Financial Performance vs. Global Peers

2014 IFRS FINANCIAL RESULTS
March 31, 2015
Moscow
Disclaimer
The information contained herein has been prepared using information available to OJSC MMC Norilsk Nickel (“Norilsk Nickel”
or “NN”) at the time of preparation of the presentation. External or other factors may have impacted on the business of Norilsk
Nickel and the content of this presentation, since its preparation. In addition all relevant information about Norilsk Nickel may
not be included in this presentation. No representation or warranty, expressed or implied, is made as to the accuracy,
completeness or reliability of the information.
Any forward looking information herein has been prepared on the basis of a number of assumptions which may prove to be
incorrect. Forward looking statements, by the nature, involve risk and uncertainty and Norilsk Nickel cautions that actual results
may differ materially from those expressed or implied in such statements. Reference should be made to the most recent
Annual Report for a description of major risk factors. There may be other factors, both known and unknown to Norilsk Nickel,
which may have an impact on its performance. This presentation should not be relied upon as a recommendation or forecast
by Norilsk Nickel, which does not undertake an obligation to release any revision to these statements.
Certain market share information and other statements in this presentation regarding the industry in which Norilsk Nickel
operates and the position of Norilsk Nickel relative to its competitors are based upon information made publicly available by
other metals and mining companies or obtained from trade and business organizations and associations. Such information and
statements have not been verified by any independent sources, and measures of the financial or operating performance of
Norilsk Nickel’s competitors used in evaluating comparative positions may have been calculated in a different manner to the
corresponding measures employed by Norilsk Nickel.
This presentation does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or
any solicitation of any offer to purchase or subscribe for, any shares in Norilsk Nickel, nor shall it or any part of it nor the fact of
its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision
1
2014 Highlights: 35% EBITDA Growth and Three-Fold Decrease in WC
 Robust performance driven by the new strategy focused on capital discipline, cost control and with ROIC
expanding to 29% in 2014 from 15% in 2013.
 Revenue increased 3% y-o-y to USD11.9 billion supported by stronger nickel and palladium prices, and growth in
PGM sales volumes.
 EBITDA grew 35% y-o-y to USD5.7 billion with margin expanding to industry leading 48% driven by substantially
lower costs on the back of cash cost optimization, RUB devaluation and top-line growth.
 Net profit almost tripled reaching USD2 billion, with net profit adjusted for non-cash items amounted to
USD4 billion.
 FCF (before financing) increased almost 81% y-o-y to USD4.7 billion driven by the expansion in EBITDA, lower
CAPEX and reduction of the working capital.
 Working capital declined by USD1.9 billion y-o-y to USD1.1 billion well above targets and ahead of the schedule.
 Dividend per share increased 10% to USD20.7.
 Leverage remained conservative with Net Debt to LTM EBITDA ratio reducing to 0.6x from 1.1x.
 Company’s long-term credit rating was confirmed at investment grade (BBB-/Negative) by S&P despite the
agency downgraded Russian sovereign rating (to BB+/Negative) in January 2015.
 Progress in exiting from non-core and non-Tier 1 assets: disposal of Australian assets closed, definitive
agreement to sell African assets signed.
2
Financial Performance vs. Global Peers
Conservative Leverage: Net Debt/EBITDA, 2014
Leading Returns: EBITDA Margin, 2014
0.0x
41%
35%
25%
6%
0.5x
1.0x
48%
NN
0.6х
48%
Rio
0.6х
BHP
Anglo
Vale
GlenXstrata
1.5x
2.0x
2.5x
3.0x
0.8х
1.6х
1.8х
2.4х
Source: Bloomberg, Company data, 2014 Financial results
3
Health and Safety
Improved Safety Records in 2014
103
 Life protection is a top management priority – target
zero fatalities.
106
-41%
12
8
63
8
95
94
 Total number of accidents in 2014 decreased by 41%
y-o-y.
 Lost Time Injury Frequency Rate (LTIFR) in 2014 was
down 42% y-o-y to 0.47 (in line with the global mining
industry average).
