2016 Strategy Update New Platform to Deliver on Assets Modernization - London, May 2016 - Norilsk Nickel
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2016 Strategy Update New Platform to Deliver on Assets Modernization London, May 2016
Disclaimer
The information contained herein has been prepared using information available to PJSC 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
Strategy Update 2016 – Agenda
Strategic vision | Andrey Bugrov
Operations Update | Sergey Dyachenko
Investment Governance and Portfolio Update | Sergey Dubovitskiy
Markets | Anton Berlin
Financial Strategy and Results | Sergey Malyshev
Corporate Governance | Andrey Bugrov
2
Strategic vision
Andrey BUGROV
Deputy Chairman of the Board,
Senior Vice-President
Strategic Goals for 2016–2018 –
“Three Years of Assets Modernization”
2016–2018
“Round 2”: Assets Modernization
2013–2015 Delivering on downstream reconfiguration /
Closure of 1942 Nickel Plant
“Round 1”: Building Efficiency Platform
Advancing on Environmental Protection /
ROIC/Tier I/capital discipline
strategy adopted
“One site” solution for the sulfur project
Redefining copper value chain
Refocusing on Tier I assets
Launch of the new asset – Bystrinskiy project
Successive “quick wins” – CapEx, working
capital, operating costs
Verification of the business case for
upstream growth optionality
Non-core and Non-Tier I disposals
4
Capital Discipline in Action –
Delivery on Norilsk Strategy “Round 1”
Despite Challenging Commodity Market … Norilsk Delivered Industry-leading Financial
Environment… Results While Maintaining Conservative Leverage
Bloomberg commodity index, bp Net Debt/EBITDA, 2015 EBITDA Margin, 2015
200
High: 174 1.0x 50%
180
160 1.1x 36%
Peer 1
140
Peer 2 1.8x 42%
120 -57%
100 Peer 3 2.7x 24%
80
Peer 4 3.0x 5%
Low: 74
60
2011 2012 2013 2014 2015 2016
Peer 5 3.6x 19%
Note: the peers group includes Rio Tinto, BHP Billiton, Vale, Glencore, Anglo American
5
Capital Discipline in Numbers –
Quick Wins of Norilsk Strategy “Round 1”
3
2 Release of Unproductive Capital
1 Capital Discipline Economic Impact of Initiatives
(US$ in bn)
Operational Efficiency Capital Expenditures
(US$ in bn) 2.0
Nickel Equivalent Unit Cash Cost 2.0 Guidance
(2012=100%)
1.7
1,1
1.3
1,0 0.8
-39%
0,9
0,8
NWC’13–15 Non-core Assets
0,7 Reduction (1) Sales
2013 2014 2015
0,6
0,5
2012 2013 2014 2015
Note: 1. Adjusted for external factors and one-off effects.
6
Industry-Leading Shareholder Returns
While the Global Metals & Mining Industry Lost Norilsk Nickel Delivered Positive and Industry
Almost US$1.0 trillion in Shareholder Value… Leading Total Shareholder Return, 2013–2016 YTD1
Market Capitalisation of MSCI World Metals & Mining Index
(US$ in trln)
Norilsk Nickel 11%
1,4
RTS M&M (18)%
1,2 High: 1.4
Peer 1 (27)%
1,0
Peer 2 (48)%
0,8
-71%
NN Commodity Basket (44)%
0,6
Peer 3 (50)%
0,4
Peer 4 (57)%
Low: 0.4
0,2
Peer 5 (62)%
0,0
2013 2014 2015 2016 (80)% (60)% (40)% (20)% 0% 20%
Sources: Bloomberg, Companies data; The peer group includes Rio Tinto, BHP Billiton, Vale, Glencore, Anglo American.
Note: 1. For Norilsk Nickel and peers total shareholder return calculated as the total percentage change in share price, inclusive of all dividends paid and announced (ex-div date)
in a period from April 2013 to April 2016. For indices and commodities – percentage change index from April 1, 2013 to April 1, 2016. 7
Strategic Focus for 2016–2018 – “Round 2”
Balanced, Modern and Environmentally Friendly Assets
Implemented (in execution) at the 1st stage of the reconfiguration program
Nickel Chain Copper Chain
Balanced Ni Comprehensive solution for New «copper configuration»–comprehensive solution
smelting capacity “SO2 problem” in Ni stream for “SO2 problem” in Cu stream (“One-site solution”)
Nadezhda Nadezhda Plant Copper Plant
smelting
capacity, Mtpa Smelting
Smelting
(Copper plant)
1.9
2.4 +
New facilities on
Nadezhda plant
Nickel plant shutdown in 2016 +
SO2 capturing project is under Converting
1 Upgrade of existing
2013 2016 way Sulphur production
facility at the
Modern and flexible Ni-refining capacity Copper plant
Anode
Ni refining capacities, Ktpa smelting
2 Shutdown of the
most polluting
facilities
Refining
145
Electrowinning
(Copper plant)
65
45
3
Sulphur production from low-sulphur gases to be
Tank- NNH Tank- concentrated on one site – Nadezhda Sulphur Project
house-2 house-1
8
Strategic Focus for 2016–2018: Verification of Upstream
Business Case and Strategic Options
Focus on Talnakh development
Verified mine plan - to maintain Norilsk Nickel metal
production level in the long-term
Talnakh ore production, Mt
+20–25%
17.5–18.5
Strategic options for future
15.5–16
14.8 partnerships
Chita project – building a new mining
center in Siberia / Far East region in
1 partnership with Chinese and other
potential investors
South Cluster:
potential development option –
investment case for ore production
2 growth up to 6Mtpa
partnerships to de-risk the project
2015 2020 2025 considered
9Responsible Corporate Citizen in Dialogue with Stakeholders
and Partnership with Government
Support of major Sustainable Employees Partnership with the
nation-wide sports development of partnership and Government
and cultural projects* territories motivation
Norilsk Airport Renewed 3-year Stable fiscal
(Alykel) collective environment
reconstruction bargaining
agreement Early cancellation of
Norilsk City export duties on nickel
infrastructure: ‘Our home’ and ‘My and copper
home’ housing
• Kindergartens programs Railroad to Bystrinsky
• Hospitals project
• Water park ‘Cumulative equity
Golden Mask • Shopping mall pension’ program Co-financing of Norilsk
Art Festival
• Churches Airport reconstruction
Relocation
Fiber-optic high- program for Norilsk Dialogue on support
speed internet citizens for environmental
to Norilsk program
Subsidies on the
Pasvik Natural basic food basket Strategic partnerships
Reserve in Norilsk with state-owned
banks
* Football Union of Russia, CSKA Basketball Club, Sochi 2014 Olympic Games, Krasnoyarsk 2019 Winter Universiade, Golden Mask
National Performance Arts Festival, Rosa Khutor Olympic Ski Resort 10Promotions in the Top Management Team
Sergey Dubovitskiy Vladimir Zhukov
Vice President Vice President
Head of Strategy Head of Investor Relations
▪ Joined Norilsk Nickel in 2013 as Head of Strategic ▪ Joined Norilsk Nickel as IR Director in 2013
Planning Department
▪ 15 years of experience in the metals and mining
▪ Spearheaded the development and updates of the industry
corporate strategy, supervised capital investment policy
▪ Prior experience: Metals and mining equity research
▪ Prior experience: 6 years in strategy function in the oil & analyst at HSBC, Lehman Brothers/Nomura, Alfa Bank
gas industry and McKinsey&Co
▪ Holds PhD from the University of Nottingham Business
▪ Holds MBA from INSEAD Business School School
11Operational Priorities
