ANNUAL REPORT
ENABLING THE TRANSITION
TO A GREENER
WORLD
2020
MMC NORILSK NICKEL
Dear shareholders
and investors!
REPORTING PERIOD
FROM 1 JANUARY 2020
TO 31 DECEMBER 2020
The 2020 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).
ACCURACY OF INFORMATION CONFIRMED
by the Audit Commission of MMC Norilsk Nickel
Opinion of 5 April 2021.
APPROVED
by the Board of Directors of MMC Norilsk Nickel
Minutes No. GMK/9-pr-bd of 9 April 2021.
APPROVED
by the Annual General Meeting of Shareholders
of MMC Norilsk Nickel
Minutes No. 1 of 19 May 2021
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 2020
Annual Report of MMC Norilsk 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
electrification 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
2020 ANNUAL REPORT
CONTENT
#1
COMPANY OVERVIEW
2
4
6
8
10
12
14
16
Company profile
Performance highlights
The Company’s history
Highlights of the year
Business model
Geography
The main assets of the Group
Production flow
#2
STRATEGIC
REPORT
IMPORTANT
SOLUTIONS
22
24
28
42
Chairman’s letter
President’s letter
Strategy 2030 priorities
Key investment projects
#3
COMMODITY
MARKETS
STABLE
POSITION
54
60
64
68
71
Nickel (Ni)
Copper (Cu)
Palladium (Pd)
Platinum (Pt)
Rhodium (Ph)
#4
BUSINESS
OVERVIEW
TECHNOLOGY
BREAKTHROUGH
Sales
74 Mineral resource base
84 Operational performance
98
102 Procurement and supply chain
104 Energy assets
106 Transport assets
110 Digital transformation journey
116
Production automation
120 Financial performance (MD&A)
#5
SUSTAINABLE
DEVELOPMENT
ECOLOGICAL
AGENDA
#6
CORPORATE
GOVERNANCE
CHANGES
IN MANAGEMENT
139
Environmental protection and climate
change
156 Human resources
166 Health and safety
172
Social strategy
186 Corporate governance framework
194 General meeting of shareholders
196 Board of Directors
208 Board committees
211
220 Remuneration
President and Management Board
#7
CONTROL SYSTEM
AND RISK MANAGEMENT
#8
SHAREHOLDER
INFORMATION
222 Control system
230 Risk management
235 Key risks
250 Share capital
251 Securities
254 Dividend policy
257 Debt instruments
#9
IFRS FINANCIAL
STATEMENTS
260 Consolidated Financial Statements
330 Measurement units and currency
exchange rates
331 Glossary
333 Contacts
#10
APPENDIX
335 Corporate Governance Code
Compliance Report
Public reporting system of Nornickel includes
the Annual Report and the Sustainability Report
Considering the events of 2020, we also released
a White paper on the spill fuel in the Norilsk
Industrial Distirct.
INTERACTIVE
ANNUAL REPORT
SUSTAINABILITY
REPORT
WHITE PAPER
leak of diesel fuel
in the Norilsk Industrial
District
TO A GREENER WORLD Nornickel
2 3
COMPANY
PROFILE
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. 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.
As of the end of 2019, Nornickel’s weight
in theleading emerging market stock
indices such as MSCI Emerging Markets
was 0.5% and 8.2% in the MSCI Russia.
OLDERFEREY
HOLDINGS LTD1
34.6%
EN+ GROUP
IPJSC1
27.8%
OTHER
37.6%
THE GROUP'S ASSETS
The Group’s production assets are
located in three countries – Russia,
Finland and South Africa. The Group’s
core businesses are represented
by vertically integrated metals and mining
operations. They include Norilsk Division
(located on the Taimyr Peninsula), Kola
Division including Kola MMC (located
on the Kola Peninsula), and Norilsk Nickel
Harjavalta Оу (located in Finland), and also
Zabaykalsky Division (Bystrinsky GOK,
50.01% stake).
In South Africa, 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. The operations of the mine are
planned to cease in 1H2021 whereafter
the mine is to be placed on limited care
and maintenance pending the finalisation
and submission of a closure plan.
In addition to the production facilities,
the Group operates captive global sales
network and owns a wide range of R&D
facilities, fuel and energy assets, river fleet,
river and sea port terminals, and a unique
Arctic cargo sea fleet.
The Nornickel core operations include
exploration, mining and processing
of minerals, and the sales of base
and precious metals.
NORNICKEL'S SHARE
OF THE GLOBAL METALS MARKET
(%)2
44
№1 Palladium
22
№1 High-grade nickel
14
№1 Cobalt3
9
№2 Primary nickel
15
№3 Platinum
12
№4 Rhodium
4
2
№8 Cobalt
№11 Copper
GLOBAL INDUSTRY LEADERSHIP
BY 2020 EBITDA MARGIN (%)4
49
Nornickel №1
48
Peer №2
46
Peer №3
43
Peer №4
22 Peer №5
COMPETITIVE
ADVANTAGES
Nornickel boasts a world-class
resource base, unique for the amount
of valuable minerals, their high content,
and extensive reserve life. The key
metals are nickel, copper, palladium,
platinum and other platinum group metals
(PGMs).
9 mines
Proven and probable reserves
742.8 mln t
Ni — 6.5 mln t
Cu — 11.6 mln t
PGMs — 118 moz
Measured and indicated resources
2,018.6 mln t
Ni — 13.8 mln t
Cu — 23.0 mln t
PGMs — 258 moz
Over 75 years
resources at the current production
rate
SHAREHOLDING
STRUCTURE
AS OF 31 DECEMBER
2020 (%)
1
Indirect ownership via controlled entities.
2
3
4
Based on refined metal (including tolling) output for palladium, nickel, platinum, and rhodium and based
on contained metal production for copper and cobalt.
Excluding supply from the Democratic Republic of the Congo.
The peer group includes Anglo American, BHP, Rio Tinto, and Vale.
W
E
I
V
R
E
V
O
Y
N
A
P
M
O
C
1
.
O
N
COMPANY OVERVIEW1Annual report | 2020
PERFORMANCE HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
OPERATING
HIGHLIGHTS
KEY FINANCIAL HIGHLIGHTS
(USD BN)
EBITDA & EBITDA MARGIN
(USD BN)
NICKEL FROM OWN
FEEDSTOCK (KT)
15.5
3.6
13.6
6.0
11.7
3.1
9.1
2.1
8.3
2.5
2020
2019
2018
2017
2016
Revenue
Net income
+15%
–39%
–3%
–9 p.p.
49%
58%
53%
44%
47%
7.7
2020
7.9
2019
6.2
2018
4.0
2017
3.9 2016
EBITDA
EBITDA margin
CAPITAL INVESTMENTS
(USD BN)
DEBT
(USD BN)
1.8
1.3
1.6
2.0
1.7
1.2 | 0.5 | 0.1
2020
0.8 | 0.4 | 0.1
2019
0.7 | 0.7 | 0.2
2018
0.7 | 0.8 | 0.4
2017
0.6 | 0.9 | 0.3
2016
Stay-in-business
Growth CAPEX
Bystrinsky project
–33%
–0.3 p.p.
0.6x
0.9x
1.1x
2.1x
1.2x
4.7
2020
7.1
2019
7.1
2018
8.2
2017
4.5 2016
Debt
Net debt/EBITDA
+3%
233
2020
225
2019
217
2018
210
2017
197 2016
COPPER FROM OWN FEEDSTOCK
(KT)
–2%
487
2020
499
2019
474
2018
398
2017
344 2016
PALLADIUM FROM OWN
FEEDSTOCK (KOZ)
–3%
2,820
2020
2,919
2019
2,729
2018
2,728
2017
2,526 2016
PLATINUM FROM OWN
FEEDSTOCK (KOZ)
–3%
693
2020
700
2019
653
2018
650
2017
610 2016
4 5
SUSTAINABILITY HIGHLIGHTS
INJURY RATES
(PER MILLION HOURS WORKED)
WORK-RELATED FATALITIES
SO2 EMISSIONS (MLN T)
–34%
–11%
+0.7%
0.21
0.08
0.32
0.08
0.23
0,05
0.44
0.08
0.35
0.11
2020
2019
2018
2017
2016
LTIFR
FIFR
8
3
9
1
6
2
9
1
2020
2019
2018
2017
13
7
2016
Employees
Contractors
1.9
2020
1.9
2019
1.9
2018
1.8
2017
1.9 2016
GHG EMISSIONS (MLN T)
WATER USE (MLN M3)
ELECTRICITY CONSUMPTION (TJ)
9.2 | 0.5
2020
9.5 | 0.5
2019
9.6 | 0.3
2018
10.2 | 0.1
2017
Scope 1
Scope 2
–3%
9.7
10.0
9.9
10.3
1,458
1,260
1,344
1,172
1,412
1,210
1,342
1,138
1,464
1,256
2020
2019
2018
2017
2016
86%
87%
86%
85%
86%
17,750 | 15,111
2020
18,501 | 14,837
2019
18,762 | 14,480
2018
20,180 | 12,175
2017
20,674 | 11,856
2016
46%
45%
44%
38%
36%
Total water used
Water recycled and reused
Share of water recycled and reused
Electricity consumption from natural gas
Electricity consumption from renewables
Share of electricity from renewables
ESG PERFORMANCE
Sustainalytics
CURRENT STATUS/RATING
Target — maintains investment grade
credit ratings.
The company joined the UNGD
in 2016 and every year confirms
its commitment to the principles
of sustainable development
ESG score – 61 (out of 100) Average
Performer (vs 63 in 2029). ESG risk
score – 38.3 (out of 100)
Baa2
negative
Inclusion in the index constituent
is reiterated: score at 4.0 (out of 5)
Score – 44 (out of 100)
(vs 33 in 2019)
ESG rating – “B”, score – 3.3 (out of 10)
ВВВ–
stable
ВВВ–
stable
Environmental score and social
score – 3, governance score –
4 (where 1 is low risk, and 10 is high
risk), ESG rating – “С” medium
Disclosure to CDP launched in 2020
Climate change score – “D”,
Water Security score – “C”
ruААА
stable
NornickelCOMPANY OVERVIEW1Annual report | 2020 THE COMPANY’S HISTORY
1935–1959
1960–1992
1993–2012
2013–2020
2020–2030
6 7
CREATION
AND EVOLUTION
OF NORILSK PLANT
In 1935, the USSR Council
of People’s Commissars resolved
to build Norilsk Plant. The first
batch of converter matte
was produced in 1942, with
Norilsk Plant opening a Nickel
Tankhouse in 1943. In 1953,
Norilsk was granted the status
of a town, with Norilsk Plant
producing 35% of nickel, 12%
of copper, 30% of cobalt and 90%
of platinum group metals (PGM)
of the Soviet Union’s total output.
The company’s history
NEW DEPOSITS
DEVELOPED
AND NEW
FACILITIES PUT
ONLINE
The Talnakhskoye deposit,
the world’s largest deposit
of copper-nickel ores,
was discovered in 1960, giving
a new lease on life to Norilsk
Plant. The construction
of mines and the town
of Talnakh started on the Taimyr
Peninsula. The Oktyabrskoye
deposit of copper-nickel ores
was discovered in 1965. Nadezhda
Metallurgical Plant and the 1st
Stage of Talnakh Concentrator
were put on stream in 1981.
TRANSFORMATION
IN A MARKET
ECONOMY
In 1993, the Russian President
signed an Executive Order
to transform the Norilsk Nickel
State Concern for the Production
of Precious and Non-Ferrous
Metals into Russian Joint Stock
Company (RJSC) Norilsk Nickel
for the Production of Precious
and Non-Ferrous Metals. In 2001,
the Company was restructured,
with shareholders of RJSC
Norilsk Nickel exchanging 96.9%
of their stock to shares in MMC
Norilsk Nickel. The Company
shares were listed on the RTS
and MICEX stock exchanges,
while the Company started
the issuance of Level-1 American
Depositary Receipts (ADRs) with
MMC Norilsk Nickel shares as
the underlying asset.
IMPLEMENTING
A NEW STRATEGY
Vladimir Potanin’s team
changed the management
structure of Nornickel.
The Board of Directors adopted
a new development strategy.
The Company decided to focus
on the Tier-1 assets of the Polar
Division and Kola MMC.
Bystrinsky GOK, the largest
greenfield project in the Russian
metals industry, was constructed
from scratch.
Steps were taken to improve
the environmental situation
in our operating regions,
including the shuttering of Nickel
Plant in Norilsk, the launch
of the Sulphur Programme
to drastically improve
the environment in the Norilsk
Industrial District, and multiple
obsolete production facilities
in the Murmansk Region slated
for closure.
ENABLING
THE TRANSITION
TO A GREENER
WORLD
To implement its growth strategy
and environmental projects,
Nornickel has updated its long-
term CAPEX plan and announced
that its investment cycle would
enter an active phase in 2021.
Total investments for the next ten
years are scheduled to exceed
USD 27 billion, including
approximately USD 5.5 billion
earmarked for projects with
a positive environmental
impact. Ramping up investments
in the comprehensive
development of its mining
and processing capacities will
boost the Company’s metal output
by over 30% by 2030.
The global transition to a “green
economy” offers a unique
opportunity for the Company
to become a key player in metals
markets, essential for building
a carbon-neutral economy
in general and clean transport
in particular.
NornickelCOMPANY OVERVIEW1Annual report | 2020 HIGHLIGHTS OF THE YEAR
EXPANDING
PARTNERSHIPS
IN THE BATTERY
RECYCLING
Nornickel has been supporting
the creation of a battery recycling
cluster in Harjavalta, Finland on the
premises of its own nickel refinery
and Nornickel will continue to
support actively the recycling value
chain in Europe. Re-using critical
metals present in used batteries
would enable a successful “closed
loop” cycle offering a significant
CO2 reduction in the production of
battery materials for electric vehicles.
Additional CO2 reduction can be
achieved by using electricity from
renewable sources in Finland for the
recycling process.
COVID-19 RESPONSE
Nornickel spent about RUB 12 billion
(USD 157 million) to fight COVID-
19, directing the funds towards
supporting to safeguard the health
and safety of its employees
and purchasing personal protection
equipment, COVID-19 tests,
medicines and medical equipment
across its footprint. The Company
provided benefits and subsidies
to SMEs operating in Norilsk.
ENVIRONMENTAL
INCIDENTS
AND LESSONS
LEARNED
On 29 May 2020, as a result
of depressurisation of an emergency
fuel storage tank at CHPP-3
in the city of Norilsk, around
21 thousand tonnes of diesel fuel
were spilled into the environment.
The Company immediately initiated
a response to the fuel spill.
Already in 2020, more than 90%
of the spilled fuel was collected,
and the water/fuel mixture
was transported and separated.
The Company is committed to do all
that is necessary to fully eliminate
the consequences of the incident
and prevent any such incidents
in the future.
The Company made significant
changes to its corporate
governance structure, in particular:
set up the Risk Committee led
by the President of the Company,
introduced the position of Senior
Vice President for Sustainable
Development and established
the Ecology Department.
The Industrial Safety Department
was spun off from the Operations
unit; the Ecology Monitoring
Centre was set up within the risk
management and internal control
function. The Company transitioned
to a division-based structure, with
the heads of regional divisions
(Norilsk, Kola) taking over support
functions, and increased investment
limits.
Nornickel initiated the Great
Norilsk Expedition, which
included studies by researchers
from 14 institutes of the Siberian
Branch of the Russian Academy
of Sciences to identify the causes
and implications of the incident
at CHPP-3, but also to launch
an ambitious and comprehensive
programme to research ecosystems
on the Taimyr Peninsula and climate
changes over the last decades
To assess the impact of the incident
on local communities, a special
ethnogeographic expedition
was carried out, which focused
on studies of indigenous peoples
of the North living on the Taimyr
Peninsula. As part of the expedition,
100 representatives of local
communities were interviewed,
and the results formed the basis
of a new five-year agreement
between Nornickel and associations
representing over 90% of indigenous
peoples of the North, which
includes over 40 specific projects
and initiatives aimed at improving
their quality of life, supporting
indigenous crafts, and promoting
socio-cultural development.
At the request of the Board
of Directors, a leading global
industrial safety consultancy,
Environmental Resources
Management (ERM), prepared
an independent assessment
of the causes of the fuel spill
incident.
The Company reinvented its
approaches to environmental
safety, with USD 5.5 billion
out of the USD 27 billion
allocated for Nornickel’s
investment programme up
to 2030 to be directed towards
the environmental programme
and another USD 1.3 billion towards
improving the industrial safety
of infrastructure.
8 9
ADOPTION
OF A DIVISION-BASED
ORGANISATIONAL
STRUCTURE
ENVIRONMENTAL
PROJECTS
IN THE MURMANSK
REGION
Nornickel expects to use
tokens for up to
20% of its sales
of its sales to industrial
consumers in 2021
The Group’s core operations have
been grouped into three divisions
– Norilsk, Kola and Trans-Baikal.
In addition to major production
assets, the divisions comprise
support enterprises. Division-level
investment limits not requiring
the approval of the corporate centre
were increased. The new division-
based system will accelerate
decision-making and improve
accountability of production site
management.
DISPOSAL
OF THE HONEYMOON
WELL NICKEL
PROJECT
IN AUSTRALIA
Nornickel sold its Honeymoon Well
Nickel Project in Western Australia
to BHP Billiton Nickel West Pty
Ltd. The deal also included Albion
Downs North and Jericho Joint
Ventures, both being exploration
projects where BHP already owned
the remaining 50% stake.
EUROBONDS
In September, Nornickel successfully
placed its 5-year USD 500 million
Eurobond with an annual coupon
rate of 2.55%.
A smelting shop in Nikel,
located in the cross-border
area with Norway, was shut
down in December 2020 as
part of the implementation
of the comprehensive Sulphur
Programme, Nornickel’s largest
environmental initiative aimed
at significantly reducing sulphur
dioxide emissions in Norilsk
and on the Kola Peninsula
As a result, already in 2020, sulphur
dioxide emissions were reduced
by 71% from a 2015 baseline
in Nikel and Zapolyarny and by 58%
in the Russia–Norway border area.
TRADING GOING
DIGITAL
In December 2020, Nornickel’s
Global Palladium Fund issued
the first tokens to digitise
some of the contracts with major
industrial partners, Traxys SA
and Umicore SA, taking the first
meaningful step towards shifting
to digital trading tools to ensure
efficiency and transparency
throughout the supply chain.
The Global Palladium Fund issued
tokens via Atomyze, a digital
platform backed by a number
of international investors. Nornickel
expects to use tokens for up to 20%
of its sales to industrial consumers
in 2021.
NornickelCOMPANY OVERVIEW1Annual report | 2020 BUSINESS MODEL
RESOURCES
Mineral resource base
PRODUCTION
LONG-TERM
INVESTMENT
743
mln t
Proven and
probable
reserves
2,019
mln t
Measured
and indicated
resources
>75
years
of resources
at the current
production rate
Personnel
~72 thousand employees
Mining and metallurgical assets
3
9
4
mines
concentrators
metallurgical plants
Core products
Ni: cathode, carbonyl, briquettes,
salts, pellets, powders, solutions,
semi-products
Cu: cathode, cake,
semi-products
Precious metal
concentrates: Pt, Pd,
Rh, Au, Ag, Ru, Te, Ir
Co: cathode,
sulphate
S: technical
Se: commercial
Н2SO4
Fe: concentrate
Ni
235
kt
Pd
2,826
koz
Cu
487
kt
Pt
695
koz
Auxiliary assets
• Тransport enterprises
• Energy enterprises
• Global sales network operating in Russia, China,
Hong Kong, USA and Switzerland
• R&D – Gipronickel Institute
MINING
The Company mines copper-nickel sulphide
ores on the Taimyr and Kola Peninsulas
and gold-iron-copper ores in the Zabaykalsky
Region.
Norilsk Division:
Kola Division:
Trans-Baikal Division:
produced
produced
produced
18.8 mln t of ore
PGMs
Cu
Ni
6.9 g/t
2.3%
1.3%
7.7 mln t of ore
Cu
Ni
0.2%
0.5%
PGMs
0.1 g/t
16 mln t of ore
Cu
0.6%
Natural gas,
gas condensate
produced
2,728 Mcm
114 kt
10 11
r
s
e
h
a l e
O t
s
0 . 6
r
a l s
e
t
h
O t
m e
1 . 7
P t
0 . 6
REVENUE
FROM SALES
OF METALS
(USD BN)
d
P
6 . 4
15.5
USD bn
Revenue
USD
3.6 bn
Sulphur Programme 2.0 –
reduction in sulphur
dioxide emissions
from the Norilsk Division
>USD 4 bn
Energy infrastructure
upgrades
RUB 6.5 bn
Technology
Breakthrough 2.0 –
embedding digital
technology
C u
3 . 1
N i
3 . 1
FINANCIAL
PERFORMANCE
USD 7.7 bn
EBITDA
49%
EBITDA margin
0.6х
Net debt/
EBITDA
USD 3.6 bn
Net profit
NOR NICKEL –
is a global leader in the production of metals essential for clean transport
and the development of a low-carbon economy. Nornickel operations
focuses on the exploration, mining and processing of minerals, as well as
the production and sale of base and precious metals.
VALUE CREATED FOR STAKEHOLDERS
USD 4.2 bn
dividends paid
in 2020
USD 157 mln
spent on COVID
response
USD 2,000
Average
monthly pay
USD 500 mln
Social
expenses
0.21
LTIFR
RUB 89.4 bn
Procurement in 2020,
including 93% being local/
domestic content
9.7 mln t
GHG emissions
(Scope 1+2)
2.6 mln t
GHG emissions
(Scope 3)
46%
electricity generated
from renewable
sources
The Company’s
products
are supplied
to 37 countries
worldwide
99%
of the Company’s industrial
waste is non-hazardous
86%
Percentage of reused
and recycled water
Tax and non-tax
payments:
RUB 34.2 bn
Federal
RUB 115.7 bn
Regional
Shareholders
Employees
Suppliers
Environment
Customers
Government
NornickelCOMPANY OVERVIEW1Annual report | 2020 GEOGRAPHY
p
a
m
t
e
s
s
a
l
a
b
o
G
l
12 13
NORILSK DIVISION
Taimyr Peninsula
Share in total production
Cu
72%
PGM
42%
ZABAYKALSKY
DIVISION
Zabaykalsky Region
Share in total production
Cu
13%
KOLA DIVISION
Kola Peninsula
Share in total production
Ni
73%
Cu
14%
PGM
57%
KOLA DIVISION
Finland
Share in total production
Ni
27%
Cu
1%
PGM
1%
NKOMATI
South Africa
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.
The operations of the mine are
planned to cease in 1H2021
whereafter the mine is to be placed
on limited care and maintenance
pending the finalisation
and submission of a closure plan.
NornickelCOMPANY OVERVIEW1Annual report | 2020
THE MAIN ASSETS
OF THE GROUP1
14 15
MINING
AND METALLURGICAL
GEOLOGICAL
EXPLORATION
ENERGY
TRANSPORT
RESEARCH
SALES
AND DISTRIBUTION
NN Tehnicheskie-servisy2
(100%)
Vostokgeologiya
(100%)
Polar Division
Medvezhy Ruchey
(100%)
Kola MMC
(100%)
GRK Bystrinskoye
(50.01%)
Norilsk Nickel Harjavalta OY
(Finland, 100%)
Nkomati Nickel Mine
(South Africa, 50%)
Norilskenergo Division
NTEK
(100%)
Norilskgazprom
(100%)
TTK
(100%)
Norilsktransgaz
(100%)
Arctic-Energo
(100%)
1
2
Ownership Group in subsidiaries is indicated from the authorised capital (direct) as of December 31, 2020. (GRK Bystrinskoye is shown effective share).
Resolution No. 12 dated 7 December 2020 adopted a new revision of the Articles of Association changing the company’s name from Norilskgeologiya to Nornickel Technical
Services. The record on the approval of a new revision of the Articles of Association with the new company name was made to the Unified State Register of Legal Entities on
26 February 2021.
Polar Transport Division
Murmansk Transport Division
Arkhangelsk Transport Division
Krasnoyarsk Transport Division
Bystrinsky Transport Division
Yenisey River Shipping Company
(81.99%)
Krasnoyarsk River Port
(89.3%)
Lesosibirsk Port
(51%)
Norilsk Airport
(100%)
NordStar Airlines
(100%)
Norilsk Avia
(100%)
Gipronickel Institute
(100%)
NORMETIMPEX
(100%)
Metal Trade Overseas SA
(Switzerland, 100%)
Norilsk Nickel (Asia) Limited
(Hong Kong, 100%)
Norilsk Nickel USA Inc.
(USA, 100%)
Norilsk Nickel Metals Trading
(Shanghai) Co., Ltd.
(China, 100%)
SUPPORTING
BUSINESS
Norilsk Support Complex
(100%)
Polar Construction Company
(100%)
Norilsknickelremont
(100%)
Pechengastroy
(100%)
Nornickel – Shared Services
Centre
(100%)
Norilskpromtransport
(100%)
NornickelCOMPANY OVERVIEW1Annual report | 2020 PRODUCTION FLOW
MINING
CONCENTRATION
SMELTING
REFINING
PGM REFINING5
PRODUCTS
16 17
I
I
I
N
O
S
V
D
K
S
L
R
O
N
I
I
I
I
N
O
S
V
D
A
L
O
K
I
I
I
N
O
S
V
D
A
L
O
K
)
A
T
L
A
V
A
J
R
A
H
N
N
(
I
I
I
N
O
S
V
D
Y
K
S
L
A
K
Y
A
B
A
Z
MINES
• Taimyrsky
• Oktyabrsky
• Komsomolsky
• Skalisty
• Mayak
• Zapolyarny
Ore mined
18.8
mln t
Ni 1.3%,
Cu 2.3%
PGMs 6.9 g/t
Rich, cuprous
and disseminated ores
• Ni-Po concentrate from TC
• Metalbearing product from TC
• Ni concentrate from NC
Cuprous
and disseminated ores
TC1
NC2
Low-grade ores
Cu concentrate from NC, TC
NMP3
CP4
• Сopper Sludge from Copper
Plant tankhouse and Kola MMC
• Copper cake from NN Harjavalta
Copper Plant’s
smelting shop
Blister copper
Precious metal concentrates
under tolling agreement
Copper
Plant
Krastsvetmet
URALINTECH
Prioksky Plant
of Non-Ferrous Metals
MINE
• Severny
Ore mined
7.7
mln t
Ni 0.5%,
Cu 0.2%
PGMs 0.1 g/t
Disseminated ore
Concentrator
Briquettes of Cu-Ni
concentrate
Smelting shop
shut down
in December 2020
Converter matte
from Smelting shop
and Norilsk Division
Intermediate saleable
products
OPEN PITS
• Verkhneildikansky
• Bystrinsky-2
Ore mined
16.0
mln t
Cu 0.6%,
Fe 15.2%
Au 1.1 g/t
Gold-iron-copper ore
Bystrinsky GOK
Smelting shop
shut down
in March 2021
Refining shop
(Tankhouses 1 and 2)
Chemical-and-
metallurgical shop
Precious metal concentrates
under tolling agreement
• Ni matte and crushed
converter matte
from Kola MMC
• From 3d parties feed
Nickel refinery
• Cu: cathodes
• S: technical
• H2SO4: for Company’s
needs
• Precious metal
concentrates
• Se: technical
• Te: billots
• Ni: cathodes, carbonyl,
intermediate products
• Cu: cathodes, intermediate
products
• Co: electrolytic, saleable
concentrate
• Precious metal
concentrates
• H2SO4
• Ni: cathodes, briquettes,
salts, solutions
• Co: sulphate, solutions
• Cu: saleable cake
• Cu, Fe: saleable
concentrates
• Au: concentrate to be
processed at Nornickel’s
facilities
1
2
3
4
TC – Talnakh Concentrator.
NC – Norilsk Concentrator.
NMP – Nadezhda Metallurgical Plant.
CP – Copper Plant.
5
The precious metals are refined under tolling agreements.
NornickelCOMPANY OVERVIEW1Annual report | 2020
Nornickel
IMPORTANT
SOLUTIONS
Annual report | 2020
STRATEGIC REPORT
18 19
FOR MORE DETAIL
SEE ON THE WEB-SITE
//NORNICKEL.COM
The Company makes it a point to go beyond
just meeting today’s standards – its strategic
goal is to make products that support
the future green economy, while making
sure it manufactures environmentally friendly
products in a sustainable way.
Vladimir Potanin
President, Chairman of the Management
Board MMC Norilsk Nickel
WAY TO
"GREEN
ECONOMY"
//photo: Automatic equipment control center
WAY TO"GREENECONOMY"2 20 21
This approach helps foster highly skilled
talent, maintain long-term relations
with top talent and ensure succession
across all operations of the Company.
Out of the 660 employees of the closed
smelting shop, 72% opted to continue
working with Nornickel elsewhere. Most
of them have already been provided
with jobs, with others to be given jobs
in the near future. The Company will
spend over RUB 900 million on support
and social programmes for the smelting
shop employees before the end of 2022.
Next step
Being one of the largest employers
and tax payers in Russia, Nornickel
makes social commitments to develop
its operating regions. The Company
supports the construction of transport
infrastructure, sports facilities
and advanced communication facilities,
participates in philanthropic and volunteer
programmes, addressed current issues
and works for the future.
Nornickel honours its commitments
even after an operation shutdown. Thus,
the Company contributed to designing
the strategy for the development
of the Pechengsky District, which includes
Nikel, in the Murmansk Region. Nornickel
undertook to attract new businesses
and social entrepreneurs to this area.
As early as in 2020, the Company held
a competition to provide RUB 185 million
in interest-free loans to 11 winners for their
business projects. New businesses
are expected to launch in the Pechengsky
District in 2021, creating new jobs for local
people.
A comprehensive post-closure
territory development is another
important objective for the Company.
The smelting shop building, which
are being mothballed now, should remain
a functional part of the town, rather than
another abandoned piece of property.
Nornickel helped to hold a contest
for the best project to redevelop the site.
The environmentally friendly transformation
of the industrial zone with new green
production facilities and jobs were among
the most important conditions for entries
in the contest. The contest was won
by a project to create a small-scale
metallurgical plant producing grinding
balls and long products. Nornickel
will help the winner with consultations
and discounts for material and equipment
procurement and will undertake
to purchase a certain share of products.
IMPORTANT SOLUTIONS
Introduction
SMELTING
SHOP
SHUTDOWN
In December 2020, Nornickel shut down it oldest production facility –
smelting shop in Nikel, Murmansk Region. The decision was driven
by the Company’s green economy policy.
The smelting shop in Nikel was built back
in 1942 in an area that was once part
of Finland. After World War II, the Soviet
Union restored the metallurgical
facilities in this area. By 1991, the Nikel
smelting shop was one of the largest
in the industry. The shop was repeatedly
upgraded with the latest production
equipment over the period. Upgrades
also continued after it became part
of Kola MMC in 1998: automated furnace
charging, improved iD fan control
and other innovations were implemented
to reduce harmful emissions.
However, local improvements are no
longer enough to ensure compliance
with environmental standards.
In November 2019, the Company
decided to shut down the shop.
Halving emissions
The Nikel smelting shop shutdown
completely eliminated sulphur dioxide
emissions in the Russia–Norway border
area.
Large quantities of sulphur dioxide
are found in industrial waste, including
metallurgical waste. Sulphur dioxide
in emissions reacts to form sulphuric acid
aerosol, resulting in acid rains. People
with respiratory illnesses and ecosystems
are particularly vulnerable to this
pollution. Sulphur dioxide concentrations
are particularly high in the Northern
Hemisphere, including Russia and Europe.
After the Nikel shop shutdown, total
sulphur dioxide emissions from Kola
MMC’s operations decreased by more
than 50% by the end of 2020 (from
a 2015 baseline). Emission reduction
is expected to reach 85% in 2021.
People above all
Care for our people has always been
a top priority for us. Employee interests
are always considered when any changes
are made to the production chain.
Affected employees are offered jobs
in other units of the Company or contract
termination on comfortable terms,
retraining programmes, pension plan,
and social guarantees. The Company
offers affected employees jobs
elsewhere or, if the person does not want
to move and wishes, for example, to start
their own business, the Company helps
them to get started.
NornickelAnnual report | 2020STRATEGIC REPORT2 Nornickel
22 23
CHAIRMAN’S
LETTER
T
R
O
P
E
R
C
I
G
E
T
A
R
T
S
2
.
O
N
The year 2020 has been a difficult year for the global
economy as well as for Nornickel. We have learned
our lessons from it, and are determined to retain
our top place in the global mining industry, whilst
focusing on sustainable growth.
Gareth Peter Penny
Chairman of the Board of Directors,
MMC Norilsk Nickel
As we look into the future, we clearly
see that our metal basket is uniquely
geared towards a carbon-neutral world,
and the positive impact that we can
make is extremely important. Thus, large
investments will go into growth projects.
As a result, we are going to almost double
ore output in the Norilsk region and increase
metal production by roughly 30% by 2030.
From myself as the Chairman, through
the entire Board and the senior
management, everyone is focused
on the sustainable development
of the Company and we are absolutely
determined to get it right. We look forward
to delivering on our ambitious plans
and to assure a continuity in value creation
for our shareholders.
Fellow Shareholders
As the Chairman of the Board, we would
like to highlight that we are specifically
focused, for obvious reasons, on ESG
issues. The incident at one of our fuel farms
in the middle of last year, made a huge
impact on our risk assessment system
and organisational structure, as we needed
to take every step possible to identify root
causes of the diesel spill and to promote
changes within the Company to ensure that
such accidents do not occur again.
At Board level we established an entirely
independent Environmental Task Team
to review the clean-up operations
and a wider range of other environmental
matters. The team meets on a regular basis
to help management identify the drawbacks
in our current corporate culture and internal
procedures in order to make the necessary
changes in the Company’s leadership
and to move from a compliance-based
to a risk-based organisation.
The conclusion we made during
this work is helping us to develop
an holistic ESG programme that includes
such matters as climate change, water
stewardship, support of local communities
and indigenous people. What is important
is that we are now setting specific targets
for this programme with committed budgets.
In order to make the ESG priorities
an essential part of the Company’s
everyday life, we will embed industrial
safety and environmental objectives
into the management KPI’s, starting
from 2021.
Our total investment programme
through 2030 is estimated at more
than USD 27 billion. A significant part
of this amount will be used to improve
safety and reliability of operations,
as well as our environmental footprint.
Our Company is investing more than
USD 5.5 billion in its environmental
program, of which USD 3.6 billion will
go into the desulphurisation of the Polar
division.
Over USD 4 billion will be invested
in the modernisation of the Company’s
infrastructure aimed at total renewal
of over 60% of all energy assets
in the next five years. This investment
will allow us to progress in three main
dimensions: safety, energy efficiency
and the reduction of carbon emission.
Nornickel is already positioned in the lowest
quartile of the carbon intensity curve and is
committed to maintain this leadership
among metals and mining businesses
in the future.
Annual report | 2020STRATEGIC REPORT2
PRESIDENT’S
LETTER
The concerted work of our seventy-thousand-strong team successfully
brought us through all the hardships to achieve robust operational
and financial performance for the year.
Vladimir Potanin
President,
Chairman of the Management Board
MMC Norilsk Nickel
24 25
for each of these areas. We plan to invest
around USD 5.5 billion over the next ten
years to implement this strategy, which
is a record-high amount for the Russian
mining and metals industry.
I would also like to emphasise that
in December 2020 we discontinued
smelting operations in Nikel in the Kola
Peninsula, as part of a comprehensive
environmental programme to achieve zero
emissions in the Russia–Norway border
area. Along with other initiatives, this will
enable an 85% reduction of sulphur
dioxide emissions in the Murmansk Region
by the end of 2021.
Dear shareholders
A strategic focus on sustainability
In 2020, we faced a number
of unprecedented challenges,
and to overcome them, we needed
the utmost effort of all our employees
COVID-19 response
The COVID-19 pandemic did not only lead
to an unprecedented global economic
downturn and, consequently, a significant
drop in demand for our products,
but it also put a huge strain on our
operating model, our employees,
their families and all local communities
within Nornickel’s footprint.
To protect our employees and ensure
business continuity, special task
forces were set up that supported
the uninterrupted operation of our
production, transport and sales assets.
In addition, we provided all-encompassing
support to local authorities, healthcare
authorities, SMEs and vulnerable groups,
providing a much-needed lifeline
to our local communities at the height
of the pandemic.
Our total 2020 COVID response spending
was USD 157 million, and this year we will
certainly continue to support our people
and local communities until we get
to the other side of the pandemic.
In the end of May 2020, we experienced
a major environmental incident related
to the leak of diesel fuel in the Norilsk
Industrial District. The Company
immediately launched a comprehensive
cleanup operation, with its main phase
completed by the end of 2020. We
are currently looking into the most effective
approaches to restore the damaged
ecosystem in close cooperation with all
stakeholders. With our support, the Russian
Academy of Sciences organised
the Great Norilsk Expedition, whose
primary goal is to find effective solutions
for restoring the area after the incident,
as well as to develop recommendations
for minimising the overall impact of industry
on the Arctic environment. We plan to use
the expedition’s findings in our programme
to restore the damaged environment.
The Company has drawn an important
lesson from this incident and dramatically
reviewed its approach to environmental
risk management. We have decided
to combine isolated environmental
initiatives into a comprehensive, group-
wide environmental strategy, covering
improvements to air quality, water
stewardship, biodiversity restoration,
climate change, tailings management
and the remediation of historically polluted
areas. Most importantly, we have also set
specific targets and earmarked a budget
NornickelAnnual report | 2020STRATEGIC REPORT2 CONTINUED
PRESIDENT’S
LETTER
26 27
Financial highlights
We delivered strong financial results
in 2020. Our revenue increased 15%
to USD 15.5 billion, driven by higher
prices of palladium and rhodium,
and the ramp up of the Bystrinsky project.
EBITDA was down 3% to USD 7.7 billion,
primarily due to a large environmental
provision related to the damage caused
by the fuel spill, COVID-related expenses
and the temporary build-up of metal
inventories.
Capital expenditures increased
by 33% year-on-year to USD 1.8 billion,
driven by the Talnakh ore cluster,
the development of the South Cluster
project, more widespread energy
infrastructure overhauls, investments
in industrial safety, as well as the start
of the active construction phase
of the Sulphur Programme.
Free cash flow increased 36%
to USD 6.6 billion, an all-time high
for the Company.
Our net debt decreased more than
30%, with the net debt/EBITDA ratio
falling to 0.6x. We maintained a sharp
focus on refinancing our debt portfolio,
which enabled us to significantly reduce
the average cost of debt servicing
by changing in conditions increasing
the limit under the USD 4.150 billion
syndicated loan, and by issuing
USD 500 million in Eurobonds
on terms that are extremely attractive
for the Company. The Company’s
stable financial position is confirmed
by investment-grade ratings from the Big
Three credit rating agencies.
Transition to the active phase
of the investment cycle
To implement our growth strategy
and new environmental projects,
our team has updated the Company’s
long-term CAPEX plan. Total
investments for the next 10 years
are scheduled to exceed USD 27 billion.
In addition to our comprehensive
environmental programme, investing
in the development of our mining
capacities will become a key element
of our strategy. For example, we plan
to increase ore production in the Norilsk
Industrial District from the current 17–18
mtpa to 30–32 mtpa by developing
the South Cluster and Talnakh
mines. Ramping up ore output will
require an expansion of processing
capacities and, therefore, we have also
started investing in the development
of the Talnakh Concentrator, as well
as in the construction of a third furnace
at Nadezhda Metallurgical Plant
and a new copper refining facility at Kola
MMC. Over the next five years, CAPEX
in fuel and energy assets, including
health and safety initiatives, will amount
to more than USD 4 billion, which should
allow for an upgrade of over 60%
of all Nornickel’s energy infrastructure
by 2030.
In order to efficiently execute on its
ambitious strategy for upgrading
and increasing the reliability of its
assets, Nornickel has transitioned
to a division-based governance
structure, whereby production assets
In early 2021, Nornickel signed
a quadripartite agreement on the social
and economic development of Norilsk,
which envisages the renovation
of housing, the upgrade and overhaul
of local utilities and engineering
infrastructure, the creation
of a comfortable and safe urban
environment and the relocation of Norilsk
and Dudinka residents to other regions
with a milder climate.
In conclusion, I would like to thank all
colleagues, contractors and customers
who helped us overcome the challenges
of 2020. I am confident that together
we will deliver on all our long-term goals.
gain greater investment flexibility, without
compromising the strategic and expert
functions of the corporate centre.
In addition, the Company is developing
additional infrastructure for contractors
and expanding the pool of construction
companies that can operate in the region
to address the shortage of contractors.
Social responsibility
In line with our strategic priority
for sustainability, we significantly stepped
up social spending in 2020.
Apart from helping to control the spread
of COVID-19 among our employees
and local communities, we have
implemented a number of equally
important social initiatives, which I would
like to discuss separately.
Upon discontinuing the smelting
operations in Nikel, we provided
a comprehensive outplacement
programme for the shop’s personnel,
making it easy for employees
to transfer to other operations
of the Company, as well as setting up
a retraining programme and a pension
plan. In addition, in partnership
with the authorities of the Murmansk
Region, the Company has committed
to attracting new businesses and social
entrepreneurs to the area, as part
of its development after the shop’s
shutdown.
Last September, we signed an agreement
with organisations representing
the interests of the indigenous peoples
of the North to implement a RUB 2 billion
comprehensive plan to support
the development of these communities.
The programme will run until 2024
and includes support for traditional
activities, protection of the indigenous
habitat, as well as financing of housing,
healthcare, infrastructure, tourism
and socio-cultural projects. The list
of projects was drafted up with the direct
input of local communities, which should
provide a framework for effective
cooperation between indigenous peoples,
local authorities and industrial companies
on the development of the region.
NornickelAnnual report | 2020STRATEGIC REPORT2 STRATEGY 2030
PRIORITIES
Investment over the last five years totalled over RUB 500 bn
while the Company’s investment programme is expected
to more than double over the next five years.
Our goal is to transform into an environmentally
advanced business that offers sought-after
jobs and premium investment opportunities.
The upgrade of smelting operations
in Monchegorsk will reduce emissions
sevenfold in 2021 from a 2015 baseline. Along
with the programme in Norilsk, which will
require us to spend huge amounts running
into hundreds of billions of roubles, we will
cut emissions by 90% in the Norilsk region
as well. As a result, we will be able to position
ourselves as a business that goes beyond
offering products for the green economy
such as palladium and platinum used
in catalysts to reduce emissions from vehicles
as well as nickel, cobalt and other products
that are used to manufacture batteries
for the transition to hybrid and electric vehicles.
Vladimir Potanin
President of the Company
28 29
SAFETY AND ENVIRONMENT
• Zero tolerance for fatalities, annual reduction in work-
related injuries by 15%
• Long-term climate-based physical risk reduction
programme:
– Implementing an action plan to improve industrial safety,
including additional investment of RUB 100 bn in upgrading
the energy infrastructure of the Taimyr Peninsula
– Deploying an integrated system for monitoring permafrost
behavior
• Sulphur Programme 2.0 (ongoing). Targets:
– Reduce sulphur dioxide emissions in Norilsk tenfold by 2025
– Achieve zero emissions in the Russia–Norway border area
by discontinuing local smelting operations (completed
in 2020)
– Reduce emissions at Kola MMC sevenfold in 2021
• The Holistic Environmental Strategy to expand
the environmental agenda and set new targets
for greenhouse gas emissions, water, soil, tailings, waste
and biodiversity:
– Maintain absolute greenhouse gas emissions (Scope 1
and 2) from production enterprises not higher than 10 mln t
of CO2 equivalent
– Maintain GHG emissions (Scope 1 and 2) per tonne
of Ni equivalent in the bottom quartile on the global
GHG intensity curve for the mining and metals industry
INCREASE ORE AND METALS OUTPUT
• Boost ore production in the Norilsk Industrial District
by ~1.8 times by 2030
• Boost metals output by 20–30% for nickel and copper
and by 40–50% for PGMs by 2030
UPGRADE AND EXPAND DOWNSTREAM
AND ENERGY ASSETS
• Expansion of Talnakh Concentrator (3rd Phase of Talnakh
Concentrator Upgrade) to ramp up ore throughput
from 10 Mtpa to 18 Mtpa
• New Norilsk Concentrator
• Expansion of Nadezhda Metallurgical Plant (3rd furnace
at the smelting shop)
• A new cutting-edge copper refining facility at Kola MMC
• Upgrade of Tankhouse 2 (project completed in 2020)
• Energy infrastructure upgrades
NornickelAnnual report | 2020STRATEGIC REPORT2 NEW STRATEGIC CONCEPT
MORE GREEN METALS FOR A GREENER FUTURE
STRATEGIC AMBITIONS OF THE INVESTMENT PROGRAMME1
Average
for 2026F–2030F
Average
for 2022F–2025F
2021F
2020
Base investment programme
and other projects
Environmental programme
Growth projects
y
t
i
s
n
e
t
n
i
i
n
o
s
s
m
E
i
Climate change
EMISSION INTENSITY CURVE FOR NICKEL,
T OFCO2 EQUIVALENT/T OF NI EQUIVALENT
25%
50%
75%
Nornickel’s
strategic
threshold
Production (cumulative percentage)
Source: Wood Mackenzie,
Nornickel’s estimates
Sulphur Programme 2.0
Reducing emissions by 45% by 2023
and 90% by 2025
30 31
ORE PRODUCTION IN THE NORILSK
INDUSTRIAL DISTRICT (MTPA)2
STRATEGIC AMBITIONS FOR 2030+ METAL
PRODUCTION3
30–32
2030+
24–26
2025
17
2017
Growth
up to 1.8x
Increase in mining
The resource base potential
has been confirmed,
with production growth targets
for 2030 moderately increased
to 20–30% for non-ferrous metals
and 40–50% for PGMs4
Ni
kt
Growth
+ 20–30%
250–270
Strategic ambition 2030
210
2017
Cu
kt
Growth
+ 20–30%
490–530
Strategic ambition 2030
kt
2017
Pt+Pd
t
Growth
+ 40–50%
150–160
Strategic ambition 2030
105
2017
Upgrade
of downstream assets
MINING
CONCENTRATION
REFINING
SMELTING
1
Guidance confirmed with the projected investment growth
expected to be offset by the rouble depreciation.
» For more details, see p. 38
2
3
4
Norilsk Industrial District.
Metals produced from our own feedstock (including
metals in semi-products for sale), excluding
production at the Bystrinsky project and Nkomati.
From a 2017 baseline.
SALES
» For more details, see p. 35
NornickelAnnual report | 2020STRATEGIC REPORT2
CUSTOMER FOCUS
THE COMMODITY
BUSINESS
OF THE FUTURE
High growth
rates
of green economy
metals output
(+ 20–30% for nickel
and copper,
and + 40–50%
for PGMs)
Availability
of resources
Uninterrupted
supply chain
Demands
for the quality and form
of products
Transparency
of the product origin
Responsible
production
Low
carbon footprint
s
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CUSTOMER
NEEDS
32 33
CREATING VALUE FOR CUSTOMERS
AND BUILDING LONG-TERM COMPETITIVE
ADVANTAGES
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and proven supply
chain
High-quality product
portfolio and its further
diversification
ESG
is a key priority
of the investment programme
and organisation
24 7
First quartile
on the GHG emission intensity
curve
Source: Wood Mackenzie,
Nornickel’s estimates
Digitisation
of metal sales
NornickelAnnual report | 2020STRATEGIC REPORT2
BUILDING A ROBUST
CONFIGURATION
OF DOWNSTREAM ASSETS
2030 TARGETS
THE RESOURCE BASE POTENTIAL
AND PRODUCTION GROWTH
TARGETS HAVE BEEN CONFIRMED
PREREQUISITES FOR PRODUCTION
GROWTH
ORE PRODUCTION IN THE NORILSK
INDUSTRIAL DISTRICT (MTPA)
30–32
2030+
24–26
2025
17
2017
Growth
up to 1.8x
PRODUCTION (MTPA
OF NI EQUIVALENT)
Growth
+ 30–40%
Nornickel’s progress on SDGs in 2020
Effective use of existing production sites
A balanced production chain for each process
phase
Deployment of complementary technologies
Fit with the Holistic Environmental Strategy
Alignment with the programme for energy
infrastructure upgrade and development
USD 1,827 average
monthly salary
of employees1
94% employee
covered
by collective
bargaining
agreements
~USD 100 mln spent
on digital projects
~USD 2 mln spent
on R&D and pre-
feasibility studies
USD 219 mln
spent on energy
infrastructure
10-year plan
for the development
of Norilsk
86% of water
reused
and recycled
99% of waste
is hazard class 5
(non-hazardous)
3% reduction
in GHG emissions
(Scope 1 and 2)
to 9.7 mln t2
46% – the share
of renewables
in electricity
consumption
13 thousand
employees
and their family
members benefitted
from the health
improvement
programme
72.8 thousand
employees
insured as part
of the VHI programme
1
2
2.5 times higher than the average wage in the Russian market.
Nornickel embraces GHG minimisation.
34 35
ROADMAP FOR DEVELOPING
DOWNSTREAM ASSETS
BALANCED AND GREEN VALUE CHAIN
The new Norilsk
Concentrator (under
development)
The upgrade of Talnakh
Concentrator is underway
(ramp-up from 10 Mtpa
to 18 Mtpa by 2023–2024)
Sulphur Programme 2.0
at Copper Plant
and Nadezhda Metallurgical
Plant (ongoing)
Expansion of Nadezhda
Metallurgical Plant (3rd
production line: + 850 ktpa
of concentrate) –
investment decision
expected in 2021
Advanced 150 ktpa
copper refining –
investment decision
expected in 2021
Completion
of Tankhouse 2 upgrade
A long-term
configuration solution
to increase performance
and streamline
the product range –
under development
MINING
CONCENTRATION
SMELTING
REFINING
6
mines
1
mine
Norilsk Concentrator
Copper Plant
Talnakh Concentrator
Nadezhda
Metallurgical
Plant (3rd furnace
at the smelting shop)
Copper refining
Copper refining
(KGMK)
Zapolyarny Concentrator
Smelting shop
(Nikel)
Nickel refining
(KGMK)
Shutdown
of obsolete
facilities
in December
2020 to reduce
SO2 emissions
Market
Market
Refining
(Harjavalta)
Environment
Upgrade
Capacity growth
projects
Bystrinsky GOK
2
open pits
I
I
I
N
O
S
V
D
K
S
L
R
O
N
I
I
I
I
N
O
S
V
D
A
L
O
K
I
I
I
N
O
S
V
D
Y
K
S
L
A
K
Y
A
B
A
Z
NornickelAnnual report | 2020STRATEGIC REPORT2
COMPREHENSIVE
ENVIRONMENTAL PROGRAMME
CLIMATE CHANGE
AIR
WATER RESOURCES
TAILINGS AND WASTE
LAND
BIODIVERSITY
36 37
TARGETS
MINIMISE
CLIMATE CHANGE
IMPACT (REDUCE
CO2 EMISSION
INTENSITY)
AND MITIGATE
PHYSICAL RISKS
RELATED TO CLIMATE
CHANGE
IMPROVE AIR
QUALITY (REDUCE
SO2 EMISSIONS)
IN THE AREAS
OF OPERATION
(NORILSK INDUSTRIAL
DISTRICT AND KOLA
PENINSULA)
MAINTAIN RECYCLED
WATER RATIO
AND REDUCE
POLLUTION, CONTINUE
PROVIDING CLEAR
WATER TO LOCAL
COMMUNITIES
TARGETS
MAINTAIN SAFE
OPERATION
OF TAILINGS
FACILITIES
AND MINIMISE
ENVIRONMENTAL
IMPACT OF MINERAL
AND NON-MINERAL
WASTE
RESTORE DISTURBED
LANDS AND UPDATE
MINE AND PLANT
SHUTDOWN PLANS
BIODIVERSITY
SUPPORT PROGRAMME
Next steps:
Implement initiatives to ensure
energy efficiency, reduce CO2
emissions and mitigate physical risks
Next steps:
Execute on Sulphur Programme 2.0
and other air emission reduction
projects
Next steps:
Build and run new treatment
facilities, adopt new technical
solutions, remediate pollution
from environmental accidents in line
with recommendations resulting
from the Great Norilsk Expedition
Next steps:
Build a mass balance model
for waste management
and prepare for the self-assessment
under the Global Tailings Standard
Next steps:
Update shutdown plans across all
units, implement the Great Norilsk
Expedition’s recommendations
on soil restoration, collect waste
and remediate land in the Norilsk
Region
Next steps:
Restore biodiversity disturbed
by recent environmental incidents,
expand the monitoring programme
incorporating the Great Norilsk
Expedition’s recommendations
CAPITAL EXPENDITURES
To be updated in 2021
USD 3.6 bn
USD 1.1 bn
CAPITAL EXPENDITURES
USD 0.6 bn
USD 0.3 bn
To be updated in 2021
NornickelAnnual report | 2020STRATEGIC REPORT2 SULPHUR PROGRAMME 2.0
38 39
ROAD MAP
CONSTRUCTION STATUS
NMP
Phase 1
CP
Phase 1
2025
2023
Phase 2
Phase 2
Nickel Plant
(shut down in 2016)
Copper production chain (refining)
Monchegorsk
(to be shut down in 2021)
Copper Plant
Norilsk
Smelting shop
Nikel
(shut down
in December 2020)
KOLA DIVISION
Nadezhda
Metallurgical
Plant
NORILSK DIVISION
Ongoing
Ongoing
Ongoing
2020
2021
2023
2025
STRATEGIC
ASPIRATION 2030+
Streamline
smelting
operations
in Nikel to reduce
SO2 emissions
in the Russia–
Norway border
area
2x+
reduction
in SO2 emissions
by 71% in Nikel
and Zapolyarny1
Complete
the shutdown
of smelting
operations in Nikel
and copper
refining operations
in the Kola
Peninsula
7xreduction
in SO2 emissions
by 85%1
at the Kola
Division
Launch Sulphur
Programme 2.0
anchor initiative
for the recovery
of furnace
gases
at Nadezhda
Metallurgical
Plant
~2x
reduction
in SO2 emissions
by 45%1
at the Norilsk
Division
Launch Sulphur
Programme 2.0
Copper Plant
initiative
for the recovery
of furnace
and converter
gases
Recover sulphur-
poor gases
(including
converter gases)
at Nadezhda
Metallurgical
Plant
10xreduction
in SO2 emissions
by 90%1
at the Norilsk
Division
20x+
reduction
in SO2 emissions
by over 95%1
at the Norilsk Division
1
From a 2015 baseline.
SO2
Min
Nadezhda Metallurgical
Plant
A flagship project for the recovery of furnace
gases and construction of sulphuric acid
neutralisation facilities, including related
infrastructure:
~85% of contracts already signed
•
• The project provides for the recovery of gases
following the expansion of the smelting
operations (3rd production line)
•
Install piles and steel structures, and construct
a gypsum storage facility – ongoing
• Manufacture core equipment
Copper Plant
Project to recover over 99%–99.5% of SO2
(in line with global best practices), construction
of a continuous converting complex. Preparation
and update of design solutions:
• Phase 1: Launching the retrofit of the gas
cleaning unit
~45% of contracts already
signed
• Phase 2: Basic engineering/development
of design documents – ongoing. Construction
is expected to start in the second half of 2021
2
Including construction of additional neutralisation facilities
and related infrastructure for the 3rd furnace at Nadezhda
Metallurgical Plant.
Investment2
~USD 3.6 bn
NornickelAnnual report | 2020STRATEGIC REPORT2 CLIMATE CHANGE STRATEGY
TARGETS TO 2030
Maintain the current level
in absolute terms
Maintain the current level
in relative terms
Maintain absolute greenhouse gas emissions
(Scope 1 + 2) from production enterprises below
10 mln t of CO2 equivalent
Maintain GHG emissions (Scope 1 + 2)
per tonne of Ni equivalent in the bottom
quartile of the global GHG intensity curve
for the mining and metals industry
CLIMATE RISK ASSESSMENT AND MANAGEMENT
Transition risks
Physical risks
Source: [UPD]
IEA’s Sustainable Development Scenario outlines
a neutral/positive net effect for Nornickel metals
Adoption of a programme to assess physical
risks related to climate change and large site
monitoring
KEY INITIATIVES UNDER THE CLIMATE CHANGE STRATEGY
Reducing physical risks
Boosting energy efficiency
Reducing
CO2 emissions
KEY STEPS IN 2021 AND BEYOND
Developing and deploying
a system for monitoring
the foundations of industrial
and municipal facilities within
the permafrost area of Norilsk
(including through satellites
and geographic information
systems)
Delivering the strategy across divisions and assets:
• Developing key initiatives to mitigate physical risks, boost
energy efficiency and reduce CO2 emissions
• Drafting CAPEX plans and project implementation
Aligning climate
change disclosure
with TCFD requirements
schedules
40 41
RUSSIA’S PROGRESS
TOWARDS THE GOALS
OF THE PARIS
AGREEMENT
RUSSIA MAKES PROGRESS
TOWARDS THE GOALS OF IEA’S
SUSTAINABLE DEVELOPMENT
SCENARIO TO 2040, CHANGE
IN CO2 EMISSIONS SINCE 1990, %
320
60
3
-20
-30
-18
China
World
USA
EU
Russia
SDS2040
SINCE 2010, NORNICKEL HAS
SUBSTANTIALLY REDUCED ITS
CO2 EMISSIONS (SCOPE 1 + 2),
MLN T
2020
9,7
2013
11
2010
32
– 70%
ХХ
8
8
7
AIM STATED IN THE PARIS
7
AGREEMENT
Holding the increase in the global
average temperature to well
below 2 °C above pre-industrial
levels and pursuing efforts to limit
the temperature increase to 1.5 °C
above pre-industrial levels
NORNICKEL AHEAD
OF ITS GLOBAL PEERS
SCOPE 1 + 2 GREENHOUSE GAS
EMISSIONS (CO2 EQUIVALENT)
9.71
Nornickel
12.6
Company 4
14.7
Company 3
17.7
Company 2
28.0
Company 1
18
Industry
average
SCOPE 3 GREENHOUSE GAS
EMISSIONS (CO2 EQUIVALENT)1
460
Industry
average
2.6
Nornickel
226.0
Company 4
491.0
Company 3
563.0
Company 2
565,0
Company 1
51%
AVERAGE SHARE OF LOW-
CARBON ENERGY SOURCES
IN ENERGY CONSUMPTION
IN THE NORILSK REGION
IN 2018–2020
46%
AVERAGE SHARE OF LOW-
CARBON ENERGY SOURCES
IN THE GROUP’S ENERGY
CONSUMPTION IN 2018–2020
ENTERPRISES
TO CURB ABSOLUTE
GREENHOUSE GAS
EMISSIONS
KEEP ABSOLUTE GREENHOUSE
GAS EMISSIONS (SCOPE 1
+ 2) FROM PRODUCTION
ENTERPRISES BELOW 10 MLN T
OF CO2 EQUIVALENT, MLN T
OF CO2 EQUIVALENT
Target 10 mln t
11.3
2030
9.7
2020
11.8
2013
Production emissions1
Emissions from infrastructure facilities
and households
2030 AMBITION
MAINTAIN PRODUCTION
EMISSIONS OF CO2
NOT HIGHER THAN
10 MLN T
OF CO2 EQUIVALENT
OF GREENHOUSE
GAS EMISSIONS
(SCOPE 1 + 2) ...
... factoring in long-term production
growth targets and the launch
of Sulphur Programme 2.02
Source: Company estimates, IEA, World Energy
Outlook 2020, https://ourworldindata.org/
co2-emissions#co2-emissions-by-region
Source: official company data, with the peer
group including leading diversified mining
companies (BHP, Vale, AngloAmerican, Freeport
and RioTinto)
Source: Company estimates
1
2
Our greenhouse gas emissions were measured in line with the GHG Protocol, which includes emissions from transportation of products from the Company’s production units
to the customer, as well as from the primary processing of products by the customer.
2019 estimates in line with the GHG Protocol Corporate Accounting and Reporting Standard. Nornickel’s GHG emissions include emissions from supplying electricity
to Norilsk through NTEK, along with potential CO2 emissions from Sulphur Programme 2.0.
NornickelAnnual report | 2020STRATEGIC REPORT2 KEY INVESTMENT PROJECTS
Upstream facilities
Investment projects to develop mines in the Norilsk
Industrial District will ramp up their output from 24 mln t
to 26 mln t of ore by 2025.
LOCATION
Norilsk Industrial District,
Krasnoyarsk Region
SKALISTY MINE
MAYAK MINE 1
Rich and cuprous ores from the Talnakhskoye deposit.
Rich and disseminated ores from the Talnakhskoye deposit.
42 43
2020
Mining
2.5 mln t of ore
Investments
RUB 8 bn
(USD 109 mln)
KOMSOMOLSKY MINE
2021–2025
Maintaining ore production at levels of
up to 2.5 mln t
Investments
RUB 49 bn
(USD 0.7 bn)
Rich, сuprous and disseminated ores from the Talnakhskoye and Oktyabrskoye
deposits.
2020
Mining
4.3 mln t of ore
Investments
RUB 3.8 bn
(USD 51 mln)
2021–2023
Maintaining ore production at levels of
up to 4.2 mln t
RUB 9.7 bn
Investments
(USD 0.1 bn)
2020
Mining
0.8 mln t of ore
Investments
RUB 0.6 bn
(USD 8 mln)
TAIMYRSKY MINE
Rich ores from the Oktyabrskoye deposit.
2020
Mining
4.24 mln t of ore
Investments
RUB 7.1 bn
(USD 97 mln)
1
Excluding the comprehensive development of Mayak Mine.
2021–2023
Maintaining ore production at levels of
up to 1.0 mln t
RUB 20.3 bn
Investments
(USD 0.3 bn)
2021–2023
Maintaining ore production at levels of
up to 4.25 mln t
RUB 21.0 bn
Investments
(USD 0.3 bn)
NornickelAnnual report | 2020STRATEGIC REPORT2 OKTYABRSKY MINE
Rich, сuprous and disseminated ores from the Oktyabrskoye deposit.
2020
Mining
5.3 mln t of ore
Investments
RUB 1.1 bn
(USD 16 mln)
SOUTH CLUSTER
2021–2023
Maintaining ore production at levels of
up to 5.0 mln t
Investments
RUB 27.0 bn
(USD 0.4 bn)
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 (9.3 Mtpa), an open-pit and an underground mine at Zapolyarny Mine,
and tailing dumps No. 1 and Lebyazhye.
The Norilsk Concentrator processes all disseminated ores from Zapolyarny Mine
and cuprous and disseminated ores from the Oktyabrskoye and Talnakhskoye deposits.
In 2020, the plant processed 7.6 mln t of ore.
Ore production is planned to be ramped up to 9.0 mln t by 2027 (750–850 koz
of platinum group metals, 13 kt of nickel, 20 kt of copper).
2020
Mining
1.7 mln t of ore
Investments
RUB 8.3 bn
(USD 114 mln)
44 45
Processing projects
BYSTRINSKY GOK
Nornickel owns 50.01% in Bystrinsky GOK, with CIS Natural
Resources Fund holding 39.32% and the remaining 10.67%
belonging to Highland Fund.
LOCATION
Gazimuro-Zavodsky District,
Zabaykalsky Region
GRK Bystrinskoye (Bystrinsky
GOK) is Nornickel’s greenfield
project, which includes 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
(Nornickel owns 25%, the government
-75%), as well as a rotation camp.
Project overview
Bystrinsky GOK came online in 2019,
ramping up to design capacity in 2020. Its
EBITDA in 2020 was USD 717 million (up
100% vs 2019).
Balance (economic) ore reserves at year-
end – 301 mln t, average metal content: Cu –
0.7%, Fe in magnetite concentrate – 22.4%,
Au – 0.84 g/t1. Reserves life: 31 years.
2020
Mining
2021
Mining
2022
Mining
9.8 mln t of ore2
(Cu in concentrate – 63 kt, Au
in concentrate – 241 koz, Fe
in concentrate – 2.0 mln t)
10 mln t of ore2
(Cu in concentrate – 65–70 kt, Au
in concentrate – 230–240 koz, iron
ore concentrate –1.8–2.0 mln t)
10 mln t of ore2
(Cu in concentrate – 68–73 kt, Au
in concentrate – 234.5–255 koz,
Fe in concentrate – 2.0–2.3 mln t)
Investments
RUB 7.2 bn
(USD 98 mln)
Investments
RUB 9.3 bn
(USD 150 mln)
1
2
According to the Russian classification (А + В + С1 + С2).
Throughput
NornickelAnnual report | 2020STRATEGIC REPORT2 46 47
LOCATION
Norilsk Industrial District,
Krasnoyarsk Region
TALNAKH CONCENTRATOR
Environmental projects
SULPHUR PROGRAMME 2.0 (POLAR DIVISION)
Project overview
The Sulphur Programme 2.0 is a major
environmental project aimed at gradual
reduction of sulphur dioxide emissions
in the Norilsk Industrial District
by 45% in 2023 and by 90% in 2025
(2015: baseline). In 2020, investment
in the project totalled RUB 11.3 billion
(USD 154 million) and will reach close
to USD 3.6 billion for 2019–2025.
The project is implemented in phases
at the Company’s two core metallurgical
plants in the Norilsk Industrial District –
Nadezhda Metallurgical Plant and Copper
Plant as follows:
• Phase 1: Recovery of sulphur-rich
gases into sulphuric acid at Nadezhda
Metallurgical Plant and construction
of acid neutralisation facilities
(including gypsum storage and related
infrastructure), – to be completed
by 2023
• Phase 2: Recovery of sulphur
dioxide from rich off-gases
at sulphuric facilities at Copper
Plant, discontinuing of converter
operations with sulphur-poor gases
and expansion of neutralisation
infrastructure (for sulphuric acid
from the Cu stream) – to be completed
by 2025
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 2020, the plant processed
10.9 mln t of ore, with nickel recovery in bulk flotation
concentrate reaching 87.9% (+ 2.0% y-o-y).
LOCATION
Norilsk Industrial District,
Krasnoyarsk Region
Plans for the 3rd Phase 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. In 2020, the project’s CAPEX
totalled RUB 2.8 billion (USD 38 million).
precious metals from chlorine-leaching
residues at Kola MMC and the Polar
Division. The new technology will
also help achieve the highest purity
of metal and reduce air emissions.
In 2020, the upgrade was completed,
with investments for the period totalling
RUB 1.4 billion (USD 18.6 million).
LOCATION
Monchegorsk, Murmansk Region
Project overview
The upgrade has been rolled out in three
phases. Phase 1 was completed in 2015
and included the retrofit 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. Phase 2 was completed in 2018
and involved the expansion of the main
building, revamping of the reagent
preparation building and construction
of new 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.
NICKEL TANKHOUSE UPGRADE
Project overview
Tankhouse 2 is part of Kola MMC,
which produces nickel cathodes using
the technology of nickel electrowinning
from chlorine dissolved tube furnace nickel
powder. The upgrade project provided
for harnessing a more effective and cleaner
nickel refining technology to increase
its output of nickel cathodes to 145 ktpa.
In Q1 2020, Nornickel commissioned
all series of electrowinning cells. In Q2,
Kola MMC’s Chemical-and-Metallurgical
Shop launched an alternative technology
to process chlorine-leaching residues
at the tankhouse, increasing the throughput
and reducing work-in-progress in producing
NornickelAnnual report | 2020STRATEGIC REPORT2 COMPREHENSIVE ENVIRONMENTAL PROJECT
AT KOLA MMC
Energy projects
48 49
During 2021, the shop’s building will
be prepared for mothballing: it will
be cleaned, while materials containing
non-ferrous metals will be collected
and sent for recycling. The industrial site
may be preserved if an option is found
for transforming it by installing green
industries and creating new jobs.
With the shutdown of the smelting shop,
our production chain was modified,
with a preliminary upgrade of the flotation
shop conducted at Zapolyarny
Concentrator to produce high-grade
and low-grade saleable concentrate.
The construction of the first 250 kt
loading point for low-grade concentrate
has been completed. The second
loading point, for high-grade concentrate,
while still under construction, is in pilot
operation. The copper refining shop
in Monchegorsk was closed in March
2021.
Project investments between 2021
and 2025 will total RUB 3.5 billion
(USD 49 million), in 2020 - RUB 1.2 billion
(USD 16 million).
Project overview
The environmental project at Kola MMC
provides for the complete shutdown
of smelting operations in Nickel,
upgrade of the beneficiation plant
in Zapolyarny, construction of a loading
point to ship concentrate to consumers
and discontinuing copper production
in Monchegorsk with the obsolete copper
anode electrolysis technology replaced
with more advanced electrowinning.
In late 2020, Nornickel shut down its
smelting shop in Niсkel town. The shop’s
annual throughput was 900 kt of charge.
The project helped reduce sulphur
dioxide emissions by 71% in Nickel
and Zapolyarny and by 58% in 2020 (from
a 2015 baseline) in the Russia–Norway
border area.
When shutting down the shop, employees
who wished to stay with the Company
were offered jobs in other units, while
those who decided to try their hand
at entrepreneurship were provided
with favourable starting conditions.
Of the 660 employees of the smelting
shop, 72% chose to continue working
at the Company. The Company will spend
some RUB 912 million (USD 12.8 million)
on outplacement programmes
for the smelting shop’s employees
in 2020–2022.
LOCATION
Nickel, Monchegorsk,
Zapolyarny, Murmansk Region
ENERGY INFRASTRUCTURE UPGRADES
In the Norilsk Industrial District 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. Electricity for the needs of Norilsk
Division’s production facilities, as well as local
municipalities and social institutions is generated using
renewables (hydropower) and gaseous hydrocarbons
(natural gas).
LOCATION
Norilsk Industrial District,
Krasnoyarsk Region
on a comprehensive program to reduce
physical risks, which comprises projects
to revamp key infrastructure facilities (fuel
storage, electricity supply, gas supply)
and on a program of industrial safety
improvement. In 2020, investments
in energy infrastructure totalled
RUB 16 billion (USD 219 million).
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 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.
Investments in energy assets between
2021 and 2025 will exceed USD 4 billion,
including USD 1.3 billion to be spent
NornickelAnnual report | 2020STRATEGIC REPORT2 Nornickel
STABLE
POSITION
Annual Report | 2020
COMMODITY MARKETS
50 51
FOR MORE DETAIL
SEE ON THE WEB-SITE
//NORNICKEL.COM
Despite all the lockdown difficulties, in 2020,
Nornickel retained leadership and all
the capabilities to support future successful
operation.
STAINLESS
SUPERIORITY
STAINLESS STAINLESS SUPERIORITY3 СONFIDENT POSITIONS
Introduction
LIDERSHIP
IN COMMODITY
MARKETS
According to Russia's Ministry of Economic Development, non-ferrous metals production
in the Russian metals industry returned to pre-crisis levels over the last three years.
With the nation's abundant raw materials and leading positions in many global markets,
Russian industry players are optimistic about their future amid projections of a 3% to 5%
annual growth in metals demand until 2030 contained in Russian and global economic
growth forecasts.
Despite all the lockdown difficulties,
in 2020, Nornickel retained leadership
and all the capabilities to support future
successful operation.
However, the coronavirus pandemic
has impacted on all industries
of the economy, with disruptions
to operations, issues with exports and raw
material deliveries, a marked drop
in stainless crude steel output globally,
and declining production of vehicles due
to the pandemic - all playing a role.
Nickel
No. 1 globally in high-grade nickel
production
the production of electric vehicles (EV)
growing at a CAGR of over 40% since
2016. This led to a 13% growth in nickel
consumption by the EV industry in 2020.
In 2019, the nickel market was in deficit
but moved into surplus in 2020 driven
by a significant growth in nickel pig iron
production in Indonesia.
Total nickel consumption in other
industries slipped 14% due to falling
consumer demand amid the COVID-19
pandemic and related restrictions.
In 2020, the consumption of primary
nickel, which is used in stainless steel
and batteries, remained almost flat.
The growth in stainless crude steel
output in China, where the industry
was supported by a government
stimulus package, and Indonesia, where
new production capacity came online,
was offset by a two-digit production
slump in India (30%), the USA and Japan
(18%), Taiwan (14%), and Europe (10%).
A steady trend towards road transport
electrification continued supporting
nickel usage in lithium-ion batteries.
In 2020, global sales of electric
vehicles (plug-in HEVs and battery
electric vehicles) grew by 37%, with
Price-wise, nickel declined to USD 11,000/t
in Q1 2020 due to the COVID-
19 pandemic and falling consumer
demand amid suspended production,
but as the COVID-19 situation improved
nickel surged to USD 15,550/t in early
September, supported by a weaker US
dollar and the Tesla CEO's call for higher
sustainable nickel production. After a brief
fall to USD 14,500/t due to a resurgence
in coronavirus cases, nickel prices continued
trending upwards, reaching USD 17,500/t
on the back of higher output of stainless
crude steel in China and concerns around
ore supply from the Philippines following
the suspension of production by a leading
ore producer due to COVID-19. At the year
end, the price settled at USD 16,500/t.
Copper
No. 11 globally in copper mine
production
China is the largest copper consumer
in the global market, and the nation's rapid
economic recovery following a period
of coronavirus restrictions provided a strong
support to demand for copper, leading
to record low copper exchange inventories
by year end. In Europe, where Nornickel
sells the bulk of its copper cathodes,
consumption slipped 5.7%, while in Russia,
consumption grew by 2%. Global refined
copper consumption declined 1% in 2020.
Global copper mine production declined
marginally in 2020, but a drawdown from
the accumulated semi-product inventories
boosted refined copper output by 2%.
