Russia's Norilsk Reports 5.2% Decline in Nickel Output for First-Quarter 2014

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russia's Norilsk Nickel (LSE:MNOD) (Moscow, Russia), produced 67,818 metric tons of nickel in the first quarter, down 5.2% from 71,571 metric tons in the first quarter of 2013, due to lower production volumes at some of its global operations.

The company, which says it is the world's largest producer of nickel, said that lower volumes at its Kola division in Russia and its Tati nickel mine in Botswana were factors behind the lower output. The mothballing of its Lake Johnston operations in Australia also contributed to the overall volume decline.

Norilsk said that the Lake Johnston mine was shut down for maintenance in the second quarter of last year, as part of cost-control measures. Production at its core operations in Russia were broadly flat from the same quarter last year, but declined 9% on a quarterly basis due to lower volumes at Kola.

Norilsk said there were lower processing volumes of high-grade nickel matte shipped from the Polar division, due to scheduled repairs to one of the furnaces at its Nadezhda metallurgical plant.

"In the first quarter of 2014, the combined nickel output of our Russian operations at the Polar and the Kola divisions decreased 1.4% year-on-year to 55,706 [metric tons]," the company said.

"Rising prices for nickel and palladium [the two metals account for 65% of the company's revenue from its Russian operations] have more than offset the weakness in copper," said Sergey Donakov, a Moscow-based metals analyst with Societe Generale. "As a result, the annualized revenue of the Taymyr and Kola divisions at spot commodity prices stands [at] $200 million above the last year's average."

At 90,000 tons, Norilsk's copper production, recorded a 3% quarterly decline, while output in Russia was unchanged, in line with the company's production guidance.

Norilsk's management also reiterated its intention to optimize the company's asset portfolio with some disposals of non-core assets in 2014-15, but no specific deadlines or valuation targets were mentioned.

"The powerful tailwind for Norilsk Nickel is ruble depreciation," Donakov said. "The currency has dropped sharply versus the dollar year-to-date on the back of Russian macroeconomic woes and the Ukrainian political turmoil, and is currently trading 11% below the 2013 average. Given the macro outlook, we think that more weakness could lie ahead."

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