Next Round of Modernization &
Strategic Optionality
“On Time/On Budget” 3
Uncompromised Focus Project Delivery
on Health, Safety 2
and Environment
1
Second phase of modernization:
comprehensive solutions for
environmental issues:
First phase of modernization is
close to completion: ‒ cost-effective
Health & Safety culture ‒ Talnakh concentrator – upgraded ‒ based on new technologies/“no
change dogma” approach to solution
‒ Nadezhda smelter – upgraded
space definition
‒ Norilsk nickel smelter shutdown –
Strategic aspiration for Optionality for strategic
75% complete
“Clean Norilsk” – with partnerships – priority for
15 mining (brownfield extensions)
material progress achieved at scalable options with low risk and
projects commissioned relatively short lead time (South
both NN sites in 2016
Bystrinskiy project on track Cluster)
12Operations Update
Sergey DYACHENKO
First Vice-President
Chief Operating OfficerOperations Update
Focus on health, safety and environment –
world-class standards
Downstream reconfiguration is on track –
over 50% of projects commissioned
Major Upstream projects are on track
Potential development projects – value creation
options in case of market recovery
14Adherence to High Health & Safety Standards –
Progress Update
LTIFR Dynamics Health and Safety Culture Change
1*10-6 DuPont production safety culture index
-24%
0.80
2.30
0.61 2.10
0.46 1.40
2013 2014 2015 Mar 14 Mar 15 Mar 16
Ongoing implementation of Group safety standards in
key areas
Production safety training and assessment
program under way
Strategic Objectives:
1 Zero-fatality on production sites
2 Sustainable LTIFR improvement – two-year average went down by more than 20 %
15Progress in Implementation of
“Environmental Roadmap for New Norilsk”
Polar Division SO2
Project Impact Emissions Impact
(mtpa)
Talnakh Increased Sulphur content in
concentrator tailings -15%
upgrade & Enables moving smelting 1.8
expansion operations from Nickel to
Nadezhda plant 1.5-1.6
“Environmental
roadmap”
Nickel plant SO2 emissions in
(completed and agglomeration residential areas to
close to facility shutdown decrease by 170-190 ktpa
completion
projects)
Nickel plant SO2 emissions in
electric furnaces residential areas to
and anode decrease by 160-180 ktpa 2014 2017
smelters
shutdown Emissions in residential
areas cut by 30-35%
Emissions from facilities located outside of residential areas
Emissions from facilities located within the city of Norilsk area
16“One Site” Solution
New solution:
Previous solution:
Single project with a number of
“Two sites – two independent projects”
modernization initiatives
Nadezhda Copper Nadezhda Copper
plant plant plant plant
Furnaces Furnaces
Upgrade
! Existing ! Existing
Upgrade
Sulphur shop Sulphur shop
SO2 SO2
Converters Converters
New
Sulphur !
project #1 SO2 Sulphur SO2
project #1
Sulphur Sulphur
project #2 project #2
Electrowining Electrowining
Construction of new converters
based on new technology of
“weak” gases treatment
Cu cathodes Cu cathodes
Achievement of regulatory targets for emissions reduction
Maintenance of copper production capacity
Projected CAPEX saving (to be specified based on detailed
engineering)
17Nadezhda Sulphur Dioxide Capturing Project –
Progress to Date
May
2015
I
Tender process Stage 1 was completed with a decision to
November’15
separate detailed engineering and construction phases
Feasibility study completed and approved by the
December’15
government’s technical expertise («Glavgosexpertisa»)
II
January’16 Stage 2 tender initiation
February’16 Engineering survey on site is in progress
April’16 Construction site preparation is in progress
Detailed engineering contract awarded to one of the world
May’16
leaders in engineering and construction market – SNC Lavalin
May
2016
Dialogue with Russian Government on support measures for the Company’s environmental program launched
18Production Reconfiguration Program – Overview
Reconfiguration Program
Assets Location Mining Concentrating Smelting Refining
Cu cathodes
Copper Smelter Copper Refinery
Polar Division
Norilsk
Kola Division and Polar Division Concentrator
Upgrade
NN Harjavalta PGMs in
7 Mines
concentrate
Upgrade
Precious metals
Nadezhda Smelter refinery
Kola Division
Talnakh
Concentrator
Nickel Smelter Nickel Refinery
Finland
Ni cathodes
Kola Division & NNH
Upgrade
NN Harjavalta Chita Cu cathodes
Russia
PGMs in
Kola Nickel concentrate
Refinery
2 Mines Zapolyarny Nickel
Concentrator Smelter Ni cathodes
Ni salts
Harjavalta Refinery
Mining operations Cu conc.
Chita
Concentrators Au conc.
Bystrinsky Bystrinsky
Metallurgical plants O/P mine Concentrator Fe conc.
Overall cost saving and improved recovery
Reconfiguration SO2 emissions reduction by 15% resulting from concentrator upgrade and Nickel plant shutdown;
impact significant decrease of emissions in residential areas
Energy consumption reduction by Polar Division
19Reconfiguration Program – On-time Delivery in Progress
Reconfiguration Program
2014 2015 2016 >2017
1
Nickel plant shutdown 75% of smelting capacity is Complete plant
Rehabilitation
down shutdown
2
Talnakh concentrator
Phase 1
upgrade and capacity Phase 2 completed
completed
expansion
3
Smelter upgrade Nadezhda plant upgrade
Nadezhda smelter
(phase 1) completed; all Nickel smelting
upgrade
completed operations moved to Nadezhda
4
Re-launch of the Nickel Tankhouse-1
Kola downstream
upgrade Cobalt electrowinning facility launched
Concentrate briquetting facility launched
5
5
FS completed, regulatory approvals Construction works with gradual
Kola refining upgrade
received, contractor selected commissioning in 2017–2019
and expansion
201 Nickel Plant Decommissioning –
Two Main Facilities Shut Down in April
Reconfiguration Program
Current state Next steps
To date – 75% of smelting capacity is down All facilities to be shut down by
October 2016
Agglomeration Smelting
2016+ – closure and site rehabilitation
Agg. facilities Smelters Converters
212 Talnakh Concentrator Upgrade (Phase 2) –
Successfully Completed
Reconfiguration Program
Phase 2 – upgrade & Phase 3 (potential) –
Phase 1
capacity expansion to 10.2 mtpa capacity expansion to 16.0 mtpa
Optimized utilization Capacity increase up to 10.2 mtpa Next steps:
Increased of nickel recovery rate by 1 p.p. Concentrate volume decrease enables Nickel Update of project design as well as budget
plant shutdown & schedule
Recovery improvement: Confirmation of economic impact
‒ Impact of new technology (7.7 mtpa): Ni up to 1%
‒ Impact of re-directing volumes from Norilsk
concentrator to Talnakh (2.5 mtpa): Ni – 2 %, Cu –
2 %, PGM – up to 4 %
Completed in 2014 Commissioned in May, 2016
2223
3 “Single Stream” Smelting at Nadezhda Plant – “On
Track” Commissioning in March 2016
Reconfiguration Program
Smelting capacity, Mmtpa Moving of all Ni smelting operations to Nadezhda plant
2.4
1.9
2014 2016 Norilsk Nickel plant Nickel plant
concentrator
Ni conc.