Despite the negative impact of the COVID-
19 pandemic, copper prices grew from
the Q1 lows of about USD 4,600/t
to USD 7,964/t at the end of December
2020, supported by the following factors:
◾ Quick economic recovery starting
in Q2 2020 and led primarily by China
◾ Implementation of government stimulus
packages in major economies (USA,
European Union, China, etc.)
◾ The US dollar falling against its
benchmark currency basket
◾ Soft monetary policy of central banks
◾ Growing investor optimism amid
expectations of faster road transport
electrification and growth in renewables
(driven by the government stimulus
52 53
Prices were highly volatile throughout
2020: an upward trend that emerged
in 2019 continued into 2020, followed
by a sharp slump amid the pandemic
and then a new surge on the back
of the market recovery. The average
annual price of palladium grew 43% y-o-y
in 2020.
In 2020, enough platinum was produced
to meet the needs of existing consumers;
however, strong investment demand
during the year pushed the platinum
supply and demand balance into deficit.
focus on green technology across
the EU and plans announced
by the new US administration)
◾ A new policy of copper scrap
recategorisation in China, resulting
in temporary scrap shortages
on the Chinese market
◾ Strikes at Las Bambas mine in Peru
and El Teniente mine in Chile
◾ Record low exchange inventories
of copper.
Platinum group metals (PGMs)
No. 1 globally in refined palladium
production, No. 3 in platinum
production, No. 4 in rhodium production
The average annual price of platinum
grew 2% y-o-y.
The automotive industry is the predominant
consumer of palladium, platinum,
and rhodium. Early in 2020, car
manufacturers and dealerships had
to suspend operations due to the pandemic.
On the other hand, tighter environmental
regulations in key economies led to higher
PGM loadings per vehicle, which has
partially offset the downward trend.
The supply of PGMs, particularly platinum
and rhodium, was also impacted
by operational issues at Anglo American
Platinum's pyrometallurgical facilities,
which significantly reduced refined PGM
output in 2020.
On the palladium market, consumption
has been outpacing production
since 2010, with the deficit covered
by inventories.
Platinum consumption by the jewellery
industry (the second-largest platinum
consumer after the automotive industry)
continued declining due to lower demand
for luxury items amid the pandemic
and growing competition from gold
jewellery.
The rhodium market remained
undersupplied in 2020, with production
declines outpacing demand fall
in the automotive and other industries.
This led to high volatility in rhodium
prices, which hit all-time highs twice
during the year: USD 13,800/oz in March
and USD 17,000/oz in December.
The average annual price stood
at USD 11,231, up 188% y-o-y.
NornickelAnnual report | 20203COMMODITY MARKETS Nornickel
54 55
NICKEL (Ni)
THE COMPANY’S INDUSTRY POSITION
№ 1
IN HIGH-GRADE NICKEL
PRODUCTION (%)
№ 2
IN PRIMARY NICKEL
PRODUCTION (%)
22
Nornickel
17
Jinchuan
13
Glencore
12
Vale
8
8
BHP Billiton
Sumitomo MM
3
Sherritt
2
Impala
1
Anglo American
14
Other MMCs
18
Tsingshan Group
9
Nornickel
7
7
7
Jinchuan
Delong Group
Vale
6
Glencore
5
Shandong Xinhai
3
3
Sumitomo MM
BHP Billiton
2
Eramet
33
Other MMCs
KEY TRENDS IN THE NICKEL MARKET
In 2020, the nickel market moved
into a surplus of 87 kt, or 4% of annual
consumption (compared to a deficit
of 28 kt in 2019). This was due to a record
increase in nickel pig iron (NPI) production
driven by the commissioning of new
facilities in Indonesia amid a COVID-19
related marginal decrease in high grade
nickel consumption.
PRIMARY NICKEL CONSUMPTION
BY REGION (%)
5
2.4
mln t
59
23
13
China
Europe and Africa
Rest of Asia
Americas
Source: Company data
S
T
E
K
R
A
M
Y
T
I
D
O
M
M
O
C
3
.
O
N
Amid the first wave of COVID-19
(with rapidly growing number of cases,
national lockdowns imposed in a number
of countries, movement restrictions
and increased global uncertainty), nickel
price fell to USD 11,000/t at the end
of the first quarter of 2020; however,
starting from the second half of April,
the price showed stable growth, reaching
USD 17,000/t by year end. As a result,
the average nickel price in 2020 decreased
by only 1% y-o-y. The price recovery
was driven by the following factors:
◾ Stimulus package introduced
by the Chinese government
for post-coronavirus recovery
of the economy, which led
to increased production
of 300-series stainless steel
in China and Indonesia
◾ Growth in nickel ore prices due
to higher domestic demand
in China, Indonesian nickel ore
export ban, disruptions to ore
supply from the Philippines due
to nationwide COVID-19 lockdown
◾ Lower interest rates, higher global
liquidity, and a weaker US dollar,
all which had an overall favourable
impact on raw material prices
◾ Long-term expectations of higher
demand for nickel in the battery
sector on the back of a significant
increase in electric vehicle sales
in Europe and recovering sales
in China, bolstered by the Tesla
CEO’s call for mining more nickel
while maintaining a relentless
focus on sustainability.
AVERAGE ANNUAL NICKEL PRICES (USD/T)
2015
11,807
2016
9,609
2017
10,411
2018
13,122
2019
13,936
2020
13,789
Source: London Metal Exchange (cash settlement)
LONDON METAL EXCHANGE NICKEL PRICE (USD/T)
18,000
16,000
14,000
12,000
10,000
January
February
March
April
May
June
July
August
September
October
November
December
January
Annual report | 20203COMMODITY MARKETS
MARKET BALANCE
In 2020, the nickel market moved
into a surplus of 87 kt (compared
to a deficit of 28 kt in 2019), primarily
driven by higher NPI production
in Indonesia (up 63%, or 228 kt)
on the back of new production start-ups.
The commissioning schedules were not
affected by the COVID-19 pandemic. NPI
production in China dropped by 12%,
or 72 kt, due to Indonesian nickel ore
export ban introduced from 2020
and disruptions to ore supply from
the Philippines, with its high-grade nickel
ore reserves running down. Production
of refined nickel decreased by 3%, or
29 kt, while production of its chemical
compounds increased by 9%, or 12 kt,
mostly due to higher nickel sulphate
production for use in lithium-ion batteries.
Conversely, production of other forms
of low-grade nickel decreased by 6%, or
26 kt.
Nickel consumption remained virtually
unchanged in 2020 with a marginal
decrease of 2 kt. Growth in stainless steel
production in China (+8%) and Indonesia
(+16%) coupled with higher nickel
consumption in the battery sector (+13%)
was offset by weaker demand from other
industries due to COVID-19 restrictions.
Thus, nickel consumption in the stainless
steel sector in other countries fell by 15%;
global consumption in alloys and special
steels by 13%; in electroplating by 12%;
and in other industries by 17%.
The combined nickel inventories
of the London Metal Exchange (LME)
and Shanghai Futures Exchange (SFE)
grew by 77 kt to 265 kt by year end.
The biggest metal inflow for the year
was recorded in January and February
when LME-approved warehouses
received over 80 kt of nickel, primarily
from sources where inventories
were built up during a major draw-down
of nickel inventories from LME-approved
warehouses in 2019. Since March,
the exchange nickel inventories remained
practically unchanged.
NICKEL PRODUCTION
AND CONSUMPTION BALANCE (KT)
87
2020
–28
2019
–121
2018
Source: Company data
CONSUMPTION
NICKEL CONSUMPTION BY INDUSTRY IN 2020 (KT)
Industry
Stainless steel
Batteries
Special steels
Electroplating
Alloys
Other
Consumption
Share, %
1,779
211
131
127
124
69
73
9
5
5
5
3
MAIN CONSUMING
INDUSTRIES
Stainless steel production is the main
area of nickel consumption (over 70%
in 2020). There are many grades
of stainless steel, with austenitic stainless
steel being the most common family
(over three quarters of global production),
which includes the 300 series
and 200 series.
The 300 series steels have higher
nickel content, ranging typically
between 8% and 12% but reaching
20% in certain grades. Nickel in these
concentrations improves corrosion
resistance and strength in a broad range
of operating temperatures, ensures
good ductility, resistance to aggressive
environments, and makes the metal non-
magnetic. This series is the most versatile
and is widely used in the construction,
food, chemical, transport, energy,
and other industries.
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 global 200
series steel production.
56 57
Although they account for only 1% to 2%
of global crude steel output, 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%).
to 31 mln t) and Indonesia (up 20%
to 2.7 mln t) was offset by steel output
declines in other countries and regions
due to the COVID-19 pandemic, led
by Europe (– 10%), USA (– 18%), Japan (–
18%), India (– 30%) and Taiwan (– 14%).
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,
cutlery, kitchenware, home decor items,
and razor blades.
Nonetheless, primary nickel consumption
for stainless steel production grew by 3%
to 1.78 mln t. This growth was completely
offset by increased use of NPI (up 16%
or 156 kt) in China and Indonesia, while
the consumption of high grade nickel
in stainless steel production dropped
by 13%, or 85 kt, to 238 kt. NPI supply is
expected to grow in the coming years,
putting a significant pressure on high
grade nickel consumption by the stainless
steel sector.
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 recent years.
In 2020, total stainless steel output
decreased by 3% to 52 mln t. An increase
in crude steel output in China (up 4%
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-ion 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. Lithium-cobalt cathodes were initially
used in electronics. In the 2000s, nickel
and aluminium and later manganese
were also added to the composition.
Nickel-metal hydride batteries (Ni-
MH). Ni-MH batteries were developed
in 1989 as a substitute for Ni-Cd batteries,
to phase out 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).
These were the first batteries using
nickel, developed back in 1899. These
days their use is limited, as the EU
prohibited cadmium on grounds
of toxicity.
Growth in lithium battery production
is primarily driven by road transport
electrification. The 2016–2020 CAGR
of electric vehicles (plug-in HEVs
and battery electric vehicles)
was over 40%. The impetus for transport
electrification has come from government
incentives, more stringent environmental
regulations, improved battery
performance, and lower production costs
of battery cells.
In recent years, China has been one
of the most important growth hubs for EV
manufacturing, with plans to increase
NEV (electric vehicles and plug-in hybrids)
sales to 20% of total vehicle sales
by 2025 and to 50% by 2035.
NICKEL CONSUMPTION IN 2020
(KT)
2,441
2020
+44
Stainless steel
+24
Batteries
–20
Special steels
–19
Alloys
–31
Other
2,443
2019
Source: Company data
NornickelAnnual report | 20203COMMODITY MARKETS 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, leading to the first-ever decline
in NEV sales for 12 consecutive months.
As a result, NEV sales dropped by 44%
in the first half of 2020. Sales increased
as the nation’s economy quickly
recovered in the second half of the year,
posting a 5% annual growth for the full
year – nonetheless a multi-year low.
It was against this backdrop, that Europe
became the new global driver of EV sales
growth. 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 54%
of total vehicles sold in 2020, buyers are
exempted from vehicle registration tax
and value added tax (VAT).
Europe’s share of global EV sales
grew from 26% in 2019 to 44%
in 2020. 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 threat of fines reaching
into the billions. Also, the European
Green Deal, a plan to achieve carbon
neutrality and net-zero emissions
by transition from fossil to renewable
energy, was adopted. A battery
production chain is being developed
in the region in anticipation of increased
demand. The total announced capacity
of key producers (CATL, LG Chem,
SK Innovation, Samsung, Northvolt
and others) already exceeds 500 GW•h
by 2025, which would be equivalent
to 400 ktpa of nickel. By 2030, total
capacity is expected to exceed 700
GW•h (about 600 kt of nickel per year).
Battery cell production is one of the final
stages of battery manufacturing,
preceded by the production of cathode
precursors (hydroxides of transition
metals) and then, the production
of cathode material itself by thermal
conversion into oxide when lithium
is added. The main hubs of cathode
precursor production in 2020 included
China (63% of global production), Japan
(28%) and South Korea (9%).
There are several types of lithium-
ion batteries available depending
on the cathode materials used: LCO
(lithium, cobalt oxide), LFP (lithium, iron
phosphate), LMO (lithium, manganese
oxide), NCM (nickel, cobalt, manganese)
and NCA (nickel, cobalt, aluminium).
LCO batteries are principally confined
to mobile electronics, as the small size
of the market, high cobalt prices and low
power prevent their application in EVs.
However, other types of cathodes are
widely employed in the EV sector.
The current trend is the growing global
share of nickel-containing NCM and NCA
batteries, owing to their higher energy
density and specific energy, which
increases drive range. LFP batteries
for cars are made only in China, where
these batteries accounted for about 30%
of the total in 2020.
Growing nickel consumption
in Li-ion batteries is driven not only
by an increasing share of nickel-
containing batteries but also by a higher
average nickel content in the cathode
material, which, in turn, is caused
by the need to replace expensive cobalt
units and increase energy density.
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 compounds
in cathode materials, 2020 saw nickel-
intensive compounds – NCM 6:2:2,
NCM 5:3:2, and NCM 8:1:1 – take
the lead. Going forward, conversion
to NCMA (nickel, cobalt, manganese,
aluminium) with a higher content of nickel
is expected, and some producers
announced plans to launch commercial
production of LNO (lithium, nickel oxide),
a cathode material with nickel content
exceeding 50%.
The growing popularity of electric
and hybrid cars, along with the evolution
of cathode technology towards nickel-
intensive types add to the tailwinds
for significant growth in primary nickel
consumption by the industry in the longer
run.
In 2020, total nickel consumption
in other industries (alloys, special steels,
electroplating) dropped by 14%, or 71 kt,
amid weaker end consumer demand due
to COVID-19 restrictions. These sectors
are expected to recover in 2021 albeit
at the rates below pre-pandemic levels.
58 59
RIMARY NICKEL PRODUCTION
IN 2019–2020 (MLN T)
–2 %
+9 %
+5 %
2.5
2.4
1.0 | 1.5
2020
1.0 | 1.4
2019
High-grade nickel
Low-grade nickel
Source: Company data
NPI PRODUCTION IN 2016–2020
(KT)
1,102
946
732
576
453
512 | 590
2020
584 | 362
2019
471 | 262
2018
402 | 174
2017
366 | 87
2016
China
Indonesia
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. 2020’s
main producers of high-grade nickel
were Nornickel, Jinchuan, Glencore,
Vale, BHP and Sumitomo Metal Mining
◾ Low-grade nickel (ferronickel, NPI
and nickel oxide), produced from
laterite feed only. In 2020, the key
producers of low-grade nickel included
Chinese and Indonesian NPI smelters,
as well as ferronickel producers such
as Eramet, POSCO, Anglo American,
Solway, South32 and others
In the first half of 2020, the COVID-19
pandemic caused disruptions to many
production sites. In most cases, operations
were restarted later although some sites
in Australia and Africa have not resumed
production yet.
Despite production restrictions, primary
nickel production in 2020 grew by 5%, or 112
kt, y-o-y driven primarily by a growing NPI
output in Indonesia.
In the first half of 2020, the COVID-
19 pandemic caused disruptions
to many production sites. In most cases,
operations were restarted later although
some sites in Australia and Africa have
not resumed production yet.
Despite production restrictions, primary
nickel production in 2020 grew by 5%, or
112 kt, y-o-y driven primarily by a growing
NPI output in Indonesia.
Most of the growth in 2020 low grade
nickel production came from Indonesian
NPI at 590 kt (+ 63% y-o-y), driven by new
production capacity start-ups. COVID-
19 pandemic restrictions did not affect
the capacity project launch times. NPI
production in China decreased to 512
kt (– 12%), due to Indonesian nickel ore
export ban imposed in January 2020
and disruptions to ore supply from
the Philippines, which reduced availability
of raw materials for NPI production
in China.
Ferronickel production remained
virtually unchanged in 2020 at 388 kt
(– 3%). Increases in ferronickel output
in the Dominican Republic, Guatemala
and Brazil were offset by production
curtailments in Japan, Greece, New
Caledonia and Columbia.
Nickel oxide output declined by 21% to 52
kt primarily due to VNC’s New Caledonia
refinery decommissioning and switch
to a 100% mixed hydroxide product,
followed by a shutdown of operations
at Vale’s site in Dalian.
Notably, some ferronickel assets
face a growing risk of shutdown due
to the threat of potential replacement
of ferronickel by NPI in the stainless
steel sector. Also, social and political
tensions in New Caledonia, where
the conflict over the sale of Vale’s
asset and the island’s independence
recognition continued to escalate,
resulted in a production halt at VNC’s
site and disrupted operations at SLN’s
Doniambo.
NornickelAnnual report | 20203COMMODITY MARKETS COPPER (Cu)
60 61
KEY TRENDS IN THE COPPER MARKET
Despite the global economy taking
a hit from the COVID-19 pandemic,
global consumption of copper cathodes
decreased by only 1% in 2020. This
was primarily due to a 4% growth
in China’s consumption, as the Chinese
economy posted a V-shape recovery
following a two-month lockdown
in early 2020, which boosted demand
for copper in the second half of the year.
Consumption ex-China slipped 7%
in the reporting period.
Copper was priced at USD 6,200/t early
in 2020 but slumped to USD 4,600/t
in March amid an escalating COVID-
19 pandemic. However, already
in April, when lockdowns were lifted
and the economy started recovering,
copper price trend reversed its trajectory
to become positive. In the second half
of the year, this price rally intensified
bolstered by government support,
further production recovery in China,
growing investor optimism after positive
results of coronavirus vaccine trials
were announced, and expectations
of accelerated road transport
electrification.
Towards the year end, the positive price
trend was driven by disruptions to mine
operations in Latin American, a new
policy of copper scrap recategorization
in China, and expectations of additional
green economy investments in the United
States announced by the new
administration. These developments
contributed to the copper price peaking
at USD 7,964/t in December 2020,
a fresh high since 2013.
Copper mine production decreased
by 1.5% in 2020; however, the draw-
down of copper concentrate
inventories boosted refined copper
output by 2%. As a result, the market
flipped to a marginal surplus of less
than 2% of annual consumption.
Stocks held in Shanghai Futures
Exchange and London Metal
Exchange warehouses kept growing
in Q1 2020, peaking early in Q2, then
staring to fall as the global economy
recovered, and hitting record lows
towards the year end amid lower
global copper output and increased
buying.
The LME copper price averaged
in 2020
6,181 USD/t
up 3% from USD 6,000/t a year prior.
AVERAGE ANNUAL COPPER PRICES (USD/T)
2015
5,494
2016
4,863
2017
6,166
2018
6,523
2019
6,000
2020
6,181
Source: London Metal Exchange
MARKET BALANCE
In 2020, the refined copper market
was close to balance, with a surplus
of less than 2% of the total market
volume, or 544 kt. In 2020, total
exchange inventories dropped
by 13% to 265 kt (304 kt at year-
end 2019), or at little more than four
days of global consumption. The fall
in exchange inventories was driven
by stock relocation to non-exchange
warehouses, mostly in China.
REFINED COPPER MARKET
BALANCE (MLN T)
0.5
2020
–0.1
2019
Sources: Company data, Wood
Mackenzie
THE COMPANY’S
INDUSTRY POSITION
№ 11
IN THE COPPER MINING INDUSTRY
8
Codelco
6
6
5
5
3
3
3
2
2
2
2
Glencore
BHP
Freeport
Southern Copper
First Quantum Minerals
KGHM
Rio Tinto
Antofagasta
Anglo American
Nornickel
Vale
53
Other MMCs
ources: Wood Mackenzie, corporate
reports, Company data
REFINED COPPER CONSUMPTION
BY REGION IN 2020 (%)
6
11
15
14
China
Rest of Asia
Europe
Americas
Other
54
NornickelAnnual report | 20203COMMODITY MARKETS CONSUMPTION
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, mechanical engineering,
various equipment and consumer goods
production.
China remains the largest copper
consumer globally, accounting
for 54% of the total in 2020. Despite
the pandemic, the Chinese economy
posted a V-shape recovery as early
as Q1 2020. China imported 4.5 mln
t of refined copper in 2020, up 30%
y-o-y. Copper scrap imports fell 35%
to 0.8 mln t due to China’s tighter
requirements for imported scrap quality.
Copper concentrate imports decreased
marginally by 1% to 5.4 mln t. Refined
copper consumption in China rose by 4%
to 12.5 mln t.
Copper demand in developed markets
was shrinking in 2020, with consumption
in Europe (the Group’s key market
for copper cathodes) declining by 5.7%
in 2020, in North America by 7.2%,
in Middle East by 8.9%, and in Asia
excluding China by 10%. Russia increased
its copper consumption by 2%.
REFINED COPPER
CONSUMPTION
BY INDUSTRY
END USE BY INDUSTRY (%)
In 2020, global refined copper
consumption totalled
12
23.4 mln t
down 1%, or 0.3 mln t, y-o-y.
21
11
28
28
Construction
Power grids
Heavy engineering
Transport
Consumer goods and equipment
FIRST USE (%)
13
13
74
Wire rod
Pipe
Rolled products
Sources: Company data, Wood Mackenzie
PRODUCTION
In 2020, global refined copper
output rose by 2%, or 0.4 mln t, y-o-y
to 23.9 mln t. The biggest growth
came from China, which is firmly
on track to deliver smelting and refining
capacity expansions. In 2020, refined
copper production in China grew by 1%
to 9.16 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 copper.
Refined copper output increased by 1%
in Asia on the back of growth in Japan
and the Philippines; dropped 8% in North
America, driven primarily by declines
in the US market; rose by 2% in South
America (Chile and Peru); and went up
by 3% in Europe (led by Germany, Finland
and Bulgaria).
In 2020, global copper mine
production fell 1.5% to 20.6 mln t due
mostly to the coronavirus pandemic
and disruptions to Chilean and Peruvian
mine operations caused by strikes
In 2020, mined production in Chile,
the world’s leading producer of copper,
declined by 1% y-o-y to 5.8 mln t due
to the coronavirus pandemic and short-
lived strikes. Production in Peru
dropped 13.5% to 2 mln t, also due
to the pandemic.
A 6% growth in Africa’s mined production
to 2.59 mln t was mainly due to higher
output from mines in the Democratic
Republic of the Congo and Zambia.
China ramped up copper mine production
by 4% to 1.8 mln t in 2020, while mined
production in Indonesia grew 26%
to 0.5 mln t driven by the continued
ramp-up of underground operations
at Grasberg. Mongolia and Myanmar
posted marginal output increases.
Production in North America decreased
by 2% to 2.58 mln t – down 3% and 4.5%
in the USA and Canada, respectively,
and up 1% in Mexico.
Russia’s copper mine production
increased by 2% in 2020.
62 63
REFINED COPPER PRODUCTION
IN 2020 (MLN T)
+1,5 %
23.9
2020
23.5
2019
Sources: Company data, Wood Mackenzie
COPPER MINE OUTPUT IN 2020 (KT)
2,438
2,587
1,112
1,148
1,691
1,755
1,008
1,082
8,826
8,509
386
399
2,639
2,584
1,007
918
1,823
1,798
+6 %
Africa
+3 %
Asia (excluding China)
+4 %
China
+7 %
Europe
–3.5 %
Latin America and the Caribbean
+3 %
Middle East
–2 %
North America
–9 %
Oceania
–1.5 %
Russia and the
2019
2020
Sources: Company data, Wood Mackenzie
NornickelAnnual report | 20203COMMODITY MARKETS PALLADIUM (Pd)
KEY TRENDS IN THE PALLADIUM MARKET
Despite price volatility in the first half
of 2020, palladium chalked up further gains
over the year. Early in 2020, palladium
maintained its price momentum from
the second half of 2019 amid high demand
and metal shortages on the spot market,
hitting an all-time high of USD 2,795/
oz on 28 February. After reaching this
level, palladium plummeted by almost
45% in March amid a global pandemic
and the automotive industry virtually
grinding to a halt. However, the plunge
was followed by an equally fast recovery,
supported by a faster-than-expected
pick-up in the automotive industry
and suspended processing operations
at South Africa’s mines. Palladium price
was further bolstered by a weaker US
dollar and negative real yields of treasury
bills in key countries stemming from
extraordinary monetary and fiscal measures
taken by central banks and governments
across the world. By year end, palladium
price consolidated between USD 2,315/
oz and USD 2,350/oz. Average annual
net speculative positions dropped 71%
to 10 tonnes on the New York Mercantile
Exchange (NYMEX).
AVERAGE ANNUAL PALLADIUM PRICES (USD/OZ)
2015
691
2016
613
2017
869
2018
1,029
2019
1,538
2020
2,197
Source: LPPM
MARKET BALANCE
Since 2010, there has been
a sustained undersupply
in the physical palladium market
covered by the inventories
accumulated in previous years.
In 2020, palladium supply deficit
was fully offset by drawdown
of consumers’ strategic stocks
on lower demand and uncertainty
caused by the pandemic and lower
ETF inventories.
THE COMPANY’S
INDUSTRY POSITION
№ 1
NO. 1 IN PALLADIUM
PRODUCTION1 (%)
44
Nornickel
16
Impala Platinum
14
Anglo American Platinum
5
Sibanye-Stillwater
3
Northam Platinum
18
Other MMCs
Source: Company data
INDUSTRIAL CONSUMPTION
OF PALLADIUM BY REGION (%)
18
20
11
302 t
20
31
North America
Europe
China
Japan
Rest of world
Source: Company data
2020 palladium prices averaged at
2,197
USD/oz,
up 43% from the 2019 average
of USD 1,538/oz.
64 65
PALLADIUM MARKET BALANCE IN 2020 (T)2
Palladium production and consumption balance
Outflows from ETFs
Destocking by consumers
Supply and demand balance
–6
4
2
0
CONSUMPTION
In 2020, industrial consumption
of palladium decreased by 43 t (– 14%)
y-o-y to 302 t.
AUTOMOTIVE INDUSTRY
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 risk of physical metal shortage.
PALLADIUM CONSUMPTION
IN 2020 BY INDUSTRY (%)
3 2 1
5
7
302 t
82
Exhaust aftertreatment systems
lectronics
Chemical catalysts
Dental alloys
Jewellery
Other
Source: Company data
INDUSTRIAL CONSUMPTION
OF PALLADIUM IN 2019–2020 (t)
–14 %
302
2020
345
2019
Source: Company data
1
Refined metal including production from own feedstock by third parties under tolling agreements
2
Excluding reallocated other reserves
NornickelAnnual report | 20203COMMODITY MARKETS In 2020, palladium consumption
in the automotive industry decreased
by 40 t. The plunge was driven primarily
by the spread of the coronavirus infection
and the subsequent halts in business
activity across the globe. In early spring,
most automakers had to suspend
operations, while dealers stopped
selling. However, new safety rules
were implemented at production sites
and sales outlets in a relatively short time,
and automakers and their dealerships
in various countries were able to resume
operations by early summer. China,
which was the first market to be hit
by the pandemic and subsequent
restrictions, led the global automotive
market recovery in the second half
of the year: while sales fell 79% y-o-y
in February, they were up y-o-y as early
as April. In the reporting period, car
sales in China slipped 4%. European
and North American automotive
markets were slower to recover as
they were affected by the pandemic
later than China and were under
restrictions for a longer period of time.
In September, European and North
American market recovery slowed down
on fears of a second wave of COVID-
19 and tougher restrictions. 2020
automobile sales in Europe and North
America were down 20% and 15%,
respectively. Notably, fiscal incentives
and low interest rates have mitigated
the negative impact of the pandemic
on the global automobile industry. Fiscal
incentives helped towards restoring
consumers’ purchasing power, while
lower interest rates made car loans more
affordable.
Despite declining car production
and sales, higher usage of platinum group
metals (PGMs) per autocatalyst partially
offset the negative trend. The higher
PGM loadings per vehicle were 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 in the EU is
another recently introduced regulation,
in effect as of September 2019. These
developments forced automakers
to implement more sophisticated
exhaust treatment systems and use more
PGMs per catalytic converter. In China,
the marked increase of palladium usage
in autocatalysts 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.
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. The market share
of diesel cars in Europe (the 27 EU
countries + the UK + EFTA countries)
dropped over the year from 30% to 26%.
Vehicle hybridisation is another trend
driving palladium consumption. In 2020,
production of hybrid-electric vehicles,
so called mild, full and plug-in hybrids
(PHEVs), increased by 69%, 8% and 51%,
respectively. Since hybrids include petrol
engines, they mostly use palladium-based
catalytic converters. With the same engine
displacement 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 driven by consumers migrating
from sedans to larger-engine crossovers.
In the USA, the SUV/pickup share grew
by 5% to 69% in 2020.
CHANGE IN PALLADIUM
CONSUMPTION IN 2019–2020
BY APPLICATION AREA (t)
–13 %
302
2020
–40.0
Auto catalytic converters
–1.5
Jewellery
0
Electronics
+1.0
Chemical industry
–2.0
Healthcare
–0.5
Other
345
2019
Source: Company data
ELECTRONICS
In 2020, palladium consumption
in the electronics industry remained
unchanged at 23 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. Transition to 5G telecoms
networks should also somewhat offset
lower demand elsewhere. Moreover,
despite disruptions at electronics
assembly lines during the first half
of the year, the work-from-home trend
driven by the pandemic bolstered
demand for laptops and TV sets.
CHEMICAL INDUSTRY
JEWELLERY
INVESTMENTS
66 67
In 2020, the use of palladium
in chemical catalysts increased by 1
t y-o-y. In the medium term, growing
consumption of palladium in the chemical
industry will be driven by newly launched
terephthalic acid projects in China.
CHEMICAL INDUSTRY
The consumption of palladium
in the healthcare sector continued
a downward trend and declined by 23%,
or 2 t, y-o-y due to the substitution
of palladium with composite material
alternatives and gold, which is currently
priced lower. In Japan, the largest
consumer of dental palladium, demand
for palladium has been declining in recent
years by an average of 5% to 10% per
year.
PRODUCTION
In 2020, primary refined palladium
production decreased by 10% y-o-y
to 200 t.
In Russia, the leading palladium
producing country, palladium output
decreased by 3 t due to a high base
effect from 2019, when the Krasnoyarsk
Precious Metals Refinery (Krastsvetmet)
processed Nornickel’s work-in-progress
inventories that had been built up
previously.
South Africa, the world’s second largest
producer, also demonstrated a decrease
(– 19 t) in refined palladium output due
to the COVID-19 nationwide lockdown
and operational issues at Anglo American
Platinum’s pyrometallurgical facilities.
In Zimbabwe, palladium output increased
by 1 t.
Palladium is used in white gold alloys or
in its pure form to make wedding rings
among other items. In 2020, jewellery-
related consumption of palladium
decreased by another 1.5 t. A drop
in Chinese demand for jewellery amidst
a general slowdown in consumer
spending and a consumer shift to other
luxury goods were the primary cause
of the continued sales decline. Sales
of men’s palladium wedding jewellery
were also affected by growing prices
for the metal.
Investor demand for palladium kept
shrinking in 2020 mostly due to outflows
from exchange-traded funds (ETFs),
which had their inventories reduced by 4
t to 18 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.
Primary palladium production in Canada
and the USA remained largely flat.
ANNUAL PRIMARY PALLADIUM
OUTPUT IN 2019–2020 (t)
2019:— 221 t
Countries
South Africa
Zimbabwe
Russia
Canada
USA
Rest of world
Total
Source: Company data
The main sources of recycled
palladium supply are scrapped
auto catalytic converters, as well
as jewellery and electronic scrap.
In 2020, recycled output declined
by 15 t to 96 t due to COVID-
19 restrictions and a drop in new
car sales which, in turn, impacted
the supply of vehicles for recycling.
The sources of previously
accumulated palladium stockpiles
include trading companies, financial
institutions, government reserves,
and consumers’ surplus inventories.
2020
– 19
+1
– 3
0
0
0
200
NornickelAnnual report | 20203COMMODITY MARKETS PLATINUM (Pt)
THE COMPANY’S
INDUSTRY POSITION
№ 3
IN PLATINUM PRODUCTION1 (%)
30
Impala Platinum
25
Anglo American Platinum
15
Nornickel
14
Sibanye-Stillwater
7
Northam Platinum
9
Other MMCs
Source: Company data
KEY TRENDS IN THE PLATINUM MARKET
pyrometallurgical facilities and stronger
investor demand, which was manifested
through inflows into ETFs (+ 16 t)
and higher retail investment volume (+
11 t). Average annual net speculative
positions dropped 4% to 49 t on the New
York Mercantile Exchange (NYMEX).
Platinum price remained relatively stable
in January and February, staying within
a narrow range between USD 900/
oz and USD 1,000/oz before falling
to a 10-year low of USD 600/oz in March.
However, the price quickly recovered
to between USD 800/oz and USD 850/
oz. In the second half of 2020,
the platinum price continued an upward
trend, reaching the August 2016 level
of USD 1,050/oz driven by equipment
failures at Anglo American Platinum’s
AVERAGE ANNUAL PLATINUM PRICES (USD/OZ)
2015
1,053
2016
989
2017
949
2018
880
2019
863
2020
884
PLATINUM CONSUMPTION
BY REGION (%)
Source: LPPM
12
25
202 t
28
20
15
Europe
North America
Japan
China
Rest of world
Source: Company data
2020 platinum prices averaged at
884
USD/oz,
a 2% increase over the 2019
average of USD 863/oz.
1
Refined metal including production from own feedstock by third parties under tolling agreements
68 69
MARKET BALANCE
In 2020, the platinum market
came into balance, with
the metal production sufficient
to meet consumption. However,
strong investment demand
pushed the market into deficit,
which was offset by previously
accumulated metal stocks.
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.
PLATINUM MARKET BALANCE IN 2020 (t)
Palladium production and consumption balance
Investor demand
ETF inflow
Supply and demand balance
0
11
16
–27
CONSUMPTION
Industrial consumption of platinum
in 2020 declined to
202 t,
down 34 t (or 15%) y-o-y.
AUTOMOTIVE INDUSTRY
The automotive industry is
the predominant consumer of platinum.
Over 30% of platinum in this industry
is used to manufacture exhaust gas
catalysts for diesel vehicles.
Platinum consumption in the automotive
sector slumped in 2020 (down 19 t from
2019) due to the COVID-19 pandemic
and a falling share of diesel vehicles
in the European market (the 27 EU
countries + the UK + EFTA countries),
a key market for vehicles running on this
fuel, – the market share slipped from 30%
to 26% in 2020.
INDUSTRIAL CONSUMPTION
OF PLATINUM
–15 %
PLATINUM CONSUMPTION
BY APPLICATION AREA (t)
–15 %
202
2020
–19
Auto catalytic converters
–12
Jewellery
0
Electronics
0
Glass industry
–1
Chemical industry
–2
Other
202
2019
Source: Company data
202
2020
236
2019
PLATINUM CONSUMPTION IN 2020
BY INDUSTRY
34
20
4
6
9
202 t
27
Exhaust treatment systems
Jewellery
Chemical catalysts
Glass production
Electronics
Other
Source: Company data
NornickelAnnual report | 20203COMMODITY MARKETS JEWELLERY INDUSTRY
CHEMICAL INDUSTRY
INVESTMENTS
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 12 t), persisting over the last
few years. Apart from the coronavirus,
the decrease was driven primarily
by lower jewellery demand in China
due to consumers switching to other
investment options, and the falling
demand for luxury goods amid concerns
over the country’s sustained economic
growth. Platinum in this market is under
increasing pressure from gold jewellery.
In 2020, platinum consumption
in industrial catalyst manufacturing
decreased by 1 t due to falling refining
volumes.
GLASS INDUSTRY
Platinum is needed to produce glass fibre
and optical glass. Demand for the metal
in this industry remained unchanged
in 2020.
Platinum consumption in electronics also
remained flat.
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 2020,
demand for platinum bars from retail
investors rose slightly (up 11 t) due
to low prices coupled with expectations
of growth. During the year, investments
in platinum ETFs rose by 16 t to 121 t.
PRODUCTION
Global production of primary refined
platinum in 2020 decreased y-o-y by 40
t to 150 t.
In the reporting period, supply from
South Africa, the world’s largest
platinum producer, declined by 40
t due to the nationwide lockdown
and operational issues at Anglo American
Platinum’s pyrometallurgical facilities,
while Zimbabwe increased its output
by 1 t. The Russian Federation’s output
remained flat. Production in North
America slipped 1 t.
The main sources of recycled platinum
include used exhaust gas catalysts
and jewellery scrap. In 2020, recycled
output declined by 10 t to 52 t due
to COVID-19 restrictions and a drop
in new car sales which, in turn, impacted
the supply of vehicles for recycling.
PRIMARY PLATINUM PRODUCTION
IN 2019–2020 (t)
2019: 190 t
Countries
South Africa
Zimbabwe
Russia
Canada
USA
Rest of world
Total
Source: Company data
2020
–40
+1
0
–1
0
0
150
RHODIUM (Rh)
70 71
KEY TRENDS IN THE RHODIUM MARKET
2020 saw a major increase
in rhodium prices although
with high volatility: rhodium
prices reached an all-time high
of USD 13,800/oz amid high
demand and shortages in the spot
market in early March, but due
to the spread of COVID-19, the price
plunged 60% to USD 5,500/oz
on 24 March. However, prices
quickly recovered to between
USD 8,000/oz and USD 9,000/
oz as early as in the beginning
of April. In the second half of 2020,
the automotive industry recovery
and relaxation of coronavirus
restrictions as well as the breakdown
in Anglo American Platinum’s
pyrometallurgical processes led
to resumed growth in rhodium prices
reaching a new high of USD 17,000/
oz at the end of December.
Stronger rhodium price fluctuations
in 2020 compared to other PGMs
are attributed to a relatively small
size of the market, expectations
of further growth in consumption
by the automotive industry driven
by the new vehicle emission
standards, nontransparent reserves,
and concentration of production
in the southern Africa where
production suffered from instability
during the year.
AVERAGE ANNUAL RHODIUM PRICES (USD/OZ)
2016
694
2017
1,105
2018
2,220
2019
3,904
2020
11,231
2015
952
Source: JMI
THE COMPANY’S
INDUSTRY POSITION
№ 4
IN RHODIUM PRODUCTION1 (%)
33
Impala Platinum
19
Anglo American Platinum
17
Sibanye-Stillwater
12
Nornickel
8
Northam Platinum
11
Other MMCs
Source: Company data
RHODIUM CONSUMPTION
BY REGION (%)
17
23
27
32 t
14
19
Europe
North America
Japan
China
Rest of world
Source: Company data
Rhodium prices in 2020 averaged at
11,231
USD/oz,
up 188% from the 2019 average
of USD 3,904/oz.
1
Refined metal including production from own feedstock by third parties under tolling agreements.
NornickelAnnual report | 20203COMMODITY MARKETS 72 73
with petrol vehicles) also partly offset
the consequences of the decline
in vehicle production in 2020 thanks
to higher rhodium use per vehicle.
In 2020, rhodium consumption
in the glass industry also plunged.
Rhodium is used to make crucibles
for glass batch melting. In 2020,
the industry’s demand for this metal
decreased by 0.6 t due to its replacement
with cheaper platinum.
Rhodium consumption in the chemical
and electronics industries remained flat.
PRODUCTION
Global production of primary refined
rhodium in 2020 decreased by 5 t
y-o-y to 20 t. In the reporting period,
supply from South Africa, the world’s
largest rhodium producer, declined
by 5 t due to the nationwide lockdown
and operational issues at Anglo American
Platinum’s pyrometallurgical facilities.
The output of the Russian Federation,
North American and other countries
remained flat.
Used exhaust gas catalysts are the main
source of recycled rhodium. In 2020,
recycled output declined by 0.6 t to 10.4
t due to the pandemic restrictions
and a drop in new car sales which,
in turn, impacted the supply of vehicles
for recycling.
PRIMARY RHODIUM PRODUCTION
IN 2019–2020 (t)
2019–25 t
Countries
South Africa
Zimbabwe
Russia
Canada
USA
Rest of world
Total
Source: Company data
2020
–5.1
+0.1
0
0
0
0
20
MARKET BALANCE
In 2020, the rhodium market
remained undersupplied, as
the metal’s production decline
outpaced growth in demand from
the automotive and other industries.
RHODIUM CONSUMPTION IN 2020 BY INDUSTRY (t)
production and consumption balance
Investor demand
ETF inflow
Supply and demand balance
–2
0
0
–2
CONSUMPTION
Industrial consumption of rhodium
in 2020 declined to 32 t, down 4 t (or
11%) y-o-y.
INDUSTRIAL CONSUMPTION
OF RHODIUM
–11 %
AUTOMOTIVE INDUSTRY
The automotive industry is the key
consumer of rhodium which is used
in catalytic converters to detoxify
exhaust fumes, thanks to the unique
properties of this metal. Installation
of such converters on motor vehicles
is a legal requirement. Rhodium is
considered the best catalyst for nitrogen
oxide removal in petrol motors. In 2020,
rhodium consumption by the automotive
industry decreased by 3.2 t (down 10%)
to 27.4 t, mainly due to falling vehicle
output amid lockdown restrictions.
However, the relaxation of coronavirus
restrictions in the second half of the year,
fiscal stimuli from most governments
and monetary easing led to a recovery
in demand. Another growth driver
included tougher regulations on pollutant
emissions, including the Real Driving
Emissions (RDE) test, in effect in the EU
as of September 2019. In China,
the marked increase of rhodium usage
in autocatalysts came in the wake
of tougher environmental requirements
as part of the China 6 rollout across
the country starting from 2019. Tighter
Tier 3 and LEV III standards in the USA
and declining global share of diesel
vehicles (due to their replacement
36
2020
32
2019
RHODIUM CONSUMPTION IN 2020
BY INDUSTRY
3 1 2
7
32 t
87
Exhaust treatment systems
Chemical catalysts
Glass production
Electronics
Other
Source: Company data
RHODIUM CONSUMPTION
BY APPLICATION AREA (t)
–11 %
32
2020
–3.2
Auto catalytic converters
0
0
Chemical industry
Electronics
–0.6
Glass industry
–0.2
Other
36
2019
Source: Company data
NornickelAnnual report | 20203COMMODITY MARKETS Nornickel
74 75
MINERAL
RESOURCE BASE
Resources and reserves as of 31 december, 20201
Ore kt
Metal grade
Contained metal
NORILSK NICKEL GROUP
TOTAL PROVEN AND PROBABLE RESERVES
TOTAL MEASURED AND INDICATED RESOURCES
TOTAL INFERRED RESOURCES
TAIMYR PENINSULA
Proven and probable reserves
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
KOLA PENINSULA (disseminated ore)
Proven and probable reserves
Proven ore reserves
Probable reserves
Measured and indicated resources
Inferred resources
742,833
2,018,551
575,384
663,128
315,314
50,942
14,735
249,637
18,666
307,493
73,441
64,185
169,867
21,655
1,702,906
1,546,330
107,875
66,870
1,371,585
156,576
433,234
433,234
79,705
40,578
39,127
315,645
142,150
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
4
.
O
N
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
0.88
0.69
0.79
1.56
1.14
1.38
3.71
2.96
3.17
0.98
0.84
0.82
0.21
0.18
0.19
4.93
6,530
11,590
3.98
13,828
22,989
4.15
4,537
7,915
88,606
191,932
58,684
23,491
54,292
15,256
5,115
11,494
3,540
117,681
258,127
76,695
0.91
1.71
4.15
1.10
0.24
5.51
6,036
11,347
88,533
23,443
5,092
117,558
0.80
2.56
0.94
0.43
0.35
1.10
2.91
0.75
0.46
0.28
0.68
0.73
3.25
0.96
0.52
0.28
0.84
0.84
1.51
3.12
3.76
1.05
0.51
2.09
4.03
3.06
0.88
0.36
1.29
1.38
4.30
3.89
1.03
0.36
1.73
1.73
3.69
6.03
9.22
2.88
3.87
4.64
7.42
6.86
2.60
4.29
3.50
3.50
8.05
8.88
2.88
3.46
4.20
4.20
0.99
1.25
2.23
0.87
1.58
1.13
1.46
1.79
0.75
1.73
0.99
0.95
1.61
2.28
0.84
1.33
1.09
1.09
0.62
0.30
0.03
0.02
0.58
0.66
0.69
0.63
0.25
0.36
0.33
0.31
0.03
0.03
0.05
0.04
0.02
0.02
0.03
0.03
0.22
0.23
0.62
0.19
0.17
0.27
0.27
0.49
0.18
0.19
0.21
0.21
0.30
0.63
0.19
0.14
0.25
0.25
0.01
0.01
0.01
0.02
0.01
4.88
7.58
11.59
3.93
5.72
6.09
9.51
8.87
3.56
6.43
4.70
4.66
2,513
1,302
139
1,072
65
4,756
1,589
554
2,613
95
37,365
9,874
4,368
23,123
2,322
3,397
6,417
45,859
2,137
2,959
484
776
61
1,967
1,491
79
11,658
21,934
17,512
14,147
14,200
2,987
191,461
11,213
21,368
174,034
10.24
3,504
4,635
644
2,601
27,907
19,087
10,080
2,043
1,056
6,981
950
11,207
3,438
3,689
4,080
1,206
53,990
47,311
5,586
4,892
11.41
3.89
5.08
5.48
5.48
0.05
0.05
0.05
0.08
0.07
7,065
14,132
127,040
36,833
445
3,641
3,641
494
236
258
2,170
896
566
7,474
7,474
243
101
142
1,055
441
17,427
58,500
58,500
73
37
36
471
184
6,679
15,135
15,135
48
27
21
302
121
2,219
49,448
383
292
1,544
104
2,635
628
1,017
990
134
11,322
10,612
1,029
1,350
8,233
710
3,480
3,480
23
11
11
172
60
12,415
5,488
31,545
3,434
60,197
22,453
18,294
19,450
4,479
257,295
231,715
35,530
24,522
171,663
25,580
76,375
76,375
123
66
57
832
320
1
Excluding deposits in Zabaykalsky Region. Data regarding the mineral resources and ore reserves of the deposits of the Taimyr and Kola Peninsulas were classified according
to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC code), created by the Australasian Institute of Mining and Metallurgy, the Australian Institute
of Geoscientists, and the Minerals Council of Australia, subject to the terminology recommended by the Russian Code for Public Reporting of Exploration Results, Mineral Resources,
Mineral Reserves (NAEN Code). The six platinum group metals (PGMs) are platinum, palladium, rhodium, ruthenium, osmium, and iridium. The four elements are platinum, palladium,
rhodium, and gold.
4BUSINESS OVERVIEWAnnual report | 2020
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 replacing
and expanding its resource base is
essential to its long-term development.
RESOURCES AND RESERVES
Item2
Proven and probable reserves
Ore, mln t
Nickel, mln t
Copper, mln t
PGMs, Moz
Measured and indicated resources
Ore, mln t
Nickel, mln t
Copper, mln t
PGMs, Moz
EXISTING DEPOSITS
Nornickel is well-positioned to maintain a high level of economic ore reserves given the significant mineral resources within its existing
deposits. The depleted proven and probable reserves at the existing mines are replaced through the development of measured,
indicated and inferred resources. The Company plans to ramp up its production by tapping into new rich ore deposits and gradually
developing disseminated and cuprous ore horizons.
76 77
Ore reserves at Zabaykalsky division
at year-end – 301 mln t, average metal
content: Cu – 0.7%, Fe in magnetite
concentrate – 22.4%, Au – 0.84 g/t1.
Reserves life: 31 years.
>75 years
of resources at the current
production rate
TALNAKH ORE CLUSTER
2018
2019
2020
785
6.9
12.1
123
2,209
15.3
23.5
263
757
6.7
11.9
120
2,193
15.2
23.2
260
743
6.5
11.6
118
2,019
13.8
23.0
258
Mokulaevskoye
Deposit
Western flank
of the Oktyabrskoye Deposit
Oktyabrskoye
Deposit
Talnakh
Talnakh
Deposit
The Talnakh ore cluster is located
in the Norilsk Industrial District in the north
of the Krasnoyarsk Region, on the right
bank of the Norilskaya River. Geologically,
the Talnakh ore cluster is located
on the north-western margin of the Siberian
Craton and includes the world’s largest
Oktyabrskoye and Talnakhskoye copper-
nickel deposits. In the early 1960s,
multiple deposits 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.
RESERVES AND RESOURCES
Item
Proven and probable reserves
(according to the JORC Code)
Measured and indicated resources
(according to the JORC Code)
Balance reserves
Balance metal reserves involved
in 2020
Balance reserves growth in 2020
Average metal content
Ore
622.8 mln t
Nickel
5.9 mln t
Copper
11.2 mln t
PGMs
109.6 Moz.
1,546.3 mln t
11.2 mln t
21.4 mln t
231.7 Moz
1,979.6 mln t
14.4 mln t
3.0 mln t
–
14.9 mln t
265.6 kt
66.6 kt
2.22%
28.8 mln t
464.8 kt
106.3 kt
3.54%
308.1 Moz.
4.5 Moz.
1.0 Moz
10.27 g/t
1
2
According to the Russian classification (А + В + С1 + С2).
Data on mineral resources and ore reserves are based on the JORC Code, exclude GRK Bystrinkoye’s deposits. The 2018–2019 data include the Honeymoon Well project.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 NORILSK ORE CLUSTER
KOLA MMC DEPOSITS
78 79
Norilsk
Norilsk-1
Deposit
Chernogorskoe Deposit
(copper-nickel ores)
Southern part
of Norilsk-1 Deposit
Maslovskoye
Deposit
The Norilsk ore cluster (NID) is also
located in the Norilsk Industrial District.
Brownfields within the NID include
the northern part of the Norilsk-1
deposit producing disseminated
copper and nickel sulphide ores
since the 1930s. In 2020, the deposit
was reassessed against new permanent
exploratory standards for open-pit
and underground mining. A feasibility
study of permanent exploratory standards
and a reserve statement for the Norilsk-1
deposit (northern part) were approved
by the State Commission for Mineral
Reserves of the Russian Ministry
of Natural Resources and included
into the State Register of Mineral
Reserves (Minutes No. 6557 dated 20
May 2020).
To raise additional external investments
in brownfield expansion in the northern
part of the Norilsk-1 deposit, Nornickel
has 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.
RESERVES AND RESOURCES
Item
Proven and probable reserves
(according to the JORC Code)
Measured and indicated resources
(according to the JORC Code)
Balance reserves
Balance metal reserves involved
in 2020
Balance reserves growth in 2020
Average metal content
Ore
40.3 mln t
Nickel
0.1 mln t
Copper
0.2 mln t
PGMs
7.9 Moz
156.6 mln t
0.4 mln t
0.6 mln t
25.6 Moz
156.6 mln t
1.6 mln t
11.5 mln t
–
0.4 mln t
6.8 kt
20.2 kt
0.18%
0.6 mln t
8.3 kt
21.2 kt
0.18%
25.6 Moz
0.3 Moz
1.4 Moz.
3.91 g/t
Sputnik
Deposit
Zapolyarny
Zhdanovskoye
Deposit
Zapolyarnoye
Deposit
Bystrinskoye
Deposit
Semiletka
Deposit
Kotselvaara-Kammikivi
Deposit
Verkhneye
Deposit
Tundrovoye
Deposit
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.
RESERVES AND RESOURCES
Item
Proven and probable reserves (according to the JORC Code)
Measured and indicated resources (according to the JORC Code)
Balance reserves
Balance metal reserves involved in 2020
Ore
79.7 mln t
315.6 mln t
457.8 mln t
6.8 mln t
Nickel
0.5 mln t
2.2 mln t
3.1 mln t
43.4 kt
Copper
0.2 mln t
1.1 mln t
1.5 mln t
20.1 kt
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 80 81
BYSTRINSKOYE DEPOSIT
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.
Shelopugino
Gazimursky Zavod
Shakhtaminskaya
Area
(Cu, Au, Ag, Mo)
Bystrinskoye
Deposit
(Cu, Au, Fe, Ag)
Bystrinsko-Shirinskoye
Deposit
(Au)
Chingitayskaya
Area
(Fe)
Ore
300.9 mln t
15.1 mln t
Copper
2.1 mln t
90.8 kt
Gold
8.1 Moz
578 koz
Silver
Iron
36.9 Moz
67.5 mln t
1,444 koz
2.5 mln t
RESERVES AND RESOURCES
Item
Balance reserves
Balance reserves involved
in 2020
NKOMATI DEPOSIT
Bushveld
Complex
The Nkomati disseminated copper-nickel
sulphide ore deposit is geologically
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).
Nkomati
Deposit
Republic
of South Africa
RESERVES AND RESOURCES
Item
Proven and probable reserves
Measured and indicated resources
Ore
0.9 mln t
168.5 mln t
Nickel
3 kt
590 kt
Copper
1 kt
227 kt
Cobalt
0.2 kt
29 kt
PGMs
0.03 Moz
4.9 Moz
GROWTH PROJECTS
MASLOVSKOYE DEPOSIT
The Maslovskoye deposit is located
in the Norilsk Industrial District, 12 km
south of Norilsk. Geologically, the deposit
is part of the Norilsk Ore Cluster.
The Company received the licence
to explore and mine the Maslovskoye
deposit’s platinum-copper-nickel sulphide
ores upon its discovery in 2015.
Reserves
A feasibility study of permanent
exploratory standards and a reserve
statement for the Maslovskoye deposit
were approved by the State Commission
for Mineral Reserves of the Russian
Ministry of Natural Resources
and included into the State Register
of Mineral Reserves (Minutes No. 5561
dated 12 October 2018).
B + С1 + С2 MINERAL RESERVES
Item
Total ore
Palladium
Platinum
Nickel
Copper
Cobalt
Gold
Reserves
206,8 mln t
33 087 koz
13 040 koz
711 kt
1 098 kt
26 kt
1 268 koz
Metal content in ore
–
5.0 g/t
2.0 g/t
0.3%
0.5%
0.01%
0.2 g/t
BUGDAINSKOYE DEPOSIT
The Bugdainskoye molybdenum deposit
lies in the Alexandrovo-Zavodsky District
of the Zabaykalsky Region, 30 km north-
west of Alexandrovsky Zavod.
Nornickel halted the development
of the Bugdainskoye deposit for three
years in a low-price environment
across the global molybdenum market,
and in 2017 extended the suspension
of operations for another five years, until
31 December 2022.
Its mineral reserves were included
into the State Register of Mineral
Reserves in 2007. In 2014,
B + С1 + С2 MINERAL RESERVES
Item
Ore
Molybdenum
Gold
Silver
Lead
Reserves
812 mln t
600 kt
360 koz
6,221 koz
41 kt
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 BYSTRINSKO-SHIRINSKOYE
DEPOSIT
estimate of the newly identified resource
potential is planned following the project
completion in the second half of 2021.
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 2017–2020, SRK Consulting
(Russia) Ltd conducted a scoping
study of development options
for the Bystrinsko-Shirinskoye
gold ore deposit and completed
a mineral resource estimate in line
with the JORC Code, followed
by the evaluation of technical
and economic viability of the potential
development option. The Company
is exploring options for ores from
the Bystrinsko-Shirinskoye deposit
to be processed along with gold ores
from the Bystrinskoye deposit.
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 at the Oktyabrskoye
copper-nickel ore deposit. Prospecting
on the Severny section continued
in 2020. Preliminary estimates
of the Zapadny section suggest
potential reserve growth of 822 kt
in high-grade copper and nickel ores,
2,717 kt in cuprous ores and 688 kt
in disseminated ores.
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 in high-grade
and cuprous ore reserves.
Eastern flank
of the Oktyabrskoye deposit
In 2020, Nornickel conducted surface
exploration within its licence boundaries
as part of the Follow-Up Exploration
of the Oktyabrskoye Deposit project.
The project uncovered new high-
grade ore zones as well as further
defined the boundaries and delivered
a detailed geology of the high-grading
ore reserves within the Severnaya 3
and Severnaya 4 deposits. A quantitative
NON-METALLIC MINERAL
DEPOSITS IN THE NORILSK
REGION
Mokulaevskoye deposit
The Mokulaevskoye limestone deposit
lies 10 km north-west of the production
sites of the Oktyabrsky and Taimyrsky
Mines. The mining licence for this
limestone deposit was obtained upon
its discovery in 2017. In 2018, the State
Commission for Mineral Reserves
of the Russian Ministry of Natural
Resources reviewed the feasibility study
of permanent exploratory standards
and the reserve statement for the deposit
and included its limestone reserves
into the State Register of Mineral
Reserves for potential use in cement
and lime production and in sulphuric
acid neutralisation. The deposit can
be developed through open-pit mining.
Its B + С1 + С2 balance reserves
of limestone are 135,661 kt.
Ozero Lesnoye deposit
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 thousand m³.
Gribanovskoye deposit
In 2020, Nornickel obtained
an exploration and mining licence upon
the discovery of the Gribanovskoye
deposit, located on the Yenisey
River, 22.5 km south of Dudinka.
Exploration phase activities
were completed, and a pilot operation
was started at the deposit in 2020.
In 2021, Nornickel plans to present
the feasibility study of permanent
standards and the reserve statement
to be reviewed by the State
Commission for Mineral Reserves
to confirm the reserves of silica sand.
The Gribanovskoye deposit’s reserves
are measured based on provisional
exploratory standards, and the С1 +
С2 reserves are currently estimated
at 88,371 kt.
Gorozubovskoye deposit
In 2020, following further examination
of the deposit’s flanks carried out
as part of follow-up exploration
of the Gorozubovskoye anhydrite
deposit, the reserves were reclassified
from C2 to C1. As a result, the deposit’s
reserves were recalculated. Certificate
82 83
No. 6507 issued by the State
Commission for Mineral Reserves
of the Russian Ministry of Natural
Resources on 13 December 2020
confirmed the parameters of updated
standards; anhydrite reserves
were confirmed as follows: C1 balance
reserves at 81,830 kt, C2 balance
reserves at 12,484 kt, and A + B + C1 +
C2 off-balance reserves at 1,640 kt.
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 exploration
licences to prospect for, and appraise,
deposits within the area. In 2020,
the Company conducted prospecting
drilling across all promising areas.
A report on the area’s potential
is to be prepared in 2021 upon
the completion of chemical and analytical
studies and laboratory tests.
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 2020,
laboratory tests were completed,
and a report was prepared based
on prospecting results, which included
the appraisal of the area’s resource
potential. P1 disseminated ore resources
within the Lebyazhninskaya area are
estimated at 172.25 mln t. An economic
evaluation concluded that disseminated
ore development would be unviable,
and a decision was taken to give up
the exploration right and hand back
the license.
of Norilsk. In May 2020, Nornickel
obtained exploration licences
to prospect for, and appraise, deposits
within the area. In 2020, the Company
conducted geophysical and geochemical
prospecting across areal zones
and identified drilling targets to confirm
the geology.
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
exploration licences to prospect for,
and appraise, deposits within the area.
In 2020, the Company conducted
geophysical and geochemical
prospecting across areal zones
and identified drilling targets to confirm
the geology.
Mikchangdinskaya area
The Neralakhsky, Yuzhno-Neralakhsky,
Snezhny, Yuzhno-Ikensky and Medvezhy
copper-nickel sulphide ore prospects
lie within the Mikchangdinskaya area,
located 70 km north-east of Norilsk.
Between December 2019 and April 2020,
Nornickel obtained exploration licences
to prospect for, and appraise, deposits
within the area. In 2020, the Company
conducted geophysical and geochemical
prospecting across areal zones
and identified drilling targets to confirm
the geology.
Arylakhskaya area
The Yttakhsky, Samoedsky and Mastakh-
Salinsky copper-nickel sulphide ore
prospects lie within the Arylakhskaya
area, located 160 km north-east
Alenuyskaya area
The Severo-Alenuysky and Yuzhno-
Alenuysky gold-copper porphyry
and epithermal gold-quartz mineralisation
prospects lie within the Alenuyskaya area,
located in the Aleksandrovo-Zavodsky
Municipal District of the Zabaykalsky
Region. In February and March 2020,
Nornickel obtained exploration licences
to prospect for, and appraise, deposits
within the area. In 2020, the Company
conducted geophysical and geochemical
prospecting across areal zones,
to be continued in 2021 to further identify
drilling targets to confirm the geology.
Mostovskaya area
The Zapadno-Mostovsky and Vostochno-
Mostovsky gold-copper porphyry
and epithermal gold-quartz mineralisation
prospects lie within the Mostovskaya
area, located in the Mogochinsky District
of the Zabaykalsky Region. In May 2020,
Nornickel obtained exploration licences
to prospect for, and appraise, deposits
within the area. In 2020, the Company
conducted geophysical and geochemical
prospecting across areal zones,
to be continued in 2021 to further identify
drilling targets to confirm the geology.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 OPERATIONAL
PERFORMANCE
OPERATING PERFORMANCE FOR THE PAST 10 YEARSEARS
Norilsk nickel group saleable metals production»1
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
Norilsk and Kola Division (Russia)
Nickel, t
Norilsk Division
Kola Division
including from own Russian feed
Copper, t
Norilsk Division
Kola Division
including from own Russian feed
Palladium, koz
Norilsk Division
Kola Division
including from own Russian feed
Platinum, koz
Norilsk Division
Kola Division
including from own Russian feed
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
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
1
2
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.
Norilsk Nickel owns 50.01% of Bystrinsky GOK. Production results are shown metal in concentrate for sale on 100% basis and the total operating results fully include Bystrinsky
GOK. Bystrinsky GOK was commissioned in 2019.
84 85
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
2020
235,709
232,532
3,177
487,186
486,816
370
2,826
2,820
6
695
693
2
157,396
158,005
166,265
172,357
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
0
172,357
172,357
422,031
351,413
70,618
70,618
2,809
1,180
1,630
1,630
691
302
390
390
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 86 87
Norilsk nickel group saleable metals production»1
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Zabaykalsky Division (Russia)2
Copper (in concentrate), t
Gold (in concentrate), koz
Iron ore concentrate, t
Kola Division (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
–
–
–
48,525
–
5,681
–
34
–
12
–
5,815
2,927
24
9
9,346
8,803
68
12
–
–
–
–
45,518
–
1,006
–
21
–
9
–
9,624
4,594
32
12
12,215
10,292
83
14
–
–
–
44,252
–
6,549
–
39
–
16
–
11,920
5,034
46
20
6,416
5,412
43
7
8,975
2,826
–
–
–
42,603
–
10,629
–
74
–
31
–
11,359
4,938
48
19
3,207
2,436
18
4
–
–
–
–
43,479
424
13,048
–
78
–
33
–
11,350
5,301
53
20
911
671
5
1
–
–
–
–
53,654
19,012
9,598
593
64
8
22
2
8,486
4,007
40
15
–
–
–
–
–
–
–
–
59,716
55,021
13,441
12,328
42
35
10
6
8,006
4,504
46
20
–
–
–
–
–
19,417
89
346
60,765
59,337
18,036
17,980
58
58
11
11
6,597
3,055
33
13
–
–
–
–
–
43,489
177
1,311
62,422
58,939
12,948
12,667
54
51
12
9
6,485
3,419
33
14
–
–
–
–
–
62,664
241
2,046
63,352
60,175
2,491
2,121
17
11
4
2
5,839
2,877
30
13
–
–
–
–
–
1
2
3
4
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.
Norilsk Nickel Group owns 50.01% of Bystrinsky GOK. Production results are shown metal in concentrate for sale on 100% basis and the total operating results fully include
Bystrinsky GOK. Bystrinsky GOK was commissioned in 2019.
Norilsk Nickel Group owns 50% of Nkomati. 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.
The operations of the mine are planned to cease in 1H2021 whereafter the mine is to be placed on limited care and maintenance pending the finalisation and submission
of a closure plan.
The sale of the asset was closed on 2 April 2015.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 Despite a number of serious
environmental and COVID-related
challenges facing the Company in 2020,
we have fully achieved our production
targets. With optimised operating
processes and new refining site at Kola
MMC now running at design capacity,
we delivered on our nickel production
guidance and exceeded production
targets for platinum group metals. We
also met our copper production guidance
thanks to the scheduled ramp-up
at Bystrinsky GOK. In the last quarter
of 2020, Bystrinsky GOK reached design
capacity for all metals.
The Company has implemented maximum
measures to protect its people as part
of its COVID-19 response. The COVID-19
situation is under management’s control
and does not impact significantly on our
operating processes.
GROUP ORE OUTPUT (MLN T)
Asset
Assets in Russia
(copper-nickel sulphide ore)
Norilsk Division
Kola Division
Assets in Russia
(gold-iron-copper ores)
Zabaykalsky Division
Nkomati (South Africa)1
AVERAGE METAL CONTENT IN MINED ORE
Asset
Nickel, %
Norilsk Division
Kola Division
Nkomati
Copper, %
Norilsk Division
Kola Division
Zabaykalsky Division
Nkomati
PGMs, g/t
Norilsk Division
Kola Division
Nkomati
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
2020
26.5
18.8
7.7
16.0
16.0
2.7
2018
2019
2020
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
1.3
0.5
0.3
2.3
0.2
0.6
0.1
6.9
0.1
N/a
METALS RECOVERY IN CONCENTRATION (%)
Asset
Nickel
Norilsk Division
Kola Division
Nkomati
Copper
Norilsk Division
Kola Division
Zabaykalsky Division
Nkomati
PGMs
Norilsk Division
METALS RECOVERY IN SMELTING (%)
Asset
Nickel
Norilsk Division 4
Kola Division (Kola MMC)5
Kola Division (Kola MMC)6
Kola Division (NN Harjavalta)6
Copper
Norilsk Division 4
Kola Division (Kola MMC)5
Kola Division (Kola MMC)6
Kola Division (NN Harjavalta)6
PGMs
Norilsk Division 4
Kola Division (Kola MMC)6
Kola Division (NN Harjavalta)6
88 89
2018
2019
2020
81.5
69.5
65.9
94.6
74.1
82.9
88.4
82.7
83.13
67.9
64.2
95.23
73.2
87.7
87.7
84.81
62.9
68.3
95.13
71.8
87.4
85.4
85.23
86.43
2018
2019
2020
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
94.1
96.8
96.3
98.2
94.6
96.5
95.4
99.8
96.4
92.9
99.9
1
2
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.
The PGMs are palladium, platinum, rhodium, ruthenium and iridium.
3
4
5
6
Metals recovery in bulk concentrate.
Feedstock to finished products.
Feedstock to converter matte.
In refining, converter matte to finished products.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 SALEABLE METALS PRODUCTION
Product
Group total
Nickel, kt
from own feed
Copper, kt
from own feed
Palladium, koz
from own feed
Platinum, koz
from own feed
Norilsk and Kola Divisions
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
Kola Division – NN Harjavalta
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
Nkomati (South Africa)1
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
2018
2019
2020
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
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
235.7
232.5
487.2
486.8
2,826
2,820
695
693
172.4
484.7
2,809
691
63.4
2.5
17
4
5.8
2.9
30
13
NORILSK DIVISION (RUSSIA)
The Norilsk Division is 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
on 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 largest deposits
in the Company’s portfolio, the Norilsk
Division mines over 18 Mtpa of copper-
nickel sulphide ore.
In 2020, the Norilsk Division
accounted for
72% copper
42% PGMs
of the Group’s total
1
Nkomati’s operating results are not consolidated into the Group’s total results.
90 91
MINING
The Norilsk Division 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 depending on technological
requirements for mine backfill durability.
The Norilsk-1 deposit is developed
by Zapolyarny Mine (Medvezhy Ruchey –
South Cluster project), through open-pit
and underground mining. Underground
mining is carried out through sublevel
(level) caving using front ore passes
and self-propelled vehicles.
Оre production from the Norilsk Division
was 18.8 mln t in 2020, up 0.4 mln t
y-o-y (+2%). Rich and disseminated ore
production increased by 2% and 10%,
respectively, with Taimyrsky and Skalisty
Mines also increasing their combined rich
ore production by 12% y-o-y. Disseminated
ore production grew at Komsomolsky Mine
(+42%) and Zapolyarny Mine (+4%). Total
production of cuprous ore decreased
by 5% y-o-y. The change in the mined
ore output was in line with the annual
production plan.
ORE OUTPUT (MLN T)
Mining asset, ore type
Mine type
Total ore
rich
cuprous
disseminated
ZAPOLYARNY
Oktyabrskoye deposit:
Oktyabrsky Mine
rich
cuprous
disseminated
Taymirsky Mine
rich
Underground
Underground
Talnakhskoye and Oktyabrskoye deposits:
Komsomolsky Mine
Underground
Underground
Underground
rich
cuprous
disseminated
Skalisty Mine
rich
cuprous
Mayak Mine
rich
disseminated
MEDVEZHY RUCHEY
Norilsk-1 deposit
Zapolyarny Mine
disseminated
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
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
2020
18.82
7.48
5.49
5.85
9.58
5.34
0.80
3.41
1.13
4.24
4.24
7.55
4.25
0.14
1.81
2.3
2.54
2.27
0.27
0.76
0.03
0.73
Open-pit/underground
1.67
1.63
1.69
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 CONCENTRATION
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
for further processing. In 2020,
the Company’s concentration facilities
processed a total of 18.5 mln t across
all types of ore feedstocks (including
rich, cuprous and disseminated ores).
Talnakh Concentrator processed
10.9 mln t of ore in 2020 (up 0.2 mln
t y-o-y). Its nickel recovery from
ore into bulk flotation concentrate,
including the output of metal-bearing
pyrrhotite products, increased by 2.0%
y-o-y to 87.9% due to the optimised
technology for obtaining copper-nickel
concentrate deployed at Talnakh
Concentrator.
Talnakh Concentrator increased ore
processing to 7.6 mln t (up 0.1 mln t
y-o-y) in 2020. The facility’s nickel
recovery into bulk concentrate
was 0.7% lower y-o-y at 70.6%. During
the year, the facility also processed
significant amounts of low-grade ores
from Copper Plant.
ORE PROCESSING AND NICKEL RECOVERY
Concentrator
Sulphide ores processed (mln t)
Talnakh Concentrator
Norilsk Concentrator
Nickel recovery (%)
Talnakh Concentrator
Norilsk Concentrator
SMELTING
Production chain
The produced concentrates, including
steam cured sulphide concentrate,
and secondary materials 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, and concentrates
from tailings ponds. The matte produced
in flash smelting furnaces is then
converted into high-grade converter
matte.
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.
CONCENTRATION
FACILITIES
• Talnakh Concentrator
• Norilsk Concentrator
92 93
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 Norilsk Division are refined
at Krastsvetmet, URALINTECH,
and Prioksky Plant of Non-Ferrous Metals
under tolling agreements.
Copper production remained basically
flat y-o-y in 2020, with a slight decrease
of 1% due to a lower-than-expected copper
content in the stored copper concentrate
provided by Rostec and concentrate
stock drawdowns by Rostec. PGM
output increased by 15% y-o-y, mainly
due to temporary processing of chlorine
dissolution residue by Copper Plant
(during the deployment of a new precious
metal production technology at Kola
MMC) and higher precious metal content
in the copper cake supplied by Norilsk
Nickel Harjavalta.
The Polar Division products:
◾ Copper cathodes
◾ Nickel converter matte sent
for processing to Kola MMC
◾ Precious metal concentrates
◾ Commercial sulphur, selenium
◾ Tellurium in billots
2018
2019
2020
10.4
6.8
83.2
71.9
10.7
7.5
85.9
71.3
10.9
7.6
87.9
70.6
SMELTING ASSETS
• Nadezhda Metallurgical Plant
• Copper Plant
• Copper Plant’s smelting shop
PRODUCTION VOLUMES
Product
Copper, t
Palladium, koz
Platinum, koz
KOLA DIVISION (RUSSIA)
2018
353,131
987
260
2019
355,706
1,042
251
2020
351,413
1,180
302
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 2020, Kola MMC accounted
for 73%, 14% and 57% of the Group’s
total nickel, copper, and PGM finished
products, respectively.
MINING
Kola MMC 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 (sub-economic) open-pit
mining waste is processed as well
◾ 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
In 2020, Kola MMC produced about 7.7 mln
t of ore (down 3% y-o-y), with the marginal
decrease attributable to dwindling surplus
ore inventories that had built up at the end
of 2019 due to scheduled maintenance
at the concentrator.
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
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
2020
7.65
7.08
6.43
0.65
0.05
0.05
0.52
0.52
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 CONCENTRATION
The concentrator produces briquetted
copper-nickel concentrate. Briquettes
are delivered to a smelting shop in Nikel
to produce converter matte.
In 2020, Kola MMC’s concentrator
processed 7.96 mln t of ore (up 5%).
The rate of metals recovery in bulk
concentrate decreased, due to a higher
share of complex morphology ores
with disseminated sulphide minerals
in the charge.
CONCENTRATION
FACILITIES
• Zapolyarny Concentrator
ORE PROCESSING
Concentrator
Ore processing by the concentrator, mln t
SMELTING
Nornickel has continued to ramp
up Tankhouse 2 to design capacity
for the production of nickel cathode using
the technology of electrowinning from
chlorine dissolved tube furnace nickel
powder.
In 2020, Kola MMC used only Nornickel’s
own Russian feedstock in metals
production. Growth in saleable nickel
output was mostly driven by the start-up
of saleable nickel loading point
at the concentrator. Saleable copper
output decreased due to changes
in the output mix of saleable products
and the redistribution of copper semi-
products within the Company. Lower
PGM output in 2020 was caused
by temporary shipments of chlorine
leaching residuals to the Polar Division
(during the deployment of a new precious
metal production technology at Kola
PRODUCTION VOLUMES
Product
Nickel, t
from own Russian feed
Copper, t
from own Russian feed
Palladium, koz
from own Russian feed
Platinum, koz
from own Russian feed
2018
7.90
2019
7.60
2020
7.96
DOWNSTREAM
FACILITIES
• Smelting shop (Nikel), shut
down in December 2020
• Briquetting section
(Zapolyarny), shut down
in December 2020
• Smelting shop (Monchegorsk),
shut down in March 2021
• Chemical-and-metallurgical
shop (Monchegorsk)
• Refining shop (Monchegorsk)
• Tankhouses 1 and 2
(Monchegorsk)
MMC) and larger amount of transportation
and production work-in-progress
along the Kola MMC – Norilsk Nickel
Harjavalta – the Polar Division leg due
to shipments of converter matte with
a higher PGM content to Norilsk Nickel
Harjavalta.
