar year.
SUSTAINABILITY
HIGHLIGHTS
Injury rates
per million hours worked
‘19
‘18
‘17
‘19
‘18
‘17
‘19
‘18
‘17
0.08
0.32
0.05
0.23
0.08
0.44
1.9
1.9
1.8
1,172
1,344
1,210
1,412
1,138
1,342
LTIFR
FIFR
SO2 emissions
mln t
Water use
mln m3
Work-related
fatalities
Employees
Contractors
GHG emissions
mln t
Scope 1
Scope 2
Electricity consumption
TJ
‘19
‘18
‘17
‘19
‘18
‘17
‘19
‘18
‘17
1
9
2
6
1
9
9.9
10.0
10.3
14,837
18,501
14,480
18,762
12,175
20,180
9.8 0.1
9.9 0.1
10.2 0.1
45%
44%
38%
86%
86%
85%
Total water used
Water recycled and reused
Share of water recycled and reused
Electricity consumption
from natural gas
Share of electricity from renewables
Electricity consumption
from renewables
ESG PERFORMANCE
Since 2016
SIGNATORY TO THE UN GLOBAL
COMPACT SINCE 2016
RATED B, UPDATED
IN DECEMBER 2019
CONSTITUENT OF THE FTSE4GOOD
EMERGING INDEX SCORE OF 3.0
OUT OF 5.0 UPDATED IN JUNE 2019
RATED AVERAGE PERFORMER, SCORE
OF 67 OUT OF 100, UPDATED IN 2019
3.0 / 5.0
67 / 100
«B»
37 ↑27
SCORE OF 37 IN 2019
(UPGRADED FROM 27)
4
GOVERNANCE
SCORE
2
ENVIRONMENTAL
SCORE
2
SOCIAL
SCORE
UPDATED IN OCTOBER 2019
(1 is low risk, and 10 is high risk)
7
2019 Annual reportNORNICKELCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix KEY 2019
EVENTS FOR THE REPORTING
2019 YEAR
January
Moody’s upgraded Nornickel’s credit
rating to “Baa2”, investment grade, and
changed the outlook from “Stable”
to “Positive”. As a result, Nornickel
was assigned investment-grade credit
ratings by all three major international
rating agencies, including S&P Global
and Fitch.
Baa2
April
Nornickel won the gold award in the
Business Transformation Category at
SAP Quality Awards 2019 in the CIS
region for its project to roll out SAP
ERP across its operations in the Norilsk
Industrial District. This is Nornickel’s
largest business automation project and
one of SAP’s largest Russian projects in
terms of organisational and functional
scope.
March
Nornickel took final investment decisions for two attractive
growth projects – expansion and retrofit of the 3rd stage of
Talnakh Concentrator and the South Cluster development. The
two projects’ combined CAPEX (for 2019-2022) is estimated at
around RUB 90 bn (approximately USD 1.4 bn).
As Krasnoyarsk hosted the 2019 Winter Universiade, Nornickel
supported this major international sporting event, acting as
its general partner. Nornickel’s contribution to the success
of the student games was highly praised by international
sports federations, participating countries, the local organising
committee, and Russia’s leadership while also earning the
Company a number of prestigious awards.
investment decisions
for two attractive
growth projects
1.4USD bn
November
Nornickel was ranked No. 1 in the Top
50 Most Attractive Employers ranking
published by Forbes Russia.
Nornickel’s Corporate Integrated Quality
and Environmental Management System
(CIMS) successfully passed its second
surveillance audit for compliance with
ISO 9001:2015 and ISO 14001:2015.
At Nornickel’s annual Capital Markets
Day in London, the Group’s senior
management unveiled Nornickel’s 10-year
strategic vision and a new comprehensive
environmental programme.
June
The General Meeting of Shareholders
refreshed the Board of Directors, with
a majority of the Board comprised of
independent directors for the first time in
Nornickel’s history.
September
Bystrinsky GOK was commissioned.
The GRK Bystrinskoye’s EBITDA for
1H 2019 was USD 160 mln, for FY 2019
– USD 349 mln.
October
Nornickel successfully completed a USD
750 mln Eurobond issue, maturing in
2024 and achieving the lowest coupon on
record for this type of debt at 3.375% p.a.
Eurobond issue
750USD mln
8
9
2019 Annual reportNORNICKELCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix BUSINESS
MODEL
GLOBAL ASSET
MAP
NORILSK NICKEL HARJAVALTA
Finland
Share in total production
Ni 27% Cu 3% PGMs 2%
KOLA MMC
Kola Peninsula
Share in total production
Ni 73% Cu 17% PGMs 62%
POLAR DIVISION AND
MEDVEZHY RUCHEY
Taimyr Peninsula
Share in total production
Cu 71% PGMs 36%
GRK BYSTRINSKOYE
Zabaykalsky Region
Share in total production
Cu 9%
Greenfield project
Nornickel’s new copper,
gold and iron concentrate
project launched in 2019
The Group owns
50%of Nkomati, which
operates a nickel mine
of the same name
In 2019, the Group and its
operating partner, African
Rainbow Minerals, reached
an agreement to scale down
production at Nkomati Nickel
Mine during 2020. As part of
this process, the partners will
elaborate in due course a plan
contemplating the cessation
of the mining operations and
the placing of the mine in care
and maintenance.
10
NKOMATI
South Africa
Nornickel holds a licence to develop
the Honeymoon Well project, which
includes deposits of disseminated
nickel sulphide ores.
The asset is slated for sale.
HONEYMOON WELL
Australia
13
WHERE WE
OPERATE
Proven and probable
reserves
673
mln t
Polar Division
and Medvezhy Ruchey
Taimyr Peninsula
Ore output:
26 Mtpa
Reserve life:
30 years
Proven and probable
reserves
85
mln t
Kola MMC
Kola Peninsula
Norilsk Nickel
Harjavalta
Finland
Ore output:
10 Mtpa
Proven and probable
reserves
316
mln t1
GRK Bystrinskoye
Zabaykalsky Region
Sales
In 2019, Nornickel maintained its long-standing
reputation as a reliable supplier of high-quality
products, shipping products to 37 countries
and products registered for delivery against
contracts at the London Metal Exchange
and the Shanghai Futures Exchange.
Sales network:
• Metal Trade
Overseas A.G.
Switzerland,
Zug
• Norilsk Nickel
Asia Ltd.
China,
Hong Kong
• Norilsk Nickel
Metals Trading
(Shanghai)
Co., Ltd.
China,
Shanghai
• Norilsk Nickel
USA
USA,
Pittsburgh
Ports in Americas
Rotterdam
Hamburg
Polar
Division
Dudinka Port
Transport assets
Honeymoon Well
Australia
Nornickel
holds a licence
to develop
the project
Nkomati
South Africa
Nornickel owns 50%
of Nkomati, which
operates a nickel mine
of the same name
Kola MMC
Murmansk Port
Arkhangelsk Port
Nornickel
Harjavalta
Nornickel owns a modern transport infrastructure capable of
handling most challenging freight logistics tasks and ensuring
continuity and sustainability of operations. It includes sea, river,
rail and aircraft fleets as well as logistics hubs
International assets
1/ According to the Russian classification (А + В + С1 + С2).
China
12
Domestic market
GRK Bystrinskoye
Energy assets
Nornickel owns an integrated network of energy assets, comprising four gas fields, three
thermal power plants, and two hydropower plants as well as gas pipelines and power lines, all
located within the Norilsk Industrial District
OTHER MINING
ASSETS
OTHER
NON-METALLURGICAL
ASSETS
Proven and probable
reserves
8
mln t
WHAT WE
DO
REVENUE FROM METAL SALES,
USD MLN
nickelNi
Cucopper
Pdpalladium Ptplatinum
Other
metals
Total
3,843
2,452
246
83
76
10
10
588
106
31
475
1,109
1,269
880
65
65
523
78
12
8
7
630
90
64
106
19
6
3,388
2,877
5,043
628
915
8,557
2,271
1,145
182
133
563
REVENUE
12,851
USD mln
EBITDA
7,923
USD mln
NET PROFIT
FOR THE YEAR
5,966
USD mln
GROUP REVENUE FROM METAL SALES TO END USERS
Europe
7%
6,680
USD mln
(52%)
21%
35%
9%
28%
Asia
North and South America
Russia and the CIS
5%
1%
7%
1%
41%
2,289USD mln
(18%)
70%
3,243
USD mln
(25%)
46%
7%
13
19%
3%
37%
15%
1%
13%
34%
639USD mln
(5%)
Nickel
Copper
Palladium
Platinum
Other
metals
Global
Palladium
Fund L.P.
Financial platform to
engage major holders
of existing palladium
stockpiles and boost
industrial demand for
palladium
VALUE
CREATION
FOR STAKEHOLDERS
SHAREHOLDER
RETURNS
Dividends paid in 2019
Dividend yield in 2019
4.1
USD bn
14.9%
SOCIAL
PERFORMANCE
LTIFR in 2019
0.32
Tax payments
3USD thousand
Average monthly pay
2,000
USD
Social investments
278USD mln
ENVIRONMENTAL
PERFORMANCE
GHG emissions
(Scope 1 + 2)
9.9
mln t
Share
of renewables
45%
Percentage of reused
and recycled water
87%
Percentage
of non-hazardous waste
96%
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governance PRODUCTION
FLOW FOR THE REPORTING
2019 YEAR
MINING
CONCENTRATION
SMELTING
REFINING
PRODUCTS
NORNICKEL
2019 Annual report
Copper smelting at
COPPER PLANT
Blister
copper
COPPER PLANT
Nickel smelting at
NADEZHDA
METALLURGICAL
PLANT
SMELTING
SHOP
Sludge from
copper
tankhouse
Converter
matte
Converter
matte
COPPER PLANT’S
SMELTING SHOP
SMELTING SHOP
REFINING SHOP
(TANKHOUSES 1 AND 2)
POLAR DIVISION
AND MEDVEZHY
RUCHEY
KOLA MMC
GRK BYSTRINKOYE
NKOMATI
Cuprous and
disseminated ores
NORILSK
CONCENTRATOR
Rich and
cuprous ores
TALNAKH
CONCENTRATOR
Disseminated
ores
CONCENTRATOR
Low-grade ores
Cu concentrate
Ni concentrate
Cu concentrate
Ni-Po concentrate
SPC KUR1
Briquettes of Cu-Ni
concentrate
Intermediate products
Mines
• Taimyrsky
• Oktyabrsky
• Komsomolsky
• Skalisty
• Zapolyarny
• Mayak
18.4
mln t
of ore
Ni
~ 1.32%
Cu
~ 2.24%
PGMs
~ 6.9 g/t
Mines
• Severny
• Kaula-Kotselvaara
7.9
mln t
of ore
Ni
~ 0.55%
Cu
~ 0.24%
PGMs
~ 0.1 g/t
Open pits
• Verkhneildikansky
• Bystrinsky-2
• Medny Chainik (planned)
• Yuzhno-Rodstvenny (planned)
Gold-iron-copper
ore
10.5
mln t
of ore
Mines
6.7
mln t
of ore
Cu
~ 0.6%
Au
~ 0.9 g/t
Fe
~ 16.1%
Ni
~ 0.3%
Cu
~ 0.1%
BYSTRINSKY GOK
Disseminated
ores
CONCENTRATOR
1/ SPC KUR – Stored pyrrhotite concentrate from Kayerkansky Open Pit Coal Mine.
14
NORILSK NICKEL HARJAVALTA
Ni matte from Kola MMC
Crushed converter matte from Kola MMC
From 3d parties feed
NICKEL REFINERY
• Сu: cathodes
• Sulphur: technical
• Acid: sulphuric
(for Company’s needs)
Precious metal
concentrates:
• Se: technical
• Те: billots
• Ni: cathodes, carbonyl,
intermediate products
• Cu: cathodes,
intermediate products
• Co: electrolytic, saleable
concentrate
• Precious metal
Concentrates
• Acid: sulphuric
• Cu, Fe: saleable
concentrates
• Au: concentrate to be
processed at Nornickel’s
facilities
• Saleable concentrate
• Ni: cathodes, briquettes,
salts, solutions
• Co: sulphate, solutions
• Сu: saleable cake
15
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Strategic report
tra
te
gic
Report
Chairman’s letter
President’s letter
20
22
24 Our strategy
30
Key investment
projects
S CHAIRMAN’S
LETTER
STRATEGY OF SUSTAINABLE
DEVELOPMENT
contributed to a sharp increase in EBITDA
to almost USD 8 bn, the highest level in the last
12 years. We increased production of our key
metals and over delivered on all financial targets
set in our most recent efficiency program,
with unit cost declining 5% year-on-year.
These outstanding results allowed us continue
to generate healthy cash flow and pay industry-
leading dividends, while maintaining net
leverage at a conservative level.
Since 2013 we have been consistent in delivery
on our promises to the investment community
and in achieving our strategic goals, proving
that the Company’s outstanding performance
is not just a ‘flash in a pan’, but is driven
by a deeply sustainable business model.
The most exciting thing about Nornickel,
however, is not the past, but the future. Having
one of the best resource bases in the world,
it is natural to look for longer term opportunities
and to ask what the business is going to look
like in 2030. We believe that we can make
further advances by unlocking the unique value
potential of our Company. We have materially
improved our knowledge of the resource base
and progressed well with the preparation
of key mining projects for their execution.
Thus, our long term plans have become more
DEAR SHAREHOLDERS,
In 2019, once again, we delivered a strong
financial performance that was reflected
in the dynamics of our market capitalisation
and total shareholder returns.
Higher metal prices combined with relentless
work to improve the performance
and competitiveness of our businesses,
20
NORNIKEL
Annual Report 2019
informed, and hence our ambitions more
achievable.
We have already embarked on this growth path,
having made investment decisions on a further
Talnakh concentrator upgrade and the South
cluster development. Based on the existing
resource base in Taimyr Peninsula, we are able
to scale up ore production to 30 mln tonnes
by 2030, which will be 75% higher than in 2017.
We have also identified opportunities
for optimisation of our downstream
assets, which should enable more efficient
monetisation of our mineral resources.
We have added to our prospective project
portfolio, the expansion of Nadezhda smelter,
the reconstruction of Norilsk concentrator
and the construction of a new copper refining
unit at Kola MMC.
Sustainability is a core principle at Nornickel.
However, for us, it involves more than just
the sustainable use of natural resources;
it also comprises the sustainable development
of communities and our contribution
to a greener economy globally.
Firstly, we are adopting an unprecedented
environmental program that covers our key
geographies. For Norilsk, we have set new,
more aggressive long term targets for sulfur
dioxide emissions reduction being nearly 90%
versus 75% previously. For Kola operations,
our target is seven times emissions reduction
within the next two years. Total capital
expenditure is budgeted at almost $3.5
billion over the next five years, making it one
of the biggest environmental investments
in the mining sector globally.
Secondly, Nornickel is perfectly positioned
to play a critical role in support of major global
megatrends that are already shaping “green
mobility”, namely: tightening of emission
standards for ICE cars and the rapid growth
of electric vehicles. Our exposure to nickel,
copper, cobalt, palladium and platinum is unique
in the mining industry, and we will do our best
to provide steady supply of these crucial
materials to global markets.
We strongly believe that we are making
good progress in shaping Nornickel into
an outstanding investment for shareholders,
while contributing to the transition to cleaner
mobility and a greener economy worldwide.
Gareth Peter Penny
Chairman of the Board of Directors,
MMC Norilsk Nickel
21
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix PRESIDENT’S LETTER
13.6 bn. Furthermore, our successful operational
efficiency programme and rigorous cost
management have helped us reduce our unit
costs by almost 5%. As a result, our EBITDA
grew by 27% to USD 7.9 bn while the EBITDA
margin reached 58%. We have also seen our net
profit increase by almost 2 times to USD 6 bn
while free cash flow reached an impressive USD
5 bn for the second year running.
Finally, our leverage remained low, with Net
Debt to EBITDA reduced to 0.9. We believe
that a conservative approach to debt is central
to maintaining our financial stability, which
is particularly relevant amidst macroeconomic
uncertainty.
Strategic priorities and investments
Last year, Nornickel came to the end of its five-
year strategic cycle, which was primarily aimed
at reconfiguring and upgrading its downstream
facilities, and provided a secure foothold
for further business growth. It is now time
to take the next move to reach for even more
ambitious objectives, and on this note, I would
like to discuss in more detail the ten-year
strategic programme that we have designed.
We have fundamentally improved
our knowledge of our immense resource base
to allow for a smooth transition to longer-term
planning. In the Taimyr Peninsula, with its ore
reserves of more than 2 billion tonnes, we intend
to ramp up our production by 75%, or up to 30
Mtpa. In doing so, our output of key metals
is expected to rise considerably by 2030: nickel
by 15%–25% to 240–260 ktpa, copper by 20%–
30% to 480–520 ktpa, and platinum group
metals (PGMs) by 30%–45% to 140–150 ktpa.
These strategic plans assume that we will
successfully complete the already-sanctioned
South Cluster project, brownfield expansion
projects at the Talnakh mines, upgrades
and debottlenecking of our concentration
and metallurgical facilities.
DEAR SHAREHOLDERS,
2019 was for us a year
of phenomenal achievements. Once again,
we have shown the investor community
the strengths of our business model
and our ability to reach ambitious goals.
We have been able to significantly increase
the value of our business and pay industry-
leading shareholder returns through
the consistent delivery of our strategy, whose
success has been supported by higher metal
prices.
Financial highlights
Last year, we ramped up the output of all
key metals, breaking a record in the process
by producing almost half a million tonnes
of copper. Strong operational performance
and higher prices for nickel and palladium have
contributed to a boost in revenue of 16% to USD
22
Backed by our unique metal basket
and world-leading exposure to mining assets,
we are perfectly positioned to support
the global transition to green mobility.
The rise of hybrid and electric vehicles,
and the tightening of regulations on exhaust
emissions across the globe are two megatrends
that are expected to considerably boost
the demand for our products in the coming
years.
By 2030, we will be able to supply enough
PGMs to the global market to produce 25–40
mln autocatalysts, in turn leading to a 170–270
mln t reduction in air pollutants. In addition,
we believe that we will be able to supply enough
high-grade nickel to produce 3.5–5.5 mln EV
battery packs, which will reduce global GHG
emissions by 50–100 mln t. We are confident
that Nornickel will play a crucial role in helping
the global economy, and above all transport, go
green.
For this very reason, we believe that
our own assets should also be green. Last
year, we adopted the new comprehensive
environmental protection programme,
conventionally called “Sulphur Programme
2.0”. The programme is expected to reduce
emissions by 90% by 2025 for the Polar Division,
and by 85% as early as 2021 for Kola MMC.
Accordingly, our growth strategy
and environmental projects will require
significant investment, which can be broken
down into three phases. During the first, active
construction phase, management expects
a gradual increase in investment from USD 2.2–
2.5 bn in 2020. During the second phase (from
2022 to 2025), the annual investment is to reach
its peak of USD 3.5–4 bn. During the third phase
(from 2026 to 2030), our capital expenditures
are expected to return to their historical annual
average of about USD 2 bn.
NORNIKEL
Annual Report 2019
Health and safety
Our top priorities are to ensure employee safety
and mitigate the risk of work-related injuries.
In 2019, we continued our unwavering efforts
to enhance occupational health at our facilities.
We have maintained our lost time injury
frequency rate (LTIFR) at a level significantly
below the global industry average. Despite
this, it is with deep regret that I must inform
you that nine of our colleagues lost their lives
at the workplace during the last year. I offer
my sincere condolences to their families,
and I believe statistics like these are simply
unacceptable. We are sparing no effort
to achieve our priority goal of zero work-related
fatalities at our facilities.
Social responsibility
Sustainability and social responsibility
are not just hollow buzzwords for Nornickel:
we have been and will continue to be an investor
in social infrastructure and human capital.
In 2019, Nornickel and the Russian Government
continued their joint implementation of a long-
term target programme to relocate people
from Norilsk and Dudinka (Krasnoyarsk Region)
to other Russian regions with a better climate.
Under the programme, 7,586 families moved
into new homes on the “mainland” between 2011
and 2019.
We are actively involved in the construction
and renovation of social infrastructure across
our footprint, with the aim of creating inclusive
and people-friendly work and living spaces.
On a final note, I would like to highlight that
our 2019 performance has provided ample
evidence that we are on the right strategic track.
I would like to give my thanks to all those who
have contributed to our success, and express my
confidence that together we can deliver on all
our long-term goals.
Vladimir Potanin
President,
Chairman of the Management Board
MMC Norilsk Nickel
23
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix We are confident that Nornickel will play a crucial
role in making the global economy, and above all
transport, green. To this end, we need to make
sure that our own assets in this new, more
environmentally conscious world are equally
as green.
STRATEGY EVOLUTION
STRATEGY UPDATE COVERING KEY AREAS
EXPANDING
OUR HORIZONS
OUR
STRATEGY
capital projects we are betting on in the metals
and mining industry take on average about 7
to 10 years to deliver. We expect to increase
Nornickel’s ore production 1.8 times
over this time horizon, investing approximately
more than RUB 2.0 trillion in our growth projects.
The seamless execution of our strategy
over the past six years, as well as tailwinds
in the commodities markets, have helped
us to achieve industry-leading TRS (total returns
to shareholders) performance. Now it’s time
for us to take the next step towards even more
ambitious goals, both in terms of business growth
and environmental performance.
We are setting new planning horizons,
as we see a positive outlook going forward.
Firstly, the nickel market, which is a strategic
focus for us, is showing a stable global trend
in demand from battery and electric vehicle
(EV) manufacturers. And while this story has
been more about expectations than real action
so far, we are keenly aware that the future
for the automotive industry lies with green
technology, which provides an extra tailwind
for us. At the same time, petrol-driven cars
are also still being produced, and this sector
is our traditional consumer. With environmental
standards getting ever tougher, demand
for palladium is surging, as this metal
is indispensable for making catalytic converters
which capture harmful exhaust pollutants.
The strong long-term demand for nickel
and platinum group metals (PGMs) creates
a positive case for our shift from the current,
tactical five-year planning horizon to a longer,
ten-year strategic planning horizon. This
is even more important, as all of the major
VLADIMIR POTANIN,
President, MMC Norilsk Nickel
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 to
realise their aspirations for development and technological
progress
NORNIKEL
Annual Report 2019
GLOBAL MEGATRENDS IN THE AUTOMOTIVE INDUSTRY
Electrification
Hybridisation
Stricter exhaust emission
regulations
Steady growth in demand
for Ni, Cu, and PGMs
10
years
Ni
Cu
Pt+Pd
Production growth1
• Accelerating output growth
• Expanding the long-term investment
programme
Growth in mining production2
on the Taimyr Peninsula
+60–75%
Growth in metals output
Ni
nickel
Cu
copper
+15–25%
+20–30%
Pd+Pt
platinum
group metals
+30–45%
1/ To the base year (2017).
2/ To the base year (2015).
Comprehensive
environmental programme
• Slashing sulphur-dioxide emissions
• Maintaining leadership in CO2
reduction
Reduction of SO2
emissions from operations2
by
2025
at the Polar Division
by 90%
by
at Kola MMC
2021
by 85%
Nornickel’s production cycle ensures
one of the lowest levels of GHG
emissions among global metals and
mining companies
STRATEGIC ASPIRATION
Sustainable growth and maintaining industry-leading
shareholder returns
24
25
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix
COMPREHENSIVE
ENVIRONMENTAL
PROGRAMME
OUR
STRATEGY
CONTRIBUTION TO THE GLOBAL
SUSTAINABLE DEVELOPMENT AGENDA
By 2030, Nornickel’s supplies
of PGMs to the global market
will support the production of
Air pollutant emissions will be
reduced by
25–40
mln
autocatalysts annually
170–270
mln t
Increases in high-grade
nickel output will support the
production of
3.5–5.5
mln
EV battery packs annually
Global CО2 emissions will be
reduced by
50–100
mln t
Nornickel maintains one of the lowest CO2
footprints among peers (Scope 1&2)
mln t
¹
Nornickel
Peer 5
Peer 4
Peer 3
Peer 2
Peer 1
9.9
14.2
16.1
16.5
28.2
30.3
SHARE OF ELECTRICITY FROM RENEWABLE SOURCES
44.5%
for the Group
53.5%for the Norilsk Industrial District
1/ According GHG Standard (Scope 1 & 2) (GHG Corporate Accounting and Reporting Standard)
26
NORNIKEL
Annual Report 2019
Sulphur Programme 2.0
Sulphur Programme 2.0, Nornickel’s new comprehensive environmental protection
programme, aims to achieve world-class performance in sulphur capture, and zero
emissions within the cross-border zone affected by Kola MMC (by the end of 2021).
Strategic aspiration
~2 times
10 times
20 times
2023
2025
2030+
NORILSK
INDUSTRIAL
DISTRICT
Launch of an anchor project
to recover furnace SO2
at Nadezhda Metallurgical
Plant
A 45%2 reduction in SO2
emissions at the Polar
Division
Completion of the Sulphur
Project at Copper Plant
to recover furnace
and converter gases
A 90%2 reduction in SO2
emissions at the Polar
Division
Recovery of SO2 lean gases
(including converter gases)
at Nadezhda Metallurgical
Plant
A 95%2 reduction in SO2
emissions at the Polar
Division
2 times
7 times
KOLA MMC
2020
2021
Optimization of smelting
operations in Nickel
to cut SO2 emissions
in the Russia-Norway
border zone
A 50%2 reduction in SO2
emissions in the Nickel
and Zapolyarny
municipalities
Complete shutdown
of smelting operations
in Nickel town and
downstream modernization
in Monchegorsk
A 85%2 reduction in SO2
emissions at Kola MMC
2/ Against a 2015 baseline.
27
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix ACCELERATING
PRODUCTION GROWTH
OUR
STRATEGY
Our long-term strategy for accelerated production growth
is closely aligned with plans to upgrade production facilities
and other related infrastructure
ORE PRODUCTION
GROWTH
1/
Development of the South
Cluster
2/
3/
Modernisation of the Skalisty
Mine
Brownfield expansion
projects at the Talnakh mines
(Oktyabrsky, Komsomolsky,
Taimyrsky, and Mayak)
Nornickel’s resource base expansion programme
envisages a production ramp-up by 2030 to
27-30
mln t
Ore production in the Norilsk Industrial District
Mtpa
2030+
2025
2017
40-45
27-30
17
20.8
5.5
17.0
15.7
1.6
9.0
Talnakh mines
South Cluster
STRATEGIC AMBITIONS
FOR 2030+ METAL
PRODUCTION1
Nickel
kt
2030+
240–260
2019
2017
225
210
1/ Metals produced from Russian feedstock (including metals in saleable semi-products) excluding production from Bystrinsky GOK
and Nkomati.
NORNIKEL
Annual Report 2019
CONCENTRATION
FACILITIES
1/
3rd Stage of the Talnakh Concentrator Upgrade to boost
throughput capacity to 18 Mtpa from 10 Mtpa
2/
Norilsk Concentrator retrofit and expansion
Nornickel’s phased
long-term investment
programme
USD bn
Average for the period
2026–2030
2022–2025
<2,0
3.5–4.0
During Phase 1 of the active construction
period, CAPEX is expected to steadily
grow from USD 2.5–2.8 bn in 2020 to USD
3.0–3.4 bn in 2021, eventually peaking
at an annual average of USD 3.5–4 bn
between 2022 and 2025. During Phase 3,
between 2026 and 2030, CAPEX is expected
to revert to its historical annual averages
of around USD 2 bn.
SMELTING
AND REFINING
OPERATIONS
1/
2/
3/
Nickel tankhouse upgrade at KGMK
Process chain upgrade at Copper Plant
(a Continuous Converting Facility
project)
Retrofit of production facilities
at Severonickel Plant (KGMK)
with the roast-leach-electrowin
(RLE) technology rolled out to cover
the entire copper output (currently
under consideration)
4/
Construction of the 3rd furnace
at Nadezhda Metallurgical Plant’s
smelting shop (currently under
consideration)
Copper
kt
Palladium + platinum
t
2030+
480-520
2019
2017
454
398
2030+
140-150
2019
2017
113
105
28
29
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix KEY INVESTMENT
PROJECTS
MINING PROJECTS
SKALISTY MINE
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
The Skalisty Mine development
project aims to ramp up ore
production to 2.5 Mtpa by 2020,
and maintain this level until 2025
through mining the rich and cuprous
ore reserves of the Talnakhskoye
and Oktyabrskoye deposits.
In 2020–2025, the project’s CAPEX
will total RUB 58.3 bn (USD 0.85 bn).
Ore reserves1
53 mln t
Average metal content
NI – 3.2 %
Cu – 3.7 %
PGMs – 10.0 g/t
Project timeline
The Skalisty Mine forms part of Nornickel’s Polar Division
and produces ore from the Talnakhskoye and Oktyabrskoye
deposits. In 2019, the mine extracted 2.3 mln t of rich ore
and 88 kt of copper ore.
Taimyrsky Mine forms part of Nornickel’s Polar Division
and produces ore from the Oktyabrskoye Deposit. In 2019,
the mine extracted about 4.1 mln t of rich ore.
'19
'20
• CAPEX – RUB 3.7 bn (USD 58 mln)
• Refurbishment of ventilation shaft No. 10
completed, and the main ventilation unit
launched
• The sinking of skip-cage shaft No. 1 completed
(2.1 km in total)
• Commissioning of ventilation shaft No. 10
• Commissioning 400 ktpa of saleable
ore capacity
Project timeline
'19
'20-'24
• CAPEX – RUB 4.3 bn (USD 67 mln)
• 5.6 km of underground workings completed
• Commissioning 1.15 Mtpa of capacity to maintain
ore production at 4.3 Mtpa
30
31
1/ According to JORC standards.
NORNIKEL
Annual Report 2019
TAIMYRSKY MINE
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
The Taimyrsky Mine development
project aims to sustain ore production
at 4.3 Mtpa until 2025 by tapping into
the rich copper-nickel ore reserves
of the Oktyabrskoye deposit.
In 2020–2024, the project’s CAPEX
will total RUB 32.8 bn (USD 491.6
mln).
Ore reserves1
139 mln t
Average metal content
NI – 1.2 %
Cu – 1.9 %
PGMs – 4.5 g/t
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix MINING PROJECTS
OKTYABRSKY MINE
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
The Oktyabrsky Mine development
project aims to maintain production
of depleting reserves, and gradually
ramp up production to 6.0 Mtpa
until 2025, through mining 38.5 mln t
of the rich disseminated and cuprous ore
reserves of the Oktyabrskoye deposit.
In 2020–2025, the project’s CAPEX
will total RUB 3.8 bn (USD 56.1 mln).
Ore reserves1
215 mln t
Average metal content
NI – 0.6 %
Cu – 2.1 %
PGMs – 5.8 g/t
NORNIKEL
Annual Report 2019
KOMSOMOLSKY MINE
Location
Norilsk Industrial District, Krasnoyarsk
Territory (Polar Division)
Project overview
The Komsomolsky Mine development
project aims to maintain ore
production at 4 Mtpa until 2023,
by mining the rich, cuprous,
and disseminated ore reserves
of the Talnakhskoye and Oktyabrskoye
deposits. In 2020–2023, the project’s
CAPEX will total RUB 13.7 bn
(USD 204.5 mln).
Ore reserves1
182 mln t
Average metal content
NI – 0.6 %
Cu – 1.1 %
PGMs – 4.8 g/t
Oktyabrsky Mine forms part of Nornickel’s Polar Division
and produces ore from the Oktyabrskoye Deposit. In 2019,
the mine extracted 5.4 mln t of ore.
The Komsomolsky Mine forms part of Nornickel’s
Polar Division and produces ore from the Talnakhskoye
and Oktyabrskoye deposits. In 2019, the mine extracted
4.0 mln t of ore.
Project timeline
Project timeline
'19
'20-'25
• CAPEX – RUB 1.7 bn (USD 27 mln)
• 2.6 km of underground workings completed
• Commissioning 300 Ktpa cuprous ore
and 1.15 Mtpa ore capacity to maintain
production reserves
'19
'20-'23
• CAPEX – RUB 3.5 bn (USD 54 mln)
• 4.5 km of underground workings completed
• Commissioning 1.5 Mtpa of saleable ore capacity
32
33
1/ According to JORC standards.
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix MINING PROJECTS
SOUTH CLUSTER
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
The project aims to ramp up ore
production to 9 Mtpa by 2027,
first by expanding the pit (open-
pit operations) and then through
underground mining. In 2020–2027,
the project’s CAPEX will total RUB 63.1
bn (USD 0.9 bn).
Ore reserves1
42 mln t
Average metal content
NI – 0.3 %
Cu – 0.4 %
PGMs – 6.0 g/t
In 2017, Nornickel established Medvezhy Ruchey, a wholly-
owned subsidiary that operates the assets of the South Cluster.
The South Cluster comprises the Norilsk Concentrator
(processing capacity of 9.3 Mtpa), the northern part
of the Norilsk-1 deposit, developed by the Zapolyarny open-
pit mine and the Zapolyarnaya mine, as well as the tailing dump
No. 1 and Lebyazhye tailing dump. The Norilsk Concentrator
processes all disseminated ores from the Zapolyarny Mine
and cuprous and disseminated ores from the Oktyabrskoye
and Talnakhskoye deposits. In 2019, the plant processed
7.5 mln t of ore, with nickel recovery in bulk concentrate
reaching 71.3%. In 2019, the Zapolyarny Mine produced
1.6 mln t of disseminated ore. In 2019, the South Cluster
project’s CAPEX was RUB 5.0 bn (USD 76 mln).
Project timeline
'19
'20
'21-'22
• CAPEX – RUB 1.6 bn
(USD 24 mln)
• Stripping completed
• Exploration conducted
• Design documentation
development started
• Feasibility study
and detailed engineering
conducted
• Completion of design
documentation
• Securing of approval
from the Main Department
of State Expertise
• Launch of construction
and installation works
• Construction
and installation works,
equipment delivery
• Launch of ore production
1/ According to JORC standards.
34
NORNIKEL
Annual Report 2019
ARCTIC PALLADIUM
In 2018, Nornickel and Russian Platinum, a Russian private
company, signed a memorandum of intent to set up a joint
venture (JV) with a view to develop the Norilsk Industrial
District’s deposits. Contributions to the JV’s authorised capital
included Nornickel’s licence to develop the Maslovskoye deposit
and Russian Platinum’s licence to develop the southern part
of the Norilsk-1 deposit and the Chernogorskoye deposit.
In March 2020, Russian Platinum has notified the Company of its
decision to terminate the negotiations regarding Arctic Palladium
JV and to proceed with the development of the Chernogorskoye
Deposit and the southern part of the Norilsk-1 Deposit on its
own. This decision owes to UC RUSAL, one of Nornickel's
shareholders, not issuing due corporate approvals to Nornickel
to participate in the proposed joint venture.
35
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix PROCESSING PROJECTS
BYSTRINSKY GOK (CHITA PROJECT)
Location
16 km east of Gazimursky Zavod,
Gazimuro-Zavodsky District,
Zabaykalsky Region
Project overview
The Bystrinsky GOK construction
project is made up of an open-pit mine
at the Bystrinskoye deposit; a mining
and processing plant (MPP) with all
associated infrastructure, including
a power line and the 227 km Borzya–
Gazimursky Zavod railway line; as well
as a rotation camp.
Construction of the open-pit mine
and the MPP started in 2013. In 2017,
a 220 kV power line was commissioned
and a camp for 1,047 people was built.
Hot commissioning of the MPP started
in October 2017. The MPP came
online in December 2019. The project
is expected to ramp up to design capacity
by 2021.
Ore reserves1
316 mln t
Average metal content
Cu – 0.7 %
Fe3O4 – 23 %
Au – 0.9 g/t
Launched in 2019, GRK Bystrinskoye (Bystrinsky GOK)
is Nornickel’s new copper, gold and iron concentrate project.
It is the largest greenfield project in the Russian mining
industry, covering ore mining, concentration and shipment
of end products to customers. Nornickel owns 50.01%
in Bystrinsky GOK, with CIS Natural Resources Fund holding
39.32%, and the remaining 10.67% belonging to Highland Fund.
In 2005–2020, the project’s CAPEX will total RUB 92.5 bn
(USD 1.8 bn).
In 2020–2022, the project’s
CAPEX will total
Project timeline
RUB 16.7 bln
(USD 252.0 mln).
The project’s design
capacity
10 Mtpa
New jobs
~2,000 positions
1/ According to the Russian classification (А+В+С1+С2)
36
'19
• CAPEX – RUB 6.7 bn
(USD 103 mln)
• Mining of 7.5 mln t of ore
and production of 43.5 kt
of copper concentrate,
177 koz of gold
concentrate, and 1.3 mln t
of iron ore concentrate.
EBITDA – USD 349 mln
'20
• The MPP is expected
to reach design capacity
with the following annual
concentrate volumes: Cu –
55–65 kt; Au – 220–240
koz; Fe3О4 (Fe – 66%) –
1.5–1.7 mln t
NORNIKEL
Annual Report 2019
TALNAKH CONCENTRATOR
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
The Talnakh Concentrator
(Polar Division) processes rich,
cuprous, and disseminated
ores from the Oktyabrskoye
and Talnakhskoye deposits to produce
nickel-pyrrhotite and copper
concentrates. In 2019, the plant
processed 10.7 mln t of ore, with nickel
recovery in bulk concentrate reaching
85.9% (+2.7% y-o-y).
The upgrade has been rolled out in three stages. Stage 1 was
completed in 2015, and included the reconstruction of existing
floatation capacity and the replacement of flotation cells
that were beyond their useful lives, in order to maintain
the concentration capacity at 7.5 Mtpa. Stage 2 involved
the expansion of the main building, the reconstruction
of the reagent preparation building, and the construction
of additional ball mills and vertical mills, as well as the 1st
Stage of the tailing dump, all of which helped to boost capacity
to 10 Mtpa. This stage was completed in 2018. Plans for the 3rd
Stage of the Talnakh Concentrator Upgrade include a capacity
ramp-up to 18 Mtpa and construction of the tailing dump’s 2nd
Stage. The new concentration technology will increase recovery
by 4%–7% for all key metals. The project’s completion is slated
for 2023, reaching design capacity by 2024+. CAPEX for the 3rd
Stage of Talnakh Concentrator in 2020–2024 is estimated
at RUB 40 bn (about USD 0.6 bn).
The new concentration
technology will increase
recovery by 4%-7% for all key
metals.
3rd Stage project timeline
'19 '20-'22 '23-'24
• CAPEX – RUB 424 mln (USD 7 mln)
Inspection of the construction site
•
and completion of preparatory work
• Development of design
documentation completed
• Approval from the Main
Department of State Expertise
received and construction permit
secured
• Completion of preparatory work
in the main building of Talnakh
Concentrator
• Development
of engineering
documents
• Construction
and installation works
• Equipment delivery
• Pre-commissioning
• Commissioning
• Ramping up to design
capacity
37
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix PROCESSING PROJECTS
NICKEL TANKHOUSE UPGRADE
Location
Monchegorsk, Murmansk Region
Project overview
The tankhouse 2 upgrade will
create a highly effective nickel
cathode production unit, harnessing
the technology of nickel electrowinning
from chlorine dissolved tube furnace
nickel powder, which will help increase
output of nickel cathodes from 120 ktpa
to 145 ktpa. The new technology will
help achieve the highest purity of metal
and reduce air emissions. In 2020–2021,
the project’s CAPEX will total RUB 2.9
bn (USD 43.4 mln).
NORNIKEL
Annual Report 2019
ENERGY PROJECTS
ENERGY INFRASTRUCTURE UPGRADES
Location
Norilsk Industrial District, Krasnoyarsk
Region
Project overview
Investment in energy infrastructure
aims to replace outdated and obsolete
HPP turbines and CHPP units,
and retrofit key elements of the gas
transmission system. These initiatives
will markedly extend the service
life of our key energy infrastructure
facilities, enhance the reliability
of our energy and gas supply, increase
the amount of renewable energy
generated, and enable the creation
of an energy saving ecosystem.
In 2020–2025, energy infrastructure
CAPEX will total RUB 135 bn
(USD 2 bn).
Tankhouse 2 is part of Kola MMC, which produces nickel
cathodes using electrowinning technology.
Nornickel operates its own energy assets, which comprise four
natural gas fields, three thermal power plants (CHPP-1, CHPP-2,
and CHPP-3), two hydropower plants (Ust-Khantayskaya HPP
and Kureyskaya HPP), gas pipelines, and power lines. Our
energy sources include renewables (hydropower) and gaseous
hydrocarbons (natural gas).
Project timeline
Project timeline
'19
'20
• CAPEX – RUB 4.8 bn (USD 74.5 mln)
• Refurbishment of electrowinning cells –
the project reaches 98% completion
• Pre-commissioning and ramping up to design
capacity
'19
'20-'25
• CAPEX – RUB 15.9 bn (USD 246 mln)
• Replacement of hydropower units at Ust-
Khantayskaya HPP (turbine and electrical shops)
• Replacement of power unit equipment
at CHPP-2
• Replacement of two existing power units
at CHPP-2 and CHPP-3
• Modernisation of grid facilities and gas
transmission equipment upgrades
• Turbine replacement and the introduction
of an automated dispatch system at HPPs
38
39
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix ENVIRONMENTAL PROJECTS
SULPHUR PROGRAMME AT KOLA MMC
NORNIKEL
Annual Report 2019
SULPHUR PROGRAMME (POLAR DIVISION)
Location
Nickel settlement, Murmansk Region
Project overview
The project envisages the construction
of a 200 kt dry concentrate loading
point, the upgrade of the flotation circuit
at Zapolyarny Concentrator to allow
for production of two types of copper-
nickel concentrate, and the complete
shutdown of smelting operations
in Nickel. The new facility will separate
high-grade concentrate and low-grade
concentrate, ready to be shipped
to third-party consumers. In 2019,
the concentrator processed 7.9 mln t
of ore.
After all smelting operations are shut
down, the employees will be offered
jobs at other Nornickel enterprises.
For more details
p. 161
In 2017–2020, the project’s CAPEX will
total RUB 5.8 bn (USD 90.9 mln).
WILL BE
CLOSED
The Sulphur Programme at Kola MMC envisages the closure
obsolete production shop in Nickel town (near the Norwegian
border) and downstream modernization in Monchegorsk. These
activities will completely eliminate sulphur dioxide emissions
in the Russia-Norway border area and significantly reduce
adverse environment impact in Monchegorsk. The programme
is expected to reduce sulphur dioxide emissions from Kola
MMC by 50% in 2020, and by 85% in 2021 (from a 2015
baseline).
This is a large-scale environmental project designed to capture
sulphur dioxide emissions at Nadezhda Metallurgical Plant
and Copper Plant (both part of Nornickel’s Polar Division),
dramatically reducing emissions.
Nornickel considers its Sulphur Programme at the Polar
Division a staged journey, with the following milestones
set for sulphur dioxide reduction in the Norilsk Industrial
District: 45% by 2023 and 90% by 2025 (from a 2015 baseline).
In 2019–2025, the project’s CAPEX will total about RUB 3.5 bn.
Location
Norilsk Industrial District, Krasnoyarsk
Region (Polar Division)
Project overview
The project will be phased
in at Nornickel’s two core downstream
facilities in the Norilsk Industrial
District as follows:
Nadezhda Metallurgical Plant
• Phase 1: The recovery of gases
at Nadezhda and the establishment
of acid neutralisation facilities
(including gypsum storage
and related infrastructure) – to be
completed by 2023
• Phase 2: The expansion
of neutralisation infrastructure (for
sulphuric acid from Cu stream) –
to be completed by 2025
Copper Plant
• Phase 1: Preparatory work
and retrofitting of the gas cleaning
unit – to be completed by 2023
• Phase 2: Recovery of sulphur
dioxide from rich off-gases
at sulphuric facilities, reduction
of Copper Plant’s emissions
to the maximum allowable limits,
and the discontinuing of converter
operations with sulphur-poor
gases – to be completed by 2025
Project timeline
'19
• CAPEX – RUB 2.3 bn
(USD 35.6 mln)
• Approval
from the Main Department
of State Expertise secured
• Completion of all
construction and installation
works
• Launch of finished
concentrate production
and plant pre-commissioning
'20
'21
• CAPEX – RUB 1.6 bn
(USD 24.9 mln)
• Partial closure of electric
furnaces at the smelting
shop in Nickel
• Pre-commissioning
at the loading point,
and shipping of low-grade
concentrate
• Complete shutdown
of smelting operations
in Nickel
• Launch construction
of a loading point for high-
grade concentrate
Project timeline
'19
• CAPEX – RUB 1.5 bn (USD 24 mln)
• Completion of the bulk of on-site preparatory
work
• Development of design documentation
for Phase 1 at Nadezhda Metallurgical Plant,
and successful state environmental review
• A number of equipment supply contracts signed
• Development of design documentation
for Phase 1 at Copper Plant
'20
• Nadezhda Metallurgical Plant will develop
detailed design documentation, secure approval
from the Main Department of State Expertise,
and commence construction and installation works
• Copper Plant will carry out construction
and installation works for Phase 1 and develop
documentation for Phase 2
40
41
CLOSURE OF THE SMELTING SHOP IN NICKELThis is a comprehensive environmental project at Kola MMC that will completely eliminate emissions in Nickel, while reducing emissions from Kola MMC by 50% by the end of 2020 (from a 2015 baseline). Nickel, Zapolyarny, Murmansk RegionCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Commoddity market overview
om
mod
dity
Market overview
44 Nickel
Copper
51
Palladium
55
Platinum
59
C NICKEL (Ni)
KEY TRENDS IN THE NICKEL
MARKET
No. 1 in high-grade nickel
production (%)
London Metal Exchange nickel price (USD/t)
1
4
5
8
11
15
18
19
22
«NORNICKEL»
Annual report 2019
In 2019, nickel deficit in the market narrowed to 42 kt
(down from 149 kt in 2018). The commissioning of new
facilities in Indonesia and China led to a record
increase in nickel pig iron (NPI) production,
completely offsetting the nickel consumption
growth in stainless steel in China (against weaker
consumption outside China) and the higher demand
for battery manufacture.
Nickel prices showed mixed trends and high
volatility during the first half of 2019. High demand
from the stainless steel sector in China and the impact
from the Brumadinho dam disaster in Brazil
(threatening to reduce nickel output from Vale’s
assets) were offset by negative macroeconomic
effects of the US–China trade war and low global
manufacturing PMI.
No. 2 in primary nickel
production (%)
Primary nickel consumption
by region (%)
The price went up in the second half of the year after
rumours that Indonesia may reintroduce a ban on ore
exports, as well as on the news of increased capital
intensity of laterite leaching projects. In August,
the Indonesian government officially announced
a nickel ore export ban effective from 1 January 2020,
two years earlier than planned, in an effort to increase
domestic processing of mineral resources and capture
more value. As a result, the nickel price soared to USD
18,625/t (a five- year high), but this was followed
by a period of consolidation. In the fourth quarter,
the price dropped on the back of a significant decline
in electric vehicle sales in China, caused by reduced
government subsidies and stagnation in the stainless
steel market, along with falling nickel premiums.
Source: Company data
2014
16,867
2015
11,807
2016
9,609
2017
10,411
Average annual nickel prices (USD/t)
2018
13,122
2019
13,936
Source: London Metal Exchange (Cash Settlement)
18,000
16,000
14,000
12,000
10,000
2
3
6
7
9
10
12
13
14
17
16
20
21
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Sources: LME, Company data
1/ Dam failure at Vale’s iron ore mine in Brazil gives
rise to concerns over potential decline in nickel
production
2/ Considerable growth in Chinese stainless steel
production
3/ Positive market expectations regarding China–US
12/ Ramu mine in Papua New Guinea closed after
an industrial waste spill
13/ Indonesian ban on ore exports officially
announced for 1 January 2020
14/ Production at Onca Puma resumed
15/ Nickel inventories dwindle at LME-approved
negotiations to resolve trade disputes
warehouses
4/ Optimistic PMIs in China
5/ SLN given green light to export nickel ore
16/ Electric vehicle sales in China fall considerably
17/ Off-take agreement with SK Innovation
from New Caledonia
6/ US government increases tariffs on Chinese goods
for the supply of nickel sulphate from the Sconi
project (Australia) terminated
worth USD 200 bn from 10% to 25%
18/ Market players’ concerns over the threat of early
7/ Strengthening of the US dollar
8/ Ferronickel production halted at Vale’s Onca
Puma plant
9/ Indonesian President meets with the CEOs
of China’s Tsingshan, Huayou and Brunp
10/ News of an increase in the capital intensity
termination of ore exports from Indonesia
19/ Reports that Vale would write off USD 1.6 bn
from the book value of its Goro nickel asset
in New Caledonia
20/ Nickel deliveries to LME-approved warehouses
commence
of potential laterite leaching projects in Indonesia
21/ European Commission approves a total EUR
11/ First reports of a potential ban on nickel ore
exports from Indonesia from the beginning
of 2020
3.2 bn in subsidies to boost battery production
in Europe
22/ US -China phase 1 trade deal agreed
44
45
141724815877ValeNornickelJinchuanGlencoreSherrittBHPSumitomo MMOther MMCs9138777643333GlencoreTsingshan GroupNornickelValeJinchuanDelongShandong XinhaiSumitomo MMSherrittBHPOther MMCsRest of Asia24China55Europe and Africa15129вопросовAmericas62.5mln tCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix MARKET BALANCE
CONSUMPTION
In 2019, nickel deficit in the market shrank to 42 kt
(from 149 kt in 2018), driven primarily by an increased
production of nickel pig iron in Indonesia and China
(by 32%, or 228 kt) on the back of cheap supplies
of high nickel content laterite ores. There were only
marginal increases in the production of refined nickel
(1%, or 11 kt) and its chemical compounds (22%, or 21
kt), mostly due to higher nickel sulphate production
in China for use in the manufacture of lithium
batteries. Conversely, production of other forms
of low-grade nickel decreased by 4%, or 17 kt.
Consumption grew by 6%, or 133 kt, mostly due
to increased demand for nickel in the Chinese
stainless steel segment (by 13%, or 127 kt). Total
consumption outside China decreased by 5%, or 32
kt. Nickel consumption for cathode precursors used
in the manufacture of lithium batteries grew 26%,
or 38 kt, driven by the electrification of transport.
Demand from special steels and alloys rose by 2%,
while consumption in electroplating decreased by 1%.
The combined nickel inventories of the London Metal
Exchange (LME) and Shanghai Stock Exchange (SSE)
dropped 16% to 191 kt. The two-year long depletion
of inventories accelerated markedly in September–
October but ceased in December when 85 kt of nickel
was delivered to LME-approved warehouses. The key
factors behind the metal inventories winding down
(117 kt from January to November 2019) included
expectations of higher demand from the battery
sector in 2020–2021, the Indonesian nickel ore
export ban, and delays to laterite leaching projects
in Indonesia. However, when the nickel price dropped
in the fourth quarter, market traders’ “paper profits”
began to ebb, and the cost of holding long physical
positions mounted, leading to a backflow of metal
into the exchange.
Nickel production and consumption balance (kt)
Source: Company data
MAIN CONSUMING INDUSTRIES
The main area of nickel consumption can be found
in the production of stainless steel (over 70% in 2019),
which comes in several different grades. Austenitic
stainless steel is the most common family of stainless
steels (over three quarters of the global production)
and includes the 200 series and 300 series.
Nickel consumption by industry (%)
The 300 series steels have an increased nickel
content, ranging usually between 8% and 12%
but reaching 20% in some grades. Nickel in these
concentrations improves resistance to corrosion
and strength in a broad range of operating
temperatures, ensures good ductility, resistance
to aggressive environments, and strips the metal of its
magnetic properties. This series is the most versatile
and sees a wide range of uses in construction, food,
transport, the chemical and energy industries,
and other sectors.
In comparison, nickel content in the 200
series is lowered by alloying with manganese,
and these steels are not complete substitutes
for grades with high nickel content. The 200 series
steels are prone to surface (pitting) corrosion,
are not heat resistant and are not resistant
to aggressive environments. However, due their lower
cost, they are widely used in consumer goods such
as domestic appliances. China and India alone account
for over 90% of the total 200 series steel production.
Although they account for only 1% to 2% of global
smelting, austenitic-ferritic (duplex) stainless steels
also use nickel and are distinguished from other
grades by a higher content of chromium (18% to 25%)
and molybdenum (1% to 4%).
‘19
‘18
Ferritic and martensitic stainless steels (400 series)
typically do not contain nickel, and their properties
are similar to those of low-carbon 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, cutlery, kitchenware,
home decor items, and razor blades.
Stainless steel production uses almost all types
of nickel feed (except for some special products,
such as nickel powder and compounds). As nickel
feed quality has practically no impact on the quality
of stainless steel, steel mills predominantly use
cheaper feeds. It is for this reason that high-grade
nickel has been losing its share of nickel units
consumed in stainless steel production in the past
few years.
In 2019, total stainless steel output increased by 5%
to a record high of 53 mln t. The increase was mostly
driven by growing stainless steel production in China,
where nickel consumption grew by 13%, or 127 kt, due
to higher demand and the restricted stainless exports
from Indonesia. Production of nickel-heavy 300 series
increased by more than 1.2 mln t, with Tsingshan,
the world’s largest stainless steel producer,
accounting for over 75% of the production growth.
Following a period of strong growth in 2018,
Indonesian stainless steel production in 2019
increased by only 50 kt, or 1 kt of nickel. The increase
is mostly attributed to growth in 200 series with low
nickel content, as 300 series production decreased
marginally. This was accompanied by a reshuffle
of stainless export flows amid higher trade tariffs
on Indonesian products in China and other countries.
Exports to China fell by 635 kt, while exports to India,
South Korea, Italy, Taiwan and Thailand rose by a total
of 650 kt.
With China increasing its output, a growing
availability of low-grade nickel, and cheap Indonesian
«NORNICKEL»
Annual report 2019
Stainless steel production by series (mln t)
54
29
28
23
23
13
11
11 53
11 50
300 series
200 series
400 series
Source: Company data
exports, stainless steel production in other countries
and regions fell considerably. The fall was particularly
prominent in Europe, South Africa, Japan, and Taiwan.
The total level of stainless steel smelting in the USA
decreased by 7%, but primary nickel consumption
went down by only 2%, or 1 kt, due to the declining
production of 400 series, which does not contain
nickel.
Thanks to a 2% rise in global 300 series production,
a 17% rise in 200 series production, and a marginal
reduction in average scrap metal share, primary nickel
consumption in stainless steel production grew by 6%
to 1.75 mln t. Nonetheless, the use of high-grade
nickel in the stainless steel sector decreased by 131 kt,
mostly driven by increased supply of nickel pig iron.
Nickel consumption (kt)
Source: Company data
The battery industry uses nickel as a key element
in the production of cathode precursors for battery
cells. However, nickel consumption trends vary
depending on the type of battery.
Lithium batteries (Li-ion). Li-ion batteries were
first commercially launched in 1991 and became
widespread due to their ability to retain a high level
of energy capacity, even after multiple recharge
cycles.
46
47
‘17‘18‘19-41-149-118Stainless steel71Electroplating6Special steels6Batteries7129вопросов2.5mln t4-12,4532,31938-295Special steels‘19OtherAlloysBatteriesStainless steel‘18Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Nickel-metal hydride batteries (Ni-MH). Ni-MH
batteries were developed in 1989 as a substitute
for Ni-Cd batteries, to avoid using cadmium.
Currently, the nickel-metal hydride battery market
is growing at a slow pace (with the hybrid vehicle
projects of some manufacturers being its only
growth driver) and is facing formidable competition
from lithium-ion batteries.
Nickel-cadmium batteries (Ni-Cd). The first batteries
using nickel were developed back in 1899. These days
their use is limited, as the EU prohibited cadmium
on grounds of toxicity.
Road transport electrification has been the spark
behind the growth in lithium battery production.
The 2016–2019 CAGR of electric vehicles (plug-in
HEVs and battery electric vehicles) was around 45%.
The impetus for transport electrification has come
from government incentives, but other key drivers
include more stringent environmental regulations,
improved battery performance, and lower production
costs of battery cells.
In recent years, China has been an important
growth centre for EV manufacturing, with plans
to increase NEV (electric vehicles and plug-in
hybrids) sales to 25% of total vehicle sales
by 2025. To this end, China implemented a number
of initiatives to stimulate transport electrification,
including subsidies for the purchase of electric cars
and mandatory requirements for large automakers
to produce electric vehicles and plug-in HEVs.
However, government subsidies were slashed
in the second half of 2019, resulting in the first-ever
decline in NEV sales, by 4% y-o-y.
As a result, the centre of battery industry growth
is shifting to Europe. In a number of countries,
including Belgium, Germany, the UK, and France,
buyers receive handsome subsidies and tax
incentives for buying EVs; in Norway, where EVs
account for 42% of total vehicles sold, buyers
are exempted from vehicle registration tax and value
added tax (VAT).
Europe’s share in global NEV sales grew from 23%
in 2018 to 27% in 2019, and is expected to reach 38%
by 2025. In March 2019, the European Commission
approved new requirements for greenhouse
gas emissions from road transport, which call
for a more than 2X reduction of CO2 emissions
by 2030 from a 2018 baseline. The initiative
pressures automakers to expedite electrification
under the punishment of fines reaching into
the billions. A battery production chain is being
developed in anticipation of increased demand
in the region. The total announced capacity (CATL,
LG Chem, SK Innovation, Samsung, and Northvolt)
already exceeds 400 GW•h by 2025, which would be
equivalent to 300 kt of nickel.
Battery cell production is one
of the final stages of battery manufacturing, preceded
by the production of cathode precursors, and when
lithium, graphite or silicon are added as the anode,
the production of cathode material itself. In 2019,
China held its position as the leader in cathode
precursor production (61% of global production),
while cathode material production was split between
China (43%), Japan (30%), and South Korea (26%).
There are several types of lithium batteries available
depending on the cathode materials used: LCO
(lithium, cobalt oxide), LFP (lithium, iron phosphate),
LMO (lithium, manganese oxide), NCM (nickel,
cobalt, manganese), NCA (nickel, cobalt, aluminium).
LCO batteries are principally confined to mobile
electronics, as high cobalt prices, low power,
and chemical instability of the compounds used
prevent their application in EVs. However, other
types of cathodes are widely employed in the EV
sector. The current trend is to replace LFP and LMO
«NORNICKEL»
Annual report 2019
with nickel-containing NCM and NCA batteries,
owing to the higher energy density and specific
energy of the latter, which increases vehicle range.
Growing nickel consumption in Li-Ion batteries
is driven not only by an increasing share of battery
types containing nickel, but also by a higher average
nickel content in the cathode material, which, in turn,
is caused by the need to substitute expensive cobalt
units. In comparison to 2016, when NCM 1:1:1 (with
a nickel mass fraction of 20% of the total cathode
mass) accounted for the lion’s share of nickel-
magnesium compounds in cathode materials, 2019
saw nickel-intensive compounds – NCM 6:2:2 (36%)
and NCM 5:3:2 (30%) – take the lead. Going forward,
conversion to NCM 8:1:1 (with a nickel content of 48%)
is expected, and some producers announced plans
to launch commercial production of LNO, a cathode
material with nickel content exceeding 50%.
The further development of the automotive industry,
with the growing popularity of electric and hybrid
cars, along with the evolution of cathode technology
towards nickel-intensive types make for a major
uptick in growth of primary nickel consumption
by the industry in the long run.
Changes in demand in other consuming
industries were negligible. Demand for nickel
used in special steels with improved structural
properties and stability grew by 3%, or 4 kt. Nickel
consumption for the production of heat-resistant
alloys with a high nickel content, which are key
materials for the production of aircraft engines,
remained unchanged. Even against the backdrop
of the grounding of the Boeing 737 Max, major
commercial aircraft manufacturers are building
their order books 8 to 10 years ahead, which should
prop up nickel demand from the sector. Nickel
consumption for standard alloys dropped by 1%, or 2
kt, due to low demand from the oil and gas industry
on the back of falling oil prices in 2019.
Nickel is widely used for corrosion protection
and as an alternative to chrome plating. Having
a strong resistance to corrosion, a high level
of hardness and aesthetic properties, nickel can be
used to apply decorative and protective electroplating
to products. Amid a lower availability of high-grade
nickel, which is traditionally used in the premium
electroplating segment, nickel consumption
for electroplating in 2019 decreased slightly (by 1%,
or 2 kt), due to reduced demand in China and other
Asian countries.
PRODUCTION
Primary nickel can be sorted into two major groups:
• High-grade nickel (cathodes, briquettes, carbonyl
nickel and nickel compounds), produced from both
sulphide and laterite feed. 2019’s main producers
of high-grade nickel were Nornickel, Jinchuan,
Glencore, Vale, Sherritt, and BHP
• Low-grade nickel (ferronickel, NPI and nickel
oxide), produced from laterite feed only. In 2019,
the key producers of low-grade nickel included
Chinese and Indonesian NPI smelters, as well
as ferronickel producers such as Eramet, Posco,
South 32, Anglo American, and Pamco
Primary nickel production in 2019 grew by 11%, or 242
kt y-o-y, driven primarily by a surge in low-grade
nickel (NPI) output.
Primary nickel production (mln t)
‘19
‘18
1.0
1.0
54
23
23
1.4 2.4
1.2
2.2
High-grade nickel
Low-grade nickel
Source: Company data
48
49
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix In 2019, high-grade nickel production increased
by 3%, or 32 kt. Despite a marginal decrease
in production by Vale and BHP, total smelting
of refined metal increased, thanks to higher output
by Nornickel and Jinchuan.
This was coupled with an increased output of nickel
sulphate, which is a key feed for the production
of cathode precursors used in Li-Ion batteries.
Integrated production of nickel sulphate uses nickel
matte, but elsewhere, the main feed for nickel
sulphate production is hydrometallurgy semi-
products (mixed hydroxide residue and mixed
sulphide residue) and crude nickel sulphate,
a by-product of copper and PMG production.
In 2019, the main feeds for sulphate production were
hydrometallurgy semi-products, as well as nickel
briquettes and powders, which are melted down
during shortages of other feeds.
Low-grade nickel production grew by 17%, or 211 kt,
boosted by a significant increase in NPI production.
In China, a record level of stainless steel smelting,
coupled with a stable growth in ore imports, were
the key drivers behind 2019’s 24% increase in NPI
production to 584 kt. In Indonesia, the startup of new
production facilities of Jinchuan, and brownfield
expansions at existing smelters using local ores
with high nickel content resulted in NPI production
growth of 46%, or 114 kt.
In 2019, high-grade nickel
production increased by 3%,
or 32 kt. Despite a marginal
decrease in production
by Vale and BHP, total
smelting of refined metal
increased, thanks to higher
output by Nornickel
and Jinchuan.
NPI production (kt)
‘19
‘18
‘17
‘16
584
362 946
471
248 719
1,0
402
174 576
366
87 453
China
Indonesia
Saleable nickel ore imports into China in 2016–2018 (mln t)
8
6
4
2
0
50
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2017
2018
2019
COPPER (Cu)
KEY TRENDS IN THE COPPER
MARKET
2019: Relatively high prices at the beginning
of the year (January–April), supported by reduced
extraction from Chilean mines and stable demand
for copper from China. Abrupt drop in May–
September as escalating trade war between the USA
and China gave rise to concerns that demand
for metals might fall.
Outlook: Neutral. In the mid-term, the market will
remain balanced; a successful outcome of the US–
China trade talks and continued global demand may
support copper prices in the short term.
Concerns over the possible fallout from the US–China
trade war triggered a decline in the price of copper
at the end of 2018, which was followed by a period
of growth in January and February 2019. The price
reached its annual peak of USD 6,572/t in early
March. Price growth in 2019 was driven by deficit
expectations in the copper market amid production
declines in several countries: Chile saw a lower
copper content in mined ores, and heavy February
rains disrupted production; Indonesia’s Grasberg
mine (the largest in the country) experienced reduced
output as it switched from surface to underground
mining; and a number of mines in Africa were closed.
Refined copper consumption by region (%)
1
Africa and Oceania
23.6
mln t
51
China
12
Americas
17
Europe
19
Rest of Asia
«NORNICKEL»
Annual report 2019
No. 11 in the copper mining
industry (%)
Early May marked another round of the US–China
trade war, when the US government imposed import
tariffs on certain Chinese goods, adding to pessimistic
sentiment in the market and causing copper prices
to plummet to USD 5,750/t in mid-June. However,
a strike at the Chuquicamata mine in Chile helped
the price to recover to USD 5,970/t by the end
of the second quarter. A lack of progress in the trade
deal negotiations between the USA and China,
along with a new round of tariffs from both sides put
pressure on the copper price, plunging it to a two-year
low of USD 5,537/t in early September.
In the fourth quarter, the copper price started
to recover on the news of strikes and protests
at Peruvian and Chilean mines, and amid reports
of falling exchange stocks. The growth was further
bolstered by a preliminary trade deal between
the USA and China, bringing the price up to USD
6,200/t by the end of December.
The average copper price on the London Metal
Exchange in 2019 was USD 6,000/t, down by 8%
from USD 6,523/t in 2018.
2015
5,494
2016
4,863
2017
6,166
Average annual copper prices (USD/t)
2018
6,523
2019
6,000
Source: London Metal Exchange (settlement)
51
988775533332245KGHMCodelcoBHP BillitonFreeportGlencoreSouthern CopperAntofagastaFirst QuantumAnglo AmericanRio TintoNornickelMMGOther MMCsCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix London Metal Exchange copper price in 2019 (USD/t)
CONSUMPTION
Refined copper consumption by industry
«NORNICKEL»
Annual report 2019
7,000
6,500
6,000
5,500
5,000
1
3
5
6
8
11
13
14
16
18
19
2
4
7
9
10
12
15
17
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: LME, Company data
1/ Research groups forecast increasing market deficit
2/ Freeport announces reduced output from its
Grasberg mine in Indonesia
3/ Codelco reports a decrease in copper output
4/ Heavy rains halt production at some Chilean
mines
5/ Glencore shuts down a number of mines in Africa
6/ Trade talks between the USA and China continue
7/ Falling copper cathode imports to China
8/ The USA imposes import tariffs on Chinese goods
12/ Chuquicamata strike ends
13/ Increas in copper concentrate imports to China
14/ Extra US tariffs on Chinese imports worth USD
325 bn
15/ Research groups report increasing market deficit
16/ National strike in Peru
17/ News of a reduction in electric grid investment
in China
18/ Brief strike at Chile’s Escondida mine
19/ The USA and China sign a preliminary trade
worth USD 200 bn
agreement (phase 1)
9/ Chinese countersanctions, tariffs on US goods
10/ Reports of declining production in Chile
11/ Strike at Chile’s Chuquicamata mine
MARKET BALANCE
In 2019, the refined copper market remained
in balance, as in 2018, with the deficit at just 0.2%
of the total market volume, or 50 kt. In 2019, total
exchange inventories dropped by 13% to 304 kt (351
kt at end-2018), or at little less than five days of global
consumption, with off-exchange inventories going
slightly up.