55
2012
2013
Lost Time Injury
2014
Fatal
 All the accidents over the 5-year period were
analyzed with key risks identified. An
independent audit of current system of industrial
safety management was carried out .
lost time injuries per 1,000,000 hours
Lost Time Injury Frequency Rate (LTIFR)
0.77
 In 2014, management implemented the following
initiatives to improve H&S standards:
0.81
-42%
0.47
 Adaptation course for new employees and
personnel with work experience under 3 years
was prepared and over 1500 employees have
been trained.
 Health and Industrial Safety Strategy has been
approved.
2012
2013
2014
Source: Company data 1. LTIFR is calculated as the number of lost-time injuries per million hours worked
4
Markets Overview
Currencies and Oil Price Effect on Commodities Prices
Passive Funds Track Global Commodities Indices,
Energy 70% Weight, Base Metals <4%
Copper Price is Inversely Correlated with USD (DXY)
USD/t
USD bn
b.p.
11,000
110
10,000
100
9,000
90
8,000
80
7,000
70
6,000
60
Agriculture,
15%
150
Energy
70%
S&P CSCI
Cu,3%
Ni,1%
100
Other,11%
50
5,000
20-Mar-11
20-Mar-12
20-Mar-13
LME Copper price
20-Mar-14
50
20-Mar-15
Institutional and commodity
DXY Index
Active
USD
RUB
BRL
Passive
Mining Cash Costs Down in LTM:
Currencies & Oil Impact
Mining Currencies and Oil Price
Depreciation vs. USD, LTM
Brent
ETFs
AUD
CAD
MXN
-14%
-13%
-13%
ZAR
South Africa
North
American
Chile
Peru
New
Caledonia
Canada
-8%
-12%
-26%
-13%
-18%
-42%
-29%
-32%
PGMs
-29%
Cu
Ni
-69%
Source: Company data, Bloomberg, Wood Mackenzie, Citi Research; Notes: 1.Mining cash costs estimations based on USD costs
6
Preferred Metals Basket
Metal balances: Deficit in PGMs and Ni
for the Next Two Years
Preferred Metal Basket for the Medium Term
Consensus commodity price outlook
40%
5%
Norilsk
Nickel
Metal
Basket
(exc. Al)
30%
2%
2%
2%
1%
0.5%
1%
20%
1%
10%
-1%
0%
2014
-3%
2015Е
2016Е
2017Е
-3%
-10%
-5%
-20%
-7%
-30%
-9%
Pd
Pt
Ni
Cu
Al
Thermal
Coal
2015E
Norilsk Nickel metal basket
Iron Ore
2016E
-40%
Nickel
Copper
Palladium
Platinum
Aluminum
Gold
Iron Ore
Crude Oil (Brent)
Source: Company data, Bloomberg consensus, Citi Research, March 2015
7
Nickel Market: 2015 - a Turning Point
LME Nickel Price Down 6%, Inventories up 4% YTD
LME Inventories Accumulation Slowed Down in 2015
USD/t
kt
500
35,000
60
kt
q-o-q change
30,000
400
45
25,000
300
20,000
30
15,000
200
10,000
100
15
5,000
0
Mar-10
Mar-11
Johor
Mar-12
Mar-13
Rotterdam
Mar-14
Other
0
Mar-15
Nickel Price
0
1Q 12
3Q 12
1Q 13
Johor
-15
3Q 13
Rotterdam
1Q 14
3Q 14
2015 YTD
Other
China’s Dependence on Imported Refined Ni Set to Rise
Nickel Market Entering Deficit in 2015
kt
155
134
23%
22%
28%
39%
34%
48%
53%
13%
13%
13%
11%
11%
11%
2010
2011
2012
2013
2014
2015E
42%
88
27
(73)
2010
2011
2012
2013
2014
2015E
2016E
Own feed
64%
67%
Imported feed ore/intermediate
61%
47%
Imported primary nickel
Source: Company data, Bloomberg
8
Chinese Stainless Steel Remains Major Ni Demand Driver
kt
+4%
2,140
Consumption in Stainless Steel
+3%
Consumption in non-stainless applications
2,060
+4%
1,993
+5%
1,917
1,829
2013
China
Europe
Americas
Asia (ex China) 2014
China
Europe
Americas
Asia (ex China) 2015
2016
2017
Changes Y-on-Y basis:
 China share of global Ni demand has grown from 5% to 50% over the last 15 years!