Products:
◾ Nickel cathodes
◾ Nickel carbonyl
◾ Saleable nickel concentrate
◾ Copper cathodes
◾ Saleable copper concentrate from
converter matte separation
◾ Sulphide concentrate from
the concentrator
◾ Cobalt cathodes
◾ Cobalt concentrate
◾ Precious metal concentrates
◾ Sulphuric acid
◾ Crushed converter matte for Harjavalta
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
2020
172,357
172,357
70,618
70,618
1,630
1,630
390
390
KOLA DIVISION (FINLAND)
94 95
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 2020, Norilsk Nickel Harjavalta
accounted for 27%, 1% and 1%
of the Group’s total nickel, copper
and PGM finished products, respectively.
SMELTING
In 2020, 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 feedstocks, i.e., converter
matte from Boliden and nickel salts from
other suppliers, were supplied regularly
in small amounts throughout 2020. Metal
recovery improved y-o-y on better quality
of copper cake.
PRODUCTION VOLUMES
Product
Nickel, t
from own Russian feed
Copper (in copper cake), t
from own Russian feed
Palladium (in copper cake), koz
from own Russian feed
Platinum (in copper cake), koz
from own Russian feed
In 2020, Norilsk Nickel Harjavalta produced
63.4 kt of saleable nickel (up 1.5% y-o-y),
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 2.5 kt, down 83% y-o-y,
while the output of saleable palladium
in copper cake decreased by 69% y-o-y
and platinum output was down by 67% y-o-y.
The decrease in copper and palladium
output was due to the fact that the copper
cake mined was mostly shipped to the Polar
Division for further processing.
Products:
◾ Nickel cathodes and briquettes
◾ Nickel salts, powders and solutions
◾ Cobalt sulphate and solutions
◾ PGM-bearing copper cake
FACILITY’S PROCESS CHART
RUSSIAN NICKEL-BEARING FEEDSTOCK
FROM KOLA MMC
Matte/converter matte
Cu cake
NORILSK NICKEL HARJAVALTA
REFINERY
Matte/converter matte
Ni powders
Ni cathodes
Ni briquettes
Ni salts
Ni solutions
Co sulphate
Co solutions
Cu cake
NICKEL-BEARING FEEDSTOCK SOURSED
FROM THIRD PARTIES
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
2020
63,352
60,175
2,491
2,121
17
11
4
2
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 ZABAYKALSKY DIVISION
NKOMATI (SOUTH AFRICA)
Nornickel commenced the construction
of Bystrinsky GOK in 2013. In October
2017, Nornickel started the pre-
commissioning activities. Bystrinsky GOK
was commissioned in 2019 and reached
its design capacity in 2020.
ORE OUTPUT (MLN T)
Mining asset
Total ore
Bystrinskoye deposit
Verkhneildikansky open-pit mine
Bystrinsky-2 open-pit mine
CONCENTRATION
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 2020, it processed
9.76 mln t of ore (2019: 7.5 mln t).
The increase was due to scheduled
ramp-up to design capacity.
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, %
In 2020, Zabaykalsky Division accounted
for 13% of the Group’s total copper.
MINING
Bystrinsky GOK mines gold-iron-copper
ores of the Bystrinskoye deposit.
Mine type
Open-pit
Open-pit
2018
7.86
7.86
7.43
0.43
2019
10.49
10.49
8.60
1.89
2020
16.04
16.04
11.57
4.47
Copper and iron ore concentrates
are sold via third parties, while gold
concentrates are further processed
at the Polar Division.
CONCENTRATION
FACILITIES
• Concentrator
Products:
◾ Copper concentrate
◾ Gold concentrate
◾ Iron ore concentrate
2018
3.8
19,417
25.4
89
6,218
346
64.1
2019
7.5
2020
9.8
43,489
62,663
25.5
177
4,034
1,311
64.6
24.7
241
3,050
2,047
64.2
96 97
output decline in the reporting period
was due to the planned placement
of the mine in care and maintenance
and the completion of reserve mining.
Products:
◾ Saleable concentrates
CONCENTRATION
FACILITIES
• Concentrator for ore mined
in the main section, with
installed capacity of 375 kt
of ore per month
• Concentrator for ore mined
in the peridotite chromite
section, with installed capacity
of 250 kt of ore per month
2018
2019
2020
6.6
3.1
33
13
6.5
3.4
33
14
5.8
2.9
30
13
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. The operations of the mine
are planned to cease in 1H2021
whereafter the mine is to be placed
on limited care and maintenance
pending the finalisation and submission
of a closure plan.
Nkomati is located in the Mpumalanga
Province, South Africa, 300 km east
of Johannesburg. It is South Africa’s only
producer of nickel concentrate, which
also contains copper, cobalt and PGMs.
Nkomati produces chrome concentrate
as well.
MINING
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.
In 2020, total ore mined by Nkomati
reached 2.7 mln t (attributable
to the Group’s 50% shareholding) with
an average nickel content of 0.27%
and copper content of 0.11%.
CONCENTRATION
AND SMELTING
The mined ore is processed
at the concentrators using the sulphide
flotation technology, with the resulting
concentrates then sold by Nornickel
to third parties.
The Nkomati deposit has a substantial
resource base represented
by disseminated copper-nickel sulphide
ores. The deposit consists of several
In 2020, Nkomati (50% owned
by the Group) produced 6 kt of nickel,
3 kt of copper, 30 koz of palladium
and 13 koz of platinum. The metals
PRODUCTION VOLUMES1
Copper (in concentrate), t
Nickel, kt
Copper, kt
Palladium, koz
Platinum, koz
NKOMATI
(SOUTH AFRICA)
as of 31 December 20202
Proven and probable
reserves
Measured and indicated
resources
Ore kt
Ni % Cu %
Metal grade
Co % 4 PGM
g/t
Contained metal
Ni kt
Cu kt
Co kt
4 elements
koz
980
0.29
0.11
0.02
0.90
3
1
0.2
27
168,490
0.35
0.14
0.02
0.94
590
227
29
8
4,926
1,438
Inferred resources
46,350
0.41
0.13
0.02
1.00
188
62
1
2
Volumes based on the 50% ownership.
The Company owns 50% of Nkomati. Nkomati's mineral reserves and resources are not included Group’s total amounts.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 SALES
Despite the constraints caused
by the COVID-19 pandemic, in 2020
Nornickel successfully 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 fully matched
the target level.
Overall, the pandemic had
a significant impact on consumption
in the Company’s markets in 2020,
which declined as a result of the global
effort to curb the spread of COVID-
19. Demand for some products
declined by as much as 20%. Faced
with uncertainty, consumers sought
to reduce their stock and increase
the share of call options/spot
trades in procurement. However,
the overall decline in demand
did not lead to a proportional
decrease in the Company’s sales.
The Company’s strong sales
performance in 2020 despite external
headwinds can be seen as a testament
to the effectiveness of the sales
strategy chosen by the Company
to position itself in its sales markets
through developing Nornickel’s own
sales platform that relies on direct
long-term relationships with key
consumers and diversified client base.
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. The Company
continues to advance its innovative
project that embeds its business
into a digital ecosystem for higher
performance and transparency
throughout the metals supply chain,
including enabling responsible
sourcing for customers. The Company
plans to digitise some of its metal
supply contracts via Atomyze,
an advanced DLT (Distributed Ledger
Technology) platform. In 2020,
Nornickel’s Global Palladium Fund
issued its first tokens to digitise
the Company’s contracts with
several of its major customers.
Digital investment instruments will
also be issued as part of the project,
representing a new class of investment
products that open up access
to commodity markets to a wide range
of investors.
Nornickel’s products are listed
on the London Metal Exchange
and the Shanghai Futures Exchange.
Registration at the world’s top
exchanges ensures the necessary
liquidity for the Company’s products.
In early 2020, NORNICKEL full-plate
nickel cathodes produced by Kola
MMC were registered at the Shanghai
Futures Exchange, the leading
metals trading platform in China
and Asia. Another highlight of the year
was the rebranding of NORNICKEL
(formerly NORILSK I) cobalt cathodes
on the London Metal Exchange.
The Company’s products are supplied
to 37 countries around the world, with
Europe as the major consumer.
«The tokens issued
via Atomyze will enable
the Global Palladium Fund
to market Nornickel’s
products in an effective
and transparent
way to a wide range
of customers interested
in using digital solutions.
We are confident that this
will give the mining industry
the ability to guarantee
responsible sourcing».
Anton Berlin,
Nornickel’s Vice President, Sales
and Distribution
SALES BY REGION (%)
45 | 35 | 16 | 4
2020
52 | 25 | 18 | 5
2019
54 | 27 | 15 | 4
2018
Europe
Asia
North and South America
Russia and the CIS
98 99
SALES STRATEGY
Sales, along with production, have
traditionally been a key focus area
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 to secure a stable
position in the market.
Electric vehicles and batteries are
a priority segment in the nickel
consumption structure, as its growth
rates suggest that in a longer range
it can become the key source
of demand for high-grade nickel.
Therefore, the Company is running
a programme to support high-
growth 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
in this area. 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-vehicle (EV)
market and related value chains while
maintaining a strong focus on building
long-term partnerships with key
industry players.
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 precursors
for certification by automakers in 2019.
The Company also confirms its plans
to arrange for battery recycling.
In the alloys and special steels sector,
the Company seeks to maximise
the benefits of its product portfolio
and improve product quality to boost
its share in high-quality, premium
segments.
In the electroplating sector, Nornickel
is optimising its product offering
to better meet customer needs
and acquire new customers in other
markets.
Accordingly, in order to secure
a stable position in the nickel market,
the Company seeks to achieve
a balanced presence across all
segments of the market.
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 bolster 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 maintain
the long-term stability of the palladium
market and the launch of the new
South Cluster project.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 100 101
Sales markets
Russia, Europe, Asia, Americas
SALEABLE PRODUCTS
Type of metals
Base metals
Presuaus metalls
Saleable products
copper cathodes,
copper saleable intermediate products,
copper cake
nickel cathodes,
nickel carbonyl (powder and pellets), nickel briquettes,
nickel saleable intermediate products,
nickel sulphate (crystals),
nickel sulphate solution,
nickel hydroxycarbonate
Platinum,
palladium,
phodium,
iridium,
ruthenium,
gold,
gold gravity concentrate,
silver
Others
Cobalt cathodes and sulphates
Tellurium ingots
Commercial selenium (powder)
Commercial sulphur
Sodium sulphate
Sulphuric acid
Iron ore concentrate
Europe
Russia, Europe,
Russia, Asia
Russia
Russia
Asia, Russia
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 mix 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 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.
In particular, Nornickel is developing new
product solutions for critical consumer
segments. Over the past two years,
the Company developed specialised
products for the battery sector based
on nickel sulphate solution at its Finnish
refining plant. In addition, Nornickel
cooperated with a partner to design
a competitive process for dissolving
nickel and cobalt cathodes as
a technological solution for customers
to ensure the availability of nickel feed
for the production of electric vehicles.
THE COMPANY’S PRODUCT DISTRIBUTION
NORILSK
DIVISION,
RUSSIA
KOLA DIVISION
(КOLA MMC),
RUSSIA
ZABAYKALSKY
DIVISION,
RUSSIA
NORMETIMPEX,
Russia
KOLA DIVISION
(NN HARJAVALTA),
FINLAND
Metal Trade
Overseas SA,
Switzerland
Customer
in Russia
and in CIS
Customer
in Europe
Norilsk Nickel Asia,
Hong Kong
Customer
in Asia
Norilsk Nickel
Metals Trading
(Shanghai), China
Customer
in China
Norilsk Nickel USA,
USA
Customer
in the USA
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 102 103
PROCUREMENT
AND SUPPLY CHAIN
PROCUREMENT PROCESS
Nornickel’s procurement process is
certified to ISO 9001:2015 Quality
Management Systems (“ISO 9001:2015”)
and ISO 14001:2016 Environmental
Management Systems (“ISO 14001:2016”).
Factors underlying the procurement
framework include 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 the Head Office units, 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
collective procurement bodies, such
as the tender committee, tender
commissions of the Head Office,
procurement and tender commissions
of branches and Group companies.
Over 4,000 agreements were signed
in 2020 for the supply of inventories
under centralised procurement
procedures, worth about RUB 89.4 billion
(USD 1,239 million) in total. Nornickel has
in place category procurement policies.
In 2020, about 58% of inventories
were purchased for Nornickel’s
core operations under the category
procurement policies.
Nornickel’s SAP SRM, an automated
solution for supplier relationship
management, provides its suppliers with
anytime access to its tender process
information and enables supplier
feedback. Over 10 thousand potential
suppliers have registered in the system,
with 4,800 of them successfully passing
accreditation.
SUPPLY CHAIN CONTROL
Supply chain management at Nornickel
ensures continuous operation
of the Group, high quality of its products,
and reliable shipments to its customers.
Nornickel is constantly striving to improve
its supply chain performance by adopting
global best practices and standards,
optimising and automating business
processes.
Given the diversity of Nornickel’s
business activities across a wide
geography, efficient, timely and full
provision of necessary resources is
essential to the success of its business.
Nornickel pays close attention
to fostering ties with reliable suppliers
offering unique products that are critical
to the Company’s success in achieving
its strategic goals. Nornickel is committed
to increasing local content, which totalled
93% in 2020 (up 7% y-o-y). Long-term
supply contracts are signed with certain
producers.
Foreign suppliers are mainly engaged
to deliver unique equipment or systems
that do not have Russian alternatives.
Nornickel focuses on local sourcing
to provide social support for its operating
regions. Along with saving jobs, this
policy supports unique enterprises
whose continuous operation is essential
to both the well-being of their employees
and the social fabric of local communities.
ESG-DRIVEN SUPPLIER
SELECTION
In engaging with suppliers and other
counterparties, Nornickel, in addition
to requirements for product/service
quality, pricing and delivery timelines,
focuses on three sustainability pillars:
environmental safety of operations
and supplied products; health and safety
compliance; and contribution to the social
development of local communities.
Prior to engaging any supplier,
the Company signs a Master Agreement
setting out the requirements for shipping
documents, including for hazardous
cargoes, and certification and labelling.
The Master Agreement commits suppliers
to comply with the following standards:
◾ Human rights, including freedom
of association and zero tolerance
to discrimination and retaliation
◾ Labour relations, including
requirements on working conditions
and remuneration, and prevention
of child and forced labour
◾ Environmental protection
◾ Anti-corruption
◾ UN Global Compact
To mitigate potential negative
environmental impact of the cargo
in transit, the Company includes
a separate clause in the Master
Agreement with requirements for cargo
packaging. Cargoes to be shipped must
meet cargo standards and requirements
of GOST 26653–2015 Preparation
of general cargoes for transportation
and GOST 15846–2002 Production
for transportation to the areas of the Far
North and similar regions. Packing,
marking, transportation and storage. There
is a mandatory requirement for transport
containers and product packaging
to ensure the integrity of cargo during
multiple transshipments and transportation
legs on a route to the Far North.
Environmental impact is assessed
throughout the life cycle of purchased
products, including production, transport,
storage, use and disposal. Nornickel
requires its contractors to have
a functioning environmental management
system in place and to ensure that all
services and products supplied by them
comply with local environmental laws.
The anti-corruption clause included
in the Master Agreement outlines
the course of action to be taken between
the counterparty and Nornickel with
respect to various risks of abuse.
By signing the Master Agreement,
counterparties acknowledge that they
have read MMK Norilsk Nickel’s Anti-
Corruption Policy published in the anti-
corruption section on Nornickel’s
website (see Preventing and Combatting
Corruption).
The Company also expects its
counterparties to comply with global best
practices in sustainable use of natural
resources and with Nornickel’s key
policies such as the Human Rights
Policy, Working Conditions Policy,
Occupational Health and Safety Policy,
Freedom of Association Policy and Equal
Opportunities Programme. The Supplier
Code of Conduct will be developed
in Q2 2021 to fulfil Nornickel’s
responsibility toward ESG issues
for entire supply chain.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 ENERGY ASSETS
Nornickel owns an integrated network
of fuel and energy assets, including four
hydrocarbon deposits.
2,728 Mcm 1
natural gas production
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.
114 kt
— gas condensate production
46%
— electricity generated from
renewable sources
Start of production: 1969
Gas reserves
244 bcm
Gas condensate reserves:
4,576 kt
MINING VOLUME
Asset
Natural gas, Mcm
Taimyrgaz2
Norilskgazprom
Gas condensate, kt
Taimyrgaz2
Norilskgazprom
2018
2,896
2,027
869
90
88
2
2019
2,804
0
2,804
92
0
92
2020
2,728
0
2,728
114
0
114
1
2
Data on gas condensate production include production losses (carryover with separation gas
in 2019 was the reorganisation of Taimyrgaz.
104 105
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.
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
◾ 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) supplies
electricity to Kola MMC and other Group
entities in the Murmansk Region, is
a default electricity supplier within its area
of operations and has the right to trade
in the wholesale electricity and capacity
market. The company was established
to ensure energy independence, efficient
and uninterrupted electricity supply
at cheapest rates to Kola MMC operations.
In 2020, it sold 2,596,781 thousand kWh
of electricity.
Norilsktransgaz (100% stake) transports
natural gas and gas condensate from
deposits to consumers.
The length of gas and gas condensate
pipelines totals 1,602.5 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 1,115 MW, and two
hydropower plants (HPPs) with total
installed capacity of 1,101 MW. The total
installed capacity of all plants is 2,216
MW.
Ust-Khantayskaya and Kureyskaya HPPs
are Nornickel’s two renewable electricity
generation facilities. In 2020, renewables
accounted for 46% of total electricity
consumed by the Group and 55% of total
electricity consumption within the Norilsk
Industrial District.
POWER GENERATION BREAKDOWN
IN THE NORILSK INDUSTRIAL
DISTRICT IN 2020 (%)
45
55
Renewable energy sources
(hydropower)
Hydrocarbons (natural gas)
ARCTIC-ENERGO ELECTRICITY
SALES BREAKDOWN IN 2020
(IN KOLA PENINSULA) (%)
2 4
94
Kola MMC
Population
Other consumers
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 TRANSPORT ASSETS
1
Murmansk
Transport Division
3
Norilsk Airport, Norilsk
Avia, NordStar (100%)
5
Krasnoyarsk Transport
Division, Krasnoyarsk
River Port (89%)
and Nornickel-YRSС
7
Bystrinsky
Transport Division
2
Arkhangelsk
Transport Division
4
Polar Transport Division
(Dudinka Port)
6
Yenisey River Shipping
Company (82%)
8
Lesosibirsk Port (51%)
1
4
3
2
6
8
5
7
Nornickel owns a modern transport
infrastructure capable of handling
most challenging freight logistics
tasks and ensuring continuity
and sustainability of operations
of the Group’s enterprises. Nornickel’s
transportation and logistics assets cover
the full range of transportation and freight
forwarding services.
Norilsk Nickel’s transportation
and logistics assets include:
◾ sea fleet – six heavy ice-class vessels
◾ river fleet – 627 vessels (including 198
self-propelled and 429 towed vessels)
◾ rail car and locomotive fleet –
118 container flatcars, one switch
locomotive, one Yermak electric
locomotive (sold in 2020), and one
2М62 diesel locomotive
◾ aircraft fleet – 18 helicopters
operated by Norilsk Avia and 15
airplanes operated by NordStar
Airlines.
106 107
DRY CARGO TRANSPORTATION
BY NORNICKEL’S FLEET (MLN T)
1.4
1.5
1.4
1.2 | 0.2
2020
1.3 | 0.2
2019
1.2 | 0.2
2018
For Nornickel
For third parties
TRANSPORTATION BY YENISEY
TANKER (KT)
189
153
222
99 | 90
2020
76 | 77
2019
89 | 133
2018
For Nornickel
For third parties
FREIGHT SHIPPING SERVICES
Nornickel’s dry cargo fleet provides
year-round freight shipping services
between Dudinka, Murmansk,
Arkhangelsk, Rotterdam, and Hamburg
sea ports while also serving other
destinations. In 2020, 66 voyages
were made from Dudinka (2019:
68), including nine direct voyages
to European ports (2019: 11).
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.
Between 2015 and 2020, the public-
private partnership between Nornickel
and the Federal Agency for Air Transport
(Rosaviatsiya) renovated the airfield
complex and airport infrastructure.
The renovated Norilsk Airport meets all
current regulatory requirements, offering
higher quality and safety standards
and ensuring reliable and consistent
passenger and freight transportation
services.
Nornickel has a unique Arctic fleet
comprising five dry cargo vessels
and one Yenisey heavy ice-class
tanker (Arc7 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
field to European ports and makes
commercial voyages to other
destinations.
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 carrier has its own fleet of 18
helicopters and provides air services
related to the operations of the Norilsk
Nickel Group, emergency air medical
services, 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
15 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
traffic is in excess of one million people.
The airline’s current route network covers
over 30 cities in Russia and the CIS.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 108 109
Lesosibirsk Port (Nornickel interest 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
◾ 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 TRANSPORT AND LOGISTICS ASSETS
INVESTMENT
Expenditure
Capital construction
Equipment
purchases
Other
Total
2018
2019
2020
USD mln
RUB bn
USD mln
RUB bn
USD mln
RUB bn
6.4
12.8
15.9
35.1
0.4
0.8
1.0
2.2
3.1
40.2
12.4
55.6
0.2
2.6
0.8
3.6
5.8
77.6
12.3
95.7
0.4
5.7
0.9
7.0
Higher CAPEX in 2020 vs 2019 was due
to the programme to replace mobile
harbour cranes in Dudinka Port, as well as
the purchase of a new aircraft. In addition
to the programme, in 2020, Nornickel
completed scheduled repairs of vessels,
overhauled several berths and harbour
cranes, implemented projects to improve
security and shift shore power supply from
marine fuel-fired generation to power
grids, introduced fuel consumption
metering and upgraded marine
equipment.
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
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.
◾ Receipt of converter matte from
Dudinka and its shipment by rail
to Kola MMC
◾ Shipment of empty containers,
equipment and materials to Dudinka
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 the 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.
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
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.
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.
Krasnoyarsk Transport Division is
based in Krasnoyarsk. This division
is responsible for transportation
and forwarding of Nornickel’s cargoes
and for carriage of precious metal
concentrates.
In 2019, Nornickel-YRSС (Nornickel
interest 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
rock, clinker, equipment, materials,
and socially significant cargoes (as part
of the Northern Deliveries programme).
CARGO TRAFFIC AT DUDINKA PORT
(MLN T)
3.6
3.4
3.5
1.4 | 2.2
2020
1.4 | 1.9
2019
1.3 | 2.2
2018
Via the Northern Sea Route
Via the Yenisey River
CARGO TRAFFIC AT MURMANSK
TERMINAL (MLN T)
1.4
2020
1.4
2019
1.3
2018
Yenisey River Shipping Company
(Nornickel interest 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
and Podkamennaya Tunguska Rivers,
and their largest tributaries.
Krasnoyarsk River Port (Nornickel
interest 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.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 DIGITAL
TRANSFORMATION JOURNEY
Nornickel has been consistently implementing a programme to improve its operational efficiency, including through the use
of advanced information technologies. The Company is clearly ahead of the curve on technology adoption, rolling out multiple
innovations that are unique in the industry. In 2020, Nornickel moved to the second phase of its IT strategy: advanced automation
projects. Nornickel is already rolling out Industry 4.0 innovations across its operations and business activities, while our powerful IT
infrastructure built out as part of Nornickel’s digital transformation journey enabled fast response to the last year’s unprecedented
challenge and our continued operation throughout the pandemic.
IT INFRASTRUCTURE DEVELOPMENT
Nornickel’s global IT strategy
includes a programme to deploy high
performance computing capabilities.
The construction of a data centre
in Moscow was the culmination of a major
programme to build out a more resilient,
advanced IT infrastructure. It also
included projects to upgrade four data
centres at the Polar Division and Kola
MMC, build a company-wide backup
system, create a new corporate-wide
data transmission network, and build out
a corporate services and infrastructure
monitoring system. The IT infrastructure
upgrade provided a solid foundation
for Nornickel’s further digital projects,
from process automation to new ERP
functionality, as well as ensured business
continuity throughout the pandemic.
Over 14,000 Nornickel employees
were shifted to work from home
in the shortest timeframe while meeting
all information security requirements.
Our near-term key priority in developing
IT infrastructure is to enable ubiquitous
access to data centre resources
and ensure fast data sharing between
all sites. This will significantly accelerate
management decision-making
and support it, among other things,
by data from resource-intensive AI
platforms. Further development in this
area will also be focused around
an effective scale-up and high availability.
During the year, Nornickel kicked off its
private corporate cloud project, expected
to dramatically accelerate IT infrastructure
provisioning through automation. Within
a few years, employees will be able
to submit requests for a virtual machine or
disk space via the self-service portal.
In 2020, Nornickel also launched a project
to promote local solutions by upgrading
technology networks through aggregation
at a regional level and at our production
sites. This includes networks to support
projects within the Technology
Breakthrough and Technology
Breakthrough 2.0 programmes, as well
as regional segments of the corporate
network, including the creation of internet
traffic filtering nodes.
BUSINESS APPLICATIONS
In 2020, Nornickel continued
the successful automation of its
key business processes through
the implementation and rollout
of corporate IT systems. For example,
as part of digitising its document
management, a document management
system for binding B2B documents
was deployed across pilot sites.
The project received an award
for the Electronic Document Management
Innovation of the Year at the CFO
Russia contest. The number of users
of the corporate document automated
management & control system (CDAMCS)
grew to 23,000, with an average of 4,000
documents and 6,000 orders generated
in CDAMCS on a daily basis.
The Company also completed a project
for comprehensive internal audit
automation based on the SAP Audit
Management solution to improve its
audit processes and speed up analytical
reporting. The project significantly
boosted the reliability and performance
of our corporate reporting, with 350 new
users connected to the corporate data
warehouse.
110 111
As part of net working capital
optimisation, an IT service was set up
to identify comparable inventories.
Over 10,000 comparable products
were identified in 2020, which allowed
increasing the use of stale stocks
in production processes. We have
deployed RPA solutions across over 40
new use cases, with 40,000 Group
employees already connected to the Nika
virtual assistant.
Nornickel places a particular emphasis
on improving industrial safety. In 2020,
three more Group companies rolled
out a video analytics system to monitor
the use of personal protective equipment.
The pilot implementation of the Control,
Management, Safety system was also
successfully completed, covering 70 OHS
business processes. The system captures
700 behavioural safety audits and issues
over 30 work permits on a daily basis.
Active digitisation of the Company’s
HR processes is also ongoing. In 2020,
Nornickel completed the rollout of its HR
management system, with the project
covering 53 branches and legal entities
across 12 cities within our footprint.
The system has 4,500 users while
22,000 employees are using self-
service products. In 2020, the project
won the SAP Quality Award as the most
ambitious business transformation
project.
The Company also launched
an onboarding solution to improve
the engagement and performance of its
new hires. The solution is integrated with
the Nika virtual assistant: employees
can use the chat-bot to get updated
on their tailored onboarding plan tasks,
find out more about the Company and fill
in the necessary questionnaires.
Progress on the social agenda included
the deployment of an integrated
software suite for the Your Home
housing programme. The service
automates the processes for engaging
and recording the performance under
the corporate programme for relocating
employees from the Far North.
IMPROVING DIGITAL LITERACY
Our IT function is actively developing
the Digital Nornickel educational
programme, which focuses primarily
on improving the digital literacy
of Company employees and enhancing
their digital skills and knowledge. This
list includes both basic IT competencies
(knowledge of office applications
and other software, messengers,
electronic document management, etc.)
and more advanced competencies such
as coding, RPA basics, understanding
and use of innovative technology:
machine vision, digital twins, big data,
virtual reality and artificial intelligence.
12 interactive courses under the IT
and Digitalisation programme are already
available on the Nornickel Academy
portal. More than 500 employees took
the courses over several months, while
over 4,000 users successfully completed
the Digital Literacy online course
via the Tsifronikel mobile app.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 collected by the Digital Lab
at production units.
>200 ideas
The Digital Lab’s research pipeline
contains
>70 initiatives.
DIGITAL LAB
Digital Lab (Nornickel’s R&D function)
is responsible for implementing
innovative technology at Nornickel,
exploring the applicability of innovations
to the Company’s operating processes
and testing them.
In 2020, as part of measures to prevent
the spread of COVID-19, the Digital Lab
explored the use of a disinfecting robot
in office spaces and the use of video
surveillance to monitor mask-wearing.
The Digital Lab’s pipeline
of environmental initiatives included
a number of projects to reduce
the Company’s environmental footprint:
◾ The Digital Tailings Dump,
an integrated solution that combines
automation and autonomous
monitoring tools to ensure effective
and safe operation of hydraulic
structures. The technology includes
space imagery using the InSAR method
(a satellite-based radar technique used
in geodesy), UAV surveys of the dam
(using photogrammetric survey
to create a 3D model of the tailings
facility and detect weak zones
in the hydraulic structure), as well
as bathymetry of the pond bottom
using an autonomous echoboat –
a special boat carrying a geodetic-
grade high-precision echo sounder
and GPS receiver. The devices digitise
the bottom surface and transmit
the data to the operator’s computer
via an industrial Wi-Fi network)
◾ SO2 Emissions Monitoring
in Monchegorsk, driven by a hardware
and software system designed
to monitor air pollution and inform
preventive measures
◾ An innovative oil filter designed
to reduce the consumption of fuel
and lubricants in rail transport
30% of the initiatives within the Digital
Lab’s 2021 portfolio are related
to the environment.
The Lab’s operating model is fully
integrated into the Company’s ongoing
operational excellence programme.
The Digital Lab seeks out innovative
solutions to do more and better
with less. The economic benefits
generated by the Digital Lab’s activities
over 2018–2020 total RUB 650 million
(USD 9 million).
112 113
video-recording the surrounding space
to build a horizontal section of the area.
The solution can survey workings that
cannot be accessed by people or
machinery.
Awards and partnerships
The Digital Lab’s initiatives consistently
generate strong interest and recognition
from the industry. Its projects won awards
at the Mine Digital contest of innovative
solutions and technologies for digital
transformation of the mining industry held
as part of the MINEX Russia 2020 Mining
& Exploration Forum. The Intelligent
Automated Process Control System
at Kola MMC’s Concentrator project
was the gold winner while the Digital
Core project won the bronze award.
Also in 2020, a cooperation agreement
was signed between Nornickel
and Gazprom Neft for the development
and implementation of digital products
and industrial exoskeletons designed
by the Digital Lab.
Plans are in place to roll out the new
approaches to the Company’s other
concentrators over the next few years.
The use of the Digital Twin technology
is a key focus area for the Digital Lab,
which has already enabled a number
of innovative solutions:
◾ An advisory system at Kola MMC’s
Concentrator, which increased
component extraction by 0.73% from
the baseline period
◾ A Digital Twin in the main aisle
of Copper Plant’s smelting shop –
a system for optimising in-process
logistics of the converter operations
through the use of digital tools for real-
time charge planning
◾ The Digital Core, a software suite that
uses machine vision components
in combination with neural network
algorithms to enable the online
detection and analysis of ore present
in a core using a photograph, as
well as highly accurate estimates
of mineralisation grades.
As part of the efforts to ensure safety
and drive operational efficiency at Kola
MMC’s Severny Mine, the Digital Lab
tested a prototype of an autonomous
UAV to inspect the workings. The drone’s
built-in navigation allows it to fly without
connecting to GPS/GLONASS while
BIG DATA
In 2020, the Nornickel – Shared
Services Centre data analytics group
used machine learning to develop
and test a number of systems
to optimise concentration processes
at the Talnakh Concentrator.
The implemented algorithms provide
real-time recommendations on ore
milling and floatation. The process aims
to increase metal recovery in concentrate.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 CREATING A DATA LAKE
SMART CITY
114 115
In 2020, Nornickel set out to create
a corporate data lake, a latest-
generation data processing
and storage platform with a number
of advantages over incumbent
architecture solutions:
◾ Storage and efficient processing
of extra-large data sets – millions
of gigabytes or more
◾ Ease of horizontal scaling
◾ Integration of diverse data
sources with both structured
and unstructured data
◾ Advanced business analytics
including predictive analytics
and data processing with machine
learning algorithms
◾ Near real-time data delivery from
source to the end user of business
analytics
◾ Effective change management:
short lead time from business
need definition to implementation
and productive use
SAP ERP
Nornickel consistently automates
business activities of the Group
companies to achieve a high level
of optimisation across its operational,
logistics, financial and HR processes.
In 2020, the following support
companies were successfully connected
to the unified management system
of the Company’s SAP ERP: Polar
Construction Company, Nornickel –
Shared Services Centre, Norilsk Avia,
Norilsk Airport, Nortrans-Norilsk, Norilsk
Plant and the Company’s transportation
branches (at Dudinka, Krasnoyarsk,
Arkhangelsk and Murmansk), etc.
The unified management system already
enables interactions between more than
17,000 users.
The corporate data lake will help
reinvent Nornickel’s consolidated
data assets (including entirely new
data sources ranging from video files
to social media data) to capture value
and boost operational efficiency.
Kola MMC was selected as a pilot
site to launch a data lake prototype.
The effort covered two business
segments: HR management
and production process management.
Five prototypes of business solutions
were implemented as Tableau
dashboards:
◾ Production data deviation
monitoring, a system to support
process operator decisions
on selecting optimal equipment
operating parameters
◾ Production data quality monitoring,
a control tower to detect
and forecast abnormal equipment
behaviour, with event logging
and follow-up examination
and corrective actions
◾ Sick leave prediction model,
a system to predict employee sick
leaves mathematically
◾ Career development/multi-skilling,
an analytics system to define
a career path for each employee
and identify high-potential
employees that could add value
to the business
◾ Actual employee attendance
analysis, a business analytics
tool for real-time monitoring
of employee workplace attendance
and systematic analysis of employee
and department working time
Over the next two years, the system is
expected to be rolled out to Nornickel’s
global sales network and a number
of division-specific support companies,
such as Norilsk Support Complex, Taimyr
Fuel Company, Yenisey River Shipping
Company, etc.
In parallel with the system’s roll-out, it
will be continuously improved to capture
additional business impacts. Under
the SAP 2.0 development programme,
the Company’s business units implement
commercially viable (self-sustaining)
initiatives for advanced automation with
digital elements, e.g. Integrated Planning,
Digital Treasury, and Tax Monitoring.
Digital assistants, mobile solutions
and analytics tools are developed
under the programme. The Company’s
pilot project included 14 initiatives
carefully selected out of 50 ideas based
on the size of expected business impact.
Nornickel’s holistic approach to business
process transformation and digitisation has
earned international acclaim. The Company
won the gold award in the Business
Transformation category at SAP Quality
Awards — 2019 for EMEA (Europe, Middle
East and Africa). For over 15 years, this
award has been given by an independent
international judging panel to recognise
high-quality, large-scale business
transformations based on a SAP platform,
and Nornickel did very well representing
Russia amongst the world’s largest
and most ambitious leaders in SAP-driven
business transformation and performance
improvement.
Nornickel is also actively contributing
to social projects. In 2019, the Company
launched the Smart City project
positioned as a new business segment
and implemented in three phases until
2025. The project is aimed at the digital
transformation of cities, harnessing
innovative technology for an easier
and more comfortable life for city
dwellers.
In 2020, during the first phase
of the project, Nornickel subsidiary
Edinstvo launched the City Online
platform in five cities: Norilsk,
Dudinka, Monchegorsk, Murmansk
and Krasnoyarsk. This digital solution
was developed to improve quality of live
and enhance urban management systems
in northern cities and open up additional
opportunities for business development.
The new platform received positive user
feedback: support for its launch by city
administrations; high focus group ratings
(scores of more than eight points out
of ten); early customer satisfaction metrics
NPS = 7 and SCI = 78%; 68,000 unique
users as at 15 December 2020.
A total of 14 products have been
implemented on the platform, which is
above target; however the product mix
roll-out was adjusted to incorporate
market feedback, prioritising
the launches of traffic generating services
and postponing some commercial service
launches until 2021.
Preparations for future scale-up in 2020
included establishing close relations
with the Ministry for the Development
of the Russian Far East and Arctic, setting
up a working group with representatives
from 12 cities, diagnostics of urban
needs, obtaining confirmations of interest
in Edinstvo’s offer from most cities,
identifying the scale-up approach
and getting it approved by the ministry,
and identifying opportunities
for co-financing and platform launches
in small and medium towns.
The portal features telemedicine
and remote learning services as well
as news and upcoming events. SME
support, urban online voting, utility
bill payment, public transport tracking
and monitoring, further education,
professional development, and other
services are expected to be added
shortly. The platform is available both
online and as a mobile app.
1
NPS = 34 based on focus group data; NPS = 20 based on both survey and focus group research; NPS = 7 based on surveys only, excluding focus group data.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 PRODUCTION AUTOMATION
TECHNOLOGY BREAKTHROUGH PROGRAMME
In 2015, as part of basic production
automation, Nornickel launched
the Technology Breakthrough
programme running from December
2015 to April 2021.
The programme’s key objective is
to embed all operating processes in a new
effective system of multiple option planning
and automated day-to-day monitoring,
aligning performance with KPIs.
By December 2020, 26 IT projects
were implemented under the Technology
Breakthrough programme, 31 IT systems
were developed and put into operation
at all relevant sites, and 2,418 users were
connected.
116 117
In 2018, a separate programme
was spun off from the Technology
Breakthrough programme – Underground
Infrastructure and Mining Operations
Dispatch that comprises six IT projects
to be implemented between July 2018
and December 2020.
All systems were put into operation at all
relevant sites in 2020, and in December
2020, the Underground Infrastructure
and Mining Operations Dispatch
programme was completed with
the following measures implemented:
◾ Dispatch control over rock delivery from
the mine face to the ore pass and further
from the ore pass to the intermediate
stockpile (autonomous haul trucks, rail
transport)
◾ Dispatch control over drilling operations
More than 70 km of fibre was laid
in mines, 365 access points
were installed to provide Wi-Fi coverage,
386 pieces of mining equipment
were connected, and more than
500 specialists were trained.
At the same time, the progress
on the mining and ore transportation plan
is monitored online 24/7. These measures
helped enhance the production culture
and execution discipline.
UNDERGROUND INFRASTRUCTURE AND DISPATCH PROGRAMME
EFFECTIVE SOLUTIONS FOR PRODUCTION MANAGEMENT
UNDERGROUND INFRASTRUCTURE AND MINING CONTROL
Mining efficiency
improvement
24/7 online visibility of each
mining machinery unit
WI-FI in the mine
Technological
breakthrough
Transparency
of the underground
production process
Efficient operation
of the equipment fleet
Higher
professionalism
24/7 online target
control
>70 km
of cable laid
365
contact points established
386
self-propelled diesel
equipment items equipped
>500
employees trained
EXECUTION
CONTROL
PRODUCTION
CULTURE
• Mining plan implementation
• Execution discipline
•
In-mine ore movement control
• Employee qualifications data
• Hourly performance profile
STATISTICS
• Mining operations performed
• Equipment use statistics
By end-2020, upon completion
of the Technology Breakthrough
and Underground Infrastructure
and Mining Operations Dispatch
programmes, the Company implemented
unique solutions that significantly improved
production management efficiency.
The solutions were deployed across all
production operations, from ore mining
to metals production.
INDUSTRIAL SAFETY
MANAGEMENT
The Control, Management, Safety
system was designed to collect, process,
record and analyse health and safety
data. The system’s main objectives are
to automate labour-intensive and routine
functions associated with health
and safety processes and to create
a single information environment
for its users. This will reduce time
and information constraints when making
management decisions, and improve
the quality and efficiency of industrial
safety processes.
PRODUCTION DISPATCH
All key processes in the Company
are controlled from control centres
at the Norilsk and Kola Division,
covering a total of 18 operating units.
Dispatch control allowed the Company
to completely abandon collecting
information by phone and recording it
on paper. By automating the collection
of data from production chains, Nornickel
is able to effectively calculate and monitor
process and production parameters,
including development of production
plans and schedules and progress
monitoring in real time.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 METALS BALANCE
Based on real-time data, all production
units simultaneously prepare metals
inventory plans, enabling detailed,
granular views into metal-bearing
products at each production stage,
and accurate real-time control
over commodity flows within the Company
and the actual volume of products
manufactured.
GEOLOGICAL MODELLING
AND MINE PLANNING
SOLUTIONS
By deploying geological modelling
and mine planning solutions,
the Company was able to develop
a single mining database, design
underground workings and obtain survey
data. 3D models of underground ore
bodies or workings can be displayed
at any time to assess the current
situation in a mine. The system enables
the preparation and feeding to automated
drill rigs of electronic data sheets, with
significant gains to be achieved in drilling
and blasting performance.
SIMULATION MODELLING
SYSTEM
The simulation modelling system enables
the development and prompt analysis
of mining plan options to select the best
ones. To make it possible, more than
500 pieces of equipment were modelled,
including LHDs, autonomous haul
trucks and self-propelled drilling rigs,
electric locomotives and skip shafts.
Simulation models comprise data
on 5,000 underground workings and their
characteristics. Nornickel plans to create
a single simulation model covering all
production operations – a full digital twin
that will feature optimal operation modes
to manage all processes in the Company,
based on modelling and big data.
PRODUCT QUALITY
MANAGEMENT
LIMS (Laboratory Information
Management System) automates
operations at control and analysis
centres and supports the entire cycle
of quality control processes, from
sample registration to reporting on test
results. With LIMS, Nornickel has
centralised the collection and storage
of all information about laboratories’
activities and ensured its reliability
and confidentiality.
ENERGY ACCOUNTING
The automated system for commercial
energy accounting monitors
the consumption of electricity, heat,
gas, cold water, as well as industrial
oxygen and compressed air in real time.
Thanks to the energy accounting system,
enterprise managers will be able to see
the actual consumption of all resources
at once, track any deviations from
the planned parameters, and decide
on necessary measures to ensure
efficient use of resources.
TECHNOLOGY BREAKTHROUGH 2.0 PROGRAMME
In 2020, the Company launched the Technology Breakthrough 2.0 programme, which,
in turn, includes 10 sub-programmes. Business milestones have already been set
for each sub-programme, with a roadmap consisting of 42 IT initiatives and IT projects
to achieve these milestones.
The Technology Breakthrough 2.0
Programme is planned to be implemented
within five years with a total budget
of RUB 6.5 billion.
Our experience in implementing projects
across existing operations over the last
five years gives us confidence that we will
also successfully complete Technology
Breakthrough 2.0.
To sum up, between 2015 and 2020:
◾ all projects approved for implementation
were completed
◾ the targeted outcomes and outputs
were achieved under the Technology
Breakthrough and Underground
Infrastructure and Dispatch programmes
◾ a 2020–2024 further development plan
was prepared.
TRANSITION FROM BASIC
AUTOMATION TO DIGITAL
OPERATIONS
As a result of basic production
automation, all underground mines
were equipped with positioning and
communication systems. A powerful
system was created to feed data from the
surface underground and back. All in all,
we have created the basic infrastructure
to manage mining operations.
In 2020, the Company completed
the basic automation of its production
processes, with 31 information
systems (including systems developed
under the Technology Breakthrough
and Underground Infrastructure
and Dispatch programmes) deployed
and put into operation with more than 3,000
active users.
We collected and digitised all equipment
data sheets and process sheets for the
most critical equipment, which allows
effective production asset management
via a unified system. The deployment of
geological and mining information systems
has enabled us to develop a single mining
database and 3-D models of underground
ore bodies, design mine workings and
118 119
OPERATIONAL EXCELLENCE
Improved production asset performance
• Reliability management
• EBITDA@RISK modelling
• Workload management
• Day-to-day planning of mining and metallurgical
operations
• Modelling the content of valuable components
in the ore released and optimising the release strategy
Improved energy efficiency
• Energy management
• Energy balance
Lights-out/autonomous operation
• Automatic management of self-propelled drilling rigs
during extraction and shaft sinking operations
• Autonomous remote management of electric
locomotive haulage
• Autonomous remote management of self-propelled
diesel vehicles
Improved efficiency of mining and exploration
operations
• Processing and analysis of mining and geological data
• Licence risk management
Production planning and management
• Precious metal balance
•
• Management of ore dressing, charge blending
and concentration processes with forecasting
Inventory and semi-product movement accounting
Process data analysis
Occupational safety
• Occupational health
• Smart PPE and intelligent analytics
• Contractor management
• Mobile solutions
IP asset management
Digital model to manage capex projects
• Digital construction control
• Netgroup management
•
• Database of resource and process models
Interactive and analytical reports
Investment activities
manage mine survey information. 100%
of ore bodies and measured reserves of
the Company have been digitised, with
mining plans designed based on this data.
Local mining projects have also been fully
digitised in 3D.
The mining plans generated by the
geological and mining information
systems are promptly checked for
feasibility in a simulation modelling
system. The mine simulation model can
simulate the implementation of the annual
programme in less than 10 minutes,
factoring in:
◾ the actual geometry of the transport
network
◾ the position of mine workings
◾ the operation of the core and some of
the auxiliary equipment
◾ the actual performance parameters of
the equipment
◾ the mine’s operating mode
◾ emergency and scheduled repairs
◾ restrictions during blasting and venting
operations.
Moreover, the system’s deployment
delivered significant economic benefits,
sparing the need to purchase 40 units
of mining equipment. Currently, over
80% of operations (all key processes)
are monitored in real time from control
centres at the Company’s Polar Division
and Kola MMC.
Based on real-time data, all production
units simultaneously prepare metals
inventory plans, enabling detailed,
granular views into metal-bearing
products at each production stage, and
accurate real-time control over commodity
flows within the Company and the actual
volume of products manufactured.
All energy consumption is also metered
in real time now. Data from the core
process equipment is fed into the process
data storage, which captures over 100
thousand parameters collected from the
Company’s enterprises.
We also made further progress towards
the Company’s digital future, with plans
for remote equipment control, big data
analytics, AI-based decision making
and unmanned mines where human
involvement in the production process
will be minimised. We are currently
working on unmanned solutions
and have already obtained the first
results. For example, in February 2020,
Russia’s first unmanned autonomous
haul truck was successfully tested
at a Nornickel mine. Through this
entire transformation journey, we will
build highly effective and agile digital
operations with advanced business
processes.
AWARDS
OF THE TECHNOLOGY
BREAKTHROUGH
PROGRAMME
Industry experts have been long
interested in and recognised
the contribution of the industrial
automation projects integrated
into the Company’s ambitious Technology
Breakthrough programme to improve
operational efficiency of operations.
In October 2020, the Company was given
the Russian Mining Award for its
Underground Infrastructure and Dispatch
programme implemented at seven
mines. The Technology Breakthrough
programme has a total of eight awards.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 FINANCIAL PERFORMANCE
(MD&A)
2020 HIGHLIGHTS
Consolidated revenue increased 15%
y-o-y to USD 15.5 billion owing to higher
prices of palladium and rhodium as well
as the scheduled ramp-up of Bystrinsky
project.
EBITDA decreased 3% y-o-y
to USD 7.7 billion due to the USD 2 billion
environmental provision related
to the reimbursement of environmental
damages caused by the fuel spill
in Norilsk industrial district, expenses
related to containment of COVID-
19 spread and increase of inventory
of saleable metals.
CAPEX increased 33% y-o-y
to USD 1.8 billion owing to the execution
of mining projects at Talnakh ore cluster,
development of South Cluster, increased
capital repairs of energy infrastructure,
investments into improvement
of industrial safety as well as the launch
of an active construction phase
of the Sulfur project.
Net working capital decreased 28%
to USD 0.7 billion mainly driven
by the depreciation of the Russian
rouble and changes in income tax
payable, which was partly compensated
by increase of inventory of saleable
metals.
Free cash flow increased 36% y-o-y
to USD 6.6 billion driven by higher
revenue and scheduled ramp-up
of Bystrinsky project.
Net debt was down 33% y-o-y
to USD 4.7 billion. Net debt/EBITDA ratio
decreased to 0.6x as of December 31,
2020. The Company’s financial stability
was confirmed by investment grade
credit ratings from all three major rating
agencies.
On 29 May 2020, diesel fuel leaked
from the emergency fuel tank at the heat
and power plant №3 (HPP-3) due
to sudden sinking of support posts based
in permafrost. By now, the main phase
of the clean-up operations has been
completed.
On September 10, 2020, the Federal
Service for Supervision of Natural
Resources (“Rosprirodnadzor”) filed
a claim with the Arbitration Court
of the Krasnoyarsk region seeking
compensation from the Company
of damages caused to the environment
in the amount of RUR 147.78 billion (or
approximately USD 2 billion).
In September 2020, the Company
successfully placed a 5-year
USD 500 million eurobond offering
with a record low annual coupon rate
of 2.55%.
In December 2020, in line with its
complex environmental programme
the Company shut down a smelter
at Nickel town (Kola GMK), which resulted
in the complete elimination of sulphur
dioxide emissions in the cross-border
area with Norway and alongside other
environmental initiatives should enable
a reduction of sulphur dioxide emissions
in the Murmansk region by 85%
by the end of 2021.
In response to coronavirus, the Company
provided a comprehensive support
to safeguard the health and safety of its
employees and regional communities s.
In total, the Group spent USD 157 million
net of VAT to prevent and combat spread
of COVID-19.
Starting from 2021, Mineral Extraction
Tax has been increased 3.5x for certain
minerals, including ores mined by Norilsk
Nickel.
120 121
RECENT DEVELOPMENTS
In January 2021, investment tokens
backed by physical metal were issued
using EU-registered financial vehicle
listed on Deutsche Börse and London
Stock Exchange;
On February 5, 2021, Arbitration
Court of Krasnoyarsk Kray announced
that it decided to award diesel spill
damages claimed by Rosprirodnadzor
in the amount of RUB 146.2 billion
(USD 1,979 million at the exchange rate
as of December 31, 2020). The Company
has set up a provision that fully covers
both the damages and the expenses
related to liquidation of incident
consequences and rehabilitation
of disturbed area. The decision
of the Krasnoyarsk Region Arbitration
Court was implemented on 10 March
2021.
KEY CORPORATE HIGHLIGHTS (USD MILLION)
On February 12, 2021, the Company made
an early repayment of exchange-traded
bonds in the amount of RUB 15 billion
(USD 203 million at the exchange rate as
of 31 December 2020).
Index
Revenue
EBITDA1
EBITDA margin
Net profit
Capital expenditures
Free cash flow2
Normalized net working capital2 3
Net debt2
Net debt, normalized for the purpose of dividend calculation4
Net debt/12M EBITDA
Net debt/12M EBITDA for dividends calculation
Dividends paid per share (USD)5
2020
15,545
7,651
49%
3,634
1,760
6,640
712
4,705
3,469
0.6x
0.5x
26.3
2019
13,563
7,923
58%
5,966
1,324
4,889
985
7,060
4,952
0.9x
0.6x
26.3
Change
15%
(3%)
(9 p. p.)
(39%)
33%
36%
(28%)
(33%)
(30%)
(0.3x)
(0.1x)
0%
1
2
3
4
5
A non-IFRS measure, for the calculation see the notes below.
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.
Paid during the current period
Normalized on interim dividends (at the rate of the Board of Directors meeting date) and deposits with maturity of more than 90 days
Normalized on receivables from the registrar on transfer of dividends to shareholders
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 KEY SEGMENTAL HIGHLIGHTS1 (USD MILLION (UNLESS STATED OTHERWISE))
Index
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
2020
15,545
12,700
694
8,926
1,308
1,004
137
1,387
(10,611)
7,651
6,171
407
1,757
70
717
(14)
31
(556)
(932)
49%
49%
59%
20%
5%
71%
(10%)
2%
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%
Change
15%
(8%)
(20%)
3x
12%
5x
3%
(2%)
48%
(3%)
(35%)
(14%)
30x
(5%)
2x
(55%)
0%
(69%)
19%
(9 p. p.)
(20 p. p.)
4 p. p.
18 p. p.
(1 p. p.)
n.a.
13 p. p.
0 p. p.
In 2020, revenue of GMK Group segment
decreased 8% to USD 12,700 million
primarily due to decrease in PGMs sales
volumes that was partly compensated
by higher palladium prices. PGMs sales
volumes decreased due to the launch
of direct sales of semi-products to KGMK
Group in 1H2019 and higher base
effect in 1H2019 owing to the release
of work-in-progress inventory, which
was exacerbated by decrease
in palladium global demand owing
to the coronavirus pandemic.
Revenue of South cluster segment
decreased 20% to USD 694 million due
to the launch of direct sales of semi-
products to GMK Group in 1H2019.
Revenue of KGMK Group
segment increased three times
to USD 8,926 million due to the launch
of direct sales of semi-products supplied
by GMK Group segment and increase
of sales of semi-products to GMK Group
and NN Harjavalta.
Revenue of NN Harjavalta increased 12%
to USD 1,308 million driven by higher
palladium price and increase in sales
volumes of semi-products, that was partly
compensated by decrease in refined
nickel sales volume.
Revenue of GRK Bystrinskoye amounted
to USD 1,004 million, which included
sales of semi-products since the full
commissioning of Bystrinsky project
in September 2019.
Revenue of Other mining segment
increased 3% to USD 137 million driven
by higher realized price of Nkomati nickel
concentrate, that was partly compensated
by decrease of it’s sales volume.
Revenue of Other non-metallurgical
segment decreased 2%
to USD 1,387 million mostly owing
to lower sales volumes from Palladium
Fund and decrease in other sales
due to depreciation of Russian rouble
and negative effect of coronavirus
pandemic that was partly compensated
by higher palladium price.
In 2020, EBITDA of GMK Group
segment decreased 35%
to USD 6,171 million primarily owing
to accrual of environmental provisions
and decrease in revenue. EBITDA of GMK
Group segment included profit from
SALES VOLUME AND REVENUE
Index
Metal sales
Group
Nickel, thousand tons2
from own Russian feed
from 3d parties feed
in semi-products3
Copper, thousand tons2 4
from own Russian feed
in semi-products3
Palladium, koz2
from own Russian feed
in semi-products3
Platinum, koz2
from own Russian feed
in semi-products3
Rhodium, koz2
from own Russian feed
in semi-products3
Cobalt, thousand tons2
from own Russian feed
in semi-products3
122 123
EBITDA of GRK Bystrinskoye segment
increased 2 times to USD 717 million
primarily due to higher production
volumes since the full commissioning
of Bystrinsky project in September 2019.
EBITDA of Other non-metallurgical
segment was unchanged and amounted
to USD 31 million.
EBITDA of Unallocated segment
decreased by USD 147 million
and amounted to a negative
USD 932 million primarily driven
by increase in social expenses.
the sale of semi-products to KGMK Group
segment, which was eliminated from
EBITDA of the Group.
EBITDA of South cluster segment
decreased 14% to USD 407 million due
to decrease in metal sales.
EBITDA of KGMK Group segment
increased 30 times to USD 1,757 million
primarily owing to the launch of direct
sales of semi-products supplied by GMK
Group segment.
EBITDA of NN Harjavalta decreased
by USD 4 million to USD 70 million
primarily driven by increase
in transportation expenses due
to the launch of semi-products sales
to the GMK Group segment.
2020
2019
Change
221
198
3
20
500
427
73
2,634
2,604
30
689
684
5
58
56
2
6
5
1
230
213
3
14
479
433
46
2,988
2,890
98
714
698
16
78
69
9
7
7
-
(4%)
(7%)
0%
43%
4%
(1%)
59%
(12%)
(10%)
(69%)
(4%)
(2%)
(69%)
(26%)
(19%)
(78%)
(14%)
(29%)
100%
1
Segments are defined in the consolidated financial statements
2
3
4
All information is reported on the 100% basis, excluding sales of refined metals purchased from third parties and semi-products purchased from Nkomati.
Metal volumes represent metals contained in semi-products. .
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.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 Index
Gold, koz1
from own Russian feed
in semi-products2
Average realized prices of refined metals produced by the Group
Metal
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 million3
Nickel
including semi-products
Copper
including semi-products
Palladium
including semi-products
Platinum
including semi-products
Rhodium
including semi-products
Gold
including semi-products
Other metals
including semi-products
Revenue from metal sales
Revenue from other sales
Total revenue
2020
2019
Change
REVENUE
124 125
386
192
194
13,916
6,221
2,176
882
12,056
30,745
1,764
3,144
342
3,078
424
6,365
147
622
19
682
6
676
336
410
224
14,977
568
15,545
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
291
20
328
71
296
81
12,851
712
13,563
64%
4%
4x
(3%)
3%
43%
2%
3x
15%
27%
(7%)
20%
7%
65%
26%
(24%)
(1%)
(30%)
2x
(70%)
2x
5x
39%
3x
17%
(20%)
15%
NICKEL
COPPER
PALLADIUM
Nickel sales contributed 21%
to the Group’s total metal revenue
in 2020, down from 26% in 2019. This
reduction in nickel share in metal revenue
was primarily driven by the different price
dynamics of nickel in comparison with
other metals within the metal basket.
In 2020, copper sales accounted
for 21% of the Group's total metal sales,
increasing 7% (or +USD 201 million)
to USD 3,078 million. The increase
was driven by both higher sales volume
(+USD 123 million) and realized copper
price (+USD 78 million).
The average realized price of refined
copper increased 3% from USD 6,047
per tonne in 2019 to USD 6,221 per tonne
in 2020.
Physical volume of refined copper sales
from the Company’s own Russian feed
decreased 1% (or -6 thousand tonnes)
to 427 thousand tonnes primarily
due to lower copper production from
concentrate purchased from Rostec.
Revenue from copper in semi-
products in 2020 increased
65% to USD 424 million primarily
due to the production increase
by the Bystrinsky project that was fully
commissioned in September 2019.
In 2020, nickel revenue was down
7% to USD 3,144 million. The decline
was driven both by the decrease in sales
volume (-USD 167 million) and lower
realized nickel price (-USD 77 million).
The average realized price of refined
nickel decreased 3% from USD 14,355
per tonne in 2019 to USD 13,916 per
tonne in 2020.
Sales volume of refined nickel produced
from own Russian feed, decreased 7%
(or -15 thousand tonnes) to 198 thousand
tonnes owing to the temporary
accumulation of metal inventory following
the weak demand for the metal amidst
the coronavirus pandemic.
Sales volume of nickel produced from
third-party feed remained unchanged
and amounted to 3 thousand tonnes.
In 2020, sales of nickel in semi-products
increased 20% to USD 342 million
primarily owing to higher sales volume
of semi-products.
In 2020, palladium accounted for 42%
of total metal revenue, increasing
3 p.p. y-o-y. Palladium revenue
increased 26% (or +USD 1,322 million)
to USD 6,365 million due to higher
realized price (+USD 1,954 million) which
was partly offset by lower sales volume
(-USD 741 million).
The average realized price of refined
palladium increased 43% from USD 1,524
per troy ounce in 2019 to USD 2,176 per
troy ounce in 2020.
Physical volume of refined palladium
sales from the Company’s own Russian
feed decreased 10% (or -286 thousand
troy ounces) to 2,604 thousand troy
ounces in 2020. The decline in sales
volume was primarily due to the weak
palladium global demand owing
to the coronavirus pandemic, as well as
the launch of production using a new
technology at the Kola MMC and higher
base effect in 2019 owing to the release
of work-in-progress inventory.
Revenue of palladium in semi-products
decreased 24% to USD 147 million
in 2020 primarily due to lower sales
volume of semi-products resulting from
processing of semi-products produced
by NN Harjavalta at the Polar division
refinery in 2020.
In 2020, revenue from the resale
of palladium purchased from third
parties amounted to USD 553 million (vs
USD 444 million in 2019).
1
2
3
All information is reported on the 100% basis, excluding sales of refined metals purchased from third parties and semi-products purchased from Nkomati.
Metal volumes represent metals contained in semi-products.
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.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 OTHER METALS
COSTS OF METAL SALES (USD MILLION)
In 2020, revenue from other metals
increased 93% (or +USD 853 million)
to USD 1,768 million. The main factors
were:
◾ higher revenue from rhodium
(+USD 391 million), primarily due
to favorable pricing environment in 2020;
◾ higher revenue from gold
(+USD 348 million) and iron ore
concentrate (+USD 146 million), primarily
due to the ramp-up of Bystrinsky project
in September 2019.
Cash operating costs also increased
by USD 156 million y-o-y due to the full
commissioning of Bystrinsky project
in September 2019.
in 2020 primarily due to higher base
effect in 2019 owing to the release
of work-in-progress inventory.
Revenue of platinum in semi-products
in 2020 decreased 30% to USD 19 million
primarily due to lower sales volume
of semi-products resulting from
processing of semi-products produced
by NN Harjavalta at the Polar division
refinery in 2020.
PLATINUM
In 2020, platinum sales decreased 1%
(or -USD 6 million) to USD 622 million
and accounted for 4% of the Group’s
total metal revenue. The decline
of sales volume (-USD 21 million)
was partly positively offset
by the increase in realized platinum price
(+USD 15 million).
Physical volume of refined platinum
sales from the Company’s own Russian
feed decreased 2% (or -14 thousand troy
ounces) to 684 thousand troy ounces
OTHER SALES
In 2020, other sales decreased 20%
to USD 568 million negatively impacted
by the Russian rouble depreciation
(-USD 69 million) and lower air
transportation service revenue owing
to the pandemic.
COST OF SALES
COST OF METAL SALES
CASH OPERATING COSTS
In 2020, the cost of metal sales
was unchanged amounting
to USD 4,500 million, with the main
impacts coming from the following
changes:
◾ Increase in cash operating costs by 2%
(or +USD 78 million);
◾ Increase in depreciation
and amortisation by 15% (or
+USD 110 million);
◾ Comparative effect of change
in metal inventories y-o-y leading
to cost of metal sales decrease
of USD 187 million.
In 2020, total cash operating costs
increased 2% (or +USD 78 million)
to USD 3,886 million.
The positive effect of Russian rouble
depreciation (-USD 314 million) was partly
compensated by inflationary growth
of cash operating costs (+USD 69 million),
higher mineral extraction tax and other
levies (+USD 50 million), higher
purchases of refined metals for resale
(+USD 44 million) and expenses
related to anti-COVID measures
(+USD 55 million).
Index
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
126 127
2020
1,307
731
482
298
276
248
151
109
90
194
3,886
845
(231)
4,500
2019
1,295
712
438
402
239
221
155
101
78
167
3,808
735
(44)
4,499
Change
1%
3%
10%
(26%)
15%
12%
(3%)
8%
15%
16%
2%
15%
5x
0%
Labour
In 2020, labour costs increased 1% (or
USD 12 million) to USD 1,307 million
amounting to 34% of the Group’s
total cash operating costs driven
by the following factors:
◾ -USD 129 million – positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 35 million - higher consumption
of materials primarily due to increased
volume of repairs;
◾ +USD 5 million - higher materials
expenses due to the pandemic;
◾ +USD 7 million - inflationary growth
of materials and supplies expenses.
Third-party services
In 2020, cost of third party services
increased 15% (or USD 37 million)
to USD 276 million mainly driven by:
◾ -USD 24 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 34 million - ramp-up of Bystrinsky
project that was fully commissioned
in September 2019;
◾ -USD 16 million - lower Nkomati
production volumes;
◾ +USD 29 million – increase in repair
services;
◾ +USD 11 million - inflationary growth
of third-party services.
◾ +USD 56 million - indexation of salaries
and wages in line with the terms
of collective bargaining agreement;
◾ +USD 44 million - ramp-up of Bystrinsky
project that was fully commissioned
in September 2019;
◾ +USD 45 million – hardship payments
to employees due to the pandemic.
Purchases of refined metals
for resale
In 2020, expenses related to purchase
of refined metals for resale increased 10%
(or USD 44 million) to USD 482 million
owing to the increase in palladium price,
which was partly compensated by lower
purchase volume.
Materials and supplies
In 2020, expenses for materials
and supplies increased 3% (or
USD 19 million) to USD 731 million driven
by the following factors:
◾ -USD 72 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 38 million - ramp-up of Bystrinsky
project that was fully commissioned
in September 2019;
Purchases of raw materials
and semi-products
In 2020, purchases of raw materials
and semi-products decreased 26% (or
USD 104 million) to USD 298 million
mainly driven by lower processed
volumes of Rostec concentrate.
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 Sundry costs
In 2020, sundry costs increased 16% (or
+USD 27 million) to USD 194 million mainly
driven by the commissioning of Bystrinsky
project and higher expenses in Norilsk
industrial region.
Depreciation and amortisation
In 2020, depreciation and amortisation
expenses increased 15% (or USD 110 million)
to USD 845 million.
Positive effect of the Russian rouble
depreciation amounted to -USD 72 million.
Depreciation charges in real terms increased
by USD 182 million mainly due to transfers
from construction in progress to production
assets including the full commissioning
of Bystrinsky project and KGMK.
(Increase)/decrease in metal
inventories
Сomparative effect of change in metal
inventory amounted to -USD 187 million
resulting in a decrease of cost of metal sales,
primarily driven by accumulation of refined
metals owing to coronavirus pandemic
in 2020.
Mineral extraction tax and other
levies
In 2020, mineral extraction tax and other
levies increased 12% (or USD 27 million)
to USD 248 million driven by the following
factors:
◾ -USD 23 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 50 million – primarily increase
in payments related to negative
environmental impact due to changes
in the legislation.
Electricity and heat energy
In 2020, electricity and heat energy
expenses decreased by USD 4 million
to USD 151 million driven by the following:
◾ -USD 11 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 7 million - ramp-up of Bystrinsky
project that was fully commissioned
in September 2019.
Fuel
In 2020, fuel expenses increased by 8%
(or USD 8 million) to USD 109 million driven
by the following factors:
◾ -USD 10 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 18 million - ramp-up of Bystrinsky
project that was fully commissioned
in September 2019.
Transportation expenses
In 2020, transportation expenses
increased 15% (or +USD 12 million) to
USD 90 million driven by the following
factors:
◾ -USD 6 million - positive effect
of the Russian rouble depreciation
against US dollar;
◾ +USD 3 million - inflationary growth
of expenses;
◾ +USD 15 million – primarily increase
in transportation expenses in Norilsk
industrial region.
COST OF OTHER SALES
In 2020, cost of other sales decreased
by USD 109 million to USD 575 million.
The effect of the Russian rouble
depreciation was exacerbated by lower
air transportation sales due to travel
restrictions during the pandemic.
SELLING AND DISTRIBUTION EXPENSES
128 129
GENERAL AND ADMINISTRATIVE EXPENSES
In 2020, general and administrative
expenses decreased 7% (or USD 69 million)
to USD 869 million. Positive effect
of the Russian rouble depreciation amounted
to -USD 90 million. Changes of the general
and administrative expenses in real terms
were primarily driven by the following:
◾ -USD 12 million – decrease in staff
costs mainly due to decrease of one-
off payments related to management
bonuses, which was partly
compensated by salaries indexation;
◾ +USD 28 million – increase of third
party services primarily related
to information security.
GENERAL AND ADMINISTRATIVE EXPENSES (USD MILLION)
Index
Staff costs
Third party services
Taxes other than mineral extraction tax and income tax
Depreciation and amortisation
Transportation expenses
Rent expenses
Other
Total
2020
529
134
69
67
18
2
50
869
2019
601
117
77
69
15
5
54
938
Change,%
(12%)
15%
(10%)
(3%)
20%
(60%)
(7%)
(7%)
OTHER OPERATING (EXPENSES)/INCOME
In 2020, other operating expenses
increased by USD 2,434 million
to USD 2,737 million driven
by the following factors:
◾ +USD 2,241 million – primarily
the environmental provision related
to the liquidation of diesel fuel leak
at the industrial site of the Heat
and Power Plant № 3 of Norilsk
and compensation for environmental
damage;
◾ +USD 192 million - cease of recognition
of net income earned during the pre-
commissioning stage generated
by GRK “Bystrinskoye” owing to the full
commissioning of Bystrinsky project
in September 2019;
◾ +USD 276 million - increase in social
expenses including coronavirus relief
packages provided to the regions
of the Company's operations;
◾ -USD 200 million - change in provision
on production facilities shut down
at the Kola GMK.
In 2020, selling and distribution expenses
increased 23% (or USD 29 million)
to USD 156 million primarily due
to increase in transportation expenses
(USD +18 million) and other expenses
(USD +9 million) primarily due
to the commissioning of production
facilities at Bystrinsky project
in September 2019.
SELLING AND DISTRIBUTION EXPENSES (USD MILLION)
OTHER OPERATING (EXPENSES)/INCOME, NET (USD MILLION)
Index
2020
2019
Change
Transportation expenses
Marketing expenses
Staff costs
Other
Total
71
44
18
23
156
53
45
15
14
127
34%
(2%)
20%
64%
23%
Index
Environmental provisions
Social expenses
Change in other provisions
Change in provision on production facilities shut down
Net income earned during the pre-commissioning stage
Other, net
Total
2020
2,242
500
24
(10)
–
(19)
2,737
2019
Change,%
1
224
39
190
(192)
41
303
100%
2x
(38%)
n.a
(100%)
n.a
9x
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 FINANCE COSTS
In 2020, finance costs, net increased three
times and amounted to USD 879 million
primarily due to a change in the fair value
of cross-currency interest rate swaps
y-o-y, caused by a comparative effect
of depreciation of the Russian ruble against
the US dollar in 2020 and its appreciation
in 2019, and also due to a change in the fair
value of other long-term and other current
liabilities y-o-y, representing an obligation
to exercise a put option in relation
to transactions with the owners of non-
controlling interests of Bystrinsky GOK.
The average value of total debt increased
in 2020, while the effective interest
rate of the Company’s debt portfolio
as of the end of 2020 (2.9% in USD1)
decreased, as compared to this as
of the end of 2019 (4.3% in USD1) because
of the following factors:
◾ Loose monetary policies of the Federal
Reserve System of the USA
and the Bank of Russia, which
positively impacted the Company’s
debt obligations bearing floating
interest rates and on the back of which
a share of the Company’s total
debt tied to floating indicators, main
of which were 1 Month Libor and Key
rate of the Bank of Russia, increased
from 38% to 54% for the period from
December 31, 2019 to December 31,
2020;
◾ Refinancing of a syndicated loan
facility, originally signed in December
2017, with a group of international
banks in February 2020, which
resulted in the reduction of the loan’s
interest rate to Libor+1.40% per
FINANCE COSTS, NET (USD MILLION)
Index
Interest expense, net of amounts capitalised
Changes in fair value of other long-term and other current liabilities
Fair value (gain)/loss on the cross-currency interest rate swap
Unwinding of discount on provisions and payables
Interest expense on lease liabilities
Other, net
Total
2020
364
262
182
61
12
(2)
879
2019
340
64
(199)
84
12
5
306
Change,%
7%
4x
n.a.
(27%)
0%
n.a.
3x
INCOME TAX EXPENSE
In 2020, income tax expense decreased
39% y-o-y to USD 945 million driven
mostly by the decrease of profit before
tax.
The effective income tax rate in 2020
of 20.6% was above the Russian statutory
tax rate of 20%, which was primarily
driven by recognition of non-deductible
social expenses.
THE BREAKDOWN OF THE INCOME TAX EXPENSE (USD MILLION)
Index
Current income tax expense
Deferred tax (benefit)/expense
Total
1
According to management accounts of the Company
2020
1,685
(740)
945
2019
1,924
(366)
1,558
Change,%
(12%)
2x
(39%)
THE BREAKDOWN OF THE CURRENT INCOME TAX EXPENSE BY TAX JURISDICTIONS (USD MILLION
130 131
annum and the increase of the loan’s
funding limit from USD 2,500 million
to USD 4,150 million;
◾ Issuance of five-year USD 500 million
Eurobonds at a coupon of 2.55% per
annum in September 2020; and
◾ Redemption of USD 1 billion Eurobonds
bearing a coupon of 5.55% per annum
in October 2020 and early repayment
of RUB 60 billion loan at an interest rate
of 8.3% per annum in November 2020.
Index
Russian Federation
Finland
Rest of the world
Total
EBITDA
2020
1,648
11
26
1,685
2019
1,883
16
25
1,924
Change,%
(12%)
(31%)
4%
(12%)
In 2020, EBITDА decreased 3% (or
-USD 272 million) to USD 7,651 million
primarily owing to environmental
provisions and additional expenses
related to the containment of COVID-
19 pandemic, which was partly offset
by higher metal revenue.
EBITDA (USD MILLION)
Index
Operating profit
Depreciation and amortisation
Impairment of non-financial assets
EBITDA
EBITDA margin
STATEMENT OF CASH FLOWS
CASH FLOWS (USD MILLION)
Index
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
Other financing activities
Net cash used in financing activities
Effects of foreign exchange differences on balances of cash and cash
equivalents
2020
6,400
943
308
7,651
49%
2020
10,254
(662)
(1,304)
8,288
(1,760)
112
(1,648)
6,640
(472)
(3,860)
(4,332)
99
2019
7,036
911
(24)
7,923
58%
Change,%
(9%)
4%
n.a.
(3%)
(9 p. p.)
2019
8,226
(307)
(1,910)
6,009
(1,324)
204
(1,120)
4,889
(460)
(3,163)
(3,623)
130
Change,%
25%
2x
(32%)
38%
33%
(45%)
47%
36%
3%
22%
20%
(24%)
72%
Net increase in cash and cash equivalents
2,407
1,396
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 132 133
DEBT AND LIQUIDITY MANAGEMENT
As of December 31, 2020, the Company's
total debt slightly increased, as
compared to this as of December 31,
2019, while the share of current loans
and borrowings in the Company's total
debt decreased from 11% as of December
31, 2019 to 0.12% as of December 31,
2020. The key factors behind significant
reduction in the share of current loans
and borrowings in the reporting period
were redemption of USD 1 billion
Eurobonds in October 2020, early
repayment of RUB 60 billion loan
in November 2020, and drawing of long-
term funds totaling USD 1,565 million
from a syndicated loan facility, funding
limit of which was increased in February
2020 from USD 2,500 million
to USD 4,150 million. This effect was also
reinforced with a long-term borrowing
in the total amount of USD 500 million
by way of issuing five-year Eurobonds
in September 2020 maturing
on September 2025.