Refined copper market balance (kt)
‘19
‘18
-60
-50
Source: Company data
Given its high electrical and thermal conductivity,
ductility and corrosion resistance, copper is widely
used in various industries. Up to 75% of refined
copper produced globally is used for manufacturing
electrical conductors, including various types of cable
and wire. Key copper-consuming industries include
construction, electrical and electronic equipment
manufacturing, power industry, transport, engineering,
various equipment and consumer goods production.
First use (%)
9
Pipe
13
Flat rolled
products
23.6
129
mln t
вопросов
In 2019, global consumption of refined copper
totalled 23.6 mln t (up 0,3%, or 0.1 mln t, y-o-y) due
primarily to stronger demand from cable and wire
manufacturers. Growth in copper consumption
in pipe, flat rolled products and billet production
segments was marginal.
China remains the largest copper consumer globally,
with its market share reaching around 51% in 2019
and demand growing by 2%. Experts’ concerns
over a potential major slowdown of the country’s
economy (in part due to the trade war with the USA)
proved unfounded. Refined copper imports to China
decreased in 2019 by 6% to about 5 mln t, while copper
scrap imports were down by 2% after imposition
of restrictive quotas on imports by the government.
End use (%)
11
Heavy engineering
12
Transport
21
Consumer goods
and equipment
4
Billets
74
Wire rod
28
Construction
28
Power grids
Changes in refined copper consumption
by product type (mln t)
Sources: Company data, Wood Mackenzie
Sources: Company data, Wood Mackenzie
Copper concentrate imports rose by 12% to 22 mln t,
which helped to meet China’s growing consumption
needs through the expansion of local production
capacity.
Copper demand trends in developed markets were
mixed: consumption in Europe (the Group’s key market
for copper cathodes) shrank by 3.5% in 2019; in North
America and Asia (excluding China), consumption rose
by 1%. Russia’s domestic copper cathode consumption
grew by 4% in 2019.
52
53
0.0123.62 4530.060.020.0123.5Flat rolled products‘19PipeBilletsWire rod‘18Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix PRODUCTION
In 2019, global refined copper output rose 0.3%,
or by 0.1 mln t, y-o-y to 23.55 mln t. The biggest
growth came from China, which is firmly on track
to deliver smelting and refining capacity expansions.
In 2019, refined copper production in China grew
by 5% to 9 mln t, while its share in total global output
reached 38%. Copper ore mined locally supports just
20% of total Chinese production, with the remaining
80% covered by imported copper concentrates
and scrap.
In the rest of Asia (excluding China), refined copper
output dropped 3% (with production declines
in India and Japan). In North America, it grew by 3.5%
(driven by the USA). In South America, it fell by 8%
(due to Chile and Peru ramping up concentrate
exports to China). In Europe, it slipped by 2%, driven
by Germany and Poland. According to preliminary
estimates, Russia’s refined copper production
declined marginally.
In 2019, global copper production fell 0.2%
to 20.7 mln t due primarily to production
cutbacks in some Chilean mines and scheduled
ramp-down of the Grasberg mine (Indonesia)
for technical reasons. The decline was partially
offset by the growth of China’s domestic mining
industry and the commissioning of the new Cobre
Panama project in Panama. About 2.8 mln t of refined
copper were additionally produced from previously
stockpiled scraps and concentrates.
Copper production (mln t)
‘19
China
Panama
Peru
USA
DRC1
Other
Indonesia
Chile
‘18
20.77
0.1
0.16
0.04
0.06
0.13
-0.14
-0.28
-0.11
20.81
Sources: Company data, Wood Mackenzie
Refined copper production (mln t)1
‘19
‘18
54
23
23
23.6
23.5
In 2019, mined production in Chile, the world’s
leading producer of copper, declined by 2% y-o-y
to 5.75 mln t due to poor weather conditions
and short-lived strikes. The output of the state-
owned Codelco continued to decline (1.7 mln t
in 2019, down 5% y-o-y) due to a lack of investment
in older deposits with declining average copper
ore grades and technical challenges. Production
in Peru grew by 1.5% to 2.4 mln t on the back
of the Toquepala mine development.
A 4% growth in Africa’s mined production to 2.5
mln t was mainly due to higher output from mines
at the Democratic Republic of the Congo, while
Zambia’s mined production slipped marginally.
In 2019, China, which is currently developing
a number of smaller mines, ramped up its mined
production by 6% to 1.7 mln t. Mined production
in Indonesia was almost halved to 0.4 mln t
as the Grasberg mine operated by Freeport shifted
from open-pit to underground mining.
North America’s production grew by 4% to 2.7
mln t thanks to resumed operations at multiple
smaller mines in the USA, Mexico, and Canada, after
technical problems in the previous year. According
to preliminary estimates, Russia’s copper production
increased by about 2%.
The actual growth in refined copper output
in 2019 came short of analysts’ forecasts made
early in the year due to falling extraction rates.
Consumption growth was also below expectations
due to the escalation of the US–China trade war.
Eventually, the global market remained rather
well balanced, with its minor deficit close to initial
forecasts.
«NORNICKEL»
Annual report 2019
PALLADIUM (Pd)
KEY TRENDS
IN THE PALLADIUM MARKET
2019 was another year of growing palladium
prices due to the steady increases in consumption
from the automotive industry amid tougher
environmental standards worldwide. Deficit was offset
by primary production growth and improved recovery
of automotive catalysts as supplies from previously
accumulated stocks were much smaller.
The price growth of palladium that began in the second
half of 2018 continued into the first quarter
of 2019. At the end of March, the price hit an all-
time high of USD 1,604/oz. Palladium benefited
from a fundamental market deficit and a continued
shortage of metal available for spot buying. Price
growth was also supported by macroeconomic factors.
At its January and March meetings, the US Federal
Open Market Committee (FOMC) decided to put
interest rate hikes on hold, which had a positive effect
on precious metals prices. Moreover, the revived
growth of stock market indices increased interest
in palladium as a metal widely used in industrial
applications.
March peaks were followed by price correction
early in the second quarter to USD 1,350/oz due
to additional supply from South African palladium
producers and recyclers which had built up significant
work-in-progress inventories by the end of 2018.
Besides, consumers sold some of their inventories
No. 1 in palladium production (%) 2
Industrial consumption of palladium by region (%)
13
Rest of world
12
Japan
21
Europe
357
t
28
China
26
North America
Source: Company data
to reduce hedging costs and improve balance sheet
structures. Another significant driver was speculators
locking in profits at the close of the first quarter
of the financial year, which in some countries ends
on 31 March.
Statements made by the US FED in early June gave rise
to expectations of possible interest rate cuts in 2019.
This weakened the dollar and had a positive effect
on precious metals prices, resulting in resumed growth
in palladium prices, which exceeded USD 1,500/oz
by the end of the first half of the year. After a moderate
correction seen in late July, palladium prices began
growing from August to September and came close
to a USD 1,700/oz mark. This was, in part, caused
by the increased net long speculative positions
in NYMEX; however fundamental factors and news
of metal shortages in both warehouses and on the spot
market contributed the most to the price increase.
The price rally continued into the fourth quarter,
with palladium prices hitting another all-time high
of USD 1,990/oz amid stronger backwardation
in the forward market, increased demand
from automakers, and structural deficit in the market.
Lease rate increases were moderate and long
speculative positions remained at moderate levels.
Average annual palladium prices (USD/oz.)
1/ DRC — Democratic Republic of the Kongo
2/ Refined metal including production from own feedstock by third-parties under tolling agreements.
54
2014
803
2015
691
2016
613
2017
869
2018
1,029
2019
1,538
Source: LBMA
55
12204131311Impala PlatinumNornickelAnglo PlatinumSibanye StillwaterGlencoreOther MMCsCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Average annual palladium prices (USD /oz)
2,000
1,500
1,000
500
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thus, it can be argued that prices were supported
by long-term fundamental factors such as a multi-year,
persistent market deficit with palladium production
lagging behind consumption; an increasing share
of petrol cars; a growing production of vehicles
with hybrid propulsion systems; and expectations
of a surge in palladium use in the catalysts of automobile
exhaust treatment systems – a trend initiated by tougher
environmental standards in key markets.
However, the negative effect from car production
decrease in absolute terms, especially in China, was
fully offset by the increased per unit use of palladium
in exhaust treatment systems, which was facilitated
by new vehicle emissions testing standards (WLTP
and RDE tests) and environmental regulations (China 6,
Euro 6d, the US’s Tier 3, etc.).
consumption in 2019, market deficit stood at 24 t due
to dwindling government reserves of palladium and ETF
inventories.
CONSUMPTION
In 2019, industrial consumption of palladium increased
by 20 t (up 6%) y-o-y, hitting a new all-time high of 357 t.
Industrial consumption
of palladium (t)
‘19
‘18
54
23
357
337
The average palladium price in 2019 reached USD 1,538/
oz, 49% more than the previous all-time high in 2018.
AUTOMOTIVE INDUSTRY
Palladium, together with rhodium, remained among
the strongest performers in the commodity markets,
with its premium to platinum rising throughout the year
and coming close to 100% by the year-end.
MARKET BALANCE
Since 2010, there has been a sustained undersupply
in the physical palladium market covered
by the inventories accumulated in previous years.
Even though production grew faster than industrial
Palladium market balance 1 (t)
Palladium production and consumption balance
–29
Exhaust treatment systems account for the bulk
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 motor
vehicles.
Due to its unique catalytic properties ensuring
effective chemical reactions throughout the entire
vehicle life cycle, there are almost no alternatives
to palladium in this sector except for platinum,
which is used mostly in diesel vehicles, and rhodium.
Given the already significant share of the automotive
industry in rhodium consumption and small market
size (annual global production stands at 23 t), rhodium
is subject to high price volatility and constant risk
of physical metal shortage.
Outflows from ETFs
Destocking by mining companies
Supply and demand balance
1/ Excluding reallocated other reserves
56
4
1
–24
In 2019, palladium consumption by the automotive
industry increased by 25 t, hitting a new all-time
high of 294 t. This was mostly driven by tougher
regulations on pollutant emissions, including
the Worldwide Harmonised Light Vehicle Test
Procedure (WLTP) – a new procedure for testing
cars’ emissions that took effect in the EU and Japan
in September and October 2019, respectively. WLTP
is designed to make tests more rigorous by extending
their distance and duration, increasing the car weight,
requiring faster acceleration, and stipulating that
testing should be performed at different altitudes
and temperatures. The Real Driving Emissions (RDE)
test is another recently introduced regulation,
in effect as of September 2019. These developments
forced automakers to implement more sophisticated
exhaust treatment systems and expand the use
of PGMs per catalytic converter.
The marked increase in palladium consumption
by the automotive industry in China came
in the wake of tougher environmental requirements
as part of the China 6b rollout across the country
starting from 2019. The China 6b standard is based
on best practices in emission control as developed
in the USA and the EU, and sets out certain additional
requirements. About 70% of all cars manufactured
in China in 2019 met the new standard.
Changes in the fleet mix also boosted palladium
consumption among automakers as light diesel
vehicles were further replaced with petrol cars
and hybrids, which make greater use of palladium-
based catalytic converters for exhaust fumes.
In 2019, the market share of diesel cars in Europe (27
countries) dropped from 36% to 31%, an all-time low
since 2000.
Vehicle hybridisation is another trend driving
palladium consumption. In 2019, production of mild,
full and plug-in HEVs (PHEVs) increased by 22%, 26%
and 3%, respectively. Since hybrids include petrol
engines, they mostly use palladium-based catalytic
converters. With the same engine displacement
Change in palladium
consumption
by application area (t)
‘19
Other
Healthcare
Chemical
industry
Electronics
Jewellery
Auto catalytic
converters
‘18
358
0.1
-1.1
-1.0
-1.2
-0.7
24.6
337
Source: Company data
«NORNICKEL»
Annual report 2019
Palladium consumption by industry (%)
4
Chemical catalysts
6
Electronics
3
Dental alloys
2
Jewellery
2
Other
357
129
t
вопросов
82
Exhaust
aftertreatment
systems
Source: Company data
as the regular petrol vehicle, the hybrid uses more
of the metal due to more frequent cold starts.
The growing use of PGMs in the automotive industry
is also indirectly driven by consumers migrating
from sedans to larger-engine crossovers. In 2019,
the share of SUVs and pickups in the USA increased
by 2% to 64%, completely offsetting the overall
decline of the national automotive industry’s output
in terms of palladium consumption.
Vehicles using batteries without PGM-based exhaust
catalytic converters have remained a niche market
(under 2% of the global car production), which
showed no significant growth in 2019 due to cuts
in government subsidies for buyers of electric
vehicles in China.
The global automotive industry’s overall output
and sales declines (down 4% y-o-y) were
a drag on the industry’s palladium consumption,
with the world’s largest market, China, showing
the biggest decline (down 8%). Vehicle production
in the North America, Europe and Japan largely
remained flat from 2018, and none of the world’s
regions saw any significant growth. The negative effect
from the decreasing overall global vehicle production
was fully offset by more extensive use of palladium
per vehicle.
The average premium of palladium vs platinum ranged
from USD 400/oz to USD 1,000/oz and stood at USD
950/oz as of the end of the year. Contrary to most
players’ expectations expressed in the last two
years regarding imminent substitution of palladium
with platinum in catalytic converters used for petrol
engines, no signs of such substitution were observed
in 2019.
57
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ELECTRONICS
Palladium consumption in the electronics industry
continued a moderate downward trend in 2019
(down 1.2 t) In recent years, the use of palladium
in multi-layer ceramic capacitors has been in decline,
becoming limited to the most sophisticated
products with a focus on reliability and performance
in harsh environments, such as those in the defence
and aerospace industries. Given the metal price
inelasticity of demand, consumption in these
sectors is expected to remain flat. However,
the use of palladium as an electroplating material
for connectors and lead frames continued
to decrease due to a decline in the global production
of electronic devices.
CHEMICAL INDUSTRY
The use of palladium in chemical catalysts decreased
by 1 t y-o-y after significant growth in 2018.
In the mid-term, growing consumption of palladium
in the chemical industry will be driven by newly
launched terephthalic acid projects in China.
HEALTHCARE
The consumption of palladium in the healthcare
sector continued a downward trend and declined
by 11%, or 1 t, y-o-y due to the substitution
of palladium with composite material alternatives.
In Japan, the largest consumer of the metal for dental
prostheses, demand for palladium has been declining
in recent years by an average of 5% to 10% per year.
JEWELLERY
Palladium is used in white gold alloys or, in its
pure form, to make wedding rings among other
items. In 2019, jewellery-related consumption
of palladium decreased by another 0.7 t. A drop
in Chinese demand for these products amidst
a general slowdown in consumer spending
Primary palladium output
by countries (t)
‘19
Russia
South Africa
Zimbabwe
North America
Rest of world
‘18
220
6
2
0
-1
0
214
Source: Company data
Russia, the leading palladium
producing country, posted
an output increase (up 6 t)
and a shift to other luxury goods were the primary
cause of the continued sales decline. Palladium
jewellery sales were also affected by growing prices
for the metal.
INVESTMENTS
Investor demand for palladium kept shrinking in 2019
mostly due to outflows from exchange-traded funds
(ETFs), which had their inventories reduced by 4 t
to 22 t – an all-time low since 2008. The outflows
amid growing palladium prices were driven by a wave
of profit taking and by investors reallocating
their capital to other palladium investment options
to benefit from a swing to backwardation.
PRODUCTION
In 2019, primary refined palladium production
increased by 3% to 220 t.
South Africa, the world second largest palladium
producer, also demonstrated a y-o-y increase (up 2 t).
In Zimbabwe, palladium output remained stayed flat
from 2018.
Primary palladium production in Canada declined by 1
t, while in the USA it remained largely flat.
The main sources of recycled palladium are scrapped
auto catalytic converters, as well as jewellery
and electronic scrap. In 2019, recycled output grew
by 12 t to 109 t as demand grew for catalytic converter
scrap on the back of increased prices for palladium
and steel scrap. Recycling capacity utilisation rates
are currently near 100%. Jewellery and electronic
scrap volumes remained flat.
The sources of previously accumulated palladium
stockpiles include trading companies, financial
institutions, government reserves, and consumers’
surplus inventories. In 2017–2018, Nornickel’s Global
Palladium Fund (GPF) supplied the market with more
than 1 Moz of palladium on top of Nornickel’s own
output. The stockpile had been created through
purchases from third parties.
«NORNICKEL»
Annual report 2019
PLATINUM (Pt)
KEY TRENDS
IN THE PLATINUM MARKET
2019: A growing deficit in the market driven by high
investor demand which has fully offset the decline
in platinum use by the automotive, jewellery, glass,
and other industries.
Following a significant drop in late 2018, the price
of platinum remained stable throughout 2019
and showed some fluctuation while staying within
the range of USD 780/oz to USD 920/oz in the first half
of 2019. In the second half of 2019, the price increased
as investor demand recovered, triggering sharp inflows
into platinum ETFs (31 t in total). At year-end, the price
of platinum stood at USD 971/oz.
Platinum and gold prices moved closely together
in 2019, indicative of platinum prices being highly
dependent on macroeconomic factors, which had
an overall positive influence on precious metals
during the year. The US Fed’s decision to put interest
rate hikes on hold led to a weaker US dollar and thus
bolstered precious metals prices. And as inflation
expectations rose compared to 2018, investors were
more inclined to move to precious metals as a safe-
haven asset.
During the year, platinum traded 40% lower against
gold. In April and May, the gap reduced to 30%,
driven by recovering investor demand for platinum
and an increase in net-long speculative positions
in NYMEX. As the price and the speculative
sentiment went down at the end of the first half
of 2019, the spread soon rebounded to a 40% mark.
No. 4 in platinum production (%)1
Platinum consumption by region (%)
19
Rest of world
13
Japan
13
North America
248
t
29
China
26
Europe
Source: Company data
(primarily, Western Europe), the lack of anticipated
recovery in demand from Chinese jewellers due
to a threatened trade war between China and the USA,
and primary producers not being too sensitive to low
prices.
The key fundamentals behind this included a drop
in platinum consumption by the automotive industry
due to a shrinking share of diesel cars in key markets
The average platinum price in 2019 was USD 863/oz
(a 15-year low), down 2% y-o-y.
2014
1,385
2015
1,053
2016
989
2017
949
2018
880
2019
863
Average annual platinum prices (USD/oz)
Source: LBMA Platinum price
1/ Refined metal including production from own feedstock by third parties under tolling agreements.
58
59
1123356187NornickelAnglo PlatinumImpala PlatinumSibanye StillwaterNorthamOther MMCsCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix INVESTMENTS
Platinum is widely used as an investment instrument.
Physical investments may vary from coins
and smaller bars to investments in physical platinum
ETFs, which accumulate large amounts of platinum
in standard bars. In 2018, the demand for platinum
bars from retail investors slightly rose (up 9 t) due
to low prices coupled with expectations of growth.
During the year, investments in platinum ETFs fell
by 7 t to 76 t.
PRODUCTION
Global production of primary refined platinum in 2019
decreased y-o-y by 2 t to 189 t.
In the reporting period, supply from South Africa,
the world’s largest platinum producer, declined by 2 t.
Russia recorded a slight increase of 0.3 t in platinum
output, with continued production declines
at the alluvial deposits in the Far East region driven
by a depleting mineral resource base. The negative
trend was offset by an increase in Nornickel’s output.
The platinum output in other regions remained largely
unchanged.
«NORNICKEL»
Annual report 2019
Primary platinum production
by countries (t)
Source: Company data
The main sources of recycled platinum include used
exhaust gas catalysts and jewellery scrap. Recycled
output in 2019 grew by 6 t to 71 t. However, the growth
of recycling was hampered by difficulties in using new
types of silicon carbide-based diesel catalysts. Being
a refractory material, it can damage furnaces unfit
to handle it. This requires processors to sort through
catalysts and separately process material with a high
silicon content, requiring extra time and resources.
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.
MARKET BALANCE
Platinum market balance (t)
Platinum production and consumption balance
The platinum market went into a deficit in 2019: even
though platinum production exceeded consumption,
much of the excess supply was absorbed by investor
demand.
Investor demand
Destocking by mining companies
Supply and demand balance
18
42
3
–22
CONSUMPTION
Industrial consumption of platinum in 2019 declined
to 243 t, down 6 t (or 3%) y-o-y.
Consumption of platinum (t)
The automotive industry is the predominant
consumer of platinum. Over 80% of platinum
in this industry is used to manufacture exhaust gas
catalysts for diesel vehicles.
‘19
‘18
54
23
243
249
In 2019, platinum consumption in the automotive
sector marginally decreased y-o-y by 0.4 t mainly due
to a decreased share of diesel vehicles in their key
market – Europe. In 2019, the market share of diesel
cars in Europe (27 countries) dropped from 36%
to 31%, an all-time low since 2000.
Diesel engines are giving way to petrol-based
solutions, while more expensive vehicles utilise
petrol-electric hybrids. The lower platinum
consumption by car makers was partially offset
by increased manufacturing of trucks, the catalytic
devices of which still rely on platinum.
The second-largest platinum consumer
is the jewellery industry, accounting for a third
of demand. The reporting period saw a sustained
downward trend in platinum consumption
in the industry (down 3.6 t), persisting over the last
few years. The decrease was primarily driven by lower
jewellery demand in China due to consumers
switching to other investment options,
and the falling demand for luxury goods amid
Platinum consumption
by application area (t)
Platinum consumption in 2019
by industry (t)
concerns over the country’s sustained economic
growth. While China is currently facing growing
competition in the platinum jewellery sector
from gold items, other major markets (India, Japan,
USA, and Europe) have seen increased platinum
jewellery sales.
CHEMICAL INDUSTRY
In 2019, primary platinum consumption in industrial
catalyst manufacturing decreased by 1.5 t due to lower
refining volumes and falling oil prices.
GLASS INDUSTRY
Platinum is needed to produce glass fibre and opti-
cal glass. In 2019, the industry’s demand for platinum
declined (down 1 t) after several years of continuous
growth.
Platinum consumption in electronics slightly
decreased (down 0.1 t).
60
61
41Other11Chemical catalysts11Jewellery28Electronics3Glass production6129вопросов243tExhausttreatmentsystems-0.1-1.50.4243249-3.6-1.0-0.4ElectronicsOther‘19Chemical industryGlass industryJewelleryAuto catalytic converters‘1800-2189-10191North AmericaSouth Africa‘19ZimbabweRussiaRest of world‘18Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Business overview
usi
ness
Overview
64 Mineral base
73 Operational
performance
Sales and distribution
Energy assets
89
94
Transport assets
96
102 Research
and development
innovations
108 Financial performance
(MD&A)
B MINERAL BASE
Nornickel boasts a unique mineral resource base of Tier
1 assets in Russia, on the Taimyr and Kola Peninsulas
and in the Zabaykalsky Region. Nornickel’s continued
focus on expanding its resource base is essential to its
long-term development.
MINERAL RESOURCES AND ORE
RESERVES1
2,220
Ore,
mln t
2,209
2,193
7.1
15.5
6.9
15.3
6.7
15.2
12.4
23.8
12.1
23.5
11.9
23.2
125
265
123
263
120
260
Ni
mln t
Cu
mln t
PGMs
Moz
Ore,
mln t
815
785
2017
2018
757
2019
Proven and probable
reserves
Measured and indicated
resources
EXISTING DEPOSITS
Nornickel is well-positioned to maintain a high level
of economic ore reserves given the significant mineral
resources within the existing deposits. The depleted
ore reserves at the existing mines are replaced
through resource development. The Company plans
to ramp up its production by tapping into new rich
ore deposits and gradually developing disseminated
and cuprous ore horizons.
>80
years
of resources at the current
production rate
For more details on mineral resources and ore
reserves, please see p. 326
1/ Data on mineral resources and ore reserves are based on the data on ore and metal balance reserves from the Russian divisions (reported
in Form No. 5-gr under the Russian classification), analysed and converted as necessary to estimates under the Australasian Code for Reporting
of Mineral Resources and Ore Reserves (the JORC Code). The estimates are JORC-compliant, use the terms recommended by the Russian
Code for the Public Reporting of Exploration Results, Mineral Resources and Mineral Reserves (the NAEN Code), and are based on the rules
and regulations developed by Micon International Limited which conducts regular audits of the Group’s reserves in Russia.
The reserves and resources include wholly owned international assets (the Honeymoon Well project), net of GRK Bystrinkoye’s deposits.
Platinum group metals (PGMs) are platinum, palladium, rhodium, ruthenium, osmium, and iridium.
«NORNICKEL»
Annual report 2019
TALNAKH ORE CLUSTER
Location and profile
The Talnakh ore cluster is located in the Norilsk
Industrial District, on the right bank of the Norilskaya
River. It includes the world’s largest Oktyabrskoye
and Talnakhskoye copper-nickel deposits located
on the north-western margin of the Siberian Craton.
In the early 1960s, multiple ore bodies of high-grade
cuprous and disseminated ores were discovered within
the area. Nornickel is still well supplied with base
and noble metals from the uniquely rich and vast
resource base of the Talnakh ore cluster developed
through mining operations of its Polar Division.
Proven
and probable reserves
631
mln t of ore
Ni — 6 mln t
Cu — 11 mln t
PGMs — 112 Moz
Measured
and indicated resources
1,554
mln t of ore
Ni — 11 mln t
Cu — 22 mln t
PGMs — 234 Moz
Balance
reserves growth
in 2019
4
mln t of ore
Ni — 109 kt
Cu — 123 kt
PGMs — 1 Moz
Balance
metal reserves
involved in 2019
14
mln t of ore
Ni — 259 kt
Cu — 448 kt
PGMs — 4 Moz
Average metal content
Ni — 3.0%, Cu — 3.3%, PGMs — 8.6 g/t
Balance reserves
1,991
mln t of ore
Ni — 15 mln t
Cu — 29 mln t
PGMs — 312 Moz
64
65
TalnakhDepositOktyabrskoye DepositWestern flank of the Oktyabrskoye DepositTalnakhCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
KOLA MMC DEPOSITS
Location and profile
Kola MMC develops deposits located within a 25 km
stretch between Nickel and Zapolyarny in the west
of the Murmansk Region, and grouped into two ore
clusters: Western (Kotselvaara and Semiletka deposits)
and Eastern (Zhdanovskoye, Zapolyarnoye, Bystrinskoye,
Tundrovoye, Sputnik, and Verkhneye deposits).
The deposits in the Western and Eastern clusters have
been developed since the 1930s and 1960s, respectively.
Balance metal reserves
involved in 2019
7
mln t of ore
Ni — 47 kt
Cu — 21 kt
Proven
and probable reserves
85
mln t of ore
Ni — 0.5 mln t
Cu — 0.3 mln t
Measured
and indicated resources
321
mln t of ore
Ni — 2 mln t
Cu — 1 mln t
Balance reserves
465
mln t of ore
Ni — 3 mln t
Cu — 1.5 mln t
NORILSK ORE CLUSTER
Location and profile
The Norilsk ore cluster (NID) is located in the Norilsk
Industrial District. Brownfields include the northern part
of the Norilsk-1 deposit producing disseminated sulphide
ores since the 1930s.
To finance brownfield expansion in the northern part
of the Norilsk-1 deposit, Nornickel launched the South
Cluster project. A licence to develop Norilsk-1 and also
some of the Polar Division’s assets were transferred
to Medvezhy Ruchey, a wholly owned subsidiary
established specifically to implement the expansion
project. Medvezhy Ruchey includes Norilsk Concentrator,
an open pit and an underground mine at Zapolyarny Mine,
and tailing dumps No. 1 and Lebyazhye.
Balance
reserves growth
in 2019
1
mln t of ore
Ni — 2 kt
Cu — 3 kt
PGMs — 0.1 Moz
Balance
metal reserves
involved in 2019
2
mln t of ore
Ni — 7 kt
Cu — 10 kt
PGMs — 0.4 Moz
Average metal content
Ni — 3.0%, Cu — 0.5%, PGMs — 2.3 g/t
Proven
and probable reserves
42
mln t of ore
Ni — 0.1 mln t
Cu — 0.2 mln t
PGMs — 8 Moz
Measured
and indicated resources
145
mln t of ore
Ni — 0.4 mln t
Cu — 0.5 mln t
PGMs — 25 Moz
Balance reserves
146
mln t of ore
Ni — 0.4 mln t
Cu — 0.6 mln t
PGMs — 25 Moz
66
67
NorilskNorilsk-1DepositChernogorskoe Deposit(copper-nickel ores)Southern part of Norilsk-1 DepositMaslovskoye DepositZapolyarnySputnikDepositBystrinskoyeDepositVerkhneyeDepositTundrovoyeDepositKaulaDepositSemiletkaDepositZhdanovskoyeDepositZapolyarnoyeDepositKotselvaaraDepositCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
Proven
and probable reserves
8
mln t of ore
Ni — 22 kt
Cu — 8 kt
Co — 1 kt
PGMs — 0.2 Moz
Measured
and indicated resources
173
mln t of ore
Ni — 602 kt
Cu — 236 kt
Co — 32 kt
PGMs — 5.2 Moz
BYSTRINSKOYE DEPOSIT
Location and profile
The Bystrinskoye deposit is located
in the Zabaykalsky Region, 16 km east of Gazimursky
Zavod. Nornickel owns 50.01% of GRK
Bystrinskoye which develops gold-iron-copper ores
of the Bystrinskoye deposit. The Bystrinskoye deposit
and Bystrinsky GOK came online in 2019.
Balance reserves
316
mln t of ore
Cu — 2 mln t
Au — 9 Moz
Ag — 38 Moz
Fe — 70 mln t
Balance reserves
involved in 2019
10
mln t of ore
Cu — 61 kt
Au — 317 koz
Ag — 823 koz
Fe — 2 mln t
NKOMATI DEPOSIT
Location and profile
The Nkomati disseminated copper-nickel sulphide
ore deposit is part of the Bushveld Complex in South
Africa. The deposit consists of several ore bodies.
The major ones are a solid sulphide ore body (high-
grade nickel ore) and the main mineralisation zone
(MMZ ore). It also includes a peridotite chromite
mineralisation zone (PCMZ) with a lower metal
content vs the main mineralisation zone. The deposit
is developed by Nkomati (50%-owned by Nornickel).
In 2019, the Group and its operating partner,
African Rainbow Minerals, reached an agreement
to scale down production at Nkomati Nickel Mine
during 2020. As part of this process, the partners
will elaborate in due course a plan contemplating
the cessation of the mining operations and the placing
of the mine in care and maintenance.
68
69
ShelopuginoGazimursky ZavodBystrinskoyeDepositChingitayskayaAreaShakhtaminskaya AreaBystrinsko-ShirinskoyeDeposit(Cu, Au, Ag, Mo)(Cu, Au, Fe, Ag)(Au)(Fe)Bushveld ComplexNkomatiDepositRepublic of South AfricaCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix GROWTH PROJECTS
MASLOVSKOYE DEPOSIT
Location and profile
The Maslovskoye deposit is located in the Norilsk
Industrial District, 12 km south of the Norilsk-1
deposit.
The Company received the licence to explore
and mine the Maslovskoye deposit’s platinum-
copper-nickel sulphide ores in 2015.
B + С1 + С2 mineral reserves
Item
Total ore
PGMs
Palladium
Platinum
Nickel
Copper
Cobalt
Gold
Balance reserves
A feasibility study of permanent exploratory
standards and a reserve statement
for the Maslovskoye deposit were approved
by the State Reserves Commission of the Russian
Ministry of Natural Resources and included into
the State Register of Mineral Reserves (Minutes No.
5561 dated 12 October 2018).
Ore
Metal content in ore
207 mln t
49 Moz
33 Moz
13 Moz
1 mln t
1 mln t
26 kt
1 Moz
BUGDAINSKOYE DEPOSIT
Location and profile
The Bugdainskoye molybdenium deposit
lies in the Alexandrovo-Zavodsky District
of the Zabaykalsky Region, 30 km north-west
of Alexandrovsky Zavod.
Its mineral reserves were included into
the State Register of Mineral Reserves
in 2007. In 2014, Nornickel halted the development
of the Bugdainskoye deposit for three years in a low-
price global molybdenium market, and in 2017
extended the suspension of operations for another
five years, until 31 December 2022.
Balance reserves
Item
Ore
Molybdenum
Gold
Silver
Lead
–
7.4 g/t
5.0 g/t
2.0 g/t
0.3%
0.5%
0.01%
0.2 g/t
Reserves
812 mln t
600 kt
360 koz
6,221 koz
41 kt
«NORNICKEL»
Annual report 2019
HONEYMOON WELL
The Group holds a mining licence to develop
the Honeymoon Well project in Australia, which
comprises deposits containing disseminated
nickel sulphide ore (the Hannibals, Harrier, Corella
and Harakka deposits), and massive and stockwork
ores (the Wedgetail deposit). The total measured
and indicated mineral resources of the Honeymoon
Well project are estimated at 173 mln t of ore
at an average grade of 0.68% nickel.
Western flank of the Oktyabrskoye
deposit
In 2017, Nornickel obtained an exploration licence
to prospect for and appraise mineral deposits within
the western flank of the Oktyabrskoye deposit.
The exploration licence area shares a boundary
with the already licensed mining area. Prospecting
on the property continued in 2019, with chemical analysis
and laboratory tests completed for the 2018 prospecting
results.
In 2017, Nornickel halted the development
of the Wedgetail deposit for five years, until
7 October 2021.
BYSTRINSKO-SHIRINSKOYE
DEPOSIT
The Bystrinsko-Shirinskoye gold ore deposit
is located 24 km south-east of Gazimursky
Zavod in the Zabaykalsky Region. The licence
area shares a boundary with the Bystrinskoye
deposit. In 2019, technical and economic viability
of the potential development option was evaluated
for the Bystrinsko-Shirinskoye gold ore deposit
based on the results of a scoping study conducted
to evaluate development options.
TALNAKH ORE CLUSTER DEPOSITS
To unlock the full potential of its deposits supporting
existing operations and determine the best
configuration for new operations, Nornickel explores
the Talnakh ore cluster deposits, ensuring increases
high-grade and cuprous ore reserves.
Eastern flank of the Oktyabrskoye
deposit
In 2018, Nornickel conducted surface exploration
within its licence boundaries as part of the Follow-Up
Exploration of the Oktyabrskoye Deposit project.
The results included multiple drill-hole intersections
of rich ores outside the boundaries of the approved
reserves, adding to the quantity of the high-grading
ore reserves of the Severnaya 4 and Severnaya 3 Lens
deposits. A quantitative estimate of the additions
is planned following the project completion in 2020.
NON-METALLIC MINERAL
DEPOSITS IN THE NORILSK REGION
Mokulaevskoye deposit
The Mokulaevskoye deposit lies 10 km north-west
of the Oktyabrsky and Taimyrsky Mines. A mining
licence for this limestone deposit was obtained upon
its discovery in 2017. In 2018, the State Reserves
Commission of the Russian Ministry of Natural
Resources reviewed the feasibility study of permanent
exploratory standards and the reserve statement
for the deposit, including its limestone reserves into
the State Register of Mineral Reserves for potential use
in cement and lime production and in desulphurisation.
The deposit can be developed through open-pit mining.
Its B + С1 + С2 balance reserves of limestone
are 135,661 kt.
Gribanovsky licence area
In 2017, Nornickel obtained an exploration licence
to prospect for and appraise silica sand deposits
within the Gribanovsky licence area on the Yenisey
River, 22.5 km south of Dudinka. A prospecting
and appraisal programme for the property was
completed in 2019. A feasibility study of permanent
exploratory standards and a silica sand reserve
statement for the deposit were completed based
on its results and submitted to the State Reserves
Commission of the Russian Ministry of Natural
Resources for review.
The estimated С1 + С2 reserves of silica sand
are 88,371 kt.
70
71
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Ozero Lesnoye deposit
The Lebyazhninskaya area
The Lebyazhninskaya copper-nickel sulphide ore
prospect is located 20 km north-west of Norilsk.
In 2014, Nornickel obtained an exploration licence
to prospect for and appraise deposits within the area.
In 2019, laboratory tests were conducted for previous
prospecting results.
Yuzhno-Norilskaya area
The Morongovsky and Yuzhno-Yergalakhsky copper-
nickel sulphide ore prospects lie within the Yuzhno-
Norilskaya area, located 30 km south of Norilsk.
In 2019, Nornickel obtained an exploration licence
to prospect for and appraise deposits within the area.
Mikchangdinskaya area
The Yuzhno-Neralakhsky, Snezhny and Neralakhsky
copper-nickel sulphide ore prospects lie within
the Mikchangdinskaya area, located 70 km north-east
of Norilsk. In 2019, Nornickel obtained an exploration
licence to prospect for and appraise deposits within
the area.
In 2017, Nornickel obtained a survey, exploration
and mining licence for the basalt reserves
of the Ozero Lesnoye deposit (licence area No. 2),
located 22 km north of Norilsk.
Following a review of the 2019 feasibility study
of permanent exploratory standards and the reserve
statement, the deposit’s basalt reserves were
included into the State Register of Mineral Reserves
for potential use as inert reinforcement for backfill
concrete in underground mines.
The С1 + С2 balance reserves of basalt
are 187,911,000 m³.
PROMISING AREAS
AND PROSPECTS
Khalilskaya area
The Razvedochny, Mogensky, Khalilsky, Nizhne-
Khalilsky, and Nirungdinsky copper-nickel sulphide
ore prospects lie within the Khalilskaya area, located
150–160 km south-east of Norilsk.
In 2014, Nornickel obtained an exploration licence
to prospect for and appraise deposits within the area.
In 2019, the Company conducted surface prospecting
and geochemistry, and identified promising areas
for drilling to confirm the geology.
«NORNICKEL»
Annual report 2019
OPERATIONAL
PERFORMANCE
In 2019, the Company increased the output of all key metals as a result
of improved operating efficiency, optimization of production flow and ongoing
ramp-up of Bystrinsky project.
Total nickel output increased 5% year-on-year to 229 kt owing to the ramp-up
of the refining shop operating new chlorine leaching technology
and expansion of carbonyl nickel production capacity at Kola MMC. Total
copper output increased 5% year-on-year to a record of 499 kt driven
by improved operating efficiency, increased mined ore volumes and higher
copper grades at Talnakh mines as well as the ramp-up of Bystrinsky
(Chita) project that was fully commissioned in September 2019. Palladium
and platinum output increased 7% and 8% year-on-year to 2.9 moz
and 0.7 moz, respectively, owing primarily to the release of work-in-progress
inventory.
Sergey Dyachenko
First Vice-President –
Chief Operating Officer
Ore output (mln t)
Asset
Assets in Russia (copper-nickel sulphide ore)
Polar Division and Medvezhy Ruchey
Kola MMC
Assets in Russia (gold-iron-copper ores)
GRK Bystrinkoye
Nkomati (South Africa)1
Average mined grades
Asset
Nickel, %
Polar Division and Medvezhy Ruchey
Kola MMC
Nkomati
Copper, %
Polar Division and Medvezhy Ruchey
Kola MMC
GRK Bystrinkoye
Nkomati
PGMs, g/t2
Polar Division and Medvezhy Ruchey
Kola MMC
Nkomati
2017
25.0
17.4
7.6
0
0
3.5
2018
25.2
17.3
7.9
7.9
7.9
3.1
2019
26.3
18.4
7.9
10.5
10.5
3.5
2017
2018
2019
1.3
0.5
0.3
2.2
0.2
n/a
0.1
6.8
0.1
n/a
1.3
0.6
0.3
2.2
0.2
0.4
0.1
6.8
0.1
n/a
1.3
0.5
0.3
2.2
0.2
0.6
0.1
6.9
0.1
n/a
72
73
1/ All metrics for Nkomati are hereinafter shown based on the 50% ownership. Nkomati’s operating results are not consolidated into the Group’s
total results.
2/ Five platinum group metals: palladium, platinum, rhodium, ruthenium, and iridium.
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 2017
79.9
69.8
70.7
94.7
75.4
n/a
90.9
81.5
2017
93.9
96.5
98.2
98.5
94.0
96.2
97.4
99.7
95.6
96.7
99.3
2018
81.5
69.5
65.9
94.6
74.1
82.9
88.4
82.7
2019
83.11
67.9
64.2
95.21
73.2
87.7
87.7
85.21
2018
2019
94.6
96.7
98.0
97.9
94.4
96.1
97.6
99.7
95.9
94.0
99.8
94.6
96.7
97.0
97.9
94.1
96.2
96.5
99.8
95.8
91.6
99.8
Metals recovery in concentration1
Asset
Nickel, %
Polar Division and Medvezhy Ruchey
Kola MMC
Nkomati
Copper, %
Polar Division and Medvezhy Ruchey
Kola MMC
GRK Bystrinkoye
Nkomati
PGMs, %
Polar Division and Medvezhy Ruchey
Metals recovery in smelting
Asset
Nickel, %
Polar Division and Medvezhy Ruchey2
Kola MMC3
Kola MMC4
Norilsk Nickel Harjavalta4
Copper, %
Polar Division and Medvezhy Ruchey2
Kola MMC3
Kola MMC4
Norilsk Nickel Harjavalta4
PGMs, %
Polar Division and Medvezhy Ruchey2
Kola MMC4
Norilsk Nickel Harjavalta4
1/ Metals recovery in bulk concentrate.
2/ Feedstock to finished products.
3/ Feedstock to converter matte.
4/ In refining, converter matter to finished products.
74
Saleable metals production
Product
Group total
Nickel, kt
– from own Russian feedstock
Copper, kt
– from own Russian feedstock
Palladium, koz
– from own Russian feedstock
Platinum, koz
– from own Russian feedstock
Assets in Russia
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
Norilsk Nickel Harjavalta (Finland)
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
Nkomati (South Africa)5
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
«NORNICKEL»
Annual report 2019
2018
218.8
216.9
473.7
473.5
2,729
2,729
653
653
158.0
455.6
2,671
642
60.8
18.0
58
11
6.6
3.1
33
13
2019
228.7
225.2
499.1
498.8
2,922
2,919
702
700
166.3
486.2
2,868
690
62.4
12.9
54
12
6.5
3.4
33
14
2017
217.1
210.1
401.1
397.8
2,780
2,728
670
650
157.4
387.6
2,738
660
59.7
13.4
42
10
8.0
4.5
46
20
Production breakdown by asset in 2019 (share of the Group’s total production) (%)
Nickel
Copper
PGM
36
73
71
17
27
3
9
62 2
Polar Division and Medvezhy Ruchey
Kola MMC
Bystrinsky GOK
Harjavalta
5/ Nkomati’s operating results are not consolidated into the Group’s total results.
75
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix POLAR DIVISION AND MEDVEZHY RUCHEY,
TAIMYR PENINSULA
The Polar Division and Medvezhy Ruchey
are the Group’s flagship assets boasting a full metals
production cycle from ore mining to the shipment
of finished products to customers. They are located
in the Taimyr Peninsula in Russia, in the north
of the Krasnoyarsk Region beyond the Arctic Circle,
and linked to other regions by the Yenisey River,
the Northern Sea Route, and by air.
Operating the Company’s largest deposits, they mine
over 18 Mtpa of copper-nickel sulphide ore.
In 2019, the Polar Division
and Medvezhy Ruchey accounted
for 71% and 36% of the Group’s
total output of copper and PGMs,
respectively.
MINING
The Polar Division and Medvezhy Ruchey mine
copper-nickel sulphide ores of three grades: rich
ores, characterised by a higher content of base
and precious metals; cuprous ores, with a higher
copper content vs nickel; and disseminated ores,
with a lower content of all metals.
The Talnakhskoye and Oktyabrskoye deposits
are developed by Taimyrsky, Oktyabrsky,
Komsomolsky, Skalisty, and Mayak Mines. The mines
deploy slicing and chamber methods with the cut-
and-fill system. Stopes are refilled with backfill
mixtures, with their composition adjusted in each
case to technological requirements to mine backfill
durability.
The Norilsk-1 deposit is developed by Medvezhy
Ruchey’s Zapolyarny Mine through open-pit
and underground mining. Underground mining
is carried out through sublevel (level) caving using
front ore passes and self-propelled vehicles.
1
Norilsk
Airport
2
Nadezhda
Metallurgical Plant
3
Norilsk
Concentrator
4
Copper
Plant
5
Talnakh
Concentrator
«NORNICKEL»
Annual report 2019
In 2019, a feasibility study of Zapolyarny Mine was
completed to assess the combined development
options for the remaining disseminated ore reserves
at the Norilsk-1 deposit. Based on the study results,
disseminated ore production at Medvezhy Ruchey
is expected to increase to 9 Mtpa by 2027.
Combined ore production from the Polar Division
and Medvezhy Ruchey was 18.4 mln t in 2019,
up 1.1 mln t y-o-y (+ 6%). Rich and cuprous ore
production increased by 8% and 10%, respectively,
with Taimyrsky and Skalisty Mines also increasing
their combined rich ore production by 12% y-o-
y. Oktyabrsky and Komsomolsky Mines increased
cuprous ore production by 10% while disseminated
ore production was almost flat (+ 0.3%). The change
in the mined ore output was in line with the annual
production plan.
Ore output (mln t)
Mining asset, ore type
Total ore
– rich
– cuprous
– disseminated
Polar Division
Oktyabrskoye deposit:
Oktyabrsky Mine
– rich
– cuprous
– disseminated
Taimyrsky Mine
– rich
Mine type
Underground
Underground
Talnakhskoye and Oktyabrskoye deposits:
Komsomolsky Mine
Underground
– rich
– cuprous
– disseminated
Skalisty Mine
– rich
– cuprous
Mayak Mine
– rich
– disseminated
Medvezhy Ruchey
Underground
Underground
Norilsk-1 deposit, Zapolyarny Mine, disseminated
ore
Open-pit/
underground
2017
17.38
6.57
5.56
5.23
8.82
5.23
1.13
3.15
0.95
3.59
3.59
6.92
5.86
1.83
2.41
1.63
n/a
n/a
n/a
1.06
0.03
1.03
1.64
2018
17.32
6.78
5.24
5.30
8.95
5.17
0.98
2.98
1.21
3.79
3.79
6.70
3.82
0.11
2.18
1.53
1.95
1.87
0.09
0.93
0.04
0.89
1.67
2019
18.42
7.35
5.75
5.32
9,45
5.37
0.88
3.38
1.11
4.08
4.08
7.34
4.00
0.10
2.28
1.62
2.34
2.25
0.09
1.00
0.04
0.97
1.63
76
77
21543NorilskKayerkanTalnakhDudinkaTaimyrsky MineOktyabrsky MineKomsomolskaya MineSkalistaya MineMayak MineMedvezhy Ruchey open pitZapolyarny MineCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
and concentrates from tailings ponds. The matte
produced in flash smelting furnaces is then converted
into high grade converter matte.
The Polar Division products:
• Copper cathodes
• Nickel converter matte sent for processing to Kola
Copper Plant processes all of the copper
concentrate from the Company’s concentrators,
as well as third-party feedstocks, to obtain copper
cathodes, elemental sulphur and sulphuric acid
for the operational needs of the Polar Division.
Copper Plant’s smelting shop recycles sludge
from the copper tankhouses of Copper Plant
and Kola MMC to produce precious metal
concentrates, commercial selenium and tellurium.
The precious metals produced by the Polar Division
are refined at Krastsvetmet and URALINTECH
under tolling agreements.
The Polar Division produces metals from its own
feedstock. Since the fourth quarter of 2016, all nickel
converter matte from Nadezhda Metallurgical Plant
has been processed at Kola MMC due to Nickel Plant
shutdown.
MMC
• Precious metal concentrates
• Technical sulphur, selenium
• Tellurium in billots
Copper production
remained basically flat y-o-y
in 2019, with a slight increase
of 1% driven by a higher copper
content in the ore mined.
Production of PGMs grew
by 4% y-o-y, mainly through
drawdowns in high-value work-
in-progress inventory.
Production volumes
Product
Copper, t
Palladium, koz
Platinum, koz
2017
306,859
956
259
2018
353,131
987
260
2019
355,706
1,042
251
CONCENTRATION
Concentration facilities
• Talnakh Concentrator
• Norilsk Concentrator (part of Medvezhy Ruchey)
Talnakh Concentrator processes rich, cuprous,
and disseminated ores from the Oktyabrskoye
and Talnakhskoye deposits to produce nickel-
pyrrhotite and copper concentrates, and metal-
bearing products. The key processing stages include
crushing, milling, flotation, and thickening.
Norilsk Concentrator processes all disseminated ores
from the Norilsk-1 deposit, cuprous and disseminated
ores from the Oktyabrskoye and Talnakhskoye deposits,
and low-grade ores from Copper Plant to produce nickel
and copper concentrates. The key processing stages
include crushing, milling, flotation, gravity concentration,
and thickening.
Thickened concentrates are transported from Talnakh
and Norilsk Concentrators via slurry pipelines to the Polar
Division for further processing.
In 2019, the Company’s concentration facilities processed
a total of 18.2 mln t across all types of ore feedstocks
(including rich, cuprous, and disseminated ores).
Talnakh Concentrator processed 10.7 mln t of ore
in 2019 (up 0.3 mln t y-o-y). Its nickel recovery into bulk
flotation concentrate, including the output of metal-
bearing pyrrhotite products, increased by 2.7% y-o-y
to 85.9% due to the optimised technology for obtaining
metal-bearing pyrrhotite products deployed at Talnakh
Concentrator.
Norilsk Concentrator processed 6.8 mln t of ore in 2019
(down 0.7 mln t y-o-y), in line with the mining plan.
The facility’s nickel recovery into bulk concentrate was
0.6% lower y-o-y at 71.3%. During the year, the facility
also processed significant amounts of low-grade ores
from Copper Plant.
SMELTING
Smelting assets of the Polar Division
• Nadezhda Metallurgical Plant
• Copper Plant
• Copper Plant’s smelting shop
Nadezhda Metallurgical Plant produces converter
matte and elemental sulphur by processing:
• Talnakh Concentrator’s nickel-pyrrhotite
concentrate and metal-bearing products
• Norilsk Concentrator’s nickel concentrate
• pyrrhotite concentrate from Kayerkansky open-pit
coal mine’s storage.
PRODUCTION CHAIN
The produced concentrates, including steam
cured sulphide concentrate, are fed into flash
smelting furnaces at Nadezhda Metallurgical
Plant. Steam cured sulphide concentrate
is leached at Hydrometallurgical Shop
of Nadezhda Metallurgical Plant from products
with low metal content, such as Talnakh
Concentrator’s metal-bearing products, products
from Nadezhda Metallurgical Plant’s tailings facility,
Sulphide ores processed (mln t)
Concentrator
Talnakh Concentrator
Norilsk Concentrator
Nickel recovery (%)
Concentrator
Talnakh Concentrator
Norilsk Concentrator
2017
10.0
7.5
2017
81.7
71.7
2018
10.4
6.8
2018
83.2
71.9
2019
10.7
7.5
2019
85.9
71.3
78
79
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix • The Kotselvaara and Semiletka deposits primarily
use stoping from sublevel drifts and sublevel
caving. Room-and-pillar short-hole and long-hole
stoping are also used on a limited scale.
KOLA MMC, KOLA PENINSULA
Kola MMC is Nornickel’s wholly owned subsidiary
and a valuable production asset located in the Kola
Peninsula in the Murmansk Region of Russia.
In 2019, Kola MMC accounted for 73%, 17% and 62%
of the Group’s total nickel, copper, and PGM finished
products, respectively.
MINING
Kola MMC’s mines disseminated copper-nickel
sulphide ores.
At Kola MMC, various ore mining methods are used:
• The Zhdanovskoye and Zapolyarnoye deposits use
three mining methods: gravity caving with front ore
passes, sublevel caving with room-and-pillar ore
removal, and room-and-pillar mining. To ensure full
utilisation of the concentrator’s design capacity,
off-balance open-pit mining waste is processed
as well.
1
Concentrator
and Briquetting Shop
2
Smelting
Shop
3
Refining
Shop
4
Tankhouse
Cells
«NORNICKEL»
Annual report 2019
Ore output (mln t)
Mining asset
Total ore
Zhdanovskoye deposit
– Severny Mine
– Severny Mine
Zapolyarnoye deposit
Mine type
Underground
Open-pit
– Severny underground section
Underground
Kotselvaara and Semiletka deposits:
– Kaula-Kotselvaara mine
Underground
2017
7.64
6.81
6.55
0.26
0.14
0.14
0.70
0.70
2018
7.90
7.14
6.56
0.58
0.08
0.08
0.68
0.68
2019
7.91
7.25
6.49
0.77
0.06
0.06
0.60
0.60
In 2019, Kola MMC produced
about 8 mln t of ore
(up 0.2% y-o-y). The slight
increase was due to off-
balance open-pit mining waste
processing to ensure full
utilisation of the concentrator’s
design capacity, in line
with the annual production plan.
CONCENTRATION
Concentration facilities
• Zapolyarny Concentrator
The concentrator produces briquetted copper-nickel
concentrate. Briquettes are delivered to the smelting
shop to produce converter matte.
In 2019, Kola MMC’s concentrator processed
7.6 mln t of ore, down 0.3 mln t y-o-y. The rate
of metals recovery in bulk concentrate decreased
as well, due to a higher share of complex morphology
ores with disseminated sulphide minerals
in the charge.
80
81
2134Severny MineKaula-Kotselvaara MineZapolyarnyNickelMurmanskMonchegorskCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix SMELTING
Downstream facilities
• Smelting Shop (Nickel)
• Briquetting section (Zapolyarny)
• Smelting Shop (Monchegorsk)
• Refining Shop (Monchegorsk)
• Tankhouses 1 and 2 (Monchegorsk)
Nornickel continues upgrading Tankhouse 2 to launch
nickel cathode production using the technology
of nickel electrowinning from chlorine dissolved
tube furnace nickel powder. The project is expected
to boost Tankhouse 2 production capacity
from 120 ktpa to 145 ktpa of electrolytic nickel while
also improving the recovery rate by 1%. In 2019,
Nornickel commissioned the second, the fourth
and a part of the third series of electrowinning cells.
The project is expected to ramp up to full design
capacity in Q2 2020. Pre-commissioning is also
in progress for a new precious metal concentrate
section of Kola MMC’s Smelting Shop. The section’s
commissioning is an integral and essential part
of Nornickel’s plan to optimise the configuration
of refining facilities.
In 2019, Kola MMC used only Nornickel’s own
Russian feedstock in metals production. The y-o-y
increase in nickel and copper output was driven
by the expansion of carbonyl nickel production
capacity and supplies of richer copper concentrate
from the Polar Division. The increase in PGMs output
in 2019 was due to drawdowns in high-value work-in-
progress inventory.
Products:
• Nickel cathodes
• Nickel carbonyl
• Saleable nickel concentrate
• Copper cathodes
• Saleable copper concentrate from converter
matte separation
• Electrolytic cobalt
• Cobalt concentrate
• Precious metal concentrates
• Sulphuric acid
• Crushed converter matte for Harjavalta
Production volumes
Product
Nickel, t
– from own Russian feedstock
Copper, t
– from own Russian feedstock
Palladium, koz
– from own Russian feedstock
Platinum, koz
– from own Russian feedstock
2017
157,396
155,110
80,781
78,587
1,782
1,737
401
385
2018
158,005
157,519
83,070
82,987
1,684
1,684
381
381
2019
166,265
166,265
86,976
86,976
1,826
1,826
439
439
«NORNICKEL»
Annual report 2019
GRK BYSTRINKOYE, ZABAYKALSKY REGION
GRK Bystrinskoye (Bystrinsky GOK) is Nornickel’s
50.01%-owned subsidiary. Bystrinsky GOK is located
in the Gazimuro-Zavodsky District, Zabaykalsky
Region, 16 km east of Gazimursky Zavod village, 350
km away from Chita.
Nornickel’s new asset is the largest greenfield
project in the Russian metals industry, integrating ore
mining, concentration and shipment of end products
to customers. The expected volume of ore mined
and processed at Bystrinsky GOK is approximately
10 Mtpa.
Nornickel commenced the construction of Bystrinsky
GOK in 2013. The construction project includes
open-pit mining at the Bystrinskoye deposit,
a mining and processing plant (MPP) along with all
of the associated infrastructure, including a power
line and a 227-km Borzya–Gazimursky Zavod
railway line, and a rotation camp. In October 2017,
Nornickel started the pre-commissioning activities,
and in September 2019 Bystrinsky GOK was
commissioned. The project is expected to ramp up
to design capacity by 2021.
In 2019, Bystrinsky
GOK accounted for 9%
of the Group’s total copper
end products.
1
Bystrinsky
GOK
82
83
1Alexandrovsky ZavodGazimursky ZavodSretenskChitaBorzyaCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix MINING
Bystrinsky GOK mines gold-iron-copper ores
of the Bystrinskoye deposit.
Ore output (mln t)
Mining asset
Total ore
Bystrinskoye deposit
– Verkhneildikansky open pit mine
– Bystrinsky-2 open pit mine
CONCENTRATION
Concentration facilities
• Concentrator
The concentrator construction commenced
in 2015; the facility’s purpose is to process ores
of the Bystrinskoye deposit into copper, iron ore,
and gold concentrates. The key processing stages
include crushing, milling, flotation, thickening,
filtration and end product packaging. The concentrator
has two processing lines. In 2018, Bystrinsky GOK
started pre-commissioning of the processing lines,
and in 2019 the concentrator was commissioned.
Production volumes
Product
Ore processing, mln t
Copper (in copper concentrate), t
– copper content in the concentrate, %
Gold (in copper and gold concentrates), koz
– gold content in the concentrate, g/t
Iron ore concentrate, kt
– iron content in the concentrate, %
Mine type
Open-pit
Open-pit
2018
7.86
7.86
7.43
0.43
2019
10.49
10.49
8.60
1.89
In 2019, it processed 7.5 mln t of ore (2018: 3.8 mln t).
The increase was due to scheduled ramp-up to design
capacity.
Copper and iron ore concentrates are sold via third
parties, while gold concentrates are further processed
at the Polar Division.
Products:
• Copper concentrate
• Gold concentrate
•
Iron ore concentrate.
2018
3.8
19,417
25.4
89
6,218
346
64.1
2019
7.5
43,489
25.5
177
4,034
1,311
64.6
NORILSK NICKEL HARJAVALTA, FINLAND
«NORNICKEL»
Annual report 2019
Norilsk Nickel Harjavalta is Nornickel’s wholly
owned subsidiary, acquired by the Group in 2007.
The Harjavalta facility processes Nornickel’s Russian
feedstock and nickel-bearing raw materials sourced
from third-party suppliers.
Founded in 1959, it is Finland’s only nickel refinery
and one of the largest nickel producers in Europe.
Harjavalta’s capacity is 66 ktpa of nickel products.
The facility uses sulphuric acid leaching with metal
recovery rates above 98%, which is a best practice
in the global mining and metals industry.
In 2019, Norilsk Nickel
Harjavalta accounted for 27%,
3% and 2% of the Group’s total
nickel, copper and PGM finished
products, respectively.
1
Norilsk Nickel
Harjavalta Plant
84
85
1St PetersburgHelsinkiTallinStockholmCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Saleable nickel output by product
in 2019 (%)
NKOMATI, SOUTH AFRICA
«NORNICKEL»
Annual report 2019
Nkomati is a joint venture between Nornickel (50%
interest) and African Rainbow Minerals. Nkomati’s
performance is reflected in Nornickel’s financial
results using proportional consolidation, based
on our stake.
In 2019, total ore mined
by Nkomati reached 3.5 mln t
(attributable to the Group’s 50%
shareholding) with an average
nickel content of 0.26%
and copper content of 0.11%.
Nkomati is located in the Mpumalanga Province,
South Africa, 300 km east of Johannesburg.
It is the only South African company to produce
nickel concentrate, which also contains copper,
cobalt, and PGMs. Nkomati produces chrome
concentrate as well.
MINING
The Nkomati deposit has a substantial resource
base represented by disseminated copper-nickel
sulphide ores. The deposit consists of several ore
bodies. The major ones are a solid sulphide ore body
with a high nickel content and a peridotite chromite
mineralisation zone with a relatively lower nickel
content and a relatively higher chrome content.
10
Powders
17
Salts
and solutions
27
Cathodes
62.4
129
kt
вопросов
47
Briquettes
Ni powders
Ni cathodes
Ni briquettes
Ni salts
Ni solutions
Co sulphates
Co solutions
Cu cake
SMELTING
Facility’s process chart
n 2019, the refining facilities of Kola MMC were
gradually increasing their nickel feedstock supplies
to Norilsk Nickel Harjavalta in line with the Group’s
downstream reconfiguration strategy. Third-party
feedstock supplies, i.e. , converter matte from Boliden
and nickel salts from other suppliers, were regular
and marginal in 2019. Metal recovery rates remained
flat y-o-y.
In 2019, Norilsk Nickel Harjavalta produced
62 kt of saleable nickel (up 3% y-o-y),
RUSSIAN
NICKEL-BEARING
FEEDSTOCK
FROM KOLA MMC
Matte / converter matte
NORILSK NICKEL
HARJAVALTA
REFINERY
NICKEL-BEARING
FEEDSTOCK
FROM THIRD
PARTIES
Cu cake
an all-time high for the refinery. The growth was
driven by the reconfiguration of refining facilities
and increased nickel feedstock supplies from Kola
MMC. The production of copper in copper cake
totalled 13 kt, down 28% y-o-y, while the output
of saleable palladium in copper cake decreased
by 8% y-o-y and platinum output increased
by 5% y-o-y. The decrease in copper and palladium
output was due to the start of copper cake shipments
to the Polar Division for further processing.
• Cobalt sulphate and solutions
• PGM-bearing copper cake
1
Mine
2
Concentrator
Refining capacity utilisation (%)
Products:
• Nickel cathodes and briquettes
• Nickel salts, powders, and solutions
‘19
‘18
‘17
95
92
90
Production volumes
Product
Nickel, t
– from own Russian feedstock
Copper (in copper cake), t
– from own Russian feedstock
Palladium (in copper cake), koz
– from own Russian feedstock
Platinum (in copper cake), koz
– from own Russian feedstock
86
2017
59,716
55,021
13,441
12,328
42
35
10
6
2018
60,765
59,337
18,036
17,980
58
58
11
11
2019
62,422
58,939
12,948
12,667
54
51
12
9
87
12JohannesburgCapetownCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONCENTRATION AND SMELTING
Concentration facilities
• Concentrator for ore mined in the main section,
with installed capacity of 375 kt per month.
• Concentrator for ore mined in the peridotite
chromite section, with installed capacity of 250 kt
per month.
The mined ore is processed at concentrators using
the sulphide flotation technology, with the resulting
concentrates then sold by Nornickel to third parties.
In 2019, Nkomati produced 6.5 kt of nickel (down
2% y-o-y), 3.4 kt of copper (up 12% y-o-y), 33 koz
of palladium (down 1% y-o-y), and 14 koz of platinum
(up 6% y-o-y) (attributable to the Group’s 50%
shareholding). The drop in nickel and palladium
production and the increase in copper and platinum
output were due to changes in the processed ore
composition and the commencement of production
ramp-down as part of plans to scale down production
at Nkomati Nickel Mine during 2020.
Products:
• Saleable concentrate.
Production volumes1
Product (in concentrate)
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
2017
8.0
4.5
46
20
2018
6.6
3.1
33
13
2019
6.5
3.4
33
14
«NORNICKEL»
Annual report 2019
SALES
AND DISTRIBUTION
In 2019, Nornickel maintained its long-standing
reputation as a reliable supplier of high-quality
products. The integrated index of customer
satisfaction with the Company’s products
and services matched the target level.
As a top global producer of base and platinum group
metals, Nornickel sees its role as leading the industry
on building an improved ecosystem for all market
players and to this end launched a project to digitise
all metal sale contracts in 2019.
The Company supplies its products to 37
countries and has products registered for delivery
against contracts at the London Metal Exchange
and the Shanghai Futures Exchange. Registration
at the world’s top exchanges ensures the liquidity
and premium pricing for the Company’s products.
PRODUCT RANGE
One of Nornickel’s objectives is to make sure its
product range matches the current and anticipated
global metals demand.
Nickel product diversification
is a priority in developing the product range
as the Company is implementing a range of initiatives
to enhance and expand its existing product range,
with a particular focus on changes in the metals
demand structure, including the rapid growth
in the share of the electric vehicles and batteries.
In particular, Nornickel continues active interactions
with the battery sector players to expand its product
range to meet the new requirements for shape
and quality emerging in the market.
Norilsk Nickel Harjavalta is recognised as 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’s
nickel and cobalt sulphates are considered
the industry benchmark and are widely used
in battery manufacturing. Norilsk Nickel Harjavalta
is uniquely flexible when it comes to manufacturing
various shape products, which enables it to factor
in consumer preferences in developing its product
portfolio.
1/ Volumes based on the 50% ownership.
88
89
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Main consuming industries and sales markets
POLAR DIVISION
AND MEDVEZHY RUCHEY
Cu
Copper cathodes
Se
Commercial selenium (powder)
S
Сommercial sulphur
Te
Tellurium ingots
Na2SO4
Sodium sulphate
H2SO4
Sulphuric acid
KOLA MMC
Ni
Nickel cathodes, nickel
carbonyl (powder and pellets),
intermediate products
Cu
Copper cathodes,
copper matte
Co
Cobalt cathodes, cobalt
concentrate
NORILSK NICKEL HARJAVALTA
GRK BYSTRINSKOYE
KRASTSVETMET1
Ni
Nickel cathodes, nickel briquettes,
electrolytic nickel powder,
nickel sulphate, nickel
hydroxycarbonate
Cu
Сopper concentrate
Fe
Iron ore concentrate
Cu
Copper cake
Co
Cobalt sulphate
Pt
Platinum
Pd
Palladium
Rh
Rhodium
Ir
Iridium
«NORNICKEL»
Annual report 2019
Ru
Ruthenium
Ag
Silver
Au
Gold
Sales markets:
Main consuming industries:
Russia
Europe
Asia
Americas
Cables and wires
Rolled products
and pipes
Metallurgy
Chemical
industry
Glass
making
Electrical
engineering
Feeds
and fertilizers
Fertilisers, paper
and pipes
Rubber
vulcanisation
Stainless steel
Alloys
and superalloys
Non-ferrous
metallurgy
Rubber
industry
Photo-
and thermoelements
Special steels
and alloys
Electroplated
coatings
1/ 100% of shares are owned by the government. Precious metals are refined from raw materials produced by the Polar Division
and Kola MMC under a tolling agreement.
Welding electrodes
Leather goods
Rolled products
Auto catalytic
converters
Synthetic
detergents
Pulp & paper
Textiles
Healthcare
and veterinary
Batteries
Additives
and catalysts
Special steels
Electronics
Jewellery
Investments
Electrochemical
industry
90
91
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix In the electroplating sector, Nornickel is optimising
its product offering to better meet customer needs
and acquire new customers in China and other
markets. The Shanghai Futures Exchange completed
the approval procedure for the NORNICKEL brand
of electrolytic nickel produced by Kola MMC,
with a registration certificate expected to be issued
early in 2020.
In 2019, the London Metal Exchange (LME) added
the NORILSK I brand of electrolytic cobalt produced
by Kola MMC to its list of brands approved for LME
delivery.
As the world’s largest producer of palladium,
the Company continues to implement its 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 to ensure stable
supply of palladium as the world palladium market
remains significantly undersupplied. As the leading
supplier of this metal, the Company’s strategy
includes a number of measures to ensure long-term
stability of the palladium market, including greenfield
and brownfield expansion project such as the South
Cluster.