 Chinese Stainless Steel industry (Tsingshan, Fujian Fuxin, Shandong, Sichuan Southwest, Baosteel, TISCO and others) is expected to
further expand capacity at 6% CAGR in 2015-2017
 Solid growth expected in global alloy and superalloy sector mainly driven by aerospace industry
 Moderate growth in ROW expected in 2015 and beyond
Source: Company data
9
Growing Nickel Consumption
Other World (exc. China) Stainless Steel Production
slowed down in 2014
China Stainless Steel Production up Strongly in 2014
kt
6,000
+5%
+15%
+16%
kt
6,000
-5%
4,000
4,000
2,000
2,000
-10%
-12%
0
0
1Q12
3Q12
1Q13
3Q12
1Q14
3Q14
1Q12
1Q15
1Q13
3Q13
1Q14
3Q14
1Q15
Ferritic Stainless Steel (400 series)
Ferritic Stainless Steel (400 series)
High Ni-contained Stainless Steel (300 series)
Y-o-Y
Y-o-Y
High Ni-contained Stainless Steel (300 series)
Low Ni-contained Stainless Steel (200 series)
Low Ni-contained Stainless Steel (200 series)
Primary Nickel Consumption (Stainless Steel)
1,600
3Q12
+5%
Primary Nickel Consumption (Non-Stainless Steel)
+4%
600
+4%
+3%
1,200
400
800
400
40%
49%
52%
57%
58%
60%
200
27%
29%
27%
30%
30%
31%
2010
2011
2012
2013
2014
2015E
0
0
2010
2011
2012
Nickel consumption in China
2013
2014
2015E
Nickel consumption in other countries
Nickel consumption in China
Nickel consumption in other countries
10
Nickel Ore Stocks in China are Depleting, Feed is Reducing
Nickel Feed for Chinese NPI to Reduce
by 35% by 2016
Chinese Ni Ore Inventories Down 4x in LTM:
Two Months of Consumption Left
50
mln, wet mt
months
40
8
Ni units, kt
500
6
400
30
300
4
20
200
2
10
0
Jan-13
100
0
0
May-13
Sep-13
Jan-14
May-14
Sep-14
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Jan-15
Low grade (Ni 0.8-1.2%)
Blended high&medium
Ore imported From the Philippines
Medium grade (Ni 1.3-1.6%)
High grade (Ni > 1.7%)
Ore imported from Indonesia
Ore from Chinese stock
Month of consumption High&Medium grade
Philippines: Declining Count of
Operating Mines, Steady Ore Grades
Philippines Ore Import to China Ahead of Mined
Production in 2014
y-o-y
38%
25
27%
20%
12%
-3%
Nickel ore production
20
18
15
1.4%
1.1%
10
2.0%
19
1.1%
17
1.5%
1.2%
1.0%
0.5%
5
2%
2012/2011
21
2013/2012
0
9М 2014/9М 2013
Nickel ore import to China
0.0%
2011
2012
Mined operated
2013
2014
Average Ni content in ore
Source: Company data, China custom statistics, Mines and Geosciences Bureau Republic of Philippines
11
New Nickel Projects Unable to Satisfy Demand Growth
New Projects Cannot Compensate for NPI Losses
while…
kt
… Nickel Consumption Keeps Growing
kt
120
65
100
80
78
60
40
88
20
0
2014
2015
2016
-20
2014
2015
2016
-40
New projects growth
Change at existing operations
New demand increase
NPI production losses (incl. effect on Indonesian NPI ramp-up)
Sources: Wood Mackenzie, Norilsk Nickel estimates
12
NPI Projects in Indonesia: Little Progress Thus Far
Only 3 Projects Have High Probability
to Complete
Project
name
Process
Indoferro
BF
Probability
Started
Indonesia NPI Output Forecast for 2015-2020
Start
year
Capacity,
kt Ni
2013
12
Mt
274
234
PT Cahaya
Modern Metal
Industry
BF
Started
2014
3
Tsingshan
RKEF
High
2015
30
9 projects
RKEF/BF
Medium
20162018
86
167
109
54
8 projects
RKEF/
BF/Leach
Low
2016-2017
163
20
6
2014
2015
2016
2017
2018
2019
Comissioned in 2014-2015
High probability
Medium probability
Low probability
2020
Sources: Company estimates
13
Palladium Demand Outstrips Supply
Automotive Industry is the Major Driver for Pd Demand
Moz
+2%
9.8
+1%
9.6
9.5
+2% +2%
10.1 10.2
Palladium ETFs Holdings Change:
Investors Fatigue Could be Temporary?
