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Nornickel, the world’s largest palladium producer, reported a huge jump in first half profit with higher palladium prices offsetting a decline in nickel, copper and platinum prices. expects a global palladium deficit of 600,000 troy ounces for 2019.

Palladium Nornickel

The higher prices for palladium and increased output offset other metal prices decline because of the global trade slowdown Nornickel President and co-owner Vladimir Potanin said in a statement. Nornickel is part owned by Potanin and aluminum producer Rusal.

Earnings Beat

The company’s first-half earnings before interest, tax, depreciation and amortization (EBITDA) totaled $3.7 billion, up 21% year on year, on revenue that rose 8% to $6.3 billion.

“In 1H19, we increased the output of all key metals delivering most notable growth in copper and PGMs. The increase in PGMs’ production was driven by the release of work-in-progress inventory at Krasnoyarsk Precious Metals Refinery and higher PGM content in processed Russian feed at Norilsk Nickel Harjavalta. The increase in copper output was due to the ramp up of Bystrinsky Project. We reiterate our metal production guidance from own Russian feed for FY2019”.

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Metals Production Highlights

Nickel

In 2Q19, consolidated nickel production was down 4% quarter-on-quarter (q-o-q) to 54 kt. Nickel output from own Russian feed decreased 4% q-o-q to 53 kt due to the annual repairs at Harjavalta refinery normally scheduled in May. In 1H19, total nickel output increased 6% year-on-year (y-o-y) to 110 kt, while nickel output from own Russian feed increased 5% y-o-y to 108 kt. The growth was attributed to the expansion of carbonyl nickel production capacities at Kola MMC, higher processed volumes of nickel matte produced by the Company in Russia, which were shipped to Norilsk Nickel Harjavalta, and processing of nickel feed supplied by Boliden in accordance with a three-year contract, that enables Norilsk Nickel to utilize Harjavalta refining capacity most efficiently.

Copper

In 2Q19, consolidated copper production was down 2% q-o-q to 125 kt, almost all of which were produced from the Company’s own Russian feed. The reduction was attributed to lower processing volumes of concentrate purchased from Rostec and scheduled annual repairs at Harjavalta refinery. In 1H19, copper output increased 9% y-o-y to 251 kt, almost all of which were produced from the Company’s own Russian feed. The growth was driven by the ramp up of Bystrinsky Project, increased mined ore volumes with higher

Platinum Group Metals

In 2Q19, both palladium and platinum were produced solely from the Company’s own Russian feed, with their output amounting to 764 koz (down 1% q-o-q) and 185 koz (down 9% q-o-q), respectively. The reduction was driven by the annual repairs at Harjavalta refinery normally scheduled in May as well as a seasonal high base effect of 1Q19, when the Company processed in addition to mined feed also the work-in-progress concentrate accumulated in 2018, whereas in 2Q19 only the mined feed was processed. In 1H19, palladium and platinum output increased 2 www.nornickel.com 10% y-o-y to 1,533 koz and 16% y-o-y to 388 koz, respectively. The increase of PGMs output was attributed to the release of work-in-progress inventory at Krasnoyarsk Precious Metals Refinery and higher PGM content in Russian feed processed at Norilsk Nickel Harjavalta.

Palladium Deficit

The company expects a global palladium deficit of 600,000 troy ounces for 2019. Nornickel cites growing demand from the autos sector on the back of tighter emission regulations in all major markets. Palladium is used mainly in emissions-capping catalytic converters for automobiles.

Palladium Uses

Nornickel is trying to overtake Brazil’s Vale VALE5.SA to be the world’s biggest nickel producer and expects the global nickel deficit to narrow to 60,000 tonnes in 2019, with Indonesia and China increasing their nickel pig iron (NPI) output.

After the announcement shares in Nornickel rose 2.3% in Moscow, outperforming a 0.9% gain for the broader index .IMOEX. The company also announced tronger than expected dividends. Nornickel has $2.2 billion free cash flow which enabled it to recommended an interim dividend of 883.93 roubles ($13.27) per share, equating to $2.1 billion in total.

Capex

Its first-half capital expenditure was unchanged from a year ago at $500 million. Nornickel forecast that 2019 total capital expenditure is expected to reach up to $2.2 billion as its Talnakh concentrator and South Cluster mining projects enter the active construction phase in the second half of 2019. ($1 = 66.6225 roubles)

About MMC NORILSK NICKEL

PJSC MMC NORILSK NICKEL is a diversified mining and metallurgical company, the world's largest producer of refined nickel and palladium and a leading producer of platinum, cobalt, copper and rhodium. The company also produces gold, silver, iridium, selenium, ruthenium and tellurium. The production units of NORILSK NICKEL Group are located at the Norilsk Industrial District, on the Kola Peninsula and Chita region in Russia as well as in Finland and South Africa.

PJSC «MMC «NORILSK NICKEL» shares are listed on the Moscow and on the Saint-Petersburg Stock Exchanges. PJSC «MMC «NORILSK NICKEL» ADRs trade over the counter in the US and on the London and Berlin Stock Exchanges.

Source: Reuters, Nornickel

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