Sales by region (%)
SALES STRATEGY
Sales, along with production, have traditionally been
a key value adding part 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 other industries.
Electric vehicles and batteries are a priority segment
in the nickel consumption structure, as its growth
rates suggest that in a few years time it will become
a key source of demand, second only to stainless
steel.
Therefore, the Company is running a programme
to support high-growth applications of nickel
applications, primarily in the battery sector.
Cooperation with the growing battery sector relies
on our wide range of nickel products, high reliability
of supplies, availability of the Company’s own global
sales platform and a long track-record of partnering
with automotive manufacturers and chemical
companies. The Company also maintains an ongoing,
proactive dialogue with new leading players. All
these factors make Nornickel well-positioned
to become a key element in the battery components
value chain.
In the battery segment, the Company is set
to support the electric vehicles market and related
value chains, build long-term partnerships
with key industry players, and expand the market
and its accessibility for nickel and cobalt products.
Nornickel’s sales team is closely monitoring
changes in the technical requirements for nickel
and cobalt products in the sector. The Company
is actively engaging major players in the battery
segment, as evidenced by its agreement with BASF,
signed in 2018. Under the agreement, pilot
production facilities were launched, commencing
supplies of test product batches for certification
by consumers in 2019.
In the alloys and special steels sector, we seek
to maximise the benefits of our product portfolio
and improve product quality to boost our share
in high-quality, premium segments.
«NORNICKEL»
Annual report 2019
The Company’s product distribution diagram
KOLA MMC
RUSSIA
GRK BYSTRINSKOYE
MMC NORILSK NICKEL
RUSSIA
NORMETIMPEX RUSSIA
CUSTOMERS IN RUSSIA
AND THE CIS
MEDVEZHY RUCHEY
RUSSIA
CUSTOMERS
IN EUROPE
NORILSK NICKEL ASIA
HONG KONG
CUSTOMERS
IN ASIA
NORILSK NICKEL
HARJAVALTA FINLAND
METAL TRADE OVERSEAS
AG SWITZERLAND
NORILSK NICKEL METALS
TRADING SHANGHAI
CHINA
CUSTOMERS
IN CHINA
NORILSK NICKEL USA
USA
CUSTOMERS
IN THE USA
92
93
Europe52Russia and the CIS5North and South America18Asia25129вопросовCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ENERGY ASSETS
Nornickel owns an integrated network of fuel
and energy assets, including four hydrocarbon
deposits.
Most of Nornickel’s production facilities are located
beyond the Arctic Circle, operating in sub-zero
temperatures for eight months of the year. It
is therefore critical for the Group to ensure energy
supplies to its production and infrastructure facilities,
as well as to communities in its regions of operation.
Norilskgazprom (100% stake) produces gas
and gas condensate at the Pelyatkinskoye, Yuzhno-
Soleninskoye and Severo-Soleninskoye gas
condensate fields, as well as the Messoyakhskoye
gas field. The Pelyatkinskoye gas condensate field
was transferred to Norilskgazprom in 2019 following
the reorganisation of Taimyrgaz.
2,803.5
mln Mcm
natural gas production
92
kt
gas condensate production
44.5%
electricity generated
from renewable sources
• Start of production: 1969
• Gas reserves: 246.6 bcm
• Gas condensate reserves: 4,727 kt
• Gas production in 2019: 2,803.5 Mcm
• Gas condensate production in 2019: 92 kt
Production1
Asset
Natural gas, Mcm
– Taimyrgaz
– Norilskgazprom
Gas condensate, kt
– Taimyrgaz
– Norilskgazprom
2017
3,014
2,086
928
100
98
2
2018
2,896
2,027
869
90
88
2
2019
2,804
0
2,804
92
0
92
1/ Data on gas condensate production include production losses (carryover with separation gas).
94
«NORNICKEL»
Annual report 2019
Norilsktransgaz (100% stake) transports natural gas
and gas condensate from deposits to consumers.
Power generation breakdown in the Norilsk Industrial
District in 2019 (%)
The length of gas and gas condensate pipelines
totals 1,588 km. The pipelines were commissioned
between 1969 and 2018.
NTEK (100% stake) is focused on electricity
and heat generation, transmission and sales
harnessing the assets of Norilskenergo, a branch
of Nornickel. Energy is produced from both
renewable (e.g. hydropower) and non-renewable
(e.g. natural gas) sources. NTEK supplies electricity,
heat, and water to households in the city of Norilsk
and to all production facilities within the Norilsk
Industrial District. In terms of its location
and operational mode, the local electricity grid
is isolated from the national grid (the Unified Energy
System of Russia), which means stricter reliability
requirements. NTEK operates five generating
facilities – three thermal power plants with installed
electricity generation capacity of 1,190 MW, and two
hydropower plants (HPPs) with total installed
capacity of 1,091 MW. The total installed capacity
of all plants is 2,281 MW.
Ust-Khantayskaya and Kureyskaya HPPs (491 MW
and 600 MW of installed capacity, respectively)
are Nornickel’s two renewable electricity
generation facilities. In 2019, renewables
accounted for 44.5% of total electricity consumed
by the Group and 53.5% of total electricity
consumption within the Norilsk Industrial District.
To boost the share of renewables such
as hydropower, capture fuel and energy savings,
and improve the reliability of energy and gas
supplies, Nornickel’s investment programme
contains a number of large-scale priority projects.
In 2019, the spending under the programme totalled
about RUB 7.7 bn (USD 119 mln).
Selected major projects being implemented
by Nornickel to improve equipment reliability,
enhance energy efficiency, and boost product output:
• Replacement of seven hydropower units at Ust-
Khantayskaya HPP
Arctic-Energo electricity sales breakdown
in 2019 (%)
• Replacement of power units at CHPP-2 and CHPP-
3 in Norilsk
• Upgrade of power grids, main gas pipelines, and gas
distribution networks within the Norilsk Industrial
District
Arctic-Energo (100% stake) is a default electricity
supplier to Kola MMC in Monchegorsk,
established to ensure efficient and uninterrupted
electricity supply at cheapest rates to Kola MMC
operations. In 2019, it sold 2,719,610 thousand kWh
of electricity.
95
53.5Hydrocarbons(natural gas)46.5129вопросовRenewable energysources (hydropower)Kola MMC94Other consumers4Population2129вопросовCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix TRANSPORT
ASSETS
Nornickel owns a modern transport infrastructure
capable of handling most challenging freight logistics
tasks and ensuring continuity and sustainability
of operations. Nornickel’s transportation and logistics
assets cover the full range of transportation and freight
forwarding services.
1
2
1
Murmansk Transport
Division (Murmansk
terminal, 6 heavy-duty
ice-class vessels)
Arkhangelsk
Transport Division
3
4
Norilsk Airport, Norilsk
Avia, NordStar Airlines
(100% stake)
Polar Transport Division
(Dudinka Port)
5
6
Krasnoyarsk Transport
Division, Krasnoyarsk
River Port (89% stake)
and Nornickel-ERP LLC
7
Bystrinsky
Transport
Division
Yenisey River Shipping
Company (82% stake)
8
Lesosibirsk Port
(51% stake)
2
4
3
6
8
5
7
FREIGHT SHIPPING SERVICES
Nornickel has a unique Arctic fleet comprising
five dry cargo vessels and one Yenisey heavy-duty
ice-class tanker (ARC 7 as per the classification
of the Russian Maritime Register of Shipping).
The vessels are capable of breaking through Arctic
ice up to 1.5 m thick without icebreaker support.
The Yenisey tanker carries gas condensate exports
from the Pelyatkinskoye gas condensate deposit
to European ports, and makes commercial voyages
to other destinations.
Nornickel’s dry cargo fleet provides year-round
freight shipping services between Dudinka,
Murmansk, Arkhangelsk, Rotterdam, and Hamburg
sea ports while also making commercial voyages
to other destinations. In 2019, 68 voyages were made
from Dudinka (2018:66), including 11 direct voyages
to European ports (2018:10).
AVIATION ASSETS
Norilsk Avia (Nornickel interest 100%) serves
the transportation needs of local communities
in the Norilsk and Taimyrsky Dolgano-Nenetsky
Districts of the Krasnoyarsk Region. The air company
has its own fleet of 16 helicopters and provides air
services related to the operations of the Norilsk
Nickel Group, emergency air medical assistance,
search-and-rescue operations, and local passenger
traffic.
NordStar Airlines (Nornickel interest 100%)
is an aviation project that has been steadily growing
since its establishment in 2008. Its fleet comprises
13 aircraft. NordStar Airlines is a major air carrier
in the Siberian Federal District and the anchor airline
of Norilsk Airport. The air carrier’s annual passenger
«NORNICKEL»
Annual report 2019
Dry cargo transportation by Nornickel’s fleet
(mln t)
1.3
0.2 231.5
1.2
0.2 1.4
1.1
0.2
1.3
For Nornickel
For third parties
Transportation by Yenisey tanker (kt)
76
77
153
23
89
102
133 222
60
162
For Nornickel
For third parties
‘19
‘18
‘17
‘19
‘18
‘17
traffic is in excess of one million people. The airline’s
current route network covers over 30 cities in Russia
and the CIS. .
Norilsk Airport (Nornickel interest 100%) is located
36 km away from Norilsk. It plays an essential role
in ensuring the region’s transport accessibility
as it connects the north of the Krasnoyarsk Region
with other parts of Russia.
During 2019, the public private partnership between
Nornickel and the Federal Air Transport Agency
(Rosaviatsiya) renovated the airport’s patrol road,
security fencing, utility and communication networks;
and the renovation of the airport apron’s concrete
pavement was 95% complete at end-2019.
The renovation programme is scheduled
for completion in 2020.
Norilsk Nickel’s transportation and logistics assets include:
• sea fleet — 6 heavy-duty ice-class vessels;
•
•
river fleet — 556 vessels, including 161 self-propelled and 395 towed vessels;
rail car and locomotive fleet — 118 container flatcars, 1 switch locomotive,
1 Yermak electric locomotive, and 1 2М62 diesel locomotive;
• aircraft fleet — 16 helicopters operated by Norilsk Avia and 15 planes operated
by NordStar Airlines.
96
97
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix TRANSPORT DIVISIONS
AND PORTS
The Polar Transport Division and Dudinka Port
are the key industrial facilities of the city port
of Dudinka, accessible by both sea and river vessels.
Located in the Far North, Dudinka Port is the world’s
only port that gets flooded every year during
the spring thaw. From November to May its water
area and the Yenisey River freeze over. At this period,
Dudinka Port handles only sea vessels using
icebreakers to de-ice the berths and provide support
during manoeuvring and mooring operations.
In May and June, during the flooding, the service
is suspended to be resumed for sea and river vessels
when ice flows pass and the water level goes down.
Dudinka Port transships cargoes destined for Taimyr
Peninsula, including goods for local residents (except
for perishables and mail). In summer, river vessels
deliver equipment and materials (sand, round timber,
clinker, etc.) for process needs from Krasnoyarsk
and Lesosibirsk; sulphur shipments are directed both
via the Yenisey River and via sea routes. Converter
matte and metal products are shipped by sea
from Dudinka throughout the year.
Cargo traffic at Dudinka port (mln t)
The Polar Transport Division operates its own fleet
of port service vessels which includes a river-class
icebreaker, towboats, motorboats, a bunker barge,
and a floating crane. To reduce its environmental
footprint, the division runs programmes to cut fuel
consumption and prevent pollution of the Dudinka
and Yenisey Rivers, while also investing in bioresource
management (e.g. releasing fingerlings).
The year-round ice-free sea port of Murmansk
is home to Nornickel’s Murmansk Transport Division.
Murmansk Transport Division’s key functions:
• Shipment of Nornickel’s finished metal products
from Murmansk to European ports
• Receipt of converter matte from Dudinka and its
shipment by rail to Kola MMC
• Shipment of empty containers, equipment,
and materials to Dudinka
In addition to sea transportation, Murmansk
Transport Division is focused on freight forwarding,
transshipment and storage of cargoes, and rail
transportation between Murmansk and Monchegorsk.
The division’s shipping department complies
with international maritime conventions by ensuring
environmentally friendly and safe sea transportation,
with the vessels undergoing regular scheduled
repairs and safety inspections. In addition, in 2019,
Murmansk Transport Division’s Information
Security Management System was certified
to ISO/IEC 27001:2013.
‘19
‘18
‘17
‘19
‘18
‘17
1.4
1.3
1.2
1.9
3.4
23
2.2 3.5
2.0
3.2
Via the Northern Sea Route
Via the Yenisey River
Cargo traffic at Murmansk terminal (mln t)
Arkhangelsk Transport Division is based
in Arkhangelsk. The division provides year-round
transshipment services for Nornickel’s cargo via
Arkhangelsk sea port, which is conveniently linked
to other Russian and foreign regions by road, air
and rail.
1.4
1.3
1.1
Krasnoyarsk Transport Division is based
in Krasnoyarsk. This division is responsible
for transportation and forwarding of Nornickel’s.
«NORNICKEL»
Annual report 2019
• Offers year-round service (rail-to-road and road-
to-rail cargo transshipment services in between
the navigation periods)
• Has access to the Baikal (M53) federal highway via
the Krasnoyarsk–Yeniseysk highway
• A railway to Achinsk links Lesosibirsk to the Trans-
Siberian Railway.
Bystrinsky Transport Division was established
in 2017 to support shipments of finished products
from Bystrinsky GOK and handle its inventories.
Bystrinsky Transport Division provides maintenance
services for the 227-km Naryn (Borzya)–Gazimursky
Zavod private railway line built through a public
private partnership.
INVESTMENT
IN TRANSPORTATION
AND LOGISTICS ASSETS
In 2019, Nornickel completed scheduled repairs
of vessels, overhauled several berths and port
cranes, deployed integrated security technologies
and solutions, upgraded communications hardware,
introduced fuel consumption metering, and launched
a programme to replace mobile port cranes
at Dudinka Port.
In 2019, Nornickel- Yenisey River Shipping Company
(100%) was established to coordinate operations
of Krasnoyarsk port and Yenisey River Shipping
Company, which operate a strictly seasonal service
due to the Yenisey River getting frozen in winter.
When ice flows pass, the Group uses the ports
to transship Nornickel’s cargoes to Dudinka,
including crushed granite, clinker, materials,
equipment, and socially significant cargoes (as part
of the Northern Deliveries programme).
Yenisey River Shipping Company (82%) carries the bulk
of the Group’s and third-party cargoes shipped
on the Yenisey River. The company owns over 600
river vessels, including self-propelled and towed ones.
The fleet operates in the Yenisey, Angara, Nizhnyaya
Tunguska and Podkamennaya Tunguska Rivers,
and their largest tributaries.
Krasnoyarsk River Port (89%) is one of the largest
ports in the Yenisey basin. The port transships cargoes
delivered by road, rail and water, provides storage
services and transports cargoes using private railway
lines. The port has three operating areas – Yenisey,
Zlobino, and Peschanka.
Lesosibirsk Port (51%) is located 40 km downstream
of the point of confluence of the Angara and Yenisey
Rivers and downstream of the hard-to-navigate
rapids. This secures the delivery of Nornickel’s
cargoes at times of low water on the Yenisey
and the use of fully loaded ships. The port’s unique
benefits:
• The only dedicated port on the Yenisey River
capable of handling explosives with a storage
option
Investment in transportation and logistics assets
Expenditure
2017
2018
2019
TOTAL
Capital construction
Equipment purchases
Other
USD mln
RUB bn
USD mln
RUB bn
USD mln
RUB bn
46.2
22.2
15.4
8.6
2.7
1.3
0.9
0.5
35.1
6.4
12.8
15.9
2.2
0.4
0.8
1.0
55.6
3.1
40.2
12.4
3.6
0.2
2.6
0.8
98
99
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Technology
Breakthrough
A programme aimed at embedding ad-
vanced digital solutions into designing,
planning and operational control pro-
cesses throughout mining operations
WHY
WE
DO
THIS
We develop
digital
technologies
to deliver
operational
efficiency gains
went live
17 SYSTEMS
50
NEW
INITIATIVES
slated for rollout
before 2024
RESEARCH
AND DEVELOPMENT
INNOVATIONS
RESEARCH
AND DEVELOPMENT
R&D is a major driver behind the implementation
of the Company’s strategic priorities. In 2019,
Nornickel’s R&D and feasibility studies mainly
focused on providing research data for the updated
Norilsk Nickel Group Strategic Development Plan.
Operations. Mining, processing, metallurgy.
Gipronickel Institute is Nornickel’s main R&D
facility. Part of the Norilsk Nickel Group, it is also
one of Russia's largest research and engineering hubs
for mining, concentration, metallurgy and processing
of minerals, providing a wide range of research
and technology services.
PATENTS AND LICENCES
Implementation of uniform approaches
to intellectual property (IP) management is a major
driver of Nornickel’s innovative development.
The Company registers its exclusive rights
to inventions and means of identification both
in Russia and beyond.
International registration process for Nornickel’s
Method for Continuously Converting Nickel-
Containing Copper Sulphide Materials
is now in progress, with a Kazakhstan patent
for this invention granted in 2019.
A Certificate of State Registration for 10-day/
shift Operations Planing and Control System
for Underground Mines software was also granted
in 2019. The software solution is being rolled out across
the Group as part of its mining automation project.
DIGITISATION
Nornickel is the industry’s digital leader:
• Nornickel won the first place and the gold award
in the Business Transformation Category at SAP
Quality Awards in the CIS region for two years
in a row – 2018 and 2019 – for its project to roll out
SAP ERP
• The Company won the first place for the Machine
Vision-Based Detection of Ore Contaminants
on Concentrator Conveyors project
• Bronze award was given for the Smart Tailing Dump
project leveraging all currently available state-of-
the-art dam movement monitoring technologies
• Nornickel’s project to optimise flotation processes
at Talnakh Concentrator was awarded a BCG
Olympics medal in 2019 as the best project
internationally to win this highly prestigious annual
global competition
Adoption of state-of-the-art technology,
including digital solutions, is critical to business
competitiveness. Nornickel places considerable
emphasis on researching and adopting various digital
technologies to optimise production processes,
improve overall business performance, and eliminate
bottlenecks, resulting in a higher conversion
productivity, lower costs and a streamlined
organisation. The Company has built a portfolio
of various applied technology solutions which can be
of interest to other players in the metals and mining
industry as well as other industries.
In July 2019, Rosbank and Nornickel migrated
the interface between their information systems
to a host-to-host digital platform developed
by Rosbank and Nornickel’s experts supported
by BDO Unicon Business Solutions. The host-to-host
solution provides a high-speed secure data transfer
directly between Nornickel’s corporate SAP system
and Rosbank’s host-to-host service.
Also in 2019, the Company completed
the registration process and obtained an international
certificate of registration for the NORNICKEL
trademark in the USA for the first time in its history.
It now takes Nornickel’s Treasury barely a moment
to send payment orders to Rosbank and receive
settlement account statements from it. Migration
to the host-to-host solution has not only made
payments faster and more secure but also
streamlined Nornickel’s internal processes and going
forward enables fundamentally new, digital
business use cases around interfaces with banks
and counterparties.
TECHNOLOGY BREAKTHROUGH
PROGRAMME
The Company runs the Technology Breakthrough
programme to integrate advanced technologies
into the design, planning and operational
control processes of its mining activities, driving
the operational efficiency of its production processes.
About 40 IT initiatives were developed during its first
phase (Technology Breakthrough 1.0).
The key projects within the programme: development
of mining equipment and personnel positioning
and communication systems; mining operations
planning and dispatch; and deployment of various
solutions including geological modelling and mine
planning solutions, metals balance calculation,
industrial asset management, process data storage,
and health and safety systems.
Basic infrastructure building
Nornickel has equipped all of its underground
mines with positioning and communication
systems. More than 300 kilometres of fibre have
been laid, with over 1,000 Wi-Fi access points
installed underground. Every day, each person
out of more than 6,500 is given special equipment
with an RFID tag to track the person’s movements
within the mine. Similar tracking solutions
are installed on moving machinery, totalling more
than 500. Video surveillance is provided for key
infrastructure facilities underground. A control room
operator monitors movements of each employee
and can contact them by phone. An anti-collision
technology is used to warn drivers of people
in the way. The Company has deployed a powerful
system providing complete information on people
and machinery positions and ore flows in mines
by feeding virtually unlimited volumes of data
from the surface underground and back.
«NORNICKEL»
Annual report 2019
Geological modelling and mine planning
solutions
The deployment of geological modelling and mine
planning solutions has enabled the development
of a single mining database and 3-D models
of underground ore bodies. The software can also
be used to design underground workings and obtain
survey data. The system enables data preparation
and feeding to automated drill rigs, with significant
gains to be achieved in drilling and blasting
performance. Geological modelling and mine
planning software can also accelerate development
and analysis of multiple mining options to identify
the most effective one and plan mining accordingly.
Simulation modelling system
The software analyses data on underground
workings, their geometry, underground transport
and ore production plans to calculate an optimal
quantity of required underground machinery.
The purpose is to optimise ore production
and transportation from the mine to the surface.
Nornickel’s mid-term plans are to use the simulation
modelling system to test the use of remotely
controlled underground machinery.
Smart digital mines
It took a lot of time and effort to develop
underground infrastructure across all mines
operated by the Company before operational
control centres could launch and assume associated
control and management functions. Wireless data
transmission system points and fibre links were
installed under the Polar Division’s machinery
tracking and radio communication project,
implemented as part of the Technical Breakthrough
programme. Each underground working now has Wi-Fi
access and is fitted with video cameras.
The Company has also developed a unique
10-day/shift scheduling software to eliminate
the decentralised approach and manual planning
for certain mine parts. The software allocates tasks
and equipment to workings and shifts in accordance
with the process cycles and pre-set inputs to create
the mine operation 10-day/shift schedule with 10-day
increments and task scheduling for each specific
shift. Mining plans covering different periods
and parts of all underground mines are integrated
102
103
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix into higher-level plans within a single centralised
planning system. The operational control centres now
operate in accordance with the new mining planning
processes. The 10-day/shift scheduling software
creates work plans using data from the Micromine
geological modelling and mine planning software
which creates a 3D model of the mined ore body
with a clear representation of beds and seams
and helps optimise reserve development sequencing
and production techniques.
Process data storage
All data is fed into a process data warehouse,
which also collects telemetry data from moving
machinery: motor RPM, fuel consumption, working
hours, etc. The single process data warehouse
collates over 60,000 parameters for all enterprises
of Nornickel. The data is then used in other
Technology Breakthrough systems such as Production
Dispatch, Metals Balance, and in the SAP ERP
equipment maintenance and repair management
system.
Technical Breakthrough 1.0 has improved total metal
recovery and increased the quality of saleable ore
by 6.5% between 2016 and 2019, achieving total
savings of billions of Russian roubles.
In 2020, Nornickel will launch the second phase
of the programme – Technical Breakthrough 2.0,
which will include 11 projects. The second phase
will mostly focus on Industry 4.0 levers, with certain
autonomy embedded in all mine development
projects. The Company will now harness big data
to improve production planning and overhaul
the production process, implementing projects to roll
out artificial intelligence, robotics, digital twins, etc.
Nornickel is developing a database enabling it to plan
for unmanned production. In particular, mining
at depths between 2 km and 2.5 km in the Glubokaya
mine (at the Skalisty Mine site) will maximise the use
of autonomous mining systems.
DIGITAL LAB
Nornickel actively deploys digital technologies
to address local production tasks. Its R&D division
Digital Lab has been active for almost two years.
Two initiatives of the Digital Lab won awards
at the Mine Digital contest held as part of the Minex
Russia geological forum. The gold winner was
the Conveyor Contaminant Identification project
applying artificial intelligence technology to recognise
non-metallic matter on the conveyor which, if
entering the concentrator’s crusher, can damage
the equipment. Bronze award was won for the Smart
Tailing Dump project which focuses on the analysis
of satellite radiolocation data to track potential strata
movements with a millimetre accuracy.
Concentrator conveyor contaminant
identification system
The Digital Lab won the gold award for this initiative
at the Mine Digital contest held as part of the Minex
Russia geological forum.
The system uses artificial intelligence technology
to recognise non-metallic matter on the conveyor
which, if entering the concentrator’s crusher, can
damage the equipment. The system will reduce
the wear of crushing equipment and the frequency
of unscheduled repairs, and is planned to be launched
in the mid-term across all of Nornickel’s sites.
«NORNICKEL»
Annual report 2019
Short circuit detection in copper
electrolysis at metallurgical plants
An integrated hardware/software solution has
been developed to detect short circuits in copper
electrolysis, stabilising the electrolysis process
and increasing the output of copper cathodes.
Drones for aerial surveillance of hard-
to-reach areas
Nornickel is developing drones capable of video
recording and autonomous movement deep
underground without relying on GPS. The drones
will be used to inspect the condition of facilities
in hard-to-reach areas, enabling faster inspections,
reduced diagnostic costs, and most importantly,
improved safety. Nornickel has also designed drones
for automatic scanning of mine areas that are out
of bounds for employees, which will also prevent
unscheduled shutdowns and accidents.
Mine surveying robot
Nornickel has piloted a robotic system capable
of laser scanning and autonomous movement
in workings, which enables high-quality 3D surveying
including for hard-to-reach areas. The Company
will be able to use the data feed from the robot
for integration with its geological modelling and mine
planning system.
Industrial exoskeletons
In 2019, Nornickel made its first-ever public
presentation of an exoskeleton system developed
jointly with the South-West State University.
The presentation featured rapid training and testing
of exoskeletons on a testing ground, providing
the companies in the audience with an opportunity
to get a first-hand feel for the new solution.
The presentation generated great interest from many
companies, and as a result several exoskeletons were
shipped for testing to production sites of several
Russian metals companies. The exoskeletons were
also presented by Nornickel at an advanced project
exhibition held by the Agency for Strategic Initiatives.
Industrial exoskeletons are designed for use in harsh
environments, helping to resolve health and safety
issues and improve operational efficiency. An
exoskeleton is put on over the safety workwear
and is attached to the person’s body by special straps.
It can help persons lifting or carrying weights of up
to 60 kg by taking up to 90% of the weight. Thanks
to its small size, an exoskeleton can be used in hard-
to-reach areas inaccessible to specialised machinery.
Nornickel’s exoskeletons have some smart features:
apart from the exoskeleton itself, the system also
includes an onboard computer to monitor ambient air
pollution concentrations, temperature, illuminance
levels, and the user’s operating modes in real time.
H&S compliance monitoring solution
Health and safety violations are detected
and recorded by video cameras using machine vision
and artificial intelligence. The system drives employee
accountability, simplifies monitoring and reduces
accidents at work.
104
105
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix WHY
WE
DO
THIS
We are looking
for solutions
to drive operational
efficiency within
the existing asset
portfolio and ease
the workload of
metallurgists
Digital Lab
Nornickel actively deploys digi-
tal technologies to address local
production tasks. Its R&D unit
Digital Lab has been active for
almost two years now
moved into large-
scale rollout
6 INITIATIVES
53 INITIATIVES
Digital Lab
worked on
FINANCIAL
PERFORMANCE (MD&A)
2019 HIGHLIGHTS
• Consolidated revenue increased 16% y-o-y
to USD 13.6 billion owing to higher production
volumes of all key metals and growth of palladium
and nickel prices;
• EBITDA expanded 27% y-o-y to USD 7.9 billion
owing to higher metal revenue and tight control
of operating expenses, with EBITDA margin
reaching 58%. Reported EBITDA includes negative
impact of the USD 190 million provisions accrued
in respect of the upcoming shutdown of certain
production facilities at Kola Division;
• EBITDA generated by the Bystrinsky project
that was fully commissioned in September 2019
amounted to USD 349 million;
• CAPEX decreased 15% y-o-y to USD 1.3 billion
owing to the completion of large investment
projects in 2018;
• The Company made final investment decisions
on strategic growth projects such as the expansion
of the Talnakh concentrator (TOF-3 project)
and the development of South Cluster mining
project and also updated its environmental
programme, which is scheduled to go into active
construction phase in 1H2020;
• Net working capital increased to USD 1.0 billion
in line with the medium-term target level;
• Free cash flow amounted to USD 4.9 billion, almost
unchanged y-o-y;
• Net debt/EBITDA ratio decreased to 0.9x
as of December 31, 2019;
• Cash interest paid decreased 17% y-o-y
to USD 460 million owing to the ongoing
optimization of debt portfolio;
• At the annual Capital Markets Day in November,
the Company provided its strategic vision until
2030 with the focus on development prospects
of Taimyr mining operations, debottlenecking
of downstream assets and dramatic reduction
of sulfur dioxide emissions at both key operating
units in Russia: Polar division and Kola MMC.
RECENT DEVELOPMENTS
• On January 14, 2020, the Company paid
interim dividend for the nine months of 2019
in the amount of RUB 604.09 (approximately
USD 9.9) per ordinary share for the total
of approximately USD 1.6 billion;
• On February 20, 2020, the Company entered
into agreement to revise terms and conditions
of the USD 2.5 billion syndicated term loan
originally signed in December 2017 with a group
of international banks, whereby increasing the total
facility amount to USD 4.15 billion, reducing
the interest rate and rescheduling the repayment
of outstanding amount from the period
of December 2020 - December 2022 to the period
of February 2023 - February 2025.
Key corporate highlights
USD million (unless stated otherwise)
Revenue
EBITDA1
EBITDA margin
Net profit
Capital expenditures
Free cash flow2
Net working capital
Net debt
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
«NORNICKEL»
Annual report 2019
2018
11,670
6,231
53%
3,059
1,553
4,931
867
7,051
5,160
1.1x
0.8x
21.3
Change,%
16%
27%
5 p.p.
95%
(15%)
(1%)
14%
0%
(4%)
(0.2x)
(0.2x)
23%
2019
13,563
7,923
58%
5,966
1,324
4,889
985
7,060
4,952
0.9x
0.6x
26.3
In 2H2019, the Group updated its management
accounting system in line with business changes.
As a result, the South Cluster segment was separated
from GMK Group segment in 2019.
Revenue of Other non-metallurgical segment
decreased 7% to USD 1,412 million. Lower sales
volumes of Palladium Fund were partly compensated
by higher palladium prices.
In 2019, revenue of Group GMK segment increased
42% to USD 13,836 million. This was primarily
driven by the growth of intersegmental sales revenue
due to the launch of direct sales of semi-products
to KGMK Group, which was additionally supported
by higher refined metals production volumes
and palladium price.
In 2019, EBITDA of GMK Group segment increased
44% to USD 9,522 million owing primarily to higher
revenue and depreciation of Russian rouble. EBITDA
of GMK Group segment included profit from the sale
of semi-products to Group KGMK segment, which
was eliminated from EBITDA of the Group.
The revenue of South cluster segment amounted
to USD 864 million.
The revenue of Group KGMK segment increased
more than three times to USD 3,115 million due
to the launch of direct sales of semi-products
supplied by GMK Group segment.
Revenue of NN Harjavalta increased 14%
to USD 1,172 million. Higher sales volumes were
supported by higher nickel price.
Revenue of GRK Bystrinskoye amounted to USD 201
million, which included sales of semi-products
since the full commissioning of Bystrinsky project
in September 2019.
The EBITDA of South cluster segment amounted
to USD 475 million.
EBITDA of Group KGMK segment decreased 69%
to USD 58 million primarily owing to the start
of direct purchases of GMK Group segment
semi-products.
EBITDA of NN Harjavalta increased by USD 3 million
to USD 74 million.
EBITDA of GRK Bystrinskoye segment increased
by USD 253 million and amounted to USD 349 million
due to higher production volumes.
EBITDA of Other non-metallurgical segment
decreased 38% to USD 31 million following one-off
expenses in 2019.
Revenue of Other mining segment increased 23%
to USD 133 million mostly driven by higher semi-
products sales volumes and palladium price.
EBITDA of Unallocated segment insignificantly
changed 3% to a negative USD 785 million.
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 (at the rate of the Board of Directors meeting date) and deposits with maturity of more than 90 days.
4/ Paid during the current period.
108
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Key segmental highlights1
USD million (unless stated otherwise)
Revenue
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Eliminations
EBITDA
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Eliminations
Unallocated
EBITDA margin
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Sales volume and revenue
Index
Metal sales
Group
Nickel, thousand tonnes2
– from own Russian feed
– from 3d parties feed
– in semi-products4
Copper, thousand tonnes2,3
– from own Russian feed
– in semi-products4
2019
13,563
13,836
864
3,115
1,172
201
133
1,412
(7,170)
7,923
9,522
475
58
74
349
(31)
31
(1,770)
(785)
58%
69%
55%
2%
6%
n.a.
(23%)
2%
2018
11,670
9,742
–
911
1,026
8
108
1,514
(1,639)
6,231
6,602
–
190
71
96
(6)
50
(13)
(759)
53%
68%
n.a.
21%
7%
n.a.
(6%)
3%
Change,%
16%
42%
p.p.
3x
14%
n.a.
23%
(7%)
4x
27%
44%
n.a.
(69%)
4%
4x
5x
(38%)
n.a.
3%
5 p.p.
1 p.p.
n.a.
(19 p.p.)
(1 p.p.)
n.a.
(17 p.p)
(1 p.p.)
2019
2018
Change,%
230
213
3
14
479
433
46
217
208
2
7
455
431
24
6%
2%
50%
2x
5%
0%
92%
Index
Palladium, koz2
– from own Russian feed
– in semi-products4
Platinum, koz2
– from own Russian feed
– in semi-products4
Rhodium, koz2
– from own Russian feed
– in semi-products4
Cobalt, thousand tonnes2
– from own Russian feed
– from 3d parties feed
Gold, koz2,3
– from own Russian feed
– in semi-products4
Average realized prices of refined metals produced by the Group
Nickel (USD per tonne)
Copper (USD per tonne)
Palladium (USD per oz)
Platinum (USD per oz)
Rhodium (USD per oz)
Cobalt (USD per tonne)
Gold (USD per oz)
Revenue, USD million5
Nickel
– including semi-products
Copper
– including semi-products
Palladium
– including semi-products
Platinum
– including semi-products
Other metals
– including semi-products
Revenue from metal sales
Revenue from other sales
Total revenue
«NORNICKEL»
Annual report 2019
2018
2,974
2,913
61
668
657
11
62
62
–
4
3
1
161
155
6
13,531
6,566
1,025
877
2,194
68,604
1,264
3,013
175
2,977
144
3,674
98
596
20
702
55
10,962
708
11,670
Change,%
0%
(1%)
61%
7%
6%
45%
26%
11%
100%
75%
67%
2x
46%
19%
9x
6%
(8%)
49%
(2%)
80%
(61%)
10%
12%
63%
(3%)
78%
37%
98%
5%
35%
30%
3x
17%
1%
16%
2019
2,988
2,890
98
714
698
16
78
69
9
7
5
2
235
184
51
14,355
6,047
1,524
862
3,948
26,756
1,393
3,388
285
2,877
257
5,043
194
628
27
915
172
12,851
712
13,563
1/ Segments are defined in the consolidated financial statements.
2/ All information is reported on the 100% basis, excluding sales of refined metals purchased from third parties and semi-products purchased
from Nkomati.
3/ Includes semi-products, produced by GRK “Bystrynskoe” after ramp-up of Bystrinsky project that was fully commissioned in September 2019.
4/ Metal volumes represent metals contained in semi-products.
5/ Includes metals and semi-products purchased from third parties and Nkomati. Includes revenue from semi-products, produced by GRK
“Bystrynskoe”, after ramp-up of Bystrinsky project that was fully commissioned in September 2019.
110
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix REVENUE
NICKEL
Nickel sales contributed 26% to the Group’s total
metal revenue in 2019, down from 27% in 2018.
A 1 p.p. decrease was driven by palladium price that
outperformed nickel price in the reported period.
In 2019, nickel revenue was up by 12% amounting
to USD 3,388 million. The growth was driven both
by higher realized nickel price (+USD 188 million)
and increase in sales volume (+USD 187 million).
The average realized price of refined nickel increased
6% to USD 14,355 per tonne in 2019 vs USD 13,531
per tonne in 2018.
Sales volume of refined nickel produced from own
Russian feed, increased by 2% (or +5 thousand
tonnes) to 213 thousand tonnes owing to higher
production volumes.
Sales volume of nickel produced from third-party
feed increased 50% to 3 thousand tonnes primarily
due to the increased processing of third-party feed
at Harjavalta refinery.
In 2019, sales of nickel in semi-products increased
63% to USD 285 million primarily owing to higher
sales volume of semi-products.
COPPER
In 2019, copper sales accounted for 22%
of the Group's total metal sales, decreasing 3%
(or -USD 100 million) to USD 2,877 million primarily
owing to lower realized price (-USD 227 million)
which was partly compensated by higher sales
volume (+USD 127 million).
The average realized price of refined copper
decreased 8% from USD 6,566 per tonne in 2018
to USD 6,047 per tonne in 2019.
Physical volume of refined copper sales
from the Company’s own Russian feed remained
unchanged at 433 thousand tons.
Revenue from copper in semi-products in 2019
increased 78% to USD 257 million primarily due
to the ramp-up of Bystrinsky project that was fully
commissioned in September 2019.
PALLADIUM
In 2019, palladium accounted for 39% of total
metal revenue, increasing 5 p.p. y-o-y. Palladium
revenue increased 37% (or +USD 1,369 million)
to USD 5,043 million due to higher realized price
(+USD 1,484 million) and increased sales volume
(+USD 34 million).
The average realized price of refined palladium
increased 49% from USD 1,025 per troy ounce in 2018
to USD 1,524 per troy ounce in 2019.
Physical volume of refined palladium sales
from the Company’s own Russian feed remained
stable y-o-y and amounted to 2,890 thousand
troy ounces in 2019. Higher base effect in 2018
(from the sale of metal from stock accumulated
in the Company’s Palladium Fund in 2017) was
compensated by higher sales volume in 2019 due
to release of work-in-progress inventory.
Revenue of palladium in semi-products increased
98% to USD 194 million in 2019 primarily owing
to higher sales volume of semi-products.
In 2019, revenue from the resale of palladium
purchased from third parties amounted
to USD 444 million (vs USD 593 million in 2018).
«NORNICKEL»
Annual report 2019
PLATINUM
OTHER METALS
In 2019, platinum sales increased 5%
(or +USD 32 million) to USD 628 million
and remained at 5% of the Group’s total metal
revenue. The higher sales volume (+USD 42 million)
was partly compensated by decline of realized
platinum price (-USD 10 million).
Physical volume of refined platinum sales
from the Company’s own Russian feed in 2019
increased 6% (or +41 thousand troy ounces)
to 698 thousand troy ounces primarily due to release
of PGM work-in-progress inventory.
Revenue of platinum in semi-products in 2019
increased 35% to USD 27 million primarily due
to higher sales volume of semi-products.
In 2019, revenue from other metals increased 30%
(or +USD 213 million) to USD 915 million. This
was primarily due to higher revenue from gold
(+USD 123 million) mainly due to the ramp-up
of Bystrinsky project, higher revenue from rhodium
(+USD 155 million) resulting from the increase
in price, which was partly negatively compensated
by decrease in cobalt revenue (-USD 108 million)
primarily due to price decrease.
OTHER SALES
In 2019, other sales increased 1% to USD 712 million.
Revenue growth in real terms that was primarily
driven by higher fuel sales volumes was offset
by the negative effect of Russian rouble depreciation.
Other sales
USD million (unless stated otherwise)
Air transport
Fuel-power complex
Water transport
Food retail
Zapolyarye Health Resort
Other
Total
2019
250
184
52
38
19
169
712
2018
Change, %
257
178
56
38
17
162
708
(3%)
3%
(7%)
0%
12%
4%
1%
112
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix COST OF SALES
COST OF METAL SALES
In 2019, the cost of metal sales was unchanged
and amounted to USD 4,509 million. Main factors
contributing to it were as follows:
•
Increase in cash operating costs by 2% (or +USD
75 million);
Increase in depreciation and amortisation by 13%
(or +USD 82 million);
•
• Change in metal inventories y-o-y leading to cost
of metal sales decrease of USD 153 million.
CASH OPERATING COSTS
In 2019, total cash operating costs increased 2%
(or +USD 75 million) to USD 3,818 million.
Cash operating costs
USD million
Labour
Materials and supplies
Purchases of refined metals for resale
Purchases of raw materials and semi-products
Third party services
Mineral extraction tax and other levies
Electricity and heat energy
Fuel
Transportation expenses
Sundry costs
Total cash operating costs
Depreciation and amortisation
(Increase)/decrease in metal inventories
Total cost of metal sales
The positive effect of Russian rouble depreciation
was fully offset by inflationary growth of cash
operating costs.
Cash operating costs related to Bystrinsky
project after its full commissioning amounted
to USD 62 million in 2019.
2019
1,295
712
438
402
239
221
155
101
88
167
3,818
735
(44)
4,509
2018
1,283
727
430
436
200
212
143
87
70
155
3,743
653
109
4,505
Change,%
1%
(2%)
2%
(8%)
20%
4%
8%
16%
26%
8%
2%
13%
n.a.
0%
«NORNICKEL»
Annual report 2019
Labour
Materials and supplies
In 2019, labour costs increased 1% (or USD 12 million)
to USD 1,295 million amounting to 34% of the Group’s
total cash operating costs driven by the following:
•
-USD 44 million - cost decrease owing
to the Russian rouble depreciation against US
Dollar;
• +USD 52 million - increase in real terms primarily
driven by the indexation of salaries and wages
in line with the terms of collective bargaining
agreement;
• +USD 15 million - cost increase driven by ramp-up
of Bystrinsky project that was fully commissioned
in September 2019;
-USD 15 million - cost decrease following
the decrease of production staff headcount
primarily due to disposal of a subsidiary.
•
Purchases of raw materials
and semi-products
In 2019, purchases of raw materials and semi-products
decreased 8% (or USD 34 million) to USD 402 million
driven by the following:
•
-USD 15 million - cost decrease owing
to the Russian rouble depreciation against
US Dollar;
-USD 73 million - cost decrease owing to lower
volumes of Rostec concentrate processing;
• +USD 29 million - cost increase owing to higher
•
volumes of purchased semi-products from Boliden
for processing at NN Harjavalta;
• +USD 24 million - cost increase driven by higher
purchases of Nkomati concentrate.
Purchases of refined metals for resale
In 2019, expenses related to purchase
of refined metals for resale increased 2%
to USD 438 million owing to the increase in palladium
price, most of which was offset negatively by decrease
of purchased volume.
In 2019, materials and supplies decreased 2%
(or USD 15 million) to USD 712 million driven
by the following factors:
•
-USD 18 million - positive effect of the Russian
rouble depreciation;
• +USD 13 million - cost increase driven
•
by commissioning of Bystrinsky project;
-USD 10 million - lower materials and supplies
expenses primarily related to lower consumption
of materials, which was partly offset by inflationary
growth of expenses.
Third-party services
In 2019, cost of third party services increased 20%
(or USD 39 million) to USD 239 million mainly
driven by:
•
-USD 7 million - positive effect of the Russian
rouble depreciation;
• +USD 15 million - costs increase primarily due
to higher PGM refining costs due to release
of PGM work-in-progress inventory and tariffs
revision;
• +USD 10 million - cost increase owing
•
to the commissioning of Bystrinsky project;
•USD 13 million - cost increase mainly driven
by higher Nkomati stripping costs.
Mineral extraction tax and other levies
In 2019, mineral extraction tax and other levies
increased by 4% (or USD 9 million) to USD 221
million driven by the following:
•
-USD 7 million - positive effect of the Russian
rouble depreciation;
• +USD 13 million - cost increase driven by higher
volumes of ore mined.
114
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Electricity and heat energy
Sundry costs
In 2019, electricity and heat energy expenses
increased by USD 12 million to USD 155 million
driven by the following:
•
-USD 7 million - positive effect of the Russian
rouble depreciation;
• +USD 14 million - cost increase driven
by inflationary growth of expenses;
• +USD 3 million - cost increase owing
to the commissioning of Bystrinsky project.
Fuel
In 2019, fuel expenses increased 16% (or
USD 14 million) to USD 101 million driven
by the following:
•
-USD 3 million - positive effect of the Russian
rouble depreciation;
• +USD 6 million - higher oil price;
• +USD 5 million - cost increase driven
by commissioning of Bystrinsky project.
Transportation expenses
In 2019, transportation expenses increased 26%
(or +USD 18 million) to
USD 88 million driven by the following:
•
-USD 1 million - positive effect of the Russian
rouble depreciation;
• +USD 9 million - costs increase driven by higher
volumes of third-party transportation services
in Norilsk industrial region;
• +USD 10 million - cost increase owing
to the commissioning of Bystrinsky project.
In 2019, sundry costs increased 8%
(or +USD 12 million) to USD 167 million mainly
driven by inflationary growth of expenses
and commissioning of Bystrinsky project.
Depreciation and amortisation
In 2019, depreciation and amortisation
expenses increased 13% (or USD 82 million)
to USD 735 million.
Positive effect of Russian rouble depreciation
amounted to -USD 19 million.
Depreciation charges in real terms increased
by USD 101 million mainly due to transfers
from construction in progress to production assets
and full commissioning of Bystrinsky project.
(Increase)/decrease in metal inventories
In 2019, comparative effect of change in metal
inventory amounted to -USD 153 million resulting
in a decrease of cost of metal sales, primarily driven
by accumulation of work -in-process and semi-
products in 2019 excluding the changes in Rostec
concentrate.
«NORNICKEL»
Annual report 2019
COST OF OTHER SALES
In 2019, cost of other sales increased
by USD 62 million to USD 684 million.
Cost of other sales increased primarily due to higher
fuel sales, higher repairs and inflationary cost
growth, which were partly positively compensated
by the Russian rouble depreciation.
SELLING AND DISTRIBUTION EXPENSES
Selling and distribution expenses
USD million
Marketing expenses
Transportation expenses
Staff costs
Other
Total
In 2019, selling and distribution expenses increased
27% (or USD 25 million) to USD 117 million
primarily due to increase in marketing expenses
(USD 14 million).
2019
2018
Change,%
45
43
15
14
117
31
39
14
8
92
45%
10%
7%
75%
27%
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses
USD million
Staff costs
Third party services
Taxes other than mineral extraction tax and income tax
Depreciation and amortisation
Transportation expenses
Rent expenses
Other
Total
2019
601
117
77
69
15
5
54
938
2018
Change,%
569
96
103
38
9
23
52
890
6%
22%
(25%)
82%
67%
(78%)
4%
5%
In 2019, general and administrative expenses
increased 5% (or USD 48 million) to USD 938 million.
Positive effect of Russian rouble depreciation
amounted to -USD 24 million. Changes of the general
and administrative expenses in real terms were
primarily driven by the following:
• +USD 48 million – increase in staff costs mainly
due to one-off payments related to management
bonuses, as well as salaries indexation;
• +USD 23 million – increase of third party services
related to the automatization of production
processes and roll out of digital technologies;
-USD 24 million – reduction of property tax owing
to changes in tax legislation in 2019.
•
116
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix OTHER OPERATING EXPENSES
Other operating expenses, net
USD million
Social expenses
Provision on production facilities shut down
Change in other provisions
Net income earned during the pre-commissioning stage
Other, net
Total
2019
224
190
39
(192)
42
303
2018
207
–
21
(106)
(27)
95
Change,%
8%
100%
86%
81%
n.a.
3x
In 2019, other operating expenses, net increased
by USD 208 million to
USD 303 million driven by the following factors:
• Provision related to shut down of certain
• Net income generated by GRK “Bystrinskoye”
from products sale during the hot commissioning
stage (-USD 86 million);
• Change in other provisions, primarily including
production facilities located at Kolskaya GMK
(+USD 190 million);
provision for obsolete and slow-moving inventory
(+USD 18 million).
FINANCE COSTS
Finance costs, net
USD million
Interest expense, net of amounts capitalised
Unwinding of discount on provisions and payables
Changes in fair value of non-current liabilities
Interest expense on lease liabilities
Fair value (gain)/loss on the cross-currency interest rate swap
Other, net
Total
2019
340
84
64
12
(199)
5
306
2018
382
100
46
2
51
(1)
Change,%
(11%)
(16%)
39%
6x
n.a.
n.a.
580
(47%)
The 47% decrease in finance costs in 2019
was primarily attributed to a change in the fair
value of cross-currency interest rate swaps due
to appreciation of Russian ruble against the US dollar
as of December 31, 2019 as compared to the exchange
rate as of December 31, 2018.
Furthermore, despite the increase in total debt,
the average cost of the Group's debt portfolio
decreased moderately owing to the monetary policies
easing undertaken by the Federal Reserve of the USA
and the Bank of Russia, both of which had a positive
impact on debt obligations with a floating interest rate.
In 2019, Nornickel continued to optimize its debt
portfolio aiming at the extension of debt maturity,
which allowed to optimize a number of the Group’s
bilateral credit facilities totaling USD 962 million.
INCOME TAX EXPENSE
In 2019 income tax expense increased 85%
to USD 1 558 million driven mostly by the increase
of taxable profit.
The effective income tax rate in 2019 of 20.7% was
above the Russian statutory tax rate of 20%, which
was primarily driven by non-deductible social
expenses.
The breakdown of the income tax expense
USD million
Current income tax expense
Deferred tax (benefit)/expense
Total
The breakdown of the current income tax expense by tax jurisdictions
USD million
Russian Federation
Finland
Rest of the world
Total
EBITDА
In 2019, EBITDА increased 27% (or
+USD 1,692 million) to USD 7,923 million
with the EBITDA margin amounting to 58%
(up from 53% in 2018) owing to higher metal
revenue and stringent cost control.
EBITDA
USD million
Operating profit
Depreciation and amortisation
Impairment of non-financial assets
EBITDA
EBITDA margin
«NORNICKEL»
Annual report 2019
2018
Change,%
812
31
843
2018
789
11
12
812
2x
n.a.
85%
Change,%
2x
45%
2x
2x
2018
5,416
765
50
6,231
53%
Change,%
30%
19%
n.a.
27%
5 p.p.
2019
1,924
(366)
1,558
2019
1,883
16
25
1,924
2019
7,036
911
(24)
7,923
58%
118
119
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix STATEMENT OF CASH FLOWS
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
Free cash flow
Interest paid
Dividends paid
Other financing activities
Net cash used in financing activities
Effects of foreign exchange differences on balances of cash and cash
equivalents
Net change in cash and cash equivalents
2019
8,226
(307)
(1,910)
6,009
(1,324)
204
(1,120)
4,889
(460)
(4,166)
1,003
(3,623)
130
1,396
2018
6,339
941
(787)
6,493
(1,553)
(9)
(1,562)
4,931
(551)
(3,369)
(384)
(4,304)
(91)
536
Change,%
30%
n.a.
2x
(7%)
(15%)
n.a.
(28%)
(1%)
(17%)
24%
n.a.
(16%)
n.a.
3x
In 2019, free cash flow remained stable
at approximately USD 4.9 billion. Lower cash
generated from operating activities was almost offset
by lower cash used in investing activities.
In 2019, net cash generated from operating activities
decreased 7% to USD 6.0 billion primarily driven
by comparative effect of working capital increase
in 2019 (versus decrease in 2018) and increase
in income tax payments due to higher taxable profit
and changes in intra-group operations which was
partly positively offset by increase in EBITDA in 2019.
Interest paid reduced 17% to USD 460 million
as a result of the optimization of debt portfolio.
Reconciliation of the net working capital changes
between the balance sheet and cash flow statement
is presented below.
In 2019, CAPEX decreased 15% (-USD 229 million)
primarily due to adjustment of sulfur project
schedule and optimization of certain production
projects investment schedules.
Reconciliation of the net working capital changes between the balance sheet and cash flow statement
USD million
Change of the net working capital in the balance sheet
Foreign exchange differences
Change in income tax payable
Change of long term components of working capital included in CFS
Settlement of tax reserves
Other changes including reserves
Change of working capital per cash flow
2019
(118)
112
(26)
(158)
(9)
(108)
(307)
2018
1,282
(277)
(5)
131
(143)
(47)
941
Capital investments breakdown by project
USD million
Polar Division, including:
Skalisty mine
Taymirsky mine
Komsomolsky mine
Oktyabrsky mine
Talnakh Concentrator
Sulfur project
Other Polar Division project
Kola MMC
Bystrinsky (Bystrinsky) project
Other production projects
Other non-production assets
Total
«NORNICKEL»
Annual report 2019
2019
502
58
67
54
27
14
24
258
221
103
489
9
2018
696
218
71
44
40
29
36
258
292
168
386
11
1,324
1,553
Change,%
(28%)
(73%)
(6%)
23%
(33%)
(52%)
(33%)
0%
(24%)
(39%)
27%
(18%)
(15%)
DEBT AND LIQUIDITY MANAGEMENT
Debt and liquidity management
USD million
Non-current loans and borrowings
Current loans and borrowings
Lease liabilities
Total debt
Cash and cash equivalents
Net debt
Net debt /12M EBITDA
As of 31
December 2019
As of 31
December 2018
Change,
USD million
Change,%
8,533
1,087
224
9,844
2,784
7,060
0.9x
8,208
209
22
8,439
1,388
7,051
1.1x
325
878
202
1,405
1,396
9
(0.2x)
4%
5x
10x
17%
2x
0%
As of December 31, 2019, the Company’s total
debt increased by 17% (or USD +1,405 million)
to USD 9,844 million as compared to December
31, 2018. The increase of total debt owed to new
debt raised in the second half of 2019 in the form
of two bond issues on the Russian and international
debt capital markets, respectively, for a total amount
of more than USD 1.1 billion, and recognition
of obligations under lease contracts stemming
from application of IFRS 16 Leases, which became
effective on January 1, 2019.
In spite of the increase in total debt, the Company's
net debt remained virtually unchanged due
to doubling of the amount of cash and cash
equivalents. Net debt/12M EBITDA ratio decreased
from 1.1x as of December 31, 2018 to 0.9x
as of the end of 2019 entirely due to an increase
in 12M EBITDA.
On February 12, 2019, international rating agency
Moody’s upgraded the Company’s credit rating
from “Baa3” with “Positive” outlook to “Baa2”
with “Stable” outlook in the wake of change
of Russia's credit rating to investment grade “Baa3”
with “Stable” outlook. As of December 31, 2019,
Nornickel had investment grade credit ratings
assigned from all three international rating agencies
Fitch, Moody’s and S&P Global, and Russian rating
agency “Expert RA”.
120
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Sustainable development
ustain
able
Development
124 Human resources
134 Health and safety
140 Environment
146 Climate change
154 Social and charity initiatives
S HUMAN RESOURCES
One of the Company’s focus areas is to nurture
corporate culture aimed at boosting employee
performance and commitment to delivering against
targets. Nornickel views its employees as its key
asset and keeps investing in their professional
and personal development, while also creating
an environment promoting employee performance
and engagement.
The Company makes sure all employees enjoy
equal rights and treatment regardless of gender,
age, race, nationality, and origin. Nornickel provides
all its talent with the same opportunities to unlock
their potential and promotes them solely on the basis
of professional competencies.
Respect for each employee and their rights lies
at the heart of Nornickel’s business. The protection
of human rights is reflected in a number of by-laws,
including the Company’s Code of Business
Ethics, Personal Data Policy, Reguations
on Anti-Embezzlement, and Human Rights Policy.
The Company does not use child labour.
Nornickel is committed to achieving operational
excellence and has implemented standard
approaches to developing its business unit structures
and put together a list of job titles to standardize job
creation.
The Group’s average headcount (people)
AWARDS AND INDUSTRY
RECOGNITION
In 2019, Nornickel entered a number of best
employers lists:
• Forbes Global 2000: The World’s
Best Employers: No. 1 among Russian
companies; No. 36 among 2,000 the world’s
best employers. Nornickel is the only
Russian company in the Top 100 of the list
• The World’s Most Attractive Employers
by Universum: No. 1 among students
and professionals in the Metals & Mining
category
• HeadHunter’s Russian Employers Rating:
No. 4 among Top 100 employers
In 2019, the Group’s average
headcount totalled
73.7
thousand people
Location
Russia
Africa
Europe
Asia
USA
Australia
TOTAL
2017
77,991
605
326
13
10
5
2018
74,926
617
330
13
10
5
2019
72,782
577
326
16
9
5
78,950
75,901
73,715
«NORNICKEL»
Annual report 2019
STAFF COMPOSITION
The decrease in the average headcount in 2019
was caused by structural changes within the Group
and implementation of a programme to improve
labour productivity and reduce costs.
Headcount breakdown by age
and gender (%)1
Over 50 years
13.0
5.8
30–50 years
45.5
1,9
23
19.6
Nornickel is among the main employers in the Norilsk
Industrial District and Kola Peninsula, hiring 67%
and 17% employees, respectively. Local population
accounts for 99.7% of the headcount.
Under 30 years
12.4
3.7
Male
Female
Headcount by region (%)
Неadcount breakdown by category (%)1
5
Krasnoyarsk Region
(except the Norilsk
Industrial District)
7
Moscow and other
Russian regions
17
Murmansk
Region
4
Zabaykalsky Region
1
10.5
Foreign operations
Male managers
3.5
Female managers
129
вопросов
66
Norilsk
Industrial
District
18
White-collar
employees
129
вопросов
68
Blue-collar
employees
RECRUITMENT
PARTNERSHIPS WITH UNIVERSITIES
To make jobs in the metals and mining industry
more attractive for young people and make sure
highly skilled specialists are available, Nornickel
pays special attention to collaboration with Russian
universities. In 2019, the Company selected
and invited 322 students from 25 Russian industry-
oriented universities to take part in its Career
Start-Up programme. The students learned practical
skills as part of their apprenticeship at the Company’s
major facilities, while also gaining unique knowledge
by taking part in the Conquerors of the North
business game. The initiative was specifically
designed to develop knowledge and competencies
most sought after by Nornickel.
Over the summer, the programme participants
received hands-on training and competed in a multi-
stage business game with a focus on teamwork
to try and tackle some of the Company’s real
tasks. The Company engaged 20 of its top experts
to provide mentorship support to the contestants.
Nornickel was the first company in the Russian
mining industry to engage students and graduates
in solving actual business challenges. In 2019,
the project resulted in the Group employing
93 participants of the business game.
Nornickel is committed to promoting engineering
professions among school graduates and university
students and raising the profile of engineering
education in Russia. In 2019, Nornickel sponsored
Cup Technical and Metall Cup, Russian
and international case-solving championships
among students of technical universities. During
the contest, students dealt with cases related
to Nornickel’s operations, gaining insight into
the Company’s real business processes and proposed
their own solutions.
In 2019, an apprenticeship programme kicked
off for the first time in the Head Office, taking
on board the best graduates of the leading Moscow
universities. Upon completion of the programme,
seven out of nine apprentices were offered jobs
in various business units of the Head Office.
1/ Russian operations.
124
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ASSISTANCE PROGRAMME
Financing under the Assistance programme
(USD mln)
Since the Company’s production sites are located
in remote areas, Nornickel actively sources
personnel for its production facilities from other
regions of Russia. 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 Assistance
Programme) aims at helping with getting adjusted
to the new environment. The programme targets
not only highly qualified specialists and managers,
but also young talent and workers with hard-to-
find skills. Today, it covers 1,530 of the Company’s
employees, including 352 new participants who
joined in 2019. With this programme, the Company
seeks to provide comfortable living conditions
for the invited employees and reimburse
their relocation and resettlement costs.
PERSONNEL DEVELOPMENT
In 2019, Nornickel’s work to develop corporate
culture centred around:
• Personnel engagement
• Corporate dialogues and forums
• Comprehensive training in corporate culture
• Training of corporate coaches
• Promotion and communication
ENGAGEMENT
Nornickel goes through the engagement management
cycle every year to maintain an engaging environment.
This cycle includes several phases: conducting
the “Let Everyone Be Heard. What Do You Think?”
survey; analysing survey findings; development
and implementation of resulting solutions/initiatives.
In 2019, the engagement index grew by 6 p. p.
and the Senior Management index – by 10 p. p.
The survey includes polling
and focus group research among 75,000 employees
from 32 Nornickel’s enterprises. All governance
levels, from units of individual enterprises
to the Group as a whole, are involved in both survey
data analysis and development and implementation
of improvements. A total of 850 actions were
planned for 2019.
‘19
‘18
‘17
2.3
3.3
5.1
CORPORATE DIALOGUES
AND FORUMS
A project to enhance dialogue between
senior management and regular employees
has been underway for the second year now
to improve employee awareness, gain ownership
of the Company’s goals and values and develop trust
between labour and management. In 2019, the project
included 30 corporate dialogues, 35 communication
trainings for managers, 270 informal meetings,
Nornickel Live video conference and six video
interviews with Nornickel vice presidents. More than
400 managers were trained under the project. A total
of 5,500 Nornickel’s employees participated in these
initiatives.
Corporate culture and engagement workshops
were held at 10 functional conferences and as part
of Leaders of Nornickel, On the Path to Efficiency,
and IamHR educational corporate programmes. Total
coverage exceeded 1,000 people.
COMPREHENSIVE TRAINING
IN CORPORATE CULTURE
Training in corporate culture and promotion
of the Company’s values include programmes
at all levels from senior management to regular
employees.
Nornickel provides practical training in corporate
culture (based on the Company’s White Paper)
for its managers. A total of 49 practical training
sessions were attended by more than 500 managers
in 2019. An assessment of the training results
showed an increase of the Corporate Culture
Importance for Business index by 20 p. p.
and of the Understanding How to Nurture Corporate
Culture index, by 34 p. p.
«NORNICKEL»
Annual report 2019
All enterprises showed a much better alignment
of employee behaviour conformity with corporate
values Group-wide, with a 1.5–2 times increase
in average alignment revealed by the management
team survey. The Immediate Superiors Making
Decisions in Line with Corporate Values index was
at 62%, up by 7 p. p. from 2018.
In order to build a centre of excellence for corporate
value training and embedding, the Our Values
training module was developed, with 75 corporate
coaches competitively selected who were trained
and later delivered over 400 programmes based
on this module for more than 10,000 employees.
INTERNAL COMMUNICATIONS
Promotion and internal communications focused
on the coverage of engagement and corporate
culture events by the corporate media and web
portal. In total, 10 interviews were conducted
with vice presidents, 10 videos on corporate culture
were filmed, programme handouts (leaflets, flyers)
were prepared, the Nornickel Live website and brand
were updated, and a collection of corporate
culture materials featuring best practices of various
enterprises was published in 2019.
TALENT POOL
In 2019, the Company kept rolling out the talent
pool management system across its production
facilities to cover recruiting of lower and middle
line managers. The project was joined by Medvezhy
Ruchey, Polar Construction Company,
Norilsktransgaz, and Norilskgazprom. 250 new
succession pool members commenced their training
in the Corporate University. Manuals for mentors
and succession pool members including useful tools
and techniques for the development and application
of managerial skill were put together to supplement
classroom training.
CORPORATE DEVELOPMENT
PROGRAMME
The assessment of senior and middle manager
potential, performance and future development
continued in 2019. Over 500 managers were
assessed. In 2019, assessment focused on Top
100, first and second line managers of Operations.
Apart from the assessment outcome and future
development options, HR committees also
discussed the security of top positions and readiness
of candidates for succession in the near future.
As a result, successors were identified for 200 key
managerial positions.
The Leaders of Nornickel corporate development
programme involving 54 high-potential managers was
completed in April 2019. The programme focused
on project work to improve process efficiency
across the Company’s business units based on lean
manufacturing. During the last module, the programme
participants presented the results of their work
including activities to improve Nornickel’s business
processes to the Company’s management.
The Leaders of Nornickel programme uses a gradual approach. Everything
is designed to prepare its participants for project work. Surely, one
of the most important outcomes of the training is development of specific
business cases to help improve corporate business processes. However,
it offers even more added value. Although it cannot be measured,
the emotional part of training should not be overlooked. Friendships that
come from shared trainings stay to help participants in their future work.
As one of last year participants put it, ”Alumni are forever”. “It’s very well
said – we stay in touch even when the training is over.
Larisa Zelkova
Senior Vice President
for HR, Social Policy and Public
Relations
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Such programmes are in high demand
from both businesses and key management members.
A new group of managers commenced their training
under the Leaders of Nornickel 2.0 corporate
programme in September 2019. The programme consists
of four modules with each module including theory
training, practice effectively transforming knowledge
into specific skills, master classes, and project work.
55 managers enrolled on the programme, with most
selected through a contest. This year, there were three
applicants per place.
The On the Path to Efficiency corporate programme
for middle management kicked off in June 2019.
The programme focuses on developing managerial
competencies and executive reasoning, learning
continuous improvement tools and personnel
management practices. Training will run
for 10 months in three cities: Norilsk, Monchegorsk,
and Krasnoyarsk. The programme consists of five
modules and is attended by 139 participants. Each
participant’s performance – classroom training
engagement and activity level, homework between
modules, project work, participation in online
training, etc. – is monitored. The participants can
use the training portal not only to view the calendar
of events, select convenient training dates, complete
an assignment, communicate with a coach and other
participants, but also to see their current rating.
The programme uses state-of-the-art formats
and methods of adult training.
The IamHR corporate programme for professional
development of HR employees was completed
in March 2019. It aimed to improve the human
capital management function, promote interaction
between the business and HR, and introduce
the most advanced solutions and best practices
in HR management. The participants followed up
the programme by putting together a catalogue
of HR practices and management tools, a Guide
to Employee Relations. Interviewing a Candidate
and Ecofriendly Dismissal practical trainings included
master classes delivered as part of corporate
management training programmes.
In October 2019, the IamHR programme was followed
up with the IamHR Region programme for local HR
specialists in Kola MMC.
Also in 2019, the 360-Degree module based on SAP
HCM was developed for the annual 360-degree
competency review. Its implementation will enable
rolling out competence review to all enterprises
of the Group and developing a uniform system
for identification of management development
priorities. The review uses the corporate
competence model based on values and managerial
competencies. Depending on its results and relevant
feedback from one’s superior, each participant
can choose the right path for their development
and select required tools and methods
for the next year’s development from a special library
of development activities.
The implementation of a comprehensive
project to develop professional competencies
of the Company’s managers and white-collar
employees continued in 2019. Professional
competency models were developed for the health
and safety service, the operations of the Polar
Transport Division, the metallurgists of the Polar
Division, and Kola MMC. Over 1,000 employees
were assessed against the models with special
tests. The results were used to identify directions
and focus areas for future professional development.
In 2019, about 400 employees went through tailor-
made training programmes based on the results
of their professional competency assessment in 2018.
«NORNICKEL»
Annual report 2019
In 2019, the Company also continued implementing
professional standards. 60 professions were
analysed against 14 professional standards covering
about 5,000 employees. The Company is represented
and actively participates in the activities of the Board
for Professional Competencies in Mining and Metals
and the Board for Professional Competencies
in HR Management.
ENHANCING PROFESSIONAL
EXCELLENCE
With the reconfigured production cycle, upgraded
operations, new technologies, operating procedures
and professional standards, development
and implementation of new professional
qualifications set new requirements for employee
knowledge, skills, and competencies. The corporate
training framework must provide employees
with a quick and unhindered access to new
knowledge helping them master new professional
skills and receive training and development support
for horizontal and vertical job rotation.