The Company's net debt as
of December 31, 2020 decreased 33%,
as compared to this as of December
31, 2019 due to the increase in cash
and cash equivalents by 86% (or
+USD 2,407 million) during the reporting
period. This is primarily due
to the increase in cash generated from
operating activities which had a positive
impact on Net debt / 12M EBITDA as
of the end of 2020, that decreased
by 0.3x compared to this as of December
31, 2019 and amounted to 0.6x.
As of December 31, 2020, all three
international rating agencies Fitch,
Moody’s and S&P Global, and Russian
rating agency “Expert RA” assigned
investment grade credit rating
to the Company.
DEBT AND LIQUIDITY (USD MILLION)
Index
As of 31 December
2020
As of 31 December
2019
Change, USD million
Change,%
Non-current loans and borrowings
Current loans and borrowings
Lease liabilities
Total debt
Cash and cash equivalents
Net debt
Net debt /12M EBITDA
9,622
12
262
9,896
5,191
4,705
0.6x
8,533
1,087
224
9,844
2,784
7,060
0.9x
1,089
(1,075)
38
52
2,407
(2,355)
(0.3x)
13%
(99%)
17%
1%
86%
(33%)
In 2020, free cash flow increased 36%
to USD 6.6 billion. Higher cash generated
from operating activities was partly offset
negatively by more cash used in investing
activities.
In 2020, net cash generated from operating
activities increased 38% to USD 8.3 billion
primarily driven by higher metal revenue
as well as the decrease in income tax
payments due to lower taxable profit.
In 2020, net cash used in investing activities
increased 47% (or USD 528 million) primarily
driven by a 33% capital expenditures
increase (or USD 436 million). In real terms,
capital expenditures increased 51% as
flagship investment projects entered active
construction stage.
In 2020, CAPEX increased 33% (or
USD 436 million) to USD 1.8 billion
following higher investments in main
industrial sites of the Group – Polar
Division and South cluster, including
higher investments in mining projects
and launch of the active phase
of sulfur project. This was exacerbated
by sustaining capital expenditures
including capitalized repairs
and purchase of equipment.
RECONCILIATION OF THE NET WORKING CAPITAL CHANGES BETWEEN THE BALANCE SHEET AND CASH FLOW STATEMENT
(USD MILLION)
Index
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
Other changes including reserves
Change of working capital per cash flow
CAPITAL INVESTMENTS BREAKDOWN BY PROJECT (USD MILLION)
Index
Polar Division, including:
Skalisty mine
Taymirsky mine
Komsomolsky mine
Oktyabrsky mine
Talnakh Concentrator
Other Polar Division projects
Kola MMC
Sulfur project
South cluster
Chita (Bystrinsky) project
Other operating projects
Other non-operating projects
Total
2020
273
(290)
(359)
(95)
(191)
(662)
2019
478
58
67
54
27
14
258
221
24
76
103
413
9
2020
665
109
97
51
16
38
354
155
154
114
98
563
11
1,760
1,324
2019
(118)
112
(26)
(158)
(117)
(307)
Change,%
39%
88%
45%
(6%)
(41%)
3x
37%
(30%)
6x
50%
(5%)
36%
22%
33%
Nornickel4BUSINESS OVERVIEWAnnual report | 2020 Nornickel
ECOLOGICAL
AGENDA
SUSTAINABLE DEVELOPMENT
134 135
FOR MORE DETAIL
SEE ON THE WEB-SITE
//NORNICKEL.COM
Nornickel is a leading industrial company
in the Russian Arctic. The Company’s tactical
and strategic plans are linked to the region’s
development, but further activities require
an in-depth study of the Arctic and reliable
up-to-date scientific knowledge.
Vladimir Potanin
President, Chairman of the Management
Board MMC Norilsk Nickel
THE VISION
OF A GREEN
ARCTIC
//photo: The final point of the route of the "The Great Norilsk Expedition" on the lake Pyasino
OF A GREENARCTICTHE VISIONAnnual report | 20205 136 137
adapted to the new conditions, enabling
the self-purification of the water bodies
by the microorganisms. The self-
purification ability of the water bodies
is also confirmed by studies of bottom
sediments, bacteria and animals,
as the presence of certain species
in the samples proves that the rivers
and lakes are not heavily polluted now.
The scientists have collected
an herbarium of plants, mosses
and lichens to get a better understanding
of species present in the arctic
flora. Minor reduction of biodiversity
observed in some areas was not linked
by the specialists to anthropogenic
pollution. Elsewhere, vegetation was more
diverse than expected. Abundance
of mosses, which are sensitive
to the environment quality, is another
proof of low pollution.
The region’s fauna was also not affected
by anthropogenic influence. Its diversity
was low, as expected, but no changes
that could be caused by petroleum
product pollution were identified in caught
mammals.
The specialists also examined soil
conditions to evaluate the current
condition of permafrost. The study
identified the most probable cause
of the tank failure at CHPP-3: subsidence
of its pile foundation due to underground
thawing. An analysis of the complete body
of collected data ruled out the hypothesis
that large volumes of petroleum products
had reached the Artic Ocean.
Upon completion of a review
of the expedition data, Nornickel
and the Siberian Branch of the Russian
Academy of Sciences designed
a long-term programme to eliminate
the consequences of the petroleum
product spill.
The Company intends to continue
collaboration with institutions engaged
in fundamental research. The results
of this research will lay a foundation
for a new approach to operations
in the Arctic. One of its key features
will be conformity to sustainability
principles and active deployment
of green technologies, which is especially
important given the fragility of northern
ecosystems.
The results of the Great Norilsk Expedition
will be used to develop rules for business
activities in the Arctic. Andrei Bougrov,
Senior Vice President of Nornickel,
said these rules might be formalised as
relevant governmental regulations.
ECOLOGICAL AGENDA
Introduction
GREAT
NORILSK
EXPEDITION
In July 2020, Nornickel initiated the Great Norilsk Expedition. A group
of scientists from 14 research institutes of the Siberian Branch
of the Russian Academy of Sciences was to study in detail the environment
of the Taimyr Peninsula and develop proposals and recommendations that
would help implement the best nature conservation solutions for industrial
companies operating in the Arctic region.
Nornickel is a leading industrial company
in the Russian Arctic. The Company’s
tactical and strategic plans are linked
to the region’s development, but further
activities require an in-depth study
of the Arctic and reliable up-to-date
scientific knowledge. This statement
was made by Vladimir Potanin, Nornickel’s
President. Any development of northern
territories requires an understanding
of natural and anthropogenic changes
in the natural environment and their impacts
on geological and biological processes.
Nornickel and the Siberian Branch
of the Russian Academy of Sciences
organised the Great Norilsk Expedition
to gather this research. The expedition
included specialists in various disciplines
from botany to petrochemicals from
the leading scientific institutions
of Novosibirsk, Yakutsk, Krasnoyarsk,
Tomsk, Norilsk and Barnaul.
The expedition’s priority was an objective
and high-quality study producing reliable
results.
The scientists were to determine
the outline of the Norilsk CHPP-3 spill
and the timeline of anthropogenic
pollution of the Taimyr Peninsula,
and identify changes in biocoenoses
and permafrost. An extremely large
scope of work to be done in the harsh
arctic climate required that special care
be given to designing the expedition
schedule and route. Feedback from
the participants suggests that this
was a job well done. The studies
requiring special conditions, such
as absence of snow or ice cover,
were scheduled for the most suitable
periods. Zoologists, botanists
and hydrobiologists were the first to start
work, with geochronologists being
the last in the field.
The best possible conditions
were provided for the expedition
participants. All expedition members
working in the field were reliably
provided with transport, fuel and proper
equipment. About two thousand samples
of water, soils, bottom sediments,
and living organisms have been taken
and supplemented with permafrost
measurements. This was followed up
by laboratory analysis of the samples.
A report with the expedition data
was released towards the end
of 2020. The scientists confirmed
the unsatisfactory condition of terrestrial
ecosystems near Norilsk, noting that it
improves gradually further away from
the city.
Hydrobiologists concluded that
the microflora of Taimyr water bodies
polluted with petroleum products had
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 138 139
Nornickel
T
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5
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MMC NORILSK NICKEL
KOLA MMC
Certificate:
• ISO 9001
• ISO 14001
Audit frequency:
• Surveillance audit –
annually,
• recertification audit –
every three years
Date of last audit:
• December 2020:
recertification audit
(Desk Audit phase, remote)
• October–November 2020
Auditor:
Bureau Veritas Certification
GIPRONICKEL
INSTITUTE
Certificate:
• ISO 9001
Audit frequency:
• Surveillance audit –
annually,
• recertification audit –
every three years
Date of last audit:
• October 2020
Auditor:
Societe Generale
de Surveillance (SGS)
NKOMATI
Certificate:
• ISO 9001
• ISO 14001
• OHSAS 18001
Audit frequency:
• recertification audit –
every three years
Date of last audit:
• September 2018
Auditor:
DQS
Certificate:
• ISO 9001
• ISO 14001
• OHSAS 18001
Audit frequency:
• Surveillance audit –
annually,
• recertification audit –
every three years
Date of last audit:
• August–September 2020
Auditor:
Bureau Veritas Certification
NORILSK NICKEL
HARJAVALTA
Certificate:
• ISO 9001
• ISO 14001
• ISO 45001
Audit frequency:
• Surveillance audit –
annually,
• recertification audit –
every three years
Date of last audit:
• September 2020
Auditor:
British Standards Institution
MMС NORILSK NICKEL
(Murmansk Transport
Division, Nadezhda
Metallurgical Plant,
Copper Plant)
Certificate:
• ISO/IEC 27001:2013
Audit frequency:
• Surveillance audit –
twice a year,
• recertification audit –
every three years
Date of last audit:
• February–September
2020
Auditor:
British Standards Institution
ENVIRONMENTAL
PROTECTION
AND CLIMATE CHANGE
IMPROVEMENT OF SUSTAINABILITY-RELATED
CORPORATE GOVERNANCE
During the year, Nornickel focused on strengthening its corporate governance
to improve sustainability performance. The Environmental Task Team was set up
at the Board level, chaired by Gareth Penny, the independent Chairman of the Board
of Directors, and is comprised solely of independent directors. The new team was set
up primarily in response to the Board of Directors’ desire to pay closer attention
to sustainability in general, and environment in particular.
Significant organisational changes were made at the management level within
the Company. Thus, to improve the efficiency of risk management and supplement
the existing system of industry committees, was set up a new Risk Committee headed
by the President of the Company. The creation of the Committee marks the completion
of a vertical risk management structure fully penetrating the Company from the level
of blue-collar workers to its President, Management Board and Board of Directors.
The Ecology Department and the Inspectorate for Monitoring Technical, Production
and Environmental Risks were also established in 2020 to enable more efficient
management of the risks of negative environmental impact, and enhance environment-
related industrial safety. We set up the Ecological Monitoring Centre which will create
an ecology monitoring system in line with best practices. The Ecology Department
cooperates with all units across the Company, being responsible for implementing
the strategy aimed at assessing environmental risks and minimising the Company’s
adverse environmental impacts, as well as restoring ecosystems in Nornickel’s regions
of operation.
Last year, a new position of Senior Vice President for Sustainable Development
was created (filled by Andrei Bougrov), and the Sustainable Development Department
was set up. The key tasks of the new department are to improve sustainability
performance and coordinate the Company’s units in order to bring internal processes
and regulations in line with the best international standards, such as ICMM and IRMA.
Senior Vice President for Sustainable Development will focus on relationships with all
stakeholders and support the Environmental Task Team of the Board of Directors.
In 2021, senior management’s KPIs will include the Zero Environmental Incidents
indicator with a weight of 20% (of team KPIs) to ensure a clear link between
the implementation of the Company’s environmental strategic priorities and the level
of remuneration.
Annual report | 20205SUSTAINABLE DEVELOPMENT
140 141
ENVIRONMENTAL
STRATEGY
In 2020, the Company completed the development of its
Holistic Environmental Strategy in key areas: air, water, land,
tailings and waste, biodiversity, and climate change. All six
areas of the Strategy follow a single logic in developing a set
of initiatives designed to achieve the respective goals.
Nornickel focused on developing modern, efficient,
environmentally friendly production with strategic
priorities including sustainable development and unlocking
the Company’s potential in the medium and long term, taking
into account the expanded environmental and climate agenda.
The key element of the environmentally friendly growth strategy
remains the Sulphur Programme 2.0, which implies dramatic
reduction of sulphur dioxide emissions in the Norilsk industrial
region and complete elimination of emissions along the Russian
border on the Kola Peninsula. The expansion of environmental
initiatives aimed at reducing negative environmental impact
and mitigating production risks covers water resources
(maintaining recycled water ratio and reducing industrial
effluent pollution), tailings and waste (ensuring safe operation
of tailings facilities and minimising the environmental impact
of mineral and non-mineral waste), rehabilitating legacy
damage (waste collection and land reclamation), and restoring
biodiversity. The Climate Change Strategy is primarily aimed
at mitigating physical climate-related risks, improving energy
efficiency, and ensuring the long-term competitiveness
of products by maintaining the GHG emission intensity index
in the bottom quartile of global metals and mining industry GHG
intensity curve.
UPDATED STRUCTURE OF CORPORATE GOVERNANCE IN THE FIELD
OF SUSTAINABLE DEVELOPMENT AND THE ENVIRONMENT
Risk Management
Committee chaired
by the President
to improve risk controls
and put environmental risks
under greater scrutiny
BOARD OF DIRECTORS
Increased focus on strategic
initiatives; strong commitment
to the environmental agenda
Independent
Environmental Task
Team of the Board
of Directors
led by the Chairman
PRESIDENT
First Vice
President
Chief Operating
Officer1
Senior Vice
President
Sustainable
Development
First Vice
President
Corporate Security
Vice President
Internal Controls
and Risk Management
Health
and Safety
Department
Senior Vice
President
Norilsk Division
Sustainable
Development
Department
leads organizational
transformation
towards best global
ESG practices
Environmental
Department
environmental
risk management
and independent
internal oversight
of ecological matters
Inspectorate
for Monitoring
Technical,
roduction nd
Environmental
Risks
internal ecological risk
assessment and audit
Deputy Director for Industrial
Ecology and Environmental
Protection Environmental
matters
Environmental matters
Without changes
New structure items
Ecological
Monitoring
Center
design and launch
of real-time
ecological monitoring
system
1
On 1 March 2021, the position of First Vice President – Operations Director was removed from the Company’s organisational structure, with Senior Vice President of the Norilsk
Division now reporting directly to the Company’s President, while the Health and Safety Department became part of the Strategy, Strategic Projects, Logistics and Procurement
function.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel HOLISTIC ENVIRONMENTAL STRATEGY
CLIMATE CHANGE
AIR
WATER
TAILINGS & WASTE
LAND
BIODIVERSITY
142 143
STRONG PERFORMANCE
NN vs. Peer avg.1
–38%
Absolute emissions,
Scope 1+2, Mt CO2e.
–80%
NOx emissions,
K tonnes
–51%
Total water
withdrawal,
M m3
–65%
Solids / Dust,
tonnes
–14%
Total water
discharge, M m3
1.5x
Water recycled
and reused ratio, %
–138x
Absolute
emissions,
Scope 3, Mt CO2e2
1.0x
Renewable electricity
share3, %
TARGETS
MINIMIZE IMPACT
ON CLIMATE CHANGE
(REDUCE CO2
INTENSITY EMISSIONS)
AND MITIGATE
PHYSICAL CLIMATE-
RELATED RISKS
IMPROVE AIR
QUALITY (REDUCE
SO2 EMISSIONS)
IN THE AREAS
OF OPERATIONS
(NORILSK INDUSTRIAL
AREA AND KOLA
PENINSULA)
MAINTAIN RECYCLED
WATER RATIO
AND REDUCE
POLLUTION; CONTINUE
PROVIDING CLEAR
WATER TO LOCAL
COMMUNITIES
Key next steps:
Build and run new water treatment
facilities, adopt new technical
solutions, remediate pollution from
environmental incidents in line with
GNE recommendations4
Key next steps:
Delivery on energy efficiency,
CO2 reduction and physical risks
mitigation initiatives
Key next steps:
Execute on Sulphur Programme 2.0
and other air emissions reduction
projects
1
2
3
4
Peers include Anglo America , BHP Billiton, Vale, Rio Tinto, Freeport where public data is available;
Incl. only downstream part of the supply chain;
Of total electricity;
Great Norilsk Expedition
STRONG PERFORMANCE
NN vs. Peer avg.1
–138x
Non-mineral waste recycled
and reused ratio, %
–80%
Total land disturbed, K hectares
Legacy focus:
◾ Supporting of several nature
reserves (Taimyrsky, Putoransky,
Pasvik, Laplandsky and other
Nature Reserves)
◾ Protection of rare animal species
and support of the reproduction
of aquatic bioresources
TARGETS
MAINTAIN SAFE
OPERATION
OF TAILINGS
FACILITIES
AND MINIMIZE
ENVIRONMENTAL
IMPACT OF MINERAL
AND NON-MINERAL
WASTE
Key next steps:
Build mass balance model
for waste management
and prepare for the self-
assessment under Global
Tailings Standard
REHABILITATE
LEGACY DAMAGE
AND UPGRADE MINE
AND PLANT CLOSURE
PLANS
STRENGTHEN
BIODIVERSITY
PROGRAM
Key next steps:
Review asset closure plans
in all divisions; follow GNE(4)
recommendations in soil
recovery; waste collection
and land reclamation
at Norilsk area
Key next steps:
Biodiversity remediation
following recent
environmental incidents,
launch regular monitoring
of impacts on biodiversity
and continue support
of nature reserves
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel ENVIRONMENTAL
MANAGEMENT SYSTEM
SYSTEM AUDIT
In 2020, the Environmental Management
System1 (EMS) continued to operate
as part of the Corporate Integrated
Quality and Environmental Management
System (CIMS) providing an opportunity
to coordinate environmental and quality
initiatives with other initiatives. This
approach improves both overall
and environmental performance
of the Company.
In line with ISO 14001:2015 and ISO
9001:2015, 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 December 2020,
BVC auditors conducted a desk audit
of the Corporate Integrated Quality
and Environmental Management System
and the Environmental Management
System of PJSC MMC NORILSK
NICKEL as part of a recertification
audit, which confirmed the Company’s
compliance with ISO 14001:2015 and ISO
9001:2015. The field recertification audit
to be conducted at the Company’s facilities
is scheduled for March–April 2021.
During 2020, Nornickel also conducted
internal and corporate audits involving
specially trained and competent personnel.
As a result, audits were conducted
at the following sites of the Company:
◾ Head Office – 19 audits
◾ Polar Division – 20 audits
◾ Polar Transport Division –38 audits
◾ Murmansk Transport Division – 3 audits
◾ Kola MMC – 25 audits
CLIMATE CHANGE
46%
9.7
mln t
SHARE
OF RENEWABLES
IN THE GROUP’S
ENERGY
CONSUMPTION
IN 2020
ВCO2 EMISSIONS
(SCOPE 1 AND 2)
– THE LOWEST
LEVEL AMONG
GLOBAL PEERS
In 2020, GHG emission targets to 2030
were set and a physical risk assessment
was conducted.
In 2020, the Company implemented
the following climate change initiatives:
◾ Made its first disclosures on GHG
emissions and water discharges
via the Carbon Disclosure Project
questionnaire
◾ Disclosed its Scope 3 GHG emissions
◾ Set long-term climate change targets
(until 2030)
◾ Assessed climate risks for the Company’s
product portfolio
◾ Started developing a monitoring system
for buildings and structures located
in permafrost areas and other initiatives
to minimise the physical risks related
to climate change.
TARGETS TO 2030:
• Maintain GHG emissions (Scope 1 and 2) in absolute terms not higher than
10 mln t CO2 equivalent from operations with a 30–40% increase in metal
production (compared to 2017)
• Maintain GHG emissions (Scope 1 and 2) per tonne of Ni equivalent
in the bottom quartile of the global GHG intensity curve for the nickel
industry2
• Strive to increase low-carbon energy usage
• Manage climate-related risks by building resilience strategies and helping
communities in the Norilsk industrial region and Murmansk region
• Encourage the shift to a low carbon future by using R&D to help develop
new solutions and by engaging in cross-industry climate dialogue
STRATEGY HIGHLIGHTS:
• Adoption of a programme to assess physical risks related to climate change
and large site monitoring
•
Implementation of energy efficiency initiatives and increased consumption
of low-carbon energy
• Reduction of CO2 emissions
Nornickel’s Board of Directors considers
the Company’s climate change strategy
as a matter of priority and is responsible
for its review and approval.
1
Based on the global GHG intensity curve for the nickel industry by Wood MacKenzie Group (CO2 per tonne of Ni equivalent).
144 145
result in insufficient water head at HPP
turbines leading to lower power output
as well as drinking water shortages
in Norilsk.
Permafrost thawing: loss of bearing
capacity by pile foundation beds may
lead to deformation and collapse
of buildings and structures.
CLIMATE RISK
MANAGEMENT
Repercussions of climate change,
including abnormal weather or lasting
changes in weather patterns, may affect
Nornickel’s operations in the longer
run. Physical consequences of climate
change can include soil thawing,
changes in water levels in water bodies,
precipitation amounts and wind loads,
which can have a material adverse effect
on Nornickel’s operations. As part of its
Risk Management Strategy, Nornickel
implements a full range of measures
to monitor and control these risks,
including the introduction of a system
to monitor buildings and structures
in the Norilsk Industrial District,
and is engaged in:
◾ monitoring permafrost-based structures
using satellite images and early
detection of any possible deformations
under an agreement with SOVZOND,
the leading Russian space monitoring
company
◾ evaluating supporting piles
deformation and soil temperature
by means of confirmative geological
drilling
◾ installing strain gauges
and temperature sensors
◾ upgrading the Polar Division’s
Diagnostic Centre and the permafrost
laboratory.
Climate-related risks may also unlock
additional opportunities for Nornickel
driven by the strong demand for metals
required in a future low-carbon economy.
For example, nickel is a key component
in EV batteries, and copper is used in EV
charging infrastructure.
Key risk factors: abnormal natural
phenomena (drought) caused by climate
change.
Impact on Nornickel’s development goal
and strategy:
◾ 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
Risk assessment:
◾ Impact on goals: medium
◾ Source of risk: external
◾ Year-on-year change in risk: stable
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 energy consumption
in case of risk occurrence
Key risk factors: climate changes,
average annual temperature increase
over the last 15 to 20 years, increased
depth of seasonal permafrost thawing.
Impact on Nornickel’s development goal
and strategy:
◾ Efficient delivery of finished products
(metals) in line with the production
programme
◾ Social responsibility: comfort and safety
of people living in Nornickel’s regions
of operation
Risk assessment:
◾ Impact on goals: medium
◾ Source of risk: external
◾ Year-on-year change in risk: stable
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
◾ uses satellite technology to monitor
Nornickel’s assets and further analyse
the data
◾ regularly monitors the condition
of Nornickel’s buildings and structures
via an information system
for conducting geotechnical surveys
◾ monitors soil temperature in buildings’
foundations
◾ monitors the compliance of its facilities
with operational requirements for crawl
spaces
◾ takes corrective actions to ensure
safe operating conditions for buildings
and structures.
Key climate change risks
Insufficient water resources: water
shortages in storage reservoirs
of Nornickel’s hydropower facilities may
◾ refurbishes its hydropower plants
to increase power output through
improving the hydroelectric units’
performance (implementation period:
2012–2021).
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel GHG EMISSIONS
In 2020, GHG emissions (Scope
1 and 2) totalled about 9.7 mln t.
GHG emissions decreased in 2020
on the back of lower production volumes
at the Polar Division, reduced fuel
consumption by the Company’s own
air carriers as a result of restrictions
imposed due to the COVID-19 pandemic,
and the shutdown of metallurgical
production at Kola MMC.
Nornickel’s key production facilities
are located in the Norilsk Industrial
District, beyond the Arctic Circle,
and operate in sub-zero temperatures
for about eight months of the year. Since
the Norilsk Industrial District is isolated
from the federal energy infrastructure,
Nornickel generates electricity
and heat locally at its own generating
facilities (100% owned by the Group).
As a result, the bulk of GHG emissions
comes from the Company’s energy
assets. At the same time, as Nornickel
is the only producer of electricity
and heat in the Norilsk Industrial
District, the Company also fully meets
the demand for energy resources
and heat from social infrastructure
facilities and the local population.
The share of GHG emissions generated
by infrastructure facilities and households
in Nornickel’s regions of operation
is on average 8% of the total Scope 1
and 2 GHG emissions.
The goal by 2030 is to retain GHG
emissions (Scope 1 and 2) from production
below 10 mln t of CO2 equivalent despite
production growth and the launch
of Sulphur Programme 2.0.
In 2020, the Company quantified indirect
GHG emissions (Scope 3) in accordance
with the GHG Protocol, including
emissions associated with product
transportation from the Company’s
production assets to the customer
and first use of the product. Total Scope
3 downstream GHG emissions in 2020
amounted to 2.6 mln t. Indirect GHG
emissions (Scope 3) increased in 2020
due to the ramp-up to design capacity
of Bystrinsky GOK, which boosted
the production and sales of iron ore
concentrate with its relatively high carbon
footprint from first use.
GHG EMISSIONS
(MLN T СО2 EQUIVALENT)1
–3%
9.2 | 0.5
2020
9.5 | 0.5
2019
9.6 | 0.3
2018
10.2 | 0.1
2017
RENEWABLES AND ENERGY
EFFICIENCY
Scope 12
Scope 2
Since its inception in 1935, the Company
has been developing in a harsh climate,
given that its major production asset,
the Polar Division, is located in the Norilsk
Industrial District beyond the Arctic Circle.
As such, this remote region has never
been connected to Russia’s energy
and transport infrastructure. Therefore,
the Company has historically been self-
sufficient in building its operations,
including in terms of electricity/energy
generation and transmission. Natural gas
is the core low-carbon source for power
generation in our largest Norilsk Division,
which is used to generate about 76.5%
of electricity consumed, with hydro power
accounting for close to 23.5%. Diesel
fuel, fuel oil, petrol and jet fuel are used
by Nornickel’s transport assets. Use
of high-carbon fuel by energy assets
is minimised. Only small amounts of coal
are used in certain production processes.
GHG EMISSIONS BROKEN DOWN
BY SOURCE IN 2020 (%)
8
5
87
Production emissions (Scope 1)2
Production emissions (Scope 2)
Emissions from infrastructure facilities
and households
SCOPE 3 DOWNSTREAM GHG
EMISSIONS ESTIMATE (MLN T)
The Company’s key renewable energy
source is hydropower generated
by the Group’s Ust-Khantayskaya
and Kureyskaya HPPs. In 2020,
renewables accounted for 46% of total
2.4 | 0.2
2020
1.9 | 0.1
2019
First use
Transportation
FOR MORE DETAILS, PLEASE SEE NORNICKEL'S
THE SCOPE 3 DOWNSTREAM GHG EMISSIONS
REPORT
146 147
electricity consumed by the Group
and 55% of total electricity consumption
within the Norilsk Industrial District.
and heat to external consumers, primarily
local social infrastructure and communities
in the Norilsk Industrial District.
MMC and reduced air transportation
by the Group’s own air fleet due
to transportation restrictions caused
by the COVID-19 pandemic.
Nornickel is committed to the responsible
use of heat and electricity. In 2020,
our electricity and fuel consumption
decreased due to lower metal production
by the Norilsk Division, discontinued
metallurgical operations at Kola
The use of other renewables, such
as solar, geothermal and wind energy,
is impracticable as Nornickel’s core
production assets are located beyond
the Arctic Circle in the Norilsk Industrial
District, in harsh climatic conditions.
Overall, the Group’s own energy assets
(including Kola MMC and other assets
that mainly purchase electricity from
third parties) generate about 84% of total
electricity consumed by the Group.
The Group also supplies electricity
CLIMATE IMPACT ON THE USE OF RENEWABLES BEYOND THE ARCTIC
CIRCLE
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
ENERGY GENERATION AND CONSUMPTION BY THE GROUP (TJ)3
No.
Indicator
2016
2017
2018
2019
2020
1
Fuel consumption by the Company4
172,425
156,569
148,910
144,772
141,237
• natural gas
• diesel fuel and fuel oil
• petrol and jet fuel
• coal6
Electricity and heat from own renewable sources
(HPPs)
Electricity and heat purchased from third parties
Sales of electricity and heat to third parties
151,081
134,709
129,335
125,329
122,216
15,423
3,789
2,132
15,221
5,178
1,460
12,414
10,483
19,503
13,788
13,535
13 9395
4,127
1,660
3,820
2,087
14,877
15,058
10,931
18,926
11,331
18,766
2,902
2,180
15,310
11,200
17,254
Total consumption of electricity and fuel (1 + 2 + 3–4)
159,962
155,792
152,395
150,493
2
3
4
5
1
2
GHG emissions were calculated as per the GHG Protocol Guidelines. When calculating GHG emissions across the Group, the following greenhouse gases were taken
into account: carbon oxide (CO2), nitrogen oxide (N2O) and methane (CH4). Direct methane emissions (coming mostly from gas transportation units) represent a small share
of total emissions and amount to about 150 ktpa of CO2 equivalent. Based on the inventory results, the data for 2018 and 2019 were recalculated in 2020.
Nornickel’s GHG emissions include emissions from supplying electricity to Norilsk through NTEK, along with potential CO2 emissions from Sulphur Programme 2.0.
3
4
5
6
For a detailed breakdown of the Group’s energy consumption by company, please see the 2020 Sustainability Report.
Including the fuel used to generate electricity for Norilsk.
Including the diesel fuel spill in May 2020.
Coal is only used in production processes, with Kola MMC accounting for 46% of total consumption, GRK Bystrinskoye 25%, the Polar Division 15%, Norilsk Production Support
Complex 10%, and other subsidiaries 4%.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel The Group attaches great importance
to improving the energy efficiency of its
existing and future production sites,
focusing on retaining GHG emissions
within the declared targets under
its comprehensive environmental
programme. The programme provides
for investing close to USD 4 billion
in upgrading and boosting the safety
of the energy infrastructure on the Taimyr
Peninsula in 2021–2025. The investments
will cover a wide range of projects related
to equipment replacement at thermal
and hydropower plants, and upgrade
of fuel tank storage facilities, power grids
and gas pipelines.
Major projects completed in 2020
include:
◾ replacement of a turbine at Ust-
Khantaiskaya HPP
◾ replacement of the main step-down
substation supplying electricity
to the South Cluster.
Fuel equivalent savings in 2020
totalled 10,778 t of fuel equivalent,
and 7,879 thousand kWh of electricity,
with 40 energy saving initiatives
implemented.
In 2020, fuel consumption per unit
of electricity supplied by CHPPs was 284
g/kWh, that is 7.8 g/kWh lower than
the target level.
FUEL CONSUMPTION BY THE COMPANY (TJ)
87% | 2% | 10% | 2%
2020
87% | 1% | 9% | 3%
2019
87% | 1% | 9% | 3%
2018
86% | % | 10% | 3%
2017
88% | 1% | 9% | 2%
2016
Natural gas
Coal
Diesel fuel and fuel oil
Petrol and jet fuel
ELECTRICITY CONSUMPTION (TJ)
17,750 | 15,111
2020
18,501 | 14,837
2019
18,762 | 14,480
2018
20,180 | 12,175
2017
20,674 | 11,856
2016
Electricity from natural gas
Electricity from HPPs
Share of renewables
141,237
144,772
148,909
156,568
172,425
46%
45%
44%
38%
36%
148 149
AIR
Target: improve air quality (reduce SO2
emissions) in the areas of operation.
SULPHUR PROGRAMME 2.0
AT KOLA MMC
Key next steps: execute on Sulphur
Programme 2.0 and other air emission
reduction projects.
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
Sulphur Programme 2.0 at the Polar
Division and Kola MMC.
Sulphur Programme 2.0 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 (2015: baseline). The project
is phased in at the Nornickel’s two
core downstream facilities: Nadezhda
Metallurgical Plant and Copper Plant.
The environmental project at Kola MMC
provides for the complete shutdown
of smelting operations in Nikel, upgrade
of the beneficiation plant in Zapolyarny,
and shutdown of the copper refining
facility in Monchegorsk.
The upgrade of the beneficiation plant
was completed in 2019. The shutdown
of Nornickel’s smelting shop in Nikel
in late 2020 helped reduce sulphur
dioxide emissions by 71% in Nikel
and Zapolyarny and by 58% in 2020 (from
a 2015 baseline) in the Russia–Norway
border area. The copper refining facility
in Monchegorsk was closed in March
2021, which will help reduce emissions
at Kola MMC by another 85% (2015:
baseline).
In 2020, emissions from Nornickel’s
Russian operations totalled 1,968 kt, up
0.8% y-o-y. The increase was driven
by a temporary growth in sulphur dioxide
emissions from the Polar Division due
to increased production and processing
SULPHUR DIOXIDE EMISSIONS (KT)
+0.7 %
1,911
2020
1,898
2019
1,870
2018
1,785
2017
1,878
2016
of sulphur-containing feedstock. Despite
the increase, emissions did not exceed
the Company’s set limits.
During adverse weather conditions,
the Company took extra measures
to control pollutant emissions
in residential areas. Production process
at metallurgical plants was stopped
for this reason 205 times in 2020.
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
+7,391,942 0007.
AIR POLLUTANT EMISSIONS ACROSS THE GROUP (KT)
Indicator
Across Norilsk Nickel Group
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Particulate matter
Other pollutants
Polar Division
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Particulate matter
Other pollutants
Kola MMC
Sulphur dioxide (SO2)
Nitrogen oxide (NОx)
Particulate matter
Other pollutants
2016
1,936.4
1,878.0
10.1
14.3
34.1
1,787.6
1,758.2
1.5
6.2
21.7
132.9
119.7
1.1
7.4
4.7
2017
1,845.8
1,785.0
11.5
14.0
35.3
1,705.0
1,675.9
1.6
6.1
21.5
121.9
109.1
1.2
6.9
4.7
2018
1,926.6
1,869.6
11.2
14.5
31.3
1,789.0
1,764.7
0.6
5.5
18.2
117.5
104.8
1.8
7.6
3.3
2019
1,952.7
1,898.1
10.3
13.3
30.9
1,819.2
1,798.6
0.5
4.2
15.8
110.8
99.4
1.8
7.0
2.7
2020
1,968.1
1,910.8
10.0
14.6
32.8
1,857.5
1,836.9
0.6
4.1
16.0
83.4
73.2
1.6
6.1
2.4
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel WATER
Targets: maintain recycled water
ratio and reduce pollution; continue
providing clear water to local
communities.
Key next steps: build and run new
treatment facilities, adopt new
technical solutions, remediate pollution
from environmental accidents in line
with the Great Norilsk Expedition
recommendations.
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. The Company is
committed to sustainable use of water
resources and prevention of water
body pollution.
Nornickel’s key production facilities
use closed water circuits to maintain
water withdrawal on a relatively low
level. Furthermore, the Company never
withdraws water from protected natural
areas. In 2020, 86% 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 2020. 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 year-on-year increase in discharge
can be explained by the fact that, as
of 2020, the Report discloses wastewater
discharge to municipal sewage networks.
WATER CONSUMPTION (MCM)
1,458
1,260
1,344
1,172
1,412
1,210
1,342
1,138
1,464
1,256
2020
2019
2018
2017
2016
86%
87%
86%
85%
86%
Consumed water volume
Volume of reused and recycled water
Share of reused and recycled water
WASTEWATER DISCHARGE (MCM)
202
142
165
148
144
110 | 4 | 33 | 55
2020
76 | 5 | 26 | 36
2019
93 | 7 | 31 | 34
2018
79 | 7 | 28 | 34
2017
82 | 5 | 30 | 27
2016
Clean
Treated
Insufficiently treated
Contaminated
150 151
WATER RISK MANAGEMENT
The Company also conducts assessments
of impact on water resources
on an ongoing basis.
The impact on water resources can
materially affect the Company’s financial
performance.
Procedures used by Nornickel to identify
and assess the risks of its impact
on water resources include:
◾ wastewater inventory
◾ monitoring of wastewater discharge
volume and quality at discharge sites
◾ observation of surface water
bodies at control points upstream
and downstream of discharge sites
◾ investments in improving
the performance of water treatment
systems and building new systems
◾ we also monitor wastewater treatment
processes at treatment facilities
and take organisational and technical
measures to improve treatment
effectiveness.
◾ Tailings and waste
TAILINGS AND WASTE
Targets: maintain safe operation
of tailings facilities and minimise
environmental impact of mineral and non-
mineral waste.
Key next steps: build mass balance
model for waste management
and prepare for the self-assessment
under Global Tailings Standard.
WASTE
TAILINGS
Nornickel currently operates six
tailing dumps: four in the Norilsk
Division, 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.
The Company reuses most of its industrial
waste as approximately 99% of the waste
generated are hazard 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.
The increase in waste generation in 2020
was attributed to the commissioning
of Bystrinsky GOK.
WATER CONSUMPTION AND DISCHARGE
WASTE GENERATION BY HAZARD CLASS (KT)
WATER
WITHDRAWAL
375 Mcm
Surface sources – 260 Mcm
Underground sources – 31 Mcm
Wastewater – 29 Mcm
Natural water inflow – 47 Mcm
Other – 8 Mcm
WATER
CONSUMPTION
1,458 Mcm =
198 (new) +1,260 (reused
and recycled water)
31 Mcm – water reused in other
production processes (2%)
1,229 Mcm recycled water (84%)
WASTEWATER
DISCHARGE
202 Mcm
Clean – 110 Mcm
Treated – 4 Mcm
Insufficiently treated – 33 Mcm
Contaminated – 55 Mcm
Hazard class
V
IV
III
II
I
Total
2016
32,118
1,114
30
5.8
0.1
2017
30,722
1,190
12
2.4
0.1
2018
29,517
1,191
15
1.1
0.1
2019
35,300
1,115
5
0.03
0.04
2020
144,052
1,175
7
0.05
0.04
33,267
31,926
30,725
36,420
145,234
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel BIODIVERSITY
In 2020, the Company developed its
Biodiversity Strategy and set an ambitious
goal to care about nature reserves
and protect biodiversity across its
operating regions.
Target: strengthen biodiversity
programmes.
Key next steps: remediate biodiversity
following recent environmental incidents,
launch regular monitoring of impacts
on biodiversity and continue support
of nature reserves.
COOPERATION WITH
NATURE RESERVES
In the Murmansk Region, the Pasvik
and the Lapland nature reserves are
10 to 15 km away from Kola MMC’s
production sites. 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 in line with
Nornickel’s environmental strategy, which
incorporates a large-scale investment
programme.
In the Zabaykalsky Region, the Company
supports the development of research
capabilities and environmental awareness
programmes of the Relict Oaks State
Nature Reserve.
THE INVESTIGATION RESULTED IN
THE EXPEDITION’S FINDINGS WAS PUBLISHED
ENVIRONMENTAL INCIDENT
On 29 May 2020, an accidental damage to a diesel fuel storage tank caused
by a sinking of piles and depressurisation of the emergency fuel storage tank
at CHPP-3 in the Kayerkan District of the city of Norilsk resulted in a spill
of 21 thousand tonnes of diesel fuel. Since CHPP-3 is located in a remote area,
the city was not impacted by the spill. The Company immediately initiated
a response to the fuel spill, completing the first and second phases of clean-up
by end-2020:
• Over 90% of spilled fuel was collected
• River shores were treated with sorbents and washed off
• The collected water/fuel mixture was transported to an industrial site near
Nadezhda Metallurgical Plant where fuel was separated from water
• About 190 thousand tonnes of contaminated soil was collected, removed
and placed in special storage facilities pending disposal
Following the incident, a number of independent studies were carried out
to identify its causes and impact on the environment and local communities,
in particular:
• a technical investigation by Environmental Resources Management Limited
(ERM) at the request of Nornickel’s Board of Directors. The investigation
resulted in a report assessing the causes of the incident
• The Great Norilsk Expedition of the Siberian branch of the Russian Academy
of Sciences (RAS) comprised of 30 scientists from 14 RAS research
institutes. The objective of the Great Norilsk Expedition was to study
the environment, biodiversity and permafrost in the Norilsk area, as well
as to assess the consequences of the fuel spill. A report on the expedition’s
findings was published
• an ethnographic expedition that included interviews with 100
representatives of indigenous peoples of the North living in Taimyr
to assess the impact of the fuel spill incident on indigenous peoples
of the North, as well as to prepare proposals for a new long-term
agreement between Nornickel and indigenous peoples of the North.
152 153
CLEAN-UP PROGRAMME
Our clean-up programme and efforts
to address historical pollution (including
the demolition of abandoned buildings
and scrap collection and recycling) are
two other extremely important priorities
under the Environmental strategy.
Our objective is to clean up unused
facilities:
◾ 467 abandoned buildings
and structures
◾ > 1.3 mln t of industrial waste
◾ > 2 mln t of rubbish
◾ > 600 kt of scrap
Planned activities:
◾ Collecting and disposing of stainless
steel and other metal scrap
◾ Recycling scrap
◾ Disassembling buildings and disposing
of waste
◾ Cleaning up the territory.
Immediately after the incident, the Company launched a dedicated programme
to improve industrial safety and minimise the risk of similar incidents
in the future, which included:
• emergency inspection of fuel storage facilities
• phasing out “at risk” fuel storage facilities
• designing alternative fuel storages
• accelerating the infrastructure repair and upgrade programme, including
the fuel and energy complex
• updating the permafrost monitoring system
• developing a monitoring system for foundations built on permafrost
• updating the environmental risk assessment system: controls, procedures,
maps
• upgrading fuel storage embanking
• upgrading emergency response plans and response services.
At the end of 2020, the Company signed a contract with Hydrotechnologies
– Siberia engaging it to clean up contaminated soil using microbiological
remediation. Special bacteria that oxidise oil will be introduced into the soil.
Rehabilitated soil will be suitable for industrial and construction use.
Nornickel plans to completely eliminate the consequences of the fuel spill.
Throughout 2021–2022, remediation and environmental clean-up efforts will
continue, a programme to monitor water bodies and soils and a plan to restore
contaminated land and shoreline will be developed, separated water will
be disposed of, and contaminated soil will be remediated.
Specifically, the following initiatives are planned for 2021:
•
Installation of protective and sorbent barriers in water bodies before
the snow melts
• Monitoring the contaminated area to determine the volume of residual
contamination and using probes to check the level of contamination
• Restoring the shoreline
• Treating residual soil contamination with sorbents
• Collecting diesel fuel residues
• Soil remediation
• Soil replacement in severely damaged areas
• Planting vegetation to restore damaged soil
On 12 February 2021, the Krasnoyarsk Region Arbitration Court ruled
that the Company should pay environmental damages in the amount
of RUB 146.2 billion (approximately USD 1.9 billion). Upon thorough
consideration of the court ruling and assessment of the prospects
for an appeal, Nornickel decided to pay the damages. The Company made
a provision for the damages in its 2020 financial statements; the damages
were paid in March 2021.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel ENVIRONMENTAL PERFORMANCE OF THE COMPANY’S FOREIGN ASSETS
NORILSK NICKEL HARJAVALTA
NKOMATI
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 (Ni), and water discharges of nickel, sulphates (SO4)
and ammonium ions (NH4+). In 2020, Norilsk Nickel Harjavalta met all permit
requirements for emissions, discharges and waste disposal volumes.
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
and ISO 9001.
ENVIRONMENTAL INDICATORS
ENVIRONMENTAL INDICATORS
Indicator
Air pollutant emissions
Ni
NH3
Water (Mcm)
Wastewater
Water consumption
Waste (kt)
Generation
Generation
Disposal
2016
2017
2018
2019
2020
Indicator
Water consumption (Mcm)
Waste generation (t)
Waste disposal (t)
Environmental protection expenditures (USD mln)
Nkomati
72
1.6
70
0.8
10.9
7.0
0.8
71
1.7
69
0.9
11.1
5.5
0.8
85
1.2
84
1.0
11.8
2.8
1.1
40
1.6
38
1.0
11.5
5.7
1.3
34
1.3
33
1.0
11.4
5.1
1.2
Norilsk Nickel
Harjavalta
154 155
2020
0.1
1,647
1,598
0.6
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel HUMAN RESOURCES
AWARDS AND INDUSTRY RECOGNITION
In 2020, Nornickel entered a number
of best employers lists:
◾ The World’s Most Attractive Employers
by Universum and Ranstad Award: No.
1 among students and professionals
in the Metals & Mining category
◾ The Best Company Award
by Changellenge: No. 1 among
students and young professionals
in the Metals & Mining category
◾ HeadHunter’s Russian Employers
Rating: No. 12 among Top 100 employers
◾ Ranking by FutureToday based
on students’ opinions across Russian
universities
◾ Top 3 employers in the metals
and mining industry
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 invests in their professional and personal
development while 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 internal documents, including
the Company’s Code of Business Ethics,
Personal Data Policy, Regulations on Anti-
Embezzlement, and Human Rights Policy.
The Company does not use child labour.
Nornickel is committed to achieving
operational excellence, implements standard
approaches to developing its business unit
structures, and has put together a list of job
titles to standardise job creation.
PREVENTING THE SPREAD OF COVID-19
In 2020, Nornickel topped the rating of Russian metals companies that provided the most comprehensive response
to the pandemic COVID-19.
In combating the pandemic in close cooperation with federal and municipal authorities, the Company focuses
on employee health and safety, and business continuity as well as on preventing the spread of the virus across local
cities. Nornickel spent about RUB 12 billion (USD 157 million) to fight the pandemic and support not only its employees,
but also the healthcare system across its footprint. In the early months of the pandemic, additional payments were set
for employees who remained at their stationary workplaces. The Company upgraded a number of healthcare centres
by supplying 412 ventilators, 7 critical care vehicles, 15 mobile and 2 stationary research laboratories, as well as hundreds
of thousands of COVID-19 tests.
During the pandemic, the Company implemented a set of support measures for SMEs affected by the lockdown. Small
businesses leasing the Company’s facilities in Norilsk were granted rent holidays. Social entrepreneurs and participants
of the World of New Opportunities corporate charity programme, who had previously received loans from Nornickel
for social business development were granted credit holidays.
Nornickel continued recruitment as none of its investment projects was closed. Overall, the coronavirus pandemic made
no material impact on the Company’s operations.
156 157
STAFF COMPOSITION
In 2020, the Group’s average headcount
totalled 72,319 people.
HEADCOUNT BY REGION (%)
НЕADCOUNT BREAKDOWN
BY CATEGORY (%)1
The decrease in the average headcount
in 2020 was driven by the continued
implementation of a programme
to improve labour productivity and reduce
costs.
Nornickel is among the main employers
in the Norilsk Industrial District and Kola
Peninsula, hiring 65% and 17% employees,
respectively. Local population accounts
for 99.7% of the headcount.
Local population accounts for
99.7%
1
7
4
6
17
65
Norilsk Industrial District
Murmansk Region
Krasnoyarsk Region
(except the Norilsk Industrial District)
Zabaykalsky Region
Moscow and other Russian regions
Foreign operations
11
4
19
66
Male managers
Female managers
White-collar employees
Blue-collar employees
HEADCOUNT BREAKDOWN BY AGE AND GENDER (%)1
11.6 | 3.8
Under 30 years
45.9 | 19.8
30–50 years
13.1 | 5.9
Over 50 years
Male (71%)
Female (29%)
THE GROUP’S AVERAGE HEADCOUNT (PEOPLE)
Location
Russia
Africa
Europe
Asia
USA
Australia
Total
1
Russian operations.
2016
81,081
586
311
13
10
5
2017
77,991
605
326
13
10
5
2018
74,926
617
330
13
10
5
2019
72,782
577
326
16
9
5
2020
71,447
519
323
15
10
5
82,006
78,950
75,901
73,715
72,319
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel RECRUITMENT
CORPORATE DIALOGUES AND FORUMS
158 159
Today, it covers 829 of the Company’s
employees, including 364 new
participants, who joined in 2020.
With this programme, the Company
seeks to provide the participants
with comfortable living conditions
and reimburse them for relocation
and resettlement costs.
FINANCING UNDER
THE ASSISTANCE PROGRAMME
(USD MLN)
1.6
2020
2.3
2019
3.3
2018
PARTNERSHIPS WITH
UNIVERSITIES
and promptly move the programme online
in response to the pandemic spread
in Russia.
To spark the interest of young people
in professions of mining and metallurgical
engineers and the industry on the whole,
the Company has launched programmes
for undergraduate and graduate students
of Russian industry-specific universities.
The Company focuses on training
and upskilling students majoring
in professions that are highly valued
at Nornickel. For example, our standard
format of the Conquerors of the North
educational programme moved online
and became available to a wider
audience of students from Russian
universities involved in the industry.
In 2020, 1,602 students applied
for participation while 323 participants
completed the course.
The Conquerors of the North online
academy has served as a tremendous
library of knowledge for students.
The participants listened to 23 video
lectures and discussed a case study
to consolidate their knowledge. Nornickel
was the first Russian mining company
to engage undergraduates and graduates
in addressing real business challenges
In 2020, an online apprenticeship
programme kicked off for the first time
in the Head Office in Moscow. The best
graduates of the leading Moscow
universities took part in the programme.
The Company continues to support
talented students from the industry’s
universities, with Nornickel’s corporate
scholarship awarded to 90 students
in 2020.
ASSISTANCE PROGRAMME
Since the Company’s production sites
are located in remote areas, Nornickel
actively sources personnel for its
production facilities from other regions
of Russia. The Assistance Programme
helps new hires adapt to their new
environment and settle in at their new
places of residence in the Taimyr
Peninsula. The programme targets
not only highly qualified specialists
and managers, but also young talent
and workers with hard-to-find skills.
ENGAGEMENT
Nornickel goes through
the engagement management cycle
every year to maintain an environment
conducive to integration.
This cycle includes three phases:
◾ Conducting the “Let Everyone
Be Heard. What Do You Think?”
survey
◾ Analysing survey findings
◾ Developing and implementing
resulting solutions
In 2020, the engagement index grew
by 10 p. p. from 2018, in particular,
in the following categories:
◾ Senior Management: +14 p. p.
◾ Respect and Acceptance: +11 p. p.
◾ Compensation and Recognition: +9 p. p.
◾ Conditions for Success: +9 p. p.
◾ Career Opportunities: +9 p. p.
◾ Performance Management: +9 p. p.
The survey includes focus group polling
among 73 thousand employees from 32
Nornickel’s entities. In 2020, 42 thousand
employees were involved in the survey, up
27% y-o-y.
All governance levels, from units
of individual entities to the Group as a whole,
are involved in both survey data analysis
and development and implementation
of improvements.
A project to enhance dialogue
between senior management
and regular employees has been
underway for the second year now
to promote employee awareness, gain
ownership of the Company’s goals
and values, and develop trust between
labour and management. In 2020,
the project included 32 corporate
dialogues, the Nornickel Live video
conference with the Company’s vice
presidents, and the “Challenges 2020:
Environment, Pandemic, Safety” video
conference, a video conference with
engagement experts and internal
value coaches, and six forums.
A total of over 30 thousand Nornickel
employees participated in these
initiatives.
INTERNAL
COMMUNICATIONS
Improvement of internal communications
was focused on the coverage
of engagement and corporate culture
events by the corporate media and web
portal. A total of four video courses
on employee engagement, three
video courses for enterprise managers
on effective communications, and one
e-course on the Company’s corporate
values for blue-collar employees
were created in 2020. All materials
were posted on the Nornickel Academy
platform, and handouts on the programmes
and information videos on the changes
and initiatives implemented in the Company
were produced.
DEVELOPMENT PROGRAMMES
PROJECT ENVIRONMENT
PROGRAMME
The Company has launched the Project
Environment development programme
to develop a knowledge base and project
management tools for employees
involved in the implementation
of capital construction investment
projects. The Project Environment
programme comprises two levels: Project
Management (PM) for project office
managers, and Professional for line
managers and specialists.
From August to December 2020,
training sessions within the “Project
Environment. Professional” programme
were held, broken down into eight
modules aimed at employee upskilling
in relevant functional areas. More
than 114 project office employees took
part in the programme. An individual
development track was designed
for each employee depending on their
position and functional area. The training
sessions were held online.
In September 2020, the “Design
Environment. PM” programme
was launched, involving 47 Group
managers. The programme comprises
six modules covering the entire life cycle
of a capital construction investment
project, and aims to develop both
engineering competencies and soft
skills in HR management and contractor
management. During the training sessions
the participants get acquainted with
best practices in project management,
development of leadership skills,
and work in project teams. Any participant
in the programme may propose project
topics.
Training within the programme will
continue in 2021 with the involvement
of leading Russian and foreign experts.
Participants will review global trends
and practices in project management,
as well as modern project management
tools, such as cost engineering, planning
and technical support of inventory supply,
construction planning and quality control,
risk management, contract management,
etc.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel Company employees submitted
176 applications to participate
in the 360-Degree Management
programme. A total of 124 managers,
the Group’s Russian companies,
and the Head Office completed
the training..
TALENT POOL
In 2020, the Company kept developing
the talent pool system at its production
facilities to cover recruiting of lower
and middle line managers. Due
to the pandemic-related restrictions,
training of pool members in the Corporate
University was conducted online,
and more attention was paid to mastering
the required management skills
in practice, on the job. Short reminders
(“navigators”) were developed for new
project participants.
In addition, the Company is actively
building up a talent pool to fill top
management positions. In 2020, HR
committees held 40 meetings devoted
to key functional areas. One of the main
topics discussed at the meetings of HR
committees was the security of top
positions and readiness of candidates
for succession. Developing the talent
pool using various methods, from
designing an individual development plan
to temporary work in a higher position, is
a priority task for Nornickel.
ENHANCING
PROFESSIONAL
EXCELLENCE
In 2020, the Company continued
its efforts to educate and upskill its
employees. A total of 70.9 thousand
person-events were held as part
of training and retraining programmes,
covering 36.7 thousand employees.
A total of 3,462 thousand person-
hours of training were delivered
to 17.4 thousand employees in corporate
training centres (38.3 thousand person-
events). Due to the restrictions imposed
in Russia, which preclude face-to-
face training, the Company actively
switched to distance learning formats
for employees.
Particular attention is paid to using
advanced technologies to train
various categories of personnel.
The launch of Nornickel Academy,
a corporate training platform
available to all Company employees,
in 2020 expanded distance
learning opportunities. More than
5,000 employees are active users
of the platform.
Over 65 training courses are publicly
available on the Nornickel Academy
platform. The catalogue includes
courses aimed at developing
management and digital skills, job-
specific courses, compulsory trainings
and briefings. Management skills
development comprises 22 courses,
six of which focus on enhancing
the effectiveness of work from home.
1,868 employees completed training
courses to develop management skills.
The Nornickel Academy platform offers
26 training courses aimed at developing
digital skills, completed by more than
1,500 employees.
In 2020, 50 employees of the Company
completed face-to-face training based
on the results of their professional
competency assessment. Due
to the epidemiological situation, there
has been no face-to-face training
since Q2 2020. In 2020, the Company
continued implementing professional
standards. 60 professions were analysed
against 14 professional standards,
covering about 5,000 employees.
The Company is represented on,
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.
In 2020, the Digital Nornickel training
programme scheduled for two years
was developed to improve the digital
literacy of all Company employees.
Training under the Digital Nornickel
programme is conducted online, using
the Tsifronikel mobile app. The app
enables users to take a training course
broken down into blocks, test their
knowledge in a game test, and take part
in various contests and tournaments,
individually or within a team. More than
4,000 employees completed training
between October and December.
360-DEGREE MANAGEMENT
In August 2020, training within
the 360-Degree Management
programme was completed
for executives who had been assessed
via the 360-degree competency review.
The programme focused on development
of corporate and management skills.
Training was offered on six topics:
◾ HR management
◾ Execution management
◾ Corporate skills development
◾ Communications
◾ Systems thinking
◾ Partner relations
REMUNERATION FRAMEWORK AND PAY
160 161
The compensation package comprises
salary (94%) and benefits (6%).
The salary consists of fixed and variable
components (75% and 25%, respectively),
with the latter linked to the Company’s
operating performance and achievement
of relevant KPIs.
The social package includes
the following:
◾ Voluntary health insurance and major
accident insurance 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
◾ One-off financial assistance
to employees at different life stages or
in difficult life situations
◾ Complementary corporate pension
plan
with a project bonus. Bonuses are paid
for the achievement of key project
parameters and are aimed at motivating
and retaining key project employees
until project completion.
Nornickel employees’ pay depends
on the work complexity, individual
expertise and skills, and their personal
contribution to the Company’s
performance. The collective bargaining
agreement prohibits any discrimination
by setting and changing wages based
on gender, age, race, nationality or
origin.
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 evaluation outcome
◾ Other types of social benefits under
the existing collective bargaining
agreements and local regulations
◾ Simplicity of the remuneration
framework – pay level calculation
and review procedures are
transparent, and employees know
how they can improve their pay levels
Average monthly salaries of Nornickel
employees are much higher
than the minimum living wage
in the Company’s operating regions.
Nornickel’s remuneration framework is
linked to key performance indicators (KPIs)
for different job grades, with assessment
reliant on KPIs covering social responsibility,
occupational safety, environmental safety,
operating efficiency and capital management,
and responding to cross-functional interests
of stakeholders. In 2020, 12,045 employees
of the Group were assessed against its KPIs.
The framework is instrumental in streamlining
performance assessment criteria and enabling
the management and employees to align
the current year’s priorities with the Company’s
strategy and link an employee’s pay level
to their performance.
Automation of the KPI-based employee
assessment commenced in 2018.
The automated system helped standardise
talent pool management methods across
the Group, consolidate relevant data
into a shared database, and provide access
to the assessment process through personal
accounts for each employee. Starting from
2020, the framework covers virtually all units
within the Company.
The Company put in place the procedure
for performance evaluation whereby
performance is managed by setting KPI
targets and evaluating achievements against
these targets. In 2020, a new incentive system
was introduced for all employees of capital
construction project offices: project bonuses
and traditional annual bonus were replaced
REMUNERATION PACKAGE ACROSS THE GROUP’S RUSSIAN OPERATIONS
Salary
Fixed
94%
75%
Variable (bonuses)
25%
Benefits
6%
Regular bonuses One-off bonuses
10%
15%
Voluntary health
insurance (VHI)
Reimbursement of round
trip travel expenses
Financial assistance
Health resort treatment
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel NORNICKEL’S EMPLOYEE BENEFIT EXPENSES (PER YEAR)
Costs
Total costs (USD mln)
Cost per employee (USD thousand)
2016
103
1.3
2017
123
1.6
2018
128
1.7
2019
147
2.0
MINIMUM LIVING WAGE IN NORNICKEL’S OPERATING REGIONS
Region
Murmansk Region
Norilsk Industrial District (NID)
Krasnoyarsk Region (excluding NID)
Moscow
Zabaykalsky Region
RUB thousand
27.9
31.5
12.1
20.2
18.2
AVERAGE MONTHLY SALARIES OF NORNICKEL EMPLOYEES1
Currency
USD2
RUB thousand
2016
1,405
94
2017
1,784
104
2018
1,780
112
2019
1,835
119
2020
99
1.4
USD
386
437
168
279
252
2020
1,827
132
REWARDING PERFORMANCE
The Award Policy is closely linked
to Nornickel’s values and strategic
priorities. 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.
There are several categories of awards
and incentives. 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.
Corporate incentives are Company-level
awards.
Resolutions on corporate incentives are
passed by the President of the Company.
There are also internal incentives that
are initiated and awarded to employees
on behalf of the enterprise where they
work.
EMPLOYEE AWARDS IN 2020 (PS)
254 54
580
1,767
1,249
Internal awards from the Group’s enterprises
Awards from regional and municipal authorities
Corporate awards
Ministerial and agency awards
State awards
Categories of awards and incentives
1
STATE, AGENCY AND
REGIONAL AWARDS
2
CORPORATE
INCENTIVES
3
INTERNAL INCENTIVES
AT ENTERPRISES
• State awards
• Badge of honour,
• Awards from industry
• Honorary titles, special
ministries
• Awards from regional
and municipal authorities
honorary titles of MMC Norilsk
Nickel
• Honorary titles of NN RBUs3,
Nornickel’s branches and Head
Office
• Certificates of merit and letters
of acknowledgement from
NN RBUs3, Nornickel’s
branches and Head Office
1
2
3
Russian operations.
Based on the average annual RUB/USD exchange rate given in the end of the Report.
Russian subsidiaries of Nornickel.
162 163
SOCIAL PARTNERSHIP
SOCIAL PARTNERSHIP FRAMEWORK
EMPLOYER
SOCIAL PARTNERSHIP
Trade union
organisations
8.4%
Social
and labour
councils
78%
Collective
bargaining
agreements
93.7%
Interregional cross-
industry agreement
88.5%
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. 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 social
and labour relations, compensation,
work hours, labour standards, provision
of guarantees and allowances,
occupational health, etc.
TRADE UNION
ORGANISATIONS
The Group has 58 primary trade
unions united into local trade union
organisations of the Norilsk Industrial
District and Murmansk Region, which are
part of the Trade Union of MMC Norilsk
Nickel Employees, an interregional public
organisation.
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.
IIn 2020, trade unions contributed to:
◾ additional social support for current
and former employees during
the COVID-19 pandemic
◾ the increase in the minimum standards
of financial assistance to employees
◾ the increase in 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 to discuss,
negotiate and conclude the first
collective bargaining agreement
between Nornickel – Shared Services
Centre and GRK Bystrinskoye.
A total of 8.4% of employees
of the Group’s Russian entities
were members of trade unions
organisations at end-2020. In 2020,
the relations between Nornickel
and the Trade Union of MMC Norilsk
Nickel Employees were governed
by the social partnership agreement
signed in 2014. In December 2020,
Nornickel and its Trade Union concluded
another social partnership agreement.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel MAIN TOPICS OF QUERIES
AND REQUESTS (%)
1
20
79
Social welfare matters
Legal matters
Other matters
Based on the collective bargaining
process in 2019, the interregional cross-
industry agreement on copper and nickel
producers and production support
providers 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, allowances and benefits
to employees, work and rest hours,
occupational health, and other matters.
In 2020, a number of changes
were made to the agreement to bring it
in line with the amended labour law.
SOCIAL AND LABOUR
COUNCILS
COLLECTIVE BARGAINING
AGREEMENTS
Group enterprises 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 matters
relating to health resort treatment,
recreation and leisure programmes
for employees, disease prevention,
catering and workplace arrangements,
and provision of personal protective
equipment.
In 2020, the percentage of employees
represented by social and labour councils
was 78% of the total headcount across
the Group’s Russian entities.
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.
Queries submitted to offices are
reviewed by relevant specialists or are
forwarded to functional or industrial
units to be handled in accordance with
the topics raised. The timing and quality
of the responses are monitored
by the offices. When handling complaints,
the offices adhere to the principle
that precludes sending complaints
to the managers whose actions are being
challenged. In 2020, Group enterprises
in the Norilsk Industrial District operated
24 offices which received about
40 thousand queries and requests from
employees (81%), former employees (18%),
and other individuals (1%).
Collective bargaining agreements
at the Group’s Russian entities comply
with the applicable laws and mostly meet
employee expectations.
In 2020, Group entities signed eight
collective bargaining agreements
for a term of three years, including two
entities that signed these agreements
for the first time.
Thus, by end-2020, all collective
bargaining agreements of the Group’s
Russian entities were signed based
on unified approaches to regulating social
and labour relations within the social
partnership framework.
The percentage of employees covered
by collective bargaining agreements
stood at 93.7% in 2020.
Collective bargaining commissions
perform ongoing monitoring
of the performance of obligations under
collective bargaining agreements
by the parties. 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 mass
layoffs were recorded across the Group
entities in 2020.
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 two
regional associations established
by the Group’s Russian entities located
in the Krasnoyarsk Region and Murmansk
Region.
164 165
OUTPLACEMENT FOLLOWING
THE CLOSURE OF THE SMELTING
SHOP IN NIKEL
By discontinuing the smelting operations in December
2020, Nornickel completely eliminated sulphur
dioxide emissions in the Russia–Norway border area
and improved the environment in the Pechengsky
District.
Nornickel decided to shut down the smelting shop
in Nikel in November 2019 and immediately developed
an outplacement programme for the affected
employees. The programme was agreed with
the social and labour council and primary trade
union organisations of Kola MMC and Pechengastroy.
Nornickel provided a comprehensive outplacement
programme for the shop’s employees who lost their job,
making it easy for them to transfer to other operations
of the Company, as well as setting up a retraining
programme and a pension plan. Of the 660 employees
of the smelting shop, 72% chose to continue working
at the Company.
In 2020, Nornickel launched a dedicated Employment
Centre to provide all-round support to employees
affected by the shutdown of the smelting operations
(including by providing information, advice and career
guidance) and to partner with other Group entities,
the government of the Murmansk Region and local
employers on job opportunities for redundant
employees. All staff-related decisions and actions
complied with the Russian labour and employment
laws and Nornickel’s social support programme. Total
expenses under this programme in 2020 exceeded
RUB 478 million, including RUB 402 million paid to 241
dismissed employees as compensation, severance
pay or financial assistance. In addition, 265 employees
were re-employed within the Group, retaining their
salaries and obtaining compensation for living expenses
and financial assistance for home purchase. These
initiatives have been ongoing for several years.
KEY PROVISIONS OF THE SOCIAL
SUPPORT PROGRAMME
When employees are re-employed within Norilsk Nickel
Group, they are offered:
• housing rent reimbursement in case of relocation
• same salary for one calendar year
• compensation for travel expenses of employees
and their families
• reimbursement of baggage fees
• preemptive right to participate in corporate
programmes to purchase housing at the new location
• training/retraining/certification in a new trade/job
with all costs paid by the Company.
In case of redundancy:
• Severance pay in the amount of at least six
months’ average salaries (as well as additional
payments for retirees, socially vulnerable groups
and participants of the Succession programme)
• Early provision of a corporate pension to participants
of corporate pension plans who are eligible
for a superannuation, disability or long service
pension
• Compensation for travel expenses of employees
and their families
• Reimbursement of baggage fees
• Financial assistance for housing purchase under
the Our Home/My Home and Your Home programmes
• Voluntary health insurance policy maintained for one
calendar year from the termination date
The Succession programme provides for training
of an affected employee by another Nornickel employee
(above the retirement age) with a severance pay
to the mentor upon completion.
Currently, the Association of Employers
comprises 22 entities. The agreement
covers 88.5% of employees of the Group
entities.
In March 2021, the Company closed
its copper refining operations
in Monchegorsk, which will affect a total
of 701 employees. The Company plans
to apply the approved employee social
support programme to employees of its
metallurgical operations.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 166 167
HEALTH AND SAFETY
STRATEGIC GOALS
INJURY RATES
Continuous reduction in injury rates
Decrease in lost time injuries to the level of 2013
Zero fatalities
Zero-tolerance policy on work-related fatalities
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.
OCCUPATIONAL HEALTH KPIS
20% OF KPIS
• Linked to total recordable
injuries (TRI)
12% TO 28% OF KPIS
•
In KPI scorecards of heads
of production units.
• A failure to prevent a fatality
blocks them from receiving
a performance bonus.
EXPENSES FOR IMPROVING
WORKING CONDITIONS
AND LABOR PROTECTION
135
1.9
159
2.2
168
2.2
149
2.0
127
1.6
2020
2019
2018
2017
2016
Total cost (USD mln)
Cost per employee (USD thousand)
CERTIFICATION
In 2020, Nornickel approved
and implemented the new Regulations
on the Occupational Health
Management System compliant with
ISO 45001:2018 in line with its plans. As
part of the preparations for certification
of the existing occupational health
management system to ISO 45001:2018,
the Company passed an internal pre-
certification audit and an external
certification audit. As a result
of the certification audit, the Company
was certified to ISO 45001:2018.
At end-2020, all key production
enterprises of the Group had health
and safety certification:
◾ MMC Norilsk Nickel to ISO 45001
◾ Kola MMC to OHSAS 18001
◾ Norilsk Nickel Harjavalta to ISO 45001
In 2020, the lost time injury frequency
rate (LTIFR) decreased by 34% to 0.21
(0.32 in 2019), hitting all-time lows within
the observation period while remaining
below the industry average. Due
to measures taken to comply with basic
industrial safety standards and improve
the safety standards management system,
the number of lost time injuries decreased
by 32% (from 44 to 30 incidents) while
the number of fatalities decreased by 11%
(from nine to eight incidents). All 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 accidents and work-
related injuries.
WORK-RELATED INJURIES
(PEOPLE)
30
32
44
61
56
22 | 8
2020
35 | 9
2019
26 | 6
2018
52 | 9
2017
43 | 13
2016
Lost-time injuries
Fatal injuries
INJURY RATES
Indicator
FIFR
LTIFR
Contractors’ work-related injuries
Including fatalities
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
2016
0.11
0.35
10
7
2017
0.08
0.44
16
1
2018
0.05
0.23
19
2
2019
0.08
0.32
9
1
2020
0.08
0.21
15
3
2016
2017
2018
2019
2020
3
0
1
2
4
2
1
0
0
13
0
1
1
0
0
1
0
4
2
9
1
0
0
1
1
0
0
0
3
6
1
0
2
0
0
0
1
1
4
9
0
2
1
2
0
3
0
0
0
8
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel RESPONSIBILITY AND ACCOUNTABILITY
CORPORATE STANDARDS AND SAFETY MEASURES
168 169
The Audit and Sustainable Development
Committee deals with industrial safety
matters. The Committee reviews
management reports on industrial
safety performance every quarter,
with management participating
in the Committee’s meetings 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.
Remuneration payable to all heads
of production units is linked to their
industrial safety performance. They
are personally responsible for the life
and health of each of their subordinates.
In addition, team KPIs for all employees
include injury rate reduction across
the Group enterprises (20% of team KPIs).
Industrial safety targets weigh between
12% and 28% of the overall KPI (including
individual KPIs). A failure to prevent
a fatality reduces to zero the health
and safety indicator in the KPI scorecard
(injury rate reduction), hence the amount
of remuneration is also reduced.
The Company also has a dedicated
Health, Safety and Environment
Committee, which is focused on improving
efficiency and accountability in industrial
safety. The Committee meets quarterly
at the Group’s various production sites
of branches and Russian companies
of the Group to discuss improvements
to industrial safety management, including:
◾ analysis of the circumstances and causes
of severe and fatal work-related injuries
◾ status of measures planned
and implemented to prevent similar
injuries across the Company’s
enterprises
◾ programmes of organisational
and technical measures to improve
health and safety.
MANAGEMENT’S
COMMITMENT
AND LEADERSHIP
In 2020, the Group adopted a corporate
standard for the management’s health
and safety commitment. In line with
the standard, managers prepare annual
plans of personal health and safety
commitments, which include personal
and group meetings with employees
at production units, participation in audits
of the occupational health management
system, as well as Engineers
and Technicians Days conducted with line
managers (pre-shift briefings, workplace
visits, discussions and recommendations
to managers). Performance against
personal commitments is included in each
manager's individual KPIs.
ENGAGEMENT WITH ORGANISATIONS REPRESENTING
Engagement with organisations
representing
The Group’s collective bargaining
agreements have health and safety
provisions. At the end of 2018,
companies 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.
CONTRACTORS
As all maintenance and construction
operations at the existing production
facilities are classified as high-hazard,
contractor personnel is required
to attend induction and target
briefings on occupational health prior
to the commencement of any work. Work
permits also include occupational health
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 2020, Nornickel
consistently monitored compliance
with the standard, 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 20 million
(USD 277 thousand) in 2020.
Nornickel’s production enterprises have
process-, job- and operation-specific
regulations and guidelines in place
containing dedicated industrial safety
sections.
Nornickel has corporate industrial safety
standards that apply to both the Group’s
employees and contractors’ personnel.
The Group’s production units are
regularly audited for compliance with
applicable industrial safety requirements.
A total of 25 audits took place in 2020
in accordance with the approved
schedule, with production site managers
and their deputies also involved
in the audits.
As part of the Implementation
of the Industrial Safety Management
System programme, in 2020, Nornickel
continued rolling out its Control,
Management, Safety Automated System
(CMS AS).
CMS AS is a SAP EHSM-based information
system designed to collect, process,
record and analyse health and safety
data.
During the year, CMS AS was launched
at Norilsk Support Complex, NTEK,
Norilskpromtransport, Taimyr Fuel
Company, and Polar and Murmansk
Transport Divisions of PJSC MMC NORILSK
NICKEL. Nornickel plans to continue rolling
out CMS AS across the Group’s remaining
subsidiaries in 2021.
Nornickel's Technology Breakthrough
programme aims to improve planning
processes, automated day-to-day
monitoring and production safety at all
of the Company's Operations units
covering all production operations, from
ore mining to metals production. In 2020,
on completing the first basic phase
of the programme, the Company:
◾ Introduced and launched 44 information
systems with 3,195 active users
◾ equipped all underground mines
with positioning and communication
systems, created a powerful system
to transmit virtually unlimited data
from the surface to underground
and back – in other words, built
the basic infrastructure for managing
mining operations
◾ collected and digitised all equipment
data sheets, started developing
process sheets for the most critical
equipment, which allows effective
production asset management
via a unified system
◾ ensured real time remote control
over 80% of operations (almost all
key processes) from control centres
at the Company's Polar Division
and Kola MMC.