Upgrade
Ni conc.
Talnakh
Nadezhda plant Kola refinery
concentrator
NNH
Concentrating Smelting Refining
Upgrade of smelting, concentrate drying and
filtering facilities
244 Kola Downstream Modernisation: Launch of New
Facilities and Added Synergy with Polar
Reconfiguration Program
Concentrate briquetting facility Launch of cobalt cathodes Re-launch of Ni
1 2 3
commissioned production Tankhouse-1
>30 ktpa +US$25m +45 ktpa
reduction EBITDA of nickel production
of SO2 emissions capacity
Reduction of emissions in the Additional profitability compared Additional capacity to balance
concentrate preparation stage to selling Co concentrate production during
(Zapolyarny production site) reconfiguration program
255 Chlorine Leaching Technology in Kola Downstream –
Targeting Further Efficiency Gains in 2018–2019
Reconfiguration Program
What has been done? Next steps Expected impact
Kola Ni refining capacity, ktpa
Tankhouse-1 Tankhouse-2
165 190
45 45
120 145
Before After
Project design completed Equipment delivery Increase of extraction rate by
Regulatory approvals received Construction works with staged >1.0 p.p.
EPC-contractor selected, commissioning of new chlorine Decrease in unit cost at refining
construction contract signed leaching technology stage by ~10%
Zinc-recovery circuit is Full capacity from 2019 Improvement of work-in-
under construction progress turnover
26Reconfiguration Program Impact
Capital Expenditures Expected Impact
(US$ in m) % Complete
(May 2016) Government Support through
the Cancellation of Ni and Cu
1,010–1,070 Export Duties
(Starting from August, 2014)
400–420
Cost Optimization
340–360 Average Yearly
EBITDA Impact
Starting from 2018
Improved Recovery Rates
US$250–300m
260–290
2013–2019
Talnakh conc. upgrade (Phase 2) Work-in-progress Metal Release
Nadezhda upgrade and Nickel Pl. shutdown
Kola Refinery Upgrade
27Priority Upstream Brownfield Projects
Project Highlight
Taimyrskiy Mine Oktyabrskiy Mine Komsomolskiy Mine2
Reserves covered
by projects 63 mt of ore 59 mt of ore
2.3% 1.0 % 1.5%
Ni1
3.5% 3.1% 24 mt of ore 1.8%
Total
Cu1
7.3 g/t 7.6 g/t 5.3 g/t
PGM1
Ore production ramp up to 3.9 mtpa by 2022 Maintain production at 5.0–5.2 mtpa until 2023 Maintain production at 3.8–4.1 mtpa until 2020
Next stage to be launched in 2016 Next stage to be launched in 2017 Next stage to be launched in 2016
Project description CapEx 2016–2018: US$201m CapEx 2016–2018: US$113m CapEx 2016–2018: US$140m
Completion: 52% Completion: 40% Completion: 47%
72.0 70.0
CapEx, US$m 45.0
(actual 2015)
7,600m of underground shafts and drifts 7,100m of underground shafts and drifts 4,700m of underground shafts and drifts
Completed
in 2015 Launch of 0.8 mtpa capacity Launch of 1.0 mtpa capacity Launch of 0.7 mtpa capacity
On time/
On budget / / /
Note: 1. Ore grade.
2. Komsomolskiy mine data doesn’t include Skalistiy mine (Skalistiy mine is illustrated on a separate slide).
28Skalisty Mine: Project Development on Track
Project Highlight Project overview
Ventilation Shaft Main Shaft Auxiliary Shafts Ventilation Shaft Production capacity – 2.4 mtpa
Ore reserves – 58 mt
Estimated Project IRR > 30%
CapEx 2016–2018: ~ US$650m,
2015 CapEx ~ US$256m
Project timeline
Commissioned mining capacity – 500 ktpa in 2015
Next launch – 150 ktpa in 2016
Completion of ventilation shaft #10 in 2018
Completion of main shaft by 2019
Project update
Progress in 2015:
678m Shaft sinking Development
2,200m
Existing objects and shafts as at the beginning of 2015 Reconstruction works
Construction completed in 2013–2015 29
Total capital mine works planned in 2015–2025Bystrinsky Project – Pit Design Optimization Results
Indicators at 1Q16
Operational profile
macro conditions
Upstream (US$ in bn)
Pit optimization resulted in
significant reduction in
Reserves & Resources: 336 Mt
waste stripping CapEx’16–18
Cu – 0.64%
This in turn allowed to convert Fe – 20%
additional 40mt of ore resources Au – 0.8 g/t
into mineable reserves 0.9
Capacity: 10 Mtpa
Waste stripping Production profile
40,0 m m3
Ore production 10 9 10 EBITDA’20+
35,0 8
and processing, 8
30,0 Mt
6 0.4–0.5
25,0 4
2
20,0 2
0
15,0 2017 2018 2019 2020–2045
IRR
10,0
Annual production 2018–2020 (av.) 2021+
5,0
0,0
Cu (in concentrate) kt 45–50 70–75 >30%
2016 2017 2018 2019 2020 2021 2022
Au (in concentrate) koz 250–260 250–260
Previous design
Fe (magnetite kt 2000–2100 ~2900
Optimized design
concentrate)
Source: Norilsk Nickel.
30Bystrinsky Project: 45% Complete
Project Highlight
Railway link to the project site is near completion (227 km, 3.7 mtpa capacity). Project
financed in partnership with the Russian Government:
Trial operation launched in December 2015, full commissioning in 2016
An agreement reached with «FGC UES» regarding power line construction
and operation:
220kv power line construction is in progress. Commissioning is scheduled for 2Q17
Waste stripping at the open pits Ildikanskyi and Bystrinsky-2 is on schedule:
3m m3 of waste rock moved in 2015
Construction of main facilities/ordering of equipment on track:
Contractors have been hired for the construction works (concentrator, camp, etc.);
Ongoing construction of more than 20 facilities (ore supply, warehouses, etc.);
All concentrator equipment has been ordered (Outotec, FL Smidth)
31Bystrinsky Project: 45% Complete
Project Highlight
Primary Crusher Construction Crushed Ore Stockpile
Administration Building Mechanical Workshops
Source: Company data.