The Group will continue employee competence
diagnostics and management across its enterprises
in 2020, building professional competency
models for functional and production divisions
of the Company, defining knowledge and skills
requirements for each position and developing a set
of test questions to assess professional competencies
of employees in temporary fill positions.
Nornickel intends to continue implementing
professional standards within the Company.
The Company’s involvement in the activities
of boards for professional competencies helps
enhance the national competency framework.
In 2019, the Company continued its efforts
to educate and upgrade its employees.
About 70,000 employees went through various
training and retraining programmes, with about a third
of them completing two different courses. A total
of 4,655 staff-hours of training were delivered
to 40,800 employees in corporate training centres.
An area of special attention is the use of advanced
technologies to train various categories of personnel.
In 2019, 6,500 employees attended online H&S
training sessions hinging on staff expertise.
The Company produced 58 distance learning H&S
courses, 33 videos (3D computer models), and seven
multimedia briefings for blue-collar professions.
The Company leverages internal expertise
and today’s formats to quickly produce new high-
quality interactive training courses to accomplish its
business tasks.
REMUNERATION
Remuneration of Nornickel’s employees depends
on the work complexity, individual expertise
and skills, and their personal contribution
to the Company’s performance.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Principles of remuneration:
•
Internal equity – remuneration management
is based on the job description and grading
methodology. The Company has a unified grading
system across all functions
• External competitiveness – remuneration is based
on the labour market data, with adjustments made
for a company’s focus, business location, and job
grades
• Performance-based incentives – pay level
is reviewed subject to the annual performance
assessment outcome
• Simplicity of the remuneration system – pay level
calculation and review procedures are transparent,
and employees know how they can improve
their remuneration
In 2019, one of the key tasks was to keep the grading
system up to date. The Company assessed
and reassessed more than 9,500 jobs. The grading
system was also introduced at newly established
or restructured enterprises.
In 2020, Nornickel will continue to update its
grading system and automate some job description
and assessment processes.
The remuneration package consists of fixed
and variable components (73% and 27%, respectively),
with the latter linked to the Company’s operating
performance and achievement of relevant KPIs.
Average monthly salaries of Nornickel’s employees
are much higher than the minimum living wage
in the Company’s operating regions.
«NORNICKEL»
Annual report 2019
In addition to salaries, Nornickel’s employees enjoy
a variety of benefits and compensations making up 7%
of the remuneration package, including the following:
• Voluntary health insurance and major accident
• One-off financial assistance to employees
at different life stages or in difficult life situations
• Complementary corporate pensions
• Other types of social benefits under the existing
coverage
• Discounted tours for health resort treatment
and recreation of employees and their families
• Reimbursements of round trip travel expenses
and baggage fees for employees and their families
living in the Far North and territories equated
thereto
collective bargaining agreements and local
regulations.
Nornickel’s employee benefit costs (per year)
Expenses
Total expenses (USD mln)
including per employee (USD)
2017
122.6
1,571
2018
127.6
1,703
2019
147.3
2,023
Minimum living wage in Nornickel’s operating regions
Remuneration package across the Group's Russian operations
Region
Murmansk Region
Norilsk Industrial District
Krasnoyarsk Region (excluding NID)
Moscow
Zabaykalsky Region
Average monthly salaries of Nornickel’s employees1
Currency
USD2
RUB ’000
2017
1,784
104.1
2018
1,780
111.6
RUB '000
USD
25.9
29.3
11.3
20.2
16.9
401
453
174
312
261
2019
1,835
118.8
Salary
Fixed
92% 8%
73%
27%
Variable (bonuses)
Regular bonuses
10%
17%
One-off bonuses
Benefits:
Voluntary health
insurance (VHI)
Reimbursement
of round trip
travel expenses
Financial assistance
Health resort
treatment
REWARDING PERFORMANCE
In 2018, MMC Norilsk Nickel approved its Award
Policy which sets out the goals, principles, rules,
requirements, and limitations of Nornickel’s awarding
activities. The Award Policy aims, first and foremost,
at employee development and performance
improvement. A new version of the Regulations
on Corporate Rewards and Incentives came out
in the first quarter of 2019 to implement the principles
of the Award Policy. In addition to existing awards,
these Regulations introduced nine new honorary
titles in Nornickel’s priority areas to be awarded
starting from 2019.
Underlying principles of the award policy
• Objective and transparent nomination
and awarding process. Nornickel uses objective,
relevant, and transparent criteria for each award,
on one hand, and ensures clear understanding
by the awarded employees and their colleagues
which achievements are recognised,
on the other; a perception that the award is fair
and well-deserved.
• Popular, attainable, and valuable awards. Nornickel
maintains a balance between employees’
desire to be awarded and the ease of getting
an award. The balance is struck by an objective
allocation of award quotas, transparency
and objectivity of procedures, and a significant
tangible and intangible value of rewards, awards,
and recognition events.
• Communication and awareness. Nornickel
ensures that the documents governing the Award
Policy, award conditions, criteria and procedures
for nomination and awarding, and the list
of award categories and awards are clearly stated
and available to personnel.
• Maximum awareness of award winners by all
employees. The award process is open and enjoys
various types of information support. Information
on the awarded employees is communicated
to staff via all internal communications channels.
• Frequency. Awarding campaigns and events
are evenly distributed throughout the calendar
year.
1/ Russian operations.
2/ Based on the average annual RUB/USD exchange rates of 58.35 in 2017, 62.71 in 2018, and 64.74 in 2019.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Employee awards in 2019 (ps)
REMUNERATION
FRAMEWORK
The key performance indicators adopted
by Nornickel serve to build a transparent incentive
and performance assessment system. Remuneration
is linked to KPIs approved for different job grades
and rewards employees exceeding targets.
Nornickel put in place its performance management
system in 2014, with assessment reliant on a variety
of key performance indicators (KPIs) covering
social responsibility, occupational safety, operating
efficiency, and capital management and responding
to cross-functional interests of stakeholders. In 2019,
11,300 employees of the Group were assessed against
its key performance indicators.
«NORNICKEL»
Annual report 2019
The system is instrumental in streamlining
performance assessment criteria and enabling
the management and employees to align the current
year’s priorities with the Company’s performance
and link an employee’s performance to their pay level.
Automation of the KPI-based employee assessment
commenced in 2018. The automated system will help
standardise talent pool management methods across
the Company, consolidate relevant data into a shared
database, and provide access to the assessment
process through personal accounts for each
employee. By the end of 2019, the system was used
by 28 divisions of the Company. In 2020, Nornickel will
roll it out across all Russian assets of the Company.
To improve the performance of the Head Office staff,
Nornickel approved the Procedure for Assessing
Employee Performance and the Regulations
on Annual Performance Bonuses. The Procedure
primarily seeks to link remuneration, development
and promotion of employees to the assessment
outcome, whereas the Regulations on Annual
Performance Bonuses serve to review employee
performance in the reporting period against team
and individual KPIs.
To boost employee performance across its Russian
operations, the Company put in place the Procedure
for Assessing Management Performance whereby
performance is managed by setting KPI targets
and evaluating manager achievements against these
targets.
• Equal opportunities for employees from different
locations and segments to be nominated
and awarded. Nornickel ensures there is no
discrimination on gender, nationality, or religion
in the nomination and awarding of employees.
• Development of employees in line with strategic
priorities and corporate values through better
use of their potential and motivation to enhance
their professional excellence.
The Award Policy is closely linked to Nornickel’s
values and strategic priorities through corporate
incentives. The Company rewards its employees
for outstanding professional achievements
and contribution, innovations that drive growth
and add value, efforts going beyond formal
agreements with Nornickel and contributing
to overall performance of the business. Nornickel
praises and distinguishes employees showing
unmatched production, engineering and managerial
competencies by awarding those who delivered
remarkable operating and management performance
and contributed a lot to advancing production.
Awards and nominations
There are several categories of incentives
in the Company. They include corporate incentives
or Company-level awards that can be granted
to Nornickel’s employees, and internal incentives
with nomination and awarding criteria set
in compliance with the Award Policy. Top performers
may be nominated for agency and state awards.
Nornickel welcomes agency and state recognition
of its employees and nominates those who achieved
prodigious results in operations and management
and made significant contributions to production
development.
Award events are the pinnacle of the award
policy. Nornickel bestows corporate awards
at special ceremonies attended by its staff
and senior management. Data on awarded
employees are featured in corporate publications
and communicated Group-wide. December 2019 saw
the first ever ceremony of bestowing honorary titles
at the award event marking year-end results.
TRADITIONAL AWARDS
(INTRODUCED BEFORE 2019)
+
NEW TITLES (INTRODUCED IN 2019)
BADGE OF HONOUR
BEST YOUNG EMPLOYEE
HONORARY TITLES: BEST MANAGER,
BEST SPECIALIST, BEST WORKER
BEST START OF THE YEAR
CERTIFICATE OF MERIT
CHANGE LEADER
COMMENDATION
CORPORATE LIFE LEADER
VALUABLE GIFT
BEST INVENTOR
ONE-OFF BONUS
IN H&S: BEST UNIT MANAGER, BEST LINE
MANAGER, BEST SPECIALIST, BEST WORKER
IN H&S COMPLIANCE
132
133
Internal awardsfrom Groups’senterprises1,996State awards83Awards from regional and municipalauthorities1,664Ministerial and agency awards286129вопросовCorporate awards2754,304awardsCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix HEALTH AND SAFETY
The health and safety of our people as well
as mitigation of ore mining and processing risks is a top
priority in Nornickel’s operations.
CERTIFICATION
STRATEGIC GOALS
In 2019, the Company commenced preparations
for certification under ISO 45001:2018
Occupational health and safety management
systems. The preparations included an external
diagnostic audit, workshops for senior management
and business unit heads as well as master classes
on health and safety management system audit
with practical work in production units for internal
auditors. In addition, a new occupational safety
management regulation was developed to comply
with the requirements of ISO 45001:2018
and a preliminary audit of occupational safety
management certification documents was carried out.
As at the end of 2019, all key production enterprises
of the Group had health and safety certification:
• Kola MMC, OHSAS 18001
• Polar Division GOST R 54934-2012 (Russian
standard identical to OHSAS 18001)
• Norilsk Nickel Harjavalta, OHSAS 18001
• Norilsknickelremont, GOST 12.0.230-2007
(interstate standard identical to ILO-OSH 2001)
The Company’s health and safety management
system prioritises the life and health
of our people over operating results and keeps pace
with the most advanced international standards.
In 2013, the Company embarked on a mission
to reduce injury rates and promote health and safety
culture.
• Continuous reduction in injury rates:
Reduce lost time injury frequency
rate (LTIFR) by 20% every year for three
years starting from 2013 and by 15% every
year afterwards;
• Zero fatalities: Zero-tolerance policy
on work-related fatalities
Injury rates, per million hours worked
‘19
‘18
‘17
‘19
‘18
‘17
0.08
0.32
0.05
0.23
0.08
0.44
2.2
159
2.2
168
2.0
149
LTIFR
FIFR
Industrial safety costs
Total cost
(USD mln)
Cost per employee
(USD thousand)
«NORNICKEL»
Annual report 2019
RESPONSIBILITY
AND ACCOUNTABILITY
Work-related injuries (people)
The Audit and Sustainable Development Committee
deals with health and safety matters. The committee
reviews management reports on health and safety
performance every quarter, with management
required to provide detailed account of causes
of injuries, measures taken to prevent similar injuries
occurring in the future and disciplinary actions taken
against the employees at fault.
Nornickel’s First Vice President – Chief Operating
Officer is directly responsible for the development
of health and safety initiatives and ensuring
compliance with the relevant requirements. The KPIs
of the COO and heads of production units include
safety targets with weightings between 12% and 28%
of the overall KPI. A failure to prevent a fatality
blocks them from receiving a performance bonus.
The heads of production units are personally
responsible for the life and health of each
of their subordinates. Managers’ focus on improving
safety includes:
• Personal involvement in industrial safety risk
assessments
• Regular visits to production facilities
• Acting as a second party in external industrial
safety audits
• Meetings with enterprise teams to promote
employee ownership of industrial safety
improvement
• Personal participation in incident investigations
The Company’s Health, Safety and Environment
Committee is led by the First Vice President — Chief
Operating Officer and is focused on improving
efficiency and accountability in health and safety.
The committee meets quarterly at various production
sites of the Group to discuss H&S management
improvement, including:
• Analysis of the circumstances and causes of severe
and fatal work-related injuries
• Status of measures planned and implemented
to prevent similar injuries
• A programme of organisational and technical
measures to improve health and safety.
OCCUPATIONAL SAFETY
ВNornickel has corporate health and safety
standards that apply to both the Group’s employees
and contractors’ personnel deployed at the Group’s
production sites.
‘19
‘18
‘17
35
9
44
23
26
6 32
52
9
61
Lost-time injuries
Fatal injuries
Nornickel’s production enterprises have process-,
job- and operation-specific regulations and guidelines
in place containing dedicated health and safety
sections. In addition, the Group’s collective bargaining
agreements also have health and safety provisions.
At the end of 2018, key players of the copper
and nickel and supporting industries developed
and signed an interregional cross-industry agreement
setting out among other things the obligations
and commitments of the parties in relation to health
and safety. 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, contractors’ workers are required
to attend induction and target briefings on health
and safety prior to the commencement of any
work. Work permits also include occupational
safety requirements to be observed during work
preparation and performance. A special standard
setting requirements for contractors at the contractor
selection phase was developed and implemented
in 2018 to better monitor and promote the safety
of work performed by contractors on the sites
of Nornickel enterprises. In 2019, Nornickel
continued to consistently implement the standard
and monitor compliance with it including through
joint inspections of compliance with work safety
requirements and meetings of health and safety
councils (committees) involving contractor
representatives. Contractors failing to comply
with health and safety requirements were fined
for a total of more than RUB 11 mln (USD 170,000)
in 2019.
The Group’s production units are regularly audited
for compliance with applicable health and safety
requirements. A total of 81 audits took place
in 2019 in accordance with the approved schedule
(45 in 2018), with production site managers also
involved in the audits.
134
135
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ACCIDENT RATE REDUCTION
PROGRAMMES
In 2018, Nornickel launched the programme
to implement the H&S process management
system, which went live across the Group’s key
sites following a test period. The system is based
on a modern risk management model focused on pro-
active identification of hazards in existing processes
and incident cause analysis, including:
• Consideration of actual working conditions;
•
identification of the most significant safety risks
for various production operations and work areas
Identification of actual and potential risks during
incident recording and investigation or when
recording identified gaps and irregularities
• Prevention of potential incidents using historical
data on risks and near-misses, incidents
and accidents
• Risk elimination and mitigation action planning,
follow-up and performance assessment.
Since 2015, the Company has run another H&S
programme, the Technology Breakthrough, which
improves work safety through new technology:
Mine support design improvement programme
was launched in 2017 to promote mining safety,
in particular by minimising personnel access
to unsupported parts of workings. The programme
concept provides for the following measures,
in particular to reduce the risk of rock fall
• Use of powered rock bolting systems, mesh
hanging and scaling of workings
• Use of new methods to erect protective
and temporary supports.
TRAINING PROGRAMMES
The Company is committed to ensuring its
people have all the necessary knowledge, skills
and capabilities to perform their duties in a safe
and responsible manner.
Each new hire receives a preliminary safety induction
briefing upon employment, followed by subsequent
workplace briefings. Briefings are then repeated regularly
in accordance with the existing corporate programmes.
There are also interactive training courses for employees
in main production and mining occupations.
The Technology Breakthrough programme
Measures
Description
Mine automation system
Gas protection for self-propelled machinery
Radio communication and positioning system
3D training simulators
Remote control technology
The automation system scans individual tags assigned
to the employees and self-propelled machinery, ensuring
wireless connectivity to every employee via their personal
phones.
Self-propelled machinery is equipped with automated
gas monitoring and control systems shutting down
the machinery if an explosive gas concentration is detected
in the ambient air.
An automated system is in place to track personnel
and vehicles in mines and detect dangerous proximity
between people and vehicles.
Nornickel has deployed 3D training simulators with virtual
reality elements to train personnel and check their skills
not only in operations but also in safety.
The Company has rolled out remote control solutions
for its stationary equipment, enabling cuts in the number
of employees deployed within hazardous work areas.
Going forward, there are plans to use driverless or remotely
controlled self-propelled machinery in mines, significantly
reducing the number of people deployed underground.
PERSONAL SAFETY
Employees are provided with safety clothing,
footwear and other personal protective equipment
to mitigate the adverse impact of work-related harm
and hazards. Employees working in contaminated
conditions are provided with free-of-charge wash-off
and decontaminating agents. In 2019, the Nornickel
purchased personal protective equipment worth
approximately RUB 2.4 bn (USD 37 mln).
Workers with on-site production experience
of less than three years wear special red helmets
with the word “Caution” on them and protective clothing
with “Caution” badges that make them stand out.
INDUSTRIAL SAFETY COMPLIANCE
The Company has a zero-tolerance approach
to unsafe behaviours, as prevention of safety
breaches plays an important role in reducing injuries
and accidents.
Nornickel has put in place an industrial safety
compliance monitoring system featuring multi-tier
control with ad-hoc, targeted and comprehensive
inspections. The first tier control involves the line
manager or the supervisor (aided by designated
members of the H&S team) and focuses primarily
on workplace set-up. The second and higher
control tiers involve special H&S commissions
with representatives of management and employees.
In addition to the above prevention and control
initiatives, the Company regularly conducts
behavioural audits in accordance with the approved
schedule. The prevention and control team has
identified and disciplined 12,000 non-compliant
employees, including by partially or completely
stripping them of their bonuses. A total
of 221 breaches of critical safety rules have been
identified with 159 employees dismissed (105
in 2018).
«NORNICKEL»
Annual report 2019
PREVENTION OF OCCUPATIONAL
DISEASES
The Company promotes healthy lifestyle amongst its
staff to minimise the risk of occupational diseases,
with management focused on communicating to all
employees the importance of complying with safety
requirements and protecting one’s own health.
Nornickel also seeks to introduce meaningful
occupational health initiatives taking into account
both workplace and individual risk factors.
The Company offers its staff regular disease
prevention screening in line with recommendations
from the healthcare authorities. Employees undergo
compulsory pre-employment, regular and ad-hoc
medical examinations at the Company’s expense.
Special medical examinations are provided
to employees exposed to hazardous substances.
Production enterprises have dedicated medical aid
posts to perform pre-shift health checks and provide
medical assistance on request during working hours.
Implementation of electronic medical examination
system has been underway since 2018 to automate
pre- and post-shift health checks of employees.
If necessary, employees are provided free-of-
charge with personal protective equipment (PPE),
including respiratory protection (respirators, gas
masks), hearing protection (earmuffs, earplugs), eye
protection (glasses/goggles with UV filters, visors),
skin protection (gloves, protective and regenerative
creams, protective outerwear).
Occupational diseases
Indicator
Total
2017
361
2018
318
2019
290
136
137
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Main causes of fatalities
Indicator
Fall from height
Falling objects
Moving objects/parts
Rock fall
Road traffic accident (RTA)
Electrocution
Exposure to extreme temperatures
Explosion
Other
TOTAL
Injury rates
Indicator
FIFR
LTIFR
Work-related injuries (people)
– fatal injuries
– lost-time injuries
Contractors’ work-related injuries (people)
– fatal injuries
«NORNICKEL»
Annual report 2019
2017
2018
2019
0
1
1
0
0
1
0
4
1
9
2017
0.08
0.44
61
9
52
16
1
1
0
0
1
1
0
0
0
3
6
2018
0.05
0.23
32
6
26
19
2
1
0
2
0
0
0
1
1
4
9
2019
0.08
0.32
44
9
35
9
1
INJURY RATES
Unfortunately, the Company was unable to reduce
lost time injury frequency rate (LTIFR) and fatal
injury frequency rate (FIFR) in 2019. LTIFR grew
from 0.23 to 0.32 over the reporting year but is still
below the global industry average. There were
9 fatalities in 2019, including one accident
with multiple fatalities at Taimyrsky Mine in October.
All circumstances of the fatalities were reported
to the Board of Directors and thoroughly investigated
to avoid similar injuries in the future. Nornickel’s
management views safety and zero work-related
fatalities as its key strategic priorities and continues
dedicated programmes to prevent and avoid work-
related injuries.
For more details
on the Company’s health
and safety initiatives, please
see the 2019 Sustainability
Report
Employees working in harmful and hazardous
conditions receive free food, milk, and other
nutritional products for therapeutic and preventive
purposes.
All these initiatives not only raise the living standards
of the workforce, but also provide economic benefits
by reducing the number of lost time illnesses
and injuries.
INDEPENDENT SAFETY
ASSESSMENTS
Nornickel’s safe operation culture has been assessed
annually by independent consultancies since 2014.
According to the latest report, Nornickel’s safety
culture level in May 2019 was 2.77 points according
to the Bradley Curve (2.63 in 2017). The Company
is currently at the third level of safety culture maturity
when employees internalise the value of industrial
safety, and compliance with health and safety rules
and regulations is their own deliberate choice as above
all they see how they benefit from it. The gradual
improvements in the safety culture level were driven
by increased employee engagement on safety matters
and leadership demonstrated by senior management
of enterprises as well as improved knowledge of risk
assessment and management.
Safety culture level on the Bradley Curve
2.1
2.3
2.5
2.63
2.77
3.0
2.5
2.0
1.5
1.0
1.4
March 2014
March 2015
December 2015
November 2016
December 2017
May 2019
138
139
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ENVIRONMENT
ENVIRONMENTAL
MANAGEMENT SYSTEM1
In 2019, the Environmental Management System
(EMS) continued to operate as part of the Corporate
Integrated Quality and Environmental Management
System (CIMS). This has enabled coordination
of environmental activities with activities in other
areas such as production, finance, health and overall
safety management. This approach improves
both overall and environmental performance
of the Company. With the EMS now fully in place,
the Group’s enterprises reap multiple benefits,
as it highlights our compliance with global
environmental standards.
SYSTEM AUDIT
In line with ISO 14001:2015, the Company confirms
the EMS compliance with the standard by engaging
Bureau Veritas Certification (BVC) to conduct
surveillance audits once a year and recertification
audits every three years. In October–November
International quality and environmental certification
2019, Nornickel successfully passed a surveillance
audit of its CISM. BVC auditors confirmed CISM
compliance with ISO 14001:2015 and ISO 9001:2015.
Throughout 2019, the Company carried out internal
audits and a corporate audit as per the CIMS
procedures in accordance with international
standards and Norilsk Nickel’s corporate documents.
The internal audits and the corporate audit
were conducted by specially trained, competent
personnel.
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 organisations and NGOs,
mass media, shareholders, investors, local
communities, and other stakeholders.
MMC Norilsk Nickel
ISO 9001:2015,
ISO 14001:2015
Surveillance audit
Bureau Veritas
Certification (BVC)
Kola MMC
ISO 9001:2015,
ISO 14001:2015
Recertification audit
Bureau Veritas
Certification (BVC)
Gipronickel Institute
ISO 9001:2015
Surveillance audit
Societe Generale de
Surveillance (SGS)
Norilsk Nickel
Harjavalta
ISO 9001:2015,
ISO 14001:2015
Recertification audit
DQS GmbH
(DQS&UL)
Production, project
management, storage,
shipments, and product sales
Ore mining
and concentration,
production
Research, engineering
and design, engineering
surveys, environmental
protection
Production of nickel
and cobalt products
1/ MMC Norilsk Nickel's Environmental Management System (EMS) has been successfully operated since 2005, covering production, project
management, storage, shipments (including by sea), and product sales.
Company
Certificates
Independent audits
in 2019
Certification body
Scope of certification
KOLA DIVISION
«NORNICKEL»
Annual report 2019
EMISSIONS
High sulphur dioxide emissions from the smelting
of sulphide concentrates with high sulphur content
are a key environmental issue for the Company.
Nornickel’s strategic plan is to transform
the Company into an environmentally clean and safe
business by implementing the Sulphur Programme
at the Polar Division and Kola MMC. In 2020,
the Company plans to introduce light unmanned
aircraft systems for monitoring environmental
conditions on the Kola Peninsula and in the Norilsk
Industrial District.
Environmental expenses
(USD mln)
‘19
‘18
‘17
596
23610
507
518
14
445
459
11
15
Environmental
expenses
Environmental
impact fees
The Sulphur Programme is a major environmental
project aimed at gradual reduction of sulphur dioxide
emissions in the Norilsk Industrial District and Kola
Peninsula.
Sulphur Programme Roadmap
2020
2021
Optimization of smelting
operations in Nickel town to cut
SO2 emissions in Russia-Norway
border zone
2x
50% reduction in SO2 emissions
in Nickel town and cit of Zapolyarny
Complete shutdown
of smelting operations
in Nickel town and a modernisation
Сopper shop in Monchegorsk
7x
85% reduction in total SO2
emissions at Kola Division
2023
2025
Launch of anchor Sulphur
project at Nadezhda smelter
to capture furnace gases
c.~2x
45% reduction in total SO2
emissions at Polar Division
Launch of Sulphur project
at Copper Plant to capture
furnace and converter gases
10x
90% reduction in total SO2
emissions at Polar Division
POLAR DIVISION
140
141
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The Sulphur Programme in the Polar Division
is expected to reduce sulphur dioxide emissions
in the Norilsk Industrial District by 45% in 2023
and by 90% in 2025.
As part of this programme, Nadezhda Metallurgical
Plant is implementing a project to capture the off-
gases from flash smelting furnaces and neutralise
the resulting sulphuric acid with limestone to produce
gypsum. In 2019, the project documentation
successfully passed a state environmental review;
negotiations commenced for equipment supply
contracts; and construction site preparations were
completed.
At Copper Plant, a major production process
upgrade is scheduled, including capturing sulphur
dioxide from sulphur-rich off-gases and shutdown
of low-grade gas converter operations, which have
a significant effect on air quality in Norilsk during
unfavourable weather conditions.
The Sulphur Programme at Kola MMC
provides for shutdown of obsolete production
shops in Nickel near the Norwegian border
and a modernisation copper shop in Monchegorsk.
These measures will completely eliminate sulphur
dioxide emissions in the Russia-Norway border
area and significantly reduce adverse impact
on the environment in Monchegorsk. The Programme
is expected to reduce sulphur dioxide emissions
from Kola MMC by 50% in 2020 and by 85% in 2021
(from a 2015 baseline).
The total CAPEX for the Sulphur Project is estimated
at about USD 3.5 bn.
In 2019, emissions from Nornickel’s Russian
operations totalled 1,953 kt, up 1.4% y-o-y.
The increase was driven by a temporary growth
Air pollutant emissions across the Group (kt)
Indicator
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Particulate matter
Other pollutants
TOTAL
Sulphur dioxide emissions (kt)
PRODUCTION WASTE
Waste generation by hazard class (kt)
«NORNICKEL»
Annual report 2019
in sulphur dioxide emissions from the Polar Division
due to increased production and processing
of sulphur-containing feedstock. Despite the increase,
emissions did not exceed the Company’s set limits.
During adverse weather conditions, the Company
takes extra measures to control pollutant
emissions in residential areas. Production process
at metallurgical plants was stopped for this reason
262 times in 2019. Furthermore, Norilsk maintains
an automatic toll-free enquiry service line offering
forecasts on the impact of metallurgical operations
on the city air quality to anyone dialling 420 007.
The Company's transport and logistics subsidiaries
and units are fully environmentally permitted
and compliant with applicable environmental
regulations, namely:
• Air pollutant emissions from mobile sources do
not exceed the maximum allowable levels
• Marine fuels are purchased from suppliers
that have all required documents confirming
fuel quality. The quality of fuel is verified
by an independent laboratory
• Onboard wastewater treatment plants are subject
to annual certification to prevent pollution
and contamination of water bodies and marine
environment
• Oily water is transferred to specialist contractors
at sea ports
2017
1,785.0
11.5
14.0
35.3
2018
1,869.6
11.2
14.5
31.3
2019
1,898.1
10.3
13.3
30.9
1,845.8
1,926.6
1,952.7
The Company reuses most of its industrial waste
as approximately 96% of the waste generated
are class 5, i.e. non-hazardous waste. This
is mostly waste from the mining and smelting
operations, including rock and overburden,
tailings, and metallurgical slags. Ore extraction
waste is used as backfill for underground
workings and open pits, road fill, or for tailings
dam reinforcement. In 2019, Nornickel reused
about 63% of all waste (70% in 2018),
with the balance turned over to specialised
contractors for reuse or decontamination. Higher
waste generation in 2019 was due to increased
processing volumes.
TAILING DUMPS
Nornickel currently operates six tailing dumps: four
in the Polar Division and Medvezhy Ruchey, taking
tailings from Talnakh and Norilsk concentrators
and Nadezhda Metallurgical Plant; one at Kola
MMC, storing tailings from Zapolyarny Concentrator;
and Bystrinsky GOK tailing dump.
Nornickel acts responsibly to ensure tailing dump
safety and monitors the condition of tailing dump
hydraulic structures and the environment within
the dump sites and affected areas on a regular
basis. In line with governmental requirements,
Nornickel has developed safety criteria each
operating tailings facility is required to meet and got
them approved by supervisory authorities. Primary
oversight is provided by the Federal Environmental,
Industrial and Nuclear Supervision Service of Russia
(Rostechnadzor).
Hydraulic structures are subject to comprehensive
audits every five years, with mandatory prior
preparation of the hydraulic structure safety
declarations. The declarations are produced
by an independent expert agency accredited
by Rostechnadzor only after detailed inspections
of the hydraulic structures.
All tailings facilities operated by Nornickel
are situated far from production sites and human
settlements. Potential damage estimates made
for a safety declaration show minimum risks
Hazard class
2017
2018
2019
V
IV
III
II
I
30,722
29,517
35,300
1,190
1,191
1,115
12
2.4
0.1
15
1.1
0.1
5
0.03
0.04
TOTAL
31,926
30,725
36,420
of adverse impact on communities, eco-systems,
and critical infrastructures in case of a disaster
or a tailings dam failure. It should be noted that
over the last five years no environmental incidents
have been recorded across the Company’s hydraulic
structures and no orders from supervisory agencies
were received to correct critical or pre-critical
conditions.
Hydraulic structures are monitored by operating
personnel and Nornickel’s environmental team
on an ongoing basis. Nornickel employees involved
in the operation of tailing dumps complete regular
specialised trainings and knowledge assessments
by Rostechnadzor.
After the Brumadinho and Samarco dam disasters
in Brazil, Nornickel published a special report
on the safety of all its hydraulic structures
following an inquiry from a group of investors
led by the Church of England Pensions Board
and the Council on Ethics of the Swedish National
Pension Funds (AP Funds) and guided by the UN
Principles for Responsible Investment (PRI).
The report is available in the link below.
Special report on safety
of tailings storage
facilities
142
143
1,7851,8981,8781,8702,009‘16‘19‘18‘17‘15Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Tailing dumps
Branch/subsidiary
Polar Division
Medvezhy Ruchey
Kola MMC
GRK Bystrinskoye
Number of tailing dumps
Asset using the tailing dump
2
2
1
1
Talnakh Concentrator, Nadezhda Metallurgical Plant
Norilsk Concentrator
Zapolyarny Concentrator
Bystrinsky GOK Concentrator
WATER BODIES
The Company’s major production assets are located
in regions with sufficient water resources.
Nonetheless, the Company is extremely careful
about its use of fresh water and strictly complies
with restrictions applicable to industrial water
withdrawal. Nornickel’s key production facilities
use closed water circuits to reduce water
withdrawal. Furthermore, the Company never
withdraws water from protected natural areas.
In 2019, 87% of all water used by the Company
was recycled or reused. Water is mostly withdrawn
from surface and underground water bodies as well
as from wastewater of other companies and natural
water inflow. Natural water inflow and meltwater
accounted for 12% of the total water withdrawal
in 2019. All facilities using water have programmes
in place to monitor water bodies and water
protection areas..
Wastewater discharge also does not exceed
the approved limits or have any major impact
on biodiversity of water bodies and related habitats..
The Company is committed
to sustainable use of water
resources and prevention
of water body pollution.
Water consumption and discharge framework
WITHDRAWAL
CONSUMPTION
DISCHARGE
1 344 Mcm:
272
Mcm
new
1 072
Mcm
reused
and recycled
water
31 Mcm
water reused in other
production processes (2%)
1 141 Mcm
recycled water (85%)
142 Mcm:
76 Mcm
clean
5 Mcm
treated
26 Mcm
insufficiently treated
36 Mcm
contaminated
319 Mcm:
227 Mcm
surface sources
26 Mcm
underground sources
21 Mcm
wastewater
37 Mcm
natural water flow
9 Mcm
other
144
«NORNICKEL»
Annual report 2019
Wastewater discharge (Mcm)
Water consumption (Mcm)
‘19
‘18
‘17
76
5
26
36
142
23
93
7
31
34
165
79
7
28
34
148
Clean
Treated
Insufficiently
treated
Contaminated
‘19
‘18
‘17
1,172
1,344
1,210
1,412
1,138
1,342
87%
86%
85%
Consumed water volume
Volume of reused and recycled water
Share of reused and recycled water
ENVIRONMENTAL PERFORMANCE
OF THE COMPANY’S FOREIGN ASSETS
Norilsk Nickel Harjavalta
The company is fully environmentally permitted
and operates a certified integrated management system
compliant with ISO 9001 and ISO 14001.
Norilsk Nickel Harjavalta’s main environmental impact
comes from air emissions of ammonia (NH3) and nickel
2)
(Ni), and water discharges of nickel, sulphates (SO4
and ammonium ions (NH4+). In 2019, Norilsk Nickel
Harjavalta met all permit requirements for emissions,
discharges and waste disposal volumes.
Environmental indicators
Indicator
Industrial wastewater, Mm3
Total water consumption, Mcm
Pollutants in industrial wastewater, kt
Ni
2
SO4
NH4
Air pollutant emissions, t
+ (expressed as nitrogen)
Ni
NH3
Waste generation, kt
Waste disposal, kt
Nkomati
The company operates in accordance with both local
environmental protection regulations and Nornickel
corporate standards. Nkomati pays close attention
to environmental safety, is certified and regularly
audited for compliance with ISO 14001.
Environmental indicators
Indicator
Water consumption, Mcm
Waste generation, t
Waste disposal, t
Environmental protection expenditures, USD mln
2017
0.9
11.1
2018
1.0
11.8
2019
1.0
11.5
0.001
0.001
0.001
26
0.1
71
1.7
69
5.5
0.8
30
0.1
85
1.2
84
2.8
1.1
30
0.1
40
1.6
38
5.7
1.3
2017
0.064
431
845
0.27
2018
0.429
358
725
0.31
2019
0.254
1,243
670
0.33
145
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CLIMATE CHANGE
1/
HARSH CLIMATIC CONDITIONS
OF THE ARCTIC CIRCLE
«NORNICKEL»
Annual report 2019
Nornickel closely monitors for global
initiatives to reduce greenhouse gas emissions
and is developing a strategy to manage
the Company’s impact on climate change.
The Company also has a long-term development
strategy providing for the modernisation of its
production assets through the deployment of best
available technologies, improvement of energy
efficiency, energy saving, and energy intensity
reduction. The Company’s strategy takes into
account key non-financial risks, including climate
risk, as well as current trends in this space.
Nornickel’s Board of Directors considers climate
change issues as a matter of priority and includes
them in its discussions of the Company’s
environmental strategy. The climate change
matters are also high on the Company’s strategic
and operational agendas and overseen by the First
Vice President – Chief Operating Officer.
In 2019, the Company set up a working group
including its Vice Presidents to monitor
environmental programmes and initiatives including
ones related to climate change. The group is led
by Gareth Penny, Chairman of the Board of Directors.
CLIMATE RISK MANAGEMENT
Global warming and other consequences of climate
change may affect the Company’s operations
in the longer run. Their impact may include abnormal
weather or lasting changes in weather patterns.
Physical consequences of climate change can include
droughts and permafrost thawing, which can have
a material adverse effect on Nornickel’s operations.
9.9
mln t
totalled СО2 emissions (Scope 1+2),
the lowest level among global majors
As part of its risk management strategy, Nornickel
implements a range of measures to monitor
and control these risks. These activities enable
Nornickel to keep climate risks at an acceptable
level. Occurrence of climate risks may also
unlock additional opportunities for Nornickel,
driven by a strong demand for metals essential
for the development of a low-carbon economy:
Furthermore, the metals produced by the Company
are widely used in transition to low-carbon economy:
platinum group metals (PGMs) are used in auto
catalytic converters, nickel is a key component
in EV batteries, and copper is used in EV charging
infrastructure.
Hydropower is the main source of renewable energy
for the Company. The use of other renewables such
as solar, geothermal, and wind energy is limited,
as Nornickel’s main production assets are located
north of the Arctic Circle in harsh climatic conditions.
Since its establishment in 1935, the Company has
been developing in these challenging climatic
conditions and had to consider them in building its
energy assets, relying on low-carbon fuels, i.e. natural
gas (about 90% of the energy mix), and renewable
hydropower (about 10%).
Air temperatures stay below
freezing point for about eight
months a year
Strong gusts of wind with speeds
of up to 50 m/s are followed
by dead calms lasting for weeks
Polar nights and twilights last
for more than 100 days
On average, there are no more
than 70 sunny days per year
Permafrost is 300 to 500 metres
deep
Soils and ice are prone to seasonal
thawing
Description
Extreme weather events (droughts) caused by climate
change
Efficient delivery of finished products (metals) in line
with the production programme. Timely supply of products
to consumers. Social responsibility: comfort and safety
of people living in Nornickel’s regions of operation
Impact on goals: medium.
Source of risk: external.
Year-on-year change in risk: none
The Company manages the risk through:
• Closed water circuits to reduce water withdrawal
from external sources
• Regular hydrological observations to forecast water levels
in rivers and other water bodies
• Cooperation with the Federal Service
for Hydrometeorology and Environmental Monitoring
(Rosgidromet) in setting up permanent hydrological
and meteorological monitoring stations to improve
the accuracy of water level forecasts for major rivers across
Nornickel’s regions of operation
• Dredging the Norilskaya River and reducing energy
consumption at production facilities in case of risk
occurrence
• Replacing hydropower plant equipment to increase
electricity output through improving the efficiency
of hydropower units (implementation period: 2012–2021)
45%
Share of electricity from renewable
sources was 45% in 2019
KEY CLIMATE CHANGE RISKS
Insufficient water resources: water shortages
in storage reservoirs of Nornickel’s hydropower
facilities may result in insufficient water head at HPP
turbines leading to lower power output as well
as drinking water shortages in Norilsk.
Insufficient water resources
Category
Key risk factors
Impact on Nornickel’s development goal and strategy
Risk assessment
Mitigation
146
147
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Permafrost thawing: loss of bearing capacity of soil
under pile foundations can lead to deformation
and subsequent collapse of buildings and structures.
Permafrost thawing
Category
Key risk factors
Impact on Nornickel’s development goal and strategy
Risk assessment
Mitigation
GHG EMISSIONS
Including its planned projects to upgrade and expand
production facilities, and its major environmental
performance improvement programme, Nornickel’s
ambition is to stabilise its annual greenhouse gas
emissions at a level not exceeding 10 to 12 mln t
of CO₂-equivalent.
Description
Climate change, increase in average annual temperature
over the last 15 to 20 years Increased depth of seasonal
permafrost thawing.
Efficient delivery of finished products (metals) in line
with the production programme. Timely supply of products
to consumers. Social responsibility: comfort and safety
of people living in Nornickel’s regions of operation
Impact on goals: medium.
Source of risk: external.
Year-on-year change in risk: none
The Company manages the risk through:
• Regular monitoring of soil condition
under the foundations of buildings and structures built
on permafrost
• Geodetic monitoring of buildings movement
• Measurements of soil temperatures under building
foundations
• Monitoring the compliance of its facilities
with operational requirements for crawl spaces
• Recommendations and corrective action plans to ensure
safe operating conditions for buildings and structures
GHG emissions (mln t of СО2 equivalent)1
Indicator
Scope 1
Scope 2
Total emissions (Scope 1+2)
2017
10.2
0.1
10.3
2018
9.9
0.1
10.0
2019
9.8
0.1
9.9
«NORNICKEL»
Annual report 2019
87
90
78
73
GHG emission intensity index (%)2
100
100
96
100
80
60
2013
2014
2015
2016
2017
2018
2019
Fuel consumption by the Company (%)
‘19
‘18
‘17
87
87
1
1
9
9
3 144,772
3
148,909
86
1
10
3 156,568
Natural gas
Coal
Diesel fuel
and fuel oil
Petrol
and jet fuel
Electricity consumption (TJ)
USE OF RENEWABLES
AND ENERGY EFFICIENCY
The Company sources energy locally, primarily
from low-carbon natural gas and renewable energy
sources, namely two hydropower plants. Diesel fuel,
fuel oil, petrol and jet fuel are used by its transport
assets. Use of high-carbon fuel by energy assets
is minimised. Only small amounts of coal are used
in certain production processes. As a result of Nickel
Plant shutdown, estimated coal consumption
declined by 40–70 ktpa.
The Company’s priority energy source is hydropower
generated by Ust-Khantayskaya and Kureyskaya
HPPs. In 2019, renewables accounted for 45% of total
electricity consumed by the Group and 54% of power
consumption in the Norilsk Industrial District.
Group’s electricity generation and electricity and fuel consumption (TJ)3
Indicator
1. Fuel consumption by the Company4
– natural gas
– diesel fuel and fuel oil
– petrol and jet fuel
– coal5
2. Electricity and heat from own renewable sources (HPPs)
3. Electricity and heat purchased from third parties
4. Sales of electricity and heat to third parties
2017
2018
2019
156,569
134,709
15,221
5,178
1,460
12,414
10,483
19,503
148,910
129,335
13,788
4,127
1,660
14,877
10,931
18,926
144,772
125,329
13,535
3,820
2,087
15,058
11,331
18,766
Total consumption of electricity and fuel (1 + 2 +3 – 4)
159,962
155,792
152,395
1/ The estimate was made in 2019 as per the GHG Protocol Guidelines and includes carbon dioxide (СО2) and methane (СН4) emissions).
2/ Carbon intensity index is calculated as carbon emissions per tonne of copper equivalent as a percentage relative to its level in 2013,
assumed as 100%.
3/ For a detailed breakdown of the Group’s energy consumption by company, please see the 2019 Sustainability Report.
4/ Including the fuel used to generate electricity for Norilsk.
5/ Coal is only used in production processes, with Kola MMC accounting for 45% of total consumption, GRK Bystrinskoye 27%, the Polar
Division 13%, cement production 9%, and other subsidiaries 6%.
148
149
12,17520,18014,83718,50111,85620,67414,48018,76217,02738%45%36%44%40%25,916‘16‘19‘18‘17‘15Electricity from natural gasElectricity from HPPsShare of renewablesCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
audiences and cover a broad range of topics such
as traditional use of natural resources, environmental
education in schools, promoting research conducted
in natural reserves.
adjacent to the Monchegorsk site and the reserve
area. The research provides insights for further
remediation of disturbed lands and improvement
of sanitary condition and fire protection of forested
areas.
Nornickel supports the research carried out
by the nature reserve, its efforts to protect
natural and cultural heritage, promote tourism
and environmental education. The Company
participates in establishing an international
natural historical open-air museum
on the Varlam island. Nornickel sponsored
publication of the book titled The Varlam Island
– the Pearl of Pasvik. In 2019, the Company
helped purchase a unique mobile environmental
laboratory. The visitor centre of the Pasvik
Nature Reserve built with the Company’s support
is a venue for international research conferences
and environmental protection education events.
Lapland Nature Reserve (Kola Peninsula)
The Lapland Nature Reserve is one of the largest
protected areas in Europe, covering 278,000 ha.
Established with the aim of saving the wild reindeer
from extinction, it now boasts a reindeer population
of over 1,000, the largest reindeer herd in Northern
Europe. The European beaver population has also
been successfully restored.
Since 2002, the Lapland Nature Reserve has
maintained contracts providing for the restoration
of disturbed natural environments affected by multi-
year emissions from Rola MMC. Cooperation
with the reserve also includes monitoring of areas
The Company helped develop several ecotrails
including the first ecotrail for kids A Curious Child
out in the Woods and publish books on the founders
of the reserve.
Another socially important project sponsored
by the Company is Educational Saami Exhibition
In the Land of Flying Rock. The project aims
at improving knowledge of the Northern nature
and Saami people, a small community indigenous
to the Kola Peninsula.
Under an agreement between the Company
and the Murmansk Region Government, work
is underway to build ecotrails and informational
facilities on a territory of more than 83,000 ha within
the Rybachy and Sredny Peninsulas Nature Park.
Putoransky Nature Reserve (Taimyr
Peninsula)
The Putoransky Nature Reserve was listed
as a World Heritage Site by UNESCO in 2010
and is one of Russia’s largest nature reserves,
covering over 1,887,000 ha of land. The reserve, along
with the Taimyr and Great Arctic Nature Reserves,
as well as the Purinsky and Severozemelsky natural
protected areas, is managed by the Joint Directorate
of Taimyr Nature Reserves.
launched a new investment cycle to drive sustainable
growth.
In the Zabaykalsky Region, the Company supports
the development of research capabilities
and environmental awareness programmes
of the Relict Oaks State Reserve.
Pasvik Nature Reserve (Kola Peninsula)
The Pasvik State Nature Reserve is included
in the "shadow list" of wetlands of international
importance under the name of Fjærvann–Schaanning
research ground. The reserve covers an area of more
than 14,000 ha. Pasvik is the only natural reserve
in Russia holding a certificate from the EUROPARC
Federation awarded to the best protected areas
globally. The certificate is an important pre-requisite
for international cooperation with international
nature reserves.
The reserve is home to animal species included
in the Red List of Threatened Species and the Red
Data Book of the Russian Federation. Since 2006,
the Pasvik Nature Reserve has been commissioned
to conduct ecological assessments of natural
environment in the area of Kola MMC (Zapolyarny,
Nickel and their suburbs, Pasvik State Nature
Reserve), and develop a long-term environmental
monitoring programme.
The reserve is also implementing projects that
received the Company’s grants under the World
of New Opportunities charitable programme.
The projects target Russian and Norwegian
Pasvik Nature Reserve
Nornickel is committed to the responsible use of heat
and electricity. 87.5% of electricity is generated
by own energy companies supplying electricity
to both the Company’s facilities and third parties.
Nornickel’s investment programme prioritises
several major projects to fully unlock the potential
of renewable power sources (hydropower) and drive
energy savings.
In 2019, spending under the programme totalled
about RUB 16 bn (USD 246 mln).
Major projects completed in 2019 included:
• Replacement of hydropower units at Ust-
Khantayskaya HPP (turbine and electrical shops)
• Replacement of power unit equipment at CHPP-2
In 2019, the Group invested significant efforts
in improving energy efficiency, achieving total
savings of 49,924 tonnes of reference fuel. In 2019,
fuel consumption per unit of electricity supplied
by CHPPs was 271 g/kW•h, exceeding the target
by 17 g/kW•h. The Company’s subsidiaries also
achieved total savings of 15 Mcm of natural gas
by reducing their process needs and transportation
losses.
BIODIVERSITY
CONSERVATION
COOPERATION WITH NATURE
RESERVES
Nornickel’s production facilities are relatively
close to nature reserves on the Taimyr and Kola
Peninsulas. In the Murmansk Region, the Pasvik
and the Lapland Nature Reserves are only 10 to 15
km away from Kola MMC. In the Krasnoyarsk Region,
the boundaries of the Putoransky Reserve buffer
zone are at a distance of between 80 km and 100 km
from the Polar Division’s production sites.
To help protect the unique arctic nature,
the Company has been providing support to nature
reserves for more than 10 years now, with its total
annual value running into hundreds of millions
of roubles. These efforts are well-aligned
with Nornickel’s overall strategy to go greener
within the next five years, for which the Company has
150
151
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The directorate implements environmental projects
that won awards of the Social Responsibility
Initiatives Competition held as part of the World
of New Opportunities charitable programme.
The projects focus on environmental education
and protection, engagement of local communities,
landscaping and planting.
In 2019, the Joint Directorate of Taimyr Nature
Reserves won the Social Responsibility Initiatives
Competition and received RUB 4.5 mln (USD 70,000)
to implement the Friends of Taimyr Peninsula
Nature Reserves – Clean Ayan project. The project
aims to engage the Taimyr volunteer community
on restoring the environmental safety of the central
part of Putorana Plateau to make the region
more attractive to tourists. Last summer, as part
of the project, volunteers and the Joint Directorate
of Taimyr Nature Reserves staff collected 638 metal
barrels and a few hundred kilograms of legacy
pollution scrap metal. Using the Company’s grant,
a 24-day expedition was airlifted to a remote area
on Putorana Plateau, set up a camp at the Southern
Ayan Checkpoint and cleaned up the area.
Oak grove (Zabaykalsky Region)
Covering 30,000 ha along the Argun River,
the oak grove in the Gazimuro-Zavodsky District
is the only natural oak grove extant in Siberia.
Under an agreement with the Zabaykalsky Region
Government, Nornickel provides charitable aid
to the Relict Oaks Preserve to facilitate effective
protection and scientific study of its environmental
systems. The Company assisted the preserve
in obtaining video surveillance equipment and intends
to provide support for building and equipping
research facilities and launching educational
programmes for adults and children.
2030 at its 2019 Capital Markets Day. The programme
provides for phased reduction of sulphur dioxide
emissions by 95% by 2030, maintaining industry’s
lowest carbon footprint, and contributing to global
transition to green mobility.
Environmental education and experience sharing
are another top priority. The Company co-organised
the 8th Ecological Forum Corporate Responsibility
to the Future. Technology for Society and Nature, held
in Moscow on 17–18 October 2019. The forum focused
on production efficiency and striking a balance
between economic development, social improvement,
and nature conservation, which is impossible without
sustainable local development, availability of skilled
workforce and minimised harmful environmental
impact of industrial operations. More than
200 experts from all over Russia and Arctic countries
attended the event.
Water resources
The Company has been running for years a programme
to breed and release valuable fish species into water
bodies to replenish their populations. Valuable fish
species including those listed in the Red Data Book
are bred by specialised contractors and the juvenile
fish is released into water bodies. For example,
4,000 young ciscoes were released into Lumbolka
Lake (Kola Peninsula) in 2019 to facilitate reproduction
of aquatic bioresources. The Polar Division released
a total of about 1 million young fish, including 201,000
Siberian sturgeons, into the Yenisei River between 2017
and 2019. The costs of these activities over the past
three years exceeded RUB 110 mln (USD 2 mln). Also
in 2019, the Company continued land improvement
efforts in the vicinity of Lake Dolgoye in Norilsk.
The Company intends to continue breeding
and release of young valuable fish species into natural
water bodies in 2020.
ENVIRONMENTAL PROTECTION
PROGRAMMES
Planting and clean-ups
Nornickel is committed to environmental
protection and sustainable use of natural resources.
As part of this commitment, the Company
presented its 10-year Sustainable Growth Strategy
and Comprehensive Environmental Programme Until
In Norilsk, the Company’s employees jointly
with the city administration conduct regular clean-
ups and planting in the summertime. In 2019, we also
continued yet another annual environmental
initiative involving employee volunteers.
«NORNICKEL»
Annual report 2019
The Company has mine plans, as well
as abandonment and remediation project documents
in place for all deposits developed by the Company,
with special provisions made for remediation.
The design documentation covers grading, slope
formation, construction of hydraulic and irrigation
structures, and other activities. Importantly,
the Company’s deposits are in commercial
development and will not be abandoned
or mothballed before 2050.
Nornickel complies with all legal requirements
covering remediation and other environmental
protection measures required during development,
construction and other activities.
Nornickel is the world’s largest metals and mining
company, playing an important role in the Russian
economy. Due to its geography and financial
strength, Nornickel has a strong impact on the social
and economic life in the regions in which it operates.
With its facilities located mostly in single-industry
towns, Nornickel seeks to maintain a favourable
social climate and comfortable urban environment,
providing its employees and their family members
with ample opportunities for creative pursuits
and self-fulfilment.
The core principle behind this social contribution
is a partnership involving all stakeholders
in the development and implementation of social
programmes based on the balance of interests,
cooperation, and social consensus.
The harsh climate faced by Nornickel employees
in life and at work, the remoteness of the Company’s
key industrial facilities, and the increasing
competition for human capital across the industry
call for a highly effective, human-centred social
policy that would promote Nornickel’s reputation
as an employer of choice.
The fourth Poneslos (Let's Roll) environmental
initiative kicked off across Nornickel’s operating
regions in May 2019, with about 250 volunteers
participating in Norilsk. The volunteers organised
more than 100 events involving 3,000 city residents,
collected about 20 tonnes of garbage, held festivals
and master classes, improved several sites in the city,
set up a plastic recycling shop, and laid an ecotrail.
Catch the Eco Wave environmental quest was
held in Monchegorsk involving over 140 people
in 35 teams.
An eco-convention held in the Caucasus
Nature Reserve (Sochi) in October 2019
brought together 72 most active participants
in the initiative from the Company’s operating
regions. The volunteers spent three days
participating in a strategy session, sharing
their experiences with colleagues and developing
the European Bison Trail. The trail is an interactive
and engaging way of highlighting European bisons
and will be part of the Caucasus Nature Reserve
visitor centre. The event culminated with a showing
of Caring, a documentary about Nornickel volunteers
which won awards at Cannes and Los Angeles film
festivals.
Land conservation and restoration
The Company takes all necessary measures to restore
disturbed land by remediation, rehabilitation,
regeneration and other applicable methods.
Remediation consists of technical and biological
phases. The first phase includes landscaping
and planting activities such as backfilling, earth
filling, terracing, grading and covering with clayey
soil to improve the adaptation of young plants.
During the second phase, conifer trees such as pines,
larches, and cedars as well as shrubs mixed with trees
start growing on horizontal and sloping surfaces,
further reinforcing the slopes.
In accordance with applicable Russian laws, design
documentation for any natural resource development
project, including mining, must detail activities
covering environmental protection and monitoring
of changes in the ecosystem components
and implemented during facility operation
and in case of accidents.
152
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix SOCIAL AND CHARITY
INITIATIVES
Nornickel is the world’s largest metals and mining
company, playing an important role in the Russian
economy. Due to its geography and financial
strength, Nornickel has a strong impact on the social
and economic life in the regions in which it operates.
With its facilities located mostly in single-industry
towns, Nornickel seeks to maintain a favourable
social climate and comfortable urban environment,
providing its employees and their family members
with ample opportunities for creative pursuits
and self-fulfilment.
The core principle behind this social contribution
is a partnership involving all stakeholders
in the development and implementation of social
programmes based on the balance of interests,
cooperation, and social consensus.
The harsh climate faced by Nornickel employees
in life and at work, the remoteness of the Company’s
key industrial facilities, and the increasing
competition for human capital across the industry
call for a highly effective, human-centred social
policy that would promote Nornickel’s reputation
as an employer of choice.
SOCIAL PARTNERSHIP
The Group companies have in place a social
partnership framework aimed at aligning the interests
of employees and employers in the regulation
of social and labour relations.
Social partnership framework
Social and charity expenses (USD mln)1
‘19
‘18
‘17
121
58
100
3278
115
70
57
242
115
23
60
198
Charity
Sponsorship
(sports projects)
Development of infrastructure
and social facilities
Nornickel meets all its obligations under the Labour
Code of the Russian Federation, collective bargaining
agreements, and joint resolutions.
Key tasks of employee representatives in a social
partnership are to represent employee’s rights
and protect their interests when holding collective
bargaining negotiations, signing or amending
a collective bargaining agreement, overseeing its
performance, and resolving labour disputes.
Within the current social partnership framework,
employee representatives are involved in resolving
issues relating to the regulation of social and labour
relations, conducting special assessments of working
conditions, and implementing measures to prevent
work-related injuries and occupational diseases.
In line with the requirements of the labour law,
the opinion of employee representatives is taken
into account when adopting local regulations on key
aspects of labour relations, compensation, work
hours, labour standards, provision of guarantees
and allowances, occupational health, etc.
EMPLOYER
SOCIAL AND LABOUR
COUNCILS
SOCIAL PARTNERSHIP
EMPLOYEES OF THE NORILSK NICKEL GROUP’S
RUSSIAN ENTITIES
«NORNICKEL»
Annual report 2019
TRADE UNION ORGANISATIONS
SOCIAL AND LABOUR COUNCILS
The Trade Union of MMC Norilsk Nickel Employees
is an interregional public organisation that unites
local trade union organisations at the Group
enterprises located in the Norilsk Industrial District
and Murmansk Region, as well as primary trade union
organisations in other regions of operation.
The trade union of MMC Norilsk Nickel, its
subsidiaries and controlled companies is a public
organisation that unites 38 primary trade union
organisations of Norilsk Nickel Group entities located
in the Norilsk Industrial District.
Group companies located in the Norilsk Industrial
District and in the Murmansk Region established
social and labour councils back in 2006 to represent
the interests of all employees within the framework
of social partnership at the local level.
Social and labour councils are authorised to raise
issues relating to health resort treatment, recreation
and leisure programmes for employees, disease
prevention, catering and workplace arrangements,
and provision of personal protective equipment.
The local trade union organisation of Kola MMC
and its subsidiaries, along with the primary
trade union organisation of Kolskaya Mining
and Metallurgical Company, unite 17 primary trade
union organisations of Norilsk Nickel Group entities
located in the Murmansk Region.
The trade unions of transport and logistics divisions
are members of the Yenisey Basin Trade Union
of Russia’s Water Transport Workers, headquartered
in Krasnoyarsk.
A total of 9.5% of employees of the Group’s Russian
entities were members of trade union organisations
at end-2019.
During the reporting year, the relationship between
Nornickel and the trade union was governed
by the Social Partnership Agreement signed
in 2014 to formalise the procedure for joint efforts
to improve operational and financial performance
by ensuring stable operations, create safe working
conditions, improve living standards of employees,
protect their health, and improve the system of social
guarantees.
Throughout the year, trade union organisations
were actively involved in discussing and approving
draft collective bargaining agreements at the Group
entities where such agreements expired in 2019.
Employees’ trade union maintained overall
supervision over the process, reviewing employee
proposals for compliance with the labour law
and social partnership principles, and forwarding
them to the employer for consideration.
Development of uniform approaches to, and standards
of, social and labour activities is the responsibility
of the Group’s corporate social and labour council,
an advisory and consultative body comprising
authorised representatives of the Group employees
in the Krasnoyarsk Region.
In 2019, the percentage of employees represented
by social and labour councils was 79% of the total
headcount across the Group.
OFFICES FOR OPERATIONAL,
SOCIAL AND LABOUR MATTERS
In addition to the Corporate Trust Service
speak-up programme, the Group launched offices
for operational, social and labour matters back
in 2003. They are primarily tasked with response
to employee queries, follow-up, and prompt
resolution of conflicts. On a regular basis, the offices
monitor social environment across operations,
enabling timely responses to reported issues. In 2019,
Group companies in the Norilsk Industrial District
operated 24 offices which received about 40,000
queries and requests from employees (74%), former
employees (25%), and other individuals (1%).
COLLECTIVE BARGAINING
AGREEMENTS
In 2018, Nornickel developed and started
implementing uniform approaches to regulating
social and labour relations within the social
partnership framework. Collective bargaining
agreements at the Group’s Russian companies comply
with the applicable laws and mostly meet employee
expectations.
TRADE UNION
ORGANISATIONS
1/ Excluding expenses on social programmes for employees.
154
155
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix WHY
WE
DO
THIS
We run this
cross-cultural
project
to promote
Siberia
globally
FOLLOW UP SIBERIA!
The participating travel bloggers have
been sharing their experiences of travel-
ling to Siberian cities and meeting local
people, thus helping their
audiences to overcome
the stereotype
of Siberia being
some remote,
foreboding corner
of Russia
and was joined
by travel
bloggers from
Since the project’s
launch, its online
contest has received
entries from
53 COUNTRIES
19 COUNTRIES
In 2019, Group enterprises entered into 11 collective
bargaining agreements for a term of three years,
including two enterprises that signed these
agreements for the first time.
The percentage of employees covered by collective
bargaining agreements stood at 83% in 20191.
Collective bargaining commissions perform ongoing
monitoring of the performance of obligations
under collective bargaining agreements by the parties
throughout the agreement term.
The Group entities have also set up labour dispute
commissions, social benefits commissions/
committees, social insurance commissions,
occupational safety commissions/committees, social
and labour relations commissions, etc.
No breaches of collective bargaining agreements,
and no strikes or lockouts were recorded across
the Group entities in 2019.
Main topics of queries and requests (%)
allowances and benefits to employees, work and rest
hours, occupational health, and other matters.
In 2019, the Agreement was rolled out to 22 Group
enterprises, covering 89% of employees.
EMPLOYEE PLACEMENT
FOLLOWING THE CLOSURE
OF THE SMELTING SHOP IN NICKEL
INTERREGIONAL CROSS-INDUSTRY
AGREEMENT
The Interregional Cross-Industry Association
of Employers “Union of Copper and Nickel Producers
and Production Support Providers” (the “Association”)
was registered in 2018 at the initiative of the Group’s
two Russian enterprises located in the Krasnoyarsk
Region and Murmansk Region.
In order to comply with the requirements
of environmental laws and reduce emissions
in the Pechengsky District, a decision was made
in late 2019 to close the smelting shop in Nickel.
The closure of the smelting operation will affect
a total of 660 employees of the smelting shop
and support functions.
Based on the collective bargaining process
between the Association and Nornickel employees’
trade union in 2019, the Interregional Cross-
Industry Agreement for 2019–2022 was signed.
The Agreement governs social and labour relations
between the Association member employers
and their employees, and defines uniform corporate
approaches to compensation, provision of guarantees,
In December 2019, Nornickel developed a redundancy
programme to offer social support to the affected
employees of the smelting operations, whereby
Nornickel has undertaken to support them through
the process of relocation, retraining and finding
a new job. The programme was agreed with the social
and labour council and primary trade union
organisations of Kola MMC and Pechengastroy:
«NORNICKEL»
Annual report 2019
•
In case of placement with another business unit
of Nornickel:
– Housing rent reimbursement in case
of relocation
SOCIAL PROGRAMMES
FOR EMPLOYEES
– A full salary level paid during one calendar year
– Compensation for actual travel expenses
HEALTH IMPROVEMENT
PROGRAMMES
of employees and their families
– Participation in corporate programmes
to purchase housing at the new location
– Training/retraining/certification in a new trade/job
•
In case of redundancy:
– Severance pay in the amount of six average
monthly wages
– Early provision of a corporate pension
– Compensation for travel expenses of employees
and their families
– Financial assistance for housing purchase
under the Our Home/My Home programme
– Voluntary medical insurance policy maintained
for one calendar year from the termination date
– Succession programme provides training
of an affected employee by another Nornickel
employee (above the retirement age)
with a severance pay to the mentor upon
completion.
In addition, Nornickel’s dedicated Employment
Centre will be launched in 2020 to provide all-
round support to affected employees of the smelting
operations about to be shut down (including providing
information, advice, and career guidance) and to partner
with Norilsk Nickel Group entities, the government
of the Murmansk Region, and local employers on job
opportunities for redundant employees.
All staff-related decisions
and actions will be carried out in compliance
with the requirements of the Russian labour
law, Federal Law No. 1032-1 On Employment
in the Russian Federation dated 19 April 1991,
and Nornickel’s social support programme.
Given the harsh climate of the Far North
and the difficult working conditions at mining
facilities, Nornickel has been consistently
investing in health programmes for employees
and their families. Health improvement and health
resort treatment programmes are a key priority
of Nornickel’s social policy.
In 2019, 14,200 people (employees and their families)
had recreation and treatment in Zapolyarye
Health Resort (Sochi). Some 8,500 people
spent their holidays in other health resorts,
including 4,400 who travelled to Bulgarian resorts
and 1,100 who went to Hainan, China. The Company
compensates its employees an average of about 84%
of the trip voucher cost.
The health resort treatment programme is designed
to prevent the development of chronic diseases
in employees’ children and give them an opportunity
to take full advantage of their summer holidays.
As part of the initiative, about 1,400 children spent
their holidays in Anapa and Bulgaria.
SPORTS PROGRAMMES
Given the harsh climate of the Far North, supporting
healthy lifestyle behaviours is a key focus area
in the personal development of Nornickel
employees. Sports programmes seek to promote
a healthy lifestyle, build a sense of corporate
solidarity, improve interpersonal interactions,
and develop a strong corporate culture.
Social programmes for employees (USD mln)1
5
29
15
‘19
‘18
‘17
99 148
100
94
31
15
33
17
104
250
102 247
Housing
programmes
Health resort
treatment
Pension
plans
Other
social expenses
1/ Including enterprises that have no collective bargaining agreements in place but have approved relevant local regulations and are covered
by MMC Norilsk Nickel’s Collective Bargaining Agreement, including foreign assets.
158
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Social welfarematters75.4Other matters1.1Legal matters23.5129вопросовCompany overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Nornickel pays special attention to corporate
competitions, including the employees’ popular
sports such as hockey, futsal, volleyball, basketball,
alpine skiing, snowboarding, and swimming. Family
sports contests are yet another focus area. One
of Nornickel’s social policy highlights is the support
of amateur sports.
To ensure further development of amateur hockey,
in 2019, Norilsk hosted the Night Hockey League
games, with ten teams including Nornickel employees
taking part in the event.
Other events include regular Spartakiads and various
mass sports events held across its footprint
and involving not just Nornickel employees
and their families but also local residents.
About 30,500 employees as well as local residents
took part in corporate mass sports events, Spartakiads,
and other sports competitions held across
the Group’s footprint in 2019.
HOUSING PROGRAMMES
Nornickel currently operates several housing
programmes for its employees.
In 2019, Nornickel continued its consolidated
housing programme, Our Home/My Home,
purchasing ready-to-live apartments across Russia.
Apartments are usually purchased in the Moscow
and Tver Regions, as well as in the Krasnodar
Region, with the Company seeking to buy closely
located properties to create a more comfortable
living environment for employees by developing
additional infrastructure and optimising maintenance
for the property management company.
Each Programme member buys an apartment
through co-investment: the employer covers up
to half the purchase price payable but not more
than RUB 3 mln (USD 46,000), with the rest
paid by the employee within a certain period
of employment with the Group (five to ten years).
The cost of housing is fixed for the entire period
of the participation. The property title is registered
in the name of the employee only at the end
of their participation in the programme; however,
the participant may move in immediately after
the apartment is purchased. Since the programme
launch in 2010, the Company has purchased
3,826 ready-to-move-in apartments.
A new housing programme, Your Home, was
launched in 2019. It will be implemented similarly
to the Our Home/My Home programme, except
that the title to the apartment will be immediately
registered in the name of the employee, through
encumbered by a mortgage. The encumbrance
is removed from the property once the employee
fully repays the debt to the seller. Since the launch
of the programme, the Company has purchased
1,176 ready-to-move-in apartments.
Nornickel also operates the Corporate Social
Subsidised Loan Programme offering Nornickel
employees an interest-free loan to pay the initial
instalment and reimbursing a certain percentage
of interest paid to the bank on the mortgage loan.
Overall, more than 400 employees took part
in the programme.