◾ tested a prospective type of support –
yielding tendon straps, which are much
less difficult to install than combined
arch support
◾ tested mechanical wet mix shotcreting
and steel fibre-reinforced shotcreting
methods, which significantly
increase the durability of shotcrete
reinforcement
◾ fully switched from anchor-shotcrete
to mechanical steel-polymer
supports for the capital construction
of underground workings by Polar
Construction Company.
Further development in 2020–2024
will be guided by the Technology
Breakthrough 2.0 programme (second
phase), which includes 11 programmes
aimed at further improvement, production
excellence and safety.
As part of implementing the Concept
of Rock Bolting Systems Improvement
at Nornickel Mines (launched in 2017)
and to promote mining safety,
in particular by minimising personnel
access to unsupported parts of workings
(reducing the risk of rock fall),
the Company held following activities
in 2020:
◾ completed a feasibility study
and ordered two roof bolters for Kola
MMC
◾ ordered 44 units of self-propelled
bolters, delivered to the Polar Division,
including 3 for the Komsomolsky,
Mayak and Oktyabrsky Mines using
new types of binder (two-component
polymer resin) and rock bolting
(composite hollow self-drilling anchor
bolts) (second phase of equipment
procurement)
◾ changed standard diameters of steel-
polymer anchor bolts
◾ drilled production wells (one per
mine) at the Oktyabrsky Mine (with
the acceptance of construction
concrete and grouting currently
underway) and the Komsomolsky Mine
(perforating)
BUILDINGS
AND STRUCTURES
MONITORING SYSTEM
PROJECT
The project aims to ensure safe operating
conditions for buildings and structures
through timely identifying loss of bearing
capacity of soil, piles and foundations
through geotechnical and satellite
monitoring subject to the results
of geological surveys.
In 2020, the following initiatives
were launched under the project:
◾ Development of a targeted business
process for supervising and monitoring
the operating conditions of buildings
and structures in the Norilsk Industrial
District
◾ Primary digitisation of technical
documentation for buildings
and structures
◾ Implementation of Stage 1
of the monitoring well drilling
programme
◾ Inspection of pile foundations
Information support systems
for geotechnical monitoring (163 facilities)
are scheduled for piloting by the end
of 2021.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel EMPLOYEE TRAINING
PREVENTION OF OCCUPATIONAL DISEASES
170 171
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.
Training begins immediately after
an employee is hired with an induction
safety briefing and subsequent on-the-
job briefings. Briefings are then repeated
regularly in accordance with the existing
corporate programmes. There are also
interactive training courses for employees
in key positions.
In 2020, 9,500 employees attended
online health and safety training
sessions. The online courses are created
by in-house resources. The Company
produced 58 distance learning industrial
safety courses, 33 videos 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.
PROVISION OF PERSONAL PROTECTIVE EQUIPMENT
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 2020, the Nornickel purchased
personal protective equipment worth
over RUB 3 billion (USD 42 million).
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
the most 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
industrial safety inspections. The first
tier control involves the line manager
(aided by designated members
of the occupational health team)
and focuses primarily on workplace
set-up. The second and higher control
tiers involve special industrial safety
commissions with representatives
of management and employees.
in accordance with the approved
schedule. The prevention and control
team has identified and disciplined
over 10 thousand non-compliant
employees, including by partially or
completely stripping them of their
bonuses.
In addition to the above prevention
and control initiatives, the Company
regularly conducts behavioural audits
The Company promotes disease
prevention and 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
OCCUPATIONAL DISEASES
compulsory pre-employment, regular
and ad-hoc medical examinations
at the Company’s expense. Special
medical examinations at occupational
pathology centres 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.
Depending on their respective workplace
hazards, 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).
Employees working in harmful
and hazardous conditions receive
free food, milk and other nutritional
products for therapeutic and preventive
purposes to promote health and prevent
occupational diseases.
Indicator
Total
2016
339
2017
361
2018
318
2019
290
2020
235
INDEPENDENT SYSTEM ASSESSMENT
Since 2014, we engage an independent
company to conduct out an annual
assessment of our occupational health
management system and safety culture
to identify focus areas for further
improvement of corporate occupational
health management, and mitigate risks
of injuries and accidents at the Group’s
major entities. Since 2014 the stable
improvements in the safety culture level
have been driven by increased employee
engagement on health and safety matters
and leadership demonstrated by senior
management of entities as well as
improved knowledge of risk assessment
and management.
SAFETY CULTURE LEVEL ON THE BRADLEY CURVE
2.5
2.6
2.3
2.1
1.4
2014
1.4
2020
3.0
3.0
2.8
March 2014 March 2015 December 2015 November 2016 December 2017
May 2019
April 2020
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel SOCIAL STRATEGY
Nornickel is playing an important role
in the Russian economy. Due to its
geography and financial strength,
the Company has a strong impact
on the social and economic life in the regions
in which it operates. With its enterprises
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 PROGRAMMES FOR EMPLOYEES
HEALTH IMPROVEMENT
PROGRAMMES
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
are among the most popular programmes
offered by Nornickel as part of its social
policy.
In 2020, about 11,200 thousand employees
and their family members had recreation
and treatment in corporate Zapolyarye
Health Resort (Sochi). Over 2,000
employees spent their holidays in other
health resorts. The Company compensates
its employees an average of about
82% of the trip voucher cost. Due
to the pandemic, the vouchers for trips
to foreign countries and children health
camps were not offered.
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, foster team spirit,
improve interpersonal communication
and develop corporate culture.
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.
In 2018, the Night Hockey League
was registered in Norilsk to promote
amateur hockey. The teams are made up
of the Company’s employees.
Other activities 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. In 2020, most of the activities
were cancelled due to the COVID-19
pandemic.
A total of 11,098 thousand employees
participated in sports and recreational
activities in 2020, including 6,725 persons
who took part in sports and recreational
activities in Q1 2020 (prior to the introducing
quarantine measures) and 4,373
persons who attended online sports
and recreational activities.
SOCIAL PROGRAMMES FOR EMPLOYEES (USD MLN)
SPORTS EXPENSES (USD MLN)
11 | 11 | 14 | 93
2020
5 | 29 | 15 | 99
2019
100 | 31 | 15 | 104
2018
94 | 33 | 17 | 102
2017
35 | 30 | 16 | 88
2016
129
148
168
250
247
2.8
2020
2.7
2019
2.7
2018
2.7
2017
1.5
2016
Housing programmes
Health resort treatment
Pension plans
Other social expenses
172 173
HOUSING PROGRAMMES
Nornickel currently operates several
housing programmes for its employees.
In 2020, Nornickel continued its
consolidated housing programme,
Our Home/My Home, whose members
were able to purchase ready-to-
move-in apartments on preferential terms
across Russia, usually in the Moscow,
Tver or Krasnodar Regions. Since
2010, the Company has purchased
closely located properties to create
a more comfortable living environment
for employees by developing additional
infrastructure and optimising maintenance
of residential premises 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 million
(USD 41 thousand), with the rest
paid by the employee.The cost
of housing is fixed for the entire period
PENSION PLANS COVERAGE
Indicator
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
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.
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,
approximately 700 employees have
already taken part in the programme.
Also in 2020, Nornickel continued
implementing its Your Home housing
programme, which was successfully
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,
though 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 1,789 ready-
to-move-in apartments, with the list
of regions extended to Yaroslavl.
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
enterprises.
2016
2017
2018
2019
2020
7.8
8.6
7.7
7.6
17,322
15,700
13,916
12,304
6.7
614
1.0
1,755
8.5
718
0.1
1,118
6.7
545
0.9
1,114
6.1
525
1.0
1,151
7.2
11,519
5.7
511
0.9
1,064
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 174 175
The local population appreciated this
approach, and, according to social
activists, it can serve as a benchmark for
other subsoil users in the region.
Following the expedition, Nornickel also
signed cooperation agreements with
the Russian Association of Indigenous
Peoples of the North (RAIPON), the
Regional Association of Indigenous
Peoples of the North of the Krasnoyarsk
Region, and the Association of Indigenous
Peoples of Taimyr of the Krasnoyarsk
Region. Together, these organisations
represent more than 90% of the
indigenous peoples of the Russian North.
A comprehensive five-year plan
for assisting the development of
indigenous peoples was drawn up
with Nornickel’s contribution. The plan
provides for supporting traditional
crafts, financing healthcare services and
home construction projects, creating
infrastructure and developing tourism and
culture. Specific tasks were set together
with the local communities as they will
be responsible for determining what
needs to be done first. Tourism, reindeer
husbandry, fishing and hunting have been
listed among the development priorities
for the region. Specifically, Nornickel
plans to build fish and venison processing
facilities, purchase refrigerator units and
provide targeted training in professions
required by the Company.
Much will also be done to preserve the
indigenous culture of Taimyr. Nornickel
will take part in the construction of an
ethnic theme park, which will feature
workshops showcasing traditional fur,
leather, horn and tusk products. The
Company also supports the development
of local languages, which has been a
focal point in recent decades. Learning
aids will be developed and published with
support from the Company.
ECOLOGICAL AGENDA
Introduction
NORTH
FOR NORTHERNERS
In summer 2020, an ethnological expedition supported by Nornickel
visited the Taimyr Peninsula. The expedition was part of a programme
to support indigenous peoples of the North – a key component
of the Company’s social and economic policy across its footprint.
Following the expedition, Nornickel signed cooperation agreements
with organisations representing the interests of indigenous peoples
and planned a number of initiatives to create new jobs, subsidise
helicopter transportation, support targeted training for local residents,
and so on.
When planning investments in the
development of its operating regions,
Nornickel carefully studies local economies
and ways of life. In Taimyr, the support for
indigenous peoples of the North inhabiting
the peninsula is now an important part of
the Company’s social agenda.
of life among local reindeer herders and
fishermen require special approaches,
which are often incompatible with
those of a market economy. Nornickel
helps them get integrated into modern
production chains and offer their products
to a wider audience.
the impact of anthropogenic pollution,
researchers collected and analysed soil
and water samples. This is the first case
in Russia when an ethnological study
assessed the impact of anthropogenic
pollution on traditional land use rather
than planned economic activities.
Given the challenging local climate, these
efforts are mostly focused on supporting
essential services through subsidising
air transportation, supplying building
materials and diesel fuel, and constructing
social infrastructure facilities. We place
a particular emphasis on renovating
existing infrastructure. In Dudinka
alone, Nornickel financed the repair
of an orphanage and a sports facility,
construction of a new fitness centre and
renovation of the Neptun swimming pool.
The Russian North is unique for its rich
natural resources, but also for the culture
of local peoples. The Company organises
events to support local customs and
traditions and is committed to preserving
northern languages. The indigenous ways
Nornickel organised the ethnological
expedition to better understand the
region’s current agenda, as well as the
contemporary cultural diversity and
customs of the indigenous peoples of
Taimyr. Its participants were also tasked
with assessing the impact of man-made
factors on the everyday life of local
communities and the social and economic
development of the peninsula.
The Company’s specialists conducted
over a hundred interviews and surveys
with members of Taimyr major ethnic
groups engaged in traditional crafts. A
detailed ethnological map was drawn up
based on the results of the research. To
map the contaminated area and assess
Among other things, the study
established that the accident at Norilsk
CHPP-3 affected about 700 people using
Lake Pyasino and the Pyasina River as
their traditional fishing grounds. In this
situation, Nornickel made a decision,
unprecedented in Russia, to voluntarily
compensate for the damage caused.
The list of victims has been agreed
with local communities, and payments
are already ongoing. A total of about
RUB 174 million will be allocated for
these purposes. In addition to direct
payments, the Company will support land
remediation, fish stocking of local water
bodies as well as create new jobs and
production facilities.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 2020, the Company was approached
by the Husky Tyal (Husky Wind)
indigenous community with a request
to provide financial assistance for air
transportation of 10 musk oxen (calves)
from the Yamal-Nenets Autonomous
District to the village of Volochanka.
The Company allocated the necessary
funds and worked out the logistics. Due
to unfavourable weather conditions,
the helicopter was forced to land
in Norilsk where the Company provided
a heated warehouse for the musk
oxen to spend a day until the weather
improved. At present, the calves are
safely acclimatising at a musk ox farm
(10 km from the village).
A good example of how Nornickel helps
to preserve national traditions and culture
of the indigenous peoples of Taimyr
includes celebrations of professional
holidays for tundra residents organised
and held by the Company on an annual
basis: the Reindeer Herder’s Day
and Fisherman Day, with valuable gifts
and prizes for participants of national
holiday competitions in Taimyr
settlements. 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. The Company’s annual
expenses for these purposes exceed
RUB 5 million (USD 70 thousand).
Support and development of local
communities are central to Nornickel’s
charity efforts and a key part of its World
of New Opportunities charity programme.
As part of the programme, the Company
holds the annual Socially Responsible
Initiatives Competition and provides
grants for the winners. In 2020,
seven projects by representatives
of the indigenous peoples of the North
received a total funding of RUB 6.8 million
(USD 95 thousand).
SOCIAL EXPENSES (USD MLN)1
500
2020
224
2019
207
2018
303
2017
111
2016
KEY OBLIGATIONS OF THE COMPANY REGARDING
THE RIGHTS OF INDIGENOUS PEOPLES FIXED
IN THE RELEVANT POLICY
Communities use grants to build ethnic
theme parks, sports grounds, set up
ethnic clubs, children’s groups, ethnic
sewing shops, organise celebrations
of national holidays and implement
projects involving elderly people, youth
and children.
In 2020, implementing its Indigenous
Rights Policy, Nornickel launched
the Taimyr Students targeted programme
to train representatives of indigenous
peoples at Norilsk State Industrial
Institute in courses that are most
relevant for the Company. In 2020,
15 students started their studies
at Norilsk State Industrial Institute under
the programme, with their tuition fees fully
covered by Nornickel. The Company’s
spending on the programme totalled
RUB 1,152 thousand (USD 16 thousand).
In 2020, as part of its social
and economic projects to develop
infrastructure, support education
and culture and improve the living
standards of the indigenous peoples,
Nornickel developed new long-term
programme to support key business
areas of the indigenous minorities
SOCIAL INVESTMENTS
SUPPORT FOR INDIGENOUS
PEOPLES OF THE NORTH
Indigenous peoples of the North,
such as Nenets, Dolgans, Nganasans,
Evenks and Enets, currently residing
on the Taimyr Peninsula, count
over 10 thousand persons.
Nornickel respects the rights, natural
habitats, traditional culture and trades,
historical heritage and interests
of indigenous peoples within
the Company’s footprint and pursues
a policy aimed at enhancing and fostering
good neighbourly relations.
Recognising the rights of indigenous
peoples to preserve their traditional
way of life and addressing their needs
for decent living standards and modern
services, the Company has been
engaged in philanthropy and social
projects to improve the quality of life
for Taimyr indigenous minorities
for several decades.
The Company’s key commitments
with respect to indigenous rights
are set out in the relevant Policy.
Nornickel complies with all applicable
international codes and laws regarding
the support for indigenous peoples
of the North and recognises the rights
of local communities to preserve their
traditional lifestyle and indigenous trades.
The Company’s metals and mining assets
are located outside indigenous territories
in the Taimyrsky Dolgano-Nenetsky
Municipal District, so the indigenous
peoples do not have to move, and their
traditional trades and cultural heritage are
not affected.
The Company also offers regular
assistance in response to specific
requests from non-governmental
organisations that represent
the interests of indigenous peoples
of Taimyr. For example, in October
1
According to IFRS statements.
176 177
of Taimyr. A follow-up to an ethnological
expedition carried out in the summer
of 2020 on the Taimyr Peninsula,
the programme includes over 40
specific initiatives aimed at supporting
traditional activities, developing
indigenous trades, and reproducing
renewable resources, which forms
the basis for their traditional lifestyle
and conservation of indigenous ethnic
groups, as well as provides for funding
to support housing, healthcare,
infrastructure, tourism and socio-cultural
projects. The programme is planned
to be implemented within five years, with
its financing totalling about RUB 2 billion
(USD 28 million). Each initiative under
the programme has been agreed with
indigenous communities.
The supporting measures are outlined
in an agreement on cooperation signed
by Nornickel, the Russian Association
of Indigenous Peoples of the North,
the Regional Association of Indigenous
Peoples of the North of the Krasnoyarsk
Region, and the Local Public Organisation
“Association of Indigenous Peoples
of the Taimyr of the Krasnoyarsk Region”.
The agreement is an important milestone
of the historical partnership between
the Company and indigenous peoples
living in the Taimyrsky Dolgano-Nenetsky
Municipal District.
In 2020, Nornickel also started
making cash payments to indigenous
communities fishing in the area of Lake
Pyasino and the Pyasina River who
were potentially affected by the diesel
fuel spill at CHPP-3. Indigenous
communities and the Russian Association
of Indigenous Peoples of the North took
part in compiling the list of 699 affected
representatives of indigenous minorities
based on an ethnological review
conducted for the first time in Russia
to assess ethnological consequences
of an environmental incident. Total
payments exceeded RUB 175 million
(USD 2.4 million).
TRADITIONAL FISHING GROUNDS OF INDIGENOUS PEOPLES
r. Agapa
r. D u d y pta
r. P y a sin a
r. Yenisei
lake Pyasino
Dudinka
r. Ambarnaya
Norilsk
lake Lama
Water sampling points
Soil sampling points
Traditional fishing grounds
Survey area examined during
the expedition
Sorbent barriers
Emergency fuel storage tank
at CHPP-3
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel COMPRISING 42
INITIATIVES:
◾ support for the traditional lifestyle
of indigenous minorities on the Taimyr
Peninsula
◾ support for educational projects,
construction of a community centre
◾ construction of homes
◾ construction of children’s playgrounds,
purchase of sports equipment, etc.
◾ construction of new first aid stations,
purchase of special equipment, etc.
◾ tourism and other development
and support projects.
World of Taimyr project contest
In autumn 2020, the Taimyr Social
Expedition visited Taimyr to develop
proposals on a set of sustainable
measures to support local social
and public initiatives. The expedition
held a series of focus groups, surveys
and interviews. Its proposals determined
a number of local development priorities
such as traditional trades and ethno-
tourism, creation of seasonal jobs,
implementation of distance learning
(online), etc.
The expedition’s key proposals served
as the basis for the regulations on a new
World of Taimyr project contest, which
will aim at supporting public initiatives
and promoting sustainable development
of Taimyr’s indigenous territories.
The Company started the World of Taimyr
contest on 10 December 2020. In 2021,
Nornickel will implement a unique training
and support programme for project teams
involving representatives of indigenous
minorities, communities and public
organisations of Taimyr.
The contest’s key feature is that it
only covers indigenous territories
and communities within the Taimyrsky
Dolgano-Nenetsky Municipal
District. The maximum grant size is
RUB 6.5 million (USD 90 thousand).
The contest involves public and non-profit
organisations, indigenous communities,
as well as state and municipal
organisations.
Every year, representatives of indigenous
minorities take part in the Socially
Responsible Initiatives Competition
under the World of New Opportunities
charity programme. In 2020, grants
were awarded to 1 indigenous community,
5 non-profit organisations and 11
budgetary institutions across Taimyr
settlements.
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 million (~USD 1.4 million).
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 matters to drive
economic growth and improve the local
social situation.
Norilsk Development Agency
The Norilsk Development Agency
supports 16 SME investment projects
in the service economy, manufacturing,
and tourism with a total funding of around
RUB 3 billion. The projects will create
about 500 new jobs. IT-cube. Norilsk
Children’s Digital Training Centre is one
of these investment projects. The agency
applied to a grant competition
held by the Ministry of Education
of the Russian Federation to obtain
a subsidy for the launches of children’s
digital training centres. The agency’s
application was supported by the city
administration and the government
of the Krasnoyarsk Region. Currently,
400 school students receive training
in the centre.
The Norilsk Development Agency
and the city administration implement
greening and landscaping projects
within the Lake Dolgoye recreation
park and projects to create modern
public and neighbourhood spaces with
direct participation of Norilsk residents.
A number of projects to install sports
grounds and workout zones with
outdoor gym equipment and benches
and art forms have already been
completed. One of the more recent
projects is residential eco-parking with
four stations for simultaneous heating
of eight vehicle motors. 2020 saw
the completion of an initiative to restore
the Olympians, the fourth mosaic
restored under the Norilsk Development
Agency’s project with participation
of the city administration and support
from Nornickel. All these projects are part
of a master plan for Norilsk development.
The agency is completing
the development of the first phase
of a master plan for the proposed
Arctic tourist cluster. The project
aims to preserve fragile arctic nature
and develop conscious tourism while
making tourism a viable business
in the arctic part of the Krasnoyarsk
Region. A total of 51 investors
signed an agreement for the cluster
development. Funding for the cluster
investment projects totals RUB 4.3 billion.
Despite the COVID-19-induced lockdown,
at the end of 2020, tourist traffic
was up 4% year-on-year and exceeded
5,000 people. The Federal Agency
for Tourism awarded grants totalling
over RUB 17 million to seven companies
active in the cluster. 7 new routes
have been developed, 8 tourist
accommodation establishments received
classifications, and 38 new guides
were registered. First-ever agreement
for the sale of tours to Khatanga
was signed between local company
Anabar-tour and regional tour operators.
The Arctic. Putorana Plateau tourism
and recreation cluster was included
in the top 30 high-potential eco-tourism
areas at an all-Russian eco-cluster
contest.
In August 2020, a research expedition
team including representatives of WWF
Russia, Joint Directorate of Taimyr Nature
Reserves and federal experts visited
Pronchishcheva Bay. The expedition
provided data to develop future
tourist routes and explore the viability
of setting up camps and visitor centres
at abandoned polar stations, established
contacts with residents of remote villages
Syndassko and Popigay as potential
tourist destinations and collected
information for further development
of the master plan for the Arctic. Putorana
Plateau tourism and recreation cluster.
Second School centre
for community initiatives
in the Pechengsky District
In the context of its closure of a smelting
shop in Nikel, the Company together
with regional and municipal authorities
and local communities developed a new
concept for the social and economic
development of Nikel and Pechengsky
District to address various social matters
such as providing jobs for the shop
employees, creating a favourable
environment for SME development
in the region as well as attracting
investors to the region.
In 2020, the Company and the Second
School centre for community initiatives
in the Pechengsky District held a contest
to provide interest-free loans for business
development in the Pechengsky
District. A total of 11 business projects
won the contest, including new hotels,
abrasive manufacturing facility, trout
farm, dairy farm, environmentally
friendly plastic waste recycling facility,
holiday camp, bakery, mobile retail
outlets, and a cafe on wheels. The total
cost of the projects to be financed
by Nornickel stands at RUB 212 million
(USD 3 million), with about 145 new jobs
expected to be created. All projects will
be completed as early as 2021.
Monchegorsk Development
Agency
Monchegorsk administration
and Nornickel launched the Monchegorsk
Development Agency in September
2020 to create a favourable environment
and opportunities to drive the city’s
178 179
sustainable social and economic
development. The agency will focus
on three areas: business and investment,
social and cultural projects, and tourism.
for the Murmansk Region under a 3-year
social and economic development
programme.
Relocation programme
In 2020, 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
better climates. The programme provides
for financing families entitled to relocation
under government programmes
and registered to purchase an apartment
in Norilsk or Dudinka, with Nornickel
operating as its sponsor. The programme
was launched in 2011 and is scheduled
for completion in 2020. Since its launch,
the Company has donated a total
of RUB 8,651 million (USD 207 million)
under the programme. A total of 8,219
families exercised their relocation rights
under the programme between 2011
and 2020, including 6,713 families from
Norilsk and 1,506 families from Dudinka.
The Company fully discharged its financial
obligations under the programme which
was completed in 2020.
Construction of a sports
and recreation centre
In 2020, the Company completed
the construction of the Ayka sports
and recreation centre in Norilsk.
The centre was built under an agreement
concluded in 2010 for collaboration
and cooperation in the upgrade
and development of social and utility
infrastructure and housing in Norilsk.
Investments in construction projects
totalled more than RUB 3.6 billion
(USD 50 million), including RUB 2.5 billion
(USD 34.7 million) spent in 2020.
These projects span all areas within
the Company’s footprint. In Zabaykalsky
and Murmansk Regions, such social
projects have been running for several
years under formal agreements.
In 2020, Nornickel provided
RUB 400 million (USD 6 million
million) to finance social projects
of Zabaykalsky Region Government, plus
RUB 50 million (USD 0.65 million million)
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 180 181
Safe operations
Helping hand
Contribution to healthcare
Nornickel, one of Russia’s leading industrial
companies, is one of the world’s largest
producers of precious and non-ferrous metals.
The strategically important task of ensuring its
continuous operation was greatly complicated
by the threat of COVID-19 spread.
To minimise the risk of employees
contracting the disease, Nornickel
provided all staff with personal protective
equipment and installed dispensers with
disinfectants and sanitiser in all production
and office premises. In a new environment,
agreements were renegotiated with
cleaning companies to increase
the frequency of disinfection of workplaces
and administrative premises.
The Company monitored employee
health on a daily basis using thermal
imagers and non-contact thermometers.
Employees in the risk group
were regularly tested for coronavirus
and self-isolated as necessary.
Specific safety measures were developed
for shift workers, comprising mandatory
testing and quarantine in dedicated
observation facilities built and equipped
by the Company. Shifts were extended
to include the time spent in observation
facilities.
“Since we are in good shape, we have
to take care of our employees, protect
them in every possible way, both
medically and socially. That’s the first
thing. Secondly, we need to take a look
around and help municipalities and towns,
especially the single-industry towns where
we operate,” said Nornickel’s President
Vladimir Potanin. Businesses had to invest
considerable financial and human
resources to adapt to the pandemic,
and small and medium-sized enterprises
were hit the hardest. Supporting them
was one of the most important aspects
of Nornickel’s local efforts.
At the expense of Nornickel subsidiaries,
rent holidays for the duration
of the pandemic were granted, cargo
deliveries to Norilsk were subsidised,
and pro bono accounting and legal
services were offered to 116 regional
enterprises.
The Company provided subsidies
for utility bill payments to non-profits,
and granted six-month loan holidays
to social entrepreneurs.
During the pandemic, the efforts of healthcare
workers are as vital as the uninterrupted
supply of medicines and availability of medical
instruments and equipment.
This is especially important in the Far
North. Nornickel was supporting healthcare
facilities in Norilsk and on the Taimyr
Peninsula from the onset of the pandemic.
The Company allocated substantial sums
to purchase personal protective equipment
for healthcare workers, medicines
and medical equipment, including vitally
important defibrillators, inhalers, pulse
oximeters, etc. Twenty-five new Swiss ECG
machines worth a total of RUB 9 million
were purchased for three ambulance sub-
stations in Norilsk to replace the devices that
had reached the end of their service life.
Nornickel supported the opening
of an infectious disease ward for treating
COVID-19 patients at the Monchegorsk Central
District Hospital, equipped with ventilators.
The Company also purchased state-of-the-art
coronavirus testing equipment for the ward.
Doctors’ efforts in minimising the spread
of the virus were recognised: Nornickel
awarded 27 Norilsk medics with
RUB 50,000 certificates for their selfless
fight against the pandemic.
ECOLOGICAL AGENDA
Introduction
FIRST
ON THE FRONTLINE
OF FIGHT AGAINST
THE COVID-19
PANDEMIC
Nornickel is Russia’s No. 1 industrial company by COVID-19 spending,
according to Forbes’ ranking.
Last year, the global community faced
a major disaster – the coronavirus
pandemic. Within months, the pandemic
disrupted the usual way of life for people all
around the world. Nornickel management
fully realised the gravity of the situation
and joined the fight against the new
infection as early as in March 2020.
Nornickel allocated over RUB 20 billion
to fight the coronavirus – not only
to protect its own enterprises but also
to support local authorities, healthcare
and educational institutions, and socially
vulnerable citizens. The Company
purchased over 460 thousand
coronavirus tests and over 10 million
protective masks, 356 ventilators,
400 thermal imagers, and 5 critical
care vehicles. Nornickel financed
the deployment of 2 stationary
laboratories, 7 mobile laboratories,
and 15 mini-laboratories in its regions
of operation; new equipment was also
purchased for local hospitals to replace
obsolete equipment.
These efforts did not go unnoticed.
Forbes magazine ranked Nornickel
as Russia’s No. 1 industrial company
by COVID-19 spending.
Distancing from COVID-19
First of all, the Company made
every effort to implement social
distancing rules to prevent the spread
of the disease. All international business
travel was suspended and business
travel within Russia was significantly
curtailed. In the shortest timeframe,
14% of the Company employees, about
10 thousand people, were shifted
to remote working. Access to Nornickel
production sites was minimised for white-
collar employees.
As older people are particularly
vulnerable to COVID-19, all Company
employees over 65 were suspended
from work in accordance with a decree
of Russian President Vladimir Putin.
In addition, Nornickel voluntarily
developed coronavirus control
measures to protect employees aged
over 60. The Company made sure that
none of its older, more experienced
employees found themselves in a difficult
financial situation due to the pandemic,
and continued to pay them full salaries.
Blue-collar employees who could not
be shifted to remote working received
additional compensation.
A 24-hour employee hotline was set
up, with information about all measures
taken by Nornickel to combat
the pandemic made available
to employees at any time.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel 182 183
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.
In 2020, 90% of charitable events
and projects scheduled for the year
were held online, thus making it possible
for Nornickel to continue reaching
out to target audiences and achieve
performance targets.
In February 2020, We Are the City!
social technologies forum was held
in Norilsk and Zapolyarny with over 2,000
participants. The forum was themed
around People. Ideas. Locations –
a synergy of caring people, useful
ideas and meaningful public spaces.
The main motivators were Russian
and international experts: Guillermo
Peñalosa, an urbanist and expert in park
and urban street transformation (Toronto,
Canada); Vadim Mamontov, the founder
and CEO of RussiaDiscovery; winners
of the Socially Responsible Initiatives
Competition as regional experts; social
entrepreneurs and Nornickel employee
volunteers.
Zapolyarny, Severodvinsk, Anadyr,
Arkhangelsk, Naryan-Mar, Yakutsk,
etc.) The convention focused on crisis
as a time of business opportunity, with
participants discussing coronavirus
business cases and solutions and sharing
their experiences and best practices.
In June 2020, the first SVET ON youth
online forum was held with over 500
participants aged between 12 and 18
from the Company’s operating regions,
discussing youth entrepreneurship
trends, ideas for regional volunteering
development, engineering and digital
technologies.
The IMAKE engineering marathon
was held online for more than 1,300
young inventors, resulting in a new
system to engage teenagers and their
parents in research and invention
activities. Five participants
of the marathon won the regional stage
of Concours Lépine 2020 (France).
Also, two-week long engineering shifts
were arranged during summer holidays
(in July and August).
An online Convention of Social
Entrepreneurs from the North
in December 2020 gathered together
over 200 registered participants
from 33 Russian cities (Norilsk,
Dudinka, Chita, Monchegorsk, Nikel,
In December 2020, the Company
provided a total of RUB 154 million
(USD 2.1 million) to support 109 social
initiatives that had won the Socially
Responsible Initiatives Competition.
All in all, about 27 thousand people from
across Nornickel’s footprint and beyond
were involved in the social projects run
under the World of New Opportunities
charity programme in 2020.
The charitable programme’s wider
footprint is one of the benefits of using
the online format to hold its events.
The Plant of Goodness
corporate volunteer programme
Nornickel’s corporate volunteering
programme comprises a vast array
of volunteer and charitable projects
across all regions in which Nornickel
operates – in the Norilsk Industrial District,
on Kola Peninsula, in Chita and Moscow.
The programme supports employee
volunteers’ social initiatives aimed
to contribute to the social development
of our operating regions and better quality
of life for local communities. At present,
the Plant of Goodness volunteer
community boasts over 2,500 participants,
who have launched and delivered
over 350 initiatives between themselves.
VOLUNTEERING DURING
THE PANDEMIC
The coronavirus pandemic presented
a real challenge to the corporate
volunteering programme. Nevertheless,
employee volunteers promptly
responded to the new challenges with
mutual aid projects. As part of COVID-
19 response, a 200-strong employee
volunteer team was set up, which
prepared and delivered food baskets
and medicines to vulnerable groups
and made over 3,000 reusable masks.
Also during the pandemic, employee
volunteers congratulated 372 veterans
on the Victory Day.
Bystrinsky GOK volunteers and the Baikal
regional branch of the Union of Russian
Volunteers arranged the delivery
of essential supplies to local people
in the high coronavirus risk group, people
with reduced mobility and elderly people
living alone, in Chita and Gazimursky
Zavod. The Company financed
the procurement of food and provided
the volunteers with personal protective
equipment: masks, hand sanitisers,
and gloves. Nornickel employees took
special training from Russian volunteer
university to help elderly people
in emergencies. In Monchegorsk,
the Plant of Goodness volunteers set up
a small shop to make reusable masks.
The Company helped with buying
gauze for face masks, with the required
number of volunteers found through
the programme’s chat.
THOSE WHO CARE,
A CORPORATE PROGRAMME
TO SUPPORT CHANGE
WITHIN THE COMPANY
Those Who Care change-support
programme for Nornickel employees
was launched in 2020. The programme
brings together activist employees of various
professions from different enterprises
to develop and implement change projects
outside their functional roles or KPIs.
In 2020, Kola MMC hosted kick-
off sessions, formed project teams,
organised profiling business games
(to define a participant’s portrait and skills
mix), and launched komunevseravno.ru
website and the Change Makers Club.
Annual report | 20205SUSTAINABLE DEVELOPMENTNornickel Nornickel
CHANGES
IN MANAGEMENT
Annual Report | 2020
CORPORATE GOVERNANCE
184 185
FOR MORE DETAIL
SEE ON THE WEB-SITE
//NORNICKEL.COM
NEW TEAM
WILL GIVE
SUSTAINABILITY
Changes in organizational structure aiming
at strengthening of the management team should
support Nornickel’s strategic drive to improve
the sustainability and efficiency of operations.
A new management Risk Committee to be created,
which is to be chaired by the Company’s President,
that should help improving the efficiency of risk
management. This will mark the completion
of a vertical risk management structure fully
penetrating the Company from the level of blue-
collar workers to its President.
//photo: Interview of Vladimir Potanin
Annual report | 2020CORPORATE GOVERNANCE6WILL GIVENEWSUSTAINABILITY LETTER FROM
THE CHAIRMAN
OF THE CORPORATE
GOVERNANCE
COMMITTEE
Nornickel
E
C
N
A
N
R
E
V
O
G
E
T
A
R
O
P
R
O
C
6
.
O
N
186 187
Nornickel is commuted to continuous and consistent improvement of its corporate governance
framework. Effective corporate governance is critical to enhancing the stability and efficiency
of the Company’s operations and competitive edge while boosting investments in the Russian
economy from both domestic sources and foreign investors. This is why Nornickel maintains
a strong focus on this aspect and fully complies with the majority of the corporate governance
principles set forth in the Corporate Governance Code. The Company will continue to improve
its corporate governance practice in line with the highest standards, guided primarily
by the Corporate Governance Code recommended by the Bank of Russia.
Although it was a difficult year for the Company and the country as a whole, in the reporting period,
the Board of Directors addressed strategically important matters and placed a particular emphasis
on enhancing corporate governance. The transformations and activities carried out during this
challenging period enabled Nornickel to maintain its leadership in the Russian and global markets
and retain its appeal to the investment community.
Being perfectly aware of the importance of its goals, in 2021, Nornickel will continue its best efforts
to achieve them. By consolidating the experience of its employees, managers and shareholders
the Company will be able to maintain high performance and confidently follow the path
of development and success in the competitive environment.
Robert Edwards
Member of the Board of Directors, MMC Norilsk Nickel
NornickelAnnual report | 2020CORPORATE GOVERNANCE6
188 189
CORPORATE GOVERNANCE STRUCTURE
CORPORATE GOVERNANCE STRUCTURE 1
Audit Commission
MANAGEMENT
BOARD
37.6%
34.6%
GENERAL
MEETING
OF
SHAREHOLDERS
PRESIDENT,
CHAIRMAN
OF THE
MANAGEMENT
BOARD
Risk Management
Committee under
the Management
Board
chaired by the President
Health and Safety
Department
Ecology Monitoring
Centre
First Vice President
Chief Operating Officer4
Senior Vice President
Sustainable development
First Vice President
Corporate Security
Vice President
Internal Control
and Risk Management
27.8%
Election
Olderfrey Holding Ltd.2
UC RUSAL, IPJSC 3
Other shareholders
Internal Audit
Department
Independent auditor
BOARD OF DIRECTORS
Increased focus on strategic initiatives; strong commitment
to the environmental agenda
Independent Environmental Task
Team of the Board of Directors
led by the Chairman
BOARD COMMITTEES
• Corporate Governance, Nomination and Remuneration
Committee
• Budget Committee
• Strategy Committee
Senior Vice
President
Norilsk Division
Sustainable
Development
Department
Ecology
Department
Deputy Director
for Industrial
Ecology
and Environmental
Protection
Environmental matters
Corporate Secretary
Inspectorate
for Monitoring
Technical,
Production
and Environmental
Risks
New business units
and positions
Election
Reporting
Administrative reporting
1
2
3
The corporate governance chart includes new structures dealing with environmental matters.
Indirect ownership via controlled persons.
Direct and indirect ownership via controlled persons. IPJSC EN+ Group owns 56.88% of voting shares in UC RUSAL, IPJSC.
4
On 1 March 2021, the position of First Vice President – Operations Director was removed from the Company’s organisational structure, with Senior Vice President of the Norilsk
Division now reporting directly to the Company’s President, while the Health and Safety Department became part of the Strategy, Strategic Projects, Logistics and Procurement
function.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 KEY PRINCIPLES
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.
IMPROVEMENT OF CORPORATE
GOVERNANCE
During the year, Nornickel focused
on improving corporate governance
to enhance sustainability management
efficiency. The Environmental Task Team
was set up at the Board level, chaired
by Gareth Penny, the independent Chairman
of the Board of Directors, and is comprised
solely of independent directors. The new
team was set up primarily in response
to the Board of Directors’ desire to pay
closer attention to sustainability in general,
and environment in particular.
Significant organisational changes were made
at the management level within the Company.
Specifically, to improve the efficiency
of risk management and supplement
the existing system of industry committees,
the new Risk Committee was set up,
headed by the President of the Company.
The creation of the Committee marked
the completion of a vertical risk management
structure fully penetrating the Company
from the level of blue-collar workers to its
President, Management Board and Board
of Directors.
In addition, in 2020, the new Ecology
Department and Inspectorate for Monitoring
Technical, Production and Environmental
Risks were established to better manage
the risks of negative environmental impacts
and enhance environment-related industrial
safety. The new Ecology Monitoring Centre
was established to set up an ecology
monitoring system designed in line with
best practices. The Ecology Department
cooperates with all units across the Company,
being responsible for implementing
the strategy aimed at assessing
environmental risks and minimising
the Company’s adverse environmental
impacts, as well as restoring ecosystems
in Nornickel’s regions of operation.
Last year, a new position of Senior Vice
President for Sustainable Development
was created (filled by Andrei Bougrov),
and the Sustainable Development
Department was set up. The key tasks
of the new department are to improve
sustainability performance and coordinate
the Company’s units in order to bring
internal processes and regulations in line
with the best international standards,
such as ICMM and IRMA. Senior Vice
President for Sustainable Development
will focus on relations with all stakeholders
and support the Board of Directors’
Environmental Task Team.
In 2021, senior management’s KPIs will
include the Zero Environmental Incidents
indicator with a weight of 20% (within
team KPIs) to ensure a clear link between
the implementation of the Company’s
environmental strategic priorities
and the level of remuneration.
In addition, new position of Vice President
for Federal and Regional Programmes
with the following responsibilities
was introduced:
◾ Implementing programmes
and interacting with federal and regional
government authorities
◾ Representing the Company’s interests
in various collective bodies
◾ Developing strategic partnerships with
regional governmental authorities,
development institutions, Russian
and international public organisations,
environmental organisations
and movements, in particular, with
the objective of promoting sustainable
development of Nornickel’s regions
of operation while implementing its
Indigenous Rights and Biodiversity
Conservation policies
KEY CORPORATE
GOVERNANCE
PRINCIPLES
Equitable and fair
treatment of every
shareholder
Corporate social
responsibility
Ensuring transparency
of information about
the Company
Accountability
of the Board of Directors
and executive bodies
Professionalism
and leadership of the Board
of Directors
Effective risk management
and internal control
framework
Combating corruption
In 2020, particular emphasis was placed
on social matters. The Company did all
that was necessary to minimise the impact
of the pandemic on its employees, local
communities, and vulnerable groups
in its regions of operation. The Board
of Directors supports the policy
of providing assistance to Nornickel’s
regions of operation. Management
initiatives aimed at assisting Nornickel’s
operating regions are regularly
reviewed by the Corporate Governance,
Nomination and Remuneration Committee
of the Board of Directors.
190 191
An important initiative to improve
corporate governance last year
was the transformation of the governance
framework into three divisions
on a regional basis – Norilsk, Kola
and Trans-Baikal. The three divisions
combine the Company’s main
production and ancillary assets located
in respective regions. In addition
to the assets located on the Kola
Peninsula, Norilsk Nickel Harjavalta
plant became part of the Kola Division.
The prerequisites of the transition
to a division-based governance model
were the centralisation of service
functions in the Shared Services Centre,
as well as the high level of maturity
of the Company’s business processes
and the degree of their automation
achieved by the management team
in recent years.
The transition to a division-based
structure is aimed at significantly
increasing the level of responsibility
of local managers as they are vested
with more powers in operational
and investment matters (asset-
level investment limits not requiring
the approval of the corporate centre
were tripled) while maintaining
the strategic and expert role
of the corporate centre.The divisions
will have comprehensive operational
responsibility for their respective
production processes and infrastructure
facilities, as well as financial performance
and risk management. This transition
was an important expansion of the earlier
set of measures based on an analysis
of the causes of recent environmental
incidents, and should help the Board
of Directors manage matters relating
to sustainability and the Company’s
strategy in a more efficient way.
As part of the efforts to improve
the corporate governance framework
in 2020, the Board of Directors also
approved a new version of the Directors’
Code of Corporate Conduct and Business
Ethics.
The new version of the Code complies
with best corporate governance
practices, builds on the Company’s values
listed in the Manifesto of Our Values,
updates the rules for insider information
transactions in accordance with the new
version of the Regulations on Procedures
for Access to Insider Information
of PJSC MMC NORILSK NICKEL,
and Rules for Protection of Insider
Information Confidentiality and Control
over Compliance with the Requirements
of Laws Related to Combating Insider
Information Unlawful Use and Market
Manipulation.
Despite the challenges faced
by the Company in 2020, 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 2020, Nornickel’s investment-
grade credit ratings were affirmed
by the Big Three credit rating agencies:
Standard & Poor’s, Moody’s and Fitch.
Expert RA affirmed Nornickel’s credit
(financial stability) rating at the highest
level according to the national rating
scale (the Company has maintained its
ruAAA credit rating, which corresponds
to the sovereign credit rating
of the Russian Federation, for three years
running). Russian AK&M Rating Agency
assigned a RESG 1 rating to Nornickel’s
sustainability reporting (which attests
to the highest level of disclosure
in ESG reporting). Nornickel was also
able to improve its ESG score from
international rating agencies; in particular,
the ESG score assigned by S&P Global,
one of the world’s leading rating
agencies, was up by 11 points to 44 (33
in 2019), and the Company’s ESG score
from FTSE4Goog was 4.0 (3.0 in 2019).
Nornickel was included in the Most
Honored list of Institutional Investor's
2020 Emerging EMEA Executive Team
ranking, in the metals and mining sector.
In 2020, the ranking is based on a survey
of 226 investors (portfolio managers
and analysts) as well as 159 brokerage
and investment banking analysts.
The following parameters were assessed:
the management’s willingness to interact
with the investment community; timely
and appropriate disclosure of financial
information; prompt and comprehensive
response to queries; a well-informed
investor relations team authorised
to speak with authority on behalf
of the Company; constructiveness
of conference calls; quality of meetings
held as part of road shows, conferences,
corporate documents and materials
for investors; provision of analytical
assessment and ESG reports; quality
of the corporate website; and adherence
to corporate governance standards.
In addition, Nornickel topped the rating
of Russian companies that provided
the most comprehensive response
to the pandemic.
Nornickel reiterates its commitment
to further improvement of corporate
governance in 2021 in order to boost
the Company’s operational efficiency
and drive its competitive edge
in the domestic and global markets.
Priorities include improving sustainability
management, reducing environmental
risks and enhancing industrial safety,
as well as countering the coronavirus
pandemic and mitigating its impact
on the Company and local communities.
In 2021, the Company plans to get ready
to join the ICMM international association
and be certified under the IRMA
standard, as well as start implementing
the plan to ensure compliance with
TCFD standards. On top of that, in 2021,
environmental performance indicators
will be included in senior management’s
KPIs to ensure a clear link between
the implementation of the Company’s
strategic priorities and the level
of remuneration.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 COMPLIANCE WITH THE CORPORATE
GOVERNANCE CODE
Nornickel’s corporate
governance standards are based
on the recommendations of the Corporate
Governance Code, and the Company
continues to implement the Code’s
principles and recommendations. Out
of 79 principles of the Code, the Company
fully complies with 61 (about 77%), partially
complies with 17 and does not comply
with only one principle. For the full 2020
Report on Compliance with the Corporate
Governance Code with comments
on cases of partial compliance and non-
compliance with the Code’s principles,
please see Appendix 2.
Corporate
governance
principles
Number
of principles
recommended
by the Code
In 2017, Nornickel prepared its inaugural
Report on Compliance with the Corporate
Governance Code using the report
template recommended by the Bank
of Russia’s Letter No. IN-06–52/8.
The table below shows a significant
improvement of the Company’s
compliance level since 2017 (61 principles
are fully complied with versus 55 in 2017).
IMPLEMENTATION
OF THE CORPORATE
GOVERNANCE CODE PRINCIPLES
AND RECOMMENDATIONS (%)
77 | 22 | 1
2020
77 | 22 | 1
2019
75 | 24 | 1
2018
70 | 28 | 3
2017
Full compilance
Partial compilance
No compilance
2017
2018
2019
2020
55
22
100% 70%
28%
13
12
1
2
2%
–
59
7%
12
19
24%
1
1
1%
–
61
17
77%
22%
12
1
1
1%
–
61
17
77%
22%
12
1
1
1%
–
36
2
10
24
2
3
6
7
5
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
–
–
–
27
2
4
6
7
3
9
–
5
–
–
2
–
–
1
–
–
–
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 framework
Company
disclosures
Material corporate
actions
Full compliance
Partial compliance
No compliance
192 193
STAKEHOLDER RELATIONS
To achieve operational excellence
and further improve corporate
governance, Nornickel focuses
on engaging its stakeholders
in corporate governance, taking their
needs into account when making
important decisions.
DIALOGUE WITH INVESTORS
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, as well as interactive tools.
With Nornickel’s growth story appealing
to both Russian and international
investors, the Group provides parallel
disclosure both in Russian and in English
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 RAS, and lists
of affiliates. Financial statements
in accordance with IFRS are released
on a semi-annual basis and 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 Capital Markets Day
to share its updates on the corporate
long-term strategy until 2030, focusing
on sustainability and environmental
friendliness. 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
In 2020, despite the pandemic,
the Company continued to pursue
an active dialogue with investors while
striving to diversify its shareholder
base. In March 2020, following
the nationwide lockdown in Russia, all
investor communications went online.
For the first time, the Company held its
Capital Markets Day online, along with
over 300 virtual meetings with investors
and conference calls with the Company’s
senior management to discuss IFRS
statements.
In its communications, Nornickel places
a particular emphasis on environmental
safety and sustainability. 2020 saw
a major environmental incident:
an accidental damage to a diesel
fuel storage tank, caused by melting
permafrost and design/construction
flaws, resulted in a leak of 21 thousand
t of diesel fuel in the Kayerkan District
of Norilsk. The Company immediately
responded with a major programme,
implying active state and private partner
engagement, to collect the fuel and clean
up the area. Comprehensive real-time
updates on the incident were published
on the Company’s website and in social
media. In addition, an emergency
conference call with investors
and analysts was arranged at short
notice. Nornickel did its best to clean up
the site and prevent any such incidents
in the future.
To improve its communication with
investors who consider the Company’s
ESG ratings when making investment
decisions, as well as with rating agencies
that rate the Company on ESG factors,
since 2020, Nornickel publishes all latest
updates on its ESG performance, in a new
section on its website, ESG Highlights.
DIALOGUE WITH
EMPLOYEES
The Company regularly runs open
online conferences between
employees and senior management
to identify strengths and weaknesses
in communication and improve corporate
governance. In 2020, more than 40
Nornickel enterprises held 1.5-hour
live conferences where top managers
spoke about the Company’s future plans
and development strategy, and answered
the most pressing questions first-
hand. Following the latest conference
at the end of December, Nornickel
issued a leaflet for employees covering
such urgent matters as the pandemic
and its impact on the Company,
the global economy, the environment
and the accident at CHPP-3, as
well as organisational changes.
A particular emphasis was placed
on salaries and social benefits amid
the lockdown; Nornickel’s HR policy,
which is traditionally employee-oriented;
and measures to prevent the spread
of coronavirus. The leaflet also
details how the Company helps local
communities in its operating regions,
medical institutions and entrepreneurs
in the Norilsk Industrial District,
on the Taimyr Peninsula, in Monchegorsk
and in the Pechenegsky District during
the pandemic.
Over the past 3 years, 24 thousand
employees participated in 120
conferences.
DIALOGUE WITH LOCAL
AND INTERNATIONAL
ORGANISATIONS
In November 2020, Nornickel’s
representatives participated in the UN’s
online conference on transnational
organised crime which brought together
over 40 experts from two dozen countries.
Nornickel’s representative spoke about
its new initiatives to be discussed with
its partners at the Security Committee
of the International Platinum Group
Metals Association and within the scope
of the Company’s involvement
in the Security Improvements through
Research, Technology and Innovation
(SIRIO) project of the United Nations
Interregional Crime and Justice Research
Institute (UNICRI).
Nornickel also became an official partner
of the Arctic: Today and the Future
forum, which in 2020 focused on uniting
the efforts of the government, businesses
and communities to tackle sustainability
issues and implement national projects
in the Arctic. The forum brought together
representatives of Russian federal
and regional executive authorities,
member countries of the Arctic Council,
leading Russian and international
companies, as well as research, public
and environmental organisations.
Nornickel’s representatives emphasised
that developing the Russian Arctic is
1
Information about upcoming events is posted in the IR Calendar on the corporate website.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 a crucial strategic goal and that the only
way to act in the most efficient way is
to join the efforts of the government
and large businesses.
A well-built and clear corporate
governance framework which is
transparent for both Russian and foreign
shareholders and investors, as well as
active stakeholder engagement directly
affect investment decisions and the price
of Company securities.
MANAGING CONFLICTS
OF INTEREST
Nornickel has developed measures
to prevent potential conflicts of interest
involving shareholders, Board members
and senior managers.
The Company’s Articles of Association
set forth the procedure for approving
transactions with a conflict of interest
made by shareholders who hold more than
5% of voting shares. Such transactions
are only made if approved by Nornickel’s
Board of Directors by a qualified majority
of directors (at least 10 out of 13 votes).
If a Board member has a direct or indirect
personal interest in a matter reviewed
by the Board of Directors, they should
inform other members of the Board
of Directors before the matter is reviewed
or a relevant resolution is passed,
and refrain from participating in the review
and from voting on the matter.
Transactions with a conflict of interest that
are deemed interested-party transactions
are regulated by the law on joint stock
companies.
In addition, Nornickel’s internal documents
stipulate that members of the Board
of Directors and the Management Board
are to refrain from actions that may result
in a conflict of interests, and if such
a conflict arises, they should promptly
inform the Corporate Secretary in writing
thereof.
Nornickel also has in place the Regulations
on the Prevention and Management
of Conflicts of Interest, covering
the Company employees, that outlines,
in particular, the methods to identify
potential or existing conflicts of interest
and ways to resolve them. A Conflict
of Interest Commission was set up
at the Company’s Head Office to enhance
the effectiveness of preventing, identifying
and resolving conflicts of interest, as well
as to develop and improve the corporate
culture.
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 notice of a General Meeting
of Shareholders is published
in the Rossiyskaya Gazeta and Taimyr
newspapers, and posted on Nornickel’s
website at least 30 calendar days prior
to the date of the general meeting.
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).
Shareholders of MMC Norilsk Nickel who
own the Company shares via nominee
holders receive the voting ballot from
the nominee holder. They are entitled
to vote at the meeting in the same way as
the holders registered in the shareholder
register or instruct the nominee
holder to do the same as prescribed
by the Russian securities law. Nominee
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.
194 195
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.
Two General Meetings of Shareholders
were held in 2020, and a high level
of shareholders’ attendance was maintained.
The Annual General Meeting of Shareholders
during the COVID-19 pandemic was held
in absentia using an e-voting service.
Each year, more and more shareholders
take advantage of this service enabling
them to vote regardless of their location.
E-voting 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 service is highly reliable
and easy to use.
GENERAL MEETINGS OF SHAREHOLDERS HELD IN 2020
13 May 2020 – an Annual General
Meeting of Shareholders (held
in absentia)
10 December 2020 – an Extraordinary
General Meeting of Shareholders
(held in absentia)
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 2019 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. A new version of the Remuneration Policy for Members of the Board
of Directors of MMC Norilsk Nickel was approved.
An interested party transaction (liability insurance of members of the Board of Directors
and the Management Board) and related interested party transactions (indemnification
of members of the Board of Directors and the Management Board) were approved.
The auditor was approved to audit Nornickel’s Russian accounting (financial) statements,
consolidated financial statements, and interim consolidated financial statements.
A resolution to pay the 9M 2020 dividend was passed
QUORUM AT GENERAL
MEETING OF SHAREHOLDERS
IN 2018–2020 (%)
THE SHARE OF SHAREHOLDERS
WHO USED E-VOTING SERVECES (%)
SHAREHOLDERS' ATTENDANCE AT AGM
(NUMBER OF SHAREHOLDERS)
77
10.12.2020 (EGM)
51
10.12.2020 (EGM)
80
13.05.2020 (AGM)
74
16.12.2019 (EGM)
81
26.09.2019 (EGM)
79
10.06.2019 (AGM)
78
19.09.2018 (EGM)
68
28.06.2018 (AGM)
57
13.05.2020 (AGM)
43
16.12.2019 (EGM)
36
26.09.2019 (EGM)
34
10.06.2019 (AGM)
32
19.09.2018 (EGM)
16
28.06.2018 (AGM)
2,269 | 309
2020
1,972 | 262
2019
924 | 142
2018
1,090 | 81
2017
Individuals
Legal entities
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 BOARD
OF DIRECTORS
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors plays a crucial
role in designing and developing
the corporate governance framework,
ensures the protection and exercise
of shareholder rights, and supervises
executive bodies. Guided
by the principles of mutual respect
and humanism, the Board of Directors
sets the fundamental principles
of business conduct and is responsible
for nurturing Nornickel’s business
and social culture.
Following the Annual General Meeting
of Shareholders on 13 May 2020, Andrei
Bougrov and Stalbek Mishakov stepped
down from the Board of Directors,
and Nikolay Abramov and Sergey
Batekhin were elected to the Board.
As at 31 December 2020, the Board
of Directors had 13 members, of which:
◾ six independent directors: Gareth Peter
Penny, Sergey Bratukhin, Sergey Volk,
Roger Munnings, Evgeny Shvarts,
and Robert Edwards
STATUS OF BOARD
MEMBERS
46 | 39 | 15
2020
54 | 23 | 23
2019
46 | 31 | 23
2018
Independent directors
Non-executive directors
Executive directors
The Board’s authority and formation
process, as well as the procedure
for convening and holding Board
meetings are determined by the Articles
of Association and Regulations
on the Board of Directors
◾ five non-executive directors:
Nikolay Abramov, Alexey Bashkirov,
Sergey Batekhin, Maxim Poletaev,
and Vyacheslav Solomin
◾ two executive directors: Sergey
Barbashev and Marianna Zakharova.
According to Nornickel’s Articles
of Association, the Board of Directors has
13 members. Members of the Board are
elected at the Annual General Meeting
of Shareholders for a period until the next
Annual General Meeting of Shareholders.
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 all
stakeholders and enhances the quality
of managerial decisions. The current
Board of Directors comprises six
independent directors, which enables
highly professional, independent
judgements on matters on the agenda.
CHAIRMAN OF THE BOARD
OF DIRECTORS
The Chairman of Nornickel’s Board
of Directors leads the Board of Directors,
convenes and chairs its meetings,
ensures constructive collaboration
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.
At Gareth Penny’s initiative, in June
2020, the Board of Directors set
up an Environmental Task Team
to review a wide range of matters
relating to the Company’s sustainable
development, including the climate
agenda. Gareth Penny promotes open
discussion at meetings and encourages
active involvement of all Board members.
Gareth Penny’s external non-executive
directorships enable Nornickel’s Board
of Directors to better keep abreast
of global best practice in corporate
governance.
INDEPENDENT DIRECTORS
In line with corporate governance best
practice, Nornickel’s Board of Directors
assesses Board nominees and new
members against the independence
criteria set forth in the Company’s
Articles of Association and the Listing
Rules of PJSC Moscow Exchange
(the “independence criteria”).
As at the beginning of the reporting year,
Sergey Bratukhin, Roger Munnings, Gareth
Peter Penny, Robert Edwards and Evgeny
Shvarts fully met the independence criteria.
Members of the Board of Directors Sergey
Volk and Maxim Poletaev were determined
to be independent by resolution
of the Board of Directors despite being
related to a substantial counterparty,
Sberbank, as the relation does not affect
their ability to make independent, unbiased
judgements in good faith.
In March 2020, Sergey Bratukhin’s
and Gareth Peter Penny’s tenures
on the Board of Directors exceeded
seven years, and upon assessing their
independence, the Board of Directors
deemed them independent despite their
relation to Nornickel.
The new Board of Directors elected
by the Annual General Meeting
of Shareholders assessed the elected
Board members against the independence
criteria and determined that Roger
Munnings and Evgeny Shvarts meet
the criteria, and Gareth Peter Penny,
Sergey Bratukhin, Robert Edwards
and Sergey Volk are independent despite
being related to Nornickel (Gareth Peter
Penny, Sergey Bratukhin and Robert
Edwards – due to their tenure on the Board
over seven years) or a substantial
counterparty (Sergey Volk) as it does not
affect their ability to make independent,
unbiased judgements in good faith.
Thus, as at end-2020, 6 out of the 13
Directors, or 46.2%, were independent.
196 197
46
TENURE ON THE BOD (%)
15
39
Under 3 years
3–8 years
Over 8 years
BOARD COMPOSITION
BY GENDER (%)
8
Male
Female
92
BOARD COMPOSITION BY AGE
GROUP (%)
38.5
23
38.5
40–50
51–61
Over 61
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 THE BOARD’S EXPERIENCE AND SKILL MIX
Name
Tenure on the Board
of Directors
Gareth Peter Penny
2013–present
Sergey Barbashev
2011–present
Alexey Bashkirov
2013–present
Sergey Bratukhin
2013–present
Sergey Volk
2019–present
Marianna Zakharova
2010–present
Roger Munnings
2018–present
Maxim Poletaev
2019–present
Vyacheslav Solomin
2019–present
Evgeny Shvarts
2019–present
Robert Edwards
2013–present
Nikolay Abramov
(from 13 May 2020)
2020–present
As at 31 December 2020, the average tenure
on the Board of Directors was five years
Sergey Batekhin
(from 13 May 2020)
Andrei Bougrov
(until 13 May 2020)
Stalbek Mishakov
(until 13 May 2020)
2020–present
2002–2020
2012–2020
Strategy
Law
and corporate
governance
Key skills
Finance
and audit
Metals
and mining/
engineering
International
economic
relations
Name
Status
Meetings of the Board
of Directors attended/
held
Meetings of Board committees attended/held
ATTENDANCE AT MEETINGS IN 2020 1
In 2020, attendance at Board meetings was 100%.
198 199
+
+
+
+
+
+
5
+
+
+
+
+
6
+
+
+
+
+
+
+
+
+
8
+
+
+
+
+
+
+
+
8
+
+
+
+
+
5
+
+
+
Total
In
person
In
absentia
Strategy
Committee
Budget
Committee
Audit and
Sustainable
Development
Committee
Corporate
Governance,
Nomination
and
Remuneration
Committee
37/37
10/10
27/27
8/8
—
—
37/37
10/10
27/27
37/37
10/10
27/27
37/37
10/10
27/27
37/37
10/10
27/27
10/10
10/10
27/27
27/27
37/37
—
2/8
8/8
—
—
—
—
1/4
4/4
1/4
—
4/4
—
5/9
9/9
—
—
9/9
—
—
4/13
13/13
9/13
—
—
37/37
10/10
27/27
8/8
3/4
—
4/13
Gareth Peter Penny
Sergey Barbashev
Alexey Bashkirov
Sergey Bratukhin
Sergey Volk
Independent
Director/Chairman
of the Board
of Directors
Executive
Director
Non-Executive
Director
Independent
Director
Independent
Director
Roger Munnings
Maxim Poletaev
Independent
Director/Chairman
of the Audit
and Sustainable
Development
Committee
Non-Executive
Director/
Chairman
of the Strategy
Committee
Marianna Zakharova Executive Director 37/37
NUMBER OF BOARD MEETINGS
MATTERS REVIEWED (%)
10 | 27
2020
10 | 24
2019
13 | 32
2018
106
129
129
175
12
29
18
106
matters
25
15
In person
In absentia
Number of matters reviewed
Corporate governance
Transaction approval
Internal documents approval
Strategy, operations and finance
Other
BOARD OF DIRECTORS’
PERFORMANCE
In 2020, Nornickel’s Board of Directors
held 37 meetings, including 10 meetings
in person, and reviewed 106 matters.
At its meetings, the Board focused
on environment matters, including regular
management reports on the progress
of eliminating the consequences
of the incident at CHPP No. 3 in Norilsk,
analysis of Nornickel’s environmental
protection strategy, including
the Sulphur Programme, assessment
of the infrastructure, and the impact
of climate factors, such as permafrost,
on the Company’s operations. Particular
attention was paid to stakeholder
engagement on ESG matters and review
of the Company’s internal control
and risk management frameworks critical
for the Company’s sustainability.
Vyacheslav Solomin Non-Executive
37/37
10/10
27/27
Evgeny Shvarts
Robert Edwards
Director
Independent
Director
Independent
Director/Chairman
of the Corporate
Governance,
Nomination
and Remuneration
Committee
37/37
10/10
27/27
37/37
10/10
27/27
Nikolay Abramov
(from 13 May 2020)
Non-Executive
Director
25/37
9/10
16/27
Sergey Batekhin
(from 13 May 2020)
Non-Executive
Director/
Chairman
of the Budget
Committee
25/37
9/10
16/27
Andrei Bougrov
(until 13 May 2020)
Executive
Director
Stalbek Mishakov
(until 13 May 2020)
Non-Executive
Director
12/37
1/10
11/27
12/37
1/10
11/27
—
2/8
—
6/8
6/8
—
—
3/4
—
—
—
3/4
—
1/4
9/9
—
9/9
—
4/9
—
—
—
9/13
13/13
—
9/13
—
4/13
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.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 INDUCTION OF NEW
MEMBERS OF THE BOARD
OF DIRECTORS
by inviting Directors to fill in an online
questionnaire following the schedule
approved by the Board of Directors.
Nornickel has in place
the 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,
and the Corporate Secretary ensures
that new directors get acquainted with
the requirements of Nornickel’s current
internal documents. Board members are
informed about their rights and duties,
including the requirement to notify
the Company on changes in their status.
Company employees attend the insider
information management training course
each year. The Company arranges
regular off-site sessions for members
of the Board of Director to make site visits
to production facilities and meet with
heads of operating units. In September
2020, an off-site session was arranged
for several Board members to visit Kola
MMC. Due to the COVID-19 pandemic,
no other off-site events were held but
regular video calls made up for cancelled
visits. In 2021, members of the Board
of Directors plan a number of site visits
to Nornickel’s production facilities as
soon as the situation allows.
PERFORMANCE
EVALUATION OF THE BOARD
OF DIRECTORS
As recommended by the Corporate
Governance Code, the Corporate
Governance, Nomination
and Remuneration Committee
of the Board of Directors initiated
the development of the Performance
Evaluation Policy for Board of Directors,
engaging independent consultants
and incorporating global best practice
in corporate governance. In line with
the Policy, since 2014, Nornickel has run
annual internal evaluation (self-evaluation)
of the Board of Directors’ performance
Based on the evaluation results,
the Corporate Governance, Nomination
and Remuneration Committee prepares
a statement (report) on the Board
of Directors’ performance in the reporting
year and makes improvement
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.
The recommendations are communicated
to all stakeholders.
In line with the recommendations
given by the Corporate Governance,
Nomination and Remuneration Committee
following the 2019 performance
evaluation, in 2020, the Board
of Directors and the Company’s
management focused on improving
the performance of the functions with
scores below average. Specifically,
in 2020, the Internal Dynamics
indicator was improved compared
to 2019 as a result of more efficient
interaction between major shareholders,
the management and key stakeholders
achieved by holding meetings with
institutional investors, preparing interim
reports, informing the investment
community on latest operating
and financial results, and disclosing key
aspects of the Company’s development
with a particular focus on sustainability
and environment. The improvement
in the Involvement in the Company’s
Development Strategy indicator in 2020
was driven by efficient interaction
between the marketing committee
and members of the Board of Directors
supported by providing regular
updates to the Board of Directors
on the Company’s sales performance.
The Strategy Committee reviewed
matters related to the market situation,
the development status of the sales
strategy and sales of non-key metals, as
well as major investments. The positive
dynamics in the performance evaluation
of the Corporate Governance,
Nomination and Remuneration
Committee resulted from efficient
interaction with other committees
and the Company’s management
to consider stakeholder opinions
and interests in decision making. During
the year, the Corporate Governance,
Nomination and Remuneration
Committee continued reviewing human
capital development and staff motivation
matters. The Committee annually reviews
the implementation status of the Policy
of Non-Monetary Incentives for Nornickel
Employees (including the Our
Home and My Home programmes),
remuneration of key employees
of the Company, members of the Board
of Directors and Audit Commission.
The internal performance evaluation
of the Board of Directors in 2020
was carried out by the Corporate
Governance, Nomination
and Remuneration Committee in line
with the resolution of the Board
of Directors dated 4 February 2021.
Following the approved schedule,
Directors were surveyed between 8
and 25 February 2021 in accordance
with the current Performance Evaluation
Policy for the Board of Directors. All 13
members of the Board of Directors took
part in the survey.
The Corporate Governance, Nomination
and Remuneration Committee
analysed the results of the Board
of Directors’ performance self-evaluation
and concluded the following:
◾ The current composition of the Board
of Directors is well-balanced in terms
of directors’ qualifications, experience,
and business skills. The qualitative
and quantitative composition
of the Board of Directors meets
the Company’s needs and shareholder
interests
◾ The composition of the Board
committees is aligned with
the Company’s goals and objectives;
there is no need to set up additional
Board committees
◾ The Chairman of the Board
of Directors organises the Board
of Directors’ activities in the most
efficient way, ensures its
communication with other bodies
of the Company, and facilitates
the best performance of assigned
duties
200 201
Governance, Nomination
and Remuneration Committee in its
work in 2021.
In line with corporate governance best
practice, the Board of Directors will
continue performing an independent
expert to evaluate its performance
at least once every three years.
The next external evaluation will cover
the Board’s performance in 2021,
as the last one covered its 2018
performance (for more details, please
see the 2018 Annual Report).
◾ Expand the practice of reviewing
human capital development and staff
motivation matters at meeting
of the Corporate Governance,
Nomination and Remuneration
Committee
At its meeting on 9 April 2021,
the Board of Directors reviewed
the Report on the Internal Performance
Evaluation of the Board of Directors
in 2020 and the recommendations
of the Corporate Governance,
Nomination and Remuneration
Committee, and acknowledged
that the Board of Directors and its
committees, as well as the Board
Chairman and the Corporate Secretary
discharged their duties effectively.
The Board of Directors will incorporate
the recommendations of the Corporate
The Corporate Governance,
Nomination and Remuneration
Committee used the self-evaluation
results to develop recommendations
to the Board of Directors for further
improvement:
◾ Maintain the practice of regularly
informing the Board of Directors
about key trends and problems
in the markets in which the Company
operates
◾ Continue reviewing matters
relating to implementation of major
investment projects
◾ Hold regular meetings between
Board members and the President
of the Company, informal meetings
between Board members and senior
management
◾ For the Company’s management
and the Corporate Governance,
Nomination and Remuneration
Committee – assess the need
to develop and apply new tools
to analyse the existing corporate
governance framework
BIOGRAPHICAL DETAILS OF BOARD MEMBERS1
Biographical details of previous members of the Board of Directors are available in the 2019 Annual Report.
Born in: 1962
Nationality: UK
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
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
2019–present: non-executive Chairman of the Board of Directors of Ninety One
plc and Ninety One Ltd
2017–present: member of the Board of Directors of Amulet Diamond Corp.
2017–2020: 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: non-executive director at Julius Bаеr Group Ltd
Gareth Peter Penny
Chairman of the Board
of Directors since 2013
(Independent Director), member
of the Strategy Committee
1
Positions are indicated as at the end of 2019.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1946
Nationality: Russian Federation
Shareholding: 0.000667%
Made no transactions with shares in MMC Norilsk Nickel in the reporting year
Education:
Degree in Chemical Technology of Solid Fuel, Donetsk National Technical
University
Experience in the last five years
2020–present: team leader at JSC RUSAL Management
2017–present: member of the Board of Directors of Seligdar
2005–2019: CEO of Interregional Сentre for Energy Saving Technologies
Born in: 1965
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
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, PhD in Economics, Moscow International Higher
School of Business MIRBIS
Speaks French, German, English and Italian
Experience in the last five years
2020–present: Сhairman of the Supervisory Board of the Digital Capital
2020–present: member of the Board of Trustees of the Vladimir Potanin Foundation
2020–present: CEO, Chairman of the Management Board of Interros Holding
Company
2019–present: member of the Board of Directors of Jokerit Hockey Club Oy
2019–present: 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
2013–2020 – member of the Management Board (2013–2020), Vice President
(2015–2016), Senior Vice President – Head of Sales, Commerce and Logistics (2016–
2018), Senior Vice President – Head of Sales, Procurement and Innovation (2018–
2020) at MMC Norilsk Nickel
Nikolay Abramov
Member of the Board
of Directors since 2020 (Non-
Executive Director), Member
of the Strategy Committee
Sergey Batekhin
Deputy Chairman of the Board
of Directors since 2020 (Non-
Executive Director)
202 203
Born in: 1962
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
Education
Degree in Law, Moscow Higher School of Militia of the Ministry of Internal Affairs
of the USSR
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
2016–2018: Director at Olderfrey Holdings Limited
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
Born in: 1977
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
Education
Degree in International Economic Relations, Moscow State Institute of International
Relations (MGIMO University)
Experience in the last five years
2020: member of the Management Board, Senior Vice President – Head
of Commerce, Business Development, Investor and Public Relations at MMC Norilsk
Nickel
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 NPO Petrovax Pharm and Hoym
Market (before – 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 (2018–2020)
at Interros Holding Company
Sergey Barbashev
Member of the Board of Directors
since 2011 (Executive Director)
Alexey Bashkirov
Member of the Board
of Directors since 2013 (Non-
Executive Director)
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1971
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
Education
Degree in Engineering, Mendeleev University of Chemical Technology of Russia
Degree in Banking and Insurance, Finance Academy under the Government
of the Russian Federation
EMBA, Warwick Business School
Experience in the last five years
2020–present: President of Invest AG
2014–2016: member of the Board of Directors of International Financial Club Bank
2011–2020: President of CIS Investment Advisers
2017–2007: member of the Board of Directors of Dallesprom
Born in: 1969
Nationality: Ukraine
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
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
2013–2016: consulting specialist, business management consultant
Sergey Bratukhin
Chairman of the Board
of Directors since 2013
(Independent Director), member
of the Corporate Governance,
Nomination and Remuneration
Committee, member
of the Strategy Committee,
member of the Budget
Committee, member of the Audit
and Sustainable Development
Committee
Sergey Volk
Member of the Board of Directors
since 2019 (Independent Director),
member of the Corporate
Governance, Nomination
and Remuneration Committee
of the Board of Directors
204 205
Born in: 1976
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
Education
Master in Law, Peoples’ Friendship University of Russia (RUDN)
Experience in the last five years
2020–present: member of the Board of Trustees of the Vladimir Potanin Foundation
2015–present: First Vice President – Head of Corporate Governance, Asset
Management and Legal Affairs at MMC Norilsk Nickel
Marianna Zakharova
Member of the Board
of Directors since 2010
(Executive Director), Member
of the Management Board since
2016
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: UK
Education
Master in Politics, Philosophy and Economics (Hons), University of Oxford (UK)
Fellow of the Institute of Chartered Accountants in England and Wales
Experience in the last five years
2020–present: member of the Board of Directors of the Royal Welsh College of Music
& Drama
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
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1971
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
Education
Degree in Accounting and Business Analysis, P. G. Demidov Yaroslavl State
University
Experience in the last five years
2020–present: Deputy CEO of RUSAL
2019–2020: 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
2013–2018: First Deputy Chairman of the Management Board of Sberbank
Born in: 1975
Nationality: Russian Federation
Education
Degree in International Economics, Far Eastern Federal University
Experience in the last five years
2020–present: Executive Director, deputy CEO – COO of En+ Holding (2015–
2020: Director)
2018–present: director, member of Board of Directors of UC RUSAL, IPJSC (until
25 September 2020 – United Company RUSAL Plc)
2018–2020: executive director at En+ Management
2014–2018: CEO of EuroSibEnergo
2011–present: director at YES Energo Limited
Maxim Poletaev
Member of the Board
of Directors since 2019 (Non-
Executive Director), Chairman
of the Strategy Committee
of the Board of Directors, member
of the Budget Committee
of the Board of Directors
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,
member of the Budget
Committee of the Board
of Directors
206 207
Born in: 1958
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
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
Experience in the last five years
2020–present: leading researcher at the Department of Physical Geography
and Environmental Management Problems of the Institute of Geography, Russian
Academy of Sciences
2020–present: member of the Board of Directors of UC RUSAL, IPJSC (until 25
September 2020 – United Company RUSAL Plc)
2007–2019: director for Conservation Policy at the World Wide Fund for Nature
1993–present: member of the Board of the Biodiversity Conservation Centre
charitable foundation
Born in: 1966
Nationality: UK
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them
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
Limited
2016: non-executive Chairman of the Board of Directors of Sierra Rutile
Limited
2014–2018: non-executive member of the Board of Directors of GB Minerals
Ltd
2013–present: head of Highcross Resources Ltd
Evgeny Shvarts
Member of the Board
of Directors since 2019
(Independent Director), member
of the Strategy Committee
of the Board of Directors
Robert Edwards
Member of the Board
of Directors since 2013
(Independent Director),
Chairman of the Corporate
Governance, Nomination
and Remuneration Committee,
member of the Audit
and Sustainable Development
Committee
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 BOARD
COMMITTEES
MEMBERS OF THE AUDIT AND SUSTAINABLE DEVELOPMENT COMMITTEE
Committee members before the Annual
General Meeting of Shareholders
(13 May 2020)
Committee members after the Annual
General Meeting of Shareholders
(13 May 2020)
Roger Munnings
(Chairman, Independent Director)
Roger Munnings
(Chairman, Independent Director)
Alexey Bashkirov
Sergey Bratukhin
(Independent Director)
Vyacheslav Solomin
Robert Edwards
(Independent Director)
Vyacheslav Solomin
Sergey Bratukhin
(Independent Director)
Sergey Batekhin
Robert Edwards
(Independent Director)
Members of the Audit and Sustainable
Development Committee are appointed
by the Board of Directors. In accordance
with the Terms of Reference of the Audit
and Sustainable Development
Committee of the Board of Directors,
the Committee 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 2020, the Committee held nine
meetings, including six in person,
and three in absentia.