y-o-y
koz
1,104
904
381
430
507
24
2017E
2016E
2015E
Other
Jewellery
Chemical
Automotive
2014
Other
Jewellery
Chemical
Automotive
2013
(180)
(520)
2008
2009
2010
2011
2012
2013
2014
2015YTD
New Projects Have Long Development Time
Global Palladium Market: Major Structural Deficit
Supply outlook by expansion type, koz
Surplus / (deficit), koz
998
8,000
7,000
6,000
(494)
Production at existing sites
Probable projects
Possible projects
Gokhran deliveries
(1)
(956)
2020E
2019E
2018E
2017E
2016E
2015E
2014
2013
2012
2011
5,000
2011
2012
2013E
2014E
2015E
2016E
Primary metal consumption
Source: Company data
14
Platinum: Supply Side Issues Persist
Automotive Industry is the Major Driver for Pt Demand
Moz
+5%
+4%
8.3
+2%
+2%
8.4
8.6
Platinum ETFs Holdings Change
y-o-y
koz
902
7.9
7.6
583
384
276
2017E
2016E
2015E
Other
Glass
Jewellery
Automobile
2014
Other
Glass
Catalyst
Automobile
2013
102
6,000
(25)
2008
Pt Global Supply: Steady Decline of South Africa
7,000
229
183
2009
2010
2011
2012
2013
2014
2015YTD
Global Platinum Market: Deficit Holds
Surplus / (deficit), koz
koz
500
13%
13%
5,000
14%
12%
11%
4,000
3,000
15%
78%
74%
2,000
73%
73%
(264)
72%
65%
(621)
1,000
≈
0
2006
2011
South Africa
2012
Russia
Others
2013
Canada
2014
Zimbabwe
2015E
2011
2012
2013
2014E
2015E
2016E
Source: Norilsk nickel, Johnson Matthey
15
Global Car Industry Drives PGM Demand
Increasing Demand for PGM’s: Global Car Production up
3% in 2014 Lead by China, up 7%
mln
-10%
China
EU
USA
Turkey
Japan
-5%
Canada
South .Korea
0%
Mexico
Weighted average
India
Russia
ASEAN
Growth in 2014 →
5%
Argentina
Brazil
15%
10%
Growth in Vehicle Production:
Gasoline Growth Driven by China
+3%
CAGR Gasoline
+5%
59
64
67
17
17
17
2011
2012
71
74
77
68
17
18
19
20
2016E
2017E
Share in the world automobile production→
-15%
-20%
-25%
0%
0 10%
100 20%
200 30%
300 40%
400 50%
500 60%
600 70%
700 80%
800 90%
900 100%
1000
Chinese PGM Loading – Upside to Developed World
5.0
CAGR Diesel
2014
g/per vehicle
100%
80%
3.0
60%
2.0
40%
1.0
20%
0.0
0%
China
2014
2015E
Gasoline
Other
Gasoline – More Pd Intensive
4.0
Developed Economies
2013
Diesel
Diesel (including HDD)
Gasoline
Pt
Pd
Rh
Source: Company data.
