Translated material
Expansion into Finland
Norilsk Nickel expands its nickel business outside Russia for the first time
The Russian Norilsk Nickel announced yesterday the purchase of a nickel business from the American OM Group for $408 million, including both mining and processing projects. The transaction amount does not include the repayment of financial debt and does not take into account the amount of cash on the company’s balance sheet. The new assets will allow Norilsk Nickel to increase its annual nickel production by 35-40 thousand tons (this is 12-17% of the current level of nickel production by the enterprises of the Russian company). In addition, Norilsk Nickel will expand its product range. Thanks to the capabilities of the newly acquired businesses, it will be able to supply the market with nickel salts and briquettes, whereas previously it supplied mainly nickel metal.The boards of directors of Norilsk Nickel and OM Group have already approved the deal, now the regulatory authorities of the countries in which the companies' enterprises are located must give their approval. In addition, the outcome of the deal, as the Russian company said in a statement, still “depends on the fulfillment of a number of conditions” that the parties do not disclose.
As part of the deal, Norilsk Nickel will receive an OMG nickel refining plant in the Finnish city of Harjavalta, the production capacity of which is designed to produce 60 thousand tons of nickel per year, and OMG's Cawse nickel ore mining and leaching division in Western Australia, which supplies nickel carbonate to the Finnish plant , 20% stake in Australian MPI Nickel Pty. Ltd, which develops the Black Swan and Silver Swan nickel mines and the Honeymoon Well project, and up to 11.1% in the form of ordinary shares and convertible debentures in Talvivaaran Kaivososakeyhtio (a heap bioleaching project in Finland).
After completion of the transaction, which is scheduled for the first quarter of next year, OM Group will become the main consumer of Norilsk Nickel’s cobalt products. The companies intend to sign a five-year agreement under which OM Group will annually purchase from Norilsk Nickel up to 2.5 thousand tons of cobalt metal, the same amount of cobalt in hydroxide and about 1.5 thousand tons of cobalt in sulfate solution. In addition, the American company Norilsk Nickel will supply nickel raw materials used in the production of special chemical products from OMG.
During a telephone conference on the deal, the deputy chairman of the Russian company, Tav Morgan, admitted that almost all of the cobalt produced by Norilsk Nickel enterprises would go to the American group.
Analysts participating in the Norilsk Nickel conference call were somewhat confused by the fact that the companies did not disclose the total reserves of the deposits transferred to Norilsk Nickel during the transaction. However, Mr Morgan promised that "in a couple of years they will be very competitive."
It should be noted that although the announced acquisition is by no means the first foreign purchase of Norilsk Nickel, it is the first step to expand the company’s nickel business beyond Russia. Prior to this, the company acquired a controlling stake in the American platinum metal producer Stillwater Mining, bought and then sold a 20% stake in the South African gold miner Goldfields, and together with its parent company Interros became the owner of a 35% stake in the American Plug Power, a developer of hydrogen energy technologies and manufacturer of the corresponding fuel cells.