PENSION PLANS
Nornickel offers its employees private pension plans.
Under the Co-Funded Pension Plan, Nornickel 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 a long service
record at Nornickel facilities.
Pension plans coverage
Item
Co-Funded Pension Plan
Financing, USD mln
Number of participants
Complementary Corporate Pension Plan
Financing, USD mln
Number of participants
Other pension plans
Financing, USD mln
Number of participants
«NORNICKEL»
Annual report 2019
2018
7.7
13,916
6.7
545
0.9
1,114
2019
7.6
12,304
6.1
525
1.0
1,151
2017
8.6
15,700
8.5
718
0.1
1,118
SOCIAL INVESTMENTS
SUPPORT FOR INDIGENOUS
PEOPLES
Nornickel recognises the right of northern indigenous
minorities to preserve their traditional way of life,
and addresses their needs for decent living standards
of modern societies. For many years, the Company has
been engaged in projects to improve the quality of life
for Taimyr indigenous minorities.
Nornickel adopted the Indigenous Rights Policy
which defines Nornickel’s key related commitments.
No violations infringing on the rights of indigenous
minorities were recorded across the Group’s
operating regions in 2019.
To preserve ethnic traditions and culture of indigenous
minorities, Nornickel supports annual festivals
for tundra inhabitants celebrating the traditional
Reindeer Herder’s Day and the Fisherman’s Day.
To that end, the Company purchases items that
are most popular among local communities, including
tents, petrol power generators, household equipment,
outboard motors, inflatable boats, GPS navigators,
sleeping bags, binoculars, etc.
Nornickel also supports the staging of a unique ethnic
street festival, Bolshoy Argish, which has received lots
of positive feedback from the local communities.
Nornickel also offers regular assistance in response
to specific requests from Taimyr municipalities
and sponsorship support for indigenous peoples
of the North, including through arranging air
transportation and supplies of construction materials
and diesel fuel.
Nornickel’s expenses on support for northern
indigenous minorities totalled about RUB 100 mln
(~USD 2 mln) for the year.
International Year of Indigenous Languages
On 19 December 2016, the General Assembly
of the United Nations proclaimed 2019
as the International Year of Indigenous Languages
pursuant to a resolution of the UN Permanent
Forum on Indigenous Issues. The International Year
of Indigenous Languages aims to focus attention
on the risks confronting indigenous languages,
improve quality of life, wider international
cooperation and visibility and strengthened
intercultural dialogue to reaffirm the continuity
of indigenous languages and cultures.
Nornickel has supported this initiative by financing
a project to create the writing system for the Enets
people at Siberian Federal University. The Enets
people were the last people of the Siberian Arctic
with no official writing system. The 2010 census
showed the extremely small number of Enets people
left – just 221.
The writing system has been created
since then, with federal agencies engaged
to include it in educational programmes and adapt
to educational requirements.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The project was presented at the 18th session
of the UN Permanent Forum on Indigenous
Issues, where Nornickel shared its experience
in implementing its corporate policy on supporting
northern indigenous minorities and specific projects
to maintain the ethnic traditions and improve living
standards of Taimyr’s indigenous people.
Through this project, Nornickel has demonstrated
its commitment to sustainability and stakeholder
engagement in supporting indigenous minorities
in Russia.
SUPPORT FOR LOCAL
COMMUNITIES
In supporting regional development, Nornickel
focuses on financing projects that create both
commercial and social value. Nornickel makes
a significant contribution to the development
of local communities across its footprint and runs
voluntary social programmes and projects to build
an inclusive and people-friendly environment,
protect the environment, and support local
communities, both independently and in partnership
with municipalities, regional and federal authorities,
not-for-profits, NGOs, and professional associations.
These programmes and projects address specific
regional issues to drive economic growth
and improve the local social situation.
The Company also contributes to the social
and economic development across regions
by organising and holding forums and conferences
for representatives of government, business,
and society to share their opinions and establish
positive dialogues on topics that matter
for the regional economies and social life. The fact
that two regions within the Company’s footprint
are located along Russia’s borders (the Murmansk
Region and the Zabaykalsky Region) and two are part
of the Russian Arctic (the Krasnoyarsk Region
and the Murmansk Region) makes such forums,
conferences, and other similar events a key driver
in attracting investments, addressing environmental
protection issues, and facilitating the development
of the Arctic fleets, ports, and navigation along
the Northern Sea Route. At the end of the day, these
efforts help integrate the regions into a common
economic space of the Arctic and the wider global
economy.
In November 2019, Nornickel representatives
attended the 18th session of the General Conference
of the United Nations Industrial Development
Organisation (UNIDO) held in Abu Dhabi, UAE.
During the session, LI Yong, Director General
In November 2019, Nornickel representatives attended the 18th session
of the General Conference of the United Nations Industrial Development
Organisation (UNIDO) held in Abu Dhabi, UAE. During the session,
LI Yong, Director General of UNIDO, and Dmitry Pristanskov,
Vice President of Nornickel, signed a joint declaration to team up
in developing projects aimed at reducing environmental impact
and ensuring sustainable development across Nornickel’s regions
of operations. The partnership with UNIDO enables Nornickel to leverage
the international organisation’s global experience and expertise when
developing environmentally sound technologies for the metals industry
and verifying that Nornickel’s environmental projects meet the highest
standards of advanced technology.
of UNIDO, and Dmitry Pristanskov, Vice President
of Nornickel, signed a joint declaration to team
up in developing projects aimed at reducing
environmental impact and ensuring sustainable
development across Nornickel’s regions
of operations. The partnership with UNIDO
enables Nornickel to leverage the international
organisation’s global experience and expertise when
developing environmentally sound technologies
for the metals industry and verifying that Nornickel’s
environmental projects meet the highest standards
of advanced technology.
RELOCATION PROGRAMME
In 2019, Nornickel and the Russian Government
continued their joint implementation of a long-term
target programme to relocate people from Norilsk
and Dudinka (Krasnoyarsk Region) to other Russian
regions with a better climate. The programme
provides for financing families entitled to relocation
under government programmes and registered
to purchase an apartment in Norilsk or Dudinka.
The programme runs from 2011 and to 2020,
with Nornickel operating as its sponsor.
Since its launch until the end of 2019,
the Company has donated a total of RUB 7,821 mln
(USD 195 mln) under the programme. In 2011–2019,
7,586 families purchased and moved into new homes
on the “mainland” under the programme.
INFRASTRUCTURE DEVELOPMENT
In 2019, Nornickel and the administration
of Norilsk continued landscaping the embankment
of Lake Dolgoye in Norilsk. According to the plan,
the project’s phased implementation takes place
over a five-year period completing by the end
of 2021. Its concept design provides for constructing
sports areas and children’s playgrounds, a rental
outlet to rent skis, roller skates, bicycles and other
equipment, a boat station, a cafe, a skate park,
and a rollerdrome, street landscape lighting,
hardscaping, asphalt paving and planting.
The following projects implemented
in the Murmansk Region were financed by Kola MMC
«NORNICKEL»
Annual report 2019
Expenditure on infrastructure development
and social facilities (USD mln)
‘19
‘18
‘17
100
57
60
in partnership with local municipalities and non-
governmental organisations:
• Renovation of the central embankment and a part
of the road network in Monchegorsk
• A new modern cinema theatre built
and improvements made to a sports and play area
in Zapolyarny.
In 2019, Nornickel and the Zabaykalsky
Region Government continued implementing
their cooperation agreement, with the Company
allocating RUB 420 mln (USD 6.5 mln) to finance
social projects of the Zabaykalsky Region
Government and local municipalities. Initiatives so
financed include:
•
initiatives to engage the general public in socially
beneficial activities, identify and roll out best
practices, including fostering non-governmental
and not-for-profit organisations (the Power
of People project, support for the Veterans
Council, etc.) and key culture and arts projects
(Zabaykalsky International Film Festival,
and support for publishers)
• educational projects to find young talent
and unlock their potential (Quantorium science
park for children, as well as Territory of Growth!
and Successful School – Successful Future
projects)
• projects and initiatives to promote healthy
lifestyles and amateur sports (Healthy
Zabaykalsky Region project)
• social and economic development projects
of the Gazimuro-Zavodsky District
•
• projects to build a people-friendly environment
reflecting the local environmental and climatic
profile (Green Zabaykalsky Region project)
renovation of the Dekabristov Square in Chita,
with a modern, people-friendly space created
in the city centre over three years as a place
for social events and a recreation magnet
for locals, featuring themed leisure and sports
zones.
162
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix ENGAGEMENT
WITH THE GOVERNMENT
ON SOCIAL INITIATIVES
Nornickel interacts with federal legislative
and executive authorities, and civil society
institutions. Nornickel is represented and promotes
its interests in 23 committees, councils,
commissions, expert panels, and working groups
established by the government in association
with the business community, thus supporting
socially important projects. Currently, Nornickel
mainly cooperates with the working groups
of the Government Commission on the Use
of Natural Resources and Environmental Protection.
Nornickel is also actively involved
in the expert councils of regional authorities across
its geographies, including the Krasnoyarsk Region
Governor’s Council for Strategic Development
and Priority Projects.
Nornickel’s representatives take part
in parliamentary hearings 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,
the Association of Managers interregional public
organisation, etc.
Nornickel’s experts engage in draft regulation
discussions as part of open government and local
councils under federal executive bodies, as well
as in anti-corruption due diligence and regulatory
impact assessments. This all helps to maintain
a constructive dialogue with the government, cut red
tape, and improve the country’s business climate.
The retrofit of Norilsk Airport was an important
step in developing the infrastructure of the Russian
Arctic. Between 2016 and 2018, the airport’s runway
was repaved without interrupting the air traffic.
In 2019, the apron was also repaved; the patrol road,
perimeter fencing, wastewater treatment facilities,
and emergency response station were completed,
and power supply facilities were retrofitted. Capital
investment in the project totalled about RUB 12.5 bn
(USD 193 mln), including RUB 5 bn (USD 77 mln)
invested by Nornickel. The retrofitted Norilsk
Airport will become one of the most advanced
airport complexes in the Arctic.
CHARITY PROGRAMMES
World of New Opportunities
programme
Nornickel runs the World of New Opportunities
charity programme to provide sustainable
development capabilities and opportunities
to communities across its regions of operation.
The programme aims at developing soft skills in local
communities, demonstrating and introducing new
social technologies, supporting and encouraging
community initiatives, and creating a favourable
environment for cross-sector partnerships.
The programme was updated in September 2019.
Develop! — partnership for local development.
Key activities: the Socially Responsible Initiatives
Competition, We Are the City! social technologies
forum, Social Engineering Bureau, Non-Profit
Accelerator, We Are the City! PicNick event, City
Event Workshop, Peremena education project,
School of Urban Competencies, and travel grants
for social entrepreneurs. In 2019, the Socially
Responsible Initiatives Competition received
507 entries – a record high since the project was
launched in 2014.
Act! — service economy development and growth.
Within the initiative, Nornickel runs the following
Charity expenses (USD mln)
‘19
‘18
‘17
154
115
115
programmes: the Social Entrepreneurship training
course, Mentor Institute, Social Entrepreneur Club,
Convention of Social Entrepreneurs from the North,
Social Entrepreneurship Accelerator Programme,
and travel grants for social entrepreneurs. In 2019,
five social entrepreneurs were granted business
development loans under the World of New
Opportunities charity programme.
Create! — building the infrastructure for accelerated
regional development and improved living standards
in Nornickel’s regions of operation. The initiative
is implemented through the Norilsk Development
Agency and the Second School Centre across four
areas: Business, Development/Urban Environment,
Tourism, and Social and Cultural Projects.
During 2019, over 45,000 local residents
in Nornickel’s regions of operation took part
in Nornickel’s social programmes.
The City Resident’s Social Portrait
survey
From October 2018 to February 2019, Nornickel
ran the “City Resident’s Social Portrait”
survey aimed to gain insight into the real state
of affairs in our communities by compiling
the local populations’ social portraits and use
the findings to inform local development priorities
for the next decade. The survey is unique in that
it uses computational sociology, i.e. machine
learning, to analyse respondents’ digital profiles.
The survey covered a total 8,078 residents
in Norilsk, Monchegorsk, Zapolyarny, and Nickel,
with over 33,000 opinions and proposals received
from local communities. The respondents’
perspectives on the existing gaps and their vision
for what their community will be like in 10–15 years
enabled the survey team to identify and understand
the key trends for community development.
«NORNICKEL»
Annual report 2019
The Plant of Goodness corporate
volunteer programme
Nornickel’s social policy remains a key pillar
of its development strategy and the foundation
of its corporate social responsibility. A shift
from paternalism to partnership has enabled
Nornickel to build mutually beneficial relations
not only with business and local communities but also
with its employees.
The Plant of Goodness project is a vivid example
of such engagement: it has institutionalised
and consolidated Nornickel’s existing experience
and traditions of social and environmental initiatives.
Originally launched in Moscow only, the programme
has since been extended to Norilsk, Monchegorsk,
Zapolyarny, and Chita, acting as an engagement
tool that creates new opportunities, unlocks
people’s potential and strengthens their links
to their communities. When people are directly
involved in transforming their social environment,
they inevitably become more engaged with it.
The Poneslos (“Let’s Roll”) environmental initiative
that grew out of regular volunteer weekends
has become one of Nornickel’s most prominent
social projects. In addition to urban landscaping,
the initiative now includes environmental awareness
activities, and has grown to 17,000 participants.
The programme’s key areas:
• Personal donations programme (through
the corporate intranet portal)
• Corporate charity events
• Volunteers in the City partnership project
• Poneslos (“Let’s Roll”) environmental initiative
• Eco-convention
• Employee volunteering projects
• Volunteer studios
• Skill building programmes
• Plant of Goodness leaders
Nornickel will consider local residents’ expectations
when developing production and social programmes
for its employees and communities in its regions
of operation.
In 2019, the Plant of Goodness corporate volunteer
programme raised over RUB 4 mln through charitable
donations by employees and ran 209 volunteer
campaigns and events.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix SPONSORSHIP
Rosa Khutor Ski Resort
In 2016–2019, Nornickel invested USD 250.5 mln
in developing the Rosa Khutor Ski Resort as part
of the programme to support mass sports in Russia.
The funding helped transform the Olympic complex
into a year-round tourist destination. 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 supports
youth sports and professional sports, in particular,
by facilitating 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 2019, renowned
athletes visited Krasnoyarsk and Norilsk and shared
their personal Olympic experiences, did autograph
and photo sessions, and hosted master classes
and fitness tests.
Nornickel also helped organise the 30th National
Olympic Day, a sports festival aimed at promoting
healthy lifestyle, mass fitness and sports among
Russian citizens. As part of the event, Nornickel set up
a sports area combining a dedicated section of the 2019
Winter Universiade’s general partner and a streetball
ground of CSKA Professional Basketball Club,
the EuroLeague 2019 champion.
CSKA Professional Basketball Club
Nornickel remains the general sponsor of Russia’s
successful and acclaimed basketball club. In 2019,
the Club team won the VTB United League and became
a fourth time winner of the most prestigious
continental tournament, the EuroLeague Final Four.
Funding for sports projects (USD mln)
‘19
‘18
‘17
23
58
70
166
International University Sports Federation
Nornickel supports the International University
Sports Federation (FISU), the organiser
of universiades. In September 2019, Nornickel
provided support for the FISU Volunteer Leaders
Academy, a regular international forum attended
in 2019 by volunteer leaders from more than 80
countries, representatives of sports delegations,
and public officials responsible for university
sports. The forum provided a platform to foster
greater interaction between volunteers and national
university sports federations, and share knowledge
and experience in organising major international
sporting events, including the 2019 Winter
Universiade in Krasnoyarsk.
29th International Winter
Universiade in Krasnoyarsk
As the general partner of the 29th International
Winter Universiade held in Krasnoyarsk in 2019,
Nornickel fully met its commitments to assist
in preparing and holding the international student
games.
Nornickel’s contribution
to the success of the student games was highly
praised by international sports federations,
participating countries, the local organising
committee, and Russia’s leaders. The Company
received a number of prestigious awards: Regional
Development. The Best for Russia, Sport Leaders,
and Best Social Projects in Russia awards, as well
as BISPO Award and MARSPO Award.
Along with financial support and provision
of infrastructure for the international student games,
Nornickel made additional commitments to train
the required staff, develop its own volunteering
programme, and help spread modern Siberia’s new
image around the world. For the first time ever,
a dedicated team of corporate volunteers made up
of Nornickel employees and their family members
helped run the Universiade. Nornickel allocated
funds to arrange trainings for sports facilities
managers, functional heads, and sports executives,
as well as volunteer team leaders, at the Russian
International Olympic University and Siberian
Federal University. Nornickel’s support contributed
to the non-material heritage of the 2019 Winter
Universiade and the development of the Krasnoyarsk
Region’s talent pool in general.
«NORNICKEL»
Annual report 2019
Nornickel contributed a total of over RUB 2.4 bn, net
of VAT, (USD 37 mln) to prepare and hold the 2019
Winter Universiade.
In line with the existing arrangements, once
the Universiade was over, the newly built facilities
were not handed over to the state. Instead, Nornickel
will continue to finance their ongoing maintenance
and operation, drawing on many years of experience
in building and operating multifunctional
and specialised sports complexes. The new sports
and training complex is already a venue for futsal
and basketball trainings and tournaments. The facility
was upgraded to improve accessibility for children
and adults with special needs and to offer an even
safer and more comfortable leisure experience
to the city’s residents and guests.
Norilsk Nickel Futsal Club
In 2016, the team and administrative personnel
of Norilsk Nickel Futsal Club moved to Norilsk.
Nornickel is the Club’s general sponsor. The team
takes part in the Russian Super League Championship
and Russian Futsal Cup. The Russian Futsal
Association and MMC Norilsk Nickel work closely
together to ensure the success of the Futsal to Polar
Schools project. As part of this initiative, the Club’s
futsal players run master classes for schoolchildren
and special workshops for coaches.
Nornickel Football Cup – New Hopes
For the second year running, Nornickel organised
the Nornickel Cup – New Hopes inter-regional
football tournament which brought together
youth teams from the Krasnoyarsk, Zabaykalsky,
and Murmansk Regions. The tournament winners were
awarded with cups and diplomas, and all participants
received commemorative gifts. .
All-Russian Federation
of DanceSport and Acrobatic
Rock’n’Roll
In 2019, Nornickel supported the All-Russian
Federation of DanceSport and Acrobatic Rock’n’Roll
in developing and promoting these sports. As part
of the partnership, we helped set up a corporate
acrobatic rock’n’roll club in Norilsk, which
successfully competes in national and regional
contests. Nornickel is a partner of the Federation.
Rosgonki and Sochi Autodrom
Since 2018, Nornickel has partnered with Rosgonki
and Sochi Autodrom to support and promote motor
racing in Russia. Under the sponsorship agreement
between Rosgonki and Nornickel, the Company
provides assistance in preparing and holding sporting
events at the Formula One Circuit Race Track.
167
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Corporate governance
orpo
rate
Governance
170 Letter from Deputy Chairman
of the Board of Directors
176 Governance structure
205 Remuneration
208 Control system
C LETTER
FROM DEPUTY CHAIRMAN
OF THE BOARD
OF DIRECTORS
Year after year, MMC Norilsk Nickel increases focus
and efforts on enhancing its corporate governance
framework through continuous improvements
to the quality and maturity of existing governance
practices. Good corporate governance is an essential
driver of Nornickel’s corporate strategy of creating
shareholder value and fuelling overall sustainable
growth. It is not only an important factor in building
a compelling investment case and shareholder
and investor confidence but also a driver
of Nornickel’s efficiency and competitive edge.
Aware of its key role in the overall corporate
governance framework, the Board of Directors
continued in 2019 to focus on Nornickel’s business
priorities, strategy, innovative development
and the use of new technology to boost operational
efficiency. Nornickel’s programme to improve
operational efficiency and cut operating costs
was reviewed and further implemented, along
with initiatives to enhance our HSE performance.
In 2020, Nornickel will continue to improve its
corporate governance practice. Nornickel’s Board
of Directors, Board committees, and management
are aware of the areas for improvement and recognise
the importance of this challenge.
Andrei Bougrov
Senior Vice President,
Deputy Chairman of the Board
of Directors,
MMC NORILSK NICKEL
170
«NORNICKEL»
Annual report 2019
2019 HIGHLIGHTS
PLANS FOR 2020
In 2019, to further the implementation
of Nornickel’s Corporate Governance Framework
Improvement Programme (2014), the Board
of Directors closely analysed and reviewed matters
related to the Company’s business priorities
and strategy. The following focus points dominated
the agenda of the Board of Directors and its
Committees in 2019:
• Exploring innovation-driven development
opportunities and embedding new technology
across our operations
Implementing the operational efficiency and cost
optimisation programme
•
• Running regular activities and reporting
on Nornickel’s HSE performance (including
the Sulphur Project)
• Reviewing the implementation status
of the investor relations strategy
Nornickel’s senior management reiterates its
commitment to further improve corporate
governance in 2020 in order to boost the Company’s
operational efficiency and drive its competitive
edge in the domestic and global markets. Driving
shareholder value creation is Nornickel’s priority
for 2020, and this task requires good governance.
This is why Nornickel maintains a strong focus
on this aspect and will improve its governance
principles, aligning its corporate governance
framework with the highest international standards.
Shareholders who used e-voting
services
GENERAL MEETING OF SHAREHOLDERS
General Meetings of Shareholders held in 2019
Date
Meeting
Results
10 June 2019
Annual General Meeting
of Shareholders (held
in person)
• The Meeting approved the Annual Report, annual accounting (financial)
statements and consolidated financial statements
• Profit for the period was distributed, and the resolution on FY 2018
dividend payout was passed
• A new Board of Directors and Audit Commission were elected;
resolutions on remuneration of members of the Board of Directors
and the Audit Commission were passed
Interested party transactions were approved
•
• The auditor was approved to audit Nornickel’s accounting (financial)
statements, consolidated financial statements, and interim consolidated
financial statements prepared under the Russian Accounting Standards
• The Meeting approved Nornickel’s joining the Interregional Cross-
Industry Association of Employers “Union of Copper and Nickel Producers
and Production Support Providers”, and resolved other matters
A resolution to pay the 1H 2019 dividend was passed
A resolution to pay the 9M 2019 dividend was passed
26 September
2019
16 December
2019
An Extraordinary General
Meeting of Shareholders
(held in absentia)
An Extraordinary General
Meeting of Shareholders
(held in absentia)
Quorum at General Meetings of Shareholders in 2017–2019 (%)
75
73
68
78
80
81
74
100%
75%
50%
25%
0%
9 June 2017
(Annual)
29 September 2018
(Extraordinary)
28 June 2018
(Annual)
19 September 2018
(Extraordinary)
10 June 2019
(Annual)
26 September 2019
(Extraordinary)
16 December 2019
(Extraordinary)
1/ Extraordinary
2/ Annual
171
1,3801,03974968115616.12.2019¹26.09.2019¹10.06.2019²19.09.2018¹28.06.2018²Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix BOARD OF DIRECTORS
CHANGES IN THE COMPOSITION OF THE BOARD
OF DIRECTORS
The Annual General Meeting of Shareholders held on 10 June 2019:
Elected new members:
• Sergey Volk
• Maxim Poletaev
• Vyacheslav Solomin
• Evgeny Shvarts
Terminate the office:
• Artem Volynets
• Andrey Likhachev
• Vladislav Soloviev
• Maxim Sokov
Number of Board meetings
‘19
‘18
‘17
24
32
10
35
129
13
7
175
199
In person
In absentia
Number of matters reviewed
Tenure
on the Board
of Directors
38,5%
Under 3 years
38,5%
3–7 years
23,1%
Over 7 years
Board composition
by gender
«NORNICKEL»
Annual report 2019
The Board committees and their composition:
• Strategy Committee (five members, including
four independent directors (80%) and one non-
executive director)
• Audit and Sustainable Development Committee
(five members, including three independent
directors (60%) and two non-executive directors)
• Budget Committee (five members, including
three independent directors (60%) and two non-
executive directors)
• Corporate Governance, Nomination
and Remuneration Committee (five members,
including three independent directors (60%)
and two non-executive directors)
Status of Board members (%)
Remuneration to Board members in 2019
(USD mln)
‘19
‘18
‘17
54
46
39
23
31
46
23
23
15
Independent
directors
Non-executive
directors
Executive
directors
0.01
Reimbursement
of expenses
USD 3.8
mln
3.8
Remuneration
for service
on the Board
of Directors
Gareth
Penny
Chairman of the Board
of Directors since 2013
(Independent Director)
Andrei
Bougrov
Deputy Chairman of the Board
of Directors since 2013
Sergey
Barbashev
Member of the Board
of Directors since 2011
Alexey
Bashkirov
Member of the Board
of Directors since 2013
92%
Male
8%
Female
Sergey Bratukhin
Chairman of the Board
of Directors since 2013
Sergey Volk
Member of the Board
of Directors since 2019
Marianna
Zakharova
Member of the Board
of Directors since 2010
Roger
Munnings
Chairman of the Board
of Directors since 2018
Stalbek
Mishakov
Member of the Board
of Directors since 2012
Maxim
Poletaev
Member of the Board
of Directors since 2019
Board composition
by age group
54%
40-50
23%
51-61
23%
Over 61
Vyacheslav
Solomin
Member of the Board
of Directors since 2019
Evgeny
Shvarts
Member of the Board
of Directors since 2019
Robert
Edwards
Chairman of the Board
of Directors since 2013
172
173
Matters reviewed by the Board of Directors
in 2019 (%)
14
Other
17
Strategy,
operations,
and finance
18
By-laws approval
26
Corporate governance
25
Transaction approval
129
matters
Executive
Director
Non-Executive
Director
Independent
Director
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix MANAGEMENT BOARD
CHANGES IN THE COMPOSITION
OF THE MANAGEMENT BOARD
Alexander Grubman’s office was terminated,
on 12 July 2019.
Tenure on the Management Board
23%
Under 2 years
8%
2-5 years
69%
6-7 years
Management Board composition by gender
67%
Male
33%
Female
Vladimir
Potanin
Chairman of the Management
Board since 2012
Sergey
Barbashev
Member of the Management
Board since 2018
Sergey
Batekhin
Member of the Management
Board since 2013
Andrei
Bougrov
Member of the Management
Board since 2013
Vladislav
Gasumyanov
Management Board since 2014
Sergey
Dubovitsky
Management Board since 2018
Sergey
Dyachenko
Member of the Management
Board since 2013
Marianna
Zakharova
Member of the Management
Board since 2016
Larisa
Zelkova
Member of the Management
Board since 2013
Elena
Savitskaya
(until 27 December 2019 – Kondratova)
Member of the Management
Board since 2014
Sergey
Malyshev
Management Board since 2013
Nina
Plastinina
Management Board since 2013
Executive
Director
174
«NORNICKEL»
Annual report 2019
Remuneration to Management Board members
in 2019 (USD mln)
USD 93.2
mln
47.8
Salary
0.04
Remuneration
for service
on the
Management
Board
45.4
Bonus
Number of the Management Board
meetings
‘19
‘18
‘17
22
23
32
36
175
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix GOVERNANCE
STRUCTURE
Governance chart
CORPORATE GOVERNANCE FRAMEWORK
«NORNICKEL»
Annual report 2019
AUDIT
COMMISSION
election
reporting
GENERAL MEETING
OF SHAREHOLDERS
election
reporting
INDEPENDENT
AUDITOR
MANAGEMENT
BOARD
election
reporting
n
o
i
t
c
e
l
e
g
n
i
t
r
o
p
e
r
INTERNAL CONTROL
AND RISK MANAGEMENT
g
n
i
t
r
o
p
e
r
n
o
i
t
c
e
l
e
election
reporting
reporting
PRESIDENT, CHAIRMAN
OF THE MANAGEMENT
BOARD
CORPORATE
SECRETARY
election
reporting
BOARD
OF DIRECTORS:
director election
reporting
g
n
i
t
r
o
p
e
r
CORPORATE GOVERNANCE,
NOMINATION
AND REMUNERATION
COMMITTEE
STRATEGY COMMITTEE
BUDGET COMMITTEE
AUDIT ANS SUSTAINABLE
DEVELOPMENT COMMITTEE
INTERNAL
AUDIT DEPARTMENT
In its corporate governance practice, Nornickel
is governed by applicable laws, listing rules,
and recommendations of the Corporate
Governance Code. Nornickel’s corporate
governance framework is designed to balance
the interests of our shareholders, the Board
of Directors, management and employees, as well
as other stakeholders involved in Nornickel’s
activities. The approach, key principles
and mechanisms underpinning Nornickel’s efforts
to build a robust corporate governance framework
are based on the applicable Russian laws, including
the Corporate Governance Code recommended
by the Bank of Russia.
DEVELOPMENT AND FURTHER
IMPROVEMENT OF THE CORPORATE
GOVERNANCE FRAMEWORK
To support shareholder value creation and ensure
robust protection of shareholder rights and interests,
in 2019 Nornickel continued to focus on its strategy
and business priorities, and improve its corporate
governance and social responsibility framework,
seeking to achieve excellence in governance so
as to mitigate investment risks.
Nornickel’s corporate governance framework
relies on key principles that imply effective
leadership and control of the Company
and equal treatment of all shareholders.
For more details on the principles
formalised in Nornickel’s by-laws, please see
the Disclosure subsection, Investors section
of the Company’s website.
efficiency, cut operating costs, and improve HSE
performance across the Company’s footprint.
A smart strategy and an in-depth analysis of market
developments helped propel Nornickel to an entirely
new level of efficiency, reaffirming its status as one
of the most compelling investment cases in Russia.
In the reporting year, Nornickel paid significant
attention to innovative development
and the use of new technology as part of its
operational excellence drive. Nornickel’s dedicated
programme covered initiatives to step up operational
Nornickel continuously improves its corporate
governance framework and adopts global best
practice, keeping in mind their significant impact
on the Company’s sustainable development
and valuation. Corporate governance improvement
176
177
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix is seen as an integral part of Nornickel’s overall
efforts to achieve operational excellence.
The process is constantly supervised by Nornickel’s
Board of Directors and executive bodies. The Bank
of Russia’s Corporate Governance Code serves
as the main benchmark for improving Nornickel’s
corporate governance framework.
Comparison of Nornickel’s 20171, 2018,
and 2019 reports on compliance with the Corporate
Governance Code demonstrates positive progress
on the implementation of the Code’s principles
and recommendations. The number of the Code’s
principles fully complied with has increased
from 55 in 2017 to 61 in 2019, or 77% of the total.
The biggest progress was made on the standards set
out in Chapter 2, Board of Directors, and Chapter 5,
Risk Management and Internal Control Framework,
of the Code.
Nornickel fully complies with the standards
outlined in Chapter 3, Corporate Secretary, Chapter
4, Disclosures, and Chapter 5, Risk Management
and Internal Control Framework, of the Code.
Nornickel’s efforts to improve corporate governance
have been acknowledged by international ESG score
providers. Their scores are a direct evidence
Compliance with the Corporate Governance Code principles and recommendations
Corporate governance
principles
Number of principles
recommended
by the Code
2017
2018
2019
79%
100%
13
36
2
10
6
7
5
Rights and equal
opportunities
for shareholders
in exercising their rights
Board of Directors
Corporate Secretary
Remuneration
system for members
of the Board
of Directors and senior
management
Risk management
and internal control
system
Company disclosures
Material corporate
actions
55
22
2
59
19
1
61
17
1
70% 28% 2%
75% 24% 1%
77% 22% 1%
12
1
ꟷ
12
1
ꟷ
12
1
ꟷ
24
2
3
4
7
3
11
–
6
2
–
2
1
–
1
–
–
–
27
2
4
4
7
3
9
–
5
2
–
2
–
–
1
–
–
–
27
2
4
6
7
3
9
–
5
–
–
2
–
–
1
–
–
–
Full compliance
Partial compliance
No compliance
«NORNICKEL»
Annual report 2019
of Nornickel’s corporate governance quality
and business efficiency.
In line with the recommendations of the Bank
of Russia’s Corporate Governance Code, Nornickel
collaborated with the registrar to introduce
e-voting through shareholder’s personal accounts.
By using this service, shareholders may attend
meetings remotely. The service was first made
available to the Extraordinary General Meeting
of Shareholders as early as in September 2017. Since
then, the service has functioned well and undergone
further development: as of 2019, shareholders have
been able to use the national Unified Identification
and Authentication System to log into their personal
accounts via the registrar’s mobile app.
In 2019, Nornickel actively promoted e-voting
among its shareholders (including via text
messages). As a result, shareholders widely used
e-voting at General Meetings throughout the year.
Nornickel will continue to use and develop e-voting
as an efficient tool for engaging its shareholders
in corporate activities and helping them exercise
their governance rights.
Awards received by Nornickel’s managers are another
evidence of its robust corporate governance:
in 2019, they were among the business leaders listed
in the Top 1000 Russian managers rating released
annually by the Russian Managers Association
and the Kommersant Publishing House. Such awards
acknowledge executives’ leadership in the Russian
business community and the recognition
of their professional achievements by industry
experts and peers. Vladimir Potanin, President
of Nornickel, was recognised as one of Russia’s top
business leaders. Sergey Malyshev, Nornickel’s
Senior Vice President – Chief Financial Officer,
was listed among the Top 100 CFOs in the metals
and mining industry. Andrei Bougrov, Nornickel’s
Senior Vice President, was ranked among the Top
50 GR officers. Marianna Zakharova, Nornickel’s
First Vice President for Corporate Governance,
Shareholder Matters and Legal, was among the Top
50 CLOs. Sergey Batekhin, Nornickel’s Senior Vice
President for Sales, Procurement and Innovation, was
one of the Top 25 logistics directors in the metals
industry. Larisa Zelkova, Nornickel’s Senior
Vice President for HR, Social Policy and Public
Relations, was one of the Top 100 PR and corporate
communication directors in the metals and mining
sector. Svetlana Ivchenko, Head of the Social Policy
Department, was among the Top 25 CSR directors.
A special category award was also given to Roger
Munnings, Chairman of the Audit and Sustainable
Development Committee of Nornickel’s Board
of Directors, who was named the Best Independent
Director, while Pavel Platov, Nornickel’s Corporate
Secretary, was named the winner of the Director
of the Year national award in the Corporate
Governance Director/Corporate Secretary category.
STAKEHOLDER ENGAGEMENT
IN CORPORATE GOVERNANCE
To achieve operational excellence and further
improve corporate governance, Nornickel
focuses on engaging its stakeholders in corporate
governance, thus enhancing support and minimising
resistance from stakeholders while boosting
our prospects for success.
In 2019, the Nornickel 5+ Forum was held
in the Moscow Region with a key focus
on Nornickel’s commitment to building employee
engagement. The forum was the fifth such meeting
of top leaders from across Nornickel’s branches,
with the top managers engaging in frank dialogues,
debating and jointly seeking solutions, summing up
progress and sharing outlooks on Nornickel’s further
development.
Another highlight of the year was the Company’s
first-ever videoconference between Nornickel’s
senior management and employees. Employees
had the chance to ask their questions directly
1/ In 2017, Nornickel prepared its inaugural report on compliance with the Corporate Governance Code using the template recommended
by the Bank of Russia’s Letter No. IN-06-52/8.
178
179
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix to Nornickel’s top leaders – First Vice President
Sergey Dyachenko, Senior Vice President Larisa
Zelkova, and Senior Vice President Sergey Malyshev.
Nornickel’s continued focus on expanding
the horizons of sustainable growth was highlighted
during its annual Capital Markets Day in November
2019 which involved Nornickel’s Board members
and senior management. Thanks to senior
management’s well-coordinated and well-placed
efforts, the investment community received up-to-
date information on Nornickel’s operational
and financial performance, and gained an insight into
an outlook for the metals market, and the Company’s
strategic vision to 2030.
Nornickel reiterates its commitment to follow
global best practice in corporate governance
and acknowledges that the Company’s long-term
success stems from teamwork involving senior
management alongside frontline staff, investors,
bankers, and other partners. By building mutually
beneficial relationships with each stakeholder,
Nornickel drives its sustainable growth and strong
competitive edge.
LIABILITY INSURANCE
In line with best practice and recommendations
of the Corporate Governance Code, Nornickel
provides liability insurance for members of its Board
of Directors and Management Board. The insurance
covers potential damages arising from errors
in the course of managing the Company. The policy
terms and conditions and the amount of insurance
coverage are consistent with international best
practice in insuring such risks. Material terms
and conditions of the insurance policy are subject
to approval by the General Meeting of Shareholders.
MANAGING CONFLICTS
OF INTEREST
Nornickel has implemented measures to prevent
potential conflicts of interest involving Board
members and senior managers. As of December 2016,
Board members have filed annual disclosure forms
providing information about their relatives and family
members. Nornickel also has in place procedures
for identifying interested party transactions.
Nornickel’s efforts to identify and prevent conflicts
of interest help minimise the probability of adverse
impact on the Company.
GENERAL MEETING
OF SHAREHOLDERS
The General Meeting of Shareholders is the supreme
governance body of MMC Norilsk Nickel responsible
for making decisions on matters most crucial
to the Company. A full list of matters within the remit
of the General Meeting of Shareholders is detailed
in the Company’s Articles of Association. Nornickel
has in place the Regulations on the General Meeting
of Shareholders detailing the procedures for convening,
preparing and holding general meetings.
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 Meeting of Shareholders are deemed
Extraordinary General Meetings of Shareholders
and are convened as per resolution of the Board
of Directors at its discretion or at the request
of the Audit Commission, the Company’s auditor,
or shareholders who hold at least 10% of Nornickel’s
voting shares as of the date of the request.
The notice of a General Meeting of Shareholders
is published in the Rossiyskaya Gazeta and Taimyr
Articles
of Association
Regulations
on the General Meeting
of Shareholders
«NORNICKEL»
Annual report 2019
newspapers, and posted on Nornickel’s website
at least 30 days prior to the date of the general
meeting. If a general meeting is held in the form
of absentee voting, the notice is given in the above
mentioned newspapers at least 30 days prior
to the deadline set for the collection of voting ballots.
Holders of MMC Norilsk Nickel shares who
are registered in the shareholder register receive
a ballot directly from the Company and are entitled
to exercise their voting right by sending the ballot
to the Company or by attending the General Meeting
of Shareholders (in person or by proxy).
Continued successful use of e voting
at the meetings held in 2018–2019 enabled
shareholders to participate in the voting regardless
of their location. Evoting is available both
on the gosuslugi.ru website accessible to general
public and via the Shareholder’s Personal Account,
a dedicated online resource for Nornickel’s
shareholders. The number of shareholders taking
advantage of evoting has increased noticeably since
the service was introduced.
BOARD OF DIRECTORS
Shareholders of MMC Norilsk Nickel who own
the Company shares via nominal holders receive
the voting ballot from the nominal holder. They
are entitled to vote at the meeting in the same way
as the holders registered in the shareholder register
or instruct the nominal holder to do the same
as prescribed by the Russian securities law. Nominal
holders duly instructed by their clients communicate
the voting instructions to the registrar. The receipt
of instructions by the registrar shall be equivalent
to voting by ballot.
The Board of Directors is responsible for the general
management of Nornickel’s operations, excluding
matters reserved to the General Meeting
of Shareholders. The Board of Directors plays
a crucial role in designing and developing
the corporate governance system, ensures
the protection and exercise of shareholders rights,
and supervises executive bodies. The Board
of Directors sets the fundamental principles
of business conduct and is responsible for nurturing
Nornickel’s business and social culture.
ADR holders do not receive voting ballots directly
from the Company. According to the depository
agreement, Nornickel 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.
Except for the cumulative voting to elect members
of the Board of Directors, each voting share
represents one vote at the General Meeting
of Shareholders.
Three General Meetings of Shareholders were
held in 2019, and a high level of shareholders’
attendance was maintained. A General Meeting
of Shareholders shall be considered properly
convened (having a quorum) if the shareholders
who hold collectively more than 50% of the votes
granted by the Company’s outstanding voting shares
are present at the meeting.
The Board’s authority and formation process,
as well as procedures for convening and holding
Board meetings are determined by the Articles
of Association and Regulations on the Board
of Directors.
According to Nornickel’s Articles of Association,
the Board of Directors has 13 members. Members
the Shareholder’s
Personal Accounеt
180
181
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix of the Board are elected at the Annual General
Meeting of Shareholders for a period until
the next Annual General Meeting of Shareholders.
The Board of Directors may recommend that
the General Meeting of Shareholders amends
the Articles of Association by changing the number
of Board members, and may only be elected
after the relevant amendments to the Articles
of Association are approved by the General
Meeting of Shareholders and their state registration
is completed. Until a new Board of Directors
with the new number of members is elected,
the decision-making rights and process of the then
active Board remain unchanged, with the Board
making its recommendations as to nominee
Board members including independent directors.
The current size of the Board of Directors is best
aligned with Nornickel’s goals and objectives,
and its appropriate independence mix ensures that
decision making considers the interests of various
stakeholders and enhances the quality of managerial
decisions. The current Board of Directors
comprises seven independent directors, beyond
the minimum requirement set out in the Listing Rules
and the Corporate Governance Code, which enables
highly professional, independent judgements
on matters on the agenda.
INDUCTION OF NEW MEMBERS
OF THE BOARD OF DIRECTORS
Since 2014, Nornickel has in place
the Professional Development Policy for Members
of Board of Directors. To comply with the Policy’s
requirements as well as to maintain good governance
at Nornickel and ensure its continuous improvement,
newly elected Board members get immersed
into the business processes through a series
of meetings with executives and key employees
where they discuss key aspects of Nornickel’s
business. In September 2019, an off-site session
was arranged for members of the Board of Director
in Norilsk to make site visits to production
facilities operated by Nornickel’s Polar Division
and have working meetings with Nikolay Utkin,
Director of the Polar Division, and heads
of production units. The meetings focused primarily
on production development, environment (including
the implementation status of the Sulphur Project),
as well as occupational health and safety. In 2020,
members of the Board of Directors also plan
In 2019, Nornickel’s Board of Directors
held 34 meetings, including 10 meetings
in person, and reviewed
Directors’ attendance at Board meetings during 20191
In 2019, attendance at Board meetings was 100%.
«NORNICKEL»
Annual report 2019
129
matters
a number of site visits to Nornickel’s production
facilities.
BOARD OF DIRECTORS’
PERFORMANCE
At its meetings in 2019, the Board focused
on Nornickel’s corporate governance, financial
and business operations, operations of controlled
entities, approval of interested-party transactions,
as well as aspects of priority business lines.
QUALITY ASSESSMENT
OF THE BOARD OF DIRECTORS
Since 2014, Nornickel has run annual internal
assessments (self-assessments) of the Board
of Directors’ performance using the methodology
developed by independent consultants in line
with global best practice. Directors are invited
to fill in an online questionnaire in accordance
with the current Performance Evaluation Policy
for the Board of Directors following the 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. Each questionnaire features
a text field where directors may enter open-text
comments. Answering all questions is mandatory.
Based on the evaluation results, the Corporate
Governance, Nomination and Remuneration
Committee prepares a statement (Report)
on the Board of Director’s performance
in the reporting year and makes improvement
Directors
Status
Board of Directors
Total
In person
In absentia
Strategy
Committee
Budget
Committee
Audit
and Sustainable
Development
Committee
Corporate
Governance,
Nomination
and Remuneration
Committee
Gareth
Penny
Andrei
Bougrov
Sergey
Barbashev
Alexey
Bashkirov
Sergey
Bratukhin
Marianna
Zakharova
Roger
Munnings
Stalbek
Mishakov
Robert
Edwards
Independent
Director
34/34
10/10
24/24
Executive Director
34/34
10/10
24/24
Executive Director
34/34
10/10
24/24
Non-Executive
Director
Independent
Director
33/34
9/10
24/24
34/34
10/10
24/24
Executive Director
34/34
10/10
24/24
Independent
Director
Non-Executive
Director
Independent
Director
34/34
10/10
24/24
34/34
10/10
24/24
34/34
10/10
24/24
New Directors after the Annual General Meeting of Shareholders (10 June 2019)
Sergey Volk
Maxim
Poletaev
Independent
Director
Independent
Director
Vyacheslav
Solomin
Non-Executive
Director
Evgeny
Shvarts
Independent
Director
20/34
7/10
13/24
20/34
7/10
13/24
20/34
7/10
13/24
20/34
7/10
13/24
Directors before the Annual General Meeting of Shareholders (10 June 2019)
Artem
Volynets
Vladislav
Soloviev
Andrey
Likhachev
Maxim Sokov
Independent
Director
Non-Executive
Director
Independent
Director
Non-Executive
Director
14/34
3/10
11/24
14/34
3/10
11/24
14/34
3/10
11/24
14/34
3/10
11/24
7/7
—
—
7/7
7/7
—
—
—
—
—
5/7
—
5/7
2/7
—
—
2/7
—
—
—
4/4
4/4
—
4/4
3/4
—
3/4
—
—
—
1/4
—
—
1/4
—
—
—
8/8
8/8
—
8/8
4/8
8/8
—
—
4/8
—
—
—
—
—
—
—
—
12/12
12/12
—
—
12/12
12/12
—
—
—
—
—
—
6/12
—
182
183
1/ The attendance by Board members is represented as X/Y, where X is the number of meetings attended by the Director, and Y is the number
of meetings held.
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix recommendations for areas where the Board
scores were below average. The Report is approved
by Nornickel’s Board of Directors taking into account
the recommendations of the Corporate Governance,
Nomination and Remuneration Committee.
Information on the performance assessment
is published in the Annual Report and on Nornickel’s
corporate website.
In line with best corporate governance practices,
the Board of Directors will continue performing annual
self-assessments while also engaging an independent
expert to evaluate its performance at least once
every three years. No independent performance
assessment of the Board of Directors was carried out
in 2019. To view the results of the 2018 independent
performance assessment of the Board of Directors,
please see the 2018 Annual Report.
COMPOSITION OF THE BOARD
OF DIRECTORS
Following the Annual General Meeting
of Shareholders on 10 June 2019, Sergey Volk, Maxim
Poletaev, Vyacheslav Solomin, and Evgeny Shvarts
were elected, succeeding Artem Volynets, Vladislav
Soloviev, Andrey Likhachev, and Maxim Sokov.
As of 31 December 2019, the Board of Directors had
13 members, of which:
• seven independent directors: Gareth Peter Penny,
Sergey Bratukhin, Sergey Volk, Roger Munnings,
Maxim Poletaev, Evgeny Shvarts, and Robert
Edwards
three non-executive directors: Alexey Bashkirov,
Stalbek Mishakov, and Vyacheslav Solomin
three executive directors: Sergey Barbashev,
Andrei Bougrov, and Marianna Zakharova.
•
•
CHAIRMAN OF THE BOARD
OF DIRECTORS
The Chairman of the Board of Directors organises
the Board’s work, convenes and chairs meetings,
and chairs the General Meetings of Shareholders.
The key responsibilities of the Chairman of the Board
of Directors are to ensure high levels of trust at Board
meetings and constructive cooperation between
the Board members and corporate management.
Since March 2013, the Board of Directors has
been chaired by Gareth Peter Penny, who in line
with global best practice is an independent director.
Gareth Penny’s external non-executive directorships
enable Nornickel’s Board of Directors to better
Professional
Development
Policy for Members
of Board
of Directors
keep abreast of global best practice in corporate
governance.
INDEPENDENT DIRECTORS
Nornickel complies with the international standards
as well as the recommendations of the Corporate
Governance Code of the Bank of Russia regarding
an adequate number of independent directors.
Independent directors play an important role
in effective performance of the Board’s duties
by helping it make balanced decisions that consider
the interests of various stakeholder groups, as well
as ensuring a higher quality of decision making.
As of the end of the reporting year, the Board
of Directors had five independent members fully
meeting the requirements of the Listing Rules
of the Moscow Exchange and recommendations
of the Corporate Governance Code, i.e., they
were not related to the Company, its substantial
shareholder, substantial counterparty or competitor,
or to the government. Gareth Peter Penny, Sergey
Bratukhin, Roger Munnings, Robert Edwards,
and Evgeny Shvarts satisfy these independence
requirements. Two other directors, Sergey Volk
and Maxim Poletaev, were determined to be
independent despite being related to a substantial
counterparty as the relation does not affect
their ability to make independent, unbiased
judgements in good faith.
Performance
Evaluation Policy
for the Board
of Directors
«NORNICKEL»
Annual report 2019
Thus, as of the end of 2019, 7 out of the 13 Directors,
or 53.8%, were independent.
The Board of Directors considered matters
of compliance with the independence criteria
and assessed the independence of Nornickel’s
Directors twice during 2019:
1/ when assessing nominees to the Board
of Directors in preparation for the Annual General
Meeting of Shareholders
2/ based on their performance as members
of the current Board of Directors.
The Board's skill mix
Board member
Tenure
on the Board
of Directors
Key skills
Strategy
Law
and corporate
governance
Finance
and audit
Metals
and mining/
engineering
International
economic
relations
5
+
+
+
As of 31 December 2019, the average
tenure on the Board of Directors was
six years
Gareth Peter
Penny
Andrei
Bougrov
Sergey
Barbashev
Alexey
Bashkirov
Sergey
Bratukhin
Marianna
Zakharova
Roger
Munnings
Stalbek
Mishakov
2013–present
2002–present
2011–present
2013–present
2013–present
2010–present
2018–present
2012–present
Robert Edwards
2013–present
6
+
+
+
+
+
+
8
+
+
+
+
+
New Directors after the Annual General Meeting of Shareholders (10 June 2019)
Sergey Volk
2019–present
Maxim Poletaev
2019–present
Vyacheslav
Solomin
2019–present
Evgeny Shvarts
2019–present
+
+
+
+
+
Directors before the Annual General Meeting of Shareholders (10 June 2019)
Artem Volynets
2018
+
Vladislav
Soloviev
Andrey
Likhachev
2008–2011,
2013
2018
+
+
+
+
8
+
+
+
+
+
+
+
+
+
5
+
+
+
+
+
Maxim Sokov
2008
+
+
+
+
184
185
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix BIOGRAPHICAL DETAILS OF BOARD MEMBERS1
Gareth Peter Penny
Chairman of the Board of Directors since 2013 (Independent Director), Member
of the Strategy Committee
Born in: 1962
Nationality: United Kingdom
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Diocesan College (Bishops), (Cape
Town, South Africa)
Eton College (UK)
Rhodes Scholar, Master in Philosophy,
Politics and Economics, University
of Oxford (UK)
Experience in the last five years
2017–present: member of the Board of Directors of Amulet Diamond Corp.
2017–present: non-executive Chairman of the Board of Directors of Edcon Holdings
Limited
2016–2018: non-executive Chairman of the Board of Directors of Pangolin
Diamonds Corp.
2012–2016: member of the Board of Directors of OKD
2012–2016: executive Chairman at New World Resources PLC, executive director
at New World Resources N. V.
2007–2019: member of the Board of Directors of Julius Baer Group Ltd.
2019–present: non-executive Chairman of the Board of Directors of Ninety One
Education
Degree in International Economic
Relations, Candidate of Economical
Sciences, Moscow State Institute
of International Relations (MGIMO
University)
Andrei Bougrov
Deputy Chairman of the Board of Directors since 2013 (Executive Director),
Member of the Management Board since 2013, Senior Vice President
Born in: 1952
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2018–present: member of the Advisory Council of the Russo-British Chamber of Commerce
2018–present: member of the Expert Council on Corporate Governance at the Russian
Ministry of Economic Development
2018–present: Chairman of the Council for Non-Financial Reporting of the Russian Union
of Industrialists and Entrepreneurs
2016–present: Chairman of the Share Issuers Committee of the Moscow Exchange
2016–present: member of the Expert Council on Corporate Governance at the Bank
of Russia
2015–present: member of the National Council on Corporate Governance non-profit
partnership
2015–2016: member of the Investment Committee of Federal Hydro-Generating Company
RusHydro
2013–present: Deputy CEO (2013–2015), Vice President (2015–2016), Senior Vice President
(2016–present) of MMC Norilsk Nickel
2014–present: member of the Expert Committee of the Russian President’s Anti-Corruption
Office
2014–present: member of the Board of Directors of Inter RAO UES
2013–present: President of Interros Holding Company
2006–present: member of the Management Board and Vice President (since 2013)
of the Russian Union of Industrialists and Entrepreneurs
2002–present: member of the Council on Foreign and Defence Policy non-governmental
association
«NORNICKEL»
Annual report 2019
Alexey Bashkirov
Member of the Board of Directors since 2013 (Non-Executive Director), Chairman
of the Budget Committee, member of the Audit and Sustainable Development
Committee, Strategy Committee, and Corporate Governance, Nomination
and Remuneration Committee
Born in: 1977
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2016–present: CEO of Translaininvest
2016–present: managing director at Winter Capital Advisors
2016–2018: member of the Board of Directors of iGlass Technology Inc.
2016–present: member of the Board of Trustees of the Night Hockey League non-
profit amateur hockey foundation
2014–present: member of the boards of directors of Petrovax Pharm and Zaodno
2009–present: executive director, director of the Investment Department (2009–
2015), Deputy Chief Investment Officer (2009–2018), member of the Management
Board (2011–2018), CEO and Chairman of the Management Board (2018–present)
of Interros Holding Company
Sergey Barbashev
Member of the Board of Directors since 2011 (Executive Director)
Born in: 1962
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2018–present: member of the Management Board, First Vice President – Head
of Corporate Security at MMC Norilsk Nickel
2016–present: member of the Board of Endowment Fund for Education, Science
and Culture
2015–2018: director at a branch of Olderfrey Holdings Ltd
2011–2019: Chairman of the Board of Directors of Rosa Khutor Ski Resort
Development Company
2008–present: member of the Board of the Vladimir Potanin Foundation
2008–2018: CEO, Chairman of the Management Board of Interros Holding
Company
Education
Degree in International Economic
Relations, Moscow State Institute
of International Relations (MGIMO
University)
Education
Degree in Law, Moscow Higher
School of Militia of the Ministry
of Internal Affairs of the USSR
1/ Positions are indicated at the end of 2019. Biographical details of previous members of the Board of Directors are available
in the 2018 Annual Report.
186
187
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Sergey Bratukhin
Chairman of the Board of Directors since 2013 (Independent Director), Member
of the Corporate Governance, Nomination and Remuneration Committee,
Strategy Committee, Budget Committee, and Audit and Sustainable Development
Committee
Born in: 1971
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Degree in Engineering, Mendeleev
University of Chemical Technology
of Russia
Experience in the last five years
2014–2016: member of the Board of Directors of International Financial Club Bank
2011–present: President of CIS Investment Advisers
2007–2017: member of the Board of Directors of Dallesprom
Degree in Banking
and Insurance, Finance Academy
under the Government of the Russian
Federation
Degree in Business Management,
Warwick Business School
Roger Llewelyn Munnings
Chairman of the Board of Directors since 2018 (Independent Director), Chairman
of the Audit and Sustainable Development Committee, member of the Budget
Committee
Born in: 1950
Nationality: United Kingdom
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2017–present: Director of 3 Lansdown Crescent Limited
2017–present: member of the Council of National Representatives (UK)
at the Association of European Businesses in Russia
2015–present: member of the Board of Directors of LUKOIL
2013–present: member of the Board of Trustees of International Business Leaders
Forum
2013–present: trustee at Kino Klassika Foundation
2013–present: member of the National Council on Corporate Governance non-
profit partnership
2010–present: member of the Board of Directors of Sistema
2010–2016: member of the Board of Directors of Wadswick Energy Limited
2009–2016: trustee at the John Smith Trust
2003–present: member of the Board of Directors, Chairman of the Board
of Directors of the Russo-British Chamber of Commerce
Education
Master in Politics, Philosophy
and Economics (advanced course),
University of Oxford (UK)
Fellow of the Institute of Chartered
Accountants in England and Wales
«NORNICKEL»
Annual report 2019
Marianna Zakharova
Member of the Board of Directors since 2010 (Executive Director), Member
of the Management Board since 2016
Born in: 1976
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Master in Law, Peoples’ Friendship
University of Russia (RUDN)
Experience in the last five years
2015–present: First Vice President for Shareholder Relations, Corporate and Legal
at MMC Norilsk Nickel
2010–2015: member of the Board of Directors of ProfEstate
2010–2015: member of the Management Board, Deputy Director for Legal Affairs
at Interros Holding Company
Stalbek Mishakov
Member of the Board of Directors since 2012 (Non-Executive Director), Member
of the Corporate Governance, Nomination and Remuneration Committee
and Budget Committee
Born in: 1970
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2019–present: function director at RUSAL Management
2018–2019: function director at RUSAL Global Management B. V.
2013–2018: Deputy CEO at En+ Management
2013–2016: member of the Board of Directors of United Company RUSAL PLC
2010–2018: advisor to the President of RUSAL Global Management B. V.
Education
Degree in International Law, Moscow
State Institute of International
Relations (MGIMO University)
Master of Science, University
of Notre Dame (USA)
Candidate of Economic Sciences,
Diplomatic Academy of the Russian
Ministry of Foreign Affaires
188
189
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Sergey Volk
Member of the Board of Directors since 2019 (Independent Director), Member
of the Budget Committee of the Board of Directors
Born in: 1969
Nationality: Ukraine
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
«NORNICKEL»
Annual report 2019
Robert Edwards
Chairman of the Board of Directors since 2013 (Independent Director), Chairman
of the Corporate Governance, Nomination and Remuneration Committee
and Audit and Sustainable Development Committee
Born in: 1966
Nationality: United Kingdom
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Master of Business Administration
(majoring in Finance), University
of Texas at Austin (USA)
Experience in the last five years
2019–present: member of the Board of Directors of Fortenova grupa d.d. (Zagreb,
Croatia)
2018–present: member of the Supervisory Board of Mercator d.d. (Ljubljana,
Slovenia)
2016–present: senior banker at Sberbank of Russia
2013–2016: consulting specialist, business management consultant
Education
Degree in Mining Engineering,
Camborne School of Mines (UK)
Experience in the last five years
2018–present: member of the Board of Directors of Scriptfert New Zealand Ltd
2018–present: member of the Board of Directors of Chaarat Gold Holdings Ltd
2016: Chairman of the Board of Directors of Sierra Rutile Limited (SRX)
2014–2018: member of the Board of Directors of GB Minerals Ltd
2013–present: head of Highcross Resources Ltd
Maxim Poletaev
Member of the Board of Directors since 2019 (Independent Director), Chairman
of the Strategy Committee of the Board of Directors, member of the Corporate
Governance, Nomination and Remuneration Committee
Born in: 1971
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Degree in Accounting and Business
Analysis, P. G. Demidov Yaroslavl
State University
Experience in the last five years
2019–present: member of the Board of Directors of United Company RUSAL PLC
2019–present: Chairman of the Board of Directors of Fortenova grupa d.d. (Zagreb,
Croatia)
2018–present: advisor to the President of Sberbank of Russia
2013–2018: First Deputy Chairman of the Management Board of Sberbank of Russia
Vyacheslav Solomin
Member of the Board of Directors since 2019 (Non-Executive Director), Member
of the Audit and Sustainable Development Committee of the Board of Directors
Born in: 1975
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Degree in International Economics,
Far Eastern Federal University
Experience in the last five years
2018–present: director at En+ Holding Limited and United Company RUSAL PLC
2018–present: executive director at En+ Management
2014–2018: CEO of EuroSibEnergo
2011–present: director at YES Energo Limited
190
Evgeny Shvarts
Member of the Board of Directors since 2019 (Independent Director), Member
of the Strategy Committee of the Board of Directors
Born in: 1958
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2007–2019: director at the Department of Conservation Policy (2007–2016
and 2018–2019), director for Conservation Policy (2016–2018) at the World Wide
Fund for Nature
1993–present: member of the Board of the Biodiversity Conservation Center
charitable foundation
Education
Degree in Biology/Zoology
and Botanics, Lomonosov Moscow
State University
Candidate of Geographical Sciences
(Biogeography and Soil Geography),
Institute of Geography, Academy
of Sciences of the Soviet Union
Doctor of Geographical Sciences
(Geoecology), Institute of Geography,
Russian Academy of Sciences
Biographical
details of previous
members
of the Board
of Directors
are available
in the 2018 Annual
Report.
191
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix BOARD COMMITTEES
Committees established by Nornickel’s Board
of Directors are responsible for preliminary review
of key matters and making recommendations
to the Board of Directors. To discharge
their responsibilities in the most effective way,
the committees may consult Nornickel’s governance
bodies and seek opinions from independent external
consultants. Nornickel has four Board committees,
each comprised of five members:
• Audit and Sustainable Development Committee
• Strategy Committee
• Budget Committee
• Corporate Governance, Nomination
and Remuneration Committee
AUDIT AND SUSTAINABLE
DEVELOPMENT COMMITTEE
Members of the Audit and Sustainable Development
Committee are appointed by the Board of Directors.
In accordance with its Terms of Reference,
the Audit and Sustainable Development Committee
of the Board of Directors has five members, all
of them independent directors. If it is reasonably
impracticable to meet the above requirement,
independent directors should make up the majority
of Committee members, while the remaining
Committee members may include members
of the Board of Directors, except for the Company’s
CEO and/or members of its Management Board. Only
an independent director may chair the Committee.
In accordance with its Terms of Reference, the current
Audit and Sustainable Development Committee
is made up of five directors, three of whom
are independent directors, including its Chairman (i.e.
60% of the Committee members are independent
directors). On average, Committee members have
more than 10 years of experience in finance.
In 2019, the Committee held eight meetings, including
six in person, and two in absentia.
The Committee discharges its responsibilities
by overseeing:
• financial reporting
•
• external and internal audit
• prevention of wrongdoing by Nornickel
risk management and internal controls
employees and third parties
• health, safety, and environment matters.
The Audit and Sustainable Development Committee
plays an important role in enabling controls
and accountability, and has become an effective
interface between the Board of Directors, Audit
Commission, independent auditor, Internal Audit
Department, and management of Nornickel.
During 2019, the Audit and Sustainable Development
Committee prepared for the Board of Directors
a number of recommendations on the accuracy,
completeness, and reliability of Nornickel’s
financial accounts, as well as on health, safety
and environment matters, and approval
of the Company’s auditors. The Committee
also considered and took note of audit reports
by the Internal Audit Department and Internal
Control Department, Report by Nornickel’s
management on adopting a new standard, IFRS 15
Revenue from Contracts with Customers, the Norilsk
Nickel Group’s 2018 Sustainability Report, Report
on Improvements to Procurement, Corporate Risk
Appetite Statement for 2019, and information
about the development status of the risk
management framework and the implementation
status of activities addressing obsolete inventories.
Status of Board Committee members as of 31 December 2019
65%
Independent directors
35%
Non-executive directors
«NORNICKEL»
Annual report 2019
Members of the Audit and Sustainable Development Committee in 2019
Before the Annual General Meeting of Shareholders
(before 10 June 2019)
After the Annual General Meeting of Shareholders
(after 10 June 2019)
Roger Munnings (Chairman, Independent Director)
Roger Munnings (Chairman, Independent Director)
Alexey Bashkirov
Alexey Bashkirov
Sergey Bratukhin (Independent Director)
Sergey Bratukhin (Independent Director)
Stalbek Mishakov
Vyacheslav Solomin
Robert Edwards (Independent Director)
Robert Edwards (Independent Director)
STRATEGY COMMITTEE
Members of the Committee are appointed
by the Board of Directors. In accordance
with its Terms of Reference, the Strategy Committee
of the Board of Directors has five members, all
of them non-executive directors. At least one
Committee member must be an independent
director. The Committee Chair may serve on other
Board committees, but may not chair more than two
Committees at a time.
In accordance with its Terms of Reference, the current
Strategy Committee is made up of five directors,
four of whom are independent directors, including
its Chairman (i.e. 80% of the Committee members
are independent directors). In 2019, the Committee
held seven meetings in person.
The Strategy Committee assists the Board
of Directors by pre-reviewing matters related to:
• building a sustainability strategy
•
• engagement with capital markets and government
investment planning and structural changes
relations.
In 2019, the Strategy Committee considered matters
related to environment, health, safety, and climate
change, including the infrastructure development
and energy capacity expansion strategy, as part
of building Nornickel’s Environmental Vision.
The Strategy Committee’s key areas of focus:
• Supporting Nornickel’s Board of Directors
in developing, following up, and adjusting
the corporate strategy
• Recommending updates to the strategy
During the year, the Strategy Committee made
recommendations to the Board of Directors
to inform decision-making on updating Nornickel’s
development strategy and a number of functional
strategies. The Committee also reviewed
the progress and status updates on Nornickel’s
major investment projects (including the Bystrinsky
project, 3rd Stage of Talnakh Concentrator Upgrade,
and the South Cluster), and prepared the Progress
Report on Production Reconfiguration, Report
on the Comprehensive Insurance Programme
(including a review of property insurance quality),
and Progress Report on the IT Programme, including
progress on the ERP and Technology Breakthrough
programmes. The Committee also considered
the progress updates on Volta Shared Services
Centre and Stable Coin projects. To ensure efficient
strategic planning at Nornickel, the Committee
reviewed its production report and progress
on the programme designed to improve operational
efficiency and reduce operating costs.
Members of the Strategy Committee in 2019
Before the Annual General Meeting of Shareholders
(before 10 June 2019)
After the Annual General Meeting of Shareholders
(after 10 June 2019)
Maxim Sokov (Chairman)
Alexey Bashkirov
Maxim Poletaev (Chairman, Independent Director)
Alexey Bashkirov
Sergey Bratukhin (Independent Director)
Sergey Bratukhin (Independent Director)
Artem Volynets (Independent Director)
Evgeny Shvarts (Independent Director)
Gareth Peter Penny (Independent Director)
Gareth Peter Penny (Independent Director)
192
193
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
performance in 2018. The Committee reviewed
the updates on the Our Home and My Home
programmes, Corporate Social Subsidised Loan
Programme, and Nornickel’s Charitable Policy.
The Committee also considered an external assessment
of the Board of Directors’ performance in 2018, which
concluded that the Board of Directors and the Corporate
Secretary of Nornickel were effective, and assessed
the independence of nominees to the Company’s Board
of Directors.
The Committee made recommendations
to the Board of Directors to inform decision-making
on convening, preparing, and holding the Annual
and Extraordinary General Meetings of Shareholders,
and on matters reserved to the General Meeting
of Shareholders (remuneration and reimbursement
of expenses of members of the Board of Directors
and the Audit Commission, and liability insurance
and indemnity for members of the Board of Directors
and the Management Board).
The Corporate Governance, Nomination
and Remuneration Committee advised the Board
of Directors on assessment of the Board of Directors’
Members of the Corporate Governance, Nomination and Remuneration Committee in 2019
Before the Annual General Meeting of Shareholders
(before 10 June 2019)
After the Annual General Meeting of Shareholders
(after 10 June 2019)
Sergey Bratukhin (Chairman, Independent Director)
Robert Edwards (Chairman, Independent Director)
Alexey Bashkirov
Stalbek Mishakov
Alexey Bashkirov
Stalbek Mishakov
Andrey Likhachev (Independent Director)
Sergey Bratukhin (Independent Director)
Robert Edwards (Independent Director)
Maxim Poletaev (Independent Director)
BUDGET COMMITTEE
Members of the Committee are appointed
by the Board of Directors. In accordance with its Terms
of Reference, the Budget Committee of the Board
of Directors has five members, all of them non-
executive directors. At least one Committee member
must be an independent director. The Committee
Chair may serve on other Board committees, but may
not chair more than two Committees at a time.