16
Global Above-Ground PGM Stocks: Not as Much as it May Seem
Above-Ground Stocks: Only Half of Pd and a Third of Pt
is Available for Immediate Consumption
Moz,
The Market is Overestimating the Size of Available
PGMs Stocks
Months of consumption
30.0
15.0
12.0
9.0
not available
for immediate
consumption
6.0
3.0
20.0
10.0
0.0
Palladium
Platinum
Rhodium
Not-For-Sale Stocks ( consumer inventory and production-in-progress, coins,
strategic reserves, etc.)
Restricted Availability (NYMEX & TOCOM, limitation on monthly delivery
volumes)
Low Elasticity Stock (ETFs)
0.0
Palladium
Platinum
Norilsk Nickel
Standard Bank
Possibly Available Stock
Shipments from Russian Stockpiles (Gokhran)
Switzerland Net Pd Trade: Steady Outflow
Deliveries from Ministry of Finance stockpiles, koz
Moz
4.0
1,800
3.0
2.0
1,200
1.0
0.0
-1.0
600
-2.0
0
-3.0
2008
2009
2010
2011
2012
2013
2014
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Import
Export
Sources: Company estimates
17
Discount of Palladium to Platinum Set to Decline Further
Palladium is Undervalued Relative to Platinum
The Price Gap is Narrowing
1,800
1,600
USD/oz
USD/oz
1,600
1,200
1,400
1,200
800
1,000
800
400
600
400
0
200
0
1997
1999
2001
2003
2005
2007
Pd
Pt
2009
2011
2013
2015
YTD
-400
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
YTD
Pt premium over Pd
 Palladium and platinum come from the same mines, with similar processing costs
 Both metals have almost equal importance to the automotive sector, which represents 70% of the PGM demand
 The current discount of palladium to platinum has limited justification based on fundamentals; this discount has been reducing
since 2008
Source: Company data
18
Copper Market Remains Balanced, Inventories Low
China will Remain the Main Driver for
Cu Consumption Growth
LME Copper Price and Stocks
Mt
+3%
1,000
23.9
800
Price, USD/t
kt
12,000
+3%
+4%
+4%
23.3
22.6
10,000
8,000
600
21.8
6,000
400
20.6
4,000
200
2,000
0
Mar-10
2013
China
Other
countries
2014
China
Other
countries
2015
2016
2017
10%
Mt
20,000
Mar-12
SHFE
Mar-13
LME
0
Mar-14
Mar-15
LME Price
Copper Supply / Demand Balance
Copper Mine Disruptions: 60% Related to Low Prices
25,000
Mar-11
COMEX
kt
560
8%
8%
6%
15,000
6%
5%
6%
210
260
6%
5%
10,000
4%
4%
5,000
1%
0
10
2%
0%
2008
2009
2010
2011
Initinal mine production
2012
2013
2014
Supply disruptions
2015
YTD
(330)
2010
2011
2012
2013
2014
2015E
2016E
2017E
Source: Company data, Macquire Research
19
2014 Financial Results
Sales & Distribution Results: Strong Pd Performance
Base Metals Sales up from Own Feed
kt
273
55
12
45
6
219
222
369
13
9
370
12
14
-5%
286
PGM Sales Volumes: Pd up 4%, Pt up 1%, y-o-y
2,745
152
2,645
117
+1%
347
344
2013
+4%
koz
+1%
+1%
2014
2013
Russian feed
Russian tolling
Nickel
2,593
2,528
2013
2014
2014
Russian feed
International (from 3d party feed)
Palladium (1)
Copper
Realized Metals Prices: Ni and Pd Growth
USD/t
15,156
725
2013
2014
4%
9%
10,896
5%
8%
19%
21%
26%
23%
42%
43%
-6%
+11%
596
+5%
10,417
6,931
608
International (from 3d party feed)
Platinum
USD mln
17,072
7,397
660
64
Metal sales: Breakdown by Metal
+13%
-6%
651
43
1,481 1,388
804
49%
44%
Nickel
Copper
2013
2014
Palladium
2013
Platinum
2014
Nickel
2013
Copper
Palladium
2014
Platinum
Other
Source: Company data; Notes: 1. Excluding sales of metals purchased from third parties for resale
21
Metals Revenue: Structural Shifts Continue
Revenue Dynamics
