22 Apr 2024 10:17

Nornickel to move Copper Plant facilities to China, form JV with access to battery tech

MOSCOW. April 22 (Interfax) - Nornickel plans move the smelting facilities of its Copper Plant, the modernization of which has been complicated by problems with western equipment, to China and form a joint venture with a Chinese company, the Russian mining giant's president, Vladimir Potanin said in an interview with Interfax.

Losses from discounts and refusals

"The project will enable us to avoid big losses due to current difficulties with settlements, supply refusals, discounts on our metal and the formation of inventories," Potanin said. The company estimates that because of this it can now firmly count on only 80% of its pre-sanctions revenue. Transactions costs, various commissions and payment for the services of intermediaries amount to as much as 5-7% of the price of the product.

Nornickel and its products are not subject to sanctions, but the company faces voluntary refusals to buy Russian products in Europe, exports to which generate a third of its revenue. The company has learned to manage this, but "this is continuing and will have a painful impact in the long term," Potanin said.

The decision to move some facilities to China was also influenced by the sanctions recently imposed by the United States and United Kingdom, as a result of which the London Metal Exchange has been barred from accepting new shipments of nonferrous metals from Russia.

"This pressure forced us to think about how to better deliver our commodity to markets. And one such nonstandard decision is moving a portion of production to markets of direct consumption," Potanin said.

Upsides of move to China

As a result, the joint venture's products will be sold as Chinese goods, which are harder to hit with sanctions, Potanin said. The problem of mutual settlements, which is most acute for Russian exporters, will also disappear. The center for solving the environmental problems of the Copper Plant, which was built in 1949, will also move to China, where there are more high-tech scenarios, he said.

"We are moving our environmental problems, settlement problems, market access problems, problems with customizing our product for the consumption market where they are solved most effectively, in this case to China. In exchange, we get the opportunity to extend our value chain and obtain advanced competencies that the company and the country need," Potanin said.

These competencies are technologies for production of battery materials, the raw material for which will be lithium, which Nornickel plans to produce at its joint venture with Rosatom to develop the Kolmozerskoye deposit.

"No one expected us to move into more advanced stages of creating value chains, specifically battery materials and alloys, production of batteries themselves. And now the time has come to recognize that we must certainly progress along these chains," Potanin said.

Nornickel will get a stake in the joint venture and return a substantial portion of the dividends from it to Russia for investment within the country, he said. Thanks to revenue from the venture, elimination of discounts and other losses, as well as future growth of production due to debottlenecking, Nornickel expects to boost revenue by 20% compared to the situation before the beginning of 2022.

"In four years we will essentially reach indicators that are almost 50% better than we have now and 20% better than two to four years ago," Potanin said.

Domestic production growth

The construction of the facilities in China will be synchronized with the decommissioning of facilities at the Copper Plant and will happen beyond the horizon of 2027, Potanin said.

"In terms of production plans and volumes, the process will be neutral. In future, we expect general production growth thanks to an increase in mining and processing," he said.

Copper concentrate in the amount of about 2 million tonnes per year will be shipped to China along the Northern Sea Route. For this purpose, the company will expand terminals in Dudinka and Murmansk and reach an agreement on icebreaker support with Rosatom.

"We expect that by the middle of 2027 we will manage to build the plant in China, having prepared our logistics and everything necessary for concentrate shipments," Potanin said.

By moving the obsolete facilities of the Copper Plant to China, Nornickel will be able to eliminate obstacles to the development of the whole of Talnakh and the Norilsk industrial district. "This will make it possible to energetically grow in both mining and processing by 2030," Potanin said.

Nornickel is therefore pushing the construction of the third phase of the Talnakha Concentrator, a project to expand the plant's production to 18 million tonnes that is part of the process of increasing output. The company also plans to launch a third smelting facility at the Nadezhda Metallurgical Plant. Nornickel had scheduled these projects long before 2022, but they were postponed due to problems with supplies of imported components.

Nornickel's project to form a joint venture with a Chinese company has secured political support and has been included in the agenda of top-level Russian-Chinese meetings, Potanin said, without naming the potential partner.

"We will penetrate our usual markets, but in an unusual form"

In addition to the copper production chain, certain agreements are possible with other Chinese companies that specialize in products made from nickel, cobalt and lithium, as well as lithium and sodium-ion battery materials.

"Strategically, we believe that such partners have an important synergistic effect - we get access to advanced technologies in sectors that are important for Russia and our partners get the ability to supply their production facilities with raw materials for the long-term future," Potanin said.

Thus, Nornickel will be able to "package our product in a more advanced casing," meaning supply a portion of metals in the form of finished product, materials for battery production, he said. "Thus we'll be able to relieve our sales system and ease access to markets that are temporarily, I hope, closed to us. We will penetrate our usual markets, but in an unusual form for us," Potanin said.

Prior to 2022, Nornickel planned to integrate into the battery production chain by working with BASF at its Norilsk Nickel Harjavalta plant in Finland, but this project has now been put on hold. "I still have hope that its economic potential is so high that sooner or later it may be realized," Potanin said, referring to the project with BASF.

He also said there is potential for synergy with other Russian copper projects that gravitate toward the Chinese market. "Perhaps we'll reach some sort of agreements here with our partners in the industry. At some next stage we will probably discuss this with them," Potanin said.

Two major copper projects are preparing to launch in Russia's Far East: Udokan, the operator of which is part of the USM group of Alisher Usmanov and his partners, and the Baimsky GOK mine and processing plant at the Peschanka deposit, the license to which is held by KAZ Minerals.