In accordance with its Terms of Reference,
the current Budget Committee is made up
of five directors, three of whom are independent
Members of the Budget Committee in 2019
directors (i.e. 60% of the Committee members
are independent directors).
In 2019, the Budget Committee focused on making
recommendations to the Board of Directors to inform
decision-making on the amount of dividends
and on the record date to be suggested by the Board
of Directors. The Budget Committee also approved
and recommended that the Board of Directors
approve Nornickel’s 2020 budget.
Before the Annual General Meeting of Shareholders (before
10 June 2019)
After the Annual General Meeting of Shareholders (after 10
June 2019)
Alexey Bashkirov (Chairman)
Alexey Bashkirov (Chairman)
Sergey Bratukhin (Independent Director)
Sergey Bratukhin (Independent Director)
Artem Volynets (Independent Director)
Sergey Volk (Independent Director)
Roger Munnings (Independent Director)
Roger Munnings (Independent Director)
Maxim Sokov
Stalbek Mishakov
CORPORATE GOVERNANCE,
NOMINATION
AND REMUNERATION COMMITTEE
Members of the Corporate Governance,
Nomination and Remuneration Committee
are appointed by Nornickel’s Board of Directors.
The Committee has five members in accordance
with its Terms of Reference. The Board of Directors,
however, may increase the membership
of the Committee. The Committee members may
only include independent directors. If it is reasonably
impracticable to meet the above requirement,
independent directors other than the Company’s CEO
and/or members of its Management Board should
make up the majority of Committee members.
its Chairman (i.e. 60% of the Committee members
are independent directors).
The Corporate Governance, Nomination
and Remuneration Committee supports the Board
of Directors by:
• evaluating, overseeing, and improving Nornickel’s
corporate governance framework
• ensuring succession planning for Nornickel’s Board
of Directors and Management Board
• providing incentives, assessing the performance
of Nornickel’s Board of Directors, Management
Board, President, and Corporate Secretary,
and setting relevant remuneration policies
• supervising the development and implementation
of Nornickel’s information policy.
In accordance with its Terms of Reference, the current
Budget Committee is made up of five directors,
three of whom are independent directors, including
In the reporting year, the Committee held twelve
meetings, including ten in absentia, and two
in person.
194
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CORPORATE SECRETARY
The Corporate Secretary’s key functions:
•
Involvement in preparing and holding the General
Meeting of Shareholders
• Preparing and holding meetings of the Board
of Directors and its committees
• Contributing to the improvement of Nornickel’s
corporate governance framework and practice
• Managing the activities of the Secretariat
• Other functions in accordance with Nornickel’s
by-laws
The Corporate Secretary reports administratively
to the President and is accountable
to, and controlled by, the Board of Directors.
At present, Pavel Platov is Nornickel’s Corporate
Secretary. In December 2018, the Board of Directors
extended Pavel Platov’s term as Corporate Secretary
by another three years.
In 2019, Pavel Platov won the national Director
of the Year award in the Corporate Governance
Officer/Corporate Secretary category, one of Russia’s
most prestigious awards in corporate governance.
The role of the Corporate Secretary
is to ensure compliance with the procedures
for the protection of shareholder rights
and legitimate interests, as prescribed
by applicable laws and Nornickel’s by-laws,
and to monitor such compliance. According
to the Articles of Association, the Corporate
Secretary is appointed by the Board
of Directors for a three-year term. The Board
of Directors may terminate the office
of the Corporate Secretary before the end
of the term.
At its 15 January 2020 meeting,
the Board of Directors approved a new version
of the Regulations on the Corporate Secretary
of MMC Norilsk Nickel following a preliminary
review by the Corporate Governance, Nomination
and Remuneration Committee. The new
version of the Regulations contains updated
terms and definitions which are fully compliant
with the Bank of Russia’s Corporate Governance
Code.
Pavel Platov
2011–present: Corporate Secretary
Born in: 1975
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year.
Education
Dobrolyubov Linguistics University
of Nizhny Novgorod
Experience in the last five years
2017–present: Corporate Secretary of MMC Norilsk Nickel (2011–2017: Company
Secretary)
Academy of National Economy
under the Government of the Russian
Federation
EXECUTIVE BODIES
The President and the Management Board
are Nornickel’s executive bodies in charge
of day-to-day operations.
Executive bodies ensure:
• compliance with resolutions
of the Board of Directors and the General Meeting
of Shareholders
implementation of Nornickel’s key plans
and programmes
•
• continuous operation of an effective risk
management and internal control framework.
The President is Nornickel’s sole executive body
in charge of day-to-day operations. The President
is elected by the General Meeting of Shareholders
for an indefinite term and acts as Chairman
of the Management Board.
The President reports to the Board of Directors
and the General Meeting of Shareholders. Since
1 July 2016, election and dismissal of the President
is reserved to the General Meeting of Shareholders.
Since 2015, this position has been held by Vladimir
Potanin (Nornickel’s CEO in 2012–2015).
The Management Board is a collegial executive
body in charge of Nornickel’s day-to-day operations
within its scope of authority as set out in the Articles
of Association; it ensures the implementation
of resolutions passed 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 term.
The Board of Directors may at any time terminate
the office of any member of the Management Board.
As of 31 December 2019, the Management Board had
12 members.
«NORNICKEL»
Annual report 2019
COMPOSITION
OF THE MANAGEMENT BOARD
The Management Board had 13 members at the start
of 2019, according to the composition approved
by the Board of Directors on 24 December 2018.
On 11 July 2019, the Board of Directors resolved
to terminate the office of Alexander Grubman
as of 12 July 2019 and to institute a 12-member
Management Board as of 13 July 2019. Biographical
details of previous members of the Management
Board are available in the 2018 Annual Report.
In 2019,
the Management Board held
22meetings in absentia.
Biographical
details of previous
members
of the Management
Board are available
in the 2018 Annual
Report.
196
197
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Composition of the Management Board in 2019
Member
of the Management Board
Tenure on the Management Board
Meetings attended/total number
of meetings
BIOGRAPHICAL DETAILS OF MEMBERS
OF THE MANAGEMENT BOARD3
«NORNICKEL»
Annual report 2019
Vladimir Potanin
Sergey Barbashev
Sergey Batekhin
Andrei Bougrov
Vladislav Gasumyanov
Alexander Grubman1
Sergey Dubovitsky
Sergey Dyachenko
Marianna Zakharova
Larisa Zelkova
Elena Savitskaya2
Sergey Malyshev
Nina Plastinina
7
1
7
7
6
1
1
7
4
7
6
7
7
22/22
22/22
22/22
22/22
22/22
10/22
22/22
22/22
22/22
22/22
22/22
22/22
22/22
Education
Degree in International Economics,
Moscow State Institute
of International Relations (MGIMO
University)
Vladimir Potanin
Chairman of the Management Board since 2012, President of the Company since
2015 (CEO in 2012–2015)
Born in: 1961
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
Degree in International Economics, Moscow State Institute of International
Relations (MGIMO University)
Experience in the last five years:
2018–present: member of the Board of Trustees of the Russia-U.S. Council
on Business Cooperation trade association
2018–present: member of the Board of Trustees of the Solovki Archipelago
Preservation and Development Foundation
2017–present: Chairman of the Supervisory Board of the Norilsk Development
Agency
2016–present: member of the Board of Endowment Fund for Education, Science
and Culture, Chairman of the Board of Trustees of the Night Hockey League non-
profit amateur hockey foundation
2013–present: President of Interros Holding Company
2014–present: member of the Board of Trustees of the ROZA Club for Sport
Development and Support
2012–present: CEO (2012–2015), President (2015–present), and the Chairman
of the Management Board (2012–present) of MMC Norilsk Nickel
2011–present: member of the Board of Trustees of the State Hermitage Museum
Endowment Fund non-profit organisation and the Moscow Church Construction
Foundation
2010–present: member of the Board of Trustees of the Russian Geographical
Society
2009–present: Deputy Chairman of the Board of Trustees of the Russian
International Olympic University
2009–2016: Chairman of the Supervisory Board of the Russian International
Olympic University
2008–present: member of the Board of the Vladimir Potanin Foundation
2007–present: member of the Board of Trustees of Saint Petersburg State
University, Deputy Chairman of the Board of Trustees of MGIMO Endowment Fund
2006–present: Deputy Chairman of the Board of Trustees of MGIMO Endowment
Fund, member of the Board of Trustees, member of the Management Board
of the Graduate School of Management at Saint Petersburg State University
2005–present: member of the Board of Trustees, member of the Board
of the Russian Olympians Foundation non-profit charitable organisation
2004–present: Chairman, member of the Presidium of the National Council
on Corporate Governance non-profit partnership
2003–present: Chairman of the Board of Trustees of the State Hermitage Museum
2001–present: member of the Board of Trustees of the Solomon R. Guggenheim
Foundation (New York)
2000–present: member of the Bureau of the Management Board and member
of the Management Board of the Russian Union of Industrialists and Entrepreneurs
1995–present: member of the Presidium of the International Foundation
for the Unity of Orthodox Christian Nations
1/ Left the Management Board on 12 July 2019 as per the Board of Directors’ resolution.
2/ Until 27 December 2019 — Elena Kondratova.
3/ Positions are indicated at the end of 2019.
198
199
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Education
Degree in Law, Moscow Higher
School of Militia of the Ministry
of Internal Affairs of the USSR
Education
Degree in International Economic
Relations, PhD in Economics, Moscow
State Institute of International
Relations (MGIMO University)
Sergey Barbashev
Member of the Management Board since 2018, First Vice President – Head
of Corporate Security at
Born in: 1962
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2018–present: member of the Management Board, First Vice President – Head
of Corporate Security at MMC Norilsk Nickel
2016–present: member of the Board of Endowment Fund for Education, Science
and Culture
2015–2018: branch director at Olderfrey Holdings Ltd
2011–2019: Chairman of the Board of Directors of Rosa Khutor Ski Resort
Development Company
2008–present: member of the Board of the Vladimir Potanin Foundation
2008–2018: CEO, Chairman of the Management Board of Interros Holding
Company
Andrei Bougrov
Member of the Management Board since 2013, Senior Vice President
Born in: 1952
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2018–present: member of the Advisory Council of the Russo-British Chamber
of Commerce
2018–present: member of the Expert Council on Corporate Governance
at the Russian Ministry of Economic Development
2018–present: Chairman of the Council for Non-Financial Reporting of the Russian
Union of Industrialists and Entrepreneurs
2016–present: Chairman of the Share Issuers Committee of the Moscow Exchange
2016–present: member of the Expert Council on Corporate Governance at the Bank
of Russia
2015–present: member of the National Council on Corporate Governance non-
profit partnership
2015–2016: member of the Investment Committee of Federal Hydro-Generating
Company RusHydro
2013–present: Deputy CEO (2013–2015), Vice President (2015–2016), Senior Vice
President (2016–present) at MMC Norilsk Nickel
2014–present: member of the Expert Committee of the Russian President’s Anti-
Corruption Office
2014–present: member of the Board of Directors of Inter RAO UES
2013–present: President of Interros Holding Company
2006–present: member of the Management Board and Vice President (since 2013)
of the Russian Union of Industrialists and Entrepreneurs
2002–present: member of the Council on Foreign and Defence Policy non-
governmental association
«NORNICKEL»
Annual report 2019
Sergey Batekhin
Member of the Management Board since 2013, Senior Vice President – Head
of Sales, Procurement and Innovation
Born in: 1965
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Major in foreign languages
(military and political translation),
Krasnoznamenny Military Institute
of the Ministry of Defence
of the USSR
Degree in Finance and Credit,
Plekhanov Russian Academy
of Economics
Master of Business Administration,
Moscow International Higher
Business School (MIRBIS Institute)
Experience in the last five years
2019–present: member of the Board of Directors of Jokerit Hockey Club Oy,
Chairman of the Presidium of the Night Hockey League non-profit amateur hockey
foundation
2018–present: member of the Board of Directors of LLC Kontinental Hockey
League
2013–present: Deputy CEO – Head of Sales, Commerce and Logistics (2013–2015),
Vice President – Head of Sales, Commerce and Logistics (2015–2016), Senior Vice
President – Head of Sales, Commerce and Logistics (2016–2018), Senior Vice
President – Head of Sales, Procurement and Innovation (2018–present) at MMC
Norilsk Nickel
2013–2015: member of the Board of Directors of Metal Trade Overseas SA, Norilsk
Nickel Marketing (Shanghai) Co. and Norilsk Nickel (Asia) Limited (2013–2014)
2012–2015: Chairman of the Board of Directors of Interport Management Company
2009–2015: member of the Board of Directors of LLC Kontinental Hockey League
Education
Kiev Civil Aviation Engineering
Institute
North-West Academy of Public
Administration
Vladislav Gasumyanov
Member of the Management Board since 2014, Senior Vice President for Public–
Private Partnership Development
Born in: 1959
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2019–present: member of the Board of Trustees of All-Russian Fitness-Sports
Society Dynamo in Moscow
2019–present: member of the Supervisory Board of the Russian Volleyball
Federation
2019–present: member of the Presidium of National Association of International
Security
2017–present: member of the Board of Directors of Norilsk Nickel Africa (Pty) Ltd
and Norilsk Nickel Mauritius, member of the Executive Committee of Nkomati
2017–present: Head of the Corporate Security Department at the International
Institute of Energy Policy and Diplomacy, MGIMO University
2017–2019: member of the Board of Directors of Dynamo Moscow Football Club
2014–2016: member of the Board of Directors of Yenisey River Shipping Company
2012–present: Director for Corporate Security – Head of Security (2012–2015),
Vice President, Director for Corporate Security – Head of Security (2015), Vice
President – Head of Corporate Security (2015–2018), State Secretary – Vice
President for Government Relations (2018–2019), Senior Vice President (2019),
Senior Vice President for Public–Private Partnership Development (2019–present)
at MMC Norilsk Nickel
200
201
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Sergey Dubovitsky
Member of the Management Board since 2018, Vice President – Head of Strategy
and Strategic Projects
Born in: 1978
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2013–present: Director of the Strategic Planning Department (2013–2016), Vice
President for Strategic Planning (2016–2019), Vice President – Head of Strategy
and Strategic Projects (2019–present) at MMC Norilsk Nickel
Education
Degree in International Information,
Moscow State Institute
of International Relations (MGIMO
University)
Master of Business Administration,
INSEAD Business School
Marianna Zakharova
Member of the Management Board since 2016, First Vice President for Corporate
Governance, Shareholder Matters and Legal
Born in: 1976
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Master in Law, Peoples’ Friendship
University of Russia (RUDN)
Experience in the last five years
2015–present: First Vice President for Corporate Governance, Shareholder Matters
and Legal at MMC Norilsk Nickel
2010–2015: member of the Board of Directors of ProfEstate
2010–2015: member of the Management Board, Deputy Director for Legal
at Interros Holding Company
Elena Savitskaya
(until 27 December 2019 – Kondratova)
Member of the Management Board since 2014, Vice President – Chief of Staff
Born in: 1972
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Education
Degree in Psychology, Moscow
Pedagogical State University
Experience in the last five years
2015–present: Vice President – Chief of Staff (until 2015 – Chief of Staff) at MMC
Norilsk Nickel
2013–present: advisor to the President of Interros Holding Company (part-time)
«NORNICKEL»
Annual report 2019
Sergey Dyachenko
Member of the Management Board since 2013, First Vice President – Chief
Operating Officer
Born in: 1962
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2019–present: member of the Board of Trustees of the North Caucasian Institute
of Mining and Metallurgy
2017–present: member of the Board of Directors of MPI Nickel Pty Ltd, Norilsk Nickel
Cawse Pty Ltd, Norilsk Nickel Avalon Pty Ltd, Norilsk Nickel Wildara Pty Ltd, Norilsk
Nickel Africa (Pty) Ltd, Norilsk Nickel Mauritius, member of the Executive Committee
at Nkomati
2017–2018: member of the Board of Directors of Norilsk Nickel Harjavalta Oy
2016–present: member of the Supreme Mining Council of the Russian Mining Council
non-profit partnership
2013–present: First Deputy CEO – Chief Operating Officer (2013–2015), First Vice
President – Chief Operating Officer (2015–present) at MMC Norilsk Nickel
Sergey Malyshev
Member of the Management Board since 2013, Senior Vice President – Chief
Financial Officer
Born in: 1969
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2013–present: member of the Management Board, Deputy CEO – Head
of Economics and Finance (2013–2015), Vice President – Head of Economics
and Finance (2015–2016), Senior Vice President – Head of Economics and Finance
(2016), Senior Vice President – Chief Financial Officer (2016–present) at MMC
Norilsk Nickel
Education
Degree in Mining Engineering,
Plekhanov Leningrad State Mining
Institute
Master, University of Pretoria (South
Africa)
Education
Degree in Finance and Credit, Finance
Academy under the Government
of the Russian Federation
Degree in Public and Municipal
Administration, Institute of Advanced
Training at the Russian Presidential
Academy of National Economy
and Public Administration
Degree in Mechanical Engineering,
Kosygin Russian State University
202
203
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Larisa Zelkova
Member of the Management Board since 2013, Senior Vice President –
Head of HR, Social Policy and Public Relations
Born in: 1969
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2019–present: member of the council on the endowment funds for the replenishment
of the Tretyakov Gallery’s collection and development of its small museums
2017–present: member of the Supervisory Board, member of the Management Board
of the Norilsk Development Agency
2016–present: member of the Board of Trustees of Endowment Fund for Education,
Science and Culture
2015–present: member of the Board of Trustees of the Hermitage Foundation UK,
member of the Board of Trustees of the Russian Academy of Education
2014 – present: Chairwoman of the Board, President (2014–2018) of the Vladimir
Potanin Foundation
2013–present: member of the Management Board, Deputy CEO for Social Policy
and Public Relations (2013–2015), Vice President – Head of HR, Social Policy and Public
Relations (2015–2016), Senior Vice President – Head of HR, Social Policy and Public
Relations (2016–present) at MMC Norilsk Nickel
2012–2018: member of the Russian Presidential Council for Culture and Art
2011–2016: member of the Supervisory Board of the Russian International Olympic
University
2011–present: member of the Board of Directors of Rosa Khutor Ski Resort
Development Company, Chairwoman of the Management Board of the State Hermitage
Museum Endowment Fund
2009–present: member of the Board of Trustees of the Pavlovsk Gymnasium private
autonomous non-profit organisation
2007–present: member of the Presidium of MGIMO Endowment Fund
Nina Plastinina
Member of the Management Board since 2013, Vice President – Head of Internal
Control and Risk Management
Born in: 1961
Nationality: Russian Federation
Shareholding and transactions: holds no shares in MMC Norilsk Nickel and made
no transactions with them in the reporting year
Experience in the last five years
2013–present: member of the Management Board, Director of the Internal Control
Department (2013–2015), Vice President – Head of Internal Audit (2015–2016), Vice
President – Head of Internal Control and Risk Management (2016–present) at MMC
Norilsk Nickel
Education
Degree in Journalism, Lomonosov
Moscow State University
Education
Degree in Mechanical Engineering,
Moscow Chemical Machine Building
Institute
Post-graduate degree in Economics
and Production Management, Bauman
Moscow Technical Institute
«NORNICKEL»
Annual report 2019
REMUNERATION
The Board of Directors directly supervises
the remuneration framework at Nornickel.
The Corporate Governance, Nomination
and Remuneration Committee of the Board
of Directors is responsible for:
• developing the Remuneration Policy
for Members of the Board of Directors, Members
of the Management Board, and the President
of Nornickel
• overseeing the implementation and execution
of the Policy
reviewing the Policy on a regular basis.
•
Nornickel does not issue loans to members
of the Board of Directors and the Management Board
but encourages them to invest in Nornickel shares.
Remuneration paid to members
of Nornickel’s governance bodies in 2019 totalled
RUB 6.3 bn (USD 97.0 mln), including salaries, bonuses,
commissions, benefits, and reimbursed expenses)1.
DIRECTORS’ REMUNERATION
Under Paragraph 2, Article 64 of the Federal
Law On Joint Stock Companies and Clause 8.8.
of Nornickel’s Articles of Association, members
of the Board of Directors may be paid remuneration
and/or reimbursed for expenses incurred by them
in performing their duties as members of the Board
of Directors, subject to a resolution by the General
Meeting of Shareholders. Nornickel also insures
third-party liability of members of the Board
of Directors related to their roles. Agreements can
be signed with members of the Board of Directors
to reimburse them for expenses incurred by them
in performing their duties as members of the Board
of Directors.
The Board of Directors’ annual remuneration
is set out in the Remuneration Policy for Members
of the Board of Directors approved by the General
Meeting of Shareholders in June 2014. The Policy
was adopted to attract and properly incentivise top
talent with required skill sets and experience to serve
on the Board of Directors. The Policy also provides
for presenting shareholders with a full report on all
components of the remuneration payable to members
of the Board of Directors and for facilitating long-
term sustainability at Nornickel. The Corporate
Governance, Nomination and Remuneration
Committee of the Board of Directors reviews
the Policy for consistency with stated objectives
and best practices in corporate governance. If
the Policy needs revision, the relevant changes
are submitted to Nornickel’s General Meeting
of Shareholders for approval. The Policy was
not updated in 2019, and is not planned to be updated
in 2020.
The Remuneration
Policy for Members
of the Board
of Directors
204
205
1/ The amount of remuneration paid does not include the remuneration accrued but not yet paid as of 31 December 2019, as well insurance
premiums and voluntary health insurance (VHI) contributions. Adding the amounts above, remuneration of members of Nornickel’s governance
bodies for 2019 as per the 2019 consolidated IFRS financial statements totalled RUB 8.7 bn (USD 134 mln).
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix LIABILITY INSURANCE
Additional benefits for all Board members include
liability insurance and reimbursement of losses
incurred in connection with their service on the Board
of Directors. The Bank of Russia’s Corporate Governance
Code recommends companies to insure liability
of their directors to be able to recover potential losses
through the insurer. Apart from ensuring stronger
commitment from directors, the insurance encourages
competent leaders to join the Board.
On 10 June 2019, the annual General Meeting
of Shareholders resolved to take a one-year directors’
liability insurance policy with a Russian insurer,
with a minimum liability limit of USD 200 mln,
as well as grant an indemnity of up to USD 115 mln
each to members of Nornickel’s Board of Directors
and Management Board against losses arising
from the performance of their duties. In 2019, Nornickel
neither reimbursed members of its Board of Directors
for losses incurred by them, nor made insurance
payments under directors’ liability insurance policy.
REMUNERATION
OF THE CHAIRMAN OF THE BOARD
OF DIRECTORS
Remuneration of the Chairman of the Board
of Directors differs from remuneration payable
to other non-executive directors, due
to the Chairman’s enhanced scope of expertise
and responsibilities. Subject to a resolution
of the General Meeting of Shareholders, the Chairman
of the Board of Directors may be entitled
to additional remuneration and benefits other than
those set out in the Policy.
Under the Policy, the annual base remuneration
of the Chairman of the Board of Directors
is USD 1 mln. The Chairman of the Board of Directors
is not entitled to any additional remuneration
for serving on Board committees.
REMUNERATION OF NON-
EXECUTIVE DIRECTORS
Under the above Policy, all non-executive directors
receive equal remuneration. The Policy sets forth
the following annual remuneration for non-executive
directors:
• Base remuneration of USD 120,000 for Board
membership
• Additional remuneration:
– of USD 50,000 for membership on a Board
committee
– of USD 150,000 for chairing a Board committee
Non-executive directors are not eligible for any
forms of short-term or long-term cash incentives,
or non-cash remuneration, including shares (or share-
based payments), share options (option agreements),
or other non-cash rewards or benefits.
REMUNERATION OF EXECUTIVE
DIRECTORS
In line with the approved Policy, executive directors
do not receive any additional remuneration
for their service on the Board of Directors to avoid
any potential conflict of interest.
Directors’ remuneration in 2019
Type
Total
Remuneration for serving on the Board of Directors
Salary
Bonuses
Commissions
Benefits
Reimbursement
Other
206
RUB mln
249.0
248.2
0
0
0
0
0.8
0
Amount
USD mln
3.84
3.83
0
0
0
0
0.01
0
«NORNICKEL»
Annual report 2019
SENIOR MANAGEMENT
REMUNERATION
KPIs used to assess senior management’s
performance are aligned to Nornickel’s strategic
goals. In line with Nornickel’s Articles of Association,
the remuneration and reimbursement payable
to the President and members of the Management
Board are determined by the Board of Directors.
Remuneration payable to senior management
is comprised of basic salary and bonuses.
Bonuses are linked to Nornickel’s performance,
including both financial (EBITDA, per unit costs)
and non-financial metrics (work-related injury
rates and labour productivity). The variable
component of the remuneration payable to members
of the Management Board reflects KPIs, which
are annually updated and approved by the Corporate
Governance, Nomination and Remuneration
Committee of the Board of Directors. The Board
of Directors decides whether to pay the President
a performance bonus for the reporting year.
REMUNERATION
OF SENIOR
MANAGEMENT
FIXED COMPONENT
BONUS
FINANCIAL METRICS
EBITDA (20%)
PER UNIT COSTS (5%)
NON-FINANCIAL
METRICS
WORK-RELATED INJURY
RATE (5%–10%)
LABOUR PRODUCTIVITY
(2.5%)
Management Board’s remuneration in 2019
Type
Total
Remuneration for serving on the Management Board
Salary
Bonuses
Commissions
Benefits
Reimbursement
Other
RUB mln
6,032.0
2.4
3,091.9
2,937.7
0
0
0
0
Amount
USD mln
93.2
0.04
47.8
45.4
0
0
0
0
207
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONTROL SYSTEM
INTERNAL CONTROL FUNCTIONS
Internal control aims to build an effective internal
control framework as a totality of organisational
measures, policies and guidelines, control
procedures, corporate culture standards and activities
of the internal control entities to provide reasonable
assurance that Nornickel will achieve its goals. This
includes the following activities:
• Development and improvement of the robust ICF
• Ensuring a consistent approach to the design,
•
operation, and development of the ICF
Identification and prevention of any waste,
misuse, or embezzlement of funds or property
of the Company or its subsidiaries
• Ensuring accuracy of metrics and measurement
standards for the control and accounting of metal-
bearing products
• Arranging and implementing internal controls
to combat money laundering and financing
of terrorism
• Managing the Corporate Trust Service speak-up
programme
INTERNAL CONTROL
In addition to the risk management framework
(RMF) detailed in the Risk Management section
of this Report, Nornickel also has in place an internal
control framework (ICF) covering key business
processes and all management levels across
the Group.
The ICF is aimed at improving operational
effectiveness and efficiency, keeping reliable
and accurate financial and management accounts,
and ensuring compliance with the requirements
of Russian laws and Nornickel’s by-laws.
Nornickel has the Internal Control Policy
adopted by resolution of the Board of Directors
in October 2018. In addition, internal control
requirements, procedures, and processes are set
forth in the Procedure for Internal Control Processes
as well as in regulations on business units and other
guidelines.
The internal control entities are structured into
a multi-level hierarchy comprising Nornickel’s
and subsidiaries’ governance bodies, business units
and employees as well as the following dedicated
control bodies:
1/ Audit and Sustainable Development Committee
2/ Internal Audit Department
3/ Audit Commission
4/ Internal Control and Risk Management, comprising
the Internal Control Department, Financial Control
Service, and the Risk Management Service.
The performance of ICF elements is evaluated
annually as part of a financial statement audit
and ICF self-assessment. Reports containing the ICF
evaluation results are reviewed by Nornickel’s
management and the Audit and Sustainable
Development Committee of the Board of Directors.
The Financial Control Service audits financial
and business operations of Nornickel and its
subsidiaries to make updates and recommendations
for the President and members of the Board
of Directors. The Head of the Financial Control
Service is appointed by resolution of the Board
of Directors.
«NORNICKEL»
Annual report 2019
The Internal Audit Department continuously
monitors the implementation of initiatives developed
by management. The Department’s monitoring covered
263 initiatives of 2019, with the resulting insights
regularly reviewed by the Audit and Sustainable
Development Committee.
Corporate Risk Management Framework and Internal
Control Framework. The frameworks were assessed
according to the guidelines approved by the Board
of Directors in 2018. The review concluded that
the Corporate Risk Management Framework
and Internal Control Framework remain effective
overall, with some minor improvements required.
In 2019, the Internal Audit Department conducted
a total of 21 audits of production-related business
processes, as well as corporate governance, IT
management, and project management processes
at Nornickel.
In line with the functional development plan,
the Internal Audit Department oversees
the deployment of the SAP Audit Management system
at Nornickel. The project was piloted in December
2019, and will enhance the effectiveness of audit
through automating standard procedures for planning,
auditing, reporting, and making and following up
recommendations. It will also ensure the management
of databases on controls and risks for internal audit.
INTERNAL AUDIT FUNCTIONS
The Internal Audit Department was established
to assist the Board of Directors and executive bodies
in enhancing Nornickel’s management efficiency
and improving its financial and business operations
through a systematic and consistent approach
to the analysis and evaluation of risk management
and internal controls as tools providing reasonable
assurance that Nornickel will achieve its goals.
The Internal Audit Department conducts objective
and independent audits to assess the effectiveness
of the internal controls and the risk management
framework. Based on the audits, the Department
prepares reports and proposals for management
on how to improve internal controls, and monitors
the development of remedial action plans. 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 Nornickel’s President.
In 2019, the Audit and Sustainable Development
Committee:
•
reviewed the annual audit plan, and internal audit
development plans
reviewed bonus-related performance targets (KPI
scorecards) of the Internal Audit Department
Director
•
• discussed the results of completed audits,
including gaps identified and remedial actions
designed by management to improve internal
controls and minimise risks.
In 2019, the Board Audit and Sustainable Development
Committee also reviewed performance assessment
reports on internal controls and the risk management
framework, as well as performance reports
of the Internal Audit Department, concluding it was
effective.
208
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix AUDIT COMMISSION
The Audit Commission is Nornickel’s standing
internal control body that monitors its financial
and business operations. The activities of the Audit
Commission are guided by Russian laws, Nornickel’s
Articles of Association, and Regulations
on the Audit Commission. The Commission audits
Nornickel’s financial and business operations
following the end of its fiscal year and at any
time as decided by the Commission, the General
Meeting of Shareholders, or the Board of Directors,
or as requested by shareholders who hold collectively
at least 10% of voting shares in Nornickel. The Audit
Commission works in the shareholders’ interests
and reports to the General Meeting of Shareholders,
which elects members of the Audit Commission
to hold office until the next Annual General
Meeting of Shareholders. The Audit Commission
is independent from the officers of Nornickel’s
governance bodies, and its members do not serve
on the Company’s governance bodies.
In 2019, the Audit Commission audited Nornickel’s
business operations for 2018, with the auditors’ report
presented to the shareholders as part of materials
for the Annual General Meeting of Shareholders.
Nornickel’s business operations for 2019
will be audited in 2020, with the audit findings to be
presented to shareholders during the preparation
for the Annual General Meeting of Shareholders
reviewing the FY 2019 performance.
The following members were elected to the Audit
Commission at the Annual General Meeting
of Shareholders on 10 June 2019.Alexey Dzybalov,
Georgy Svanidze, and Vladimir Shilkov were
nominated to the Commission by Nornickel
shareholders, while Anna Masalova and Elena
Yanevitch were nominated by the Board of Directors.
Alexey Dzybalov replaced Artur Arustamov as a new
member of the Audit Commission elected by the 2019
Annual General Meeting of Shareholders. Other
members were reelected to the Audit Commission.
The elected members of the Audit Commission have
the necessary business experience and expertise
in accounting, finance, and control to contribute
to the Commission’s effectiveness and its objectives.
Remuneration payable to members of the Audit
Commission who are not Nornickel employees
was approved by the Annual General Meeting
of Shareholders on 10 June 2019. Members
who are Nornickel employees are remunerated
for performing their roles under their employment
contracts.
Regulations
on the Audit
Commission
Members of the Audit Commission from 10 June 2019
Name
Alexey Dzybalov
Anna Masalova
Georgy Svanidze
Vladimir Shilkov
Primary employment and position
Analyst, United Company RUSAL PLC
Chief Financial Officer, Moscow–McDonalds CJSC
Head of the Financial Department, Member
of the Management Board at Interros Holding Company
Chief Investment Officer at CIS Investment Advisers,
Deputy Project Manager of the Financial Control Service
at MMC Norilsk Nickel
Elena Yanevitch
CEO of Interpromleasing
210
111USD 000’
Remuneration paid to members
of the Audit Commission in 2019
MANAGING CONFLICTS
OF INTEREST
Timely prevention and management of conflicts
of interest are central to anti-corruption.
Conflicts of interest are addressed and managed
in line with the Regulations on the Prevention
and Management of Conflicts of Interest.
As part of the Regulations, Nornickel has approved
the standard conflict of interest reporting form
to be filled in by candidates applying for vacant
positions at Nornickel or by its employees
as required. The Regulations apply to all employees
of the Company and outline key principles, which
include the obligation of each employee to disclose
any conflict of interest, as well as non-retaliation
for reporting them.
For more details on managing conflicts of interest
related to members of the Board of Directors
and senior management, please see the Corporate
Governance Framework section.
COMPLIANCE
Anti-corruption
Nornickel complies with anti-corruption laws
of the Russian Federation and other countries
in which it operates, as well as any applicable
international laws and Nornickel’s own by-laws.
This commitment enhances Nornickel’s
reputation and boosts trust and confidence among
our shareholders, investors, business partners,
and other stakeholders.
Nornickel openly declares its zero tolerance
to corruption in any form or manifestation. Members
of Nornickel’s Board of Directors/Management Board
and senior management role model a zero-tolerance
approach to corruption in any form or manifestation
at all levels across the organisation. In addition,
facilitation payments and political contributions
to obtain or reward the retention of a business
advantage are strictly prohibited by Nornickel’s
policy. Nornickel will not tolerate any retaliation
«NORNICKEL»
Annual report 2019
against an employee who reports a concern
about suspected bribery or corruption, or refuses
to accept or offer a bribe, facilitate bribery, or take
part in any other corrupt activities, even if their refusal
to do so has resulted in a lost opportunity or a failure
to obtain a business or competitive advantage
for Nornickel.
The corporate Anti-Corruption Policy is Nornickel’s
key anti-corruption document, setting out the main
objectives, principles, and scope of anti-corruption
efforts.
As part of its anti-corruption efforts, Nornickel
has developed and approved the following anti-
corruption policies:
• Code of Business Ethics
• Code of Conduct and Business Ethics for Members
of the Board of Directors
• Anti-Corruption Policy
• Regulations on the Product Procurement
Procedure for Norilsk Nickel Group Enterprises
• Standard anti-corruption agreement – an appendix
to the employment contract
• Regulations on Information Security
• Regulations on the Prevention and Management
of Conflicts of Interest
• Regulations on Business Gifts
• Procedure for Anti-Corruption Due Diligence
of Internal Documents by the Head Office of MMC
Norilsk Nickel
• Regulations on the Conflict of Interest
Commission
• Regulations on the Information Policy
Having joined the Russian Anti-Corruption Charter
for Business, Nornickel is implementing a range
of dedicated anti-corruption measures based
on the Charter and set forth in Nornickel’s Anti-
Corruption Policy. In November 2016, Nornickel
joined the United Nations Global Compact, which
seeks to encourage businesses around the world
to recognise and adopt the ten universal principles
in the areas of human rights, labour, environment,
and anti-corruption.
Anti-Corruption Policy
211
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Starting from 2015, all Nornickel employees make
their personal anti-corruption commitments
by signing a relevant form. The corporate Anti-
Corruption Policy and related regulations
are communicated to all employees upon
commencement of employment. From June 2019, all
new hires attend an anti-corruption briefing as part
of their onboarding process.
Nornickel maintains a Corruption Prevention
and Combating section on its corporate intranet,
providing information on anti-corruption regulations
and measures taken to combat and prevent
corruption, provide legal education, and promote
lawful behaviours among employees.
Nornickel’s Corporate Security continuously works
to identify, analyse, and assess financial, corruption,
reputational, and other risks naturally inherent
in major business processes, with a particular
emphasis on considerations such as the integrity,
solvency, and financial stability of Nornickel’s
potential partners and counterparties.
Antitrust
Over the last four years, no administrative actions
or sanctions were taken against Nornickel
for breaches of antitrust laws.
Insider information
and reviews by-laws and corporate events to control
the implementation of measures as provided
for in the Russian and international laws, including
disclosure of insider information. Nornickel also takes
other measures to prevent unlawful use of insider
information.
CORPORATE TRUST SERVICE
SPEAK-UP PROGRAMME
Nornickel runs the Corporate Trust Service speak-up
programme established within the Internal Control
Department to respond promptly to reports of non-
compliance, wrongdoing, or embezzlement. Its
operating procedures are detailed in the Procedure
for the Corporate Trust Service of MMC Norilsk
Nickel approved by the President of Nornickel.
The Service’s performance is evaluated annually
at a meeting of the Audit and Sustainable
Development Committee of the Board of Directors.
Employees, shareholders, and other stakeholders can
report any actions that cause or may cause financial
or reputational damage to Nornickel. The key
principles underlying the operation of the Corporate
Trust Service include guaranteed anonymity
for whistleblowers, and timely and unbiased review
of all reports. Nornickel will in no circumstances
retaliate against an employee who raises a concern
via the Corporate Trust Service, meaning that no
disciplinary action will be taken (dismissal, demotion,
forfeiture of bonuses, etc.).
In accordance with Federal Law No. 224-FZ
On Prevention of Unlawful Use of Insider Information
and Market Manipulation and on Amendments
to Certain Legislative Acts of the Russian
Federation, dated 27 July 2010, as well as Regulation
(EU) No. 596/2014 of the European Parliament
and of the Council of 16 April 2014 On Market
Abuse, Nornickel maintains a list of insiders
Reports can be submitted via toll-free
hotlines 8 800 700 19 41 and 8 800 700 19 45,
via e-mail skd@nornik.ru or the reporting form
on Nornickel’s website.
For more details on report statistics, please see
the Sustainability Report.
«NORNICKEL»
Annual report 2019
COMPREHENSIVE SECURITY
FRAMEWORK
In 2019, MMC Norilsk Nickel enhanced
corporate security through consistent upgrades
and implementation of its comprehensive
security framework driven by the ongoing analysis
of the entire range of challenges and threats
in the context of the changing external environment.
The consistent implementation of the Management
by Objectives (MBO) model in economic, corporate,
information, physical, and transport security
enabled timely responses to key risks, prevention
of embezzlement and illicit trafficking of precious
metals and metal-bearing materials, and initiatives
to prevent internal corruption.
To ensure effective prevention of embezzlement
of products containing precious metals, Nornickel
has in place measures to identify, prevent and stop
damage to its economic interests in mining
Report statistics
Indicator
Total number of reports
Total number of reports that triggered
investigation
Percentage of corruption reports
2017
765
342
2018
961
394
2019
1,181
481
2.9% (10 reports,
including 0
substantiated)
1.5% (6 reports,
including 0
substantiated)
0.2% (1 report,
including 1
substantiated)
and processing, and metallurgy operations,
as well as in analytical monitoring and accounting
for metal products. The Corporate Security team
is making further improvements to its identification
methodology for products containing precious
metals which have been stolen or illicitly traded.
The methodology reliably identifies the nature
and origin of seized products.
A milestone in combating illicit trafficking in metal
products was UN’s approval of the resolution
on combating transnational organised crime
and its links to illicit trafficking in precious metals,
drafted at Nornickel’s initiative and with its input
in collaboration with global majors.
Anti-terrorism and improved physical security
of critical industrial, energy and transport facilities
remain Nornickel’s top priorities. Through
interactions with law enforcement agencies,
Nornickel prevented any unauthorised interference
with these infrastructures in 2019.
Information security
Nornickel consistently implements its Information
Security Policy covering business processes
and domains, including strategic and tactical
management processes, operating processes,
and information security responsibilities
of governance bodies.
In 2018, Nornickel launched a project to protect
automated process control systems, continued
providing project support for its IT initiatives
programme, and rolled out an Information
Security Management System compliant
with ISO/IEC 27001:2013 at the Murmansk
Transport Division. It also continuously upgrades
its comprehensive system preventing external
cyber interference with operating and production
processes.
As part of its day-to-day activities to minimise
information security risks associated with human
212
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix error in using data assets or IT infrastructure systems
and elements, Nornickel runs a range of activities
to raise awareness and deepen the understanding
of information security issues among its employees.
Nornickel fully ensures the safety and confidentiality
of employee and counterparty personal data. Audits
of Nornickel by the Federal Service for Supervision
of Communications, Information Technology,
and Mass Media of the Russian Federation
(Roskomnadzor) did not identify any issues.
Monitoring of cyber security performance
is part of Nornickel’s information security
management system and information security
assessment and reporting. The results performance
assessments of cyber security systems are reviewed
at the corporate level and communicated
to governance bodies and employees through
corporate procedures and initiatives.
Nornickel stepped up its international efforts
in information security, including through a number
of policy initiatives to normalise cyber behaviours,
presented at such major events as the Partnership
of State Authorities, Civil Society and the Business
Community in Ensuring International Information
Security scientific forum in Garmisch-Partenkirchen,
Germany; the Conference of the Barents
Countries in Kirkenes, Norway; the Session
of the Central American Parliament in Guatemala;
the International Forum on the Use of Information
and Communications Technology for Peaceful
Purposes in Havana, Cuba; and a major Asia-Pacific
forum in Singapore.
SUPPLY CHAIN
AND PROCUREMENT CONTROL
Supply chain management at Nornickel ensures
continuous operation of the Group and reliable
shipments to its customers. Nornickel seeks to work
with partners who are committed to occupational
safety and environmental protection. The Company
also expects its suppliers to follow global
best practices in sustainable use of resources
and materials, and maintain relevant certificates.
Nornickel pays close attention to fostering ties
with reliable domestic suppliers and contractors
to drive import substitution and thus cut costs. In 2019,
Nornickel continued to apply a life cycle costing
approach to sourcing (based on the costs of ownership,
operation, and disposal). The selected suppliers
are invited to sign a set of agreements detailing both
delivery obligations and the suppliers’ responsibility
to ensure required availability rates for their equipment
and its uninterrupted operation
Nornickel is particularly focused on building
relations with suppliers (manufacturers) whose
equipment is unique and critical for the stable
operation of its production facilities. Unique
equipment or individual process materials are sourced
only from exclusive suppliers under long-term
and mutually beneficial agreements or contracts.
Nornickel employs a proprietary multi-tier system
to evaluate its suppliers. The criteria for selection,
evaluation, and re-evaluation of external suppliers
have been determined in line with the requirements
of ISO 9001:2015 Quality management systems.
Nornickel’s suppliers
and contractors (units)
‘19
‘18
‘17
463
457
36
23
35
513
37
Domestic
Foreign
«NORNICKEL»
Annual report 2019
Along with saving jobs, ESG-driven supplier
selection supports unique enterprises whose
continuous operation is essential to the well-being
of both their employees and local communities.
The use of advanced equipment, technology,
and materials combined with pilot tests
and operational improvements facilitate lean
resource management and reduce the environmental
footprint, directly improving the environmental
performance of Nornickel’s operations.
Nornickel is committed to increasing local content
and has developed a centralised pilot testing
procedure to drive competition and replace
imported materials and equipment with local
alternatives. Foreign suppliers are mainly engaged
to deliver unique equipment or systems that do
not have Russian alternatives.
In 2019, Nornickel completed 24 pilot tests
of equipment and materials, including 16 successful
tests (of which 12 were on Russian equipment
and materials). Another 22 pilot tests were
in progress as of the end of 2019.
Nornickel seeks to create an environment
of shared knowledge and values in its relationships
with suppliers. An ESG clause is incorporated into
the standard Master Agreement with its suppliers
and contractors. Nornickel adheres to the codes
of conduct of its business partners drafted
by foreign manufacturers.
Nornickel’s experts are looking into alternative
technology such as alternative fuels and energy
sources to further reduce its environmental
footprint and costs. A supplier’s willingness
to engage in Nornickel’s alternative fuel
programmes is viewed as a critical advantage
in a bidding procedure.
In engaging with suppliers, Nornickel focuses
on building effective feedback loops. Nornickel’s SAP
SRM, an automated solution for supplier relationship
management, provides its suppliers with a continuous
access to its tender process information.
Over 3,200 potential suppliers have registered
in the system and successfully passed accreditation.
Procurement
Nornickel’s procurement is aimed at facilitating
the timely and full satisfaction of its needs
in required products supplied to the specified quality
and reliability standards at affordable price, as well
maximising the value for money spent on such
products.
Nornickel’s procurement process is certified
to ISO 9001 and ISO 14001. The KPIs set
for the procurement team cover streamlining supply
chains and supplier mix (by increasing the share
of manufacturers, their marketing arms, and major
traders in total procurement) as well as on-time
delivery and price control.
Procurement activities can be either centralised
or organised independently by business units
of the Head Office, Nornickel branches or Group
companies. Depending on the purchase budget,
procurement can be organised either as a bidding
procedure, simple procurement, or simplified
procurement. Procurement procedures may
involve different levels of collective procurement
bodies, such as the tender committee, tender
commissions of the Head Office, procurement
and tender commissions of branches and companies
of the Group. Over 3,000 agreements were signed
in 2019 for the supply of inventories under centralised
procurement procedures, worth about RUB 51.2 bn
(USD 791 mln) in total.
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Annual report 2019
EXTERNAL AUDIT
Norilsk Nickel uses the Company’s existing procedure
to run a competitive bidding process for pre-selection
of an auditor for MMC Norilsk Nickel’s consolidated
financial statements in accordance with IFRS
(international financial reporting standards) and RAS
accounts (Russian Accounts Standards). The Board’s
Audit and Sustainable Development Committee
reviews the pre-selection results and makes
a recommendation to the Board of Directors regarding
a candidate for the independent auditor to be
submitted to the General Meeting of Shareholders
of MMC Norilsk Nickel for approval.
In 2019, the General Meeting of Shareholders
approved JSC KPMG as the auditor for MMC Norilsk
Nickel’s RAS and IFRS financial statements for 2019
as recommended by the Board of Directors in its
Report on the Agenda of the Annual General Meeting
of Shareholders.
In 2019, the fee paid to JSC KPMG for its audit
and non-audit services provided to MMC Norilsk
Nickel and its subsidiaries totalled RUB 202.1 mln
(USD 3.1 mln), net of VAT, with the share of non-audit
services accounting for 38% of the total amount.
JSC KPMG has in place policies and procedures
safeguarding the independence of auditors in line
with the requirements of the International Ethics
Standards Board for Accountants (IESBA), the Code
of Professional Ethics of Auditors in Russia,
the Russian Rules for the Independence of Auditors
and Audit Organisations, and other applicable
standards.
Auditor’s fee
Service type
Audit and related services
Non-audit services, including:
quality control for the SAP ERP roll-out project
Total auditor’s fee
Share of non-audit services
RUB mln,
net of VAT
USD mln,
net of VAT
125.6
76.6
19.6
202.1
1.9
1.2
0.3
3.1
38%
Nornickel has in place category procurement
policies, outlining unified binding principles
and approaches to procurement of specific categories
to mitigate operational and financial risks, cut costs,
reduce working capital requirements, and add
reliability and cadence to the supply flow. A total
of 37 category procurement policies were in place
at Nornickel at the end of 2019, including three
new policies approved in 2019. In 2019, about 53%
of inventories were purchased for our core operations
under the category procurement policies.
Requirements planning and inventory
management
Procurement requirements are determined based
on production plans and the needs of other business
segments. During the planning phase, the Company
determines health, safety and environment
requirements, as well as other mandatory
and optional requirements for products and suppliers,
including availability of certificates, permits,
and licences. The resulting data are used as inputs
for a procurement plan.
Accurate planning and stock availability are key
to uninterrupted operations across the Group while
also facilitating inventory optimisation to minimise
the Group’s working capital. Nornickel’s requirements
planning and inventory management are governed
by the Internal Procedure for Procurement Plan
Development, Review and Approval, as well
as the Corporate Standard of Inventory Management
System for Materials and Supplies at MMC Norilsk
Nickel.
In 2019, Nornickel’s management successfully
continued developing its inventory management
system and streamlining its planning and procurement
processes. The roll-out of processes to optimise
surplus inventories across Nornickel’s major assets
reduced their surplus inventories by as much as 9%,
or RUB 1.5 bn (USD 23 mln) in absolute terms
both for core operations and investment activities.
The overall level of inventories across these
assets was reduced by 7% or RUB 4.5 bn (USD 70
mln) in absolute terms. The management’s efforts
are focused on preventing the build-up of slow-
moving inventories through further streamlining
of business processes.
Preventing corruption and other
misconduct
In order to mitigate potential engagement risks,
Nornickel evaluates business standing, integrity,
and solvency of its potential counterparties.
To prevent procurement misconduct and maximise
value capture through unbiased selection of best
proposals, Nornickel’s procurement owner,
customer, and secretary of a collective procurement
body adhere to the following rules:
• Commercial proposals, quotes and technical
specifications submitted by suppliers
are compared using objective and measurable
criteria approved prior to sending a relevant
request for proposal
• The qualification results and the winning bidder
are approved by the collective procurement
body comprised of representatives from various
functions of Nornickel
• A Master Agreement containing an anti-
corruption clause is updated and signed with each
supplier on an annual basis. The anti-corruption
clause outlines the course of action to be taken
between the supplier and Nornickel with respect
to risks of abuse. Moreover, by signing
the Agreement, suppliers acknowledge that they
have read MMK Norilsk Nickel’s Anti-Corruption
Policy published in the Anti-Corruption section
on Nornickel’s corporate website
The Anti-
Corruption section
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Risk report
isk
Report
220 Risk management
224 Key risks
R RISK MANAGEMENT
Nornickel continuously manages risks that can affect
its strategic and operational goals. This process
comprises the following stages:
•
Identification of risks that have external and (or)
internal sources
• Risk assessment based on their impact on key
financial and non-financial metrics
• Development and implementation
of measures to prevent risks and (or) minimise
their implications.
Nornickel pursues the following key risk management
objectives:
•
Increase the likelihood of achieving the Group’s
goals
Improve resource allocation
•
• Boost Nornickel’s investment case
and shareholder value.
RISK MANAGEMENT FRAMEWORK
The risk management framework is based
on the principles and requirements set out in Russian
and international laws, as well as professional
standards, including the Corporate Governance
Code recommended by the Bank of Russia, GOST
R ISO 31000–2010 (Risk Management), and COSO
ERM (Enterprise Risk Management: Integrating
with Strategy and Performance).
To manage production and infrastructure risks,
Nornickel develops, approves and updates business
continuity plans which in case of emergency
consecutively set out:
1/ a procedure for interaction between business
units in rescuing people, minimising property
damage, and ensuring process sustainability
2/ a current operations support or resumption plan
3/ a rehabilitation or retrofit plan for affected assets.
KEY FUNCTIONS
• Approves the Corporate Risk Management
Policy
• Supervises the operation of the risk
management system
• Prepares the Corporate Risk Appetite
Statement (annually)
• Manages strategic risks on a ongoing basis
• Reviews and approves the risk management
development roadmap and assesses its
implementation status (annually)
• Reviews reports on strategic and key
operational risks (annually/quarterly)
• Assesses risk management performance
at Nornickel (annually)
BOARD
OF DIRECTORS
AUDIT
AND SUSTAINABLE
DEVELOPMENT
COMMITTEE
OF THE BOARD
OF DIRECTORS
RISK
MANAGEMENT
SERVICE
KEY FUNCTIONS
• Prepares reports
on Nornickel’s Top 20 risks
(annually)
• Prepares reports on strategic
risks (annually)
• Develops and updates the risk
management methodology
• Enhances quantitative risk
assessment using simulation
modelling tools
• Improves the business
continuity management
system
• Ensures employee
development and training
in practical approaches to risk
management
INTERNAL
AUDIT
RISK OWNERS
(NORNICKEL
MANAGERS
AND
EMPLOYEES)
KEY FUNCTION
• Conducts
an independent
and objective
assessment of corporate
risk management
performance (annually)
KEY FUNCTIONS
• Identify and assess risk management
activities within the integrated risk
management model
• Integrate risk management into business
processes. Risk-based decision making
• Maintain the business continuity
framework
• Prepare reports on key risks within the risk
owner’s area of competence (quarterly)
• Develop risk management documents
by function
NORNICKEL
2019 Annual report
In 2017–2019, Nornickel improved its risk
management framework as follows.
1/ Relevant risk management documents were
developed and approved (risk management
policies, regulations and procedures by function,
guidelines for development of business continuity
plans).
Qualitative indicators of the Risk Management
Service’s performance in 2019 cover the following
activities:
• Rollout of quantitative risk assessment methods
•
for investment projects
Implementation of measures to improve
the business continuity management system
2/ Nornickel’s key risks were identified
• Corporate risk management trainings for Nornickel
and are presented to the Audit and Sustainable
Development Committee on a regular basis
as a strategic risk map and Top 20 risks. Based
on risk assessment, mitigation measures
are adopted, in particular, risk management action
plans are developed and approved.
3/ The corporate risk management framework
was extended to the Group’s key subsidiaries.
Subsidiaries’ risk reports are now regularly
reviewed at all levels and consolidated
at the Head Office level.
4/ A risk appetite statement was developed,
approved and updated annually by the Board
of Directors.
5/ Business continuity plans covering the most
critical production and infrastructure risks were
developed and approved.
6/ A decision was taken to replicate quantitative risk
assessments for investment projects and regularly
review them at Nornickel’s investment
committees to enable risk-based decision making.
7/ In-person risk trainings for employees of the Head
Office, Polar Division, Kola MMC and Gipronickel
are offered on a regular basis.
8/ An interactive online training course
in operational risk management was developed
for Nornickel employees.
9/ A set of documents was developed to design
an automated risk management system (ARMS)
based on a GRC system.
10/ Audits of the risk management framework’s
performance are conducted annually, and the risk
management development roadmap is updated.
In addition, performance self-assessment
of the corporate risk management framework
(CRMF) is conducted on an annual basis.
employees
• Automation of internal control and risk
management processes based on a GRC system
• Technical and production risk management system
improvement, including risk register updates
and quantitative assessment / scoring methods
testing.
2020+ Development Roadmap envisages
the following activities to improve the risk
management framework:
• Launch of activities to automate the risk
management process
• Refinement of algorithms for prompt
communication of all emerging risks using a GRC
system
• Regular CRMF self-diagnostic and assessment
for compliance with global best practices
• Launch of activities to define key risk indicators
•
as part of the project to implement a GRC system
Improvement of risk management practices
in strategic and operational planning
• Rollout of the approach implying the use
of simulation modelling for investment project risk
assessment
• Enhancement of the methodology to analyse
and manage various categories of technical
and production risks
• Extending the business continuity management
perimeter to cover non-production processes:
information technology, security, staffing, etc.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix NEW EMERGING RISKS
Nornickel’s new emerging risks typically have
external sources. These risks are often hard to analyse
and prevent due to the lack of information. Effective
management of new emerging risks is critical
to fostering Nornickel’s long-term sustainability,
managing change and maintaining Nornickel’s
competitive edge in the metals market. Nornickel
assesses and manages new emerging risks based
on their potential implications and on how fast they
can materialise, as well as considering its actual
capabilities to prevent and/or curb their impact.
New emerging risks are identified and tracked
early on by relevant internal experts. For example,
a team of risk champions is involved in reviewing
new emerging risks, identifying and assessing risks
related to all activities of Nornickel. Once the severity
of a new emerging risk is assessed and mitigation
measures are identified, risk owners become
responsible for managing the risk.
New emerging risk management focuses
on preventing risk occurrence and mitigating
their potential negative implications. Nornickel’s
approach includes controls such as business
continuity plans to manage external risks that can
have a disastrous effect on Nornickel’s operations
and business processes. These controls increase
Nornickel’s resilience to external shocks. New
emerging risks are assessed on a regular basis,
including their reassessment and evaluation
of their criticality to Nornickel.
CLIMATE CHANGE
Global warming and other repercussions of climate
change may affect Nornickel’s operations
in the longer run. Their impact may include abnormal
weather or lasting changes in weather patterns.
The physical implications of climate change can
include drought and permafrost thawing, which
can have a material adverse effect on Nornickel’s
operations. As part of its risk management strategy,
Nornickel implements a range of measures
to monitor and control these risks. A significant share
of renewables in Nornickel’s energy consumption,
the high share of recycled water, and one
of the industry’s lowest CO2 emission levels suggest
that the risk remains within tolerance limits. Climate-
related risks may also unlock additional opportunities
for Nornickel driven by the strong demand for metals
required in a future low-carbon economy.
INSURANCE
Insurance is an essential tool used by Nornickel
to manage its risks and finances, as well as to protect
its property interests and shareholders against any
unforeseen losses related to operations, including
due to external effects.
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. Nornickel annually approves
a comprehensive insurance programme that defines
key parameters by insurance type and key project.
Nornickel has implemented a corporate insurance
programme that covers assets, equipment failures
and business interruptions across the Group.
Nornickel maintains corporate insurance policies
with major Russian insurers under the corporate
insurance programme, involving an international
broker to ensure that Nornickel’s risks
are underwritten by highly reputable international
re-insurers.
The same principles of centralisation apply
to Nornickel’s freight, construction and installation,
aircraft and watercraft insurance programmes.
The Group’s entities, directors and officers carry
relevant liability insurance. Nornickel applies
the industry’s best practices to negotiate the best
insurance and insured risk management terms.
NORNICKEL
2019 Annual report
MAP OF NORNICKEL’S MATERIAL RISKS
WITH YEAR-ON-YEAR CHANGE IN 2019
Below is a high-level map of Nornickel’s material risks
reflecting global best practices in risk management.
The risk map ranks material risks by their impact
on the Group’s goals and by source.
RISK MAP – NORNICKEL’S 2019 ANNUAL REPORT
6
1
2
7
9
10
5
3
8
11
12
4
1. Price risk (decline in market prices
for Nornickel metals)
2. Market risk (lower competitiveness
of Nornickel products)
3. Tighter environmental regulations
4. FX risk
5. Investment risk
6. Workplace injury risk
7. Information security risk
8. Technical and production risk
9. Power outages at production
and social facilities in the Norilsk
Industrial District
10. Compliance risk
11. Social risk3
12. Changes in legislation and law
enforcement practices
13. Lack of water resources
14. Permafrost thawing
13
14
h
g
i
H
’
S
L
A
O
G
S
L
E
K
C
I
N
R
O
N
N
O
1
T
C
A
P
M
I
w
o
L
Internal
SOURCE OF RISK2
External
Risk increased year-on-year.
Risk decreased year-on-year.
Risk has not changed year-on-year.
1/ Risk: an impact of uncertainty on the goals (ISO/GOST R 31000).
2/ Source of risk: an element which, alone or in combination with other elements, may cause a risk (ISO/GOST R 31000).
3/ Nornickel implements a range of additional measures to mitigate the risk (see risk description).
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix
NORNICKEL
2019 Annual report
KEY RISKS
Nornickel’s risks are all inherent to its strategic
and operational development and business
continuity goals. Key risks have a varying degree
of impact on Nornickel’s ability to achieve its goals.
Some risks also affect several goals at a time. An
overview of goals affected by key risks is provided
in the description of these risks below.
STRATEGIC RISKS
Impact on goals:
high
Source of risk:
external
Year-on-year change in risk:
stable
Impact on goals:
high
Source of risk:
mixed
Year-on-year change in risk:
stable
PRICE RISK
(decline in the market prices for Nornickel metals due to the global market situation)
Potential decrease in sales revenues due to lower
prices for Nornickel metals subject to actual
or potential changes in demand and supply
in certain metals markets, global macroeconomic
trends, and the financial community’s appetite
for speculative/investment transactions
in the commodity markets.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Lower demand for metals
produced by Nornickel.
A slowdown in the global
economy in general
and in the economies
consuming Nornickel
metals in particular.
Supply and demand
imbalance in metals
markets
Enhancing and monetising
Nornickel’s leadership
in the nickel
and palladium markets
Nornickel is consciously accepting the existing price risk for now.
To manage this risk, Nornickel:
• continuously monitors and forecasts supply and demand
dynamics for key metals
• secures feedstock supplies for key consumers through long-
term contracts to supply metals in fixed volumes
• as a member of the global Nickel Institute and the International
Platinum Group Metals Association, works with other nickel
and PGM producers to maintain and expand the demand
for these metals.
Should the price risk materialise, Nornickel will consider cutting
capital expenditures (revising the investment programme
for projects that do not have a material impact on Nornickel’s
development strategy)
MARKET RISK
(lower competitiveness of Nornickel products)
Lower competitiveness of Nornickel products
in the market may result in discounts to the market
price and a decrease in Nornickel’s income.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Stricter market
requirements on product
quality. Competition
from producers of cheaper
nickel.
Car makers switching
from palladium to platinum
as the preferred catalyst
in petrol engines.
Sanctions
Enhancing and monetising
Nornickel’s leadership
in the nickel
and palladium markets
To manage this risk, Nornickel:
• cooperates with other market participants to monitor changes
in market requirements on product quality
• diversifies its metal product sales across industries
and geographies
• improves and diversifies its product range
• seeks partnership opportunities with key producers of batteries
for electric vehicles
• maintains strategic partnerships with car makers based
on guarantees of long-term palladium supplies
• reviews market requirements on product quality
• seeks partnerships with key producers of batteries for electric
vehicles
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
stable
Impact on goals:
low
Source of risk:
mixed
Year-on-year change in risk:
stable
NORNICKEL
2019 Annual report
TIGHTER ENVIRONMENTAL REGULATIONS
Environmental regulations are tightening, including
environmental permitting process and stricter
governmental control over environmental compliance.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Compliance by Nornickel
and Norilsk Nickel
Group entities
with the applicable laws,
regulatory requirements,
corporate standards,
and business codes
To manage this risk, Nornickel:
• carries out an environmental action plan to reduce emissions
and discharges, as well as to ensure timely waste management
• involves its employees in working groups of dedicated
committees, regional ministries, and government agencies
• takes part in joint projects with nature reserves located within
Nornickel’s regions of operation
Domestic
and international focus
on environmental
protection
and sustainability.
Extensive changes
in environmental
laws and regulations.
For example,
the environmental
permitting framework
was amended on 1
January 2019, introducing
a single environmental
permit and a new system
of standards setting out
technological limits.
Technological restrictions
related to mine water
and industrial wastewater
treatment
FX RISK
US dollar depreciation against the rouble, including
due to changes in the Russian economy and the policy
of the Bank of Russia, may adversely affect
Nornickel’s financial performance, as most of its
revenues are denominated in US dollars, while most
of its expenses are denominated in roubles.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Increase in Russia’s
balance of payments,
higher oil exchange
prices, and lower
imports. Country-specific
macroeconomic changes.
Change in ratings. Lower
volatility in financial
markets of Russia
and other emerging
markets
Maintaining investment-
grade credit ratings.
A debt portfolio
with a well-balanced
profile in terms
of maturity, currency
composition, and sources
of financing
To manage this risk, Nornickel:
• maintains a balanced debt portfolio with USD-denominated
borrowings prevailing to ensure a natural hedge
• implements regulations that limit pricing for expenditure
contracts with prices fixed in foreign currencies
• uses derivatives to mitigate its exposure by balancing USD-
denominated cash flows from revenues and cash flows
from liabilities denominated in other currencies
Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
stable
INVESTMENT RISK
Risk related to time and budget overruns,
and performance targets of Nornickel’s major
investment projects.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Changes in forecasts
of ore volumes, grades
and properties resulting
from follow-up
exploration. Delays
in implementing
investment projects.
Further changes
to budgets of investment
projects. Project
performance targets
revised in the course
of project implementation
Strategic goal: growth
driven by Tier 1
assets. Developing
the mining, concentration
and metallurgical
assets. Developing
the mineral resource
base and upgrading core
production processes
at Nornickel’s Tier 1
assets
To manage this risk, Nornickel:
• carries out proactive exploration and updates the mining plan
(a long-term production plan) based on the progress of its major
investment projects developing the mineral resource base
• holds external expert audits of geological data
• develops an in-house mining and geological information system
• as part of the project assurance process, conducts internal
(cross-functional) audits of major investment projects at each
stage in their life cycle
• enhances incentives for project delivery
• implements an integrated system for managing capital projects
• ensures that short-term, mid-term and long-term planning
processes for capital projects are in sync
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix OPERATIONAL RISKS
Impact on goals:
high
Source of risk:
internal
Year-on-year change in risk:
stable
WORKPLACE INJURY RISK
Failure to comply with Nornickel’s health and safety
(H&S) rules may result in threats to employee health
and life or temporary suspension of operations,
or cause property damage.
Impact on Nornickel’s
development goal
and strategy
Occupational health
and safety
Key risk factors
Suboptimal methods
of work organisation.
Disruptions
in technological
processes. Exposure
to hazardous factors. Non-
compliance with H&S
laws regarding obtaining
licenses to operate
hazardous equipment
in a timely manner
Mitigation
Pursuant to the Occupational Health and Safety Policy approved
by the Board of Directors, Nornickel:
• continuously monitors compliance with H&S requirements
• improves the working conditions for its employees
and contractors deployed at Nornickel’s production facilities,
including by implementing new technologies and labour-
saving solutions, and enhancing industrial safety at production
facilities
• provides employees with certified state-of-the-art personal
protective equipment
• carries out preventive and therapeutic interventions to reduce
the potential impact of harmful and hazardous production
factors
• regularly trains and briefs employees on health and safety,
assesses their health and safety performance and conducts
corporate workshops, including by deploying special simulator
units
• enhances methodological support for H&S functions, including
through the development and implementation of corporate
H&S standards
• improves the risk assessment and management framework
at the Group’s production facilities as part of the Risk Control
project
• reviews the competencies of line managers at Nornickel’s
production facilities, develops H&S training programmes
and arranges relevant training sessions
• provides training for managers under the programme
to determine root causes of accidents using global best
practices (Root Cause and Threat Tree, Five Whys, etc.)
• communicates the circumstances and causes of accidents to all
Nornickel employees, conducts ad hoc safety briefings
• introduces frameworks to manage technical, technological,
organisational and HR changes
NORNICKEL
2019 Annual report
Impact on goals:
high
Source of risk:
mixed
Year-on-year change in risk:
stable
INFORMATION SECURITY RISK
Potential cybercrimes may result in an unauthorised
transfer, modification or destruction of information
assets, disruption or reduced efficiency of Nornickel’s
IT services, business, technological and production
processes.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Growing external threats.
Unfair competition.
Rapid development
of Nornickel’s
IT infrastructure
and automation
of technological
and business processes.