Growth of metal sales by 5% to USD10.9 bn due to:
USD mln
+3%

Stronger nickel and palladium prices;
1,082
973

Increase in sales volumes of PGMs;
10,417
10,896

Negative off-set from lower nickel sales volumes
825
1,004
13,297
11,362
and lower copper and platinum prices;
2011
2012
Metal sales
2013
Other sales
2014

Price factor contributed positive USD491 mln
and volume factor – negative USD82 mln;
Metal Sales Breakdown: Growing Sales to Asia
Metals revenue mix:
USD mln
10,417
10,896
Europe
52%

PGMs up to 29%;

Nickel – the single largest at 43%;
50%
Asia
29%
32%
9%
9%
10%
9%
2013
2014
North
America
Geographical mix:

Europe – largest market, down to 50%;

Asia keeps growing – up to 32%;
Russia
Source: Company data
22
Growth in EBITDA and Improved EBITDA Margin
EBITDA increased by USD 1.5 bn (or 35%) on the back of higher metal sales prices, cost control
measures and depreciation of RUB against USD:
 Up: increase of metal sales by USD419 mln primarily due to strong prices of nickel and palladium, partly offset by increased
prices of purchased semi-products;
 Up: depreciation of RUB against USD contributed more than USD760 mln additional EBITDA;
 Up: cost control measures coupled with higher labour productivity - USD256 mln of cost reduction;
EBITDA Bridge
EBITDA & EBITDA Margin (%)
USD mln
USD mln
65%
52%
48%
8 000
40%
7 000
6 000
55%
94
150
45%
37%
(82)
5,681
35%
7,239
5 000
5,681
4 000
256
105
+35%
(219)
760
7,209
Operating improvements:
US0.4 bn
Sales
volume
58%
9 000
Macro&Regulatory factors:
USD1.1 bn
Cost
control
measures
10 000
25%
4,932
4,198
3 000
15%
4,198
419
2 000
5%
1 000
2014
Other
One-offs
2014
Inflation
2013
Export
duties
2012
Forex
2011
LME price
-5%
2010
2013
-
Source: Company data
23
Improving Management Control of Cash Costs
Cash Cost Reduction in 2014: Management Cost
Controls and RUB Depreciation
2014 Cash Costs Breakdown
USD mln
USD mln
4,756
Labour
Other
14%
39%
(631)
109
51
(94)
USD4,067 mln
4,067
(51)
(21)
Taxes
11%
3rd party
services
Services
(17)
(35)
Reported Cash Costs Dynamics
USD mln
4,756
737
4,067
557
563
912
720
829
1,830
1,574
2013
2014
-1%
Other
3rd party services
436
665
2014
Other
Transportation
2014 vs. 2013 FX Adjusted Cash Costs
USD mln
-14%
Materials and
supplies
Metals and
semi-products
Labour
20%
Purchased
metals and
semi-products
Materials
Forex
2013
16%
Materials and
supplies
Acquisition of
metals and semiproducts
Labour
Other
4,125
4,067
636
563
487
436
(10%)
759
665
(12%)
720
829
15%
1,523
1,574
2013
FX adjusted
2014
(11%)
3%
3rd party
services
Materials and
supplies
Acquisition of
metals and
semi-products
Labour
Source: Company data
24
Working Capital Release of USD1.9 bn
Net Working Capital Bridge: Management Initiatives and Favorable FX
4,044
USD1 bn
(-25%)
Operating cash flow
improvement:
USD1 bn
Environment and noncash allowances:
USD0.9 bn
3,018
(859)
USD 1.9 bn
(-64%)
(74)
(456)
(278)
1,083
(102)
(166)
12/31/2012
31.12.2013
FX
Non-cash and
non-operating
allowances
Prepayments for
metal sales
Receivables
factoring
Optimisation of
payables terms
Other
31.12.2014
Source: Company data
25
Management Focus on FCF Generation
FCF bridge(1) : More Intensive Reduction of Working Capital and Positive Effect of EBITDA
USD mln
+81%
691
4,725
(240)
(175)
(88)
448
1,483
2,606
2013
EBITDA
Working capital
change
CAPEX
Income tax paid
Other investments
Non-cash EBITDA
2014