The Committee discharges its
responsibilities by overseeing:
◾ financial reporting
◾ risk management and internal controls
◾ external and internal audit
◾ prevention of wrongdoing by Nornickel
employees and third parties
◾ HSE 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.
AUDIT AND SUSTAINABLE
DEVELOPMENT COMMITTEE
Committees established by Nornickel’s
Board of Directors are responsible
for preliminary review of critical
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:
◾ Strategy Committee (five members,
including two independent directors
(40%) and three non-executive
directors)
◾ Audit and Sustainable Development
Committee (five members, including
three independent directors (60%)
and two non-executive directors)
◾ Budget Committee (five members,
including two independent directors
(40%) and three non-executive
directors)
◾ Corporate Governance, Nomination
and Remuneration Committee (five
members, including four independent
directors (80%) and one non-executive
director)
SHARE OF INDEPENDENT
DIRECTORS ON THE BOARD
COMMITTEES (%)
45
55
Independent directors
Non-executive directors
208 209
During 2020, 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 statements, as
well as on HSE matters, and approval
of the Company’s auditors.
The Committee also reviewed the results
of audit reports by the Internal Audit
Department and Internal Control
Department and considered them when
reviewing the 2019 Sustainability Report,
report by Nornickel’s management
on COVID-related spending, Report
on Improvements to Procurement,
and Corporate Risk Appetite Statement
for 2020.
In 2020, the Audit and Sustainable
Development Committee of the Board
of Directors:
◾ 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.
STRATEGY COMMITTEE
Members of the Committee are appointed
by the Board of Directors. In accordance
with the Terms of Reference
of the Strategy Committee of the Board
of Directors, the Committee 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.
MEMBERS OF THE STRATEGY COMMITTEE
Committee members before the Annual
General Meeting of Shareholders
(13 May 2020)
Committee members after the Annual
General Meeting of Shareholders
(13 May 2020)
Maxim Poletaev
(Chairman)
Alexey Bashkirov
Sergey Bratukhin
(Independent Director)
Evgeny Shvarts
(Independent Director)
Gareth Peter Penny
(Independent Director)
Maxim Poletaev
(Chairman)
Sergey Batekhin
Sergey Bratukhin
(Independent Director)
Nikolay Abramov
Gareth Peter Penny
(Independent Director)
projects (including Bystrinsky GOK,
3rd Stage of Talnakh Concentrator
Upgrade, the South Cluster,
and the Sulphur Programme),
and prepared reports on the Company’s
operational performance, Report
on the Comprehensive Insurance
Programme (including a review
of property insurance quality), Progress
Report on the IT Programme, including
progress on the ERP and Technology
Breakthrough programmes, Report
on the Performance of Global Palladium
Fund L.P. and a consolidated progress
report on the Company’s investment
programme, as well as investment
plans. The Committee also considered
the progress updates on the Company’s
Fuel and Energy Complex Development
Strategy, Sales Strategy, and exploration
strategy. To inform the Board of Directors
on developments in metals markets
and on sales-related risks, the Committee
reviewed the impact of COVID-19
on metals markets and Nornickel’s sales.
In accordance with its Terms
of Reference, the current Strategy
Committee is made up of five directors,
two of whom are independent directors
(i.e. 40% of the Committee members
are independent directors). In 2020,
the Committee held seven meetings
in person and one in absentia.
The Strategy Committee assists the Board
of Directors by previewing matters related
to:
◾ building a sustainability strategy
◾ investment planning and structural
changes
◾ engagement with capital markets
and government relations.
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 reporting year, the Strategy
Committee made recommendations
to the Board of Directors, reviewed
the progress and status updates
on Nornickel’s major investment
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 BUDGET COMMITTEE
MEMBERS OF THE BUDGET COMMITTEE
Members of the Committee are appointed
by the Board of Directors. In accordance
with the Terms of Reference
of the Budget Committee of the Board
of Directors, the Committee 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,
two of whom are independent directors
(i.e. 40% of the Committee members are
independent directors).
In 2020, 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, and reviewed
the Company’s financial performance.
The Budget Committee also approved
and recommended that the Board
of Directors approve Nornickel’s 2021
budget.
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 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.
In accordance with its Terms of Reference,
the current Budget 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).
Committee members before the Annual
General Meeting of Shareholders
(13 May 2020)
Committee members after the Annual
General Meeting of Shareholders
(13 May 2020)
Alexey Bashkirov (Chairman)
Sergey Batekhin (Chairman)
Sergey Bratukhin (Independent Director)
Sergey Bratukhin (Independent Director)
Sergey Volk (Independent Director)
Maxim Poletaev
Roger Munnings (Independent Director)
Roger Munnings (Independent Director)
Stalbek Mishakov
Vyacheslav Solomin
MEMBERS OF THE CORPORATE GOVERNANCE, NOMINATION
AND REMUNERATION COMMITTEE
Committee members before
the Annual General Meeting
of Shareholders (13 May 2020)
Committee members after the Annual
General Meeting of Shareholders
(13 May 2020)
Robert Edwards (Chairman,
Independent Director)
Robert Edwards (Chairman, Independent
Director)
Alexey Bashkirov
Stalbek Mishakov
Sergey Batekhin
Sergey Volk (Independent Director)
Sergey Bratukhin (Independent Director) Sergey Bratukhin (Independent Director)
Maxim Poletaev (Independent Director)
Evgeny Shvarts (Independent Director)
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, evaluating
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 the reporting year, the Committee held
13 meetings, including 10 in absentia,
and 3 in person.
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 evaluation
of the Board of Directors’ performance
in 2019. The Committee reviewed
the updates on the Our Home and My
Home programmes, Corporate Social
Subsidised Loan Programme, Nornickel’s
Charitable Policy, and considered
the approval of a number of the Company’s
internal documents. The Committee
also considered the annual evaluation
of the Board of Directors’ performance
in 2019, 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.
Several meetings of the Corporate
Governance, Nomination and Remuneration
Committee were dedicated to reviewing
matters relating to remuneration
of Nornickel’s key employees.
210 211
PRESIDENT AND MANAGEMENT
BOARD
The President and the Management Board
are Nornickel’s executive bodies in charge
of day-to-day operations. They 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.
One of the Company’s major challenges
in 2020 was the diesel fuel spill at CHPP-3
in Norilsk. Vladimir Potanin, the Company’s
President, and Sergey Dyachenko,
First Vice President – Chief Operating
Officer, took an active part in eliminating
the consequences of the incident.
From the very beginning, regardless
of the causes of the incident, the Company
took responsibility for the full clean-up.
The Company’s management is aware that
new climate change risks are emerging
and that Nornickel should improve its risk
management in order to mitigate them
more effectively.
Nornickel’s President initiated
a comprehensive review of environmental
risk management and the introduction
of a number of new corporate governance
instruments, including a Risk Management
Committee chaired by him. In terms
of physical risks, the Company’s
management is taking measures
to upgrade the permafrost monitoring
service and designs a foundations
monitoring system. The monitoring
project includes satellite imaging,
monitoring of supporting piles and soil
temperature by means of geological
drilling and installation of strain gauges
and temperature sensors, as well
as upgrading the Polar Division’s
Diagnostic Centre and the permafrost
laboratory. The Company remains firmly
committed to do all that is necessary
to minimise the risks of environmental
impact. The Company also reiterates its
commitment to fully rehabilitate the area
impacted by the diesel fuel spill incident.
PRESIDENT
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).
MANAGEMENT BOARD
The Management Board is
a collective 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.
The Management Board had 12
members at the start of 2020, according
to the composition approved by the Board
of Directors on 12 July 2019. During
the reporting year, the composition
of the Company’s Management Board
changed three times:
◾ On 7 April 2020, the Board of Directors
resolved to terminate the office
of Sergey Batekhin and Larisa
Zelkova and to institute a 10-member
Management Board as of 8 April 2020
◾ On 15 June 2020, the Board of Directors
resolved to terminate the office
of Vladislav Gasumyanov and elected
Alexey Bashkirov to the Management
Board as of 16 June 2020
◾ On 13 August 2020, the Board
of Directors resolved to terminate
the office of Alexey Bashkirov
and elected Larisa Zelkova
to the Management Board as of 14
August 2020
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Biographical details of previous members
of the Management Board are available
in the 2019 Annual Report.
In 2020, the Management Board held 23
meetings, including 22 in absentia and 1
in the form of joint attendance.
During the reporting period,
the Management Board resolved
to set up divisions and revise the limits
of independent decision-making
by the CEOs of branches and subsidiaries
within the divisions, as well as the powers
of the Company’s investment committee
and its subcommittees. In 2020,
the Management Board passed
resolutions regarding branch directors,
reviewed the Company’s capital-raising
and guarantee transactions, and approved
the Group’s Tax Strategy Policy.
ATTENDANCE AT MEETINGS IN 2020
Name
Vladimir Potanin
Sergey Barbashev
Sergey Batekhin1 (until 7 April 2020)
Andrei Bougrov
Alexey Bashkirov3.5 (until 13 August
2020)
Vladislav Gasumyanov2 (until 15 June
2020)
Sergey Dubovitsky
Sergey Dyachenko
Marianna Zakharova
Larisa Zelkova1.4
Elena Savitskaya
Sergey Malyshev
Nina Plastinina
Tenure on the Management
Board
Meetings attended/total number of meetings
8
2
8
8
1
7
2
8
5
8
7
7
7
23/23
23/23
8/23
23/23
2/23
12/23
23/23
23/23
23/23
16/23
23/23
23/23
23/23
NUMBER OF MANAGEMENT BOARD
MEETENGS
TENURE ON THE MANAGEMENT
BOARD (%)
MANAGEMENT BOARD
COMPOSITION BY GENDER (%)
41
51
51
50
1 | 22
2020
22
2019
32
2018
In person
In absentia
Number of matters reviewed
60
0–2 years
3–7 years
8 years and longer
20
20
40
Male
Female
60
BIOGRAPHICAL DETAILS OF MEMBERS OF THE MANAGEMENT BOARD1
212 213
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
In the reporting year, held no
shares in MMC Norilsk Nickel
and made no transactions with
them.
Education
Degree in International Economics, Moscow State Institute of International Relations
(MGIMO University)
Experience in the last five years
2020 - present: - Chairman of the Board of the Vladimir Potanin Foundation;
2020–present: member of the Board of Trustees of the ROZA Club for Sport
Development and Support
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 Fund for the Conservation
and Development of the Solovetsky Archipelago
2017–present: Chairman of the Supervisory Board of the Norilsk Development Agency
2016–present: member of the Board of the Endowment Fund for Education
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
2014–2019: Chairman of the Board of Trustees of the ROZA Club for Sport
Development and Support
2012–present: CEO (2012–2015), President (2015–present), 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
all-Russian non-governmental organisation
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
2008–2020: 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, member
of the Board of Trustees, member of the Management Board of the Graduate
School of Management at Saint Petersburg State University, member of the Bureau
of the Management Board of the Russian Union of Industrialists and Entrepreneurs
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
2
3
4
5
Left the Management Board on 7 April 2020 as per the Board of Directors’ resolution.
Left the Management Board on 15 June 2020 as per the Board of Directors’ resolution.
Joined the Management Board on 16 June 2020 as per the Board of Directors’ resolution.
Joined the Management Board on 14 August 2020 as per the Board of Directors’ resolution.
Left the Management Board on 13 August 2020 as per the Board of Directors’ resolution.
1
Positions are indicated as at the end of 2019.
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1962
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them.
Education
Degree in Law, Moscow Higher School of Militia of the Ministry of Internal Affairs
of the USSR
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 the Endowment Fund for Education
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
Born in: 1965
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
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, PhD in Economics, Moscow International Higher
School of Business MIRBIS
Speaks French, German, English and Italian
Experience in the last five years
2020–present: Сhairman of the Supervisory Board of the Digital Capital
2020–present: member of the Board of Trustees of the Vladimir Potanin Foundation
2020–present: CEO, Chairman of the Management Board of Interros Holding
Company
2019–present: member of the Board of Directors of Jokerit Hockey Club Oy
2019–present: 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
2013–2020 – member of the Management Board (2013–2020), Vice President
(2015–2016), Senior Vice President – Head of Sales, Commerce and Logistics (2016–
2018), Senior Vice President – Head of Sales, Procurement and Innovation (2018–
2020) at MMC Norilsk Nickel
Sergey Barbashev
Member of the Management
Board since 2018, First Vice
President – Head of Corporate
Security
Sergey Batekhin
Deputy Chairman of the Board
of Directors since 2020 (Non-
Executive Director)
214 215
Experience in the last five years
2020 - present - member of the RSPP Committee on climate policy and carbon
regulation
2020 - present - member of the Expert Council for Sustainable Development
under the Ministry of Economic Development of Russia
2020–present: Chairman of the Expert Group on Corporate Governance,
Special Administrative Regions, Bankruptcy Procedures and Appraisal Activity
at the Russian Ministry of Economic Development
2018–present: member of the Advisory Council of the Russo-British Chamber
of Commerce
2018–2020: 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 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 (2016–2020), Deputy Chairman of the Board of Directors (2013–2020),
Senior Vice President for Sustainable Development (2020-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: Vice President of Interros Holding Company
2006–present: member of the Management Board, 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
Born in: 1972
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them.
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)
Andrei Bougrov
Member of the Management
Board since 2013, Senior Vice
President for Sustainable
Development
Born in: 1952
Nationality: Russian Federation
In the reporting year, held no
shares in MMC Norilsk Nickel
and made no transactions with
them.
Education
Degree in International Economic
Relations, PhD in Economics,
Moscow State Institute
of International Relations (MGIMO
University)
Elena Savitskaya
Member of the Management Board
since 2014, Vice President – Chief
of Staff
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1978
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them.
Education
Degree in International Information, Moscow State Institute of International Relations
(MGIMO University)
Master of Business Administration, INSEAD Business School
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 (2019–2020), Senior Vice President – Head of Strategy
and Strategic Projects, Logistics and Procurement (2020–present) at MMC
Norilsk Nickel
Born in: 1962
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them.
Education
Degree in Mining Engineering, Plekhanov Leningrad State Mining Institute
Master, University of Pretoria (South Africa)
Experience in the last five years
2019–present: member of the Board of Trustees of the North Caucasian Institute
of Mining and Metallurgy
2017–2021: member of the boards 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
2016–present: member of the Supreme Mining Council of the Russian Mining
Operators non-profit partnership
2013–2021: First Deputy CEO – Chief Operating Officer (2013–2015), First Vice
President – Chief Operating Officer (2015–2021) at MMC Norilsk Nickel
Sergey Dubovitsky
Member of the Management
Board since 2018, Senior Vice
President – Head of Strategy
and Strategic Projects, Logistics
and Procurement
Sergey Dyachenko
Member of the Management
Board since 2013, First Vice
President – Chief Operating
Officer - until 1 March, 2021
216 217
Born in: 1976
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them.
Education
Master in Law, Peoples’ Friendship University of Russia (RUDN)
Experience in the last five years
2020–present: member of the Board of Trustees of the Vladimir Potanin Foundation
2015–present: First Vice President – Head of Corporate Governance, Asset
Management and Legal Affairs at MMC Norilsk Nickel
Marianna Zakharova
Member of the Management
Board since 2016, First
Vice President – Head
of Corporate Governance, Asset
Management and Legal Affairs
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
In the reporting year, held no
shares in MMC Norilsk Nickel
and made no transactions with
them.
Education
Degree in Journalism, Lomonosov
Moscow State University
Experience in the last five years
Experience in the last five years
2020–present: Chairman of the Management Board of the Second School Centre
for community initiatives in the Pechenegsky District
2020–present: member of the council of the endowment fund for the replenishment
of the Tretyakov Gallery’s collection at the State Tretyakov Gallery Foundation
2020–present: member of the Management Board of the Monchegorsk Development Agency
2019–present: member of the councils of 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, Chairwoman of the Management Board
of the Norilsk Development Agency
2016–present: member of the Board of Trustees of the Endowment Fund for Education
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 (2013–2020, 2020–present), 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 (2016–2020, 2020–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
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Born in: 1969
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no
transactions with them.
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 State University of Russia
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
Born in: 1961
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them.
Education
Degree in Mechanical Engineering, Moscow Chemical Machine Building Institute
Post-graduate degree in Economics and Production Management, Bauman
Moscow State Technical University
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
Sergey Malyshev
ember of the Management Board
since 2013, Senior Vice President
– Chief Financial Officer
Nina Plastinina
Member of the Management
Board since 2013, Vice President
– Head of Internal Control
and Risk Management
218 219
CORPORATE SECRETARY
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 internal
documents, and to monitor such compliance.
According to the Company’s 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.
The Corporate Secretary reports
administratively to the President and is
accountable to 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.
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 preview 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.
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 internal
documents
Born in: 1975
Nationality: Russian Federation
In the reporting year, held no shares in MMC Norilsk Nickel and made no transactions
with them
Education:
Dobrolyubov Linguistics University of Nizhny Novgorod
Academy of National Economy under the Government of the Russian Federation
Experience in the last five years:
2017–present — Corporate Secretary of MMC Norilsk Nickel
(2011–2017: Company Secretary)
Pavel Platov
Corporate Secretary since 2011
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 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 2020 totalled RUB 6.4 billion
(USD 89 million), including salaries,
bonuses, commissions, benefits,
and reimbursed expenses).1.The Board
of Directors’ annual remuneration is
set out in the Remuneration Policy
for Members of the Board of Directors.
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. If the Policy
needs revision, the relevant changes are
submitted to Nornickel’s General Meeting
of Shareholders for approval.
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 million.
The Chairman of the Board of Directors is
not entitled to any additional remuneration
for serving on Board committees.
DIRECTORS’ REMUNERATION
By resolution of the General
Meeting of Shareholders, members
of the Board of Directors are
remunerated for their service
on the Board of Directors
and reimbursed for expenses
incurred by them in performing
their duties as Board members.
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.
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 thousand for Board
membership
◾ Additional remuneration:
– of USD 50 thousand
for membership on a Board
committee
– of USD 150 thousand 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
1
The amount of remuneration paid does not include the remuneration accrued but not yet paid as of 31 December 2020, as well as insurance premiums and voluntary health
insurance (VHI) contributions. Adding the amounts above, remuneration of members of Nornickel’s governance bodies for 2020 as per the 2020 consolidated IFRS financial
statements totalled RUB 5.6 bn (USD 78 mln).
220 221
share-based payments), share options
(option agreements), or other non-cash
rewards or benefits.
DIRECTORS’ REMUNERATION IN 2020
Type
Amount
RUB mln
USD mln
Remuneration for serving on the Board of Directors
292
4.05
REMUNERATION
OF EXECUTIVE DIRECTORS
Salary
Bonuses
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.
Commissions
Benefits
Reimbursement
Other
Total
MANAGEMENT BOARD’S REMUNERATION
0
0
0
0
0.7
0
293
0
0
0
0
0.01
0
4.1
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
key performance indicators, 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. In 2021,
senior management’s KPIs will include
the Zero Environmental Incidents
indicator with a weight of 20% (of team
KPI) team) to ensure a clear link between
the implementation of the Company’s
strategic priorities and the level
of remuneration.
REMUNIRATION OF SENIOR MANAGEMENT
FIXED COMPONENT
BONUS
Financial metrics
◾ EBITDA (20%)
◾ Per unit costs (up to 5%)
Non-financial metrics
◾ Work-related injury rate (5–10%)
◾ Labour productivity (2.5%)
MANAGEMENT BOARD’S REMUNERATION IN 2020
Type
Amount
Remuneration for serving
on the Management Board
Salary
Bonuses
Commissions
Benefits
Reimbursement
Other
Total
RUB mln
2
3,686
2,467
0
0
0
0
6,155
USD mln
0.03
51
34
0
0
0
0
85.03
NornickelAnnual report | 2020CORPORATE GOVERNANCE6 Nornickel
222 223
CONTROL SYSTEM
CONTROL STRUCTURE
Audit Commission
GENERAL
MEETING OF
SHAREHOLDERS
Independent auditor
BOARD
OF DIRECTORS
PRESIDENT,
CHAIRMAN OF THE
MANAGEMENT
BOARD
Audit
and Sustainable
Development
Committee
Internal Audit
Department
Director
Vice President – Head
of Internal Control
and Risk Management
Internal Audit
Department
Internal Control
and Risk Management
Election
Reporting
Administrative reporting
K
S
I
R
D
N
A
M
E
T
S
Y
S
L
O
R
T
N
O
C
T
N
E
M
E
G
A
N
A
M
7
.
O
N
of Shareholders on 13 May 2020.
Members who are Nornickel employees
are remunerated for performing their
roles under their employment contracts.
In 2020, remuneration of the Audit
Commission totalled RUB 8.1 million
(USD 112 thousand). No bonuses or other
rewards were paid.
AUDIT COMMISSION
The Audit Commission is Nornickel’s
standing internal control body that
monitors its financial and business
operations. 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.
AUDIT COMMISSION’S
PERFORMANCE
to the shareholders as part of materials
for the Annual General Meeting
of Shareholders. A report on the audit
of the Company’s business operations
for 2020 will be presented to the Annual
General Meeting of Shareholders in 2021.
The Annual General Meeting
of Shareholders held on 13 May 2020
re-elected the incumbent members
of 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.
In 2020, the Audit Commission audited
Nornickel’s business operations for 2019,
with the auditors’ report presented
Remuneration payable to members
of the Audit Commission who are not
Nornickel employees was approved
by the Annual General Meeting
MEMBERS OF THE AUDIT COMMISSION
Name
Primary employment and position
Alexey Dzybalov
Analyst, UC RUSAL, IPJSC (until 25 September 2020: United Company RUSAL Plc)
Anna Masalova
Chief Financial Officer, Pizza Restaurants
Georgy Svanidze
Head of the Financial Department, member of the Management Board at Interros Holding Company
Vladimir Shilkov
CEO of AG, CIS Investment Advisers, and Orion Property; Deputy Project Manager at the Financial
Control Service of MMC Norilsk Nickel
Elena Yanevich
CEO of Interpromleasing
Annual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7
224 225
INTERNAL AUDIT
Internal audits are aimed at assisting
the Board of Directors and senior
management 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.
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.
The Internal Audit Department
conducts objective and independent
audits to assess the effectiveness
of the internal control framework
and risk management framework.
Based on the audits, the Department
prepares reports and proposals
for the management on improving internal
controls, and monitors the development
of remedial action plans.
IN 2020, THE DEPARTMENT:
◾ performed 19 audits of production
management, IT asset management,
activities of the Russian division,
and corporate governance processes
◾ performed an annual evaluation
of Nornickel’s corporate risk
management framework and internal
control framework in 2020. The review
concluded that the corporate risk
management framework and internal
control framework remain effective
overall, with some minor improvements
required.
Based on the recommendations issued
during the audits, the management
developed corrective actions
and implemented a total of 322 such
actions in 2020. The actions included
updating regulatory documents,
developing new or amending existing
control procedures, communicating
them to employees, training
employees, identifying and assessing
risks. The Internal Audit Department
continuously monitors the implementation
of initiatives developed by management,
with the resulting insights on types
and number of initiatives regularly
reviewed by the Audit and Sustainable
Development Committee.
DIGITALISATION
OF INTERNAL AUDIT
In 2020, the Internal Audit Department
adopted the SAP Audit Management
information system. The successful
implementation enabled the Company to:
◾ create a tool to automate standard
procedures for planning, auditing,
reporting, making and following up
on recommendations, preparing
analytical and statistical reports
◾ create a single point of access
to the Internal Audit Department’s
data, ensure convenient storage
of documents and monitoring of audits,
increase the transparency of internal
audit activities by introducing a single
workspace
◾ ensure the management of databases
on controls and risks for internal audit.
In 2020, the Department started
preparing for rolling out the SAP
Audit Management system across
internal audit units of the Russian
division and the Company’s branches.
The system’s implementation is planned
for 2021.
The Internal Audit Department focuses
on expanding the use of data analysis
tools in audits. In 2020, in addition to IT
audits, the Internal Audit Department
used digital data processing methods
to audit procurement processes
and transportation services.
INTERNAL CONTROL
The Company has in place an internal
control framework covering key business
processes and all management levels
across the Group. The framework
comprises the following supervisory bodies:
◾ Internal Control and Risk Management,
comprising the Internal Control
Department, Financial Control
Service, Risk Management Service,
and Inspectorate for Monitoring
Technical, Production and Environmental
Risks
◾ Audit Commission
◾ Audit and Sustainable Development
Committee
◾ Internal Audit Department
The Internal Control Department regularly
monitors the reliability of the Company’s
system of accountings of metal-bearing
products, as well as high-risk business
processes – procurement and investment
operations, capital construction
and corporate insurance transactions.
The Department also continuously monitors
compliance with regulatory requirements
to counter the misuse of insider
information and combat money laundering
and the financing of terrorism.
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..
The performance and maturity of internal
control framework elements is evaluated
annually as part of a financial statement
audit and internal control framework
self-evaluation. Reports containing
the internal control framework evaluation
results are reviewed by Nornickel’s
management and the Audit and Sustainable
Development Committee of the Board
of Directors.
CORPORATE TRUST SERVICE
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. 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.).
Reports can be submitted via toll-
free hotlines 8,800,700 1941
and 8,800,700 1945, via e-mail skd@nornik.
ru or the reporting form on Nornickel’s
website.
REPORT STATISTICS
Indicator
Total number of reports
Total number of reports that triggered
investigation
Percentage of corruption reports
2018
961
394
2019
1,181
481
1.5% (6 reports,
including 0
substantiated)
0.2% (1 report, including
1 substantiated)
2020
1,037
451
0% (0 reports)
FOR MORE DETAILS ON REPORT STATISTICS,
PLEASE SEE THE SUSTAINABILITY REPORT.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 The Company regularly informs its
employees on corruption prevention
and combating. 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.
Norilsk Nickel Group provides training
for employees on an ongoing basis,
including anti-corruption induction briefings
for all new hires, regular anti-corruption
distance learning courses, and individual
advice on compliance with anti-corruption
requirements.
Nornickel maintains a Preventing
and Combating Corruption 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.
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 internal
documents. 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. 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
against an employee who reports
a concern about suspected bribery or
corruption, or refuses to 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 key anti-corruption
documents:
◾ Code of Business Ethics of MMC Norilsk
Nickel
◾ Code of Conduct and Ethics
for Members of Board of Directors
◾ 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 January 2020, the Company
submitted its Declaration on Compliance
with the Russian Anti-Corruption Charter
for Business to the Russian Union
of Industrialists and Entrepreneurs, and its
participation in the Charter was extended
until 2021.
226 227
In 2020, Nornickel collaborated with
the Federal Security Service, Ministry
of Internal Affairs and EMERCOM
to conduct a total of 127 trainings, 65
general and 12 tactical and special drills.
The protection of human rights is
reflected in the by-laws of the Corporate
Security Unit (MMC Norilsk Nickel’s Anti-
Embezzlement Regulations, In-House
Investigation Regulations, etc.).
CORPORATE SECURITY
Nornickel’s corporate security
system management is based
on a set of programmes to ensure
economic, corporate, information,
on-site, and transport security, as
well as transparency of procurement
and counterparty selection procedures.
Particular emphasis is placed on supporting
the Company’s socially significant
investment and environmental projects.
The Company continues to cooperate with
the United Nations Interregional Crime
and Justice Research Institute (UNICRI)
and the United Nations Office on Drugs
and Crime (UNODC) in areas including
the implementation of the UN Economic
and Social Council Resolution 2019/23
on combating transnational organised
crime, illicit trafficking in precious metals,
and illegal mineral extraction.
Nornickel’s representatives co-chair
the Security Committee of the International
Platinum Group Metals Association.
The Security Committee guides its
members to ensure security and combat
illicit trafficking in platinum group metals.
The International Platinum Group Metals
Association is the only international industry
association of PGM producers.
The Company cooperates with law
enforcement and supervisory bodies,
sits on public and scientific advisory
councils at the Ministry of Internal Affairs,
Investigative Committee, Transport
Prosecutor’s Office, Federal Security
Service of the Russian Federation,
and interdepartmental working groups.
INFORMATION SECURITY
SHIFT TO WORK FROM
HOME
The COVID-19 pandemic has affected
virtually every industry in Russia
and globally, including information
security. To mitigate potential health
risks for the Company’s employees
and prevent the potential consequences
for operations, Nornickel’s management
decided to shift a significant part
of its personnel to remote work.
Along with providing employees with
the necessary equipment to work from
home, additional measures were taken
to enhance the information security
of corporate resources and infrastructure.
The Company tightened security
requirements and controls for remote
computers and devices used in audio
and video conferencing. Remote work is
monitored on a daily basis, and reminders
and guidelines for users are updated.
IMPLEMENTING
INFORMATION SECURITY
PROGRAMMES
IMPLEMENTATION
OF POLICIES
FOR EMPLOYEES
Despite the pandemic-induced
restrictions, the Company continues
implementing its scheduled measures
and programmes to protect corporate
information systems and automated
process control systems (APCS)
at its Head Office and in the regions
of operation. Nornickel continued
providing project support for its IT
initiatives programme and to introduce
security tools to build the target
information security architecture.
The Company has approved information
security standards and plans to bring
all information systems and APCSs
into compliance with these standards
in the medium term.
The principle information security rules
for employees are summarised in a single
document – Guidelines on Permitted Use
of Information Assets. The information
security procedures which involve
the Company employees include:
◾ identification and classification
of information assets
◾ raising information security awareness
◾ managing access to information assets
◾ managing information security
incidents
◾ assessing IT projects for compliance
with information security requirements.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 TRAINING AND EDUCATION
Employee information security training
and upskilling, along with raising
information security awareness
(beyond dedicated units) are
directly linked to the implementation
of the corporate HR policy. New hires
are requested to take a respective test
and complete an induction briefing.
Nornickel developed and approved
the Procedure for Raising Information
Security Awareness and has in place
annual employee training plans
compiled with account for current
trends, new risks and cyber threats.
All employees of the Company’s Head
Office and facilities located across its
regions of operation undergo training
and knowledge checks. The Company
conducts training courses on the Digital
Academy corporate platform. A total of 47
video conference trainings were held
in 2020, covering 7,000 employees.
SUSPICIOUS ACTIVITY
REPORTING PROCESS
Nornickel improves the corporate
information security system through
regular trainings and drills, including
simulations of phishing attacks and other
illegal schemes to affect the corporate IT
infrastructures. Following the trainings,
instructions and guidelines for employees
are updated, and relevant information
is also included in the quarterly bulletin
forwarded to heads of the Company’s
structural units. All Nornickel’s internal
documents on information security
prompt employees to report suspicious
activities to the corporate Information
Security Incident Response Centre using
available communication channels.
CYBER INCIDENT
RESPONSE SYSTEM
The Company has an Information Security
Incident Response Centre which uses
advanced technical solutions as well
as Russian and global best practices
for managing cyber defence. Processes
and procedures in place to ensure
information security continuity in case
of emergency are tested regularly,
at least once per quarter.
COMPLIANCE
WITH REGULATORY
REQUIREMENTS
In accordance with Federal Law No.
187-FZ dated 26 July 2017 the Group
categorised critical IT infrastructure
facilities ( APCSs) and submitted
the results to the Federal Service
for Technical and Export Control.
Nornickel obtained licences
for information security monitoring
activities, and signed a number of data
sharing agreements with state regulatory
authorities to counteract cyberattacks
on IT resources and infrastructure
of leading Russian industrial corporations.
The Company also improved its
methodology and regulations covering
personal data and trade secret protection,
which are rolled out across its regions
of operation.
The Group consistently implements
the Information Security Management
System across its facilities, covering
operational production management,
procurement of feedstock
and process materials, and control
over the achievement of targets
in production and shipment of finished
products. In 2020, Nadezhda
Metallurgical Plant and Copper Plant
(Nornickel’s Polar Division) implemented
the information security management
systems certified to ISO/IEC 27001:2013.
In the course of the year, Nornickel
engaged BSI (British Standards
Institution), a leading international
standards body, to conduct four audits,
which confirmed the effectiveness
of Nornickel’s efforts and compliance
of its information security management
systems with international standards
and global best practices.
The Company regularly passes external
information security audits for compliance
with the requirements to personal data
and critical information infrastructure
protection, international cyber security
management standards, as well as
testing and security assessments, vetting
inspections to control information security
in maritime and river navigation, etc.
Nornickel’s efforts to develop
and implement advanced cyber
security solutions for industrial assets
have been repeatedly acknowledged
by the professional community
and industry associations.
ENGAGEMENT
OF THE BOARD
OF DIRECTORS AND SENIOR
MANAGEMENT
Nornickel’s Information Security Policy
outlines the respective engagement
boundaries and responsibility
of governance bodies, including the Board
of Directors and the Management Board.
Their responsibilities include setting up
an information security risk management
system, reviewing and approving
the budgets of relevant programmes
and projects.
The Company’s senior management
regularly reports to the Board
of Directors on information security
at meetings of the Audit and Sustainable
Development Committee.
228 229
PARTICIPATION
IN CONFERENCES
AND FORUMS
The Information Security and IT
Infrastructure Department took part
in the 8th international conference
Kaspersky Industrial Cybersecurity
Conference 2020, one of Russia’s
leading dedicated forums, to share their
experience and solutions in industrial
cybersecurity and cyber protection
of technology processes. Nornickel’s
achievements and willingness to share
its solutions as models to be deployed
by Russia’s industrial majors were highly
praised by the professional community.
The Company received a badge of honour
For Leadership, Openness and Responsible
Approach to Protecting Industrial Facilities.
For its contribution to the development
of the Russian Privacy Professionals
Association, the Department won a Russian
Privacy Award in the Expert of the Year
category.
In addition, throughout 2020, employees
of the Information Security and IT
Infrastructure Department spoke at events
such as the international conference
TB Forum (co-organised by the Federal
Service for Technical and Export Control),
the 8th Conference on Information Security
of Automated Control Systems for Critical
Facilities, etc.
INDEPENDENT AUDIT
Competitive bidding to select
an independent auditor for MMC Norilsk
Nickel’s financial statements is carried out
as per the Company’s existing procedure.
The Board’s Audit and Sustainable
Development Committee reviews
the pre-selection results and makes
a recommendation to the Board
of Directors regarding a proposed auditor
to be approved by the Annual General
Meeting of Shareholders of MMC Norilsk
Nickel.
In 2020, the General Meeting
of Shareholders approved JSC KPMG as
the auditor for MMC Norilsk Nickel’s RAS
and IFRS financial statements for 2020.
The fee paid to JSC KPMG for its audit
and non-audit services in 2020 totalled
RUB 305.8 million (USD 4.2 million),
net of VAT, with the share of non-audit
services accounting for 45% of the total
amount.
To avoid conflicts of interest, JSC KPMG
has in place a policy covering different
types of services provided to audited
companies, which complies with
the requirements of the International
Ethics Standards Board for Accountants
(IESBA), 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
Total auditor’s fee
Share of non-audit services
RUB mln,
net of VAT
USD mln,
net of VAT
168.1
137.7
305.8
45%
2.3
1.9
4.2
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 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
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
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
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 31000–2019 Risk
Management. Principles and Guidelines,
and COSO ERM Enterprise Risk
Management – Integrating with Strategy
and Performance.
resumption plan
3. a restoration or retrofit plan
for affected assets.
In 2020, Nornickel improved its risk
management framework as follows:
◾ The President-led Risk Management
Committee was set up under
the Management Board, along with
a number of dedicated function-
level risk management committees.
The roles of the Risk Management
Committee under the Management
Board are focused on improving
and developing the corporate risk
management framework
◾ A project to automate the risk
management system based
on a GRC solution was moved
into the implementation phase.
The solution’s functionality includes
defining key risk indicators
◾ Risk trainings for Group employees
were offered on a regular basis
◾ In order to update the development
roadmap, a self-diagnostic
and an external maturity assessment
were carried out to assess
the compliance of the corporate risk
management framework and risk
management within certain business
areas with global best practices
◾ Quantitative risk assessments
for investment projects were regularly
reviewed at Nornickel’s investment
committees to enable risk-based
decision making
◾ As part of rolling out the approach
implying the use of simulation
modeling for investment project
risk assessment, the aggregate
impact of the risks related to key
investment projects on the Company’s
financial and physical performance
was assessed (the assessment took
into account the opportunities related
to each of the investment projects)
◾ A dedicated inspectorate was set
up within the Internal Control
and Risk Management vertical
to monitor technical and production
risks as well as environmental
risks. It will focus on improving
the processes of identifying, analysing
and assessing technical, production
and environmental risks
◾ A scenario-based assessment
was carried out for investment projects
to assess risk impacts, including
the impact of the COVID-19 spread
◾ A number of tasks were accomplished
as part of developing scoring
assessment methods for certain
categories of technical and production
risks
In line with risk management framework
improvement plans for 2021 and beyond,
the following areas have been prioritised:
◾ Development of a target quantitative
model for assessing equipment
failure risks at Kola MMC, including
the development of an IT system
to monitor buildings and structures
within the Norilsk Division, ensuring
automated risk management
and prevention
◾ Regular self-diagnostic of the risk
management framework’s performance
and its assessment for compliance with
global best practices
◾ Improvement of risk management
practices in strategic and operational
planning
◾ Improvement 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
◾ Development of a methodology
for capturing a range of climate-related
risk factors
◾ Analysis of risks within Nornickel’s
logistics and operations supply chain
◾ Implementation of a project
to automate the risk management
process based on a GRC solution
230 231
RISK MANAGEMENT
SERVICE
Key roles
◾ Develops and updates the risk
management methodology
◾ Prepares report on Nornickel's Top 20
risks (annually)
◾ Prepares report on strategic risks
(annually)
◾ Enhances quantitative risk assessment
using simulation modelling tools
◾ Improves the business continuity
management system
◾ Ensures emloyee development
and training in practical approaches
to risk management
Risk management framework
BOARD OF DIRECTORS
AUDIT AND SUSTAIABLE
DEVELORMENT COMMITTEE
OF THE BOARD OF DIRECTORS
Key roles
◾ Approves the Corporate Risk
Management Policy
◾ Supervises the building of the risk
management system
◾ Prepares the Corporate Appetite
Statement (annually)
◾ Manages strategic risks on an ongoing
basis
◾ Reviews and aproves the risk
management development roadmap
and assesses its implementation status
(annually)
◾ Reviews report on strategic and key
risks (annually/quarterly)
◾ Assesses risk management
performance at Nornickel (annually)
MANAGEMENT BOARD
RISK MANAGEMENT COMMITTEE
UNDER THE MANAGEMENT BOARD
Key roles
◾ Reviews strategic risks and reports
on key risks
◾ Reviews materialised risks and lessons
learned
◾ Reviews risk appetite metrics
◾ Makes decisions related to key risk
management
◾ Reviews business continuity plans
◾ Reviews the strategy and development
plans for the Corporate Risk
Management Framework (CRMF)
and Internal Control System (ICS)
◾ Reviews the perfomance
of dedicatedvrisk management
committees within business verticals
RISK OWNERS
HEADS OF BUSINESS UNITS
Key roles
◾ Day-to-day risk management within
the integrated risk management model
◾ Risk-based decision making
INTERNAL AUDIT
Key roles
◾ Makes independent assessments
of the effectiveness of risk
management, internal control
and corporate governance (annually)
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 Board and the Audit and Sustainable
Development Committee. Nornickel sees
the following groups of risks as its key risks:
aggressive expansion of the Company’s
investment programme, the aging of its
production assets, and the mismatch
between skills supply in the labour market
and the Company’s needs in the context
of advances in new technology
and digitalisation.
NEW EMERGING RISKS
Nornickel’s new emerging risks typically
have external sources. It is hard to identify
these risks and mitigate their negative
impact due to the lack of predictive
information. Management of new emerging
risks is critical to fostering Nornickel’s
long-term sustainability and maintaining
the Company’s competitive edge
in the metals market. Nornickel assesses
new emerging risks and manages them
based on their potential implications while
considering how fast they can materialise,
as well as the Company’s actual capabilities
to prevent and/or curb their impact.
A team of internal risk champions identifies
and monitors new emerging risks,
ensuring the preliminary identification
and assessment of 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 risks are assessed
on a regular basis, including their
reassessment and evaluation of their
criticality to Nornickel, with an emphasis
on preventing risk occurrence
and mitigating potential negative
implications. Controls used by Nornickel
include the implementation of business
continuity plans to manage external
risks that can have a disastrous impact
on Nornickel’s operations and business
processes. These controls increase
Nornickel’s resilience to external shocks.
In 2020, Nornickel completed a project
to improve its approach to managing
strategic risks that could affect its long-
term performance. Trend analysis tools
and questionnaires targeting a wide
range of management-level respondents
were used to identify, assess and prioritise
risks. The results of these efforts
were discussed by the Risk Management
Committee under Nornickel’s Management
INSURANCE
Insurance is an essential tool used
to manage risks while protecting
the property interests of Nornickel and its
shareholders against any unforeseen
losses related to operations, including
due to external effects.
Nornickel has centralised its insurance
function to ensure the consistent
implementation of its uniform insurance
policy and standards. Nornickel
annually approves a comprehensive
programme that defines key parameters
by insurance type, key business area
and 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.
Nornickel’s freight, construction
and installation, aircraft and watercraft
insurance programmes are also based
on the principle of centralisation.
The Group’s entities, directors
and officers carry relevant liability
insurance. Nornickel applies industry best
practice and takes into account insurance
market trends to negotiate the best
insurance and insured risk management
terms.
232 233
CLIMATE RISKS
Repercussions of climate change, including
abnormal weather or lasting changes
in weather patterns, may affect Nornickel’s
operations in the longer run. Physical
consequences of climate change can
include soil thawing, changes in water
levels in water bodies, precipitation
amounts and wind loads, which can have
a material adverse effect on Nornickel’s
operations. As part of its risk management
strategy, Nornickel implements a full
range of measures to monitor and control
these risks, including the introduction
of a system to monitor buildings
and structures in the Norilsk Industrial
District. The measures taken by Nornickel
to mitigate these risks are outlined
in the Key Risks section.
CLIMATE RISK
MANAGEMENT
Climate risk management is part
of the corporate risk management
framework. Nornickel’s governance
bodies review risk information
on a quarterly basis, including on risks
associated with climate change.
Nornickel’s plans for 2021 and beyond
include the implementation of a unit-
and asset-level climate change risk
management strategy. Nornickel
intends to collaborate with the scientific
community to launch a comprehensive
study of factors affecting climate
in the Norilsk Industrial District; to work
out proposals to expand and upgrade
the climate monitoring system
in the Norilsk Industrial District; to identify
key initiatives to mitigate climate change
risks; to improve energy efficiency
and keep CO2 emissions within its stated
GHG emission targets; and to develop
a relevant capex plan and determine
capex project timelines.
The Company also plans to develop a list
of measures to ensure compliance with
TCFD1 standards.
IMPACT OF CLIMATE RISKS
ON PRODUCT PORTFOLIO
Climate-related risks may offer additional
opportunities for Nornickel driven
by the changing structure of demand
for metals required in a future low-
carbon economy. Nornickel has recently
assessed climate change risks based
on the International Energy Agency’s
Sustainable Development Scenario
envisaging the temperature rise in 2100
limited to 1.5 °C. In general, Nornickel
expects a positive impact on its product
portfolio under this scenario, driven
by the development of the electric
vehicle sector: a neutral impact on PGMs
and a positive impact on base metals.
Decarbonisation of the global economy: risk assessment for Nornickel’s metals
2040
Ni
PGMs
Cu
Growth of market share of BEVs
Growth of hybrids
Fuel cells
Growth of renewables/low carbon fuel in power generation
Storage and grid expansion to support grouth of xEVs
Net impact
1
The Task Force on Climate-related Financial Disclosures
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7
234 235
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.
PRICE RISK
Potential decrease in sales revenues due to lower prices for Nornickel metals is 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.
Impact on goals:
high
Source of risk:
external
Year-on-year change in risk:
stable
Impact on Nornickel’s
development goal
and strategy
Enhancing
Nornickel’s leadership
in the nickel
and palladium markets.
Key risk factors
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.
Mitigation
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).
MAP OF NORNICKEL’S MATERIAL RISKS
WITH YEAR-ON-YEAR CHANGE IN 2020
A high-level map of Nornickel’s material
risks reflects global best practices in risk
management. The risk map ranks material
risks by their impact on the Group’s goals
and by source.
In 2020, a technical and production
risk occurrence was recorded –
the destruction of above-ground
emergency diesel fuel storage tank
No. 5 at CHPP-3. Risk assessment
had been carried out at CHPP-3
facilities including storage tank No. 5
on a regular basis. The storage tank
destruction risk had been identified,
with its probability assessed as
low. The risk assessment relied
on a number of documents prepared
by experts (including the conclusions
presented in the industrial safety review
and declaration prepared by an expert
organisation and registered with
the Federal Environmental, Industrial
and Nuclear Supervision Service
(Rostekhnadzor)), as well as NTEK’s
internal regulations on risk management.
An investigation into the incident
suggested that its main causes included
an increase in permafrost temperature
and the fact that some of the piles
were not installed into hard rock, as
required by the design. In addition
to a thorough reassessment
of the risks associated with hazardous
production facilities and an increase
in the scope of the energy infrastructure
upgrades programme, a range
of measures were identified, including
the implementation of a project to create
an IT system for geotechnical and satellite
monitoring of the Company’s facilities
located within the permafrost zone.
RISK MAP
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s
'
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i
e
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n
o
t
c
a
p
m
I
Internal
Source of risk2
Risk increased year-on-year.
Risk decreased year-on-year.
Risk has not changed year-on-year
Risk
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. Work-related injury risk
7. Information security risk
8. Technical and production risk3
9. Power outages at production and social facilities
in the Norilsk Industrial District
10. Compliance risk
11. Social risk
12. Changes in legislation law-enforcement
External
13. Lack of water resources
14. Permafrost thawing
15. Risk of epidemick4
1
2
3
4
Risk an impact of uncertainty on the goals (ISO / GOST Р 31000).
Source of risk: an element which, alone or in combination with other elements, may cause a risk (ISO / GOST Р 31000).
The information on the risk occurrence is disclosed in the Annual Report.
The description of the risk is provided in the Annual Report.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7121053811915141312467
MARKET RISK
TIGHTER ENVIRONMENTAL REGULATIONS
Lower competitiveness of Nornickel products in the market may result in their lower
liquidity, discounts to the market price and a decrease in Nornickel’s income.
Environmental regulations are tightening, including environmental permitting process
and stricter governmental control over environmental compliance.
Impact on goals:
high
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:
stable
236 237
Key risk factors
Impact on Nornickel’s
development goal
and strategy
Mitigation
Stricter market
requirements on product
quality and ESG
compliance.
Competition from
producers of cheaper
nickel.
More aggressive
transport decarbonisation
programmes.
Changes in consumption
patterns for high-tech
products.
Foreign regulators
imposing new foreign
trade restrictions that
impact Nornickel’s
activities (tariff and non-
tariff regulatory
measures).
Enhancing
Nornickel’s leadership
in the nickel and palladium
markets.
To manage this risk, Nornickel:
• cooperates with other market participants to monitor and analyse
changes in market requirements on product quality and ESG
compliance
• promotes global industrial and investment demand for its metals
• monitors the development of transport electrification
• searches for new applications and uses for palladium
• diversifies its metal product sales across industries and geographies
•
• cooperates with industry institutions to maintain access to relevant
improves and diversifies its product range
sales markets for its metals
• cooperates with Russian ministries and agencies to prevent/mitigate
negative impacts of local or international regulation
implements an ESG road map
•
• 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.
Impact on Nornickel’s
development goal
and strategy
Compliance by Nornickel
and Norilsk Nickel
Group entities with
the applicable laws,
regulatory requirements,
corporate standards,
and business codes.
Mitigation
To manage this risk, Nornickel:
• carries out an environmental action plan to reduce emissions
and discharges, as well as to ensure timely waste management
• has in place the Environmental Performance Improvement
Programme for category 1 facilities in the Polar Division. Nornickel’s
Environmental Performance Improvement Programme was approved
by the relevant state interdepartmental commission
• has prepared documentation packages to obtain a single
•
environmental permit for category 1 facilities in the Polar Division
and filed them with the relevant authorities
takes measures to reduce emissions during unfavourable weather
conditions as per the plan agreed with the Ministry of Ecology
and Environmental Management of the Krasnoyarsk Region
• ensures the collection and transfer of baseline data on emissions
across the Polar Division and the Russian division to provide inputs
for summary estimates of emission concentrations for Norilsk as part
of the experiment to use emission allowances run across 12 Russian
cities
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.
•
•
Key risk factors
Domestic and international
focus on environmental
protection
and sustainability.
Extensive changes
in environmental
laws and regulations.
For example,
the environmental
permitting framework
for category 1 facilities
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.
An experiment to use
emission allowances
run across 12 Russian
cities (Federal Law No.
195-FZ dated 26 July
2019), including Norilsk
and Krasnoyarsk in 2020–
2024.
Tighter environmental
control: use of a risk-
based approach
to industrial facility audits,
spot checks during
unfavourable weather
conditions no longer
require authorisation from
prosecuting authorities.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 238 239
FX RISK
INVESTMENT 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..
Risk related to time and budget overruns, and performance targets of Nornickel’s major
investment projects.
Impact on goals:
low
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:
stable
Mitigation
To manage this risk, Nornickel:
• maintains a balanced debt portfolio with USD-denominated
•
borrowings prevailing
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 currencies other than the US dollar.
Impact on Nornickel’s
development goal
and strategy
Maintaining investment-
grade credit ratings.
A debt portfolio with
a well-balanced profile
in terms of maturity,
currency composition,
and sources of financing.
Key risk factors
Increase in Russia’s
balance of payments,
relatively lower imports,
and steadily growing oil
exchange prices.
Country-specific
macroeconomic changes,
sovereign credit rating
upgrade.
Lower volatility
in the financial markets
of Russia and other
emerging markets,
making the rouble more
attractive to investors.
Impact on Nornickel’s
development goal
and strategy
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.
Key risk factors
Changes in forecasts
of ore volumes,
grades and properties
resulting from follow-up
exploration.
Changes in investment
project timelines
(including due
to the pandemic).
Further changes
to budgets of investment
projects.
Amendments
to project performance
targets in the course
of implementation
Mitigation
To manage this risk, Nornickel:
• carries out proactive exploration and updates performance
targets and the mining plan (a long-term production plan) based
on the progress of its major investment projects developing
the mineral resource base
• conducts resource, geomechanical and hydrogeological modelling
• holds external expert audits of geological data
• develops an in-house geological and mining information system
• models mining options in geological and mining information systems
• as part of the project assurance process, conducts internal (cross-
functional) audits of major investment projects at each stage in their
life cycle
improves incentives to drive project delivery and build skills
and capabilities (including staff certification, identification
of improvement areas and provision of tailored training)
improves project delivery standards, develops tools to digitise
technical document management and project controls
•
•
• promotes the use of pilot units across all technically challenging
and unique processing stages.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 WORK-RELATED INJURY RISK
RISK OF EPIDEMICS
Failure to comply with Nornickel’s health and safety (H&S) rules may result in threats to health and life or
temporary suspension of operations, or cause property damage.
Risk related to the spread of infectious diseases and the subsequent
preventive, safety and response measures.
Impact on goals:
high
Source of risk:
internal
Year-on-year change in risk:
stable
Impact on goals:
medium
Source of risk:
external
Change in risk:
increasing
240 241
Impact on Nornickel’s
development goal
and strategy
Health and safety.
Key risk factors
Suboptimal methods
of work organisation.
Disruptions
in technological
processes.
Exposure to hazards.
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
improves the system of stationary gas analysers, provides employees
with portable gas analysers
• carries out preventive and therapeutic interventions and enforces
•
hygiene protocols 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 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
trainings
• holds H&S competitions
• 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.
Key risk factors
Spread of viral infections.
Anti-epidemic restrictive
measures imposed
by federal and regional
authorities.
Impact on Nornickel’s
development goal
and strategy
Social responsibility:
comfort and safety
of people living
in Nornickel’s regions
of operation.
Efficient delivery
of finished products
(metals) in line with
the production
programme.
Timely supply
of products
to consumers.
Mitigation
Nornickel has implemented a range of measures to mitigate the risk
impact, including:
•
100% of salaries maintained, with additional compensation
for employees working on sites and in offices
• work from home for office employees
• personal protective equipment, tests, medical devices, sanitisers, etc.
provided to all sites
• purchases of medicines and medical equipment (including
412 ventilators, 15 mobile and 2 stationary labs, 7 ambulances,
and over 372 thousand tests)
• assistance in expanding local hospital capacity
• support for SMEs
• support for local volunteers who help employees requiring regular
health monitoring
• arrangements for mandatory COVID-19 testing
• establishment of an emergency response team
•
two-week quarantine for employees coming to the Norilsk Industrial
District
increased shifts for shift workers in Chita and Norilsk.
•
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 INFORMATION SECURITY RISK
TECHNICAL AND PRODUCTION 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.
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
to need to compensate damage to third parties and the environment.
Impact on goals:
high
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:
stable
242 243
Impact on Nornickel’s
development goal
and strategy
Mitigation
of the information
security risk and risk
of cyberattacks
on Nornickel’s
information systems
and automated process
control systems.
Key risk factors
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.
Shift to work from home
and hiring remote
employees outside
Nornickel’s regions
of operation
Mitigation
To manage this risk, Nornickel:
• ensures compliance with applicable Russian laws and regulations
with respect to the protection of personal data, insider information,
trade secrets and critical information infrastructure
implements MMC Norilsk Nickel’s Information Security Policy
•
• categorises information assets and makes information security risk
assessments
• embeds and monitors compliance with corporate information security
standards within information systems and automated process control
systems
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 the automated process control system
• 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 Company’s information security management
system
implements measures to ensure safe remote access.
•
Impact on Nornickel’s
development goal
and strategy
Efficient delivery
of finished products
(metals) in line with
the production
programme.
Key risk factors
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.
Mitigation
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
implements an automated system for managing reliability, efficiency,
and production asset risks
• ensures timely replacement of fixed assets to consistently achieve
•
production safety targets
regularly monitors the condition of Nornickel’s buildings
and structures via an information system for conducting geotechnical
surveys
• uses satellite technology to monitor Nornickel’s assets and further
•
•
•
analyse the data
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, assesses and monitors technical
and production risks, implements a programme of organisational
and technical measures to mitigate relevant risks
• develops the technical and production risk management system,
including by engaging independent experts to assess the system’s
performance and completeness of risk 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 chain and make
assessments of related risks.
In 2020, 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.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 POWER OUTAGES
COMPLIANCE RISK
Failure of core equipment at generating facilities and transmission grid facilities may result in power, heat or
water shortages at key production and social facilities in the Norilsk Industrial District.
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.
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:
stable
244 245
Key risk factors
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.
Impact on Nornickel’s
development goal
and strategy
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.
Mitigation
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
• monitors the technical condition of linear facilities, including with
the involvement of external experts
• ensures timely construction and launch of transformer facilities, as
well as timely replacement of transmission towers
• ensures timely retrofits (equipment replacement) of TPP and HPP
power units
• ensures timely upgrades and repairs to trunk gas and condensate
pipelines and gas distribution networks.
Key risk factors
Discrepancies in rules
and regulations.
Considerable powers
and a high degree
of discretion exercised
by supervision agencies
Impact on Nornickel’s
development goal
and strategy
Compliance by Nornickel
and Norilsk Nickel
Group entities with
the applicable laws,
regulations, corporate
standards, and business
codes
Mitigation
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 in 2020:
• Regulations on Claims Management at MMC Norilsk Nickel (new
version)
• Procedure for Payables and Receivables Management at MMC
Norilsk Nickel Nickel (new version)
• Guidelines for Disclosing Performance Results of MMC Norilsk Nickel
in the Unified State Federal Register of Information about Corporate
Developments of Legal Entities (new version)
• MMC Norilsk Nickel’s Internal Control Rules for Preventing, Detecting
and Stopping the Unlawful Use of Insider Information and/or Market
Manipulation
• Regulations on Procedures for Access to Insider Information
of PJSC MMC NORILSK NICKEL, and Rules for Protection of Insider
Information Confidentiality and Control over Compliance with
the Requirements of Laws Related to Combating Insider Information
Unlawful Use and Market Manipulation (new version)
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 SOCIAL RISK
CHANGES IN LEGISLATION AND LAW-ENFORCEMENT PRACTICES
Tensions may escalate among the workforce due to the deterioration of social
and economic conditions in Nornickel’s regions of operation.
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.
Impact on goals:
medium
Source of risk:
mixed
Year-on-year change in risk:
stable
Impact on goals:
medium
Source of risk:
external
Year-on-year change in risk:
stable
246 247
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
To manage this risk, Nornickel:
• strictly adheres to the terms and conditions of collective bargaining
regional and local
authorities to develop
a social infrastructure
that supports a safe
and comfortable living
environment for local
communities
• Facilitating
the employees’
professional
and cultural
development
and building up
talent pools across
Nornickel’s regions
of operation
Implementing
long-term charity
programmes
and projects
•
agreements between the Group entities and their employees
(the Group has signed a total of 23 collective bargaining agreements)
• actively interacts with regional authorities, municipalities and civil
•
•
•
society institutions
fulfils its social obligations under public-private partnership
agreements
implements the World of New Opportunities charity programme
aimed at supporting and promoting regional civil initiatives, including
by indigenous peoples of Taimyr
implements infrastructure projects to support the accelerated
development of the service economy and improved living standards
across Nornickel’s regions of operation through the Norilsk
Development Agency, the Second School Centre for community
initiatives in the Pechengsky District, and the Monchegorsk
Development Agency
•
implements regular sociological monitoring across its operations
• 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 when preparing the Group’s public sustainability reports
• provides a range of social support measures to redundant staff
under Kola MMC’s social programmes and develops the Social
and Economic Development Strategy of the Pechengsky District.
Impact on Nornickel’s
development goal
and strategy
Compliance by Nornickel
and Norilsk Nickel
Group entities with
the applicable laws,
regulations, corporate
standards, and business
codes.
Key risk factors
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
revenues).
Mitigation
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.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 248 249
LACK OF WATER RESOURCES
PERMAFROST THAWING
Water shortages in storage reservoirs of Nornickel’s hydropower facilities may result
in failure to achieve required water pressures at HPP turbines, leading to lower power
output and to drinking water shortages in Norilsk.
Loss of bearing capacity by pile foundation beds may lead to deformation and collapse
of buildings and structures.
Impact on goals:
medium
Source of risk:
external
Year-on-year change in risk:
stable
Impact on goals:
medium
Source of risk:
external
Year-on-year change in risk:
stable
Key risk factors
Extreme weather events
(droughts) caused
by climate change.
Impact on Nornickel’s
development goal
and strategy
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.
Mitigation
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 energy consumption in case of risk occurrence
refurbishes its hydropower plants to increase power output through
improving the hydroelectric units’ performance (implementation
period: 2012–2021).
•
Key risk factors
Climate change, average
annual temperature
increases over the last 15
to 20 years.
Increased depth
of seasonal permafrost
thawing.
Impact on Nornickel’s
development goal
and strategy
Efficient delivery
of finished products
(metals) in line with
the production
programme.
Social responsibility:
comfort and safety
of people living
in Nornickel’s regions
of operation.
Mitigation
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
• uses satellite technology to monitor Nornickel’s assets and further
•
analyse the data
regularly monitors the condition of Nornickel’s buildings
and structures via an information system for conducting geotechnical
surveys
• monitors soil temperature in buildings’ foundations
• monitors the compliance of its facilities with operational requirements
•
for crawl spaces
takes corrective actions to ensure safe operating conditions
for buildings and structures.
NornickelAnnual report | 2020CONTROL SYSTEM AND RISK MANAGEMENT7 Nornickel
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
8
.
O
N
SHARE CAPITAL
SECURITIES
250 251
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. All shares in the Company are
voting shares, with each voting share counted as one vote.
The following shareholders with non-zero balances in their accounts were listed
on the shareholder register as of 31 December 2020:
◾ 37,982 individuals
◾ 30 legal entities, including three nominee holders
The total number of the Company’s shareholders at year-end of 2020 exceeded
38 thousand people (excluding disclosures by nominee holders).
Nornickel’s market capitalisation was USD 49.4 billion at year-end 2020, up 2%
year-on-year.
SHARE CAPITAL STRUCTURE AS AT CALENDAR YEAR-END (%)
Shareholder
Olderfrey Holdings Ltd (indirect ownership
via controlled entities)
UC RUSAL, IPJSC (Direct and indirect
ownership via controlled persons. IPJSC EN+
Group owns 56.88% of voting shares in UC
RUSAL, IPJSC)
2018
34.6
2019
34.6
2020
34.6
27.8
27.8
27.8
Free float
37.6
37.6
37.6
MARKET CAP AS OF CALENDAR YEAR-END (USD BN)
+2%
49.4
48.3
26.6
29.7
29.7
60
40
20
2016
2017
2018
2019
2020
Nornickel shares have been traded
in the Russian stock market since
2001. Since 2014, the shares are
included on the First Level quotation list
of the Moscow Exchange (ticker: GMKN).
into ADRs at a ratio of 1:10. The number
of ADRs traded on stock exchanges is not
constant, as depositary receipt holders
may convert their securities into shares
and vice versa.
In 2001, Nornickel issued American
depositary receipts (ADRs) to represent its
shares. Currently, shares are convertible
Nornickel is included in key Russian
and a number of international indices.
SHARE AND ADR SPLIT AS
OF 31 DECEMBER 2020 (%)
23.2
Shares
ADRs
158,245,476
shares
76.8
Type
Shares (ordinary)
ADRs (10 ADRs = 1 share)
Registered number
1–01–40155-F
n/a
Amount
Custodian
ISIN
Ticker
158,245,476
Registrar
IRC – R.O.S.T., nominee holders
The Bank of New York Mellon as depository, VTB Bank
(PJSC) as custodian
RU0007288411
GMKN
US55315J1025
MNOD, NILSY
Key trading platforms
Moscow Exchange
London Stock Exchange (OTC section), OTC Markets
(the US OTC market)
MOEX INDEX AND RTS INDEX
(7.7%)
MOEX METALS AND MINING INDEX
(15.0%)
BLUE CHIP INDEX
(10.1%)
MOEX 10 INDEX
(10.1%)
MOEX BROAD MARKET INDEX
(7.8%)
SUSTAINABILITY VECTOR INDEX
(7.6%)
MSCI RUSSIA INDEX
(8.2%)
MSCI EMERGING MARKET INDEX
(0.5%)
Annual report | 2020SHAREHOLDER INFORMATION8
REGISTRAR
IRC – R.O.S.T. is the Company’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. 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.
252 253
at the request of the Audit Commission,
Nornickel’s auditor, or shareholders
owning at least 10% of Nornickel voting
shares as of 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.
PUBLIC SERVICES PORTAL
REGULATIONS ON THE GENERAL MEETING
OF SHAREHOLDERS
SHAREHOLDER RIGHTS
All shareholders enjoy equal rights
and treatment in their relations with
Nornickel, in particular the rights to:
◾ 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
◾ receive dividends if the General
Meeting of Shareholders passes
the relevant resolution
◾ receive part of Nornickel’s property
in case of its liquidation
◾ 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.
The Annual General Meeting
of Shareholders is held once a year,
between 1 April and 30 June of the year
following the reporting 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
SHARE AND ADR PERFORMANCE ON STOCK EXCHANGES
Item
2018
2019
2020
MMC Norilsk Nickel shares on the Moscow Exchange
Low, RUB
High, RUB
Year-end price, RUB
Market cap as at the period end, RUB bn
MMC Norilsk Nickel ADRs on the London Stock Exchange
Low, USD
High, USD
Year-end price, USD
9,170
13,349
13,039
2,063
14.9
21.2
18.8
12,993
19,890
19,102
3,023
18.8
31.5
30.6
15,500
24,056
23,696
3,750
19.5
35.4
31.2
Market cap as at the period end, USD bn
29,687
48,344
49,373
Source: Nornickel’s estimates based on the stock exchange prices
NORNICKEL SHARE PRICE AND MOEX INDEX IN 2020 (%)
150
100
50
+22%
+7%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Nornickel shares
MOEX Index
NORNICKEL ADR PRICE AND STOCK INDICES IN 2020 (%)
150
100
50
+17%
+2%
–10%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Дек.
Nornickel ADRs
RTS Index
Euromoney global diversified index
Source: Bloomberg
FOR MORE DETAILS ON TRADING
PERFORMANCE, PLEASE SEE THE SECTION
OF OUR WEBSITE. INTERACTIVE DATABASE
NornickelAnnual report | 2020SHAREHOLDER INFORMATION8 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.
of Shareholders determines the dividend
amount and record date, which, as
per Russian law, shall be set no earlier
than 10 days before and no later than
20 days after the General Meeting
of Shareholders.
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.
The decision to pay dividends is made
by the General Meeting of Shareholders
based on recommendations of the Board
of Directors. The General Meeting
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
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.
THE DECISION TO PAY DIVIDENDS
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.
DIVIDENDS IN 2020
On 13 May 2020, the Annual General
Meeting of Shareholders approved
a dividend of RUB 557.2 per share
for 2019. The amount of dividend
payout totalled RUB 88 billion (about
USD 1.2 billion).
On 10 December 2020, the Extraordinary
General Meeting of Shareholders
approved a dividend of RUB 623.35
per share for 9M 2020, with the amount
of dividend payout totalling close
to RUB 98 billion (about USD 1.4 billion).
On 9 April 2021, the Board of Directors
recommended that the Annual General
Meeting of Shareholders approve
a dividend of RUB 1,021 per share (about
USD 13.25) for FY2020.
REGULATIONS ON THE DIVIDEND POLICY
DIVIDEND HISTORY1
254 255
Period
Total for 2020
FY20204
9M 2020
Total for 2019
FY2019
9M 2019
6M 2019
Total for 2018
FY2018
6M 2018
Total for 2017
FY2017
6M 2017
Total for 2016
FY2016
9M 2016
RUB mln
260,246
161,603
98,642
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
Declared dividend
Dividends paid2
USD mln3
RUB mln
USD mln3
3,320
2,096
1,346
4,909
1,201
1,529
2,179
3,741
1,928
1,813
2,131
1,524
607
2,379
1,239
1,141
n/a
n/a
98,290
323,482
88,166
95,430
139,886
248,983
125,298
122,685
131,546
96,117
35,429
140,758
70,509
70,249
n/a
n/a
1,334
5,011
1,264
1,567
2,180
3,827
1,986
1,841
2,137
1,527
610
2,360
1,188
1.72
DIVIDEND YIELDS
26.3
2020
26.3
2019
21.3
2018
18.8
2017
7.8
2016
Dividend per share paid
in the calendar year, USD
Dividend yield5
5%
14.9%
11.8%
7.2%
7.3%
1
2
3
4
5
Earlier dividend history is available at our website.
Dividends are paid out to shareholders within three years from the respective dividend resolution date. The dividend payouts are shown as of 31 December 2020 accordinf
IFRS reporting.
Calculated at the exchange rate of the Bank of Russia as of the declaration date or payment date, respectively.
On 9 April 2021, the Company’s Board of Directors recommended that the Annual General Meeting of Shareholders approve a dividend for FY2020.
Recommended dividend to average ADR price (Bloomberg) in the calendar year.
NornickelAnnual report | 2020SHAREHOLDER INFORMATION8 256 257
DEBT INSTRUMENTS
CREDIT RATINGS
As of the end of 2020, Nornickel held investment-grade credit ratings from all three
major international rating agencies and Russian Expert RA:
◾ Fitch Ratings: BBB−/Stable
◾ Standard & Poor’s: BBB−/Stable
◾ Moody’s: Baa2/Negative
◾ Expert RA: ruААА/Stable
A DETAILED OVERVIEW OF NORNICKEL’S DEBT
INSTRUMENTS IS AVAILABLE IN THE SECTION
OF OUR WEBSITE.INVESTORS
SECURITIES TAXATION
Income from securities is taxable pursuant
to the applicable tax laws of the Russian
Federation (Chapter 23, Personal Income
Tax, and Chapter 25, Corporate Income
Tax, of the Russian Tax Code).
Under international double taxation
treaties to which the Russian Federation
is a party, non-Russia tax residents can
claim a reduced rate of withholding tax
on Russia source income, or relief from
tax in Russia.
To claim these benefits, non-residents
need to submit relevant confirmations
to their Russian tax agent paying
the income:
◾ A confirmation of permanent residence
in a state with which the Russian
Federation has a double taxation treaty
(tax residency certificate)
◾ A confirmation that they meet other
conditions for application of a reduced
rate, if such conditions (or restrictions)
are set forth in the applicable treaty
◾ Should they fail to provide such
confirmations by the date of income
payment, the tax shall be withheld
at the standard rates stipulated
by the Russian Tax Code.
DIVIDEND TAX FORMULA1
AT = P × TR × (D1 − D2)
AT — amount of tax to be withheld from
the income of the recipient of dividends
P — proportion of the dividend amount
payable to one recipient to the total dividend
amount to be distributed
TR — tax rate stipulated by Subclauses
1–2, Clause 3, Article 284 or Clause 1,
Article 224 of the Russian Tax Code
— dividend amount to be distributed
D1
among all recipients
— dividend amount2 received
D2
by Nornickel, provided that previously this
amount was not included in the taxable
income
TAXATION OF INCOME FROM SECURITIES
Shareholder
Individuals
Residents
Non-residents
Legal entities
Residents
Non-residents
Income from transactions
Interest income
Dividend income
13%3 4
30%3
20%3
20%6
13%4
30%
20%
20%
13%4
15%
13%5
15%
1
2
3
4
5
6
The formula is not applicable to dividends paid to Russia non-residents.
Excluding the dividend amount eligible for a zero tax rate pursuant to Subclause 1, Clause 3, Article 284 of the Russian Tax Code.
Or 0% if Nornickel shares are sold, provided that by the selling date such shares have been held for more than five years and the requirements are met for the share of real
estate in Nornickel’s assets as outlined in Clause 2, Article 284.2 of the Russian Tax Code.
If the income is paid after 1 January 2021, a tax rate of 15% applies to amounts over RUB 5 mln for the reporting period.
Or 0% if as of the date of the dividend resolution a Russian entity has been owning 50% (and more) of shares in Nornickel’s authorised capital for 365 days (and more).
If the income is classified as income of a foreign entity from sources in Russia in accordance with Clause 1, Article 309 of the Russian Tax Code.
NornickelAnnual report | 2020SHAREHOLDER INFORMATION8 DEBT PORTFOLIO MANAGEMENT
DEBT
4.7
2020
7.1
2019
7.1
2018
8.2
2017
4.5 2016
0.6x
0.9x
1.1x
2.1x
1.2x
Net debt, USD bn
Net debt/EBITDA
Other currencies
RUB
DEBT PORTFOLIO BY CURRENCY
(%)1
DEBT PORTFOLIO BY INTEREST
RATE (%)1
3
46
97
54
Fixed
Floating
BONDS
In 2020, Nornickel successfully
completed a USD 500 million Eurobond
issue maturing in 2025 and locked
in the lowest coupon ever achieved
by a Russian or CIS issuer for a public
placement of USD-denominated
Eurobonds, at 2.55% p.a.