Unlawful acts
by employees and/or third
parties
Mitigation
of the information
security risk
and risk of cyberattacks
on Nornickel’s process
control systems
To manage this risk, Nornickel:
• ensures compliance with Russian laws and regulations
with respect to personal data and trade secret protection,
insider information, and critical information infrastructure
• implements MMC Norilsk Nickel’s Information Security Policy
• categorises information assets and makes information security
risk assessments
• raises information security awareness among employees
• uses technical means to ensure information security of assets
and manage access to information assets
• ensures information security of process control systems
• monitors threats to information security and the use
of technical protection means, including vulnerability analysis,
penetration testing, cryptographic protection of communication
channels, controlled access to removable media, protection
from confidential data leaks, and mobile device management
• develops an information security framework
• sets up and certifies the information security management
system
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Impact on goals:
medium
Source of risk:
internal
Year-on-year change in risk:
stable
Impact on goals:
medium
Source of risk:
internal
Year-on-year change in risk:
stable
NORNICKEL
2019 Annual report
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 equipment breakdown or reimbursable damage
to third parties and the environment.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Efficient delivery
of finished goods
(metals) in line
with the production
programme. Timely supply
of products to consumers
Harsh natural and climatic
conditions, including
low temperatures, storm
winds, and snow load.
Unscheduled stoppages
of core equipment caused
by fixed assets’ wear
and tear.
Release of explosive gases
and flooding of mines.
Collapse of buildings
and structures.
Infrastructure breakdowns
To manage this risk, Nornickel:
• ensures proper and safe operation of its assets in line
with the requirements of technical documentation, as well
as technical rules and regulations as prescribed by local laws
across Nornickel’s geographic footprint
• develops ranking criteria and criticality assessment
for the Norilsk Nickel Group’s key industrial assets
• timely replaces its fixed assets to achieve production safety
targets
• implements automated systems to control equipment process
flows, uses state-of-the art engineering controls
• improves the maintenance and repair system
• trains and educates its employees both locally, on site,
and centrally, through its corporate training centres
• systematically identifies and assesses technical and production
risks, implements a programme of organisational and technical
measures to mitigate relevant risks
• improves the system of stationary gas analysers, provides
employees with portable gas analysers
• develops the technical and production risk management
system, including by engaging independent experts to assess
the system’s performance and completeness of data
• develops and tests business continuity plans which set out
a sequence of actions to be taken by Nornickel’s personnel
and internal contractors in case of technical and production risk
causing maximum damage. These plans are aimed at the earliest
resumption of Nornickel’s production operations
• engages, on an annual basis, independent surveyors to analyse
Nornickel’s exposure to disruptions in the production
and logistics chain and make assessments of related risks.
In 2019, insurance was taken out against key technical
and production risks as part of the property and business
interruption (downtime) insurance programme, with emphasis
on best risk management practices in the mining and metals
industry
POWER OUTAGES AT PRODUCTION AND SOCIAL FACILITIES IN THE NORILSK
INDUSTRIAL DISTRICT
Failure of core equipment at generating facilities
and transmission grid facilities may result in power,
heat and water shortages at key production facilities
of Nornickel’s Polar Division and social facilities
in the Norilsk Industrial District.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Isolation of the Norilsk
Industrial District’s power
grid from the national
grid (Unified Energy
System of Russia). Harsh
natural and climatic
conditions, including
low temperatures, storm
winds, and snow load.
Length of power, heat
and gas transmission lines.
Wear and tear of core
production equipment
and grid infrastructures
Efficient delivery
of finished goods
(metals) in line
with the production
programme. Timely
supply of products
to consumers. Social
responsibility: comfort
and safety of people living
in Nornickel’s regions
of operation
To manage this risk, Nornickel:
• operates and maintains generating and mining assets
as required by the technical documentation, industry rules
and standards, and applicable laws
• timely constructs and launches transformer facilities, timely
replaces transmission towers
• timely executes retrofits (replaces equipment) of TPP and HPP
power units
• timely upgrades and repairs trunk gas and condensate pipelines
and gas distribution networks
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
stable
Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
increased
NORNICKEL
2019 Annual report
COMPLIANCE RISK
The risk of legal liability and/or legal sanctions,
significant financial losses, suspension of production,
revocation/suspension of a licence, loss of reputation,
or other adverse effects arising from Nornickel’s non-
compliance with the applicable laws, regulations,
instructions, rules, standards or codes of conduct.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Discrepancies
in rules and regulations.
Considerable powers
and a high degree
of discretion exercised
by supervision agencies.
Compliance by Nornickel
and Norilsk Nickel
Group entities
with the applicable laws,
regulatory requirements,
corporate standards,
and business codes
To manage this risk, Nornickel:
• ensures its compliance with the applicable laws
• defends its interests during regulatory inspections
and administrative proceedings
• uses pre-trial and trial remedies to defend its interests
• ensures that agreements signed by Nornickel contain clauses
safeguarding its interests
• implements anti-corruption, anti-money laundering, counter-
terrorist financing, and counter-proliferation financing
initiatives
• takes actions to prevent unlawful use of insider information
and market manipulation
• ensures timely and reliable information disclosures as required
by the applicable Russian and international laws
• has its employees attend insider information management
and anti-corruption training courses
• ensures that all employees receive anti-corruption induction
briefing.
In addition, the following internal documents have been
developed and approved:
• Regulations on Antitrust Compliance with Respect to Economic
Concentration in the Russian Federation
• Procedure for Interaction between MMC Norilsk Nickel Units
and Norilsk Nickel Group Entities in Preparing Securities
Market Disclosures.
Procedure for Maintaining and Accessing MMC Norilsk Nickel ’s
Permit Document Register
SOCIAL RISK
Tensions may escalate among the workforce
due to the deterioration of social and economic
conditions in Nornickel’s regions of operation.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Headcount/staff
composition optimisation
projects. Rejection
of Nornickel’s values
by individual employees
and/or third parties.
Limited ability to perform
annual wage indexation.
Dissemination of false
and inaccurate information
about Nornickel’s plans
and operations among
the Group’s employees.
Reallocation of funds
originally intended
for social programmes
and charity
Social responsibility:
• partnering with regional
and local authorities
to develop a social
infrastructure that
supports a safe
and comfortable living
environment for local
communities
To manage this risk, Nornickel:
• strictly adheres to the terms and conditions of collective
bargaining agreements between the Group entities
and their employees. In 2018, MMC Norilsk Nickel signed a new
collective bargaining agreement for 2018–2021
• actively interacts with regional authorities, municipalities
and civil society institutions
• fulfils its social obligations under public private partnership
agreements
• facilitating
• implements the World of New Opportunities charity
the employees’
professional
and cultural development
and building up talent
pools across Nornickel’s
regions of operation
programme aimed at supporting and promoting regional civil
initiatives
• implements the Norilsk Upgrade project to introduce
innovative solutions for sustainable social and economic
development of the region
• implements regular sociological monitoring across its
• implementing long-term
operations
charity programmes
and projects
• surveys Norilsk residents on living standards, employment,
migration trends, and general social sentiment to identify major
issues
• implements social projects and programmes aimed
at supporting employees and their families, as well
as Nornickel’s former employees
• maintains dialogues with stakeholders and conducts
questionnaire surveys while preparing the Group’s public
sustainability reports
• provides adequate social support to redundant staff
under Kola MMC’s social programmes and develops the Social
and Economic Development Strategy of the Pechengsky
District
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
stable
CHANGES IN LEGISLATION AND LAW ENFORCEMENT PRACTICES
Changes in legislation may cause financial damages
(extra costs to ensure compliance with stricter
requirements, a heavier tax and levy burden, etc.).
Changes in law enforcement and judicial practices,
uncertain legal treatment of certain matters may
hamper Nornickel’s business, entail extra expenses
and delay or raise the cost of its investment projects.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Unstable legal
environment (including
lack of codified/uniform
regulations in various
areas).
Frequent changes
to legislation.
Complicated geopolitical
situation.
Lack of treasury funds
(the government needs
to boost its tax and other
proceeds)
Compliance by Nornickel
and Norilsk Nickel
Group entities
with the applicable laws,
regulations, corporate
standards, and business
codes
To manage this risk, Nornickel:
• continuously monitors changes in legislation and law
enforcement practices across all of its business areas
• conducts legal review of draft laws and regulations as well
as relevant amendments
• participates in discussions of draft laws and regulations, both
publicly and as part of expert groups
• engages its employees in relevant professional and specialist
training programmes, corporate workshops, and conferences
• cooperates with government agencies to ensure that new laws
and regulations take into account Nornickel’s interests
NORNICKEL
2019 Annual report
CLIMATE CHANGE RISKS
Impact on goals:
medium
Source of risk:
external
Year-on-year change in risk:
stable
LACK OF WATER RESOURCES
Water shortages in storage reservoirs of Nornickel’s hydropower facilities may result in failure to achieve
required water pressure at HPP turbines leading to limited power production and in drinking water shortages
in Norilsk.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Abnormal natural
phenomena (drought)
caused by climate change
Efficient delivery
of finished goods
(metals) in line
with the production
programme. Timely
supply of products
to consumers. Social
responsibility: comfort
and safety of people living
in Nornickel’s regions
of operation
To manage this risk, Nornickel:
• implements a closed water circuit to reduce water withdrawal
from external sources
• carries out regular hydrological observations to forecast water
levels in rivers and other water bodies
• cooperates with the Federal Service for Hydrometeorology
and Environmental Monitoring (Rosgidromet) on setting up
permanent hydrological and meteorological monitoring stations
in order to improve the accuracy of water level forecasts
for major rivers across Nornickel’s regions of operation
• dredges the Norilskaya River and prepares its production
facilities for reducing their electricity consumption
in an emergency case
• refurbishes its hydropower plants to increase power output
through improving the hydroelectric units’ performance
(implementation period: 2012–2021)
Impact on goals:
medium
Source of risk:
external
Year-on-year change in risk:
stable
PERMAFROST THAWING
Loss of bearing capacity by pile foundation beds
may lead to deformation and collapse of buildings
and structures.
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Climate change, average
annual temperature
increase over the last 15
to 20 years. Increased
depth of seasonal
permafrost thawing
Efficient delivery
of finished goods
(metals) in line
with the production
programme. Timely
supply of products
to consumers. Social
responsibility: comfort
and safety of people living
in Nornickel’s regions
of operation
To manage this risk, Nornickel:
• regularly monitors the condition of foundation beds
underneath buildings and structures built on permafrost
• performs geodetic monitoring of the movement of buildings
• monitors soil temperature in buildings’ foundations
• monitors the compliance of its facilities with operational
requirements for crawl spaces
• develops recommendations and corrective action plans
to ensure safe operating conditions for buildings and structures
234
235
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix Shareholder information
hare
hol
der
Information
238 Share capital
242 Dividend policy
245 Debt instruments
247 Investor relations
S SHARE CAPITAL
Share and ADR split at the end of 2019
At the end of 2019
Nornickel capitalisation amounted
USD 48 bn
Nornickel’s authorised capital is made up
of 158,245,476 ordinary shares with a par value
of RUB 1 each. No preferred shares are issued.
The Company’s capitalisation at the end of 2019
increased by 62.6% year-on-year and amounted
to USD 48.3 bn.
Nornickel shares have been trading on the Russian
securities market since 2001 and are included
in the Blue Chip Index of the Moscow Exchange
(ticker symbol: GMKN) ranking among the most
liquid instruments in the Russian securities market.
In 2001, Nornickel issued American depositary
receipts (ADRs) to represent its shares. Currently,
shares are convertible into ADRs at a ratio of 1:10.
Depositary services for the ADR programme
and custody services are provided by the Bank
of New York Mellon and VTB Bank, respectively.
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 other exchanges.
As at 31 December 2019, the total number of ADRs
representing MMC Norilsk Nickel shares was
406,485,700 or 25.7% of the authorised capital.
The number of ADRs traded on stock exchanges
is not constant, as depositary receipt holders may
convert their securities into shares and vice versa.
Share capital structure as at calendar year-end %
’19
’18
’17
16
4
37.6
37.6
41.8
27.8
27.8
27.8
34.6
34.6
30.4
Free float
EN+ Group IPJSC
(indirect ownership via controlled entities, including UC RUSAL Plc.
In 2017-2018 shows the interest (directly and indirectly) UC RUSAL Plc.)
Olderfrey Holdings Ltd.
(indirect ownership via controlled entities)
238
NORNICKEL
2019 Annual report
In the reporting period, EN+ GROUP PLC acquired
1.98% of the voting shares in UC RUSAL Plc, bringing
its voting share ownership in UC RUSAL Plc to 50.1%.
UC RUSAL Plc held 0.0006% of shares in Nornickel
directly and 27.8238% indirectly (via indirect
control over Aktivium Holding B.V. , which held
27.8238% of the voting shares in Nornickel). In 2019,
EN+ GROUP PLC and Aktivium Holding B.V. were
registered in Russia as EN+ GROUP International
Public Joint-Stock Company (EN+ GROUP IPJSC)
and International Limited Liability Company
AKTIVIUM (MK AKTIVIUM), respectively.
Market cap as at calendar year-end
USD bn
Source: Bloomberg
As of the end of 2019, the largest shareholders’
stakes remained the same, with the stake of Olderfrey
Holdings Ltd totalling 34.6%, and the stake of EN+
Group IPJSC (formerly UC RUSAL Plc) totalling
27.8%. 37.6% of shares and ADRs are in free float
or are owned by institutional and private investors
based in Russia or USA, as well as in European, Asian,
and other countries.
Share price and trading volume on the Moscow Exchange
Period
Share price, RUB
low
high
as at the period end
Trading
volume,
mln shares
Market cap
as at the period end,
RUB bn
2019
First quarter
Second quarter
Third quarter
Fourth quarter
2018
2017
2016
2015
12,993
12,993
13,358
14,146
15,894
9,170
7,791
8,050
8,590
19,890
14,594
14,868
16,686
19,890
13,349
11,610
11,070
12,106
19,102
13,720
14,308
16,686
19,102
13,039
10,850
10,122
9,150
42
10.9
8.8
10.6
11.8
46
49
48
58
3,023
2,171
2,264
2,640
3,023
2,063
1,717
1,602
1,448
Source: Nornickel’s calculations based on the Moscow Exchange price
Nornickel share price and MOEX Index in 2019
+47%
+28%
140%
120%
100%
80%
60%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Nornickel shares
MOEX index
Source: Bloomberg
239
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix48.329.729.726.620.0’15‘16’17‘18’19ADRsShares74.3%25.7%158,245,476Shares ADR price and trading volume on the OTC market of the LSE
Period
2019
First quarter
Second quarter
Third quarter
Fourth quarter
2018
2017
2016
2015
low
18.8
18.8
20.7
22.0
24.5
14.9
13.0
10.4
12.4
ADR price, USD
high
as at the period end
Trading
volume,
mln shares
Market cap
as at the period end,
USD mln
31.5
22.7
23.0
25.7
31.5
21.2
20.2
18.2
21.6
30.6
21.1
22.7
25.6
30.6
18.8
18.7
16.8
12.7
337
88
82
87
80
491
738
647
722
48,344
33,421
35,938
40,511
48,344
29,687
29,655
26,569
20,042
Source: Nornickel’s calculations based on the LSE price
Nornickel ADR prices and global indices
+63%
+45%
+19%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Nornickel ADRs
RTS Index
Euromoney global diversified index
Source: Bloomberg
Share of Nornickel securities
on the major exchanges
60%
48%
35%
38%
2%
51% 1%
64% 1%
Moscow Exchange (shares)
LSE (ADRs)
NYSE (ADRs)
140%
120%
100%
80%
60%
’19
‘18
’17
For more details
on trading
performance, please
see the Interactive
Database section
of the websitе.
NORNICKEL
2019 Annual report
3/ Text and e-mail notifications of any instructions
regarding registered shareholders’ accounts,
viewing details of the documents received
4/ Viewing information on dividends accrued
and the payment history
5/ Preparation of registered shareholder’s
instructions
To get access to the Personal Account, shareholders
need to contact an IRC – R.O.S.T. office. Individual
shareholders with a verified Public Services Portal
account can access their personal account remotely.
The access procedure for the Shareholder’s Personal
Account is detailed on the registrar’s website.
The Annual General Meeting of Shareholders
is held once a year, between on April 1st
and on June 30th after of the financial year. General
Meetings of Shareholders other than the Annual
General Meeting of Shareholders are considered
extraordinary meetings. They are convened as per
resolution of the Board of Directors at its discretion,
or at the request of the Audit Commission,
Nornickel’s auditor, or shareholders owning at least
10% of Nornickel voting shares as at the date
of the request.
Shareholders can exercise other rights as prescribed
by the federal laws On Joint Stock Companies
and On the Securities Market, as well as other
regulations of the Russian Federation.
REGISTRAR
Independent Registrar Company acted as Nornickel’s
registrar before 5 February 2019. Following its
reorganisation completed on 4 February 2019,
Independent Registrar Company became part
of the IRC – R.O.S.T. Group. As a legal successor
of Independent Registrar Company, IRC – R.O.S.T.
has maintained Nornickel’s shareholder register
and provided a full range of registrar services from 5
February 2019. As of 31 December 2019, IRC – R.O.S.T.
acts as Nornickel’s registrar.
The Shareholder’s Personal Account service
developed by the registrar, has enabled shareholders,
including those owning shares via nominal holders,
to participate in general meetings via e-voting
ballots. The Personal Account provides registered
shareholders with the following benefits:
1/ Viewing of shareholder account information
and details
2/ Electronic document exchange with the registrar
(e.g. sending requests, receiving statements
from the register and/or shareholder account
statements)
SHAREHOLDER RIGHTS
All shareholders, including minority and institutional
shareholders, enjoy equal rights and treatment
in their relations with Nornickel, in particular
the rights to:
1/ participate in General Meetings of Shareholders
and vote on all matters within their competence,
unless otherwise provided for by Federal Law
No. 208-FZ On Joint Stock Companies dated
26 December 1995
2/ receive dividends if the General Meeting
of Shareholders passes the relevant resolution
3/ receive part of Nornickel’s property in case of its
liquidation
4/ have access to information about Nornickel’s
operations.
Nornickel’s Regulations on the General Meeting
of Shareholders detail procedures to convene,
prepare, and conduct its general meetings.
240
241
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix 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, boost its market cap, and protect shareholder
rights.
The Company’s Regulations on the Dividend Policy
approved by the Board of Directors seek to ensure
the transparency of the mechanism for determining
the amount of dividend and the dividend payout
procedure.
When determining dividends, MMC Norilsk
Nickel factors in the cyclical nature of the metals
market and the need to maintain a high level
of creditworthiness. As a result, the dividend amount
DIVIDEND REPORT
Individuals/entities whose rights to shares
are recorded in the shareholder register are paid
dividends by the registrar, IRC – R.O.S.T. , upon
Nornickel’s instruction.
Individuals/entities whose rights to shares
are recorded by a nominee shareholder are paid
dividends via their nominee shareholder.
Any person who has not received the declared
dividend 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,
in accordance with Clause 9 of Article 42 of Federal
Law No. 208-FZ On Joint Stock Companies dated
26 December 1995, request payment of unpaid
dividend within three years from the date
of the resolution to pay dividends.
may change depending on the Company’s operating
profit and leverage.
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 determines the dividend amount
and record date, which, as per the Russian law, shall
be set no earlier than 10 days before and no 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.
On 26 September 2019, the Extraordinary General
Meeting of Shareholders approved a dividend
of RUB 883.93 per share (about USD 13.27
at the exchange rate of the Bank of Russia
as at 20 August 2019, the date of the Board of Directors’
recommendation) for the first six months of 2019.
On 16 December 2019, the Extraordinary General
Meeting of Shareholders approved a dividend
of RUB 604.09 per share (about USD 9.48
at the exchange rate of the Bank of Russia
as at 11 November 2019, the date of the Board
of Directors’ recommendation) for the first nine
months of 2019.
On 7 April 2020, the Company’s Board
of Directors recommended that the General
Meeting of Shareholders approve a dividend
of RUB 557.2 per share (about USD 7.29) for FY2019.
Dividend history1
Period
Total for 2019
FY20193
9M 2019
6M 2019
Total for 2018
FY2018
6M 2018
Total for 2017
FY2017
6M 2017
Total for 2016
FY2016
9M 2016
Total for 2015
FY2015
9M 2015
6M 2015
NORNICKEL
2019 Annual report
Dividend per share
USD2
22.75
7.29
9.48
13.27
23.63
12.25
11.37
13.66
9.87
3.79
14.78
7.83
6.95
13.57
3.46
5.06
5.06
RUB
1,488
557
604
884
1,569
793
776
832
608
224
890
446
444
857
230
322
305
RUB mln
323,647
88,174
95,595
139,878
248,214
125,413
122,802
131,689
96,210
35,479
140,894
70,593
70,301
135,642
36,419
50,947
48,276
Declared dividend
USD mln2
4,754
1,154
1,500
2,100
3,739
1,939
1,800
2,162
1,562
600
2,339
1,239
1,100
2,148
548
800
800
Dividends paid
Dividend yields
Year4
2019
2018
2017
2016
2015
Total dividends paid
RUB mln
USD mln
265,233
218,873
176,246
86,712
154,227
’19
‘18
’17
‘16
’15
26.3
21.3
18.8
7.8
18.1
4,166
3,369
2,971
1,232
2,859
14.9%
11.8%
14.0%
7.2%
7.3%
Dividend per share4, USD
Dividend yield5
Dividend yield for 2019 amounted
14.9%
1/ Earlier dividend history is available at our website.
2/ Calculated at the exchange rate of the Bank of Russia as at the date of the Board of Directors’ meeting.
3/ On 7 April 2020, the Company’s Board of Directors recommended that the Annual General Meeting of Shareholders approve a dividend
for FY2019.
4/ Dividends paid in the calendar year.
5/ Recommended dividend to average ADR price (Bloomberg) for the calendar year.
242
243
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix
TAXATION
Income from securities is taxable pursuant
to the applicable tax laws of the Russian Federation1.
Item
Individuals
Residents
Non-residents
Legal entities
Russian entities
Non-resident entities
Income from securities
transactions
Interest income
on securities
Dividend income
on securities
13%2
30%3
20%2
20%5
13%
30%
20%
20%
13%
15%
13%4
15%
Tax treatment of income from securities
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 entities 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 entity’s right to receive such income
(Clause 1, Article 312 of the Russian Tax Code).
Should the entity 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 formula6
AT = P × TR × (D1 − D2)
where:
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
amount7 received
by the entity paying
dividends, provided
that previously
these amounts
were not included
in the taxable income
1/ Chapter 23 (Personal Income Tax) and Chapter 25 (Corporate Income Tax) of the Russian Tax Code.
2/ Or 0% if by the selling date the Company shares have been held for more than five years and the requirements for the share of real estate
in the Company’s assets as outlined in paragraph 2, Article 284.2 of the Russian Tax Code have been met.
3/ If the Company shares are sold in Russia. A 0% rate is applied if by the selling date the shares have been held for more than five years
and the requirements for the share of real estate in the Company’s assets as outlined in paragraph 2, Article 284.2 of the Russian Tax Code have
been met.
4/ 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).
5/ If the income is classified as income of a foreign entity from sources in the Russian Federation in accordance with Clause 1, Article 309
of the Russian Tax Code.
6/ The formula is not applicable to dividends paid to foreign entities and/or individuals who are not tax residents of Russia.
7/ Excluding the dividend amount eligible for a zero tax rate pursuant to Subclause 1, Clause 3, Article 284 of the Russian Tax Code.
244
NORNICKEL
2019 Annual report
DEBT
INSTRUMENTS
CREDIT RATINGS
On 12 February 2019, Moody’s upgraded Nornickel’s
credit rating to Baa2 with a Stable outlook following
Russia’s sovereign credit rating upgrade to Baa3
investment-grade level with a Stable outlook
and country ceiling for foreign currency debt rising
to Baa2.
A detailed overview
of Nornickel’s
debt instruments
is available
in the Investors
section
of the Company’s
website.
Therefore, as of the end of 2019, Nornickel held
investment grade credit ratings from all three
major international rating agencies and Russian
Expert RA:
1/
2/
3/
4/
Fitch
BBB−/Stable
Standard & Poor’s
BBB−/Stable
Moody’s
Baa2/Stable
Expert RA
ruААА/Stable
DEBT PORTFOLIO MANAGEMENT
Debt
USD mln
’19
‘18
’17
‘16
’15
7.1
7.1
8.2
4.5
4.2
Net debt, USD bn
Net debt / EBITDA
Debt portfolio
by currency8
Debt portfolio
by interest rate8
3%
RUB
97%
Other
currencies
61%
Fixed
8/ RUB loans with currency swap applied disclosed as USD loans at the rate of swap initiation
0.9x
1.1х
1.2х
1.0х
2.1х
39%
Floating
245
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix BONDS
In late November 2018, Nornickel registered
a 30-year exchange-traded bond programme
on the Moscow Exchange for up to RUB 300 bn (or its
equivalent in a foreign currency). In 2019, as part
of the programme, we successfully placed a 7.2%
RUB 25 bn bond maturing in 2024.
In 2019, Nornickel successfully placed a 3.375%
USD 750 mln Eurobond maturing in 2024 recording
the lowest coupon ever for the Company’s Eurobond
issues.
As of the end of 2019, Nornickel had five Eurobond
issues outstanding for a total of USD 4.25 bn
and two rouble exchange-traded bonds for a total
of RUB 40 bn.
Eurobonds
Instrument
Issuer
Offering date
Maturity date
Issue size, USD mln
Coupon rate, %
Coupon dates
Issue rating (F/M/S)
Rouble bonds
Instrument
Issuer
ISIN
Offering date
Maturity date
Issue size, RUB bn
Coupon rate, %
Coupon dates
Eurobonds
2020 (LPN)
2022 (LPN)
2022 (LPN)
2023 (LPN)
2024 (LPN)
MMC Finance D.A.C.
28.10.2013
08.06.2017
14.10.2015
11.04.2017
28.10.2019
28.10.2020
08.04.2022
14.10.2022
11.04.2023
28.10.2024
1,000
5.550
500
3.849
1,000
6.625
1,000
4.100
750
3.375
28 October /
28 April
08 October /
08 April
14 October /
14 April
11 October /
11 April
28 October /
28 April
BBB−/Bаa2/
BBB−
ВВВ−/–/ВВВ−
BBB−/Bаa2/
BBB−
ВВВ−/–/ВВВ−
BBB−/Bаa2/
BBB−
Exchange-traded bonds, BO-05
Exchange-traded bonds, BO-001P-01
PJSC MMC NORILSK NICKEL
RU000A0JW5C7
RU000A100VQ6
19.02.2016
06.02.2026
15
11.60
01.10.2019
24.09.2024
25
7.20
Every 182 days starting from the offering date
NORNICKEL
2019 Annual report
INVESTOR
RELATIONS
During 2019, the Investor Relations Department
continued to actively engage with investors,
with about 300 one-on-one meetings held over the year.
In its IR communications, Nornickel places a particular
emphasis on sustainability, with 25 meetings
with investors centred around ESG (environmental,
social and governance) matters and climate change.
In 2017, in line with best practices, Nornickel set
up a dedicated ESG Strategy section on its website
highlighting all relevant information on environmental
and sustainability matters. The section also features
an ESG databook summarising the Group’s current
and historical sustainability performance since 2010.
Nornickel also maintains a dialogue with major global
and Russian ESG agencies.
Over the past several years, the Group has achieved
a considerable progress on ESG, as reflected in its rating
upgrades. In addition, a number of major European
investors have cited the Group’s improved ESG
performance as the main reason behind their decision
to re-invest in Nornickel shares.
Nornickel maintains an active dialogue with a wide
universe of international and Russian investors,
seeking to follow global best practices in making
mandatory disclosures. To make disclosures
more meaningful and comprehensive, Nornickel
uses an array of disclosure tools, including press
releases, presentations, annual and sustainability
reports, corporate action notices, and news feeds.
With Nornickel’s growth story appealing to both Russian
and international investors, the Group provides parallel
disclosure in Russian and in English languages via
a disclosure service authorised by the UK regulator.
Nornickel’s quarterly disclosures via its website include
its operating performance, quarterly issuer reports,
financial statements under the Russian Accounts
Standards (RAS), and lists of affiliates. Financial
statements in accordance with International Financial
Reporting Standards (IFRS) are released on a semi-
annual basis. IFRS disclosures are followed by webcasts
and conference calls with the Group’s senior
management and one-on-one meetings with analysts.
Nornickel also holds an annual Investor Day to share
its corporate long-term strategy updates. To maintain
strong investor relations, the Group makes extensive use
of various communication tools, including conference
speaking opportunities, road shows, site visits
for investors, etc. 1
Nornickel’s sustainability highlights
Agency
Current rating
Date
FTSE4Good Emerging Index
Inclusion in the index is confirmed. Score at 3.0 (out of 5)
June 2019
ISS
Robeco SAM
MSCI ESG
Sustainalytics
Upgraded environmental score and social score to 2, and reaffirmed
governance score – 4 (where 1 is low risk, and 10 is high risk).
ESG rating updated to «С» medium.
October 2019
Upgraded to 37 (vs 27 in 2018)
Reaffirmed at B
Downgrade to 67 (vs 69 in 2018)
September 2019
December 2019
April 2019
246
247
1/ Information about upcoming events is posted in the IR Calendar on the corporate website.
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix IFRS financial statements
FRS
Financial
statements
I MINING
AND METALLURGICAL
COMPANY
NORILSK NICKEL
ONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
31 DECEMBER 2019, 2018 AND 2017
Index
251
252
256
256
257
258
260
262
264
Statement of management’s responsibilities for the preparation
and approval of the consolidated financial statements for the years
ended 31 December 2019, 2018 and 2017
Independent Auditors’ Report
Consolidated income statement for the years
ended 31 december 2019, 2018 and 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
«NORNICKEL»
Annual report 2019
STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
FOR THE PREPARATION AND APPROVAL
OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 2017
The following statement, which should be read in conjunction with the auditors’ responsibility stated
in the auditors’ report set out on pages 2-5, 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 of the Group is responsible for the preparation of the consolidated financial statements that
present fairly in all material aspects the consolidated financial position of the Group at 31 December 2019, 2018
and 2017 and consolidated statements of income, comprehensive income, cash flows and changes in equity
for the years ended 31 December 2019, 2018 and 2017, 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 years ended 31 December 2019, 2018 and 2017 were approved by:
Senior Vice President –
Chief Financial Officer
S.G. Malyshev
President
V.O. Potanin
Moscow, Russia
26 February 2020
250
251
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix INDEPENDENT AUDITORS’ REPORT
TO 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
statements of financial position as at 31 December 2019, 2018 and 2017, the consolidated income statements,
the consolidated statements of comprehensive income, changes in equity and cash flows for the years then
ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Group as at 31 December 2019, 2018 and 2017, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International 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 International Code of Ethics for Professional Accountants (including
International Independence Standards), and we have fulfilled our other ethical responsibilities in accordance
with the requirements in the Russian Federation and the International Code of Ethics. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key 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
Independent auditor: JSC “KPMG”, a company incorporated under the Laws
and Metallurgical Company Norilsk
of the Russian Federation, a member firm of the KPMG network of independent
Nickel”
member firms affiliated with KPMG International Cooperative (“KPMG International”),
Registration No. in the Unified
a Swiss entity
State Register of Legal Entities
Registration No. in the Unified State Register of Legal Entities 1027700125628
1028400000298.
Dudinka, Krasnoyarsk region, Russian
Federation
(SRO AAS). The Principal Registration Number of the Entry in the Register of Auditors
and Audit Organisations: No. 12006020351
Member of the Self-regulatory Organization of Auditors Association “Sodruzhestvo”
«NORNICKEL»
Annual report 2019
Implementation of the SAP ERP in the Polar division
The key audit matter
How the matter was addressed in our audit
Starting from 1 January 2019 SAP ERP was
implemented in the Polar division. The Polar division
represents mining and metallurgy operations of GMK
Group segment and a major production facility
of the Group.
During transition to SAP ERP system IT general
and process level controls were updated
in accordance with the specificity of the new IT
environment.
Given the significance of the operations of the Polar
division to the Group, the increased data integrity
risks inherent to migration of financial information
as at 1 January 2019 and risks in respect of maintenance
of accounting records throughout the reporting period,
we consider implementation of SAP ERP in relation
to the financial reporting process of the major
production facility to be a key audit matter.
Other Information
We understood and evaluated the SAP ERP
implementation project governance and data
migration plan. We involved KPMG IT specialists
to assist us in evaluating the design, implementation,
and operating effectiveness of certain IT general
controls over the migration. We evaluated design
and implementation of process level controls
over migration of financial data at 1 January 2019
and in addition, we tested accuracy and completeness
of migrated data substantially as at 1 January 2019
by comparison to respective information as at 31
December 2018 in legacy systems.
We performed a walkthrough analysis for significant
financial accounting processes that had been
updated in relation to the activity of the Polar
division. We evaluated design and implementation
of controls applied at Group level to address risks
arisen from the SAP ERP implementation in relation
to the financial reporting process of the Polar division.
We decreased our materiality when performing
our audit procedures in respect of transactions
in the Polar division for the year ended 31 December
2019 resulting in further detailed substantive
testing to specifically address the significant risks
over accounting records.
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 2019, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do
not and will not express any form of assurance conclusion thereon.
In 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 be materially misstated.
If, based on the work we have performed on the other information that we have obtained prior to the date
of this auditors’ report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
252
253
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Responsibilities of Management and Those Charged with Governance
for the Consolidated Financial Statements
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 enable
the preparation of consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability
to continue as a 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,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify 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 obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one 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 on 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 by management
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude
that a 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 on 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 a going concern
«NORNICKEL»
Annual report 2019
• 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 a manner that achieves fair presentation
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on 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 a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on 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 a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors’ report is:
Natalia Velichko
JSC “KPMG”
Moscow, Russia
26 February 2020
254
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONSOLIDATED INCOME STATEMENT FOR THE YEARS
ENDED 31 DECEMBER 2019, 2018 AND 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 2017
«NORNICKEL»
Annual report 2019
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 operating expenses, net
Operating profit
Foreign exchange gain/(loss), net
Finance costs, net
Gain from disposal of subsidiaries
Income from investments
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Shareholders of the parent company
Non-controlling interests
Earnings per share
Notes
2019
2018
2017
For the year ended 31 December
7
8
9
10
15
11
12
21
13
14
12,851
712
13,563
(4,509)
(684)
8,370
(938)
(117)
24
(303)
7,036
694
(306)
2
98
7,524
(1,558)
5,966
5,782
184
5,966
10,962
708
11,670
(4,505)
(622)
6,543
(890)
(92)
(50)
(95)
5,416
(1,029)
(580)
–
95
3,902
(843)
3,059
3,085
(26)
3,059
8,415
731
9,146
(3,939)
(632)
4,575
(788)
(75)
(227)
(362)
3,123
159
(535)
20
77
2,844
(721)
2,123
2,129
(6)
2,123
Basic and diluted earnings per share attributable
to shareholders of the parent company (US Dollars per share)
22
36.5
19.5
13.5
US Dollars million
Profit for the year
Other comprehensive income/(loss)
Items to be reclassified to profit or loss in subsequent periods:
Effect of translation of foreign operations
Other comprehensive (loss)/income to be reclassified
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/(loss) not to be reclassified
in subsequent periods, net
Other comprehensive income/(loss) 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
2019
5,966
(4)
(4)
488
488
484
6,450
6,226
224
6,450
2018
3,059
(2)
(2)
(905)
(905)
(907)
2,152
2,232
(80)
2,152
2017
2,123
15
15
277
277
292
2,415
2,417
(2)
2,415
256
257
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2019, 2018 AND 2017
US Dollars million
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Other financial assets
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
Share capital
Share premium
Translation reserve
Retained earnings
Equity attributable to shareholders of the parent company
Non-controlling interests
Notes
2019
2018
2017
At 31 December
15
16
14
18
18
19
16
17
20
22
28
23
11,993
9,934
10,960
215
223
98
370
163
141
73
386
148
192
77
732
12,899
10,697
12,109
2,475
362
74
51
68
644
2,784
117
6,575
19,474
6
1,254
(4,899)
7,452
3,813
474
4,287
2,280
204
75
147
92
271
1,388
97
4,554
15,251
6
1,254
(5,343)
7,306
3,223
250
3,473
2,689
327
71
99
82
296
852
110
4,526
16,635
6
1,254
(4,490)
7,557
4,327
331
4,658
«NORNICKEL»
Annual report 2019
Notes
2019
2018
2017
At 31 December
24
24
26
14
24
24
27
28
25
26
17
8,533
8,208
8,212
180
674
37
–
60
281
9,765
1,087
44
1,706
1,553
393
100
–
36
503
5,422
15,187
19,474
16
365
200
61
385
185
24
464
402
–
407
116
9,420
9,625
209
6
1,551
6
307
77
5
35
162
2,358
11,778
15,251
813
4
783
6
377
189
24
9
147
2,352
11,977
16,635
US Dollars million
Non-current liabilities
Loans and borrowings
Lease liabilities
Provisions
Trade and other long-term payables
Derivative financial instruments
Deferred tax liabilities
Other long-term liabilities
Current liabilities
Loans and borrowings
Lease liabilities
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
258
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS
ENDED 31 DECEMBER 2019, 2018 AND 2017
For the year ended 31 December
2019
2018
2017
US Dollars million
Purchase of other non-current assets
7,524
3,902
2,844
Loans issued
US Dollars million
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortisation
Impairment of non-financial assets
Loss on disposal of property, plant and equipment
Gain from disposal of subsidiaries
Change in provisions and allowances
Finance costs and income from investments, net
Foreign exchange (gain)/loss, 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
Purchase of property, plant and equipment
Purchase of intangible assets
911
(24)
19
(2)
220
208
(694)
64
8,226
48
(122)
14
(331)
62
(247)
(35)
304
7,919
(1,910)
6,009
(1,262)
(62)
765
50
1
–
61
485
1,029
46
6,339
297
102
(5)
(15)
11
676
(28)
(97)
7,280
(787)
6,493
(1,480)
(73)
645
227
9
(20)
41
458
(159)
58
4,103
(346)
(174)
10
(5)
9
(1,118)
(48)
2
2,433
(670)
1,763
(1,940)
(62)
«NORNICKEL»
Annual report 2019
For the year ended 31 December
2018
(104)
(7)
13
5
–
3
—
81
2017
(88)
(18)
48
(80)
9
29
99
67
(1,562)
(1,936)
2,173
(2,547)
(9)
(3,369)
(1)
(551)
4,233
(3,140)
(10)
(2,971)
(1)
(642)
294
(2,237)
(2,410)
3,325
(63)
852
2019
–
(3)
54
78
–
10
(20)
85
(1,120)
3,212
(2,163)
(45)
(4,166)
(1)
(460)
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
(Net cash outflow)/net cash inflow from disposal of subsidiaries (Note 21)
Interest and other investment income received
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayments of loans and borrowings
Payments of lease liabilities
Dividends paid (Note 28)
Dividends paid to non-controlling interest
Interest paid
Proceeds from sale of a non-controlling interest in a subsidiary (Note 23)
Net cash used in financing activities
Net change 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
(3,623)
(4,304)
1,266
1,388
130
2,784
627
852
(91)
1,388
260
261
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 2017
«NORNICKEL»
Annual report 2019
Equity attributable to shareholders of the parent company
Notes
Share capital
Share premium
Translation reserve
Retained earnings
6
1,254
6
6
6
1,254
1,254
1,254
28
23
28
28
(4,778)
288
288
(4,490)
–
(853)
(853)
–
(5,343)
444
444
(4,899)
7,340
2,129
2,129
(1,846)
35
(100)
(1)
7,557
3,085
3,085
(3,336)
7,306
5,782
5,782
(5,636)
7,452
Total
3,822
2,129
288
2,417
(1,846)
35
(100)
(1)
4,327
3,085
(853)
2,232
(3,336)
3,223
5,782
444
6,226
(5,636)
3,813
Non controlling interests
74
(6)
4
(2)
(1)
259
1
331
(26)
(54)
(80)
(1)
250
184
40
224
474
Total
3,896
2,123
292
2,415
(1,847)
294
(100)
4,658
3,059
(907)
2,152
(3,337)
3,473
5,966
484
6,450
(5,636)
4,287
US Dollars million
Balance at 1 January 2017
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
Profit/(loss) for the year
Other comprehensive loss
Total comprehensive income/(loss) for the year
Dividends
Balance at 31 December 2018
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends
Balance at 31 December 2019
262
263
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 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 34.
Major production facilities of the Group are located in Taimyr and Kola Peninsulas and the Zabaikalsky region
of the Russian Federation, and in Finland.
2. 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-FZ On consolidated financial statements (“Law 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 certain classes of financial instruments, in accordance with IFRS 9 Financial
Instruments (IAS 39 Financial Instruments: Recognition and Measurement for comparative information
at 31 December 2017).
3. CHANGES IN ACCOUNTING POLICIES
The accounting policies applied in the preparation of these consolidated financial statements are generally
consistent with those applied in the preparation of the Group’s consolidated financial statements
at and for the years ended 31 December 2018 and 2017 except for changes related to the adoption of IFRS 9
Financial instruments and IFRS 15 Revenue from contracts with customers from 1 January 2018 and IFRS 16
Leases from 1 January 2019.
Adoption of new and revised standards and interpretations during the year ended 31 December 2019
The Group initially adopted IFRS 16 Leases in the preparation of these consolidated financial statements
for the year ended 31 December 2019 from 1 January 2019. In accordance with the modified retrospective
approach on the initial application of the standard the comparative information for the years ended 31
December 2018 and 2017 has not been restated.
In accordance with modified retrospective approach as of the date of initial application:
•
for leases previously classified as operating lease in line with IAS 17 Leases lease liabilities were recognised
at the present value of the remaining lease payments, discounted using the weighted average incremental
borrowing rate at that date (at 1 January 2019: 5.55% per annum)
«NORNICKEL»
Annual report 2019
•
right-of-use assets were recognised in the amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to the respective lease contracts
On the initial application of IFRS 16 Leases the Group has recognised additional lease liabilities (both current
and non-current) in the amount of USD 204 million (see below). These leases were classified as operating lease
applying IAS 17 Leases and not recognised as lease liabilities before 1 January 2019.
Future minimum lease payments due under non-cancellable operating lease agreements
at 31 December 2018
Less
– Current leases
– Variable lease payments that do not depend on an index or a rate
– Future lease payments for leased items not transferred to the lessee at 1 January 2019
– Effect of discounting of payments
Lease liabilities additionally recognised at 1 January 2019
Plus
– Finance lease liabilities recognised at 31 December 2018
Lease liabilities recognised at 1 January 2019
At 1 January 2019
611
(13)
(103)
(158)
(133)
204
22
226
The Group applied the following practical expedients on the initial application of IFRS 16 Leases:
• applied this standard to the contracts that were previously identified as leases in line with IAS 17 Leases
and IFRIC 4 Determining whether an Arrangement contains a Lease
• did not recognise lease liabilities in respect of the current leases expiring within 12 months of the date
of the initial application
• did not perform impairment review of right-of-use assets due to the absence of the onerous lease contracts
according to IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date
of initial application
• excluded initial direct costs from the measurement of right-of-use assets
• used hindsight, such as determination of the lease term if the contract contains options to extend
or terminate the lease
Adoption of other new and revised standards and interpretations during the year ended 31 December 2019
Adoption of amendments to the following Standards did not have material impact on the accounting policies,
financial position or results of the Group:
•
•
•
•
• Annual Improvements to IFRSs 2015-2017 Cycle
IFRIC 23 Uncertainty over Income Tax Treatments
IFRS 9 Financial Instruments (amended)
IAS 28 Investments in Associates and Joint Ventures (amended)
IAS 19 Employee Benefits (amended)
Adoption of new and revised standards and interpretations during the year ended 31 December 2018
The Group has initially adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial
Instruments from 1 January 2018.
The Group has adopted IFRS 15 Revenue from Contracts with Customers at the date of initial application
using the cumulative effect method with no material effect on the Group’s consolidated financial statements
at 31 December 2018 and for the year then ended. Comparative information for the year 31 December 2017 has
not been restated.
The Group has taken an exemption not to restate comparative information for prior periods with respect
to classification requirements of IFRS 9 Financial Instruments. Therefore, the information presented
at 31 December 2017 does not generally reflect the requirements of classification of IFRS 9 Financial
Instruments but rather those of IAS 39 Financial Instruments: Recognition and Measurement.
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date have been classified at 31 December 2018 at fair value through profit or loss and are remeasured at each
reporting date using the forward price for the period till the price settlement date outlined in the contract
(mark-to-market adjustment). Previously such receivables were classified as loans and receivables
under IAS 39 Financial Instruments: Recognition and Measurement.
There were no material differences in the carrying amounts of financial assets and financial liabilities resulting
from the adoption of IFRS 9 Financial Instruments at 31 December 2018.
The significant accounting policies in respect of revenue from contracts with customers and financial
instruments in effect from 1 January 2018 are set out in Note 4.
Adoption of other new and revised standards and interpretations during the year ended 31 December 2018
Adoption of amendments to the following Standards for annual periods from 1 January 2018 did not have
material impact on the accounting policies, financial position or results of the Group:
•
•
•
•
•
•
IFRS 1 First-time Adoption of International Financial Reporting Standards (amended)
IFRS 2 Share-based Payment (amended)
IFRS 4 Insurance Contracts (amended)
IAS 28 Investments in Associates and Joint Ventures (amended)
IAS 40 Investment Property (amended)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
Adoption of new and revised standards and interpretations during the year ended 31 December 2017
Adoption of amendments to the following Standards for annual periods from 1 January 2017 did not have
material impact on the accounting policies, financial position or results 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
The Group has not early adopted any other standard, interpretation or amendment that has been issued
but is not yet effective.
Standards and Interpretations
IFRS 3 Business combinations (amended)
IFRS 7 Financial Instruments: Disclosures (amended)
IFRS 9 Financial Instruments (amended)
IAS 1 Presentation of Financial Statements (amended)
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (amended)
IAS 39 Financial Instruments: Recognition and Measurement (amended)
Revised Conceptual Framework for Financial Reporting
IFRS 17 Insurance Contracts
Effective for annual
periods beginning
on or after
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2020
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.
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Annual report 2019
Reclassification
Finance lease liabilities recognised in line with IAS 17 Leases are presented as lease liabilities
in the consolidated statement of financial position at 31 December 2018 and at 31 December 2017 (previously
presented in loans and borrowings).
For the year ended 31 December 2019 and 2018, revenue from sales of semi-products is allocated to revenue
from each metal sales as per respective metal content in a semi-product rather than being presented
under a separate “semi-products” caption (refer to Note 7). Information for the year ended 31 December 2017
has been reclassified to conform with this presentation.
For the year ended 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.
4. 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 net assets (excluding goodwill) of the consolidated subsidiaries are identified
separately from the equity of the shareholders of the Company therein. Non-controlling interests include
interests at the date of the original business combination and a non-controlling share of changes in net
assets since the date of the combination. Total comprehensive income must be attributed to the shareholders
of the Company 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 intra-group 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.
Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures, depending
on the contractual rights and obligations of each investor. 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 its investments in joint ventures
using the equity method.
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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, an associate or a joint venture 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 and joint operations is disclosed separately and goodwill relating to associates and joint ventures
is included in the carrying value of the investment in associates or joint ventures. Goodwill disclosed separately
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 fair value 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.
Functional and presentation currency
The individual financial statements of each Group entity are presented in its functional currency.
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 and Nkomati Nickel Mine
is South African Rand.
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 Law 208-FZ, which use the Russian
Rouble as the presentation currency.
The translation of components of the consolidated statement of financial position, consolidated income
statement, consolidated statement of cash flows and consolidated statement of changes in equity 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 at the dates
of the transactions, in which case income and expenses are translated at exchange rates at the dates
of the transactions)
• 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
268
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Annual report 2019
•
in the consolidated statement of cash flows, cash balances at the beginning and the 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 proceeds
from and repayments of loans and borrowings, dividends paid and advances received, proceeds from disposal
of subsidiaries, which are translated at 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 exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities denominated
in foreign currencies are translated at the closing exchange rates at the end of the respective reporting period.
Non-monetary items carried at historical cost are translated at exchange rates at the dates of the transactions.
Non-monetary items carried at fair value are translated at exchange rates that existed when the fair values were
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:
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
Euro / US Dollar
31 December
Average for the year ended 31 December
Revenue recognition
Metal sales revenue
2019
61.91
64.74
13.99
14.44
0.89
0.89
At 31 December
2017
57.60
58.35
12.36
13.30
0.84
0.89
2018
69.47
62.71
14.35
13.18
0.87
0.85
Accounting policies after 1 January 2018
Revenue from metal sales is recognised at a point of time when control over the asset is transferred
to a customer and represents the invoiced value of all metal products shipped to customers, net of value added
tax (if any).
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 of the goods,
is recognised in the consolidated financial statements as and when they are delivered. A gain or loss on forward
contracts expected to be settled by physical delivery or on net basis is measured at fair value recognised
in revenue and disclosed separately from revenue from contracts with customers.
As a practical expedient, the Group does not adjust the promised amount of consideration for the effects
of a significant financing component, if the expected period between when the Group transfers a promised good
or service to a customer and the customer pays for that good or service will be one year or less.
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 market price
at the time of sale. Price adjustment on provisionally priced contracts is recorded in revenue.
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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.
Other revenue
Revenue from contracts with customers on sale of goods, other than metals, is recognised at a point of time
when control over the asset is transferred to the customer in accordance with the shipping terms specified
in the sales agreements.
Revenue from service contracts is recognised over-time when the services are rendered.
Dividend and interest income
Dividend income from investments is recognised when the Group’s right to receive payment has been
established. Interest income is accrued using the effective interest method.
Leases
Accounting policies after 1 January 2019
The Group assesses at the inception of a contract whether it or its components is, or contains, a lease.
The Group recognises a right-of-use asset and a corresponding lease liability, if a lease contract
transfers to the lessee the right to control the use of the identified asset for a period of time in exchange
for a consideration, except for current leases with the term of 12 months or less. The Group recognises lease
payments associated with current leases as an expense on a straight-line basis over the lease term. Land
plots lease payments are treated as variable payments, if they are linked to land cadastral value and changes
in the latter do not depend on market rental rates. The Group recognises variable lease payments as an expense
in the period when the event that triggers those payments occurs.
the initial amount of the lease liability;
Right-of-use assets are initially recognised at cost that comprise when applicable:
•
• any lease payments made at or before the lease commencement date;
• any initial direct costs incurred by the lessee;
• an estimate of costs to be incurred by the lessee for retirement of the underlying asset and restoration
of the site on which it is located.
Right-of-use assets are subsequently measured at cost less any accumulated depreciation and any accumulated
impairment losses, adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated
on a straight-line basis over their estimated economic useful lives or over the term of the lease, if shorter. Right-
of-use assets are presented in property, plant and equipment in the consolidated statement of financial position.
Lease liabilities (refer to Note 24) are initially measured at the present value of the lease payments that
are not paid at the commencement date and subsequently remeasured to reflect changes to the lease
payments. The lease payments are discounted using interest rate implicit in the lease (if that rate can be readily
determined) or using Group incremental borrowing rate at the сommencement date determined based on lease
term and currency of the lease payments.
Accounting policies before 1 January 2019
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.
«NORNICKEL»
Annual report 2019
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.
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.
Finance costs
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.
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.
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 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 respective services.
Income tax expense
Income tax expense represents the sum of the current and deferred tax.
Income tax is recognised as an expense or income in the consolidated income statement unless 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.
Current tax
Current tax is based on taxable profit for the year. Taxable profit differs from profit before tax 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 also excludes items that are never taxable or deductible.
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. As a general
rule, 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. Deferred tax assets
and liabilities are not recognised, if temporary differences arise from goodwill or from the initial recognition
of assets and liabilities other than in a business combination which, at the time of the transaction, affects
neither taxable profit nor accounting profit.
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in subsidiaries, joint ventures, associates and interests in joint operations, unless 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.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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.
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.
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
Mine development costs include directly attributable borrowings costs.
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 depreciation 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 and borrowing costs eligible for capitalisation.
Carrying value of mining assets is depreciated over the lesser of their individual economic useful lives
on a straight-line basis, or the remaining life of mine based on the amount of the commercial ore reserves
on a units of production basis. 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 1 to 50 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 charge is calculated over the following economic useful lives:
• buildings, structures and utilities
2-50 years
• machinery, equipment and transport
1-30 years
1-20 years
• other non-mining assets
«NORNICKEL»
Annual report 2019
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
• borrowing costs eligible for capitalisation
Depreciation of an asset begins when it is available for use and it is in the location and condition necessary
for it to be capable of operating in the manner intended by management.
Exploration expenditure
Exploration expenditure, including geophysical, topographical, geological and similar types of expenditure
made within research, mining and exploration licences acquired, is capitalised 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.
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.
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Inventories
Refined metals
Main jointly produced metals include nickel, copper, palladium, platinum; by-products include cobalt, gold,
rhodium, silver and other metals. Main products are measured at the lower of cost of production or net
realisable value. The 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 initially measured at net
realisable value.
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 allowance for obsolete and slow-moving
items.
Financial assets
Accounting policies after 1 January 2018
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 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 amortised cost
• financial assets at fair value through other comprehensive income; and
• financial assets at fair value through profit or loss
The classification of financial assets depends on the Group’s business model for managing the financial assets
and the contractual terms of the cash flows and is determined at the time of initial recognition.
Effective interest method
The effective interest method is used for calculating the amortised cost of a financial asset and for 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 instruments other than those financial assets
designated at fair value through profit or loss or fair value through other comprehensive income.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
at fair value though profit or loss:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
The Group generally classifies cash and cash equivalents, trade and other receivables (excluding trade
receivables under provisionally priced contracts), loans issued and bank deposits as financial assets at amortised
cost.
«NORNICKEL»
Annual report 2019
Financial assets at fair value through other comprehensive income
A debt instrument is measured at fair value through other comprehensive income if it meets both
of the following conditions and is not designated at fair value though profit or loss:
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows
and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
•
At initial recognition the Group may make an irrevocable election to present in other comprehensive income
subsequent changes in the fair value of an investment in an equity instrument that is not held for trading. This
election is made on an instrument-by-instrument basis.
Financial assets at fair value through profit or loss
All financial assets not classified as measured at amorised cost or fair value through other comprehensive
income are classified as financial assets at fair value through profit or loss.
Trade receivables under provisionally priced contracts and derivative financial assets are measured at fair value
through profit or loss. Trade receivables under provisionally priced contracts are remeasured at each reporting
date using the forward price for the period till the price
Impairment of financial assets
The Group recognises an allowance for expected credit losses on a financial asset measured at amortised cost
using one of the two methods:
Lifetime expected credit losses
12-month expected credit losses since
the reporting date
Trade and other receivables
Financial assets other than trade and other receivables if the credit risk on that
financial asset has increased significantly since initial recognition
Financial assets other than trade and other receivables at initial recognition
Financial assets other than trade and other receivables for which credit risk has
not increased significantly since initial recognition
When determining whether the credit risk of the financial asset has increased significantly since initial
recognition and when estimating expected credit losses, the Group considers reasonable and supportable
information that is relevant and available, including both quantitative and qualitative information and analysis
based on Group’s historical experience and forward-looking information.
The Group applies the IFRS 9 Financial Instruments simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables. The Group assumes that expected
credit loss for all trade and other receivables, which are overdue in excess of 365 days is equal to their carrying
amount. To measure the expected credit losses, trade and other receivables that are past due for less than
365 days are grouped based on the length of the overdue period to which respective expected loss rates
are applied. The expected loss rates are based on the historical credit loss experience, adjusted to reflect
current and forward-looking information on the ability of the customers to settle the receivables.
When trade and other receivables are considered uncollectible, they are written off against the allowance
for expected credit losses. Changes in the allowance are recognised in the consolidated income statement.
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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 the 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.
Accounting policies before 1 January 2018
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.
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 managements’ estimate of fair value.
«NORNICKEL»
Annual report 2019
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.
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.
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.
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. Derivative financial liabilities are measured at fair value through profit or loss.
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 outflows 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.
276
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 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 present value, are recognised
at the moment when the legal or constructive obligation in relation to such costs arises and the future costs
can be reliably estimated. These costs are 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.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
In order to prepare the consolidated financial statements in accordance with IFRS the Group’s management
have to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the reporting date, and the reported amounts of revenues and expenses
for the reporting period. Making estimates may require judgement based on historical experience, current
and expected economic conditions, and all other available information. Actual results may differ from such
estimates.
impairment of non-financial assets
The most significant areas requiring the use of management estimates and assumptions are as follows:
• useful economic lives of property, plant and equipment
•
• provisions and allowances
• decommissioning obligations
•
• contingencies.
income taxes and
Useful economic lives of property, plant and equipment
Carrying value of the Group’s mining assets, classified within property, plant and equipment, is depreciated
over the lesser of their individual economic useful lives on a straight-line basis or the remaining life of mine
based on the amount of the commercial ore reserves on a unit of production basis. 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 may affect the estimation of the life of mine include the following:
• changes in proved and probable ore reserves
•
• differences between actual commodity prices and commodity price assumptions used in the estimation
the grade of ore reserves varying significantly from time to time
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
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 length of the period during which
they will continue to bring economic benefit to the Group.
«NORNICKEL»
Annual report 2019
Impairment of non-financial assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible non-
financial assets for an indication that these assets may be impaired or that a previously recognised impairment
loss may have decreased. For the purpose of the impairment test, the assets that do not generate independent
cash flows are allocated to an appropriate cash-generating unit. To calculate the value in use, management
necessarily applies judgement in allocating assets that do not generate independent cash flows to appropriate
cash-generating units, and in estimating the timing and value of the underlying cash flows. Subsequent changes
to the assets allocation to cash generating units or the timing of cash flows may affect the carrying value
of the respective assets.
Provisions and allowances
The Group creates an allowance 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 provisions for social commitments, tax and other provisions. Provisions represent present
value of the best estimate of the future outflow of economic benefits to settle these obligations.
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. Provisions are recognised, based on present values, for decommissioning
and land restoration costs as soon as the obligations arise. Actual costs incurred in future periods may differ
materially from the amounts provided. Additionally, future changes to environmental laws and regulations, life
of mine estimates and discount rates may 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 reporting 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.
278
279
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
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
•
• Accrual of intercompany dividends
Intercompany investments
Amounts are measured on the same basis as those in the consolidated financial statements. Following a change
in the composition of its operating segments the Group did not restate the corresponding items of the segment
information for the years ended 31 December 2018 and 2017 since the necessary information is not practically
available.
6. SEGMENT INFORMATION
Operating segments are identified on the basis of internal reports on components of the Group that
are regularly reviewed by the Management Board.
During the second half of 2019, the Group has updated its management accounting system to account
for business changes. As a result, South Cluster segment was presented separately from GMK Group segment
at 31 December 2019 and for the year then ended. In May 2019, the Group replaced certain intersegment tolling
arrangements with intersegment sales of semi-products for further processing with resulting segment revenue
re-distribution between inter-segment metal sales and sales of metal sales to external customers, as further
detailed below.
• GMK Group segment includes main mining, processing and metallurgy operations as well as transport
services, energy, repair and maintenance services located in Taimyr Peninsula. GMK Group metal sales
to external customers include metal volumes produced from semi-products purchased from South Cluster
segment starting May 2019. Intersegment revenue from metal sales for 2019 included primarily sale of semi-
products to KGMK Group segment for further processing (previously processed under intersegment
tolling arrangements). GMK Group other sales to external customers primarily include revenue for energy
and utilities services provided in Taimyr Peninsula
• South Cluster segment includes certain ore mining and processing operations located in Taimyr Peninsula
which were previously reviewed within GMK Group segment. Intersegment revenue from metal sales
included sale of semi-products to GMK Group for further processing starting May 2019 (previously
processed under intersegment tolling arrangements). South Cluster segment revenue from other sales
includes intersegment ore processing services under tolling arrangements provided to GMK Group segment
• KGMK Group segment includes mining and metallurgy operations, energy, exploration activities located
in Kola Peninsula. KGMK Group metal sales to external customers included metal produced from semi-
products purchased from GMK Group segments starting in 2019. Intersegment revenue from metal sales
includes sale of semi-products to GMK Group and NN Harjavalta for further processing. KGMK Group
revenue from other sales includes intersegment metal processing services under tolling arrangements
provided to other segments and energy and utilities services provided to external customers in Kola
Peninsula
• NN Harjavalta segment includes refinery operations located in Finland. NN Harjavalta metal sales to external
customers primarily include metal produced from semi-products purchased from GMK Group and KGMK
Group segments
• GRK Bystrinskoye segment includes ore mining and processing operations located in the Zabaikalsky region
of the Russian Federation
• Other mining segment primarily includes 50% Group interest in metal mining and processing joint
operations of Nkomati Nickel Mine (“Nkomati”), as well as certain other mining and exploration activities
located in Russia and abroad. Other mining segment sales primarily include Group 50% share in sales
of metal semi-products produced by Nkomati
• Other non-metallurgical segment includes resale of third party metal products, other trading operations,
supply chain management, transport services, energy and utility, research and other activities located
in Russia and abroad. Other non-metallurgical segment also includes resale of 50% metal semi-products
produced by Nkomati. Other sales of Other non-metallurgical segment primarily include revenue
from passenger air transportation, freight transportation services and fuel sales
280
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The following tables present revenue, measure of segment profit or loss (EBITDA) and other segment information
from continuing operations regarding the Group’s reportable segments for the years ended 31 December 2019, 2018 and 2017,
respectively.
For the year ended
31 December 2019
GMK
Group
South
Cluster
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye
Other
mining
Other non-
metallurgical Eliminations
Total
For the year ended
31 December 2018
GMK
Group
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye Other mining
Other
non-metallurgical
Eliminations
Total
«NORNICKEL»
Annual report 2019
Metal sales to external
customers
Other sales to external
customers
Inter-segment metal
sales
Inter-segment other
sales
Total revenue
Segment EBITDA
Unallocated
Consolidated EBITDA
Depreciation
and amortisation
Reversal of impairment
of non-financial assets
Finance costs
Foreign exchange gain,
net
Other income
and expenses, net
Profit before tax
Other segment
information
Purchase of property,
plant and equipment
and intangible assets
Depreciation
and amortisation
Impairment of non-
financial assets, net
8,208
349
2,271
1,145
182
133
171
—
36
5,177
336
608
280
13,836
9,522
179
864
475
200
3,115
58
6
21
–
1,172
74
4
12
3
201
349
—
—
—
133
(31)
563
495
–
12,851
–
712
4
(6,158)
350
1,412
31
—
—
(1,012)
(7,170)
13,563
(1,770)
8,708
(785)
7,923
(911)
24
(306)
694
100
7,524
839
669
(43)
76
25
—
221
104
(1)
18
26
—
103
54
—
5
1
13
62
32
7
—
1,324
—
—
911
(24)
Metal sales to external
customers
Other sales to external
customers
Inter-segment metal sales
Inter-segment other sales
Total revenue
Segment EBITDA
Unallocated
Consolidated EBITDA
Depreciation
and amortisation
Impairment of non-
financial assets
Finance costs
Foreign exchange loss, net
Other income
and expenses, net
Profit before tax
Other segment
information
Purchase of property,
plant and equipment
and intangible assets
Depreciation
and amortisation
Impairment of non-
financial assets, net
8,787
361
1,020
160
720
75
9,742
6,602
33
154
363
911
190
6
–
–
1,026
71
–
6
–
2
8
96
1,016
292
612
8
82
3
18
24
—
168
13
—
107
1
–
–
108
(6)
21
6
39
687
502
–
325
1,514
50
–
–
(874)
(765)
10,962
708
–
–
(1,639)
11,670
(13)
6,990
(759)
6,231
(765)
(50)
(580)
(1,029)
95
3,902
38
28
—
–
–
—
1,553
765
50
282
283
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix For the year ended
31 December 2017
GMK
Group
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye Other mining
Other
non-metallurgical
Eliminations
Total
For the year ended
31 December 2018
GMK
Group
KGMK
Group NN Harjavalta
Other mining Other non-metallurgical
Metal sales to external
customers
Other sales to external
customers
Inter-segment metal sales
Inter-segment other sales
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 segment
information
Purchase of property,
plant and equipment
and intangible assets
Depreciation
and amortisation
Impairment of non-
financial assets, net
6,712
347
835
176
500
59
7,447
4,559
34
122
394
897
182
5
—
—
840
61
—
14
—
1
15
(65)
1,225
228
463
101
61
3
16
25
—
449
—
—
128
—
—
—
128
(3)
20
72
122
393
502
—
391
1,286
18
—
—
(622)
(845)
(1,467)
(34)
8,415
731
—
—
9,146
4,718
(723)
3,995
(645)
(227)
(535)
159
97
2,844
64
24
1
—
—
—
2,002
645
227
The following table presents segment metal sales to external customers breakdown by metal for the years
ended 31 December 2019, 2018 and 2017, respectively.
For the year ended
31 December 2019
GMK
Group
South
Cluster
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye
Other mining
Other
non-metallurgical
Nickel
Copper
Palladium
Platinum
Other metals
1,079
2,417
3,634
484
594
30
35
209
39
36
1,269
246
588
78
90
880
83
106
12
64
8,208
349
2,271
1,145
—
76
—
—
106
182
65
10
31
8
19
133
65
10
475
5,043
7
6
628
915
563
12,851
Inter-segment liabilities
Segment liabilities
Total segment liabilities
305
1,732
2,037
Unallocated
Total liabilities
Total
3,388
2,877
«NORNICKEL»
Annual report 2019
687
10,962
Total
3,013
2,977
3,674
596
702
Total
2,416
2,422
2,434
654
489
53
8
610
6
10
53
13
308
10
9
393
8,415
Nickel
Copper
Palladium
Platinum
Other metals
1,827
2,824
2,990
574
572
8,787
275
51
1
3
31
361
805
86
55
7
67
1,020
53
8
18
6
22
107
For the year ended
31 December 2017
GMK
Group
KGMK
Group NN Harjavalta
Other mining Other non-metallurgical
Nickel
Copper
Palladium
Platinum
Other metals
1,409
2,268
2,056
618
361
6,712
254
49
11
6
27
347
647
79
36
10
63
835
53
13
23
10
29
128
The following tables present assets and liabilities of the Group’s reportable segments at 31 December 2019, 2018 and 2017,
respectively.
At 31 December 2019
Inter-segment assets
Segment assets
Total segment assets
Unallocated
Total assets
3,286
10,416
13,702
GMK
Group
South
Cluster
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye
Other
mining
Other non-
metallurgical Eliminations
Total
163
375
538
39
108
147
315
4,177
4,492
3,227
348
3,575
100
486
586
138
102
240
28
1,791
1,819
11
107
118
5
78
83
–
54
54
38
984
1,022
215
1,197
1,412
(3,935)
–
(1,983)
16,324
(5,918)
16,324
3,150
19,474
(3,935)
–
–
3,648
(3,935)
3,648
11,539
15,187
284
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix GMK
Group
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye Other mining
Other
non-metallurgical
Eliminations
Total
7. METAL SALES
«NORNICKEL»
Annual report 2019
At 31 December 2018
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 2017
Inter-segment assets
Segment assets
Total segment assets
Unallocated
Total assets
292
9,903
10,195
139
1,756
1,895
114
996
1,110
63
134
197
140
451
591
122
100
222
24
1,492
1,516
39
68
107
–
88
88
5
26
31
57
792
849
259
1,028
1,287
(627)
–
(56)
13,666
(683)
13,666
(627)
–
(627)
1,585
15,251
–
3,112
3,112
8,666
11,778
GMK
Group
KGMK
Group
NN
Harjavalta
GRK
Bystrinskoye Other mining
Other
non-metallurgical
Eliminations
Total
346
11,536
11,882
207
975
1,182
Inter-segment liabilities
Segment liabilities
Total segment liabilities
89
2,128
2,217
135
157
292
Unallocated
Total liabilities
172
390
562
124
73
197
2
1,518
1,520
43
89
132
9
118
127
1
32
33
54
935
989
398
171
569
(790)
–
(42)
15,430
(832)
15,430
1,205
16,635
(790)
–
–
2,650
(790)
2,650
9,327
11,977
The Group’s metal sales to external customers are detailed below (based on external customers’ locations).