Source: Company data 1. Free cash flow is a non-IFRS measure and is calculated as net cash generated from operating activities less net cash used in investing activities for the reported period
26
Capital Expenditures
USD mln
1,989
Chita Copper Project
(Bystrinskiy GOK)
163
117
182
Kola MMC
211
1,298
335
89
106
Key
projects
Talnakh Enrichment Plant
171
Polar mines
226
122
981
Mandatory
Capex
Skalisty mine
584
Mandatory CAPEX
2013
2014
7%
Total CapEx decreased by 35% y-o-y from USD2 bn in 2013 to USD 1.3 bn in 2014 due to:
13%
5%
 Roll out of new investment governance discipline, reduced cash advances
to suppliers, extension of deferred
payments;
7%
 Optimization of Chita project development schedule;
 Revision and optimization of Polar Division mine development projects;
31%
 RUB depreciation against USD;
Source: Company data
27
Maintaining Conservative Balance Sheet
The Highest Credit Rating from S&P Among Russian
Metals and Mining Peers
Leverage(1) Reduced to 0.6x Net Debt/EBITDA
USD bn
5.00
4.5
4.58
1.20
1.1
1.00
BBB-
3.99
4.00
3.51
3.54
0.80
3.00
0.8
0.8
2.00
1.69
1.00
0.4
(1.00)
BB+
0.40
0.5
BB
0.20
(2.61)
2009
BB+
0.6
2008
BB+
0.60
2010
2011
2012
2013
2014
0.00
Norilsk Nickel
-0.20
(2.00)
Russian
Federation
NLMK
Severstal
Metalloinvest
-0.40
(0.4)
Add text
(3.00)
-0.60
Liquidity and Debt Repayment Schedule(2)
Debt Structure as of Year-End
USD bn
Maturity
Currency
Collateral
5.0
2.5
2.2
1.8
1.5
2.8
Available liquidity
Available credit lines
1.0
2015
LT
83%
0.8
2016
2017
USD
82%
LT
83%
2018
Liquidity position
Cash and cash equivalents
LT
90%
2019+
USD
79%
USD
82%
ST
17%
ST
10%
RUB
17%
RUB
21%
2013
2014
2013
2014
Uns
ec
100
%
Uns
ec
100
%
2013
2014
Source: Company data, 1. Net Debt to Adjusted EBITDA , 2. As of December 31,2014
28
Major Projects Update
Talnakh Concentrator Modernization: First Stage Launched
New flotation cells installed
Project execution in 2 stages:
Stage 1 – completed on time/on budget
Construction of the basement for new grinding mills

Capacity – 7.7 Mtpa (unchanged)

Installation of new flotation cells (launched in January 2015)

Improved production process due to reduced amount of repairs works

Completed in 2014
Stage 2 ~10% complete
 Technology upgrade and capacity increase by 2.5 Mtpa to 10.2 Mtpa
 Increase of Ni content in Ni concentrate to 13.5%
 Completion – 2016
Current status:
 Feasibility study completed in 2014
 Construction in progress (~10% complete)
Total CapEx for the project: RUB43 bn; RUB27 bn remaining
Project IRR: over 40%1
Notes: 1.Excluding maintenance CapEx and including impact of debottlenecking for additional mining projects
30
Skalisty Mine: Completed by 50%
Project Overview
 Greenfield project
 Production capacity – 2.4Mtpa
 Ore reserves: 58Mt
 First stage to be launched in 2015
 Total CapEx: ~RUB58 bn (for 2015-2025)
 2014 CapEx: RUB4.7 bn
 Project status – completed by ~ 50%
 Estimated Project IRR exceeds 50%
 Progress in 2014:
793m Shaft sinking
Drifting
2 400m
Construction of ventilation shaft completed
Existing facility and drifting
by Q1 2013
Perspective construction 2015-2025
31
Production Reconfiguration: Current Status
Accelerated shutdown of Nickel Plant at Polar Division – on time/budget
 Shut down of smelting facilities by 1Q 2016;
 Refining capacities continue to use the work-in-progress material with a phased basis
elimination of capacity;