32Further Conversion of Norilsk Unique Resource Base into
Development Opportunities
Reserves and Resources – Polar Division (at 01/01/2016), mt
Comments
2,103 2,103
In addition to approved projects (15% of
15% 15% reserves) over 50% of reserves and
resources were subject to desktop studies
during 2015–2016
Long-term development scenarios were
identified – potential ore production increase
of 5–7 Mtpa by 2025–2030
56%
Potential development scenarios:
– Talnakh upstream projects
85%
– South Cluster development projects
– Talnakh concentrator upgrade (3rd stage)
Next stage – project design and schedule
29% development, commencing Investment
Committee procedures
2015 Strategy Current state
Reserves covered by approved projects Reserves for further review
Resources confirmed for development by desktop studies
33Long-term Mining Outlook for Polar Division
Upstream Development Scenarios, mtpa (ore)
South Cluster potential development Potential Talnakh concentrator
option: marginal returns – “zero”-NPV Expansion of concentrating
capacity after Talnakh-3: to upgrade (phase 3):
(@20%) at YTD spot
25 Mtpa Enables South Cluster
24 development
Polar Division concentrating capacity
after Talnakh-2: 19 Mtpa
20 Provides efficiency gains through
improved recoveries
16
Next steps:
12 Base production profile is stress
tested and demonstrates robust ‒ 2016–1H17:
profitability even in “gloomy” Update of project design and
8 market scenarios economic model
4 Detailed scheduling
‒ 2H17: Final investment decision
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
South Cluster “development option”
Base case ore production profile: Talnakh + “sunset” South Cluster
34Screening for Potential Long-term Opportunities
East Siberia – “home” Far East – vast undeveloped
Screening approach I region for NN/still II resource potential and links to target
underexplored Asian market
Strategic criteria:
Regions where NN can build Potential
on it competitive edge – Copper
greenfields
Russian Federation
Preferred products
(metals) basket Brownfield
exploration
Potential to become Maslovskoe
Tier I asset New exploration
licenses
Risk mitigation options
(project financing,
partnerships, etc.)
Prospects around
Chita project
35Production Guidance
Production Guidance from Russian Feedstock
Ni/Cu – kt, PGM – t
(saleable metal)
PGM Cu Ni
95–100 The Company will maintain stable
99 95–100 production levels after 2016
88-93
Copper volumes growth due to
grade increase (and from 2018 –
420–440 due to launch of Bystrinskiy project)
353 342–352 370–380
224 206–212 215–220 215–220
2015 2016 2017 2018
One-off increase of work-in-progress due to Nickel plant
shutdown and moving refining operations to Kola division
36Investment Governance and
Portfolio Update
Sergey DUBOVITSKIY
Vice-President
Head of StrategyNorilsk’s Strategic Principles – Set Out in 2013
Progress
Most non-Tier 1 assets successfully
Focus on Tier I Assets
exited, Stage II Strategic review underway
Optimal Value Chain Unprecedented production reconfiguration
Footprint program on track
Quality of investment governance enhanced
Capital and Investment
Discipline Stay-in-business CapEx and working
capital optimized down to industry averages
Enhanced focus on Health & Safety
Social Responsibility Norilsk’s city area emissions cut
by 30–35%
38Strategic Context – Rise in Volatility Combined with
Weak Prices…
Lessons Learnt from Previous Downturns:
Number of Weeks When Ni Price Was Below
Ni Spot Prices -60%, Ni Price Volatility +80% Top Quartile of Cost Curve
100
25 000 35%
90 87
30%
20 000 80
25% 70
15 000 60
20%
50 47
15%
10 000 40 36
30
10% 30
22
5 000 20 16
5%
10
0 0% 0
Apr 2014 Oct 2014 Apr 2015 Oct 2015 Apr 2016 1982-1983 1985-1986 1993 1998 2013 2016YTD
Ni Price (US$/t) Ni Price Volatility Number of weeks with the price below upper cost quartile
(years with average annual price below upper cost quartile only)
Source: Bloomberg, Norilsk Nickel data;
Note: Rolling annual volatility.
39… Driven by Tectonic Shift in Chinese Economic Model
GDP and Investments Growth Rate in China is Structural Shift in Chinese Economy:
Slowing Down Growth in Services, Reduction in Industry
12% 60%
+8% +6%
10% 50%
+3% +3%
8% 40%
6% 30%
4% 20%
2% 10%
0%
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
1990 1995 2000 2005 2010 2015
China World Agriculture Industry&Processing Services
(Primary) (Secondary) (Tertiary)
Source: Bloomberg, Norilsk Nickel data, World Bank.
40… Impacting Negatively Metal Intensity of the
Chinese Growth
Fixed-Asset Investments Growth
The Lowest Level Since 2000 Ni Demand Growth Rate in China to Normalize
China Fixed Assets Investments (Exc. Rural Households) 25%
Cumulative YoY growth
60 20%
+13% +1%
50 15%
+2% +2%
40
10%
30
5%
20
10
(5)%
0
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
1999 2002 2005 2008 2011 2014
China ROW
+ХХ% Average growth rate in 2000–2015, 2016–2020E
Source: Bloomberg, Norilsk Nickel data, JP Morgan Research, NBS Research data, World Bank.
41…. Challenge the Validity of Many Investment Decisions in
the Industry
Global Miners’ CapEx + M&A: Volatile Capital Intensity Tends to Overact in Up and Down Turns
(US$ in bn)
3.0x Decline
104
74
71
53 52 54
Overreaction?
40 38
79
71
64
26
52 21
43 20
42
36 37
2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E
M&A Spending CapEx
Source: Bloomberg, Norilsk Nickel data; Total CapEx includes major diversified peers – BHP Billiton, Rio Tinto, Vale, Anglo American, Glencore and Norilsk Nickel.
42Norilsk Investment Strategy in the Industry Context
Global Miners Investments
(US$ in bn)
224
158
61
Robust (low-risk/high
profitability) projects portfolio
Norilsk Nickel CapEx +
(US$ in bn)
Enhanced focus on investment
6.6 discipline (improved investment
governance system
4.9
implemented in 2013–2015)
=
Consistent/solid investment
2010–2012 2013–2015 2016–2018
program through the cycle
Environmental program (1st Phase) & Chita
Source: Bloomberg, Norilsk Nickel data.