As of the end of 2020, Nornickel had
five Eurobond issues outstanding
for a total of USD 3.75 billion and two
rouble exchange-traded bonds for a total
of RUB 40 billion.
On 12 February 2021, the Company made
an early repayment of exchange-traded
bonds in the amount of RUB 15 billion
(USD 203 million at the exchange rate as
of 31 December 2020).
258 259
EUROBONDS
Instrument
Issuer: MMC Finance
D.A.C.
Offering date
Maturity date
Issue size, USD mln
Coupon rate, %
Coupon dates
Eurobonds 2022
(LPN)
Eurobonds 2022
(LPN)
Eurobonds 2023
(LPN)
Eurobonds 2024
(LPN)
Eurobonds 2025
(LPN)
MMC Finance D.A.C.
08.06.2017
14.10.2015
08.04.2022
14.10.2022
500
3.849
1,000
6.625
11.04.2017
11.04.2023
1,000
4.100
28.10.2019
28.10.2024
750
3.375
11.09.2020
11.09.2025
500
2.55
8 October/
8 April
14 October/
14 April
11 October/
11 April
28 October/
28 April
11 September/
11 March
Issue rating (F/M/S)
ВВВ−/–/ВВВ−
BBB−/Bаa2/BBB−
ВВВ−/–/ВВВ−
BBB−/Bаa2/BBB−
BBB−/Bаa2/−
ROUBLE BONDS
Instrument
Issuer
ISIN
Offering date
Maturity date
Issue size, RUB bn
Coupon rate, %
Coupon frequency
Exchange-traded bonds, BO-052
Exchange-traded bonds, BO-001P-01
MMC Norilsk Nickel
RU000A0JW5C7
19.02.2016
06.02.2026
15
11.60
RU000A100VQ6
01.10.2019
24.09.2024
25
7.20
Every 182 days starting from the offering date
1
RUB loans with currency swap applied disclosed as USD loans at the rate of swap initiation.
2
Early repaid on 12 February 2021.
NornickelAnnual report | 2020SHAREHOLDER INFORMATION8 CONSOLIDATED
FINANCIAL
STATEMENTS
for the years ended 31 December
2020, 2019 and 2018
Nornickel
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
S
R
F
I
9
.
O
N
260
261
STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
FOR THE PREPARATION AND APPROVAL
OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
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 2020, 2019 and 2018 and the consolidated statements
of income, comprehensive income, cash flows and changes in equity for the years ended 31 December 2020, 2019 and 2018,
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 International Financial Reporting Standards 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 2020, 2019 and 2018 were approved by:
President
V.O. Potanin
Senior Vice President Chief
Financial Officer
S.G. Malyshev
Moscow, Russia
16 February 2021
Annual report | 2020IFRS FINANCIAL STATEMENTS9
262
263
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 2020, 2019 and 2018, the consolidated income statements, the consolidated statements of comprehensive income,
changes in equity and cash flows for the years ended
31 December 2020, 2019 and 2018, 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 2020, 2019 and 2018, and its consolidated financial performance and its
consolidated cash flows for the years ended 31 December 2020, 2019 and 2018 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 Ethics Standards Board for Accountants
International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and
we have fulfilled our other ethical responsibilities in accordance with the requirements in the Russian Federation and the IESBA
Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide 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 and Metallurgical Company “Norilsk
Nickel”
Registration number. in the Unified State Register of Legal Entities: No.
1028400000298.
Dudinka, Krasnoyarsk region, Russia
Independent auditor: JSC “KPMG”, a company incorporated under the
Laws of the Russian Federation, a member firm of the KPMG global
organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
Registration number in the Unified State Register of Legal Entities: No.
1027700125628.
Member of the Self-regulatory Organization of Auditors Association
“Sodruzhestvo” (SRO AAS). Principal registration number of the entry in
the Register of Auditors and Audit Organizations: No. 12006020351.
FUEL LEAKAGE IN NORILSK
Please refer to the Note 26 in the consolidated financial statements.
THE KEY AUDIT MATTER
HOW THE MATTER WAS ADDRESSED IN OUR AUDIT
In May 2020, an incident resulting in contamination of
water bodies and land as well as damage to biological
resources occurred at the heat and power plant of the
Group in Norilsk. On 5 February 2021 the court ruled
to partially satisfy the claim filed by Rosprirodnadzor in
relation to compensation of damages to water bodies
and soil. As at 31 December 2020 the Group recognized
an environmental provision relating to reimbursement
of environmental damage and forecast clean-up and
rehabilitation expenses in the amount of USD 2,076
million.
Given the materiality of the provision, inherent
uncertainty around the ultimate outcome of the litigation
since the court decision has not yet come into force,
this matter required significant judgement including
interpretation of laws and regulations. Therefore,
we consider the measurement and disclosure of the
environmental provision to be a key audit matter
OTHER INFORMATION
Our audit procedures included the following:
• We reviewed the correspondence with Rosprirodnadzor and
documentation considered by the court during the court hearings;
• We involved KPMG legal and environmental experts to gain an
understanding of the disputed matter;
• We analysed decision issued by the court partially satisfying the
claim filed by Rosprirodnadzor;
• We inquired management of the Group about further steps with
regard to the court ruling;
• We obtained Group’s and its in-house legal counsel’s assessment
of other existing and potential claims and analysed their
interpretation of the relevant laws and regulation.
• We involved KPMG tax specialists to assess Group’s tax treatment
in respect of recognized environmental provision.
We also considered the appropriateness and completeness of the
disclosures in the consolidated financial statements.
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 2020, 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 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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 264
265
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, actions taken to eliminate threats or safeguards applied.
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
16 February 2021
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.
• 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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
266
267
US DOLLARS MILLION
US DOLLARS MILLION
Notes
For the year ended 31 December
2020
2019
2018
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
7
8
9
10
15
Other operating expenses, net
11, 26
12
21
13
14
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/(LOSS) PER SHARE
Basic and diluted earnings/(loss) per share
attributable to shareholders of the parent
company (US Dollars per share)
14,977
568
15,545
(4,500)
(575)
10,470
(869)
(156)
(308)
(2,737)
6,400
(1,034)
(879)
19
73
4,579
(945)
3,634
3,385
249
3,634
12,851
712
13,563
(4,499)
(684)
8,380
(938)
(127)
24
(303)
7,036
694
(306)
2
98
7,524
(1,558)
5,966
5,782
184
5,966
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 to be reclassified to profit or loss in
subsequent periods, net
Items not to be reclassified to profit or loss in subsequent periods:
Effect of translation to presentation currency
Other comprehensive income/(loss) not to be reclassified to profit or
loss in subsequent periods, net
Other comprehensive income/(loss) for the year, net of tax
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR,
NET OF TAX
Attributable to:
Shareholders of the parent company
Non-controlling interests
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
19.5
22
21.4
36.5
For the year ended 31 December
2019
5,966
2018
3,059
(4)
(4)
488
488
484
(2)
(2)
(905)
(905)
(907)
6,450
2,152
6,226
224
6,450
2,232
(80)
2,152
2020
3,634
(9)
(9)
(690)
(690)
(699)
2,935
2,763
172
2,935
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
31 DECEMBER 2020, 2019 AND 2018
268
269
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
Note
2020
2019
2018
Note
2020
2019
2018
At 31 December
At 31 December
15
16
14
18
18
19
16
17
20
22
30
23
10,762
11,993
9,934
222
81
755
327
215
223
98
370
163
141
73
386
12,147
12,899
10,697
2,192
537
79
58
7
444
5,191
51
8,559
20,706
6
1,254
(5,521)
8,290
4,029
646
4,675
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
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
Other current liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
24
25
26
29
14
35
24
25
27
30
28
26
29
17
35
9,622
203
644
32
52
43
23
8,533
8,208
180
674
37
–
60
281
16
365
200
61
385
185
10,619
9,765
9,420
12
59
1,427
47
401
2,258
93
358
329
428
5,412
16,031
20,706
1,087
44
1,706
1,553
393
100
–
36
503
–
5,422
15,187
19,474
209
6
1,551
6
307
77
5
35
162
–
2,358
11,778
15,251
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
270
271
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 (Note 21)
Change in provisions and allowances (Note 26)
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
For the year ended 31 December
2020
2019
2018
4,579
7,524
3,902
Purchase of share in associates
INVESTING ACTIVITIES
943
308
19
(19)
2,464
806
1,034
120
10,254
(119)
(161)
(32)
125
20
(239)
(186)
(70)
9,592
(1,304)
8,288
911
(24)
19
(2)
220
208
(694)
64
8,226
48
(122)
14
(331)
62
(247)
(35)
304
7,919
(1,910)
6,009
765
50
1
–
61
485
1,029
46
6,339
297
102
(5)
(15)
11
676
(28)
(97)
7,280
(787)
6,493
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of non-current assets
Loans issued
Proceeds from repayment of loans issued
Net change in deposits placed
Proceeds from disposal of property, plant and equipment
Net cash inflow/(net cash outflow) 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 30)
Dividends paid to non-controlling interest
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of foreign exchange differences on balances of cash and
cash equivalents
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
For the year ended 31 December
2020
2019
2018
(14)
(1,686)
(74)
–
(3)
36
(4)
2
28
67
(1,648)
2,903
(2,552)
(46)
(4,165)
–
(472)
(4,332)
2,308
2,784
99
5,191
–
(1,262)
(62)
–
(3)
54
78
10
(20)
85
(1,120)
3,212
(2,163)
(45)
(4,166)
(1)
(460)
(3,623)
1,266
1,388
130
2,784
–
(1,480)
(73)
(104)
(7)
13
5
3
–
81
(1,562)
2,173
(2,547)
(9)
(3,369)
(1)
(551)
(4,304)
627
852
(91)
1,388
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2020, 2019 AND 2018
US DOLLARS MILLION
BALANCE AT 1 JANUARY 2018
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
Profit for the year
Other comprehensive loss
Total comprehensive income for the year
Dividends
BALANCE AT 31 DECEMBER 2020
Notes
30
30
30
Share capital
Share premium
Translation reserve
Retained earnings
6
–
–
–
–
6
–
–
–
–
6
–
–
–
–
6
1,254
–
–
–
–
1,254
–
–
–
–
(4,490)
–
(853)
(853)
–
(5,343)
–
444
444
–
1,254
(4,899)
–
–
–
–
1,254
–
(622)
(622)
–
(5,521)
7,557
3,085
–
3,085
(3,336)
7,306
5,782
–
5,782
(5,636)
7,452
3,385
–
3,385
(2,547)
8,290
272
273
Total
4,327
3,085
(853)
2,232
(3,336)
3,223
5,782
444
6,226
(5,636)
3,813
3,385
(622)
2,763
(2,547)
4,029
Equity attributable to shareholders of the parent company
Non-controlling interests
331
(26)
(54)
(80)
(1)
250
184
40
224
–
474
249
(77)
172
–
646
Total
4,658
3,059
(907)
2,152
(3,337)
3,473
5,966
484
6,450
(5,636)
4,287
3,634
(699)
2,935
(2,547)
4,675
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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 36.
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
274
275
Adoption of new and revised standards and interpretations during the year ended 31 December 2019
The Group initially adopted IFRS 16 Leases from 1 January 2019. In accordance with the modified retrospective approach on the initial
application of the standard the comparative information for the year ended 31 December 2018 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);
◾ 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.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (“IFRS”).
FUTURE MINIMUM LEASE PAYMENTS DUE UNDER NON-CANCELLABLE OPERATING LEASE
AGREEMENTS AT 31 DECEMBER 2018
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.
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 year ended 31 December 2019.
The accounting policies applied in the preparation of consolidated financial statements at and for the year ended 31 December 2019 are
generally consistent with those applied in the preparation of the Group’s consolidated financial statements at and for the year ended 31
December 2018 except for changes related to the adoption of IFRS 16 Leases from 1 January 2019.
Adoption of new and revised standards and interpretations during the year ended 31 December 2020
Adoption of amendments to the following Standards did not have material impact on the accounting policies,
financial position or results of the Group:
◾ IFRS 3 Business combinations (amended);
◾ IFRS 7 Financial Instruments: Disclosures (amended);
◾ IFRS 9 Financial Instruments (amended);
◾ IFRS 16 Leases (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.
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:
◾ 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);
◾ Annual Improvements to IFRSs 2015-2017 Cycle.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Adoption of new and revised standards and interpretations during the year ended 31 December 2018
4. SIGNIFICANT ACCOUNTING POLICIES
276
277
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.
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
IAS 16 Property, plant and equipment
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 41 Agriculture (amended)
IFRS 1 First-time Adoption of International Financial Reporting Standards (amended)
IFRS 3 Business Combinations (amended)
IFRS 9 Financial Instruments (amended)
IFRS 16 Leases (amended)
IAS 1 Presentation of financial statements (amended)
IFRS 17 Insurance Contracts
Effective for annual periods
beginning on or after
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
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. These standards are not expected to have a material impact on the Group in the future
reporting periods and on foreseeable future transactions.
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.
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 (previously presented in loans and borrowings).
Business combinations
At 31 December 2020 management reassessed reclassification between cost of metal sales and selling and distribution expenses
(refer to notes 8 and 10). Information for the year ended 31 December 2019 has been reclassified to conform with the current period
presentation.
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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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
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.
The individual financial statements of each Group entity are presented in its functional currency.
DIVIDEND AND INTEREST INCOME
278
279
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 Сomponents of the consolidated statement of financial position, consolidated income statement, consolidated
statement of cash flows and consolidated statement of changes in equity are translated into presentation currency using the following
applicable exchange rates:
Components of consolidated statements
Applicable exchange rates
Assets and liabilities
Income, expenses and cashflows
Period-end rate
Date of underlying transaction or an average
approximating exchange rates prevailing at the dates of
the transactions
Equity
Historical rates
All resulting exchange differences from translation of the consolidated income statement and consolidated statement of financial
position components are recognised as a separate component in other comprehensive income/loss.
Revenue recognition
Metal sales revenue
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.
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.
Right-of-use assets are initially recognised at cost that comprise when applicable:
◾ the initial amount of the lease liability;
◾ 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 25) 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.
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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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.
Deferred costs under housing programmes for employees Our Home/My Home and Your Home are recognised as other non-current
assets and amortised over the certain period of employee participation in the programme (five to ten years). 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.
280
281
Deferred tax liabilities are recognised for taxable temporary differences associated with investments 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.
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.
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.
Income tax expense
Income tax expense represents the sum of the current and deferred tax.
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 49 years
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.
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.
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.
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 2 – 30 years
◾ other non-mining assets 1 – 20 years
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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Exploration expenditure
Financial assets
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.
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.
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.
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.
Amortisation of patents, licenses and software is charged on a straight-line basis over 1 – 12 years.
Effective interest method
282
283
Impairment of tangible and intangible assets, excluding goodwill
At each reporting date, the Group analyses the triggers of impairment of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not practical to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less cost to sell and value-in-use. In assessing value-in-use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or cash-generating unit. If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised in the consolidated income statement immediately.
Where an impairment loss subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the original
carrying amount that would have been determined had no impairment loss been recognised in prior periods. A reversal of an
impairment loss is recognised in the consolidated income statement.
Inventories
Refined metals
Main 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. These estimates take into consideration fluctuations of price or cost directly relating to
events occurring subsequent to the consolidated statement of financial position date to the extent that such events confirm conditions
existing at the end of the period
Work-in-process
Work-in-process includes all costs incurred in the normal course of business for producing each product 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 less allowance for adjustment to net realisable value. The change in allowance for work-in-
process is recognised in the Cost of metal sales in the consolidated income statement.
Materials and supplies
Materials and supplies are valued at the weighted average cost less allowance for obsolete and slow-moving items.
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.
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 settlement dateoutlined in the contract.
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
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Lifetime expected credit losses
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
12-month expected credit losses since the
reporting date
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.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers
nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises
its retained interest in the asset and an associated liability for 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.
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.
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 Group creates provisions for social commitments, tax and other provisions.
284
285
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 and environmental provisions
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.
Environmental provisions include expenses for clean-up, rehabilitation works and legal claims and penalties of government authorities
on environmental incidents and consequences of the incidents, settlement of environment damages.
Environmental provisions are recognised at the moment when respective legal or constructive obligation arises.
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. Descriptions of key estimates and assumptions made by the Group’s management are stated in
current or other respective Notes.
The most significant areas requiring the use of management estimates and assumptions are as follows:
◾ useful economic lives of property, plant and equipment;
◾ impairment of non-financial assets;
◾ decommissioning obligations and environmental provisions;
◾ income taxes.
Useful economic lives of property, plant and equipment
The factors, that may affect the estimation of the life of mine, which determines useful economic lives of mining assets, classified within
property, plant and equipment, include the following:
◾ changes in proved and probable ore reserves;
◾ the grade of ore reserves varying significantly from time to time;
◾ differences between actual commodity prices and commodity price assumptions used in the estimation and classification of ore
reserves;
◾ unforeseen operational issues at mine sites; and
◾ changes in capital, operating, mining, processing and decommissioning costs, discount rates and foreign exchange rates could
possibly adversely affect the economic viability of ore reserves.
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.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Impairment of non-financial assets
6. SEGMENT INFORMATION
286
287
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.
Decommissioning obligations and environmental provisions
The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates
decommissioning obligations and environmental provisions 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.
Environmental provisions are recognised based on the best estimate of the consideration required to settle the environmental
obligation at the reporting date, taking into account the risks and uncertainties surrounding the present obligation, including possible
compensations under civil lawsuits and costs to be incurred under corresponding ecological and ethnological programs. Where it is
possible to set accurate period of maturity of the environmental obligation, estimation is determined using the present value of cash
flows directed to settlement of those obligation, otherwise management uses best estimate of the future cash outflows, which relates
to the environmental obligation.
Actual costs incurred in future periods may differ materially from the amounts of provided provisions. 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.
Operating segments are identified on the basis of internal reports on components of the Group that are regularly reviewed by the
Management Board.
Management has determined the following operating segments:
◾ 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 reviewed
within GMK Group segment in 2018. The Group did not restate the corresponding items of respective segment information for the
year ended 31 December 2018 since the necessary information is not practically available. 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 ore mining and processing operations, 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.
Corporate activities of the Group do not represent an operating segment, include primarily headquarters’ general and administrative
expenses and treasury operations of the Group and are presented as Unallocated.
The amounts in respect of reportable segments in the disclosure below are stated before intersegment eliminations, excluding:
◾ balances of intercompany loans and borrowings and interest accruals;
◾ intercompany investments;
◾ accrual of intercompany dividends.
Amounts are measured on the same basis as those in the consolidated financial statements.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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 2020, 2019 and 2018, respectively.
288
289
For the year ended 31 December 2020
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Elimination
Tota
Revenue to external customers
Metal sales
Other sales
Inter-segment revenue
Metal sales
Other sales
TOTAL REVENUE
Segment EBITDA
Unallocated
CONSOLIDATED EBITDA
Depreciation and amortisation
Impairment of non-financial assets
Finance costs, net
Foreign exchange loss, net
Income from investments and disposal of
subsidiaries
PROFIT BEFORE TAX
OTHER SEGMENT INFORMATION
Purchase of property, plant and equipment and
intangible assets
Depreciation and amortisation
Impairment of non-financial assets, net
Environmental provisions
5,427
156
6,907
210
12,700
6,171
1,275
596
43
2,242
–
–
532
162
694
407
114
28
–
–
6,897
27
2,001
1
8,926
1,757
155
152
264
–
949
5
354
–
1,308
70
17
32
–
–
897
3
98
6
1,004
717
98
110
1
–
129
8
–
–
137
(14)
2
1
–
–
678
369
–
340
1,387
31
99
24
–
–
–
–
(9,892)
(719)
(10,611)
(556)
–
–
–
–
14,977
568
–
–
15,545
8,583
(932)
7,651
(943)
(308)
(879)
(1,034)
92
4,579
1,760
943
308
2,242
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 GMK Group
South
cluster
KGMK Group
NN
Harjavalta
8,208
171
5,177
280
13,836
9,522
349
–
336
179
864
475
2,271
36
608
200
3,115
58
1,145
6
21
–
1,172
74
For the year ended 31 December 2019
Revenue to external customers
Metal sales
Other sales
Inter-segment revenue
Metal sales
Other sales
TOTAL REVENUE
Segment EBITDA
Unallocated
CONSOLIDATED EBITDA
Depreciation and amortisation
Reversal of impairment of non-financial assets
Finance costs, net
Foreign exchange gain, net
Income from investments
PROFIT BEFORE TAX
Other segment information
Purchase of property, plant and equipment and intangible assets
Depreciation and amortisation
Impairment of non-financial assets, net
839
669
(43)
76
25
–
221
104
(1)
18
26
–
GRK Bystrinskoye
Other mining
Other non-metallurgical
Eliminations
Total
290
291
182
4
12
3
201
349
103
54
–
133
–
–
–
133
(31)
5
1
13
563
495
4
350
1,412
31
–
–
(6,158)
(1,012)
(7,170)
(1,770)
62
32
7
–
–
–
12,851
712
–
–
13,563
8,708
(785)
7,923
(911)
24
(306)
694
100
7,524
1,324
911
(24)
For the year ended 31 December 2019
GMK Group
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Eliminations
Total
8,787
160
720
75
9,742
6,602
361
33
154
363
911
190
1,020
6
–
–
1,026
71
Revenue to external customers
Metal sales
Other sales
Inter-segment revenue
Metal sales
Other sales
TOTAL REVENUE
Segment EBITDA
Unallocated
CONSOLIDATED EBITDA
Depreciation and amortisation
Impairment of non-financial assets
Finance costs, net
Foreign exchange loss, net
Income from investments
PROFIT BEFORE TAX
Other segment information
Purchase of property, plant and equipment and intangible assets
Depreciation and amortisation
Impairment of non-financial assets, net
1,016
612
8
292
82
3
18
24
–
–
6
–
2
8
96
168
13
–
107
1
–
–
108
(6)
21
6
39
687
502
–
325
1,514
50
–
–
(874)
(765)
(1,639)
(13)
38
28
–
–
–
–
10,962
708
–
–
11,670
6,990
(759)
6,231
(765)
(50)
(580)
(1,029)
95
3,902
1,553
765
50
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 The following table presents segment metal sales to external customers breakdown by metal for the years ended 31 December 2020,
2019 and 2018, respectively.:
For the year ended 31 December 2020
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Nickel
Copper
Palladium
Platinum
Rhodium
Gold
Other metals
6
2,293
2,283
266
259
260
60
5,427
–
–
–
–
–
–
–
–
2,181
389
3,399
338
423
85
82
6,897
839
12
44
4
–
–
50
949
–
364
–
–
–
331
202
897
59
10
43
7
–
–
10
129
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
Rhodium
Gold
Other metals
1,079
2,417
3,634
484
281
240
73
8,208
30
35
209
39
–
–
36
349
1,269
246
588
78
10
26
54
2,271
880
83
106
12
–
–
64
1,145
–
76
–
–
–
62
44
182
65
10
31
8
–
–
19
133
292
293
Total
3,144
3,078
6,365
622
682
676
410
59
10
596
7
–
–
6
65
10
475
7
–
–
6
678
14,977
Total
3,388
2,877
5,043
628
291
328
296
563
12,851
For the year ended 31 December 2018
GMK Group
KGMK Grou
NN Harjavalta
Other mining
Other non-metallurgical
Nickel
Copper
Palladium
Platinum
Rhodium
Gold
Other metals
1,827
2,824
2,990
574
118
206
248
8,787
275
51
1
3
19
–
12
361
805
86
55
7
–
–
67
1,020
53
8
18
6
–
–
22
107
53
8
610
6
–
–
10
687
Total
3,013
2,977
3,674
596
137
206
359
10,962
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 The following tables present assets and liabilities of the Group’s reportable segments at 31 December 2020, 2019 and 2018,
respectively.
At 31 December 2020
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 2019
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 2018
Inter-segment assets
Segment assets
TOTAL SEGMENT ASSETS
Unallocated
TOTAL ASSETS
Inter-segment liabilities
Segment liabilities
Total segment liabilities
Unallocated
TOTAL LIABILITIES
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Elimination
2,848
10,150
12,998
350
3,794
4,144
162
412
574
24
129
153
720
3,440
4,160
2,645
322
2,967
165
480
645
266
84
350
109
1,526
1,635
8
107
115
14
49
63
–
79
79
45
1,150
1,195
770
1,139
1,909
(4,063)
(2,020)
(6,083)
(4,063)
–
(4,063)
GMK Group
South cluster
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Elimination
3,286
10,416
13,702
305
1,732
2,037
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)
(5,918)
(3,935)
–
(3,935)
GMK Group
KGMK Group
NN Harjavalta
GRK Bystrinskoye
Other mining
Other non-metallurgical
Elimination
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)
(683)
(627)
–
(627)
294
295
Total
–
15,187
15,187
5,519
20,706
–
5,654
5,654
10,377
16,031
Total
–
16,324
16,324
3,150
19,474
–
3,648
3,648
11,539
15,187
Total
–
13,666
13,666
1,585
15,251
–
3,112
3,112
8,666
11,778
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 7. METAL SALES
The Group’s metal sales to external customers are detailed below (based on external customers’ locations):
For the year ended 31 December 2020
Europe
Asia
North and South America
Russian Federation and CIS
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
Total
6,755
5,266
2,400
556
14,977
6,680
3,243
2,289
639
12,851
5,868
2,929
1,619
546
10,962
Nickel
1,277
1,366
260
241
3,144
1,399
1,329
427
233
3,388
1,323
1,090
348
252
3,013
Copper
Palladium
Platinum
Rhodium
1,826
1,027
23
202
3,078
2,354
226
77
220
2,877
2,356
386
26
209
2,977
2,353
2,292
1,715
5
6,365
1,892
1,476
1,595
80
5,043
1,216
1,313
1,111
34
3,674
543
27
46
6
622
574
32
14
8
628
514
41
34
7
596
275
51
339
17
682
85
14
137
55
291
41
17
76
3
137
296
297
Gold
341
308
–
27
676
261
47
1
19
328
199
6
1
–
206
Other metals
140
195
17
58
410
115
119
38
24
296
219
76
23
41
359
Revenue from metal sales for the year ended 31 December 2020 included net loss of USD (104) 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 2019:
net loss in the amount of USD (47) million and for the year ended 31 December 2018: net gain in the amount of USD 12 million).
For the year ended 31 December 2020, metal revenue included net gain of USD 38 million from price adjustments in respect of
certain provisionally priced contracts, primarily for sale of palladium and other metals in Europe, Asia, North and South America (for
the year ended 31 December 2019: net loss in the amount of USD (1) million and for the year ended 31 December 2018: net loss in the
amount of USD (5) million).
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 8. COST OF METAL SALES
11. OTHER OPERATING EXPENSES, NET
For the year ended 31 December
For the year ended 31 December
298
299
CASH OPERATING COSTS
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
10. SELLING AND DISTRIBUTION EXPENSES
Transportation expenses
Marketing expenses
Staff costs
Other
TOTAL
2018
1,283
727
430
436
200
212
143
87
70
155
3,743
653
109
4,505
2020
2019
1,307
1,295
712
438
402
239
221
155
101
78
167
3,808
735
(44)
4,499
731
482
298
276
248
151
109
90
194
3,886
845
(231)
4,500
2020
529
134
69
67
18
2
50
869
For the year ended 31 December
2019
601
117
77
69
15
5
54
938
2018
569
96
103
38
9
23
52
890
For the year ended 31 December
2020
2019
2018
71
44
18
23
156
53
45
15
14
127
39
31
14
8
92
Environmental provisions (Note 26)
Social expenses
Change in other provisions
Change in provision on production facilities shut down (Note
26)
Net income earned during the pre-commissioning stage
Other, net
TOTAL
12. FINANCE COSTS, NET
Interest expense, net of amounts capitalised
Changes in fair value of other long-term and other current
liabilities
Fair value (gain)/loss on the cross-currency interest rate
swap
Unwinding of discount on provisions and payables
Interest expense on lease liabilities
Other, net
TOTAL
2020
2,242
500
24
(10)
–
(19)
2,737
2019
1
224
39
190
(192)
41
303
2018
–
207
21
(106)
(27)
95
For the year ended 31 December
2020
364
262
182
61
12
(2)
879
2019
340
64
(199)
84
12
5
306
2018
382
46
51
100
2
(1)
580
13. INCOME FROM INVESTMENTS
Interest income on bank deposits
Other, net
TOTAL
For the year ended 31 December
2020
2019
43
30
73
64
34
98
2018
59
36
95
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 14. INCOME TAX EXPENSE
Current income tax expense
Deferred tax (benefit)/expense
TOTAL INCOME TAX EXPENSE
For the year ended 31 December
2020
1,685
(740)
945
2019
1,924
(366)
1,558
2018
812
31
843
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 INCOME TAX EXPENSE
For the year ended 31 December
2020
4,579
916
14
–
93
(38)
(40)
945
2019
7,524
1,505
25
–
64
(62)
26
1,558
2018
3,902
780
29
4
54
(39)
15
843
The corporate income tax rates in other countries where the Group has a taxable presence vary from 0% to 30%.
DEFERRED TAX BALANCES
At 31 December
2019
Recognised
in income
statement
Effect of translation
to presentation
currency
At 31
December
2020
Property, plant and equipment, right-of use assets
Inventories
Trade and other receivables
Decommissioning obligations
Environmental provisions
Other provisions
Loans and borrowings, trade and other payables,
lease liabilities
Other assets
Other liabilities
Tax loss carry-forwards
NET DEFERRED TAX (ASSETS)
492
(279)
(10)
(113)
–
–
(153)
22
36
(33)
(38)
(9)
(258)
16
7
(439)
(50)
1
(5)
(6)
3
(740)
(94)
89
–
12
23
(1)
35
4
(9)
7
66
389
(448)
6
(94)
(416)
(51)
(117)
21
21
(23)
(712)
300
301
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
Property, plant and
equipment,right-of
use assets
Inventories
Trade and other
receivables
Decommissioning
obligations
Loans and
borrowings,trade
and other
payables,lease
liabilities
Other assets
Other liabilities
Tax loss carry-
forwards
NET DEFERRED
TAX LIABILITIES/
(ASSETS)
386
107
(7)
(53)
(82)
24
(2)
(61)
312
15
(377)
(3)
(51)
(15)
(3)
38
30
41
–
–
–
427
107
(7)
(53)
(41)
(123)
24
(2)
(61)
–
–
–
–
312
(366)
50
(9)
–
(9)
(15)
1
–
(2)
16
492
(279)
(10)
(113)
(153)
22
36
(33)
(38)
Property, plant and equipment
Inventories
Trade and other receivables
Decommissioning obligations
Loans and borrowings,trade and other payables
Other assets
Other liabilities
Tax loss carry-forwards
NET DEFERRED TAX LIABILITIES
At 31
December
2017
Recognised
in income
statement
Effect of
translation to
presentation
currency
At 31
December
2018
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
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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
302
303
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
2020
43
(755)
(712)
2020
218
182
400
At 31 December
2018
385
(73)
312
At 31 December
2018
100
191
291
2019
60
(98)
(38)
2019
164
240
404
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 2020 deferred tax asset in the amount of USD 136 million related to tax loss arising on disposal of OJSC “Third
Generation Company of the Wholesale Electricity Market” (“OGK-3”) (31 December 2019: USD 162 million and 31 December 2018: USD
145 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 2020 deferred tax assets in the amount of USD 46 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 2019: USD 78 million and
31 December 2018: USD 46 million).
At 31 December 2020, the Group did not recognise a deferred tax liability in respect of taxable temporary differences of USD 2,031
million (31 December 2019: USD 628 million and 31 December 2018: USD 1,558 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.
Mining assets and
mine development
cost
Buildings,
structures and
utilities
Machinery,
equipment and
transport
Other
Capital
construction-in-
progress
Total
Non-mining assets and right-of-use assets
8,994
3,134
3,507
289
1,484
17,408
925
–
(6)
(67)
(12)
(1,589)
–
304
(1)
(4)
(13)
(542)
–
348
–
(43)
20
(586)
–
9
–
(4)
5
(50)
798
(661)
–
1,723
–
(7)
(12)
–
(130)
–
(251)
(3,018)
8,245
–
2,878
137
3,246
62
249
5
1,358
15,976
–
204
8,245
614
–
79
–
(52)
91
999
9,976
943
–
42
3,015
–
177
4
9
(43)
38
360
3,308
254
1,358
16,180
–
513
–
15
(69)
(43)
382
–
11
–
5
(6)
–
31
855
(701)
–
–
(32)
(86)
166
1,469
–
83
29
(202)
–
1,938
3,560
4,106
295
1,560
19,497
–
192
2
–
361
–
–
21
–
942
(574)
–
1,885
–
44
COST
Balance at 1 January
2018
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 2)
BALANCE AT 1
JANUARY 2019,
AFTER THE
ADOPTION OF IFRS
16
Additions
Transfers
Change in
decommissioning
provision
Additions of right-
of-use assets
andremeasurement of
the lease liability
Disposals
Other
Effect of translation to
presentation currency
BALANCE AT 31
DECEMBER 2019
Additions
Transfers
Change in
decommissioning
provision
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Non-mining assets and right-of-use assets
Non-mining assets and right-of-use assets
304
305
Mining assets and
mine development
cost
Buildings,
structures and
utilities
Machinery,
equipment and
transport
Other
Capital
construction-in-
progress
Mining assets and
mine development
cost
Buildings,
structures and
utilities
Machinery,
equipment and
transport
Other
Capital
construction-in-
progress
Total
Additions of right-
of-use assets and
remeasurement of the
lease liability
Disposed on disposal
of subsidiary
(Note 21)
Acquired on
acquisition of
subsidiaries
Disposals
Other
Effect of translation
to presentation
currency
BALANCE AT 31
DECEMBER 2020
–
(68)
–
(32)
(31)
(1,557)
(9)
–
25
(25)
10
(567)
69
–
1
(29)
20
(645)
5
–
–
(2)
(1)
(46)
Total
65
(68)
26
–
–
–
(12)
(9)
(100)
(11)
(244)
(3,059)
9,273
3,188
3,883
272
1,663
18,279
ACCUMULATED
DEPRECIATION
AND IMPAIRMENT
Balance at 1 January
2018
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
Charge for the year
Disposals
Impairment loss, net
Disposed on disposal
of subsidiary (Note 21)
Other
Effect of translation
to presentation
currency
BALANCE AT 31
DECEMBER 2020
Carrying value
AT 31 DECEMBER
2018
AT 31 DECEMBER
2019
AT 31 DECEMBER
2020
(2,600)
(1,637)
(1,876)
(350)
62
(33)
9
460
(2,452)
(437)
41
(32)
7
(286)
(3,159)
(466)
27
(247)
50
28
463
(96)
(24)
3
(2)
(3)
19
(103)
(27)
4
(1)
1
(239)
(6,448)
–
2
35
–
39
(773)
108
(50)
–
1,121
(163)
(6,042)
–
15
15
(9)
(923)
150
24
–
(291)
38
(19)
(12)
329
(1,831)
(314)
54
–
19
(214)
(13)
(18)
(713)
(108)
3
(31)
6
274
(1,493)
(145)
36
42
(18)
(182)
(1,760)
(175)
(2,286)
(338)
(139)
(24)
18
(41)
–
(9)
289
25
(18)
–
(10)
359
1
–
–
–
23
(160)
(7,504)
–
9
(1,003)
80
(2)
(308)
–
–
50
9
25
1,159
(3,304)
(1,678)
(2,268)
(139)
(128)
(7,517)
5,793
6,817
5,969
1,385
1,800
1,510
1,415
1,820
1,615
146
156
133
1,195
9,934
1,400
11,993
1,535
10,762
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 At 31 December 2020 capital construction-in-progress included USD 14 million of irrevocable letters of credit opened for property,
plant and equipment purchases (31 December 2019: USD 52 million and 31 December 2018: USD 197 million), representing security
deposits placed in banks.
For the year ended 31 December 2020 purchases of property, plant and equipment in the consolidated statement of cash flows
include USD 1 million of irrevocable letters of credit (for the year ended 31 December 2019: USD 221 million and for the year ended 31
December 2018: USD 192 million).
Capitalised borrowing costs for the year ended 31 December 2020 amounted to USD 118 million (for the year ended 31 December
2019: USD 174 million and for the year ended 31 December 2018: USD 172 million). The capitalisation rate used to determine the
amount of borrowing costs was 4.10% per annum for the year ended 31 December 2020 (for the year ended 31 December 2019: 5.12%
and for the year ended 31 December 2018: 5.15%).
At 31 December 2020 mining assets and mine development cost included USD 2,593 million of mining assets under development (31
December 2019: USD 2,750 million and 31 December 2018: USD 2,868 million).
At 31 December 2020 non-mining assets included USD 39 million of investment property (31 December 2019: USD 48 million and 31
December 2018: USD 44 million).
Impairment
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.
As a result of the performed assessment of the value-in-use, an impairment loss of USD 41 million was recognised in the consolidated
income statement for the year ended 31 December 2020 (for the year ended 31 December 2019: impairment loss reversal of USD 70
million and for the year ended 31 December 2018: impairment loss of USD 8 million). Accumulated impairment loss, net of respective
accumulated depreciation had no impairment been recognised, amounted to USD 152 million at 31 December 2020 (31 December
2019: USD 153 million and 31 December 2018: USD 243 million).
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).
In 2020 the Federal law set increase of mineral extraction tax in 3.5 on the types of ore mined by the Group. The Group assessed the
change in tax legislation as an indicator for impairment of one of cash-generating units within JSC “Kolskaya GMK”: ore mining and
processing production KGMK.
The recoverable amount of the cash generating unit was determined based on value in use calculations. As a result ore mining and
processing production KGMK assets were fully impaired as at 31 December 2020. The impairment loss in the amount of USD 264
million was recognised in impairment of non-financial assets in the consolidated income statement.
The most significant estimates and assumptions used in determination of value in use are as follows:
◾ Future сash flows were projected based on budgeted amounts, taking into account actual results for the previous years. Forecasts
were assessed up to 2031. Measurements were performed based on discounted cash flows expected to be generated by separate
cash-generating unit.
◾ Management used adjusted commodities price forecasts for copper-nickel concentrate price forecast. Prices adjustments were
made based on current contract terms.
◾ Production information was primarily based on internal production reports available at the date of impairment test and
management’s assumptions regarding future production levels.
◾ Inflation indices and foreign currency trends in general consistent with external sources of information. Inflation used was projected
within 3.6-4.5%, exchange rates USD/RUB were within 72.02-84.76.
◾ A pre-tax nominal discount rate of 13.7% was calculated based on weighted average cost of capital and reflects management’s
estimates of the risks specific to production units.
The Group plans to develop in 2021 optimization actions on increase of ore mining and processing production KGMK future cash
flows and partial elimination of mineral extraction tax rate increase effect.
During the year ended 31 December 2020 the Group recognised additional impairment losses in the amount of USD 3 million in
respect of specific individual assets (for the year ended 31 December 2019: USD 34 million and for the year ended 31 December 2018:
USD 3 million).
306
307
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
Additions of right-of-use assets and
remeasurement of the lease liability
Acquired on acquisition of subsidiaries
Depreciation
Effect of translation to presentation
currency
BALANCE AT 31 DECEMBER 2020
16. OTHER FINANCIAL ASSETS
NON-CURRENT
Loans issued and other receivables
Investments in associates
Bank deposits
Derivative financial instruments (Note 29)
Total non-current
CURRENT
Loans issued
Bank deposits
Derivative financial instruments
Total current
Buildings, structures
and utilities
Machinery,
equipment and
transport
Other
Total
137
9
(23)
16
139
(9)
25
(20)
(20)
115
62
15
(18)
7
66
69
–
(12)
(12)
111
5
5
(3)
–
7
5
–
(3)
(1)
8
204
29
(44)
23
212
65
25
(35)
(33)
234
2020
2019
2018
At 31 December
56
14
11
–
81
57
–
1
58
113
–
8
102
223
47
–
4
51
130
–
8
3
141
57
83
7
147
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 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
Mineral extraction tax
Property tax
Other
OTHER TAXES PAYABLE
18. INVENTORIES
Refined metals and other metal products
Work-in-process and semi-products
Less: Net realizable allowance for work-in-process
Total metal inventories
Materials and supplies
Less: Allowance for obsolete and slow-moving items
Materials and supplies, net
INVENTORIES
2020
2019
2018
At 31 December
434
17
451
(7)
444
199
48
15
12
55
329
2020
547
1,159
(84)
1,622
644
(74)
570
2,192
638
13
651
(7)
644
397
46
16
15
29
503
2019
407
1,339
(5)
1,741
811
(77)
734
2,475
244
28
272
(1)
271
74
37
15
23
13
162
At 31 December
2018
526
1,138
(4)
1,660
662
(42)
620
2,280
308
309
19. TRADE AND OTHER RECEIVABLES
Trade receivables from metal sales
Other receivables
Receivables from the registrar on transfer of dividends to
shareholders (Note 30)
Less: Allowance for expected credit losses
TRADE AND OTHER RECEIVABLES, NET
2020
2019
2018
At 31 December
411
150
32
593
(56)
537
277
151
–
428
(66)
362
143
131
–
274
(70)
204
In 2020, 2019 and 2018, the average credit period on metal sales varied from 0 to 30 days. Trade receivables are generally non-interest
bearing.
At 31 December 2020 trade and other receivables include USD 339 million of short-term trade accounts receivable measured at fair value
through profit or loss, Level 2 of fair value hierarchy (31 December 2019: USD 196 million and 31 December 2018: USD 120 million).
At 31 December 2020, 2019 and 2018 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 2020 was 37 days (for the year ended 31
December 2019: 25 days and for the year ended 31 December 2018: 23 days). No interest was charged on these receivables.
Included in the Group’s other receivables at 31 December 2020 were debtors with a carrying value of USD 83 million (31 December 2019: USD
43 million and 31 December 2018: USD 29 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:
At 31 December 2020 part of metal semi-products stock in the amount of USD 73 million net of allowance in the amount of USD 57
million was presented in other non-current assets according to Group’s production plans (31 December 2019: USD 52 million net of
allowance USD 52 million and 31 December 2018: USD 88 million net of allowance USD 38 million).
Movement in the allowance for expected credit losses was as follows:
Balance at beginning of the year
Change in allowance
Accounts receivable written-off
Effect of translation to presentation currency
BALANCE AT END OF THE YEAR
Less than 180 days
180-365 days
2020
75
8
83
At 31 December
2018
24
5
29
2019
35
8
43
2020
2019
2018
At 31 December
66
3
(2)
(11)
56
70
(8)
(4)
8
66
92
5
(12)
(15)
70
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 20. CASH AND CASH EQUIVALENTS
The earnings and weighted average number of shares used in the calculation of earnings per share are as follows:
310
311
Current accounts
• RUB
• USD
• EUR
• other
Bank deposits
• RUB
• USD
• other
Other cash and cash equivalents
TOTAL
Bank deposits
2020
41
3,744
18
102
39
1,237
8
2
5,191
At 31 December
2019
2018
72
918
34
60
1,357
326
9
8
2,784
49
398
13
64
–
850
10
4
1,388
Interest rate on USD-denominated deposits held in banks at 31 December 2020 was in the range from 0.15% to 0.41% (31 December
2019: from 1.25% to 1.80% and 31 December 2018: from 1.70% to 3.95%) per annum. Interest rate on RUR-denominated deposits held in
banks at 31 December 2020 was 3.75% (31 December 2019: from 5.90% to 6.26%) per annum.
21. DISPOSAL OF SUBSIDIARIES
In September 2020, the Group sold nickel assets in Australia, including Honeymoon Well project, held by the Group subsidiary MPI
Nickel Pty Ltd for a consideration of USD 29 million (AUD 40 million). Net cash inflow from disposal of the subsidiary in the amount of
USD 28 million were recognised in the consolidated statement of cash flows, net of costs to sell in the amount of USD 1 million. Gain
on disposal in the amount of USD 19 million was recognised in the consolidated income statement.
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.
22. SHARE CAPITAL
Authorised and issued ordinary shares
At 31 December 2020, 2019 and 2018 the Group’s number of authorised and issued ordinary shares was 158,245,476.
Earnings per share
BASIC EARNINGS PER SHARE (US DOLLARS PER SHARE):
For the year ended 31 December
2020
21.4
2019
36.5
2018
19.5
PROFIT FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS
OF THE PARENT COMPANY
For the year ended 31 December
2020
3,385
2019
5,782
2018
3,085
Weighted average number of shares used in the calculation of basic and diluted earnings per share for the years ended 31 December 2020,
2019 and 2018 was 158,245,476 shares.
At 31 December 2020, 2019 and 2018, the Group had no issued financial instruments, which would have a dilutive effect on earnings per share
of ordinary stock.
23. NON-CONTROLLING INTEREST
At 31 December 2020, 2019 and 2018 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
Net profit/(loss) for the year
Other comprehensive (loss)/income for the year
Total comprehensive income/(loss) for the year
Profit/(loss) attributable to non-controlling interest
OTHER COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE
TO NON-CONTROLLING INTEREST
Cash flows from operating activities
Cash flows used in investing activities
Cash flows from/(used in) financing activities
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS
2020
1,298
762
(718)
(67)
1,275
656
2020
497
(147)
350
248
(73)
2020
619
(413)
(215)
(9)
2019
1,486
407
(824)
(142)
927
464
At 31 December
2018
1,222
195
(790)
(139)
488
244
For the year ended 31 December
2019
362
76
438
181
38
2018
(61)
(104)
(165)
(31)
(52)
For the year ended 31 December
2019
302
(252)
(4)
46
2018
72
(190)
142
24
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 24. LOANS AND BORROWINGS
25. LEASE LIABILITIES
312
313
Currency
Fixed or floating
interest rate
Average nominal % rate
during the year ended 31
December
Maturity
At 31 December
2020
2019
2018
2020
2019
2018
floating
1.99%
3.75%
3.45%
2021–2028
5,319
3,746
3,837
Unsecured
loans
USD
RUB
EUR
Total loans
Bonds
Total bonds
TOTAL LOANS AND
BORROWINGS
fixed
–
8.30%
8.30%
2020
floating
0.85%
0.85%
0.85%
2021–2028
Secured loans
RUB
fixed
9.75%
9.75%
9.75%
2021–2022
USD
RUB
fixed
fixed
4.39%
4.88%
5.24%
2022–2025
3,736
4,220
3,472
8.85%
8.85%
11.60%
2024–2026
541
645
216
–
30
8
969
864
30
10
19
9
5,357
4,755
4,729
4,277
4,865
3,688
9,634
9,620
Lease liabilities
Currency
RUB
USD
other
Total lease liabilities
Less: current lease liabilities
NON-CURRENT LEASE LIABILITIES
Average borrowing rate
during the year ended
31 December, %
Maturity
At 31 December
2020
2019
2020
2019
2018
7.37%
8.21%
2021–2099
4.07%
4.57%
2021–2030
1.56%
2.29%
2021–2024
126
114
22
262
(59)
203
56
148
20
224
(44)
180
–
2
20
22
(6)
16
8,417
(209)
At 31 December 2020 lease liabilities with original maturity in excess of 15 years amounted to USD 12 million (31 December 2019: USD
15 million).
Less: current portion due within twelve months and presented as current loans and borrowings
(12)
(1,087)
NON-CURRENT LOANS AND
BORROWINGS
9,622
8,533
8,208
26. PROVISIONS
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 (refer to Note 25), including interest, for the year ended 31 December 2020
consist of changes from financing cash flows in the amount of USD (167) million, effect of changes in foreign exchange rates of USD
(335) million and other non-cash changes of USD 545 million (for the year ended 31 December 2019: 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 and 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).
At 31 December 2020 loans were secured by property, plant and equipment with a carrying amount of USD 8 million (31 December
2019: USD 10 million and 31 December 2018: USD 8 million).
CURRENT PROVISIONS
Environmental provisions
Provision for social commitments
Decommissioning obligations
Tax provision
Other provisions
Total current provisions
NON-CURRENT PROVISIONS
Decommissioning obligations
Provision for social commitments
Environmental provisions
Other provisions
Total non-current provisions
TOTAL
2020
2,072
96
66
5
19
2,258
549
84
9
2
644
2,902
At 31 December
2019
2018
–
51
29
4
16
100
633
38
–
3
674
774
–
53
21
2
1
77
316
49
–
–
365
442
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Balance at 1
January 2018
Accruals
Utilization
Change in
estimates
Unwinding of
discount
Effect of
translation to
presentation
currency
BALANCE AT 31
DECEMBER 2018
Accruals
Utilization
Change in
estimates
Unwinding of
discount
Effect of
translation to
presentation
currency
BALANCE AT 31
DECEMBER 2019
Accruals
Utilization
Change in
estimate
Unwinding of
discount
Effect of
translation to
presentation
currency
BALANCE AT 31
DECEMBER 2020
Decommissioning
Environmental
provisions
Social
commitments
422
–
(22)
(21)
29
(71)
337
187
(18)
81
30
45
662
26
(16)
17
32
(106)
–
–
–
–
–
–
–
1
(1)
–
–
–
–
2,136
(48)
106
–
(113)
96
47
(29)
(2)
5
(15)
102
32
(66)
2
8
11
89
223
(132)
11
5
(16)
615
2,081
180
Tax
134
21
(144)
–
–
(9)
2
4
(1)
–
–
(1)
4
1
–
–
–
–
5
Other
Total
1
2
(3)
–
–
1
1
37
(20)
–
–
1
19
17
(9)
(6)
–
–
653
70
(198)
(23)
34
(94)
442
261
(106)
83
38
56
774
2,403
(205)
128
37
(235)
314
315
Significant event – fuel leakage in Norilsk
On 6 July 2020 the Federal Environment Supervision Agency (Rosprirodnadzor) assessed the amount of environmental damages to
the water bodies and land as RUB 147.78 billion. (USD 2,113 million at RUB/USD rate at 30 June 2020) and claimed this amount from
the Group as voluntary reimbursement. The Group recognised the provision of USD 2,134 million as at 30 June 2020 taking into
consideration actual and forecast clean-up and rehabilitation expenses with respective deferred tax benefit of USD 427 million. Based
on the interpretation of the Russian tax law and current practice of its application the Group assesses recoverability of deferred tax
assets recognised with respect to the environmental provision as probable taking into consideration taxable profit forecasts.
On 10 September 2020 Yenisei interregional administration of Rosprirodnadzor filed the lawsuit to the Krasnoyarsk Arbitrary Court
against JSC “Norilsk-Taimyr Energy Company” (JSC “NTEK”) claiming compensation of damages to water bodies and soil caused by
diesel fuel spill at HPP-3 in Norilsk for the amount of RUB 147.78 billion (USD 1,943 million at RUB/USD at the date of filing).
On 5 February 2021 the court ordered partial satisfaction of the lawsuit of Rosprirodnadzor. As per the court’s decision, the amount
of damages to be compensated equaled RUB 146.177 billion (USD 1,979 million at RUB/USD rate at 31 December 2020). The Group
received the complete reasoned judgment of the Court on 13 February 2021 and as of the date the consolidated financial statements
are authorised for issue its analysis is on-going. Having regard to its provisional view of the merits of an appeal, the Group’s
management considers that it would not be in the best interests of the Group to appeal the judgment. The final decision on the
appeal will be made in accordance with all necessary corporate procedures before expiration of the term set by the Russian law
for filing of an appeal: one month following the issuance of the complete reasoned decision. If the decision is not appealed by the
expiration of the one-month term, the decision will come into force.
As of the reporting date the total expenditure for clean-up and rehabilitation equals RUB 10.6 billion (USD 144 million at RUB/USD rate
at 31 December 2020). The environmental provision was increased by this amount in the consolidated financial statements in addition
to the amount of environmental damages.
Based on the above, the Group recognised the change in estimates of the environmental provision of USD 102 million included in
other operating expenses in the consolidated income statement with respective deferred tax benefit of USD 20 million.
As of the reporting date, the Group recognised utilization of the provision for the incurred clean-up expenses of USD 48 million.
Therefore, at 31 December 2020 the amount of the environmental provision recognised within short-term and long-term liabilities of
the Group’s consolidated statement of financial position equals USD 2,076 million.
The Group will be updating its assessment of the possible amount of future expenses relating to environmental clean-up and
rehabilitation, including their tax treatment.
On 11 February 2021 the Group received a claim from the Ministry for ecology and environmental management of Krasnoyarsk region
to voluntary reimburse damages to wildlife, hunting resources and the respective habitat caused by the HPP-3 incident in Norilsk for
the total amount of RUB 494 million (USD 7 million at RUB/USD rate 31 December 2020). The Group is currently analyzing the claim.
With respect to damages to water biological resources there are no official claims, lawsuits or regulations filed against the Group as
of the date the consolidated financial statements are authorised for issue, therefore the Group did not accrue any provision, as the
amount of such liability, if any, cannot be assessed reliably.
21
2,902
All these factors could possibly influence the amount and expected settlement date of the obligations relating to the incident
depending on the resolution of the above uncertainties.
Decommissioning obligations and environmental provisions
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 2021 to 2040
2.8% - 4.1%
2.9% - 4.2%
Expected inflation over the period from 2041 onwards
2.5%
2.9%
2.9% - 3.0%
2020
2019
2018
4.2% - 7.0%
5.6% - 7.5%
7.7% - 8.9%
At 31 December
3.64%
7.14%
up to 2057
up to 2060
8.17%
up to 2068
2.9% - 4.1%
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 Present value of expected cost to be incurred for settlement of decommissioning obligations and environmental provisions was as
follows:
28. EMPLOYEE BENEFIT OBLIGATIONS
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
2020
226
88
62
82
100
558
2019
275
124
102
64
68
633
At 31 December
2018
149
24
27
86
30
316
Accrual for annual leave
Wages and salaries
Other
Total obligations
Less: non-current obligations
CURRENT OBLIGATIONS
Defined contribution plans
316
317
2020
218
178
27
423
(22)
401
At 31 December
2018
177
147
22
346
(39)
307
2019
206
225
32
463
(70)
393
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.
Amounts recognised within continuing operations in the consolidated income statement in respect of defined contribution plans were
as follows:
Pension Fund of the Russian Federation
Mutual accumulated pension plan
Other
TOTAL
For the year ended 31 December
2020
283
6
5
294
2019
281
7
5
293
2018
278
7
7
292
29. DERIVATIVE FINANCIAL INSTRUMENTS
At 31 December 2020 the fair value of the cross-currency interest rate swap contracts was presented in non-current and current
liabilities in the amount of USD 52 million and USD 84 million respectively (31 December 2019: other non-current financial assets (refer
to Note 16) in the amount of USD 101 million and 31 December 2018: non-current liabilities in the amount of USD 61 million).
The fair value of cross-currency interest rate swap contracts (Level 2 of fair value hierarchy) 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 risk of the Group and of the other party and is
calculated based on credit spreads derived from current tradeable financial instruments (refer to Note 35).
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. In 2020 the Group entered into a number of agreements with Regional Governments including revision of
current agreements under which the Company took additional financial commitments in respect to social and economic development
of the regions including construction of social infrastructure facilities construction in the regions where the Group operates. 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
2020
2019
2018
At 31 December
267
242
116
625
802
802
1,427
425
212
117
754
952
952
1,706
357
192
110
659
892
892
1,551
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
2020
322
246
57
625
At 31 December
2018
183
192
284
659
2019
260
199
295
754
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 30. DIVIDENDS
Dividends declared and paid in Russian roubles were translated to US dollars using prevailing RUB/USD rates at the declaration date
or payment date, respectively, as presented in the table below.
Dividends declared
Per share
USD
Total USD
million
Dividends paid
Payment period
Total USD million
Dividends for
the period
Declaration
period
9 months 2020
December
2020
Annual 2019
May 2020
9 months 2019
6 months 2019
December
2019
September
2019
Annual 2018
June 2019
6 months 2018
September
2018
Per share
RUB
623.35
557.20
604.09
792.52
776.02
Annual 2017
June 2018
607.98
883.93
13.77
2,179
October 2019
8.50
7.59
9.66
1,346
December 2020
1,201
1,529
June 2020
January 2020
12.19
11.45
9.63
1,928
1,813
1,524
July 2019
October 2018
July 2018
1,334
1,264
1,567
2,180
1,986
1,841
1,527
At 31 December 2020 dividends paid by the Company to the shareholders registrator but not transferred to shareholders bank
accounts amounted to USD 32 million (refer to Note 19).
318
319
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 2020
At 31 December 2019
At 31 December 2018
Accounts receivable
–
7
7
1
10
11
1
8
9
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 2020
At 31 December 2019
At 31 December 2018
Accounts payable and lease liabilities
19
15
34
3
8
11
1
3
4
During the year ended 31 December 2020, the Group acquired from related party the Company, which holds the right-of-use assets
and lease liabilities in the amount of USD 25 million.
31. RELATED PARTIES TRANSACTIONS AND OUTSTANDING BALANCES
Transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions.
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
Sales of goods and services and participating shares
For the year ended 31
December 2020
For the year ended 31
December 2019
For the year ended 31
December 2018
–
–
–
–
–
–
7
–
7
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 2020 remuneration of key management personnel of the Group included salary and performance bonuses
amounted to USD 78 million (for the year ended 31 December 2019: USD 134 million and for the year ended 31 December 2018: USD
109 million).
32. COMMITMENTS
Capital commitments
At 31 December 2020, contractual capital commitments amounted to USD 2,021 million (31 December 2019: USD 930 million and 31
December 2018: USD 544 million).
Purchase of assets and services and other operating expenses
Leases
Transactions with related parties
Entities under ownership and control
of the Group's major shareholders
Associates, joint ventures and joint
operation
TOTAL
For the year ended 31
December 2020
For the year ended 31
December 2019
For the year ended 31
December 2018
92
120
212
89
136
225
64
86
150
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 2020 total future non-discounted variable lease payments
under such contracts with the maturity up to 2069 amounted to USD 316 million (31 December 2019: USD 310 million).
At 31 December 2020 future non-discounted lease payments for leased items not transferred to the lessee and not recognised as
lease liabilities amounted to USD nil million (31 December 2019: USD 192 million).
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 320
321
Social commitments
Environmental matters
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.
33. 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.
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.
The Group periodically evaluates its environmental provisions pursuant to the environmental legislation in the countries, in
which it operates. Such provisions are recognised in the consolidated financial statements as and when obligating events occur.
Management of the Group believes that there are no material obligations for environmental damage other than those recognised
in the consolidated financial statements. However, potential liabilities, which could arise due to changes in environmental laws
and regulations, cannot be reliably estimated but may be material. The Group is unable to predict the timing or extent to which
environmental laws and regulations may change. Such change, if it occurs, may require that the Group modernise technology to meet
more stringent standards.
Litigation
Russian Federation risk
At 31 December 2020 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 2020, total claims under unresolved litigation (except legal claims
from Rosprirodnadzor which are dislosed in Note 26) amounted to approximately USD 7 million (31 December 2019: USD 14 million and
31 December 2018: USD 13 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.
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.
Impact of the COVID-19 outbreak on the Group’s operations
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.
On 11 March 2020, the World Health Organization declared COVID-19 outbreak a pandemic. The spread of COVID-19 led to lockdown
and business disruption in many countries, which triggered increased volatility of financial markets, including commodity markets, and
general economic uncertainty.
A very limited number of publicly available transfer pricing court cases in Russia does not provide enough certainty as to the approach
to applying transfer pricing rules in Russia. The impact of any transfer pricing assessment may be material to financial statements of
the Group, however, the probability of such impact cannot be reliably assessed.
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.
Current Russian transfer pricing legislation requires transfer pricing analysis for the majority of cross-border intercompany and major
domestic intercompany transactions. Starting from 2019, transfer pricing control, as a general rule, is applied to domestic transactions
only if both criteria are met: the parties apply different tax rates, and the annual turnover of transactions between them exceeds RUB 1
billion (USD 14 million at RUB/USD rate at 31 December 2020).
Russian tax authorities may review prices used in intra-group transactions, in addition to transfer pricing audits. They may assess
additional taxes if they conclude that taxpayers have received unjustified tax benefits as a result of those transactions.
Russian tax authorities continue to exchange transfer pricing as well as other tax related information with tax authorities of other
countries. This information may be used by the tax authorities to identify transactions for additional in-depth analysis.
The Group operates primarily in exploration, extraction, refining of ore and nonmetallic minerals and sale of base and precious metals
produced from ore, which have not been subject to significant adverse impact by the outbreak of coronavirus. Revenue from metal
sales increased during the year ended 31 December 2020, with the relative decrease of demand in certain markets for the Group’s
products offset by higher market prices. Respectively finished goods balance increased at the end of the reporting period.
The activities of the Group, including products deliveries, were not interrupted. According to the analysis of the Group’s financial
position, its liquidity and access to debt financing, including compliance with debt covenants, the above factors did not have a material
effect on the Group’s financial stability, hence the management of the Group believes that there is no uncertainty related to the
Group’s going concern.
Based on the results of the analysis of possible outcomes and their consequences for the economic environment and operations of
the Group, the Group’s management has developed and implemented a number of measures to ensure normal operating activities,
including:
◾ administrative arrangements to ensure timely response to threats, caused by COVID-19, continuity of production, procurement and
marketing of the Group’s products and protection of health and safety of employees;
◾ establishing remote workplaces for employees in administrative functions, sales and procurement departments whose presence in
the office is not necessary;
◾ training employees in operations to ensure strict compliance with work safety measures including social distancing;
◾ procurement of supplies to ensure compliance with the requirements of government authorities relating to wearing personal
protective equipment and the use of antiseptics;
◾ providing financial support to the regional healthcare, including significant funding allocated to healthcare institutions through
procurement of necessary medical equipment and medicines to prevent further spread of the epidemic;
◾ uninterrupted deliveries of supplies for operating and investing activities as per arrangements with the Group suppliers.
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 For the year ended 31 December 2020 , the Group spent USD 157 million net of VAT to prevent and combat spread of COVID-19,
including USD 123 million recognised as expenses for the year ended 31 December 2020, which are presented in the following line
items of the consolidated income statement:
Line items of consolidated income statement for the year ended 31 December 2020
USD million
Cost of metal sales
Cost of other sales
General and administrative expenses
Other operating expenses
Labour
Materials and supplies
Sundry costs
Labour
Staff costs and other costs
Social expense
45
5
5
11
8
49
The remaining amount as at 31 December 2020 included capital expenditures of USD 12 million and inventories and prepayments for
supplies in the amount of USD 22 million. The Group also granted rent waivers to businesses in the regions of its operations in the
amount of USD 2 million.
Taking into account the above-mentioned measures and the Group’s current operational and financial performance as well as other
currently available public information, Group management does not expect a significant adverse impact on the financial position and
operating results of the Group in a short-term perspective. The management will continue to monitor the situation closely and will
implement necessary measures to respond to possible adverse events, as they occur.
34. 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 (long and short-term borrowings) and equity (share capital and retained earnings)
structure.
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 not lower than investment grade ratings, assigned by international rating agencies S&P's, Fitch and Moody’s
on BBB-/BBB-/Baa2 investment grade level.
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.
Interest rate risk
Interest rate risk relates to changes in interest rates will adversely impact the financial results of the Group. The Group’s interest rate
risk arises from borrowings at floating rates.
The Group performs thorough analysis of its interest rate risk exposure regularly, primarily the sensitivity analysis of basic floating rate.
In order to minimize and manage the risk, the Group carries out arrangements to maintain the structure of loans and borrowings with
fixed and floating interest rates. The Group also considers impact of this factor together with macroeconomic environment changes,
particularly stage of economic growth and increase in prices, generally leading to increase of base rates.
322
323
Currency risk
Currency risk relates to changes in the fair value or future cash flows of a financial instrument denominated in foreign currency
because of changes in exchange rates.
The major part of the Group’s revenue and related trade accounts receivable are denominated in US dollars while expenditure is
primarily incurred in Russian roubles and therefore the Group is exposed to fluctuation of USD exchange rate.
Currency risk arising from other currencies is assessed by management of the Group as immaterial.
The currency risk is managed by analysis of currency position, efficiency control of currency exchange operations and the most
possible matching of cash inflows and cash outflows denominated in the same currency.
The Group uses in appropriate cases derivative financial instruments primarily cross-currency interest rate swap to reduce exposure to
currency risk by balancing revenue cash flows denominated in US Dollar and liabilities denominated in Russian Rouble.
The carrying amounts of monetary assets and liabilities denominated in foreign currencies other than functional currencies of the
individual Group entities at 31 December 2020, 2019 and 2018 were as follows:
At 31 December 2020
At 31 December 2019
At 31 December 2018
USD
EUR
Other
currencies
USD EUR
Other
currencies
USD
EUR
Other c
urrencies
Cash and cash
equivalents
4,940
Trade
and other
receivables
638
Other assets
32
Total assets
5,610
277
9,055
114
16
Trade and
other payables
Loans and
borrowings
Lease
liabilities
Other liabilities
TOTAL
LIABILITIES
19
15
–
34
99
30
20
2
110
1,227
35
69
1,234
–
398
13
4
265
12
59
122
1,684
213
2
50
66
7
–
2
–
7,966
30
147
3
11
16
10
83
8
–
2
–
380
1,879
249
7,308
–
14
13
3
73
89
114
19
–
19
9,462
151
9
8,337
115
10
7,571
152
74
4
8
86
10
3
–
–
13
Given that the Group’s exposure to currency risk for the net USD-denominated monetary liabilities is offset by the revenue
denominated in USD, management believes that the Group’s exposure to currency risk is at an acceptable level.
The sensitivity analysis of interest rate and currency risks
INTEREST RATE RISK
1 p.p. RUB rate increase impact
1 p.p. USD rate increase impact
CURRENCY RISK
Increase/(decrease) of profit before tax for the year ended 31
December
2020
(18)
(34)
2019
(33)
(6)
2018
(20)
(15)
Management believes that the Group’s exposure to interest rate risk fluctuations is at an acceptable level.
USD 20% STRENGTHENING AGAINST RUB
(1,034)
(1,594)
(1,315)
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 The sensitivity analysis is prepared including cross-currency interest rate swap effects and assuming that the amount of loans and borrowings at
floating rates outstanding at the reporting date was outstanding for the whole year.
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.
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 as well as loans receivable.
The Group minimizes the credit risk through its allocation to a large number of customers and respective credit limits approval based on
customers financial position analysis in addition to trade financing and insurance instruments, bank guarantees and documentary forms of
payment.
The Group assesses customers creditworthiness using current and forecasted credit rating by international credit-rating agencies. In case of
their absence, the Group performs the assessment of a customer’s financial sustainability and general creditworthiness through analysis of its
financial measures and financial statements of customers for several reporting periods.
The following table provides information about the exposure to credit risk for financial assets:
Cash and cash equivalents
Derivative financial instruments
Loans and other long-term receivables
Trade and other receivables
Cover for irrevocable letters of credit
Bank deposits not included in cash and cash equivalents
Note
20
16
16
19
15
16
2020
5,191
1
113
537
14
11
2019
2,784
106
160
362
52
8
At 31 December
2018
1,388
10
187
204
197
91
The outstanding balances with 5 financial institutions and 5 largest customers are presented below. The banks have a minimum of ВВ+ credit
rating.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due.
324
325
Cash and cash equivalents
Cash and cash equivalents
Bank A
Bank B
Bank C
Bank D
Bank E
Other
TOTAL
Trade and other receivables
Customer A
Customer B
Customer C
Customer D
Customer E
Other
Total
Outstanding balance at 31 December
2019
2018
821
715
485
162
152
449
417
402
214
75
64
216
2,784
1,388
31
24
22
21
21
243
362
50
38
34
20
15
47
204
2020
2,512
800
712
170
160
837
5,191
108
32
26
21
21
329
537
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:
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Revenue USD million
% Revenue USD million
2,541
5,596
8,137
7,408
16
36
52
48
2,363
4,176
6,539
7,024
%
17
31
48
52
Revenue USD
million
1,564
3,461
5,025
6,645
%
13
30
43
57
15,545
100
13,563
100
11,670
100
Largest customer
Next 9 largest
customers
Total 10 largest
customers
Remaining
customers
TOTAL
The Group’s Centralised treasury continuously monitors actual and forecast cash flow and performs analysis of maturity profiles
of financial liabilities to take in time appropriate actions to minimize possible negative effects. These actions include liquidity
management and proactive management of credit portfolio to minimise short term debt and maintain weighted average period of
credit portfolio.
Liquidity management includes detailed budgeting procedures, maintainance of daily payment position for each currency and bank
account for 30 days period and monthly planning of the Group‘s finance model for a period up to 12 months.
The Group manages liquidity risk by maintainance of liquid funds level and a portfolio of confirmed credit lines and overdrafts with
numerous banks, sufficient to cover possible revenue fluctuations based on price, currency and interest rate risks. In particular, the
Group had available committed bank facilities for the management of its day to day liquidity requirements of USD 3,313 million at 31
December 2020 (31 December 2019: USD 5,044 million and 31 December 2018: USD 4,290 million).
The following table contains the maturity profile of the Group’s borrowings and lease liabilities (maturity profiles for trade and other
payables are presented in note 27) based on contractual undiscounted payments, including interest:
At 31
December
2020
Total
Due in the first
year
Due in the
second year
Due in the
third year
Due in the
fourth year
Due in the
fifth year
Due
there- after
FIXED RATE BANK LOANS AND BORROWINGS
Principal
Interest
4,299
656
4,955
4
213
217
FLOATING RATE BANK LOANS AND BORROWINGS
Principal
Interest
LEASE OBLIGATION
Lease
obligation
5,387
312
5,699
288
7
105
112
61
CROSS-CURRENCY INTEREST RATE SWAP
Payable
Receivable
TOTAL
1,364
(1,305)
59
11,001
938
(893)
45
435
1,504
203
1,707
345
103
448
61
12
(24)
(12)
2,204
1,000
106
1,106
2,558
74
2,632
1,088
86
1,174
2,055
29
2,084
48
41
12
(24)
(12)
3,774
402
(364)
38
3,337
203
12
215
22
–
22
51
500
36
536
400
1
401
26
–
–
–
963
288
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 At 31
December 2019
Total
Due in the
first year
Due in the
second year
Due in the
third year
Due in the
fourth year
Due in the
fifth year
Due there- after
35. FAIR VALUE OF FINANCIAL INSTRUMENTS
326
327
FIXED RATE BANK LOANS AND BORROWINGS
Principal
Interest
5,860
1,050
6,910
985
346
1,331
FLOATING RATE BANK LOANS AND BORROWINGS
Principal
Interest
3,797
346
4,143
LEASE OBLIGATION
Lease
obligation
274
104
143
247
55
974
277
1,251
1,204
118
1,322
1,505
200
1,705
1,541
68
1,609
48
44
CROSS-CURRENCY INTEREST RATE SWAP
Payable
Receivable
TOTAL
1,415
(1,665)
(250)
11,077
51
(109)
(58)
1,575
938
(1,065)
(127)
2,494
12
(29)
(17)
3,341
1,000
103
1,103
833
16
849
41
12
(29)
(17)
1,976
1,154
82
1,236
100
1
101
37
402
(433)
(31)
1,343
242
42
284
15
–
15
49
348
At 31
December 201
Total
Due in the
first year
Due in the
second year
Due in the
third year
Due in the
fourth year
Due in the
fifth year
Due there- after
FIXED RATE BANK LOANS AND BORROWINGS
Principal
Interest
4,595
1,022
5,617
5
279
284
FLOATING RATE BANK LOANS AND BORROWINGS
Principal
Interest
3,883
363
4,246
210
127
337
CROSS-CURRENCY INTEREST RATE SWAP
Payable
Receivable
TOTAL
1,008
(1,067)
(59)
9,804
41
(72)
(31)
590
987
280
1,267
957
123
1,080
41
(72)
(31)
2,316
871
213
1,084
1,202
77
1,279
926
(923)
3
2,366
1,507
142
1,649
1,302
33
1,335
1,003
46
1,049
202
3
205
222
62
284
10
–
10
2,984
1,254
294
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; and
◾ Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data.
Management believes that the carrying value of financial 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 current accounts payable (refer to note 27)
and lease liabilities (refer to note 25) either approximates to their fair value or may not significantly differ from it.
At 31 December 2020 other current 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 owners of non-controlling interest, holding 13.3% of share capital in GRK
Bystrinskoe in the amount of USD 428 million (non-current liability at 31 December 2019: USD 210 million and at 31 December 2018:
USD 146 million). Reclassification to current liabilities was carried out due to the fact that the put option is exercisable on demand at
the reporting date. The fair value of the liability is determined based on the discounted cash flow of the asset less net debt taking
into account the amount of working capital at the reporting date and application of lack of control discount reflecting the ownership
interest. The fair value estimate is within Level 3 of fair value hierarchy. The most significant estimates and assumptions used in
determination of the fair value at 31 December 2020, 2019 and 2018 are as follows:
◾ Future cash flows are forecast up to 2044 based on budgeted amounts, taking into account actual results for the previous years as
well as capital expenditure budgets;
◾ Prices for metal concentrates (gold, copper) and iron ore are estimated using consensus forecasts for commodity prices;
◾ Metals concentrate (copper, gold and iron ore concentrates) production and sales forecast is based on production reports available
at the reporting date and the life of mine plan taking into account the current production capacity and current estimates of metal
content in ore reserves;
◾ The inflation and exchange rate forecasts are based on Oxford Economics data, consistent with a consensus forecast of investment
banks. Forecast for exchange rate is made based on expected RUB and USD inflation indices.
◾ An after-tax nominal RUB discount rate of 13.8% (31 December 2019: 14.3%, 31 December 2018: 16.34%) was estimated by reference
to the weighted average cost of capital and management’s estimates of the risks specific to the asset.