For the year ended 31 December 2019
Europe
Asia
North and South America
Russian Federation and CIS
For the year ended 31 December 2018
Europe
Asia
North and South America
Russian Federation and CIS
For the year ended 31 December 2017
Europe
Asia
North and South America
Russian Federation and CIS
Total
6,680
3,243
2,289
639
12,851
5,868
2,929
1,619
546
10,962
4,753
1,939
1,166
557
8,415
Nickel
Copper
Palladium
Platinum
Other
metals
1,399
1,329
427
233
3,388
1,323
1,090
348
252
3,013
2,354
226
77
220
2,877
2,356
386
26
209
2,977
1,084
2,130
804
313
215
115
–
177
1,892
1,476
1,595
80
5,043
1,216
1,313
1,111
34
3,674
756
825
807
46
2,416
2,422
2,434
574
32
14
8
628
514
41
34
7
596
449
119
–
86
654
461
180
176
98
915
459
99
100
44
702
334
76
46
33
489
Revenue from metal sales for the year ended 31 December 2019 included net loss of USD (47) million in respect of forward contracts
measured at fair value that are expected to be settled by physical delivery or on a net basis (for the year ended 31 December 2018: net
gain in the amount of USD 12 million and for the year ended: 31 December 2017: net loss in the amount of USD (26) million).
286
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 8. COST OF METAL SALES
10. SELLING AND DISTRIBUTION EXPENSES
Labour
Materials and supplies
Purchases of refined metals for resale
Purchases of raw materials and semi-products
Third party services
Mineral extraction tax and other levies
Electricity and heat energy
Fuel
Transportation expenses
Sundry costs
Total cash operating costs
Depreciation and amortisation
(Increase)/decrease in metal inventories
Total
9. GENERAL AND ADMINISTRATIVE EXPENSES
Staff costs
Third party services
Taxes other than mineral extraction tax and income tax
Depreciation and amortisation
Transportation expenses
Rent expenses
Other
Total
2019
1,295
712
438
402
239
221
155
101
88
167
3,818
735
(44)
4,509
2019
601
117
77
69
15
5
54
938
For the year ended 31 December
2018
1,283
727
430
436
200
212
143
87
70
155
3,743
653
109
4,505
2017
1,363
732
530
297
242
221
143
81
65
152
3,826
630
(517)
3,939
Marketing expenses
Transportation expenses
Staff costs
Other
Total
11. OTHER OPERATING EXPENSES, NET
Social expenses
Provision on production facilities shut down
Change in other provisions
Net income earned during the pre-commissioning stage
Other, net
Total
For the year ended 31 December
12. FINANCE COSTS, NET
2018
569
96
103
38
9
23
52
890
2017
507
97
79
32
8
25
40
788
Interest expense, net of amounts capitalised
Unwinding of discount on provisions and payables
Changes in fair value of non-current liabilities
Interest expense on lease liabilities
Fair value (gain)/loss on the cross-currency interest rate swap
Other, net
Total
13. INCOME FROM INVESTMENTS
Interest income on bank deposits
Other, net
Total
«NORNICKEL»
Annual report 2019
For the year ended 31 December
2019
2018
2017
45
43
15
14
117
2019
224
190
39
(192)
42
303
2019
340
84
64
12
(199)
5
306
2019
64
34
98
31
39
14
8
92
14
38
13
10
75
For the year ended 31 December
2018
207
–
21
(106)
(27)
95
2017
303
–
30
–
29
362
For the year ended 31 December
2018
382
100
46
2
51
(1)
580
2017
384
133
–
2
–
16
535
For the year ended 31 December
2018
59
36
95
2017
39
38
77
288
289
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix «NORNICKEL»
Annual report 2019
At 31 December
2017
Recognised
in income
statement
Disposed
on disposal
of subsidiaries
Effect
of translation
to presentation
currency
At 31 December
2018
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
368
124
(3)
(69)
(69)
46
8
(75)
330
86
–
(5)
5
(28)
(18)
(10)
1
31
–
–
–
–
–
–
–
–
–
(68)
(17)
1
11
15
(4)
–
13
(49)
386
107
(7)
(53)
(82)
24
(2)
(61)
312
At 31 December
2016
Recognised
in income
statement
Disposed
on disposal
of subsidiaries
Effect
of translation
to presentation
currency
At 31 December
2017
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
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
14. INCOME TAX EXPENSE
Current income tax expense
Deferred tax (benefit)/expense
Total
For the year ended 31 December
2019
1,924
(366)
1,558
2018
812
31
843
2017
686
35
721
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 non-financial assets
Non-deductible social expenses
Effect of different tax rates of subsidiaries
Tax effect of other permanent differences
Total
2019
7,524
1,505
25
–
64
(62)
26
1,558
For the year ended 31 December
2018
3,902
780
29
4
54
(39)
15
843
2017
2,844
569
38
7
73
8
26
721
The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 30%.
Deferred tax balances
Property, plant and equipment,
right-of use assets
Inventories
Trade and other receivables
Decommissioning obligations
Loans and borrowings, lease
liabilities, trade and other
payables
Other assets
Other liabilities
Tax loss carried forward
Net deferred tax liabilities/
(assets)
At 31 December
2018, prior
to adoption
of IFRS 16
Adjustments
on IFRS 16
adoption
At 1 January
2019, adjusted
on IFRS 16
adoption
Recognised
in income
statement
Effect
of translation
to presentation
currency
At 31 December
2019
386
107
(7)
(53)
(82)
24
(2)
(61)
312
41
–
–
–
(41)
–
–
–
–
427
107
(7)
(53)
(123)
24
(2)
(61)
312
15
(377)
(3)
(51)
(15)
(3)
38
30
(366)
50
(9)
–
(9)
(15)
1
–
(2)
16
492
(279)
(10)
(113)
(153)
22
36
(33)
(38)
290
291
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 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.
15. PROPERTY, PLANT AND EQUIPMENT
Deferred tax liability
Deferred tax asset
Net deferred tax (assets)/liabilities
Unrecognised deferred tax assets
Deferred tax assets have not been recognised as follows:
Deductible temporary differences
Tax loss carry-forwards
Total
2019
60
(98)
(38)
2019
164
240
404
At 31 December
2017
407
(77)
330
At 31 December
2017
104
219
323
2018
385
(73)
312
2018
100
191
291
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.
At 31 December 2019 deferred tax asset in the amount of USD 162 million related to tax loss arising on disposal of OJSC “Third
Generation Company of the Wholesale Electricity Market” (“OGK-3”) (31 December 2018: USD 145 million and 31 December
2017: USD 175 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 without expiry only if the Company exits the tax consolidation group.
At 31 December 2019 deferred tax assets in the amount of USD 78 million related to other non-expiring tax losses were
not recognised due to specific rules stated by art. 283 of the Tax code of the Russian Federation (31 December 2018: USD 46
million and 31 December 2017: USD 44 million).
At 31 December 2019, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD
628 million (31 December 2018: USD 1,558 million and 31 December 2017: USD 1,459 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.
«NORNICKEL»
Annual report 2019
Non-mining assets and right-of-use assets
Mining assets
and mine
development
Buildings,
structures
and utilities
Machinery,
equipment
and transport
Capital
construction-in-
progress
Other
Cost
Balance at 1 January 2017
Additions
Transfers
Change in decommissioning provision
Disposals
Other
Effect of translation to presentation
currency
Balance at 31 December 2017
Additions
Transfers
Change in decommissioning provision
Disposals
Other
Effect of translation to presentation
currency
Balance at 31 December 2018, before
the adoption of IFRS 16
Effect of adoption of IFRS 16 (Note 3)
Balance at 1 January 2019, after
the adoption of IFRS 16
Additions
Transfers
Change in decommissioning provision
Additions of right-of-use assets and
remeasurement of the lease liability
Disposals
Other
Effect of translation to
presentation currency
Balance at 31 December 2019
Accumulated depreciation and impairment
Balance at 1 January 2017
Charge for the year
Disposals
7,314
1,429
–
(7)
(124)
(40)
422
8,994
925
–
(6)
(67)
(12)
(1,589)
8,245
–
8,245
614
–
79
–
(52)
91
999
9,976
(2,090)
(347)
107
2,855
–
247
(13)
(150)
42
153
3,134
–
304
(1)
(4)
(13)
(542)
2,878
137
3,015
–
177
4
9
(43)
38
360
3,560
(1,413)
(97)
56
2,976
–
477
–
(90)
(6)
150
3,507
–
348
–
(43)
20
(586)
3,246
62
3,308
–
513
–
15
(69)
(43)
382
4,106
(1,618)
(264)
79
215
–
84
–
(23)
2
11
289
–
9
–
(4)
5
(50)
249
5
254
–
11
–
5
(6)
–
31
295
(72)
(24)
5
Total
14,747
2,269
–
(20)
(399)
–
811
17,408
1,723
–
(7)
(130)
–
1,387
840
(808)
–
(12)
2
75
1,484
798
(661)
–
(12)
–
(251)
(3,018)
1,358
15,976
–
204
1,358
855
(701)
–
–
(32)
(86)
166
1,560
16,180
1,469
–
83
29
(202)
–
1,938
19,497
(248)
(5,441)
–
4
(732)
251
292
293
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Mining assets
and mine
development
Buildings,
structures
and utilities
Machinery,
equipment
and transport
Capital
construction-in-
progress
Other
Non-mining assets and right-of-use assets
Impairment loss, net
Other
Effect of translation to presentation
currency
Balance at 31 December 2017
Charge for the year
Disposals
Impairment loss, net
Other
Effect of translation to presentation
currency
Balance at 31 December 2018
Charge for the year
Disposals
Impairment loss, net
Other
Effect of translation to presentation
currency
Balance at 31 December 2019
Carrying value
At 31 December 2017
At 31 December 2018
At 31 December 2019
(154)
4
(120)
(2,600)
(350)
62
(33)
9
460
(2,452)
(437)
41
(32)
7
(286)
(3,159)
6,394
5,793
6,817
(87)
(18)
(78)
(1,637)
(108)
3
(31)
6
274
(1,493)
(145)
36
42
(18)
(182)
(1,760)
1,497
1,385
1,800
(7)
16
(82)
(1,876)
(291)
38
(19)
(12)
329
(1,831)
(314)
54
–
19
(214)
(2,286)
1,631
1,415
1,820
–
(1)
(4)
(96)
(24)
3
(2)
(3)
19
(103)
(27)
4
(1)
1
(13)
(139)
193
146
156
Total
(227)
–
(299)
(6,448)
(773)
108
(50)
–
1,121
21
(1)
(15)
(239)
–
2
35
–
39
(163)
(6,042)
–
15
15
(9)
(18)
(160)
1,245
1,195
1,400
(923)
150
24
–
(713)
(7,504)
10,960
9,934
11,993
«NORNICKEL»
Annual report 2019
At 31 December 2019 capital construction-in-progress included USD 52 million of irrevocable letters of credit
opened for fixed assets purchases (31 December 2018: USD 197 million and 31 December 2017: USD 225
million), representing security deposits placed in banks. For the year ended 31 December 2019 purchases
of property, plant and equipment in the consolidated statement of cash flows include USD 221 million
of irrevocable letters of credit (for the year ended 31 December 2018: USD 192 million and for the year ended 31
December 2017: USD 210 million).
Capitalised borrowing costs for the year ended 31 December 2019 amounted to USD 174 million (for the year
ended 31 December 2018: USD 172 million and for the year ended 31 December 2017: USD 263 million).
Capitalisation rate used to determine the amount of borrowing costs equals to 5.12% per annum (31 December
2018: 5.15% and 31 December 2017: 6.28%). At 31 December 2019 mining assets and mine development cost
included USD 2,750 million of mining assets under development (31 December 2018: USD 2,868 million and 31
December 2017: USD 3,728 million).
At 31 December 2019 non-mining assets included USD 48 million of investment property (31 December 2018:
USD 44 million and 31 December 2017: USD 55 million).
Impairment
At 31 December 2017 the Group reclassified Nkomati Nickel Mine (Nkomati) from assets classified as held
for sale and tested the assets for impairment. 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 years ended 31 December 2018 and 31 December 2019 the Group identified indicators of further
impairment of Nkomati assets and performed impairment tests using a discounted cash flow model approach.
As a result, the carrying value of the Group’s share in Nkomati property, plant and equipment was impaired
in full at 31 December 2019 (the value-in-use of the Group’s share in Nkomati property, plant and equipment
at 31 December 2018: USD 12 million). Impairment loss in the amount of USD 12 million was recognised
in impairment of non-financial assets in the consolidated income statement for the year ended 31 December
2019 (31 December 2018: USD 39 million).
The most significant estimates and assumptions used in determination of value in use at 31 December 2019, 31
December 2018 and 31 December 2017 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 2028
• Management estimated prices for metal concentrates based on adjusted commodity price 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 inflation rate separate forecasts for each period were in range of 2-5%. Forecast for exchange rates was
made based on expected ZAR and USD inflation indices
• A pre-tax nominal ZAR discount rate was estimated at each reporting date in the range of 21,3-21,6%
by reference to the weighted average cost of capital for the Group and management’s estimates of the risks
specific to the production units
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 are assessed as a separate cash-generating unit with its value-in-use
being determined using a discounted cash flow model approach at each subsequent reporting date.
294
295
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix At 31 December 2019, the Group identified indicators for a decrease of previously recognised impairment loss,
primarily due to an increase in regulated gas tariffs and an increase in gas production forecast, and performed
assessment of the value-in-use.
The most significant assumptions used in the discounted cash flow model at 31 December 2019,
31 December 2018 and 31 December 2017 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 extraction assets
• Management estimates prices for natural gas and gas condensate based on commodities price consensus
forecasts and government regulated natural gas tariffs
• 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
• The inflation rate separate forecasts for each period were in range of 2-5%. A pre-tax nominal RUB
discount rate of 16.5% (31 December 2018: 15.8%, 31 December 2017: 15.8%) was estimated by reference
to the weighted average cost of capital and management’s estimates of the risks specific to the production
units
As a result, an impairment loss reversal of USD 70 million was recognised in the consolidated income statement
for the year ended 31 December 2019 (for the year ended 31 December 2018: impairment loss of USD 8 million
and for the year ended 31 December 2017: impairment loss of USD 48 million). Accumulated impairment loss,
net of respective accumulated depreciation had no impairment been recognised, amounted to USD 153 million
at 31 December 2019 (31 December 2018: USD 243 million).
During the year ended 31 December 2019 the Group recognised additional impairment losses in the amount
of USD 34 million in respect of specific individual assets (for the year ended 31 December 2018: USD 3 million
and for the year ended 31 December 2017: USD 50 million).
Right-of-use assets
Balance at 1 January 2019, adjusted on IFRS
16 adoption
Additions of right-of-use assets
and remeasurement of the lease liability
Depreciation
Effect of translation to presentation
currency
Balance at 31 December 2019
Buildings, structures
and utilities
Machinery, equipment
and transport
Other
Total
137
9
(23)
16
139
62
15
(18)
7
66
5
5
(3)
–
7
204
29
(44)
23
212
296
16. OTHER FINANCIAL ASSETS
Non-current
Loans issued and other receivables
Bank deposits
Derivative financial instruments
Total non-current
Current
Loans issued and other receivables
Bank deposits
Derivative financial instruments
Total current
17. OTHER TAXES
Taxes receivable
Value added tax recoverable
Other taxes
Less: Allowance for value added tax recoverable
Other taxes receivable
Taxes payable
Value added tax
Social security contributions
Property tax
Mineral extraction tax
Other
Other taxes payable
18. INVENTORIES
Refined metals and other metal products
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
«NORNICKEL»
Annual report 2019
2019
2018
2017
At 31 December
113
8
102
223
47
–
4
51
130
8
3
141
57
83
7
147
190
2
–
192
1
94
4
99
2019
2018
2017
At 31 December
638
13
651
(7)
644
397
46
15
16
29
503
2019
407
1,339
(5)
1,741
811
(77)
734
2,475
244
28
272
(1)
271
74
37
23
15
13
162
2018
526
1,138
(4)
1,660
662
(42)
620
2,280
257
40
297
(1)
296
66
26
22
17
16
147
At 31 December
2017
655
1,333
(4)
1,984
739
(34)
705
2,689
297
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix At 31 December 2019 part of metal semi-products stock in the amount of USD 52 million (31 December 2018: USD 88 million
and 31 December 2017: USD 453 million) was presented in other non-current assets according to Group’s production plans.
Movement in the allowance for expected credit losses was as follows:
19. TRADE AND OTHER RECEIVABLES
Trade receivables from metal sales
Other receivables
Less: Allowance for expected credit losses
Trade and other receivables, net
2019
277
151
428
(66)
362
At 31 December
2017
251
168
419
(92)
327
2018
143
131
274
(70)
204
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
20. CASH AND CASH EQUIVALENTS
In 2019, 2018 and 2017, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-
interest bearing.
At 31 December 2019 trade and other receivables include USD 196 million of short-term trade accounts receivable measured
at fair value through profit or loss, Level 2 of fair value hierarchy (31 December 2018: USD 120 million and 31 December 2017: USD
214 million).
At 31 December 2019, 2018 and 2017 there were no material trade accounts receivable which were overdue or individually
determined to be impaired.
The average credit period on sales of other products and services for the year ended 31 December 2019 was 25 days (for the year
ended 31 December 2018: 23 days and for the year ended 31 December 2017: 23 days). No interest was charged on these
receivables.
Included in the Group’s other receivables at 31 December 2019 were debtors with a carrying value of USD 43 million (31
December 2018: USD 29 million and 31 December 2017: USD 34 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
2019
35
8
43
At 31 December
2017
25
9
34
2018
24
5
29
Current accounts
– – RUB
– – USD
– – EUR
– – other
Bank deposits
– – RUB
– – USD
– – EUR
– – other
Restricted cash and cash equivalents
Other cash and cash equivalents
«NORNICKEL»
Annual report 2019
2019
70
(8)
(4)
8
66
At 31 December
2017
81
16
(9)
4
92
2018
92
5
(12)
(15)
70
2019
2018
2017
At 31 December
72
918
34
60
1,357
326
–
9
–
8
49
398
13
64
–
850
–
10
–
4
2,784
1,388
76
334
10
14
–
290
17
105
2
4
852
Bank deposits
Interest rate on USD-denominated deposits held in banks at 31 December 2019 was in the range from 1.25% to 1.80%
(31 December 2018: from 1.70% to 3.95% and 31 December 2017: from 1.07% to 2.29%) per annum. Interest rate on RUR-
denominated deposits held in banks at 31 December 2019 was in the range from 5.90% to 6.26% per annum. Interest rate
on deposits held in banks denominated in other currencies at 31 December 2019 was in the range from 0.40% to 3.80%
(31 December 2018: from 0.75% to 2.29% and 31 December 2017: from 0.97% to 1.10%) per annum.
21. DISPOSAL OF SUBSIDIARIES
On 4 July 2019 the Group sold its interest in a subsidiary which provides construction services for a cash consideration of USD
5 million, resulting in a net cash outflow from disposal of the subsidiary in the amount of USD 20 million. Gain on disposal
in the amount of USD 2 million was recognised in the consolidated income statement.
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.
298
299
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 22. SHARE CAPITAL
Authorised and issued ordinary shares
At 31 December 2019, 2018 and 2017 the Group’s number of authorised and issued ordinary shares was 158,245,476.
Basic earnings per share (US Dollars per share):
For the year ended 31 December
2019
36.5
2018
19.5
2017
13.5
Net profit/(loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Profit/(loss) attributable to non-controlling interest
Other comprehensive income/(loss) attributable to non-controlling interest
The earnings and weighted average number of shares used in the calculation of earnings per share are as follows:
Profit for the year attributable to shareholders of the parent company
For the year ended 31 December
2019
5,782
2018
3,085
2017
2,129
Weighted average number of shares used in the calculation of basic and diluted earnings per share for the years ended 31
December 2019, 2018 and 2017 was 158,245,476 shares.
At 31 December 2019, 2018 and 2017, the Group had no issued financial instruments, which would have a dilutive effect
on earnings per share of ordinary stock.
23. NON-CONTROLLING INTEREST
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.
At 31 December 2019, 2018 and 2017 aggregate financial information relating to the subsidiary, LLC “GRK “Bystrinskoye”, that has
material non-controlling interest, before any intra-group eliminations, is presented below:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to non-controlling interest
2019
1,486
407
(824)
(142)
927
464
At 31 December
2017
1,281
117
(593)
(156)
649
325
2018
1,222
195
(790)
(139)
488
244
«NORNICKEL»
Annual report 2019
For the year ended 31 December
2018
(61)
(104)
(165)
(31)
(52)
2017
(32)
31
(1)
(6)
5
For the year ended 31 December
2018
72
(190)
142
24
2017
(42)
(423)
458
(7)
2019
362
76
438
181
38
2019
302
(252)
(4)
46
Cash flows from/(used in) operating activities
Cash flows used in investing activities
Cash flows (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
24. LOANS AND BORROWINGS, LEASE LIABILITIES
Currency
Fixed or floating
interest rate
Average nominal % rate during
the year ended 31 December
Maturity
At 31 December
Unsecured loans
Secured loans
Total loans
Bonds
Total bonds
USD
RUB
EUR
USD
RUB
USD
RUB
floating
fixed
floating
floating
fixed
fixed
fixed
Total loans and borrowings
Less: current portion due within twelve months and
presented as current loans and borrowings
Non-current loans and borrowings
2019
2018
2017
3.75%
3.45%
3.38% 2020-2028
8.30%
8.30%
11.90%
2021
0.85%
0.85%
0.85% 2020-2028
-
-
6.72%
2018
9.75%
9.75%
8.38% 2021-2022
4.88%
5.24%
5.05% 2020-2024
8.85%
11.60%
11.60% 2024-2026
2019
3,746
969
30
–
10
4,755
4,220
645
4,865
9,620
(1,087)
8,533
2018
3,837
864
19
–
9
4,729
3,472
216
3,688
8,417
(209)
8,208
2017
2,898
1,042
4
582
34
4,560
4,206
259
4,465
9,025
(813)
8,212
300
301
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Currency
Average borrowing rate during
the year ended 31 December 2019,%
Maturity
Lease liabilities
USD
RUB
EUR
other
Total lease liabilities
Less: current lease liabilities
Non-current lease liabilities
4.57
8.21
2.18
4.21
2020-2031
2020-2099
2020-2050
2020-2022
2019
148
56
19
1
224
(44)
180
At 31 December
2018
2017
2
–
19
1
22
(6)
16
4
–
23
1
28
(4)
24
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 and lease liabilities, including interest, for the year ended 31 December 2019 consist of changes
from financing cash flows in the amount of USD 544 million, effect of changes in foreign exchange rates of USD 164 million,
adjustments on IFRS 16 adoption in the amount of USD 204 million and other non-cash changes of USD 505 million (for the year
ended 31 December 2018: changes from financing cash flows in the amount of USD (934) million, effect of changes in foreign
exchange rates of USD (230) million and other non-cash changes of USD 542 million and for the year ended 31 December 2017:
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).
At 31 December 2019 loans were secured by property, plant and equipment with a carrying amount of USD 10 million (31
December 2018: USD 8 million and 31 December 2017: USD 15 million). At 31 December 2017 100% shares of the Group’s
subsidiary LLC “GRK “Bystrinskoye” were under pledge, which was released during 2018.
At 31 December 2019 lease liabilities with original maturity in excess of 15 years amounted to USD 15 million.
25. EMPLOYEE BENEFIT OBLIGATIONS
Wages and salaries
Accrual for annual leave
Other
Total obligations
Less: non-current obligations
Current obligations
2019
225
206
32
463
(70)
393
At 31 December
2017
168
203
22
393
(16)
377
2018
147
177
22
346
(39)
307
Defined contribution plans
Amounts recognised within continuing operations in the consolidated income statement in respect of defined contribution plans
were as follows:
«NORNICKEL»
Annual report 2019
Pension Fund of the Russian Federation
Mutual accumulated pension plan
Other
Total
26. 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 provisions
Total non-current provisions
Total
For the year ended 31 December
2019
281
7
5
293
2018
278
7
7
292
2017
311
8
5
324
2019
2018
2017
At 31 December
4
51
29
16
100
633
38
3
674
774
2
53
21
1
77
316
49
–
365
442
134
28
26
1
189
396
68
–
464
653
302
303
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Balance at 1 January 2017
Provision accrued
Settlements during the year
Change in estimates
Unwinding of discount
Effect of translation
to presentation
currency
Balance at 31 December 2017
Provision accrued
Settlements during the year
Change in estimates
Unwinding of discount
Effect of translation
to presentation
currency
Balance at 31 December 2018
Provision accrued
Settlements during the year
Change in estimate
Unwinding of discount
Effect of translation
to presentation
currency
Balance at 31 December 2019
Decommissioning
Social
commitments
397
6
–
(38)
35
22
422
–
(22)
(21)
29
(71)
337
187
(18)
81
30
45
662
62
42
(21)
4
6
3
96
47
(29)
(2)
5
(15)
102
32
(66)
2
8
11
89
Tax
124
2
(2)
–
–
10
134
21
(144)
–
–
(9)
2
4
(1)
–
–
(1)
4
Other
Total
41
2
(41)
–
–
(1)
1
2
(3)
–
–
1
1
38
(21)
–
–
1
19
624
52
(64)
(34)
41
34
653
70
(198)
(23)
34
(94)
442
261
(106)
83
38
56
774
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 2020 to 2039
Expected inflation over the period from 2040 onwards
At 31 December
2019
2018
2017
5.6%-7.5%
7.7%-8.9%
6.9%-9.1%
7.14%
up to 2060
2.9%-4.6%
2.9%
8.17%
up to 2068
3.0%-4.3%
2.9%-3.0%
8.38%
up to 2071
2.9%-4.9%
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
2019
275
124
102
64
68
633
2018
149
24
27
86
30
316
«NORNICKEL»
Annual report 2019
At 31 December
2017
202
23
39
77
55
396
At 31 December 2019 the Group recognised a provision for expenditure to shutdown certain production facilities located
in the Kola Peninsula starting from 2021 (Note 11). The amount of decommissioning obligation was calculated based on the best
estimate of the amount and timing of future expenditures included in the detailed asset retirement programme, and accounted
for accordingly.
Social commitments
In 2010 the Group entered into multilateral agreements with the Government of the Russian Federation and the Krasnoyarsk
Regional Government for construction of pre-schools and other social facilities in Norilsk and Dudinka till 2020,
and for resettlement of families currently residing in Norilsk and Dudinka to other Russian regions with more favorable living
conditions till 2020. In 2017 the Group entered into agreements with the Zabaikalsky Regional Government for construction
and development of industrial, social and other infrastructure till 2026. The provisions are measured at the best estimate
of the present value of future expenditures to settle these obligations.
27. 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 on contracts with customers
Total non-financial liabilities
Total
2019
2018
2017
At 31 December
425
212
117
754
952
952
1,706
357
192
110
659
892
892
1,551
426
186
140
752
31
31
783
304
305
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The maturity analysis for the Group’s financial liabilities that shows the remaining contractual maturities was as follows:
Due within one month
Due from one to three months
Due from three to twelve months
Total
28. DIVIDENDS
2019
260
199
295
754
At 31 December
2017
194
244
314
752
2018
183
192
284
659
On 16 December 2019, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 9 months
ended 30 September 2019 in the amount of RUB 604.09 (USD 9.66) per share with the total amount of USD 1,529 million.
The dividends were paid to the shareholders in January 2020.
On 26 September 2019, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 6
months ended 30 June 2019 in the amount of RUB 883.93 (USD 13.77) per share with the total amount of USD 2,179 million.
The dividends were paid to the shareholders in October 2019 in the amount of USD 2,180 million recognised in the consolidated
cash flow statement, using prevailing RUB/USD rates on the payment dates.
On 10 June 2019, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2018
in the amount of RUB 792.52 (USD 12.19) per share with the total amount of USD 1,928 million. The dividends were paid
to the shareholders in July 2019 in the amount of USD 1,986 million recognised in the consolidated cash flow statement, using
prevailing RUB/USD rates on the payment dates.
On 19 September 2018, the Extraordinary General shareholders’ meeting declared interim dividends in respect of the 6 months
ended 30 June 2018 in the amount of RUB 776.02 (USD 11.45) per share with the total amount of USD 1,813 million. The dividends
were paid to the shareholders in October 2018 in the amount of USD 1,841 million recognised in the consolidated cash flow
statement, using prevailing RUB/USD rates on the payment dates.
On 28 June 2018, the Annual General shareholders’ meeting declared dividends for the year ended 31 December 2017
in the amount of RUB 607.98 (USD 9.63) per share with the total amount of USD 1,524 million. The dividends were paid
to the shareholders in July 2018 in the amount of USD 1,527 million recognised in the consolidated cash flow statement, using
prevailing RUB/USD rates on the payment dates.
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 cash flow
statement, using prevailing RUB/USD rates on the payment dates.
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 1,188 million recognised in the consolidated cash flow statement, using
prevailing RUB/USD rates on the payment dates.
«NORNICKEL»
Annual report 2019
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
cash flow statement, using prevailing RUB/USD rates on the payment dates.
29. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES
Related parties include major shareholders and entities under their ownership and control; associates, joint ventures and joint
operation; 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
Associates, joint ventures and joint operation
Total
Transactions with related parties
Entities under ownership and control of the Group's major shareholders
Associates, joint ventures and joint operation
Total
Sales of goods and services and participating shares
For the year ended
31 December
2019
For the year ended
31 December
2018
For the year ended
31 December 2017
–
–
–
7
–
7
279
1
280
Purchase of assets and services and other operating
expenses
For the year ended
31 December
2019
For the year ended
31 December
2018
For the year ended
31 December 2017
89
136
225
64
86
150
115
107
222
Outstanding balances with related parties
Entities under ownership and control of the Group's major shareholders
Associates, joint ventures and joint operation
Total
At 31 December
2019
At 31 December
2018
At 31 December
2017
Accounts receivable
1
10
11
1
8
9
–
–
–
306
307
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Outstanding balances with related parties
Entities under ownership and control of the Group's major shareholders
Associates, joint ventures and joint operation
Total
At 31 December
2019
At 31 December
2018
At 31 December
2017
Accounts payable
3
8
11
1
3
4
2
9
11
Terms and conditions of transactions with related parties
Sales to and purchases from related parties of electricity, heat energy and natural gas were made at government-regulated tariffs.
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 2019 remuneration of key management personnel of the Group included salary and performance bonuses
amounted to USD 134 million (for the year ended 31 December 2018: USD 109 million and for the year ended 31 December 2017:
USD 103 million).
30. COMMITMENTS
Capital commitments
At 31 December 2019, contractual capital commitments amounted to USD 930 million (31 December 2018: USD 544 million
and 31 December 2017: USD 801 million).
Leases
The Group is a party to a number of lease contracts with variable lease payments that do not depend on an index or market rental
rates, and hence are not recognised as lease liabilities. At 31 December 2019 total future non-discounted variable lease payments
under such contracts with the maturity up to 2,068 amounted to USD 310 million.
At 31 December 2019 future non-discounted lease payments for leased items not transferred to the lessee and not recognised
as lease liabilities amounted to USD 192 million.
Social commitments
The Group contributes to mandatory and voluntary social programs and maintains social facilities in the locations in which
it operates. The Group’s social assets as well as local social programme benefit the community at large and are not normally
restricted to the Group’s employees.
31. CONTINGENCIES
Litigation
At 31 December 2019 the Group is involved in legal disputes in the ordinary course of its operations, with the probability
of their unfavorable resolution being assessed as possible. At 31 December 2019, total claims under unresolved litigation
amounted to approximately USD 14 million (31 December 2018: USD 13 million and 31 December 2017: 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), income tax, mandatory social security contributions,
mineral extraction tax and other levies. 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 its has recognised adequate provisions for tax liabilities based on its interpretation
of current and previous legislation, the risk remains that the 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.
«NORNICKEL»
Annual report 2019
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.
In 2017 the Russian tax authorities completed the 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.
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 bodies as well as generation and disposal
of production waste.
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.
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 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 depend on the effectiveness of economic measures undertaken by the government as well as the development
of legal system.
Starting 2014, the United States of America, the European Union and some other countries have imposed and expanded economic
sanctions against a number of Russian individuals and legal entities. The imposition of the sanctions has led to increased
economic uncertainty, including more volatile equity markets, a depreciation of the Russian rouble, a reduction in both local
and foreign direct investment inflows and certain restrictions for operations with individuals and legal entities under sanctions,
including financing and investment activities. Management assesses the changes in the Russian business environment did
not significantly affect the operations, financial results and the financial position of the Group as of the date of issue of these
consolidated financial statements. The longer-term effects of the imposed and possible additional sanctions are difficult
to determine.
32. FINANCIAL RISK MANAGEMENT
Capital risk management
The Group manages its capital 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 structure.
The capital of the Group consists of 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 ratio 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 12 February 2019
Moody’s rating agency upgraded the Company’s rating from the investment grade Baa3 to the investment grade level Baa2
with stable outlook.
308
309
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix 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. 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 financial results sensitivity to a 2 p.p. increase in floating interest rate. The sensitivity analysis is prepared assuming
that the amount of loans and borrowings at floating rates outstanding at the reporting date was outstanding for the whole year.
2 p.p. floating rate increase impact
For the year ended
31 December
2019
For the year ended
31 December
2018
For the year ended
31 December
2017
Loss before tax
76
77
70
For the year ended 31 December 2019 changes in interest rates impact the value of cross-currency interest swap was
as follows: 1 p.p. increase in RUB interest rate results in a loss of USD 33 million (for the year ended 31 December 2018: loss of
USD 20 million), 1 p.p. decrease in USD interest rate results in a loss of USD 32 million (for the year ended 31 December 2018:
loss of USD 23 million). Management believes that the Group’s exposure to interest rate risk fluctuations does not require
additional hedging activities.
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 2019, 2018 and 2017 were as follows:
At 31 December 2019
At 31 December 2018
At 31 December 2017
USD
EUR
Other
currencies
USD
EUR
Other
currencies
USD
EUR
Other
currencies
Cash and cash
equivalents
Trade and other
receivables
Other assets
Total assets
Trade and other
payables
Loans and borrowings,
lease liabilities
Other liabilities
Total liabilities
1,227
398
59
1,684
213
8,113
221
8,547
35
13
2
50
66
33
16
115
69
4
10
83
8
2
–
10
1,234
265
380
1,879
249
7,308
160
7,717
13
3
73
89
114
19
19
152
74
4
8
86
10
3
–
13
609
384
141
1,134
290
7,684
136
8,110
28
4
297
329
80
5
23
108
121
4
15
140
14
–
–
14
310
«NORNICKEL»
Annual report 2019
Currency risk is monitored on a monthly basis utilising sensitivity analysis to assess if the risk of a potential loss
is at an acceptable level. The Group estimates 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, as follows:
US Dollar 20% strengthening against Russian Rouble
For the year ended
31 December
2019
For the year ended
31 December
2018
For the year ended
31 December
2017
Loss before tax
1,577
1,344
1,395
Given that the Group’s exposure to currency risk for the net USD-denominated 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. The Group applies derivative financial instruments including cross-currency interest swaps
in order to manage currency risk by matching cash flows from revenue denominated in USD and financial liabilities denominated
in RUB.
Credit risk
Credit risk refers to the risk that a debtor 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 entering in a new contract, management assesses the creditworthiness of a potential customer or a financial institution.
If the latter 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 and other publicly available information.
The outstanding balances with 5 financial institutions and 5 largest customers are presented below. The banks have a minimum
of ВВ+ credit rating.
Cash and cash equivalents
Bank A
At 31 December 2018
At 31 December 2017
Outstanding balance
Bank A
Bank B
Bank C
Bank D
Bank E
Total
Trade and other receivables
Customer A
Customer B
Customer C
Customer D
Customer E
Total
821
715
485
162
152
2,335
31
24
22
21
21
119
417
402
214
75
64
1,172
50
38
34
20
15
157
224
143
125
102
80
674
66
41
23
18
16
164
311
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix The Group is not economically dependent on a limited number of customers because the majority of its products are industrial
metals traded on the world commodity markets. Metal and other sales to the Group’s customers are presented below:
At 31
December 2019
Due
within one
month
Total
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
«NORNICKEL»
Annual report 2019
For the year ended 31 December
2019
For the year ended 31 December
2018
For the year ended 31 December
2017
Largest customer
Next 9 largest
customers
Total
Next 10 largest
customers
Total
Remaining customers
Total
Number
of customers
Revenue
USD million
1
9
10
10
20
2,363
4,176
6,539
2,382
8,921
4,642
%
17
31
48
18
66
34
Number
of customers
Revenue
USD million
1
9
10
10
20
1,564
3,461
5,025
1,965
6,990
4,680
%
13
30
43
17
60
40
13,563
100
11,670
100
Number
of customers
Revenue
USD million
1
9
10
10
20
1,319
2,936
4,255
1,494
5,749
3,397
9,146
%
14
32
46
16
62
38
100
Management of the Group believes that with the exception of the cash and cash equivalents in banks 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, issued loans, irrevocable
letters of credit, secured by deposits, bank deposits other than included in cash and cash equivalents and trade and other
receivables:
Fixed rate bank loans and borrowings
Principal
Interest
5,860
1,050
6,910
–
–
–
Floating rate bank loans and borrowings
Principal
Interest
3,797
346
4,143
Lease obligation
Lease principal
199
Cross-currency interest rate swap
Payable
Receivable
Total
1,415
(1,665)
(250)
11,002
–
12
12
2
–
–
–
14
–
49
49
–
23
23
7
16
(35)
(19)
60
985
297
1,282
104
108
212
30
36
(75)
(38)
1,486
974
277
1,251
1,204
118
1,322
1,505
200
1,705
1,541
68
1,609
36
34
938
(1,065)
(127)
2,482
12
(29)
(17)
1,000
103
1,103
833
16
849
33
12
(29)
(17)
1,154
82
1,236
100
1
101
30
402
(433)
(31)
1,336
242
42
284
15
–
15
27
–
–
–
326
3,331
1,968
At 31
December 2018
Due
within one
month
Total
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
At 31 December
Fixed rate bank loans and borrowings
Cash and cash equivalents
Loans, trade and other receivables
Irrevocable letters of credit
Bank deposits
2019
2,784
522
61
8
2018
1,388
394
203
91
2017
852
518
248
96
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 bank facilities.
Management continuously monitors rolling cash flow forecasts and performs analysis of maturity profiles of financial assets
and liabilities, and undertakes detailed annual budgeting procedures.
The following table contains the maturity profile of the Group’s borrowings, lease liabilities and derivatives (maturity profiles
for trade and other payables are presented in Note 27) based on contractual undiscounted payments, including interest:
Principal
Interest
4,595
1,022
5,617
Floating rate bank loans and borrowings
Principal
Interest
3,883
363
4,246
Cross-currency interest rate swap
Payable
Receivable
Total
1,008
(1,067)
(59)
9,804
1
–
1
5
4
9
–
–
–
10
–
30
30
–
21
21
10
(18)
(8)
43
4
249
253
205
102
307
31
(54)
(23)
537
987
280
1,267
957
123
1,080
,41
(72)
(31)
871
213
1,084
1,202
77
1,279
926
,(923)
3
1,507
142
1,649
1,302
33
1,335
–
–
–
1,003
46
1,049
202
3
205
–
–
–
222
62
284
10
-
10
–
–
–
2,316
2,366
2,984
1,254
294
312
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix At 31
December 2017
Fixed rate bank loans
Principal
Interest
Total
5,586
1,189
6,775
Floating rate bank loans
Principal
Interest
Total
3,510
246
3,756
10,531
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
301
565
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
404
12
416
2,440
1,790
At 31 December 2019 the Group had available committed bank facilities for the management of its day to day liquidity
requirements of USD 5,044 million (31 December 2018: USD 4,290 million and 31 December 2017: USD 3,554 million).
33. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that are measured at fair value subsequent to initial recognition, are grouped into Levels 1 to 3 of fair
value hierarchy based on the degree to which their 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
The information below presents financial instruments not measured at fair value, including loans and borrowings, trade and other
long-term payables.
«NORNICKEL»
Annual report 2019
Fixed rate bonds
Total bonds
Loans, including:
Floating rate loans
Fixed rate loans
Total loans
At 31 December 2019
At 31 December 2018
At 31 December 2017
Carrying
value
Fair value
Level 1
Carrying
value
Fair value
Level 1
Carrying
value
Fair value
Level 1
4 865
4 865
5 100
5 100
3 688
3 688
3 705
3 705
4 465
4 465
4 685
4 685
Carrying
value
Fair value
Level 2
Carrying
value
Fair value
Level 2
Carrying
value
Fair value
Level 2
3 776
979
4 755
3 814
1 007
4 821
3 856
873
4 729
3 654
861
4 515
3 484
1 076
4 560
3 439
1 055
4 494
Carrying
value
Fair value
Level 2
Carrying
value
Fair value
Level 2
Carrying
value
Fair value
Level 2
Trade and other long-term payables
Total trade and other long-term payables
37
37
37
37
200
200
210
210
402
402
440
440
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 2019, 2018 and 2017 was calculated based
on the present value of future cash flows (principal and interest), discounted at the best management estimation of market
interest rates, taking into consideration currency of the loan, expected maturity and risks attributable to the Group existing
at the reporting date
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
• The fair value of trade and other long-term payables at 31 December 2019, 2018 and 2017 was calculated based on the present
that are not based on observable market data
value of future cash flows, discounted at the best management estimation of market interest rates
Management believes that the carrying value of current financial assets and liabilities: instruments such as cash and cash
equivalents (refer to Note 20), other financial assets (refer to Note 16), trade and other accounts receivable (refer to Note 19)
and accounts payable (refer to Note 27); as well as lease obligations approximates to their fair value or may not significantly
differ from it. Derivative financial instruments measured at fair value through profit or loss include cross-currency interest rate
swap contracts (Level 2 of fair value hierarchy). Other long-term liabilities classified as measured at fair value through profit
or loss include a liability on the execution of a put option related to transactions with non-controlling interest owners, Level 3
of fair value hierarchy.
The fair value of cross-currency interest rate swap contracts is calculated as the present value of future cash flows discounted
at the interest rates applicable to the currencies of the corresponding cash flows and available at the reporting date. The fair
value is subject to a credit risk adjustment that reflects the credit risks of the Group and of the otherparty and is calculated based
on credit spreads derived from current tradeable financial instruments.
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Effective % held
«NORNICKEL»
Annual report 2019
Effective % held
Subsidiaries by operating segments
Country
Nature of business
31 December 2019
31 December 2018
31 December 2017
Subsidiaries by operating segments
Country
Nature of business
31 December 2019
31 December 2018
31 December 2017
GMK Group
JSC “Norilsky Kombinat”
JSC “Taimyrgaz”
JSC “Norilskgazprom”
JSC “Norilsktransgaz”
JSC “Taimyrenergo”
JSC “NTEK”
LLC “ZSC”
LLC “Norilsknickelremont”
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Rental of property
Gas extraction
Gas extraction
Gas transportation
Rental of equipment
Electricity
production
and distribution
Construction
Repairs
LLC “Norilskyi obespechivaushyi
complex”
Russian
Federation
Production of spare
parts
South Cluster
LLC “Medvezhyi ruchey”
KGMK Group
JSC “Kolskaya GMK”
LLC “Pechengastroy”
Norilsk Nickel Harjavalta
Russian
Federation
Ore mining
and processing
Russian
Federation
Russian
Federation
Mining
and metallurgy
Repairs
Norilsk Nickel Harjavalta OY
Finland
Metallurgy
100
—
100
100
—
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
GRK Bystrinskoye
LLC “GRK “Bystrinskoye”
LLC “Vostokgeologiya”
Other non-metallurgical
Metal Trade Overseas A.G.
Norilsk Nickel (Asia) Limited
Russian
Federation
Russian
Federation
Ore mining
and processing
Geological works
and construction
Switzerland
Hong Kong
Distribution
Distribution
50.01
50.01
50.01
100
100
100
100
100
100
100
100
100
Norilsk Nickel USA, Inc.
USA
Distribution
LLC “Institut Gypronickel”
JSC “TTK”
JSC “ERP”
LLC “Aeroport Norilsk”
JSC “AK “NordStar”
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Russian
Federation
Research
Supplier of fuel
River shipping
operations
Airport
Aircompany
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Joint operations by operating
segments
Other mining
Country
Nature of business
31 December
2019
31 December
2018
31 December
2017
Effective % held
Nkomati Nickel Mine
Republic of South
Africa
Ore mining
and processing
50
50
50
35. EVENTS SUBSEQUENT TO THE REPORTING DATE
In February 2020, the Company entered into an amendment agreement to revise terms and conditions of the USD 2,500 million
syndicated term loan originally signed in December 2017 with a group of international banks, increasing the total facility amount
to USD 4,150 million concurrently reducing the interest rate and rescheduling the repayment of the outstanding amount of USD
2,500 million from the period of December 2020 – December 2022 to the period of February 2023 – February 2025. At the signing
date, the committed undrawn facility amounted to USD 1,265 million with the availability period expiring in October 2020.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder informationIFRS financial statementsAppendix Appendix
ppendix
A TRANSPORT
MINING
AND METALLURGICAL
ENERGY
RESEARCH
GEOLOGICAL EXPLORATION
SUPPORTING BUSINESS
SALES AND DISTRIBUTION
NORNICKEL
2019 Annual report
Polar Transport Division
Polar Division
Norilskenergo Division
Gipronickel Institute
(100% stake)
Medvezhy Ruchey
(100% stake)
Kola MMC (100% stake)
GRK Bystrinskoye
(50.01% stake)
Norilsk Nickel Harjavalta OY
(Finland, 100% stake)
Nkomati Nickel Mine (South
Africa, 50% stake)
NTEK (100% stake)
Norilskgazprom
(100% stake)
TTK (100% stake)
Norilsktransgaz
(100% stake)
Arctic-Energo (100% stake)
Murmansk
Transport Division
Arkhangelsk
Transport Division
Krasnoyarsk
Transport Division
Bystrinsky
Transport Division
Yenisey River Shipping
Company (81.99% stake)
Krasnoyarsk River Port
(89.3% stake)
Lesosibirsk Port (51% stake)
Norilsk Airport
(100% stake)
NordStar Airlines
(100% stake)
Norilsk Avia (100% stake)
Nornickel- Yenisey River
Shipping Company (100%)
Norilskgeologiya (100% stake)
Norilsk Support Complex (100% stake)
NORMETIMPEX (100% stake)
Vostokgeologiya (100% stake)
Polar Construction Company
(100% stake)
Metal Trade Overseas SA
(Switzerland, 100% stake)
Norilsknickelremont (100% stake)
Pechengastroy (100% stake)
Nornickel – Shared Services Centre
(100% stake)
Norilsk Nickel (Asia) Limited
(Hong Kong, 100% stake)
Norilsk Nickel USA Inc.
(USA, 100% stake)
Norilsk Nickel Metals Trading
(Shanghai) Co. , Ltd. (China, 100%
stake)
THE GROUP
STRUCTURE:
MAIN ASSETS1
1/ Ownership Group in subsidiaries is indicated
from the authorised capital (direct) as of December 31, 2019.
(GRK Bystrinskoye is shown effective share).
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix OPERATING
PERFORMANCE
FOR THE PAST 10 YEARS
Norilsk Nickel group saleable metals production1
Total nickel, t
including from own Russian feed
including from 3d parties feed
Total copper, t
including from own Russian feed
including from 3d parties feed
Total palladium, koz
including from own Russian feed
including from 3d parties feed
Total palladium, koz
including from own Russian feed
including from 3d parties feed
Polar division and kola mmc (russia)
Nickel, t
Polar division
Kola MMC
including from own Russian feed
Copper, t
Polar division
Kola MMC
including from own Russian feed
Palladium, koz
Polar division
Kola MMC
including from own Russian feed
Platinum, koz
Polar division
Kola MMC
including from own Russian feed
2010
295,840
235,518
60,322
388,027
365,698
22,329
2,855
2,723
132
692
663
29
235,518
124,200
111,318
111,318
365,698
309,320
56,378
56,378
2,723
2,053
670
670
663
529
134
134
2011
295,098
234,906
60,192
377,944
362,854
15,090
2,806
2,704
102
696
672
24
237,227
124,000
113,227
110,906
363,460
303,940
59,520
58,914
2,704
2,038
666
666
672
536
136
136
2012
300,340
223,153
77,187
363,764
344,226
19,538
2,732
2,624
108
683
658
25
233,632
124,000
109,632
99,153
352,466
295,610
56,856
48,616
2,628
1,989
639
635
660
529
131
129
NORNICKEL
2019 Annual report
2013
285,292
219,273
66,019
371,063
345,737
25,326
2,662
2,529
133
650
604
46
231,798
122,700
109,098
96,573
359,102
296,760
62,342
48,977
2,580
2,006
574
523
627
504
123
100
2014
274,248
223,224
51,024
368,008
345,897
22,111
2,752
2,582
170
662
595
67
228,438
122,390
106,048
100,834
354,943
297,552
57,391
48,345
2,660
2,065
595
517
627
500
127
95
2015
266,406
220,675
45,731
369,426
352,766
16,660
2,689
2,575
114
656
610
46
222,016
96,916
125,100
123,335
355,707
292,632
63,075
60,134
2,606
1,935
671
640
622
488
134
122
2016
235,749
196,809
38,940
360,217
344,482
15,735
2,618
2,526
92
644
610
34
182,095
50,860
131,235
126,937
350,619
280,347
70,272
63,542
2,554
1,703
851
815
622
449
173
159
2017
217,112
210,131
6,981
401,081
397,774
3,307
2,780
2,728
52
670
650
20
2018
218,770
216,856
1,914
473,654
473,515
139
2,729
2,729
0
653
653
0
2019
228,687
225,204
3,482
499,119
498,838
281
2,922
2,919
3
702
700
2
157,396
158,005
166,265
0
157,396
155,110
387,640
306,859
80,781
78,587
2,738
956
1,782
1,737
660
259
401
385
0
158,005
157,519
436,201
353,131
83,070
82,987
2,671
987
1,684
1,684
642
260
381
381
0
166,265
166,265
442,682
355,706
86,976
86,976
2,868
1,042
1,826
1,826
690
251
439
439
1/ Total amounts may vary from the sum of numbers due to arithmetical rounding. The production results of Nkomati are not included in the total
amounts of the Group.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix NORNICKEL
2019 Annual report
Norilsk Nickel group saleable metals production1
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Grk Bystrinskoye (Russia, Zabaykalsky krai)2
Copper (in concentrate) t,
Gold (in concentrate), koz
Iron ore concentrate t
Norilsk Nickel Harjavalta (Finland)
Nickel, t
including from own Russian feed
Copper, t
including from own Russian feed
Palladium, koz
including from own Russian feed
Platinum, koz
including from own Russian feed
Nkomati (South Africa)3
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
Norilsk Nickel Tati (Botswana)4
Nickel, t
Copper, t
Palladium, koz
Platinum, koz
Lake Johnston (Australia)
Nickel, t
0
0
0
49,159
0
11,279
0
48
0
15
0
5,525
3,082
23
7
17,401
11,050
84
14
0
0
0
0
48,525
0
5,681
0
34
0
12
0
5,815
2,927
24
9
11,163
8,803
68
12
0
0
0
0
45,518
0
1,006
0
21
0
9
0
9,624
4,594
32
12
9,346
10,292
83
14
8,975
0
0
0
44,252
0
6,549
0
39
0
16
0
11,920
5,034
46
20
12,215
5,412
43
7
2,826
0
0
0
42,603
0
10,629
0
74
0
31
0
11,359
4,938
48
19
6,416
2,436
18
4
0
0
0
0
43,479
424
13,048
0
78
0
33
0
11,350
5,301
53
20
3,207
671
5
1
0
0
0
0
53,654
19,012
9,598
593
64
8
22
2
8,486
4,007
40
15
911
0
0
0
0
0
0
0
59,716
55,021
13,441
12,328
42
35
10
6
8,006
4,504
46
20
0
0
0
0
0
19,417
89
346
60,765
59,337
18,036
17,980
58
58
11
11
6,597
3,055
33
13
0
0
0
0
0
43,489
177
1,311
62,422
58,939
12,948
12,667
54
51
12
9
6,485
3,419
33
14
0
0
0
0
0
1/ Norilsk Nickel Group owns 50.01% of Bystrinsky GOK (Chita Copper Project). Production results are shown metal in concentrate for sale
on 100% basis and fully consolidated in total operational results. The concentrator at the Bystrinsky project was launched in 2018 as part
of the hot commissioning stage and was fully commissioned in 2019.
2/ Production results report metal contained in saleable concentrate on a 50% basis and are not consolidated in the Group’s total operating results.
In 2019, the Group and its operating partner, African Rainbow Minerals, reached an agreement to scale down production at Nkomati Nickel
Mine during 2020. As part of this process, the partners will elaborate in due course a plan contemplating the cessation of the mining operations
and the placing of the mine in care and maintenance.
3/ The sale of the asset was closed in 2015.
4/ XX
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2019 Annual report
MINERAL RESOURCES
AND ORE RESERVES
Measured and indicated recoures
/ proven and probable resorves
as of December 31, 2019 1
Ore
kt
Taimyr Peninsula
Proven and probable reserves
672,815
Proven reserves
Talnakh ore field, including
rich
cuprous
disseminated
Norilsk-1 deposit (disseminated ore)
Probable reserves
Talnakh ore field, including
rich
cuprous
disseminated
Norilsk-1 deposit (disseminated ore)
Measured and indicated resources
Talnakh ore field, including
rich
cuprous
disseminated
Norilsk-1 deposit (disseminated ore)
Inferred resources
Talnakh ore field
Norilsk-1 deposit (disseminated ore)
Kola Peninsula (disseminated ore)
Proven and probable reserves
Proven ore reserves
Probable reserves
Measured and indicated resources
Inferred resources
321,482
50,946
17,118
253,418
20,156
309,474
78,140
61,096
170,238
21,703
1,698,853
1,553,511
111,927
66,249
1,375,335
145,342
438,473
437,405
1,068
84,682
43,231
41,451
320,943
143,625
Ni%
Cu%
Pd g/t
Pt g/t
Au g/t
6 PGM g/t
Ni kt
Cu kt
Pd koz
Pt koz
Au koz
6 PGM koz
Metal grade
Contained metal
0.92
0.79
2.52
0.96
0.43
0.35
1.13
2.91
0.75
0.46
0.28
0.69
0.73
3.24
0.97
0.52
0.30
0.85
0.85
0.28
0.62
0.58
0.66
0.69
0.63
1.72
1.53
3.12
3.88
1.05
0.50
2.10
3.96
3.15
0.88
0.36
1.30
1.39
4.26
4.03
1.03
0.38
1.73
1.73
0.28
0.30
0.25
0.36
0.33
0.31
4.19
3.78
6.25
9.48
2.90
3.88
4.63
7.15
7.06
2.60
4.29
3.53
3.52
7.98
9.23
2.88
3.66
4.21
4.22
3.69
0.03
0.03
0.03
0.05
0.04
1.11
1.02
1.29
2.29
0.88
1.57
1.13
1.40
1.84
0.75
1.73
1.00
0.96
1.60
2.36
0.84
1.43
1.09
1.09
1.46
0.02
0.02
0.02
0.03
0.03
0.24
5.55
6,176
11,598
90,585
23,967
5,200
119,987
0.23
0.25
0.63
0.19
0.17
0.26
0.25
0.51
0.18
0.19
0.21
0.21
0.29
0.66
0.19
0.15
0.25
0.25
0.13
0.01
0.01
0.01
0.02
0.01
5.00
7.92
11.91
3.95
5.73
6.05
9.06
9.12
3.56
6.34
4.74
4.68
10.12
11.85
3.90
5.39
5.53
5.52
7.78
0.05
0.05
0.05
0.08
0.07
2,539
1,285
164
1,090
71
3,505
2,271
456
778
61
11,778
11,349
3,624
640
7,085
429
3,707
3,704
3
524
250
274
2,204
905
4,906
1,589
665
2,652
101
6,512
3,094
1,923
1,495
79
22,167
21,618
4,772
2,669
14,177
549
7,585
7,582
3
256
107
149
1,070
446
39,038
10,235
5,216
23,587
2,513
46,041
17,951
13,858
14,232
2,993
193,056
175,939
28,722
19,666
127,551
17,117
59,401
59,274
127
78
40
38
480
184
10,508
2,114
1,261
7,133
1,019
11,232
3,525
3,618
4,089
1,208
54,456
47,775
5,746
5,030
36,999
6,681
15,375
15,325
50
51
29
22
307
121
2,330
409
348
1,573
111
2,625
625
1,008
992
134
11,428
10,715
1,054
1,397
8,264
713
3,526
3,522
4
24
12
12
174
60
51,705
12,965
6,553
32,187
3,710
60,149
22,757
17,914
19,478
4,423
259,157
233,986
36,401
25,229
172,356
25,171
77,899
77,632
267
130
70
60
846
320
326
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix
NORNICKEL
2019 Annual report
Measured and indicated recoures
/ proven and probable resorves
as of December 31, 2019 1
Ore
kt
Australia (Honeymoon Well)
Measured and indicated resources
(nickel sulfide ores)
Inferred resources (nickel sulfide ores)
Inferred resources (nickel laterite ores)
TOTAL RUSSIAN ASSETS
173,300
11,900
339,000
Total proven and probable reserves
757,497
Total measured and indicated resources
2,019,796
Total inferred resources
582,098
TOTAL RUSSIAN AND INTERNATIONAL ASSETS
Total proven and probable reserves
757,497
Total measured and indicated resources
2,193,096
Total inferred resources
932,998
Ni%
Cu%
Pd g/t
Pt g/t
Au g/t
6 PGM g/t
Ni kt
Cu kt
Pd koz
Pt koz
Au koz
6 PGM koz
Metal grade
Contained metal
0.68
0.68
0.81
0.88
0.69
0.79
0.88
0.69
0.80
0
0
0
1.56
1.15
1.38
1.56
1.06
0.86
0
0
0
3.72
2.98
3.18
3.72
2.74
1.99
0
0
0
0.99
0.84
0.83
0.99
0.78
0.52
0
0
0
0.21
0.18
0.19
0.21
0.16
0.12
0
0
0
4.93
4.00
4.18
4.93
3.69
2.61
1,180
81
2,746
6,700
13,982
4,612
6,700
15,162
7,439
0
0
0
11,854
23,237
8,031
11,854
23,237
8,031
0
0
0
90,663
193,536
59,585
90,663
193,536
59,585
0
0
0
24,018
54,763
15,496
24,018
54,763
15,496
0
0
0
5,224
11,602
3,586
5,224
11,602
3,586
0
0
0
120,117
260,003
78,219
120,117
260,003
78,219
MINERAL RESERVES AND
RESOURCES
as of June 30, 20192
South Africa (Nkomati)
Proven and probable reserves
Measured and indicated resources
Inferred resources
Ore kt
Metal grade
Ni%
Cu%
Co%
4PGM g/t
7,580
172,670
46,350
0.29
0.35
0.40
0.11
0.14
0.13
0.02
0.02
0.02
0.90
0.94
0.97
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).
Proven and probable ore reserves are included in mineral resources.
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.
The six platinum group metals (PGMs) are platinum, palladium, rhodium, ruthenium, osmium, and iridium. The four elements are platinum,
palladium, rhodium and gold.
Ore losses applied ranged from 1.6 % to 26% and dilution from 6% to 31.9%.
Excluding deposits in Zabaykalsky Region.
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.
2/ The Company owns 50% of Nkomati. Nkomati's mineral reserves and resources are not included Group’s total amounts.
Ni kt
22
602
188
Cu kt
8
236
62
Contained metal
Co kt
4 elements koz
1
32
8
219
5,214
1,438
328
329
Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix
MEASUREMENT
UNITS
AND CURRENCY
EXCHANGE RATES
Measurement units
1 km
1 m
1 cm
1 mi
1 foot
1 in
Length
0.6214 mi
3.2808 ft
0.3937 in
Area
1 sq m
1 sq km
10.7639 sq ft
1 kg
0.3861 sq mi
1 metric tonne
1 ha
2.4710 acres
1 short tonne
1.609344 km
1 sq ft
0.09290304 sq m
1 troy ounce
Weigth
2.2046 lb
1,000 kg
907.18 kg
31.1035 g
0.3048 m
2.54 cm
1 sq m
2.589988 sq km
1 acre
0.4046873 ha
1 lb
1 g
0.4535924 kg
0.03215075 oz t
Currency exchange rates in 2015–2019
Exchange rates used to translate the costs denominated in rouble
Index
Average rate Russian Rouble / US Dollar for the year ended
31 December
2015
60.96
2016
67.03
2017
58.35
2018
62.71
2019
64.74
NORNICKEL
2019 Annual report
GLOSSARY
Anode. Crude metal (nickel or copper) obtained
from anode smelting and fed for electrolytic refining
(electrolysis) whereby it is dissolved.
Cathode. Pure metal (nickel or copper) obtained
as a result of electrolytic refining of anodes.
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.
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.
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.
Leaching. Selective dissolution of one or several
components of the processed solid material in organic
solvents or water solutions of inorganic substances.
Kinds of leaching: acid leaching (leaching with acids
as reagents), chlorine leaching.
Proven ore reserves. Estimated based
on the economically mineable part of measured
mineral resources, including possible dilution
and losses during mining operations.
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).
Cake. Solid residue from filtering pulp during leaching
of ores, concentrates or metallurgical intermediates,
and purification of processing solutions.
Conversion. Oxidation process to turn matte
into converter matte (in smelting copper-nickel
concentrates) or blister copper (in smelting copper
concentrates) and remove slag (carbon, sulphur, iron
and other impurities).
Concentrate. A product of ore concentration
with a high grade of the extracted mineral, which gives
its name to the concentrate (copper, nickel, etc.).
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.
Roasting. Heating ore to high temperatures to trigger
chemical changes that enable subsequent metal
recovery processes.
Concentration. Artificial improvement
of metallurgical feedstock mineral grades by removal
of a major portion of waste rock not containing any
valuable minerals.
Oxide. A compound of a chemical element
with oxygen.
Tailings pit. A complex of hydraulic structures used
to receive and store mineral waste / tailings.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix 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.
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.
Fluidised bed furnace. A furnace where solid particles
are intensively mixed under a fluidising impact
of heated gas (air, oxygen or flue gases) flowing
through the bed of grainy material (powder, granules).
Pyrrhotite concentrate. By-product of copper-nickel
ore concentration.
Sublevel caving. An underground mining method
in which ore blocks are developed from top to bottom
via sublevels, and ore is extracted by blasting
or causing sublevels to cave in. The voids formed after
extraction get filled with fractured rock.
Pulp. A mixture of finely ground rock with water
or a water solution.
Ore. Natural minerals containing metals
or their compounds in economically valuable amounts
and forms.
Mine. A mining location for extraction of ores.
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.
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).
Sulphides. Compounds of metals and sulphur.
Drying. Removal of moisture from concentrates
performed in designated drying furnaces (to
a moisture level below 9%).
Tolling agreement. An agreement to process foreign
feedstock with subsequent shipping of finished
product. The feedstock and end product are exempt
from customs duties.
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.
Filtration. The process of reducing the moisture level
of the pulp by forcing it through a porous medium.
NORNICKEL
2019 Annual report
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.
Sludge. Powder product containing precious metals
settling during electrolysis of copper and other metals.
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.
Tailings. Waste materials left over after concentration
processes and containing mostly waste rock
with a minor amount of valuable minerals.
Ore mixture. A mixture of materials in certain
proportions needed to achieve the required chemical
composition of the end product.
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.
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.
Electrowinning. Electrodeposition of metal from ores
that have been put in solution. Ore or concentrate
is leached with agents that dissolve metal-containing
minerals or the entire material, so that the metal
is deposited on the cathode. The electrolyte is typically
reused in the process. The end product is high-purity
metal cathode.
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Company overviewStrategic reportCommodity market overviewBusiness overviewSustainable developmentCorporate governanceRisk reportShareholder information IFRS financial statementsAppendix CONTACTS
Investor relations
Head office
Vladimir Zhukov
Vice President for Investor Relations
Email: ir@nornik.ru
Mikhail Borovikov
Deputy Head of Investor Relations
Email: borovikovMA@nornik.ru
Phone: +7 (495) 786-83-20
Fax: +7 (495) 797-86-13
For shareholders
Marina Raychenko
Head of the Share Capital Division
Phone: +7 (495) 797-82-44
Email: gmk@nornik.ru
Public relations
Andrey Kirpichnikov
Head of Public Relations
Email: pr@nornik.ru
Tatiana Egorova
Head of Press Office
Email: egorovaTS@nornik.ru
Phone: +7 (495) 785-58-00
Fax: +7 (495) 785-58-08
Address: 1-iy Krasnogvardeyskiy proezd, 15, 123100
Moscow, Russian Federation
Registrar
JSC R.O.S.T. Registrar
Russian Federal Securities Commission license
number 045-13976-000001, dated December 3, 2002,
valid indefinitely
Web-site: www.rrost.ru/en/
Address: 18 bldg. 13, Stromynka Street, 107996
Moscow, Russian Federation
Phone: +7 (495) 989-76-50
Fax: +7 (495) 780-73-67Email: info@rrost.ru
Norilsk Branch
Address: 8 Bogdan Khmelnytskiy, Norilsk,
Krasnoyarsky Krai, 663305, Russian Federation
Phone: +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, Russian
Federation
Phone: +7 (391) 216-51-01, 223-20-30
Fax: +7 (391) 216-57-27
Helpdesk operating hours:
Monday - Friday from 9:00 to 13:00
ADR Depositary
Bank of New York Mellon
Depositary Receipts Division
Address: 240 Greenwich Street, 22nd Floor West,
New York, NY 10286
Phone: +1 (212) 815-41-58
Fax: +1 (212) 571-30-50
Web-site: www.bnymellon.com
Auditor
JSC "KPMG"
Address: 3035, 18/1 Olympiysky prospekt, Moscow,
129110 Russian Federation
Postal address: Naberezhnaya Tower Complex, Block
C, 31st Floor, Presnenskaya Naberezhnaya, Moscow,
123112 Russian Federation
Phone: +7 (495) 937-44-77
Fax: +7 (495) 937-44-99
Email: moscow@kpmg.ru
Web-site: www.kpmg.com/ru
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