43Strategic Priorities – Focus on Investment Discipline
US$1.0bn of Capital Investment Savings in 2014–2015
Annual CapEx (Norilsk Nickel)
(US$ in bn)
2.7
Portfolio of highly profitable commercial
0.7
projects – stress tested under spot
2.0 Guidance / market expectation
macro parameters
2,7 0.3
0.7 1.7 Major commercial projects are delivered on
time/on budget (see details on the next slide)
1.0
1.3
1.1 1,3
2.0 0.7
1.0 Stay-in-business investments optimized to
0.6 0.6 industry benchmark levels
2012 2013 2014 2015
Stay-in-business Projects Commercial Projects
44Strategic Priorities – Focus on Investment Discipline
Delivery On Key Investment Projects
Schedule Deviation, % of Investments Budget Deviation, % of Investments
83% of Investments – On Schedule since 2013 >95% of investments – On Budget/with Savings
Accelerated 19%
4% 4%
13%
83%
96%
On Schedule Over 6m delay On Budget/with Savings Overspending More than 20%
Up to 6m Deviation Overspending Up to 20%
Rigorous investment governance procedures in action
Low-risk projects portfolio
FX impact tailwind
45Strategic Priorities – Focus on Investment Discipline
Stress-tested Profitability of 2013 Upstream Projects Portfolio
Portfolio of Upstream Projects – Approved by the Investment Committee in 2013
IRR as of 01.01.2013 Based on Original Macro IRR as of 01.01.2013 Based on Spot Macro
Parameters Parameters1
% %
Skalistaya 31% 27%
Mine Projects
Komsomolsky 40% 35%
Mine Projects
Taimyrsky 53%
61%
Mine Projects
Oktyabrsky 79%
Mine Projects 91%
20% 20%
Note: 1. Average 1Q16 macro parameters.
46Strategic Priorities – Focus on Investment Discipline
Robust Returns of Current Upstream Projects Portfolio
Returns (Point-forward) Sensitivity of Approved Upstream Projects Portfolio1 to Macro Scenarios
As of 01.01.2016
Ni price
18 000
IRR 59% At Average 1Q16 Macro Parameters
15 000 Other Actual (Short-term) Macro Data Points
IRR 60%
in 2Q15–1Q16
IRR 59%
12 000
IRR 60%
9 000
IRR 59%
IRR 53%
6 000
3 000
Area of Returns Below 20%
0
45 50 55 60 65 70 75 80 85 90
RUB/US$ FX Rate
Note: 1. Excluding projects with launch in 2016.
47Strategic Priorities – Focus on Investment Discipline
Stay-in-business CAPEX Optimisation
Production Assets Maintenance Energy Assets Maintenance
Implementation of risk assessment tools and Strategy review for Energy business – revised
long-term equipment replacement programs technological solutions
Approach
Implementation of Total Cost of Ownership approach
Enhanced tendering procedures/Review of payment terms
Example: capitalized maintenance dynamics Example: Energy business strategy review
Roubles –
Up to 20% of CapEx savings (excl. FX impact)
Examples zero inflation
while maintaining the same level of energy
supply security
US$ – (see next slide for more details)
>40%
2012-2013 2015-2016 optimization
average average
48Energy Business Strategy Review –
Optimization of CAPEX Program for 2016–2018 by 20 %
PV CAPEX in Energy Assets in 2016–2018
(US$ in m)
-19–20%
890 -220
+170 720
-120
550
Energy Business Revision of The Cost and Payment CapEx Program in Additional Projects “Nov 2015” Strategy
Strategy “2012” Projects Portfolio Schedule the Same Scope
Optimization
Review of Gas Midstream development strategy Additional projects identified due to
based on revised technological solution more rigorous planning process and
risk assessment
Investments synchronized with demand dynamics
492016 Investment Plan
US$0.5bn Optimization Vis-à-Vis the Guidance
Potential Tier-1 status confirmed
projects
Growth
Chita
500–550
Copper Project
De-risking strategy in implementation – partnership and
project financing
2.0 Guidance
Saving vis-à-vis
the Guidance
1.5 Downstream Nickel Plant shutdown, completion of Nadezhda Plant upgrade,
Base Investment Program
240–270 Reconfiguration Talnakh concentrator upgrade – Phase 2 launch
Brownfield extension projects to maintain current
Upstream Projects
330–370 production level
Other Efficiency improvement projects and initiatives (IT, automation,
140–160 Commercial Projects R&D, exploration, etc.)
250–290 Maintenance of Investments in Energy (gas, power) and Logistics (ports,
Infrastructure Assets fleet) assets
430–490 Maintenance of Investments in maintenance of production assets (equipment
Production Assets replacement, fulfilment of regulatory requirements, etc.)
2016 Plan
US$ in m
502016–2018 CAPEX Target – US$2bn p.a.
Cumulative CAPEX 2016–2018
(US$ in bn) Goals / Context Potential Co-funding
Growth Projects
~0.9 Chita Copper Project completion in 4Q2017
Partnership and project financing
Project and ramp-up
TBD Optional Projects
Investment decisions subject to market Partnership for South Cluster
Talnakh conc. (Ph.3) conditions and strategic review results considered
South Cluster
Environmental
Program
TBD Sulphur Dioxide First phase of “One-Site Sulphur
Government support discussed
Capturing Project Project”
+
4.4
Base Investment Program
0.5–0.6 Reconfiguration Full completion in 2019
1.2–1.4 Brownfield projects to maintain current
Upstream Projects
level of production
0.4–0.5 Other Commercial Process upgrades (IT infrastructure,
Projects automation), R&D, exploration, etc.
Mandatory CapEx – to ensure
1.9–2.3 Stay-in-business
undisrupted production processes and
Projects
meeting of all obligations
2016–2018
51Norilsk Asset Portfolio – Status Update
Norilsk Asset Portfolio
Maslovskoe Honeymoon Well
Potential/Greenfields
Core Assets
Strategic Review Cash Proceeds &
Foregone Liabilities
Non-Core:
Exited/In Closing
Bystrinsky
Polar :
South Cluster Nkomati (50%)(1) Closed:
(PGM/Tail Co)
Kola Arkhangelsk Port US$0.8bn
Tati Nickel (85%)
Operating
Polar :
Talnakh Cluster Nordavia Inter Rao (13,2%)
NNH In Closing:
Australian assets
Gas UpstreamCo Minority stakes in
power grid companies US$0.6bn(2)
Other non-core assets
Tier I Non-Tier I/Supporting Business
– The size of the bubble represents indicative estimate of the assets’ value compared to each other