 Total shut-down scheduled by the end of 2016;
Modernization and expansion of smelting capacities at Nadezhda Plant
 Project realized on time/on budget;
 Capital repairs of the flash smelter furnace №2 was completed;
 Project preparation for the capital repairs of the flash smelter furnace №1 (EUR40 mln
and RUB0.5 bn);
 Project completion by December 2015;
Modernization and expansion of capacities at Kola Nickel Refinery
 The corrections to feasibility study for nickel electrolysis shop №2 have been made;
 Total project budget of RUB9.8 bn;
 Ramp-up by the end of 2017;
32
Chita Copper Project Development on Track
Transport Infrastructure
 Railway line Naryn-1 (Borzya) – Gazimursky Zavod completed by~90% (227 km, 3.7Mtpa
capacity). New contractor was hired in November 2014 to complete construction. Anticipated
commissioning – 2016.
 All inter-facility roads completed. Main access 11 km road connecting the site with the rail
station completed.
Stripping works at open-pit mine Ildikanskyi and Bystrinsky-2
 3 mln m3 of waste rock were moved in 2014.
Regular air transportation service between Irkutsk city and Gazimursky Zavod village
was launched in October 2014
Water dam at Gosudareva River
 The water dam was completed in 2014.
 The reservoir to provide water for the beneficiation plant and other needs.
Construction of main facilities
 The basement for enrichment plant, labour camp and storage facilities were constructed.
 The construction of the tailings storage facility started.
 Water disposal system construction started.
33
2015 Outlook
 We reiterate our bullish view on nickel market. We expect the market to turn into a small deficit in 2015,
which should expand in 2015.
 We expect robust copper demand and anticipate more production cuts due to technical, regulatory and
weather-related issues. We expect copper market to remain almost balanced with a small surplus in
2015.
 We expect both palladium and platinum prices to increase due to a structural deficit in the PGM market.
We also reiterate our long-held view that the discount of palladium to platinum should continue to shrink.
 We expect CAPEX for the FY2015 at RUB105 billion.
 Annual dividends are expected to be announced in April 2015.
 The company plans to buy back up to USD500 million of stock in 2015. The shares will be purchased
through open market operations and are expected to be cancelled afterwards.
34
Production Targets
2014 1
(actual)
2015 2
(plan)
2016
(plan)
2018
(plan)
Nickel, kt
228
(225-235)
220-226
225-235
225-235
Copper, kt
354
(340-350)
360-368
360-375
420–445 3
Platinum, koz
625
(625-635)
590-615
615-640
665-690
Palladium, koz
2,660
(2,530-2,550)
2,580-2,610
2,530-2,630
2,730-2,840
 New basis for production guidance - from "Metals produced by Russian assets" (Guidance 2013) to
"Metals produced from own feedstock" (current guidance)
 Target volumes for 2018 – in line with the previous guidance (2013), with the growth of production from own
feedstock (up 6% for Ni3) to overweight the effect of the exit from low-margin tolling operations
Notes: 1. In brackets – production guidance for 2014 for Russian Assets, including Kola Division tolling operations
2. Production targets for 2015E from Russian raw materials (including processing of Norilsk’s Russian materials at Norilsk Nickel Harjavalta)
3. Including the effect of Bystrinsky project ramp-up
35
Q&A Session
36