Change in the fair value of the liability on the execution of the put option for 2020 amounted up to USD 262 million and was
presented in the financial costs of the consolidated income statement (31 December 2019: USD 64 million and 31 December 2018:
USD 46 million). The estimation of fair value of the liability on the execution of the put option is sensitive to changes in the number of
key assumptions The sensitivity analysis at the reporting date is disclosed in the table below:
Increase in fair value of the liability on the
execution of the put option
At 31 December 2020
At 31 December 2019
At 31 December 2018
Decrease in
discount rate
by 1 p.p.
Weakening
of RUB/USD
exchange rate
by 10%
Increase of
copper price
by 10%
25
15
6
70
68
44
37
33
22
Change of parameters
Increase of gold price by
10%
36
30
18
The information below presents financial instruments not measured at fair value, including loans and borrowings (refer to note 24),
trade and other long-term payables (refer to note 27).
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 At 31 December 2020
At 31 December 2019 At 31 December 2018
Carrying
value
Fair value
Level 1
Carrying
value
Fair value
Level 1
Carrying
value
Fair value
Level 1
Fixed rate bonds
TOTAL
Loans, including:
Floating rate loans
Fixed rate loans
TOTAL
4,277
4,277
Carrying
value
5,349
8
5,357
4,512
4,512
4,865
4,865
5,100
5,100
3,688
3,688
Fair value
Level 2
Carrying
value
Fair value
Level 2
Carrying
value
5,309
8
5,317
3,776
979
4,755
3,814
1,007
4,821
3,856
873
4,729
3,705
3,705
Fair value
Level 2
3,654
861
4,515
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
32
32
32
32
37
37
37
37
200
200
210
210
The fair value of financial liabilities presented in table above is determined as follows:
◾ the fair value of corporate bonds was determined as their market price at the reporting dates;
◾ the fair value of floating rate and fixed rate loans and borrowings at 31 December 2020, 2019 and 2018 was determined as the present value
of future cash flows (principal and interest), discounted at the market interest rates, which are determined as of the reporting date based on
the currency of a loan, its expected maturity and credit risks attributable to the Group;
◾ the fair value of trade and other long-term payables at 31 December 2020, 2019 and 2018 was determined as the present value of future
cash flows, discounted at the best management estimation of market interest rates.
36. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES
Subsidiaries by operating
segments
Country
Nature of
business
GMK GROUP
JSC “Norilsky Kombinat”
JSC “Taimyrgaz”
JSC “Norilskgazprom”
JSC “Norilsktransgaz”
JSC “Taimyrenergo”
JSC “NTEK”
LLC “ZSC”
LLC “Norilsknickelremont”
LLC “Norilskyi
obespechivaushyi
complex”
Russian
Federation
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
Production of
spare parts
100
-
100
100
-
100
100
100
100
100
-
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
Subsidiaries by operating
segments
Country
Nature of
business
31 December 2020
31 December 2019
31 December 2018
Effective % held
328
329
SOUTH CLUSTER
LLC “Medvezhyi ruchey”
KGMK GROUP
JSC “Kolskaya GMK”
LLC “Pechengastroy”
NORILSK NICKEL
HARJAVALTA
Norilsk Nickel Harjavalta
OY
GRK BYSTRINSKOYE
LLC “GRK “Bystrinskoye”
LLC “Vostokgeologiya”
Russian
Federation
Ore mining and
processing
Russian
Federation
Russian
Federation
Mining and
metallurgy
Repairs
Finland
Metallurgy
Russian
Federation
Russian
Federation
Ore mining and
processing
Geological
works and
construction
OTHER NON-METALLURGICAL
Metal Trade Overseas
A.G.
Norilsk Nickel (Asia)
Limited
Switzerland Distribution
Hong Kong Distribution
Norilsk Nickel USA, Inc.
USA
Distribution
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
50.01
100
100
100
100
100
100
100
100
100
100
100
100
100
50.01
100
100
100
100
100
100
100
100
100
100
100
100
100
50.01
100
100
100
100
100
100
100
100
100
Country
Nature of business
31 December 2020
31 December 2019
31 December 2018
Effective % held
Joint operations by
operating segments
OTHER MINING
Nkomati Nickel
Mine
Republic
of South
Africa
Ore mining and
processing
50
50
50
37. EVENTS SUBSEQUENT TO THE REPORTING DATE
On 12 February 2021 the Company made an early repayment of exchange-traded bonds in the amount of RUB 15 billion (USD 203
million at RUB/USD rate at 31 December 2020).
31 December 2020
31 December 2019
31 December 2018
Effective % held
LLC “Institut Gypronickel”
Annual report | 2020NornickelIFRS FINANCIAL STATEMENTS9 MEASUREMENT UNITS AND
CURRENCY EXCHANGE RATES
MEASUREMENT UNITS
LENGTH
1 km
1 m
1 cm
1 mi
1 foot
1 in
AREA
1 sq m
1 sq km
1 ha
1 sq ft
1 sq m
1 acre
WEIGHT
1 kg
1 metric tonne
1 short tonne
1 troy ounce
1 lb
1 g
0.6214 mi
3.2808 ft
0.3937 in
1.609344 km
0.3048 m
2.54 cm
10.7639 sq ft
0.3861 sq mi
2.4710 acres
0.09290304 sq m
2.589988 sq km
0.4046873 ha
2.2046 lb
1,000 kg
907.18 kg
31.1035 g
0.4535924 kg
0.03215075 oz t
CURRENCY EXCHANGE RATES IN 2016–2020
Index
Average rate Russian Rouble / US Dollar
Average effective rate Russian Rouble / US Dollar (for
CAPEX)
2016
67.03
66.25
2017
58.35
58.32
2018
62.71
63.88
2019
64.74
64.40
2020
72.15
73.15
330
331
GLOSSARY
Anode. Crude metal (nickel or copper) obtained from anode
smelting and fed for electrolytic refining (electrolysis) whereby it
is dissolved.
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.
Refinement. The process of extracting high purity precious
metals through their separation and removal of impurities.
Roasting. Heating ore to high temperatures to trigger chemical
changes that enable subsequent metal recovery processes.
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.
Concentration. Artificial improvement of metallurgical feedstock
mineral grades by removal of a major portion of waste rock not
containing any valuable minerals.
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.
Oxide. A compound of a chemical element with oxygen.
Tailings pit. A complex of hydraulic structures used to receive
and store mineral waste / tailings.
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).
Cathode. Pure metal (nickel or copper) obtained as a result of
electrolytic refining of anodes.
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.).
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.
Smelting. Pyrometallurgical process carried out at temperatures
that ensure complete melting of the processed material.
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.
Annual report | 2020Nornickel9 Slag. Melted or solid substance with a varying composition
that covers the surface of a liquid product during metallurgical
processes (resulting from ore mixture melting, melted
intermediate processing and metal refining) and includes waste
rock, fluxes, fuel ash, metal sulphides and oxides, and products
of interaction between the processed materials and lining of
melting units.
Sludge. Powder product containing precious metals settling
during electrolysis of copper and other metals.
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.
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.
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.
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.
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.
Annual report | 2020
CONTACTS
Investor relations
Registrar
ADR Depositary
332
333
Bank of New York Mellon
Depositary Receipts Division
Address: 240 Greenwich Street, 8th Floor
West, New York, NY 10286
Phone: +1 (212) 815 5021
Fax: +1 (212) 571 3050
Web-site: www.bnymellon.com
9
Auditor
JSC "KPMG"
Address: 24E, 16/5 Olympiysky prospekt,
Moscow, 129110 Russian Federation
Postal address: Naberezhnaya
Tower Complex, Block C, 31st Floor,
Presnenskaya Naberezhnaya
Phone: +7 (495) 937 4477
Fax: +7 (495) 937 4499
Email: moscow@kpmg.ru
Web-site: www.kpmg.com/ru
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 8320
Fax: +7 (495) 797 8613
For shareholders
Oksana Kuznetsova
Head of the Share Capital Division
Email: gmk@nornik.ru
Phone: +7 (495) 797 8244
Public relations
Tatiana Smirnova
Head of Public Relations
Email: pr@nornik.ru
Tatiana Egorova
Head of Press Office
Email: egorovaTS@nornik.ru
Phone: +7 (495) 785 5800
Fax: +7 (495) 785 5808
Address: 1-iy Krasnogvardeyskiy proezd,
15, 123100 Moscow, Russian
JSC IRC - 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/
Head office
Address: 18 bldg. 5B, Stromynka Street,
107076 Moscow, Russian Federation
Email: info@rrost.ru
Phone: +7 (495) 989 7650
Fax: +7 (495) 780 7367
Norilsk Branch
Address: 8 Bogdan Khmelnytskiy, Norilsk,
Krasnoyarsky Krai, 663305, Russian
Federation
Phone: +7 391 946 2817
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 5101, 223-20-30
Fax: +7 (391) 216 5727
Helpdesk operating hours:
Monday - Friday from 9:00 to 13:00
Nornickel Nornickel
334 335
CORPORATE GOVERNANCE CODE
COMPLIANCE REPORT
This Corporate Governance Code
Compliance Report was discussed by
the Board of Directors of PJSC MMC
NORILSK NICKEL (the Company) at its
meeting held on “9”April 2021 (Minutes
No. GMK/9-pr-sd).
The Corporate Governance Code
Compliance Report was prepared in
accordance with the Recommendations
on Preparation of the Report on
Compliance with the Principles and
Recommendations of the Corporate
Governance Code (Letter of the Bank of
Russia No. IN-06-52/8 dated 17 February
2016).
The Board of Directors certifies that
all data in this Report contain full and
reliable information on compliance by
the Company with the principles and
recommendations of the Corporate
Governance Code for 20201.
No.
1.1
1.1.1
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The company shall ensure fair and equitable treatment of all shareholders in exercising their rights to participate in
the governance of the company.
☑ Full
compliance
The company ensures the
most favourable conditions
for its shareholders to
participate in the general
meeting, develop an
informed position on
agenda items of the general
meeting, coordinate
their actions, and voice
their opinions on items
considered.
1. The company’s internal document
approved by the general meeting
of shareholders governing the
procedures to hold general
meetings of shareholders is
publicly available.
2. The company provides accessible
means of communication with
the company, such as a hotline,
email or online forum, to enable
shareholders to express their
opinions and send questions on
the agenda in preparation for the
general meeting. The company
performed the above actions in
advance of each general meeting
held in the reporting period.
X
I
D
N
E
P
P
A
0
6
1
№
O
N
.
NornickelAnnual report | 202010APPENDIX
Reasons3 for non-compliance
Compliance
status2
☑ Full
compliance
☑ Full
compliance
☑ Full
compliance
No.
1.1.2
Corporate governance
principles
The procedure for giving
notice of, and providing
relevant materials for, the
general meeting enables
shareholders to properly
prepare for attending the
general meeting.
1.1.3
In preparation for the
general meeting and
during the general
meeting, shareholders
were enabled to receive
information about, and all
materials related to, the
meeting, put questions
to executive bodies and
members of the board
of directors, as well as
communicate with each
other, in an unobstructed
and timely manner.
1.1.4
Shareholders did not
encounter unjustified
difficulties in exercising
their right to request that
a general meeting be
convened, to nominate
candidates to governance
bodies, and to make
proposals for the agenda
of the general meeting.
Compliance criteria
1. The notice of an upcoming
general meeting of shareholders
is posted (published) online at
least 30 days prior to the date
of the general meeting.
2. The notice of an upcoming
meeting indicates the location
of the meeting and the documents
required for admission.
3. Shareholders were given access
to the information on who
proposed the agenda items
and nominees to the company’s
board of directors and the audit
commission.
1.
In the reporting period,
shareholders were given an
opportunity to put questions to
members of executive bodies and
members of the board of directors
in advance of, and during, the
annual general meeting.
2. The position of the board of
directors (including dissenting
opinions entered in the minutes)
on each item on the agenda of
general meetings held in the
reporting period was included
in the materials for the general
meeting of shareholders.
3. The company gave duly
authorized shareholders access
to the list of persons entitled to
participate in the general meeting,
as from the date when such list
was received by the company, in
all instances of general meetings
held in the reporting period.
1.
In the reporting period,
shareholders had an opportunity
to make proposals for the agenda
of the annual general meeting for
at least 60 days after the end of
the respective calendar year.
2. In the reporting period, the
company did not reject proposals
for the agenda or candidates
to governance bodies due to
misprints or other insignificant
flaws in the shareholder’s
proposal.
No.
1.1.5
1.1.6
1.2
1.2.1
Corporate governance
principles
Each shareholder was
enabled to freely exercise
his/her voting right in
the simplest and most
convenient way.
The procedure for holding
a general meeting set by
the company provides
equal opportunities for
all persons attending
the meeting to voice
their opinions and ask
questions.
Compliance
status2
☑ Full
compliance
☑ Partial
compliance
Compliance criteria
1. An internal document (internal
policy) of the company contains
provisions stipulating that every
participant in the general meeting
may, before the end of the
respective meeting, request a
copy of the ballot filled in by them
and certified by the counting
commission.
1. During general meetings of
shareholders held in the reporting
period in the form of a meeting
(joint presence of shareholders),
sufficient time was allocated for
reports on, and discussion of, the
agenda items.
2. Nominees to the company’s
governance and control bodies
were available to answer
shareholders’ questions at
the meeting at which their
nominations were put to vote.
3. When passing resolutions on
preparing and holding general
meetings of shareholders, the
board of directors considered
using telecommunication means
for remote access of shareholders
to general meetings in the
reporting period.
336 337
Reasons3 for non-compliance
Criterion 2 is partially complied
with.
In accordance with the Regulations
on the General Meeting of
Shareholders of OJSC MMC
Norilsk Nickel approved by the
Company’s General Meeting
of Shareholders (Minutes No. 1
dated 6 June 2014), when the
General Meeting of Shareholders
considers the election of the
Board of Directors and the Audit
Commission, candidates to the
Company’s bodies must be invited.
Amid the COVID-19 pandemic, in
2020, the Annual General Meeting
of Shareholders was held in
absentia, which made it impossible
to invite candidates to governance
and control bodies to the General
Meeting of Shareholders.
Shareholders have equal and fair rights to share profits of the company by receiving dividends.
The company has
developed and put in
place a transparent and
clear mechanism for
determining the dividend
amount and paying
dividends.
1. The company’s dividend policy
is developed, approved by the
board of directors and disclosed.
2. If the company’s dividend policy
uses the company’s reporting
figures to determine the dividend
amount, then relevant provisions
of the dividend policy take into
account the consolidated financial
statements.
☑ Full
compliance
1.2.2
The company does
not resolve to pay out
dividends if such payout,
while formally compliant
with law, is economically
unjustified and may lead to
a false representation of the
company’s performance.
1. The company’s dividend policy
clearly identifies financial/
economic circumstances under
which the company shall not
pay out dividends.
☑ Full
compliance
1.2.3
The company does not
allow for dividend rights of
its existing shareholders to
be impaired.
1.
In the reporting period, the
company did not take any actions
that would lead to the impairment
of the dividend rights of its existing
shareholders.
☑ Full
compliance
NornickelAnnual report | 202010APPENDIX Reasons3 for non-compliance
Compliance
status2
☑ Full
compliance
No.
2.1
2.1.1
No.
1.2.4
Corporate governance
principles
The company makes
every effort to prevent
its shareholders profiting
from the company through
any means other than
dividends and liquidation
value.
Compliance criteria
1. To prevent its shareholders
profiting from the company
through any means other
than dividends and liquidation
value, the company’s internal
documents provide for controls
to timely identify and approve
deals with affiliates (associates)
of the company’s significant
shareholders (persons entitled
to use votes attached to voting
shares) where the law does not
formally recognize such deals as
interested party transactions.
1.3
1.3.1
1.3.2
1.4
1.4.1
The corporate governance system and practices ensure equal conditions for all shareholders owning the same type
(class) of shares, including minority and non-resident shareholders, and their equal treatment by the company.
The company has
created conditions for
fair treatment of each
shareholder by the
company’s governance
and control bodies,
including conditions that
rule out abuse by major
shareholders against
minority shareholders.
The company does not
take any actions that lead
or may lead to artificial
redistribution of corporate
control.
☑ Full
compliance
1.
In the reporting period,
procedures for managing
potential conflicts of interest
among significant shareholders
were efficient, and the board
of directors paid due attention
to conflicts, if any, between
shareholders.
1. No quasi-treasury shares were
issued or used to vote in the
reporting period.
☑ Full
compliance
Shareholders are provided with reliable and efficient means of recording their rights to shares and are able to freely
dispose of their shares without any hindrance.
Shareholders are provided
with reliable and efficient
means of recording their
rights to shares and are
able to freely dispose of
their shares without any
hindrance.
1. The company’s registrar
maintains the securities register
in an efficient and reliable way
that meets the needs of the
company and its shareholders.
☑ Full
compliance
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The board of directors carries out the strategic management of the company, determines key principles of, and
approaches to, setting up a corporate risk management and internal control system, oversees the activities of the
company’s executive bodies, and performs other key functions.
338 339
☑ Partial
compliance
1. The board of directors has
the authority stipulated in
the articles of association to
appoint and dismiss members of
executive bodies and to set out
the terms and conditions of their
contracts.
2. The board of directors reviewed
the report(s) by the sole
executive body and members
of the collective executive body
on the implementation of the
company’s strategy.
The board of directors is
responsible for appointing
and dismissing executive
bodies, including due to
improper performance of
their duties. The board of
directors also ensures that
the company’s executive
bodies act in accordance
with the company’s
approved development
strategy and core lines of
business.
The board of directors
sets key long-term targets
for the company, assesses
and approves its key
performance indicators
and key business goals,
as well as the strategy
and business plans for the
company’s core lines of
business.
The board of directors
determines the principles
of, and approaches
to, setting up a risk
management and internal
control system in the
company.
Criterion 1 is partially complied with.
In accordance with the Company’s
Articles of Association, election
and dismissal of the President is
reserved to the General Meeting of
Shareholders.
Criterion 2 is partially complied with.
In the reporting period, the Strategy
Committee reviewed the materials
relating to the implementation of the
Company’s functional strategies,
submitted by executive bodies:
•
Implementation status of the
development concept for the
Company’s design, repair, and
construction services
• Consolidated report on the
implementation of the 2019
investment programme and the
2020 investment plan
• Progress report on the
•
Company’s major projects
Implementation status of the IT
programme, fuel and energy
complex development strategy,
exploration strategy, and sales
strategy
• Updated long-term production
programme (including the
progress report on Bystrinsky
GOK reaching the design
capacity)
In addition, in the lead-up to
the Annual General Meeting of
Shareholders, the Company’s
Board of Directors previewed the
report of the President (Chairman
of the Management Board) on the
Company’s performance, included in
the Annual Report.
2.1.2
1.
The board of directors sets
key long-term targets for
the company, assesses
and approves its key
performance indicators and
key business goals, as well
as the strategy and business
plans for the company’s
core lines of business.
☑ Full
compliance
In the reporting period, the
board of directors reviewed at its
meetings matters related to the
progress in the implementation
of the strategy and its updates,
approval of the company’s
financial and business plan
(budget), and consideration of
the implementation criteria and
performance (including interim
criteria and performance) of the
company’s strategy and business
plans.
2.1.3
The board of directors
determines the principles
of, and approaches
to, setting up a risk
management and internal
control system in the
company.
1. The board of directors determined
the principles of, and approaches
to, setting up a risk management
and internal control system in the
company.
2. The board of directors assessed
the company’s risk management
and internal control system in the
reporting period.
☑ Full
compliance
NornickelAnnual report | 202010APPENDIX Compliance
status2
☑ Partial
compliance
No.
2.1.4
Corporate governance
principles
The board of directors
determines the
company’s policy on
remuneration payable to,
and/or reimbursement
(compensation) of
expenses incurred by,
directors, executive bodies
and other key executives
of the company.
Compliance criteria
1. The company has developed
and put in place a policy
(policies) on remuneration and
reimbursement (compensation)
of expenses incurred by
directors, executive bodies
and other key executives of
the company, approved by the
board of directors.
2. At its meetings in the reporting
period, the board of directors
discussed matters related to
such policy (policies).
No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
340 341
2.1.5
2.1.6
2.1.7
The board of directors
plays a key role in
preventing, identifying and
resolving internal conflicts
between the company’s
bodies, shareholders and
employees.
The board of directors plays
a key role in ensuring that
the company is transparent,
timely and fully discloses its
information, and provides
its shareholders with
unhindered access to the
company’s documents.
The board of directors
controls the company’s
corporate governance
practices and plays a
key role in its significant
corporate events.
☑ Full
compliance
☑ Full
compliance
1. The board of directors plays a key
role in preventing, identifying and
resolving internal conflicts.
2. The company has set up
mechanisms to identify
transactions implying a conflict
of interest and to resolve such
conflicts.
1. The board of directors approved
the company’s regulations on
the information policy.
2. The company designated
persons responsible for
implementing the information
policy.
1.
In the reporting period, the
board of directors reviewed
the company’s corporate
governance practices.
☑ Partial
compliance
Matters related to the
Remuneration Policy for the
Company’s Top Management
were reviewed by the Corporate
Governance, Nomination and
Remuneration Committee during
the reporting period. Following
the review of remuneration of the
Company’s key executives by
the said committee, it is planned
to include environmental and
resource conservation indicators in
the Company’s KPI system.
The Board of Directors reviews the
Company’s corporate governance
practices as part of its own
performance evaluation as a key
element of the Company’s corporate
governance framework, during
the annual assessment of internal
controls, as well as during the
preparation and preliminary approval
of the Company’s Annual Report and
approval of the Sustainability Report
of the Norilsk Nickel Group.
In 2020, The Board of Directors
reviewed the Report on the
Internal Performance Evaluation
of the Board of Directors for 2020
and the recommendations of the
Corporate Governance, Nomination
and Remuneration Committee,
and found the performance of the
Board of Directors, Board Chairman,
Corporate Secretary and the Board
committees to be good.
Reasons3 for non-compliance
Criterion 1 is partially complied with.
The Company has developed and
put in place the Remuneration
Policy for Members of the Board
of Directors that determines the
structure of remuneration of non-
executive directors and the Chairman
of the Board of Directors, as well
as rules for reimbursing expenses
incurred by members of the
Board of Directors. The Policy was
approved by the Board of Directors,
recommended for approval by the
General Meeting of Shareholders
(Minutes No. GMK/10-pr-sd dated
7 April 2020) and approved by the
General Meeting of Shareholders
(Minutes No. 1 dated 14 May 2020).
The principles and basic mechanisms
of the remuneration (expense
reimbursement) system for members
of executive bodies and other key
executives of the Company are set
forth in the Articles of Association,
the Regulations on the Management
Board, and internal documents
approved by the President of the
Company.
The Company’s current remuneration
policy (system) operates under the
continuous and direct control of the
Board of Directors.
The Corporate Governance,
Nomination and Remuneration
Committee is responsible for
developing and regularly reviewing
the remuneration policy (system) for
members of the Board of Directors,
members of the Management Board,
and the President of the Company,
as well as for overseeing its
implementation and execution.
Criterion 2 is partially complied with.
In the reporting period, the Board
of Directors recommended that the
General Meeting of Shareholders
approve a new version of the
Remuneration Policy for Members
of the Board of Directors and set
remuneration and reimbursement of
expenses related to the performance
of their duties for members of the
Board of Directors in the amount
proposed by the Board of Directors.
Corresponding resolutions were
passed at the Annual General
Meeting of Shareholders held on 13
May 2020.
NornickelAnnual report | 202010APPENDIX No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The Company’s Board of Directors
reviewed the Internal Audit
Department’s 2020 performance
assessment report for internal
controls, which covers most
aspects of corporate governance:
• Division of roles between
governance bodies
• Organisation of the Board of
Directors’ activities, including
engagement with executive
management
• Business development strategy
• Coordination of risk
management
• Preventing conflicts of
interest among shareholders,
members of the Board of
Directors, executive bodies and
employees of the Company
• Defining rules and procedures
to ensure compliance with
business ethics
• Coordinating corporate
disclosures
• Monitoring internal controls
The Norilsk Nickel Group’s
Annual Reports and Sustainability
Reports include large sections
on corporate governance with
detailed information on the
roles and performance of each
governance body and changes in
corporate governance practices
at the Company. These reports
must be reviewed by the Corporate
Governance, Nomination and
Remuneration Committee and then
by the Board of Directors.
2.2
The board of directors is accountable to the company’s shareholders.
2.2.1
Information about the
performance of the board
of directors is disclosed
and made available to the
shareholders.
1. The company’s annual report
for the reporting period includes
the information on individual
attendance at board of directors
and committee meetings.
2. The annual report contains key
results of the board of directors’
performance assessment in the
reporting period.
2.2.2 The chairman of the board
1. The company has in place a
of directors is available
to communicate with the
company’s shareholders.
transparent procedure enabling
its shareholders to forward
questions and express their
positions on such questions to
the chairman of the board of
directors.
☑ Full
compliance
☑ Full
compliance
No.
2.3
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The board of directors manages the company in an efficient and professional manner and is capable of making fair
and independent judgements and adopting resolutions in the best interests of the company and its shareholders.
342 343
☑ Full
compliance
☑ Full
compliance
☑ Full
compliance
☑ Full
compliance
1. The procedure for assessing the
board of directors’ performance
established in the company
includes, inter alia, assessment
of directors’ professional
qualifications.
2. In the reporting period,
the board of directors (or
its nomination committee)
assessed nominees to the
board of directors for required
experience, expertise, business
reputation, absence of conflicts
of interest, etc.
1. Whenever throughout the
reporting period the agenda
of the general meeting of
shareholders included election
of the board of directors,
the company provided to
shareholders the biographical
details of all nominees to the
board of directors, the results
of their assessment carried
out by the board of directors
(or its nomination committee),
and the information on
whether the nominee meets
the independence criteria set
forth in Recommendations
102–107 of the Code, as well as
the nominees’ written consent
to be elected to the board of
directors.
1. As part of the board of directors’
performance assessment run
in the reporting period, the
board of directors reviewed its
requirements to professional
qualifications, experience and
business skills.
1. As part of the board of directors’
performance assessment run
in the reporting period, the
board of directors considered
whether the number of directors
met the company’s needs and
shareholders’ interests.
2.3.1 Only persons of
impeccable business and
personal reputation who
have the knowledge,
expertise and experience
required to make
decisions within the
remit of the board of
directors and essential to
performing its functions
in an efficient way are
elected to the board of
directors.
2.3.2 The company’s directors
are elected via a
transparent procedure
that enables shareholders
to obtain information on
nominees sufficient to
judge on their personal
and professional qualities.
2.3.3 The board of directors has
a balanced membership,
including in terms of
directors’ qualifications,
experience, expertise and
business skills, and has
the trust of shareholders.
2.3.4 The company has a
sufficient number of
directors to organise
the board of directors’
activities in the most
efficient way, including
the ability to set up
committees of the board
of directors and enable
the company’s significant
minority shareholders to
elect a nominee to the
board of directors for
whom they vote.
NornickelAnnual report | 202010APPENDIX 344 345
No.
2.5
2.5.1
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The chairman of the board of directors ensures that the board of directors discharges its duties in the most efficient
way.
☑ Full
compliance
The board of directors is
chaired by an independent
director, or a senior
independent director is
chosen from among the
elected independent
directors to coordinate the
activities of independent
directors and enable
the interaction with the
chairman of the board of
directors.
1. The board of directors is chaired
by an independent director, or
a senior independent director
is chosen from among the
independent directors4.
2. The role, rights and duties of
the chairman of the board of
directors (and, if applicable,
of the senior independent
director) are duly set out in the
company’s internal documents.
The Board of Directors is chaired
by an independent director.
The Company believes that this
situation is the most closely
aligned with global best practices.
An independent Chairman of the
Company’s Board of Directors
ensures interaction between the
Board of Directors, shareholders
and other stakeholders in the most
efficient way.
2.5.2 The chairman of the board
of directors maintains a
constructive environment
at meetings, enables free
discussion of agenda
items, and supervises the
execution of resolutions
passed by the board of
directors.
1. Performance of the chairman
of the board of directors was
assessed as part of the board
of directors’ performance
assessment in the reporting
period.
☑ Full
compliance
No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
2.4
The board of directors includes a sufficient number of independent directors.
☑ Full
compliance
1.
In the reporting period, all
independent directors met all
independence criteria set out
in Recommendations 102–107
of the Code, or were deemed
independent by resolution of
the board of directors.
2.4.1 An independent director is
a person who is sufficiently
professional, experienced
and independent to
develop his/her own
position, and capable
of making unbiased
judgements in good faith,
free of influence by the
company’s executive
bodies, individual groups
of shareholders, or other
stakeholders. It should
be noted that a nominee
(elected director) who is
related to the company,
its significant shareholder,
significant counterparty or
competitor, or is related
to the government, may
not be considered as
independent under normal
circumstances.
2.4.2 The company assesses
1.
compliance of nominees
to the board of directors
and reviews compliance
of independent directors
with independence criteria
on a regular basis. In such
assessment, substance
should prevail over form.
☑ Full
compliance
In the reporting period, the board
of directors (or its nomination
committee) made a judgement
on the independence of each
nominee to the board of directors
and provided its opinion to
shareholders.
2. In the reporting period, the board
of directors (or its nomination
committee) reviewed, at least
once, the independence of
incumbent directors listed by
the company as independent
directors in its annual report.
3. The company has developed
procedures defining the actions
to be taken by directors if they
cease to be independent,
including the obligation to timely
notify the board of directors
thereof.
2.4.3 Independent directors make
up at least one third of
elected directors.
1.
Independent directors make
up at least one third of
directors.
2.4.4 Independent directors play
1.
a key role in preventing
internal conflicts in the
company and in ensuring
that the company performs
material corporate actions.
Independent directors (who do
not have a conflict of interest)
run a preliminary assessment
of material corporate actions
implying a potential conflict of
interest and submit the results to
the board of directors.
☑ Full
compliance
☑ Full
compliance
NornickelAnnual report | 202010APPENDIX Reasons3 for non-compliance
No.
Corporate governance
principles
Compliance criteria
2.6.4 All directors have equal
access to the company’s
documents and
information. Newly elected
members of the board of
directors are furnished
with sufficient information
about the company and
the performance of the
board of directors as soon
as possible.
1.
In accordance with the
company’s internal documents,
directors are entitled to access
documents and make queries
regarding the company
and its controlled entities,
while executive bodies of
the company should furnish
all relevant information and
documents.
2. The company has in place a
formalised induction programme
for newly elected members of
the board of directors.
346 347
Compliance
status2
☑ Partial
compliance
Reasons3 for non-compliance
Under the Regulations on
the Board of Directors of the
Company, members of the
Board of Directors may request
information (materials) and
clarifications from the executive
bodies and officers of the
Company on the Company’s
activities where such information
is required to make an informed
decision within the remit of the
Board of Directors.
The remit of the Company’s Board
of Directors includes both the
matters that directly affect the
Company’s operations and the
key matters related to activities of
the Company controlled entities.
In this regard, the disclosure rules
outlined in the Regulations on the
Board of Directors apply, inter alia,
to documents and information
of entities controlled by the
Company.
2.7
Meetings of the board of directors, preparation for such meetings, and participation of directors ensure efficient
performance by the board of directors.
2.7.1 Meetings of the board
of directors are held
as needed, taking into
account the scale of
business and goals of the
company at a particular
time.
1. The board of directors held
at least six meetings in the
reporting year.
☑ Full
compliance
2.7.2 The company’s internal
1. The company has an approved
documents set out a
procedure for arranging
and holding meetings of
the board of directors,
enabling members of
the board of directors to
properly prepare for such
meetings.
internal document that
describes a procedure for
arranging and holding meetings
of the board of directors and
stipulates, in particular, that the
notice of the meeting is to be
given, as a rule, at least five
days prior to such meeting.
☑ Full
compliance
No.
Corporate governance
principles
Compliance criteria
2.5.3 The chairman of the board
of directors takes all steps
necessary for the timely
provision to directors
of information required
to pass resolutions on
agenda items.
1. The company’s internal
documents set out the duty
of the chairman of the board
of directors to take all steps
necessary for the timely
provision to directors of
materials regarding items on the
agenda of a board meeting.
Compliance
status2
☑ Full
compliance
2.6
Directors act reasonably and in good faith in the best interests of the company and its shareholders,
on a fully informed basis and with due care and diligence.
☑ Full
compliance
☑ Full
compliance
☑ Full
compliance
2.6.1 Directors pass resolutions
on a fully informed
basis, with no conflict
of interest, subject to
equal treatment of the
company’s shareholders,
and assuming normal
business risks.
2.6.2 The rights and duties
of directors are clearly
stated and formalised in
the company’s internal
documents.
1. The company’s internal
documents stipulate that a
director should notify the board
of directors of any existing
conflict of interest as to any
agenda item of a meeting of
the board of directors or its
committee, prior to discussing
the relevant agenda item.
2. The company’s internal
documents stipulate that a
director should abstain from
voting on any item in connection
with which he/she has a conflict
of interest.
3. The company has in place a
procedure enabling the board
of directors to get professional
advice on matters within its
remit at the expense of the
company.
1. The company has adopted and
published an internal document
that clearly defines the rights
and duties of directors.
2.6.3 Directors have sufficient
1.
time to perform their
duties.
Individual attendance at board
and committee meetings,
as well as time devoted to
preparation for attending
meetings, was recorded as part
of the procedure for assessing
the board of directors in the
reporting period.
2. In accordance with the
company’s internal documents,
directors should notify the board
of directors of their intentions
to be elected to governance
bodies of other entities (apart
from the entities controlled by,
or affiliated to, the company),
and of their election to such
bodies.
NornickelAnnual report | 202010APPENDIX No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
348 349
In the reporting period, in-person
meetings of the Board of Directors
approved the Company’s budget
and pre-approved the Annual
Report, discussed the election
of the Chairman of the Board of
Directors and the formation of
the Company’s executive bodies,
reviewed the implementation of the
investor relations strategy, reports on
production, occupational health and
safety, progress in responding to the
incident at CHPP-3 in Norilsk, Norilsk
Nickel Group’s 2019 Sustainability
Report, and matters related to
preparing and holding General
Meetings of Shareholders.
Taking into account the requirements
of the Federal Law On Joint Stock
Companies, the level of decision-
making on applying for delisting has
been raised higher than required
by the Code – the Articles of
Association of PJSC MMC
No.
Corporate governance
principles
Compliance criteria
2.7.3 The format of the meeting
1. The company’s articles of
of the board of directors
is determined taking into
account the importance of
its agenda items. The most
important matters are
dealt with at meetings of
the board of directors held
in person.
association or internal document
provide(s) for the most important
matters (as per the list set
out in Recommendation 168
of the Code) to be discussed
at meetings of the board of
directors held in person.
Compliance
status2
☑ Partial
compliance
Reasons3 for non-compliance
Criterion 1 is partially complied with.
The Regulations on the Board of
Directors of PJSC MMC NORILSK
NICKEL list matters to be discussed
only at in-person meetings of the
Board of Directors.
This list largely matches the list
set out in Recommendation 168 of
the Code; however, it reflects the
features of the Company’s corporate
governance and the distribution of
roles among its governance bodies.
Formally, the following matters are
not included in the list of matters to
be reviewed at in-person meetings of
the Board of Directors:
• Approval of material transactions
• Approval of the Company’s
registrar, as well as the terms of
the contract with the registrar and
its termination
• Review of material aspects
of operations of legal entities
controlled by the Company
• Matters relating to the Company’s
receipt of a mandatory or
voluntary offer
• Review of the Company’s
financial activities in the reporting
period (quarter, year)
• Matters related to the listing and
delisting of Company shares
• Review of the results of the
performance assessment of the
Board of Directors, executive
bodies of the Company and key
executives
• Review of the Risk Management
Policy
• Approval of the Company’s
Dividend Policy
NornickelAnnual report | 202010APPENDIX No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
NORILSK NICKEL refer this
matter to the General Meeting
of Shareholders. Approval of
the Annual Report and annual
accounting (financial) statements
is also referred to the General
Meeting of Shareholders. The
matter of convening the General
Meeting of Shareholders, including
the preparation of a report by the
Board of Directors setting forth its
substantiated position on the agenda
items of the General Meeting of
Shareholders, is reviewed at the
meeting of the Board of Directors
held in person.
Thus, the list of matters to be
reviewed only at in-person
meetings of the Board of Directors,
stipulated by the Regulations on
the Board of Directors of PJSC
MMC NORILSK NICKEL, does not
fully comply with the list of matters
stipulated by Recommendation
168 of the Code. Nevertheless,
virtually all of the matters specified
in Recommendation 168 of the Code
are reviewed in person by members
of the Board of Directors.
Discussion of items on the
agendas of committee meetings
requires sufficient time, since
recommendations expressing the
opinions of committee members
on agenda items are the basis for
an informed decision at a Board
meeting.
Excessive workload of
independent directors contradicts
the principle laid down in the
Corporate Governance Code
about “board members should
be able to spend sufficient time
working on the board of directors,
including on its committees”.
All elected members of the Audit
and Sustainable Development
Committee have the knowledge,
skills and experience required
to serve on the Committee. The
Committee is chaired by an
independent director.
The risks associated with partial
compliance with this criterion are
minimal.
No.
Corporate governance
principles
Compliance criteria
2.7.4 Resolutions on the
1. The company’s articles
most important matters
relating to the company’s
operations are passed at
a meeting of the board
of directors by a qualified
majority or by a majority of
all elected directors.
of association provide for
resolutions on the most
important matters set out in
Recommendation 170 of the
Code to be passed at a meeting
of the board of directors by a
qualified majority of at least
three quarters or by a majority
of all elected directors.
Compliance
status2
☑ Partial
compliance
350 351
Reasons3 for non-compliance
Criterion 1 is partially complied with.
The Company’s Articles of
Association provide for resolutions
on increasing the Company’s
authorised capital by placing
additional shares to be passed by
the Board of Directors unanimously.
Resolutions on certain material
matters (some of which are listed in
Recommendation 170 of the Code)
are passed by at least ten votes of
members of the Board of Directors
(which is at least three quarters of all
directors). These matters include:
• Submission for review by the
General Meeting of Shareholders
of matters concerning
amendments and addenda to the
Articles of Association and the
reduction of authorised capital
• Approval and amendment of the
Dividend Policy
• Approval of material transactions
• Review of material matters
relating to the operations of
controlled entities
Internal documents, the Company’s
sales strategy and other matters are
also approved by at least ten votes of
members of the Board of Directors.
In addition, a special quorum
is stipulated by the Company’s
Articles of Association whenever
the agenda of a meeting includes
the determination of the Company’s
business priorities, development
concept and strategy, approval of the
Company’s plans and budgets, as
well as submission for review by the
General Meeting of Shareholders of
matters concerning reorganisation
and liquidation of the Company
and increase of its authorised
capital: at least two thirds of the
elected directors, including at least
one independent director, must
participate in the meeting.
The risks associated with partial
compliance with Recommendation
170 of the Code are offset by the
traditionally active participation
of Board members in meetings
(generally, 100%) and consensus-
based decision-making by the
Board of Directors (in most cases
unanimously). Matters of particular
importance are subject to preliminary
discussion by committees of the
Board of Directors.
NornickelAnnual report | 202010APPENDIX Compliance
status2
☑ Partial
compliance
No.
Corporate governance
principles
2.8.2 To preview matters
related to adopting an
efficient and transparent
remuneration scheme, a
remuneration committee
was set up, comprised
of independent directors
and headed by an
independent director who
is not the chairman of the
board of directors.
Compliance criteria
1. The board of directors
set up a remuneration
committee comprised solely of
independent directors.
2. The remuneration committee
is chaired by an independent
director who is not the chairman
of the board of directors.
3. The company’s internal
documents set out the tasks of
the remuneration committee,
including those listed in
Recommendation 180 of the
Code.
352 353
Reasons3 for non-compliance
Criterion 1 is partially complied
with.
The Company combines the
functions of the Remuneration
Committee and the Nomination
Committee within the Corporate
Governance, Nomination and
Remuneration Committee of the
Board of Directors. The Committee
is made up of four independent
directors and one non-executive
director (who are not the issuer’s
sole executive body and/or
members of its collegial executive
body).
According to the Company’s
internal documents, the Board
of Directors has 13 members.
The Board of Directors includes
six independent directors.
The Company has four Board
committees, each comprised
of five members. According
to their terms of reference,
each committee must include
independent directors. All six
independent members of the
Board of Directors are involved in
the activities of the committees,
but it is not possible to establish
committees entirely made up of
independent directors due to the
insufficient ratio of the number of
independent directors (six people)
to the total number of committee
members (20 people). In 2020,
the Corporate Governance,
Nomination and Remuneration
Committee of the Board of
Directors held 11 meetings. In
addition, an average of three
Board meetings were held each
month in 2020.
No.
2.8
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The board of directors sets up committees to preview the most important matters related to the company’s
operations.
☑ Partial
compliance
2.8.1 An audit committee
1. The board of directors set up
comprised of independent
directors was set up to
preview matters related to
controlling the company’s
financial and business
activities.
an audit committee comprised
solely of independent directors.
2. The company’s internal
documents set out the tasks of
the audit committee, including
those listed in Recommendation
172 of the Code.
3. At least one member of the
audit committee represented
by an independent director has
experience and knowledge of
preparing, analyzing, assessing
and auditing accounting
(financial) statements.
4. In the reporting period,
meetings of the audit committee
were held at least once a
quarter.
Criterion 1 is partially complied
with.
The Audit and Sustainable
Development Committee is
established at the Company, made
up of three independent and two
non-executive directors (who are
not the issuer’s sole executive
body and/or members of its
collegial executive body).
According to the Company’s
internal documents, the Board
of Directors has 13 members.
The Board of Directors includes
six independent directors.
The Company has four Board
committees, each comprised
of five members. According
to their terms of reference,
each committee must include
independent directors. All six
independent members of the
Board of Directors are involved in
the activities of the committees,
but it is not possible to establish
committees entirely made up of
independent directors due to the
insufficient ratio of the number of
independent directors (six people)
to the total number of committee
members (20 people).
In 2020, the Audit Committee of
the Board of Directors held eight
meetings. In addition, an average
of three Board meetings were held
each month in 2020.
Discussion of items on the
agendas of committee meetings
requires sufficient time, since
recommendations expressing the
opinions of committee members
on agenda items are the basis for
an informed decision at a Board
meeting.
Excessive workload of
independent directors contradicts
the principle laid down in the
Corporate Governance Code
about “board members should
be able to spend sufficient time
working on the board of directors,
including on its committees”.
All elected members of the Audit
and Sustainable Development
Committee have the knowledge,
skills and experience required
to serve on the Committee. The
Committee is chaired by an
independent director.
The risks associated with partial
compliance with this criterion are
minimal.
NornickelAnnual report | 202010APPENDIX No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
No.
Corporate governance
principles
Compliance criteria
2.8.3 To preview matters related
to talent management
(succession planning),
professional composition
and efficiency of the board
of directors, a nomination
(appointments, HR)
committee was set up,
predominantly comprised
of independent directors.
1. The board of directors set up
a nomination committee
(or its tasks listed in
Recommendation 186 of the
Code are fulfilled by another
committee5) predominantly
comprised of independent
directors.
2. The company’s internal
documents set out the tasks
of the nomination committee
(or the tasks of the relevant
committee with combined
functions), including those listed
in Recommendation 186 of the
Code.
Discussion of items on the
agendas of committee meetings
requires sufficient time, since
recommendations expressing the
opinions of committee members
on agenda items are the basis for
an informed decision at a Board
meeting.
Excessive workload of
independent directors contradicts
the principle laid down in the
Corporate Governance Code
about “board members should
be able to spend sufficient time
working on the board of directors,
including on its committees”.
All elected members of the
Corporate Governance,
Nomination and Remuneration
Committee have the knowledge,
skills and experience required
to serve on the Committee. In
addition, the Committee is chaired
by an independent director.
The risks associated with partial
compliance with this criterion are
minimal.
Criterion 3 is partially complied
with.
The Terms of Reference of
the Corporate Governance,
Nomination and Remuneration
Committee of the Board of
Directors of PJSC MMC NORILSK
NICKEL set out the Committee’s
tasks listed in Recommendation
180 of the Code, excluding Sub-
paragraph 7 “Preparing a report
on practical implementation of
the policies on remuneration due
to members of the company’s
executive bodies; such report
shall be included in the annual
report and other documents of the
company”.
354 355
Compliance
status2
☑ Partial
compliance
Reasons3 for non-compliance
Criterion 1 is complied with.
The Company integrates the
functions of the Nomination
Committee within the Corporate
Governance, Nomination and
Remuneration Committee of the
Board of Directors. The Committee
is made up of five members of
the Board of Directors – four
independent directors and one
non-executive director (who are
not the issuer’s sole executive
body and/or members of its
collegial executive body).
Criterion 2 is partially complied
with.
The Terms of Reference of
the Corporate Governance,
Nomination and Remuneration
Committee of the Board of
Directors of PJSC MMC NORILSK
NICKEL set out all the tasks listed
in Recommendation 186 of the
Code, excluding Sub-paragraph
4 “Description of individual duties
of directors and the chairman of
the board of directors, including
time they should spend on
issues related to the company’s
activities, both at and outside the
board meetings, in the course
of planned and unplanned work.
Such descriptions (which shall be
prepared separately for the board
members and the chairman of
the board of directors) must be
approved by the board of directors
and provided to each new board
member and the chairman for
review after their election”.
The main duties of members
of the Board of Directors (including
the Chairman of the Board
of Directors) are prescribed
in the Regulations on the Board
of Directors. The composition
of the Company’s Board of
Directors is quite stable, and the
individual duties of each director
have already been established.
An induction training programme
has been developed for newly
elected directors to familiarise
them, among other things,
with the procedures of the Board
of Directors.
An additional description
of directors’ duties by the relevant
Committee will be purely formal.
The risks associated with partial
compliance with this criterion are
minimal.
The Company does not intend
to include this task in the functions
of the Committee.
NornickelAnnual report | 202010APPENDIX Compliance
status2
☑ Full
compliance
Reasons3 for non-compliance
The Company has four Board
committees6:
• Audit and Sustainable
Development Committee
• Corporate Governance,
Nomination and Remuneration
Committee
• Budget Committee
• Strategy Committee
No.
Corporate governance
principles
Compliance criteria
In the reporting period, the
company’s board of directors
considered whether the
composition of its committees
was in line with the board’s
tasks and the company’s
business goals. Additional
committees were either set up
or not deemed necessary.
2.8.4 Taking into account
1.
the company’s scale of
business and level of risks,
the company’s board
of directors made sure
that the composition of
its committees is fully in
line with the company’s
business goals. Additional
committees were either
set up or not deemed
necessary (strategy
committee, corporate
governance committee,
ethics committee, risk
management committee,
budget committee, health,
safety and environment
committee, etc.).
No.
Corporate governance
principles
2.8.5 Committees are
composed so as to
enable comprehensive
discussions of matters
under preview, taking into
account the diversity of
opinions.
Compliance
status2
☑ Partial
compliance
Compliance criteria
1. Committees of the board
of directors are headed by
independent directors.
2. The company’s internal
documents (policies) include
provisions stipulating that
persons who are not members
of the audit committee, the
nomination committee and the
remuneration committee may
attend committee meetings only
by invitation of the chairman of
the respective committee.
2.8.6 Committee chairmen
1.
inform the board of
directors and its chairman
on the performance of
their committees on a
regular basis.
In the reporting period,
committee chairmen reported
to the board of directors on the
performance of committees on a
regular basis.
☑ Full
compliance
356 357
Reasons3 for non-compliance
Criterion 1 is partially complied with.
According to the Company’s
internal documents, the Board
of Directors has 13 members,
including six independent directors.
The Company has four Board
committees, each comprised of five
members. According to their terms
of reference, each committee must
include independent directors. All
six independent members of the
Board of Directors are involved in
the activities of the committees. If
independent directors are elected
chairmen of all committees, it
will lead to excessive workload
of independent directors, which
contradicts the principle laid down
in the Corporate Governance Code
about “board members should be
able to spend sufficient time working
on the board of directors, including
on its committees”.
Consequently, the Budget
Committee and the Strategy
Committee are headed by non-
executive directors. The Budget
Committee and the Strategy
Committee each comprise two
independent and three non-
executive directors.
All elected members of the Budget
Committee and the Strategy
Committee have the knowledge,
skills and experience required to
serve on the committees. Committee
chairmen ensure their efficient
performance.
The risks associated with partial
compliance with this criterion are
minimal.
NornickelAnnual report | 202010APPENDIX Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The board of directors ensures performance assessment of the board of directors, its committees, and members of the
board of directors.
No.
2.9
2.9.1
The board of directors’
performance assessment
is aimed at determining
the efficiency of the
board of directors, its
committees and members,
consistency of their work
with the company’s growth
requirements, as well as
at bolstering the work
of the board of directors
and identifying areas for
improvement.
1. Self-assessment or external
assessment of the board
of directors’ performance
carried out in the reporting
period included performance
assessment of committees,
individual directors and the
board of directors in general.
2. Results of self-assessment or
external assessment of the
board of directors’ performance
carried out in the reporting
period were reviewed at
the meeting of the board of
directors held in person.
2.9.2 Performance of the board
1. The company engaged an
external advisor to conduct an
independent assessment of the
board of directors’ performance
at least once over the last three
reporting periods.
of directors, its committees
and members is assessed
regularly at least once a
year. An external advisor
is engaged at least once in
three years to conduct an
independent assessment
of the board of directors’
performance.
☑ Full
compliance
☑ Full
compliance
3.1
3.1.1
The company’s corporate secretary ensures efficient ongoing interaction with shareholders, coordinates the
company’s efforts to protect shareholder rights and interests, and supports efficient performance of the board of
directors.
☑ Full
compliance
The corporate secretary
has the knowledge,
experience and
qualifications sufficient
to perform his/her duties,
as well as an impeccable
reputation and the trust of
shareholders.
1. The company has adopted and
disclosed an internal document
– regulations on the corporate
secretary.
2. The biographical data of
the corporate secretary are
published on the corporate
website and in the company’s
annual report with the same
level of detail as for members of
the board of directors and the
company’s executives.
3.1.2
The corporate secretary is
sufficiently independent of
the company’s executive
bodies and has the
powers and resources
required to perform his/
her tasks.
1. The board of directors approves
the appointment, dismissal and
additional remuneration of the
corporate secretary.
☑ Full
compliance
No.
4.1
4.1.1
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
Remuneration payable by the company is sufficient to attract, motivate and retain people with competencies
and qualifications required by the company. Remuneration payable to directors, executive bodies and other key
executives of the company is in compliance with the approved remuneration policy of the company.
358 359
☑ Partial
compliance
1. The company has in place an
internal document (internal
documents) – the policy
(policies) on remuneration of
directors, executive bodies and
other key executives, which
clearly defines the approaches
to remuneration of the above
persons.
The amount of
remuneration paid by the
company to directors,
executive bodies and
other key executives
creates sufficient
incentives for them to
work efficiently while
enabling the company
to engage and retain
competent and qualified
specialists. At the same
time, the company avoids
unnecessarily high
remuneration, as well as
unjustifiably large gaps
between remunerations
of the above persons and
company employees.
The new version of the
Remuneration Policy for Members of
the Board of Directors of PJSC MMC
NORILSK NICKEL was approved
at the Annual General Meeting of
Shareholders reviewing the 2019
performance (Minutes No. 1 dated 14
May 2020).
The Policy describes the key
principles and parameters of the
remuneration system for members
of PJSC MMC NORILSK NICKEL’s
Board of Directors, the structure
of remuneration for non-executive
Board members (base remuneration,
additional remuneration for serving
on Board committees/chairing one
of the Board committees) and the
Chairman of the Board of Directors,
procedures for reimbursing incurred
expenses, as well as liability
insurance and indemnification.
The principles and basic mechanisms
of the remuneration (expense
reimbursement) system for members
of executive bodies are set forth
in the Articles of Association, the
Regulations on the Management
Board, and other internal documents
of the Company.
In particular, the Company has
in place the following internal
documents:
• Regulations on Annual
Performance Bonuses for Head
Office Employees of PJSC MMC
NORILSK NICKEL approved by
Order of the CEO – Chairman
of the Management Board of
OJSC MMC Norilsk Nickel No.
GMK/43-p dated 14 July 2014
• Regulations on Implementing
the Long-Term Remuneration
Programme for Key Employees
of the Norilsk Nickel Group
approved by Order of the
President of PJSC MMC NORILSK
NICKEL No. GMK/134-p dated 30
December 2015
• Regulations on Remuneration for
Employees of Business Units of
the Head Office of PJSC MMC
NORILSK NICKEL approved by
Order of the CEO of OJSC MMC
Norilsk Nickel No. GMK/49-p
dated 26 April 2002
NornickelAnnual report | 202010APPENDIX No.
4.1.2
4.1.3
Corporate governance
principles
The company’s
remuneration policy is
devised by the remuneration
committee and approved by
the board of directors. The
board of directors, assisted
by the remuneration
committee, ensures control
over the introduction and
implementation of the
company’s remuneration
policy, revising and
amending it as required.
The company’s
remuneration policy
includes transparent
mechanisms for
determining the amount
of remuneration due to
directors, executive bodies
and other key executives
of the company, and
regulates all types of
payments, benefits and
privileges provided to
such persons.
Compliance
status2
☑ Partial
compliance
Compliance criteria
1.
In the reporting period, the
remuneration committee
considered the remuneration
policy (policies) and its
(their) introduction practices
and presented relevant
recommendations to the board
of directors as required.
☑ Partial
compliance
1. The company’s remuneration
policy (policies) includes
(include) transparent
mechanisms for determining the
amount of remuneration due
to directors, executive bodies
and other key executives of
the company, and regulates
(regulate) all types of payments,
benefits and privileges provided
to such persons.
Reasons3 for non-compliance
The Corporate Governance,
Nomination and Remuneration
Committee of the Board of Directors
monitored the implementation of the
remuneration policy (system) so as to
develop proposals on its efficiency
improvement. Recommendations
of the Corporate Governance,
Nomination and Remuneration
Committee were communicated
to, and considered by, the Board of
Directors.
The Company’s remuneration
system includes the procedure for
determining (setting) the amount
of remuneration due to members
of the Board of Directors and
executive bodies. The remuneration
policy (system) in place at the
Company broadly complies with the
transparency criterion.
The procedure for determining the
amount of remuneration due to
members of the Board of Directors
is set forth in the Remuneration
Policy for Members of the Board of
Directors of PJSC MMC NORILSK
NICKEL, and is determined by
resolution of the General Meeting of
Shareholders.
The aggregate remuneration
payable to the President and
members of the Management Board
is comprised of basic salary and
bonuses (variable part). The variable
part of remuneration depends on
the Company’s performance and is
determined by both financial and
non-financial indicators.
The mechanism for determining the
amount of the variable part of the
remuneration payable to members of
the Management Board is based on
key performance indicators.
Key performance indicators are
reviewed and updated by the
Corporate Governance, Nomination
and Remuneration Committee of
the Board of Directors on an annual
basis.
360 361
Reasons3 for non-compliance
Compliance
status2
☑ Full
compliance
Compliance criteria
1. The remuneration policy
(policies) or other internal
documents of the company
define the rules for
reimbursement of expenses
incurred by directors, executive
bodies and other key executives
of the company.
Corporate governance
principles
The company determines
a policy on reimbursement
(compensation) of
expenses detailing a list of
reimbursable expenses and
specifying service levels
that directors, executive
bodies and other key
executives of the company
may claim. Such policy can
make part of the company’s
remuneration policy.
The remuneration system for members of the board of directors ensures alignment of financial interests of directors
with long-term financial interests of shareholders.
No.
4.1.4
4.2
4.2.1
The company pays fixed
annual remuneration to its
directors.
4.2.2 The company does not
1.
pay remuneration for
attending individual
meetings of the board
of directors or its
committees.
☑ Full
compliance
☑ Full
compliance
1. Fixed annual remuneration
was the only form of monetary
remuneration payable to
directors for their service on the
board of directors during the
reporting period.
If the company’s internal
document(s) – the remuneration
policy (policies) stipulates
(stipulate) provision of company
shares to members of the board
of directors, clear rules for share
ownership by board members
shall be defined and disclosed,
aimed at stimulating long-term
ownership of such shares.
No.
Corporate governance
principles
4.2.3 The company does
not provide for any
extra payments or
compensations in the
event of early termination
of directors’ tenure
resulting from a change
of control or any other
reasons.
Compliance criteria
1. The company does not provide
for any extra payments or
compensations in the event of
early termination of directors’
tenure resulting from a change
of control or any other reasons.
Compliance
status2
☑ Partial
compliance
Reasons3 for non-compliance
The Company’s remuneration policy
(system) does not provide for any
extra payments or compensations
in the event of early termination
of directors’ tenure resulting from
a change of control or any other
reasons.
The only exception is made for
the incumbent Chairman of the
Board of Directors. The General
Meeting of Shareholders resolved
to make additional payments to the
incumbent Chairman of the Board
of Directors of the Company in the
event of the above.
This exception is due to the unique
business skills and high demand
for this specialist, who is one of the
most experienced and professional
managers at the international level,
with significant experience in the
metals and mining sector.
NornickelAnnual report | 202010APPENDIX Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
362 363
No.
4.3
4.3.1
The company considers its performance and the personal contribution of each executive to the achievement of such
performance when determining the amount of a fee payable to members of executive bodies and other key executives
of the company.
Remuneration due to
members of executive
bodies and other key
executives of the company
is determined in a manner
providing for reasonable
and justified ratio of the
fixed part of remuneration
and the variable part
which depends on the
company’s performance
and the employee’s
personal (individual)
contribution.
☑ Partial
compliance
1.
In the reporting period, annual
performance targets approved
by the board of directors
were used to determine the
amount of the variable part of
remuneration due to members
of executive bodies and other
key executives of the company.
2. During the latest assessment
of the remuneration system for
members of executive bodies
and other key executives of the
company, the board of directors
(remuneration committee) made
sure that the company applies
an efficient ratio of the fixed and
variable parts of remuneration.
3. The company has in place a
procedure that guarantees
return to the company of bonus
payments illegally received by
members of executive bodies
and other key executives of the
company.
Criterion 1 is partially complied with.
Annual KPIs were used to determine
the amount of the variable part
of remuneration due to members
of executive bodies. These final
(annual) KPIs were preliminarily
analysed and assessed by the
Corporate Governance, Nomination
and Remuneration Committee of the
Board of Directors.
Criterion 2 is partially complied with.
The Corporate Governance,
Nomination and Remuneration
Committee of the Board of Directors
assesses the remuneration system
for the Company’s executive
bodies on an annual basis. Based
on the results of the most recent
assessment, recommendations were
made to change the variable part of
remuneration.
Criterion 3 is partially complied with.
Applicable laws stipulate a legal
mechanism for the Company to
recover bonus payments illegally
received by employees (including
members of the Company’s
executive bodies). The mechanism
is quite effective and can be used
whether or not it (or a reference
thereto) is included in the Company’s
internal documents.
4.3.2 The company has in place
1. The company has in place a
☑ No compliance The Company considers
a long-term incentive
programme for members
of executive bodies and
other key executives of
the company with the
use of company shares
(options and other
derivative instruments
where company shares
are the underlying asset).
long-term incentive programme
for members of executive
bodies and other key executives
of the company with the use
of company shares (financial
instruments based on company
shares).
2. The long-term incentive
introducing various motivation
programmes for employees of the
Norilsk Nickel Group including
members of executive bodies,
focusing in particular on promoting
legislative initiatives aimed at
improving the legal regulation of
the acquisition by a joint stock
company of its own shares.
programme for members of
executive bodies and other
key executives of the company
implies that the right to dispose
of shares and other financial
instruments used in this
programme takes effect at least
three years after such shares or
other financial instruments are
granted. The right to dispose of
such shares or other financial
instruments is linked to the
company’s performance targets.
In the reporting period,
the compensation (golden
parachute) payable by the
company in case of early
termination of powers of
members of executive bodies or
key executives at the company’s
initiative, provided that there
have been no actions in bad
faith on their part, did not
exceed the double amount of
the fixed part of their annual
remuneration.
☑ Full
compliance
1.
The compensation (golden
parachute) payable by the
company in case of early
termination of powers of
members of executive
bodies or key executives
at the company’s initiative,
provided that there have
been no actions in bad
faith on their part, does not
exceed the double amount
of the fixed part of their
annual remuneration.
The company has in place an effective risk management and internal control system providing reasonable assurance
in the achievement of the company’s goals.
The company’s board
of directors determined
the principles of, and
approaches to, setting up
a risk management and
internal control system at
the company.
The company’s
executive bodies ensure
establishment and
continuous operation of an
efficient risk management
and internal control
system at the company.
1. Functions of different
governance bodies and
business units of the company
in the risk management and
internal control system are
clearly defined in the company’s
internal documents/relevant
policy approved by the board of
directors.
1. The company’s executive
bodies ensured the distribution
of functions and powers related
to risk management and internal
control between the heads
(managers) of business units
and departments accountable
to them.
☑ Full
compliance
☑ Full
compliance
4.3.3
5.1
5.1.1
5.1.2
NornickelAnnual report | 202010APPENDIX Reasons3 for non-compliance
Corporate governance
principles
The company’s risk
management and internal
control system ensures
an objective, fair and clear
view of the current state
and future prospects of
the company, the integrity
and transparency of the
company’s reporting, as
well as reasonable and
acceptable risk exposure.
The company’s board of
directors takes necessary
measures to make sure that
the company’s current risk
management and internal
control system is consistent
with the principles of, and
approaches to, its setup
determined by the board
of directors, and that it
functions efficiently.
Compliance
status2
☑ Full
compliance
Compliance criteria
1. The company has approved an
anti-corruption policy.
2. The company has established
an accessible method of
notifying the board of directors
or the board’s audit committee
of breaches or any violations of
the law, the company’s internal
procedures and code of ethics.
☑ Full
compliance
1.
In the reporting period, the
board of directors or the board’s
audit committee assessed the
performance of the company’s
risk management and internal
control system. Key results of
this assessment are included in
the company’s annual report.
The company performs internal audits for regular independent assessment of the reliability and efficiency of its risk
management and internal control system, as well as corporate governance practices.
No.
6.1
6.1.1
6.1.2
No.
5.1.3
5.1.4
5.2
5.2.1
The company has set up a
separate business unit or
engaged an independent
external organisation to
carry out internal audits.
5.2.2 Functional and
administrative reporting
lines of the internal audit
unit are delineated.
The internal audit unit
functionally reports to the
board of directors.
☑ Full
compliance
☑ Full
compliance
1. To perform internal audits, the
company has set up a separate
business unit – internal audit
division functionally reporting to
the board of directors or to the
audit committee, or engaged
an independent external
organisation with the same line
of reporting.
1.
In the reporting period, the
performance of the internal
control and risk management
system was assessed as part of
the internal audit procedure.
2. The company applies generally
accepted approaches to internal
control and risk management.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The internal audit division assesses the performance of the internal control, risk management, and corporate
governance systems. The company applies generally accepted standards of internal audit.
364 365
The company has
developed and
implemented an
information policy
ensuring efficient
exchange of information
by the company, its
shareholders, investors
and other stakeholders.
The company discloses
information on its
corporate governance
system and practices,
including detailed
information on compliance
with the principles and
recommendations of the
Code.
☑ Full
compliance
☑ Full
compliance
1. The company’s board of
directors approved an
information policy developed
in accordance with the Code’s
recommendations.
2. The board of directors (or one
of its committees) considered
matters related to the
company’s compliance with its
information policy at least once
in the reporting period.
1. The company discloses
information on its corporate
governance system and
general principles of corporate
governance, including disclosure
on its website.
2. The company discloses
information on the composition
of its executive bodies and board
of directors, independence of
directors and their membership in
the board of directors’ committees
(as defined by the Code).
3. If the company has a controlling
person, the company publishes a
memorandum of the controlling
person setting out this person’s
plans for the company’s corporate
governance.
NornickelAnnual report | 202010APPENDIX Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The company makes timely disclosures of complete, up-to-date and reliable information about the company to allow
shareholders and investors to make informed decisions.
No.
6.2
6.2.1
The company discloses
information based
on the principles of
regularity, consistency
and promptness, as well
as availability, reliability,
completeness and
comparability of disclosed
data.
6.2.2 The company avoids a
formalistic approach to
information disclosure
and discloses material
information about
its operations, even
if disclosure of such
information is not required
by law.
6.2.3 The company’s annual
report, as one of the
most important tools of
its information exchange
with shareholders and
other stakeholders,
contains information
enabling assessment of
the company’s annual
performance results.
☑ Full
compliance
☑ Full
compliance
☑ Full
compliance
1. The company’s information policy
sets out the approaches to, and
criteria for, identifying information
that can have a material impact
on the company’s evaluation and
the price of its securities, as well
as procedures ensuring timely
disclosure of such information.
2. If company securities are traded
on foreign organized markets,
the company ensured concerted
and equivalent disclosure of
material information in the Russian
Federation and in the said markets
in the reporting year.
3. If foreign shareholders hold a
significant amount of the company
shares, the relevant information
was disclosed in the reporting
period both in the Russian
language and in one of the most
widely used foreign languages.
1.
In the reporting period, the
company disclosed annual and
semi-annual financial statements
prepared under the IFRS. The
company’s annual report for the
reporting period included annual
financial statements prepared
under the IFRS, along with the
auditor’s report.
2. The company discloses
complete information about its
capital structure, as stated in
Recommendation 290 of the
Code, in its annual report and on
the corporate website.
1. The company’s annual report
contains information about the
key aspects of its operational and
financial performance.
2. The company’s annual report
contains information about the
environmental and social aspects
of the company’s operations.
No.
6.3
6.3.1
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
The company provides information and documents requested by its shareholders in accordance with the principles of
equal and unhindered access.
366 367
The company provides
information and
documents requested
by its shareholders in
accordance with the
principles of equal and
unhindered access.
1. The company’s information
policy establishes the procedure
for providing shareholders with
easy access to information,
including information on legal
entities controlled by the
company, as requested by
shareholders.
☑ Full
compliance
Under the Company’s Regulations
on the Information Policy (the
“Regulations”), the procedure and
turnaround times for providing
access to the Company’s
documents are to be set out in an
internal document of the Company
published on the Company’s
website.
Pursuant to the above provision of
the Regulations, information on the
procedure for providing copies of
the Company’s documents upon
request of security holders and
other stakeholders is disclosed by
the Company on its website at:
https://www.nornickel.ru/
upload/iblock/d5c/Poryadok_
predostavleniya_dokumentov_
PAO_GMK_NN.pdf.
The procedure does not involve
any complex steps preventing
shareholders from obtaining
documents of the Company or its
controlled entities.
Additionally, documents that
are subject to disclosure by the
Company under Russian laws
and containing information on
controlled persons are freely
available on the Company’s
website under the Investors
section.
In particular, information on
controlled entities is provided in
Annual Reports, Sustainability
Reports, Issuer’s Quarterly
Reports, IFRS Consolidated
Financial Statements, Production
Results updates and Capital
Markets Day presentations.
NornickelAnnual report | 202010APPENDIX Reasons3 for non-compliance
No.
Corporate governance
principles
Compliance criteria
Compliance
status2
Reasons3 for non-compliance
368 369
No.
Corporate governance
principles
Compliance criteria
6.3.2 When providing
1.
Compliance
status2
☑ Full
compliance
In the reporting period, the
company did not refuse
shareholders’ requests for
information, or such refusals
were justified.
2. In cases defined by the
information policy, shareholders
are warned of the confidential
nature of the information and
undertake to maintain its
confidentiality.
information to
shareholders, the
company ensures
reasonable balance
between the interests of
particular shareholders
and its own interests
consisting in preserving
the confidentiality of
important commercial
information which may
materially affect its
competitive edge.
7.1
Actions that materially affect or may affect the company’s authorised capital structure and financial position and
accordingly the position of its shareholders (material corporate actions) are taken on fair terms ensuring that the
rights and interests of shareholders and other stakeholders are observed.
☑ Partial
compliance
7.1.1 Material corporate
1. The company’s articles of
actions include company
reorganisation, acquisition
of 30% or more of the
company’s voting shares
(takeover), execution by
the company of material
transactions, increase
or decrease of the
company’s authorised
capital, listing or delisting
of company shares, as
well as other actions
which may lead to material
changes in the rights of
shareholders or violation
of their interests. The
company’s articles of
association provide for a
list (criteria) of transactions
or other actions classified
as material corporate
actions, and these actions
are referred to the remit
of the company’s board of
directors.
association include a list of
transactions or other actions
classified as material corporate
actions, and their identification
criteria. Resolutions on material
corporate actions are referred
to the remit of the board of
directors. When execution
of such corporate actions
is expressly referred by law
to the remit of the general
meeting of shareholders, the
board of directors presents
relevant recommendations to
shareholders.
2. According to the company’s
articles of association, material
corporate actions include at
least: company reorganisation,
acquisition of 30% or more
of the company’s voting
shares (takeover), execution
by the company of material
transactions, increase or
decrease of the company’s
authorised capital, listing or
delisting of company shares.
Criteria 1 and 2 are partially complied
with.
The Company’s Articles of
Association do not formally stipulate
a list of actions and transactions that
are material corporate actions for the
Company.
At the same time, the Company’s
Articles of Association identify
certain corporate actions and
transactions, resolutions on which
are referred to the remit of the
Board of Directors due to their
significance for the Company.
Thus, the Company defines these
actions and transactions as material
and establishes the procedure
for passing relevant resolutions
recommended by the Code.
The list of such actions and
transactions largely follows
Recommendations 303 and 307 of
the Code, but also includes other
events and transactions of particular
importance to the Company.
When addressing the matter
of arranging and holding the
General Meeting of Shareholders,
the Board of Directors makes
recommendations to shareholders
for voting on all agenda items,
including those defined in
Recommendation 303 of the Code
as material corporate actions
– reorganisation, delisting, and
increase of the authorised capital.
In accordance with the Company’s
Articles of Association, approval of
a number of other transactions, in
addition to major transactions and
interested party transactions, is
referred to the remit of the Board of
Directors, including:
•
•
•
•
•
transactions with Company
shareholders holding more than
5% of voting shares, and their
affiliates
transactions worth over USD
200 mln
transactions worth over USD
20 mln excluding transactions
entered into in the ordinary
course of business
transactions associated
with purchase, disposal or
encumbrance of any securities
and derivative financial
instruments worth over USD 5
mln
transactions associated with
purchase/sale of any business/
enterprise, exclusive rights, real
estate, licences, concessions
and other rights to develop and
extract mineral resources, outside
the Russian Federation, worth
over USD 5 mln.
The Company’s voting
procedure at general meetings
of shareholders/participants of
subsidiaries on the approval of
the above transactions is also
referred to the remit of the Board
of Directors.
NornickelAnnual report | 202010APPENDIX Compliance criteria
1. The company has in place
a procedure enabling
independent directors to
express their opinions on
material corporate actions prior
to approval thereof.
Compliance
status2
☑ Full
compliance
☑ Full
compliance
1. Due to the specifics of the
company’s operations,
the company’s articles of
association contain less
stringent minimum criteria for
material corporate actions than
required by law.
2. All material corporate actions
in the reporting period were
duly approved before they were
taken.
No.
7.1.2
Corporate governance
principles
The board of directors
plays a key role in
passing resolutions or
making recommendations
on material corporate
actions, relying on the
opinions of the company’s
independent directors.
7.1.3 When taking material
corporate actions affecting
the rights and legitimate
interests of shareholders,
equal terms and conditions
are guaranteed for all
shareholders; if the statutory
procedure designed
to protect shareholder
rights proves insufficient,
additional measures are
taken to protect their rights
and legitimate interests. In
doing so, the company is
guided by the corporate
governance principles
set forth in the Code, as
well as by formal statutory
requirements.
7.2
7.2.1
The company takes material corporate actions in such a way as to ensure that shareholders timely receive complete
information about such actions, allowing them to influence such actions and guaranteeing adequate protection of
their rights when taking such actions.
Information about
material corporate
actions is disclosed
with explanations of the
grounds, circumstances
and consequences.
1.
In the reporting period, the
company disclosed information
about its material corporate
actions in due time and in detail,
including the grounds for, and
timelines of, such actions.
☑ Full
compliance
Reasons3 for non-compliance
No.
Corporate governance
principles
Compliance criteria
7.2.2 Rules and procedures
1. The company’s internal
related to material
corporate actions taken by
the company are set out
in the company’s internal
documents.
documents set out a procedure
for engaging an independent
appraiser to estimate the value
of assets either disposed of or
acquired in a major transaction or
an interested party transaction.
2. The company’s internal
documents set out a procedure
for engaging an independent
appraiser to estimate the value of
shares acquired and bought back
by the company.
3. The company’s internal
documents provide for an
expanded list of grounds on which
the company’s directors and other
persons as per the applicable
law are deemed to be interested
parties to the company’s
transactions.
370 371
Compliance
status2
☑ Partial
compliance
Reasons3 for non-compliance
Criteria 1 and 2 are partially
complied with.
The Company engages an
independent appraiser in all cases
stipulated by law. An independent
appraiser can be engaged at the
initiative of members of the Board
of Directors.
Notes:
1. The reporting year is indicated, and if the Corporate Governance Code Compliance Report contains data for the period from the
end of the reporting year to the date of this report, the date of this report is indicated.
2. Full compliance” means that the company meets all the compliance criteria. Otherwise, a “Partial compliance” or “No compliance”
status is used.
3. Reasons for partial compliance or non-compliance are provided for each compliance criterion in case the company only complies
with the criteria partially or does not comply with any of them. If the company’s compliance status is indicated as “Full compliance”,
no explanation is required.
4. Specify which of the two alternative approaches permitted by the principle has been implemented in the company and explain why
this approach was chosen.
5. If the tasks of the nomination committee are fulfilled by another committee, the name of the latter committee must be indicated.
6. A list of additional committees set up at the company must be provided.
NornickelAnnual report | 202010APPENDIX