Note: 1. Closure pending due to regulatory approvals
2. Including proceeds from the sale of 0.79% treasury shares (US$158m).
52Norilsk’s Legacy Assets – Status Update
Pro-Forma
Overview Revenue Core/tier 1? Status
(FY’15, US$ in bn)
PGM-rich
Asset perimeter
mines (open pit
defined,
& underground)
business case
with own ~0.4 under review
concentrating
facility located Strategic
within Polar options
Division considered
Polar “South (incl. potential
partnerships)
Cluster” Norilsk
Upstream Ongoing legal
cluster of 4 restructuring of
developed gas ~0.1 gas business
fields in close into Upstream
Norilsk gas proximity to the and
upstream Polar Division Downstream
companies
53Bystrinsky Project De-Risking Plan – Implemented
Realized De-Risking Initiatives:
Leveraging Public-Private Partnerships:
Railway link construction on track; to be Best-in-class mining
Project Status
completed by the end of the year greenfield project
Project Launch: Agreement with Federal Grid and VTB bank on
On track, planned construction and financing of grid infrastructure Tier-1 status in
for 4Q17 Norilsk portfolio
Bringing high-quality strategic partners:
Residual CAPEX: Norilsk reiterates its
~US$0.9bn Sale of a minority stake (13.33 %) to a strategic interest in
consortium of Chinese investors. Binding operating the project
agreement signed in 2015 and increasing its
footprint in the region
Securing project financing:
US$800m facility from Sberbank for 8 years
approved; first installment received in May 2016
54Adaptive Dividend Targets Providing Superior Shareholder
Returns and Balanced Financial Model
Uses Sources
New Dividend Targets Dependent on Highest quality Tier I mining assets – strong
with Improved Flexibility Net debt/EBITDA margins and cash generation even at cycle lows
Dividend Ample liquidity – US$6bn in cash and
Floor committed credit lines as of 1Q16
3.65
Project financing for Bystrinskiy Project
Environmental
(up to US$0.8bn)
Projects & Chita
Highly Profitable, Proceeds from the sale of non-core assets
Disciplined CapEx (executed/signed transactions)
Base CapEx
Programme
4.4
Further strategic optionality – ongoing strategic
review and non-core asset disposal programs,
potential pre-payment/streaming options
2016–2018
55Superior Shareholder Returns
Leading Mining Companies - Projected Dividend Yield for 2016 FY
Corresponding
to the minimum
dividend of
$1.3bn*
6.2%
4.1%
1.7%
0.1% 0.0% 0.0%
Norilsk Nickel Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
Sources: Bloomberg, Companies data; The peer group includes Rio Tinto, BHP Billiton, Vale, Glencore, Anglo American.
Note: 1. Projected dividend yield (ex-date) based on 2016 FY (including interim and final dividends for 2016 FY) - minimal definition of the “floor”, to be increased by Nkomati deal
proceeds 56Key Takeaways
Norilsk in the industry context – consistent and solid investment program through the cycle
1
“All-in” CAPEX Target for 2016-2018 – US$ 2bn p.a.
2 (incl. “Base Investment Program”, Chita, 1st Phase of Environmental Program and potential options)
“Base investment program”:
3 ‒ US$ 4.4bn cumulatively for 2016-2018
‒ Portfolio of verified investments: optimized stay-in-business CAPEX levels and stress-tested
commercial projects
Portfolio Review: non-core assets disposal program well advanced; ongoing strategic review of the
4 “legacy” assets; de-risking plan for Bystrinskiy project implemented
Strategic financial model enhanced through adaptive dividend targets – balanced and providing
5 superior shareholder returns
55Markets
Anton BERLIN
Head of Strategic MarketingMacro-Driven Commodity Prices, Increased Volatility
Commodity Prices are Inversely Correlated with
Trade-Weighted US Dollar Commodity Price Volatility Increased in 2015-2016
180 35
Corr (LTM) = -0.94 Bloomberg Commodity Index
30
150
25
20
120
15
10
90
5
60 0
Apr 2013 Apr 2014 Apr 2015 Apr 2016 янв фев мар апр май июн июл авг сен окт ноя дек
USTWBROA Bloomberg Commodity Index 2014 2015 2016YTD
Source: Company data, Bloomberg, WoodMackenzie; As of 25th April 2016.
Note: USTWBROA Index is a broad trade-weighted USD index relative to other world currencies, as reported by the US Federal Reserve.
59Lowering of the Cost Curve Driven by Currencies and Oil
Price Depreciation
C1 Nickel Total Projects Cash Costs (ex. Norilsk)
Mining Currencies and Oil Price Decline vs. USD Down 23% Driven Mainly by Currencies & Oil
End of March 2016/ End of December 2014, US$/t
(23)%
(6)%
(9)%
(11)%
(13)%
12,430
(22)% 9,592
(26)%
Other
C1 2014
C1 2016
FX Rates
By-product
Oil Prices
Ni Price
(36)%
credits
Oil (WTI) BRL ZAR RUB CAD CLP AUD
Source: Company data, Bloomberg, WoodMackenzie.
Note: C1 cash cost 2016 updated as of April, 2016 60Speculative Pressure Running High on Demand Concerns
Speculative Pressure on Metals Running High: Ni Speculations at Record High Levels:
Change in Exchange Trading Positions LME Turnover Over 200x of Physical Market
250
1Q 2016/4Q 2014¹ Mt
178% 245
200
74
150
82%
142
50%
100
101
88
66 116 124
58 64
50
46 84
32 36 33 68
45 50
(43)% 41
(46)% 26 24 32
22
0
(78)% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Ni Cu Pd Annual Ni trade volumes (LME Ni quality)
LME SHFE xx
Change in speculative shorts Change in net positions Annual Ni output (LME Ni quality)
Source: Company data.
Note: 1. NYMEX,LME data used for metal trading positions.
61Sharp Downward Adjustment of Consensus Forecasts
Analyst Consensus Ni Price Forecast: Sharp
Nickel LME Forward Curve: No Sense of Direction Downward Adjustment, Bullish Outlook Retained
US$/t US$/t
18 000 25 000
21,200
15 000
20 000
12 000
15 000
US$11,900/t
9 000
12,300
10 000
10,600
6 000
9,300
3 000 5 000
Spot 3M 15M 27M Spot 2015 2016 2017 2018
Jan 2015 Jun 2015 Apr 2016 Jan 2015 Jul 2015 Apr 2016 Sep 2015
Source: Company data, Bloomberg.
62Nickel Market: Little Guidance from Inventory Movements
Total Exchange Inventories Up 19% in 2015, LME Inventories: Relocation Between Asian
Relocation from LME to SHFE Warehouses Since 2H 2015
Kt Mt
600 25 000
456
441
431
413
500
20 000
192 166
165
400
177
15 000
1
300 53
2 59
10 000
200
5 000 203 209
100 178 166
0 0
Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2016 Dec 2014 Jun 2015 Dec 2015 Apr 2016
LME SHFE Ni price ($/t) Johor Singapore Taiwan Other
Source: Bloomberg, Company data;
63Ni-Intensive Stainless Steel in China – Healthy Demand
Variety of Chinese Sources: Ni-intensive Stainless … with Modest Growth Rates Continuing into 1Q
Steel Production Up 5–11% in 2015 2016
Mt YoY Kt
1 200
+5% +2% 1Q16: +3%
+1%
3,4 1 000
4,0 3,6
4,1
3,9 4,0
11% 800
14%
6% 9,8 10,9
9,3 10,6
9,2 9,7 600
400
6,9 7,8 7,2
6,6
5,4 5,0
200
2014 2015 2014 2015 2014 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source 1 Source 2 Source 3
2013 2014 2015 2016
200 series 300 series 400 series
ХХ% YoY
Source: Company data, Umetal, BGRIMM, TSSINFO
64China – Nickel Destocking in 2015 and Surge of Ni Imports
Implied Ni Units Destocking in China Excluding Strong Increase of Fe-Ni and Refined Ni Imports to
Build Up of SHFE Inventory (48 kt) in 2015 China in 2015 Extended into 1Q 2016
Ni Units, Kt Ni Units, Kt
500 Refined Ni +125% +342%
Fe-Ni +90% +15%
400
123
118 300
198
200
35
65
292
48 31
100
130
(10) 106
Incremental China Incremental Ni Change in Implied
net-import production usage in SHFE inventory destocking 0
(2015) losses stainless steel (2015) 2014 2015 мар.16
production
Refined Ni Fe-Ni
YoY%
Source: Company data, China customs statistics, Bloomberg, TSSINFO, UMETAL.
65Supply Rigidity – Investment Cycle
Major Ni Projects Ramp-up When Ni Market is High Reported Ni Stocks: After 3Y of Potential
Trending Downward Drawdowns Inventory Would Still Run High
US$ in bn Kt Kt
7,0 450
400 83 days 70
6,0
350 70 –100
5,0
300
70 –100
4,0 250
48 days
3,0 200 485
40 days
150
2,0 31 days
100 255
1,0 8 days
50
0,0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
Ni 2016E 2017E 2018E Ni Al Zn Cu
exchange exchangeExchangeExchangeExchange
inventory inventory inventory inventory inventory
(2015) (2015) (2015) (2015)
Production ramp-up Project capex
Industry inertia (cycles) Constant inventory re-allocation
Barriers to exit/re-entry Unknown off-exchange stocks
Political considerations
Source: Bloomberg, Norilsk Nickel data
66Slow Response From Supply Side Helped by Lowering Cost
Curve
1Q 2016 Average Ni Cash Cost (C1) Down 23% vs. 4Q 2014
US$/t
30 000
25 000
20 000
15 000
10 000
5 000
0
(5 000)
(10 000)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1Q 2016 4Q 2014
Flattening of the Cost Curve
Decreasing marginal cost – reduced support for Ni price
Source: Bloomberg, Norilsk Nickel data, WoodMackenzie.
67Only a Quarter of Loss Making Capacity Runs a
Shut-Down Risk
At Spot Price, Over 70% of Global Nickel Production
is Making a Cash Loss … … but Only 17% Run a Shut-down Risk
US$/t
35 000
30 000 44%
30% 70%
25 000 5%
4%
20 000 17%
15 000 2016 consensus forecast of US$9,889/t Diversified miners
Average 1Q 2016 of US$8,526/t Government support
10 000 Ramp-up
Price sensitive production (under risk)
5 000
Ni Industry Has Entered a Major Restructuring Phase
0
Norilsk
Production cuts and shut-downs, kt
(5 000)
(10 000) 218
48
(15 000) 90
00 10%
10020% 20030% 30040%
40050%
50060%
60070% 70080%80090%900100% 1000 42
Diversified miner Government support
Ramp up Price sensitive production 139
Spot price
2015 2016 Assets for sale
China ex.China Assets for sale
Source: WoodMackenzie, Bloomberg.
68Pressure on Loss Making Ni Producers Rising Rapidly
Most of the Ni Industry Became EBITDA Negative
Only in 2H 2015 … … Pressure on CFs is Mounting in 1H 2016
EBITDA Ni Segments Ni price, US$/t Re-based to Nickel Price, US$/t Performance H-o-H
800 20 000 18 000
EBITDA
Expansion
600 16 000
15 000
EBITDA
400 14 000 contraction
200 10 000 12 000
0 10 000
5 000
(200) 8 000
(400) 0 6 000
1H 14 2H 14 1H 15 2H15 1H 2014 2H 2014 1H 2015 2H 2015 1Q 2016
EBITDA Ni segments Average Ni price Crude Oil (WTI) Mining Currencies Nickel price
Source: Bloomberg, Norilsk Nickel data
Note: Combined EBITDA includes results of Anglo American, Glencore, Sherritt, BHP Billiton and ERAMET nickel business units 69Nickel Feed for China: Philippines
Nickel Ore Imports from Philippines to China Were Mine Life of Nickel Ore Reserves with Ni Grade >1.5%
Down 26% in 2015 and Continue to Fall in 2016 in Philippines is Less than 3 Years
Mt Ni Units, Kt
10,0 1 400 3,0
2015 YoY: (26)% 2.6
1 200
2,5
8,0 1Q 2016 YoY: (25)%
1 000
2,0
6,0
800
1,5
600
4,0
1,0
400
2,0
0,5
200
0,0 0 0,0
Mar 2013 Sep 2013 Mar 2014 Sep 2014 Mar 2015 Sep 2015 Mar 2016 Ni Ore Ni Reserves Number
Number
Production in (>1.5%) by the of Years
of Years
Indonesia Philippines Other 2015 End of 2015
Source: Company data, China customs statistics, Bloomberg
70Nickel Feed for China: Indonesia
Only 3 Projects in Indonesia Have High Probability
of Completion Indonesia NPI Output Forecast for 2015-2017
Ni Units, Kt
Capacity, 250
Project Name Process Status Start Year Kt pa Ni
Indoferro BF Started 2013 18
200
PT Cahaya
BF Started
Modern Metal 2014 4
Industry 150
Tsingshan RKEF Started 2015 30
100
Tsingshan
RKEF High 2015 60-120
2–3 stages
50
9 projects RKEF, BF Medium 2016-2018 70
RKEF, BF, 0
8 projects Low 2016-2017 150 2014 2015E 2016E 2017E
Leach
Commissioned in 2014-2015 High probability
Medium probability Low probability
Source: Company data, China customs statistics, Bloomberg.
71Nickel Market Moving into Deficit in 2016
Moderate Supply Cuts Have Been Triggered … … while Global Consumption Holds …
Kt Incremental change in global supply Kt Incremental change in global demand
100 150 +2.0%
+1.3% +2.1%
100
50
40
50
40
0
20
0
2015 2016E 2017E
(50)
… and Growth Reliant on China
Kt
(100) +3.0%
+3.6%
?
?
(150)
2 000
1 960
1 920
(200)
2015 2016E 2017E
New projects growth Indonesian NPI ramp-up
2015
Americas
Americas
China
Europe
China
Europe
2016E
2017E
Other Asia
Other Asia
China NPI production losses Change at existing operations
Source: Company data.
72Palladium Market in Structural Deficit
Palladium ETFs Holdings Change:
Driven by the Macro Concerns Global Palladium Market: Structural Deficit
Koz YoY Kt Surplus/(Deficit), Koz
1 104
904
507 1 015
381 430
24
(24) (225) ETF
(435)
(655) outflow
(520)
(703)
(1,622)
2008
2009
2010
2011
2012
2013
2014
2015
2016YTD
2010
2011
2012
2013
2014
2015
2016E
2017E
Source: Norilsk Nickel data.
73Platinum Market – Deficit Holds
Platinum ETFs Holdings Change:
2015 Outflow Reversed in 2016 Global Platinum Market: Deficit Holds
Koz YoY Kt Surplus/(Deficit), Koz
902
583
384
276
228
183
102 247 233
72
(261)
(574) ETF
outflow
(975)
(278)
2008
2009
2010
2011
2012
2013
2014
2015
2016YTD
2010
2011
2012
2013
2014
2015
2016E
2017E
Source: Norilsk Nickel data.
74PGM Demand Drivers In Automotive Industry –
Tightening Environmental Regulations
Increasing Complexity of Emission Systems and
Powertrains Requires Higher PGM Loadings Tightening Emission Legislation
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Requires soot (particulate matter) filter
Gasoline
(Euro 6c) = more PGMs RDE Phase 2/95
Europe Eu 6b Eu 6c/RDE Phase 1 EU 7?
g/km CO2
North America Tier 2 Tier 3 Phase In: NMOG + Nox, PM Tightening
EPA
Requires advanced NOx control
Diesel North America LEV III Phase In: NMOG + Nox, PM
(SCR, LNT, SCR-LNT) LEV III Further Tightening
CARB Tightening
Japan JP09 JP18?
Smaller engines but frequent “cold start” requires more
Hybrid South Korea K-
PGMs loadings K-ULEV 70 K-SULEV?
(Gasoline) ULEV
South Korea
Eu 6b Eu 6c
(Diesel)
Direct Cooler exhaust gas, higher HC and soot requires more
injection PGMs in catalyst China (Beijing) BJ5 (EU 5) BJ6 BJ6 Phase 2
China
China 4 (EU 4) China 5 (EU 5) China 6
(Nationwide)
Gasoline
Lean Requires LNT = more PGMs
burn India BS4 (EU 4) BS6 (EU 6)
Indonesia EU 2 EU 4
Current ~30 g Pt per vehicle
Fuel Cell
Pd for hydrogen production and storage Thailand EU 4 EU 5 EU 6
Source: Norilsk Nickel analysis ,Johnson Matthey
75PGM Demand Drivers In Automotive Industry – Rising
Vehicle Production
Total Number of Vehicles Forecasted to Increase:
Gasoline Remains the Main Driver Global Light Vehicle Sales Expected to Grow in 2016
Mln Units Mln Units
120
+3%
100
80
60
91
40
89
20
0 2015
Japan/Korea /
China
Europe
North America
South America
2016E
ME+Africa
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
South Asia
Total Diesel Total Gasoline Electric cars
Source: Norilsk Nickel analysis, IHS estimates
76Copper Market: China Driven Demand and Low Global
Inventories
China Remains the Main Driver for LME Copper Price Near Multi Year Lows while
Cu Consumption Growth Inventories Run Tight
Mt Mt US$/t
1 000 8 000
+4%
+3% 900
23,3 7 000
800
22,9
6 000
+2% 700
5 000
600
22,3
+1%
500 4 000
21,8 400
3 000
21,6
300
2 000
200
1 000
100
0 0
2014 2015 China Other 2016E China Other 2017E 2018E Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16
ХХ% YoY LME COMEX SHFE Cu price
Source: Company data, Macquaire Research, Wood Mackenzie.
77Copper Market Remains Balanced, Supply Disruptions -
Limited
Copper Supply Disruptions: Unfold in 2015 at 5% in
Line with Historical Average Copper Supply/Demand Balance
Kt Kt
1 400 10%
560
1 200 8%
8%
1 000
5% 6% 6% 190
800 170
6% 6% 6%
5% 5% 5% 10
600
4%
400 4%
2%
200
(330)
0 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E
Disruption Relative to original production target
Source: Company data, Macquaire Research, Wood Mackenzie
78Metal Markets Outlook
Loss making
Inventory Forecasted market Medium-term
Metal production
(days of consumption) balance fundamentals
(% of cost curve)
Kt
Deficit
? 30%
Nickel 80 70% (70)
(70-100)
Exchange Off-exchange 2016E 2017E
Profitable Loss-making
Koz Deficit
Palladium 87
(550)
(700)
46%
ETF 2016E 2017E
54%
Koz
Deficit
1
120 Profitable Loss-making
Platinum (150)
(130)
ETF
2016E 2017E
Kt Balanced
160
9 10% 50
Copper 90%
Exchange inventory 2016E 2017E
Profitable Loss-making
Source: Company data; Note: 1. South Africa and Zimbabwe
79Financial Strategy and Results
Sergey MALYSHEV
Senior Vice-President
Chief Financial OfficerFinancial Policy Framework…
Financial Policy Goals Recent Achievements
1
▪ Industry leading US$ unit cost
▪ Maintain industry leading profitability by containing operating
improvement in 2012–2015
Profitability costs while benefiting from rouble devaluation
▪ Industry leading EBITDA margin
2
▪ Debt maturity extended
▪ Maintaining investment grade credit ratings ▪ Funding sources diversified (Chinese
Prudent Balance ▪ Balanced debt structure in terms of currencies, maturities, credit line, Sberbank project
Sheet Management and financing sources financing etc.)
▪ Defensive liquidity management ▪ Above-average liquidity and
comfortable leverage ratios
3
Working Capital ▪ Following significant improvement in previous years,
▪ Working capital stable despite one-
off increases; some release
Management maintain achieved levels of net working capital
expected in 2016
4
Financial ▪ 2015 audited results published in
▪ Gradually speed up publication of IFRS financials mid-March (vs late March in
Disclosure previous years)
81… Resulting in Global Leadership on Margins and Balance
Sheet Strength
EBITDA margin, 2011–2015 Net debt/EBITDA, 2011–2015
50% Peer group range
Norilsk
Peer group range 1,0x
Norilsk
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Company’s leading cost position and conservative financial policy allow Norilsk to maintain strong
standing through the commodity cycle
Source: Bloomberg, Company data.
Peer group includes BHP Billiton, Rio Tinto, Glencore, Vale, and Anglo American.
82Unit Costs Under Control Despite Some Headwinds
Profitability
Unit costs in US$, 2012 = 100%
Norilsk Peer 1 Peer 2 Peer 3 Peer 4
-39% -39% -33% -20% -17%
2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015
Despite some of the negative underlying trends (ore degradation, depletion of low-cost secondary
feedstock, catch-up inflation of consumables and salaries etc.) the company managed to
outperform peers
Tight cost controls were greatly helped by the US$ appreciation starting from 2H14
Peer group includes Rio Tinto, Glencore (industrial assets only), Vale, and Anglo American.
83EBITDA and FCF Strongly Supported by FX
Profitability
At the year-end US$/RUB rate of 72.9, 1% change in exchange rate translates into EBITDA change of US$ 22.0m, FCF change of
US$ 36.3m
US$m
60 exchange
rate as at
31.12.15
50 44.1
40.7
40 36.3
33.1
29.4
30 26.7
24.7 Free cash
22.0
20.0
17.8 flow
20
EBITDA
10
60.0 65.0 72.9 80.0 90.0
Share of Foreign Currency in Company CapEx Share of Foreign Currency in Company OPEX
Non- Non- Non-
Non-
RUB RUB
RUB 7% RUB
11% 22% 24%
24% 13%
5%
2014 2015 2014 7% 2015
76% 78% 31% 76%
89%
RUB RUB RUB RUB
Source: Company data.
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