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Russian miner OAO Norilsk Nickel (GMKN.RS), the world's largest nickel producer by production volume, is formulating a plan for its international assets, several of which are suspended, the company said Monday.
Since the end of last year, the company has placed all its Australian mines on care and maintenance citing market conditions. They account for about 43,500 metric tons of annual capacity.
Recent reports indicate that the company is considering selling its Australian operations, but Norilsk said it doesn't intend to do so until a plan is finalized.
"We are currently working on a plan for our international assets," said Dmitry Kostoev, chief financial officer of Norilsk Nickel, on a conference call.
"We are not planning on sales until a strategy is approved. We have received a number of proposals but they're not on the table until we come up with a plan."
Last week media reports cited an independent director to the company saying that Norilsk may consider selling its Australian operations in a year or so.
And last month, Oleg Pivovarchuk, Deputy Chief Executive Officer, told Dow Jones Newswires that it would consider selling its Cawse mine in Australia if it received an offer "good enough."
Poseidon Nickel Ltd. (POS.AU) said in March that it's in "confidential discussions" with Norilsk Nickel to acquire the Cawse nickel operation in Western Australia.
However, analysts said Monday that Norilsk is unlikely to receive an offer that would be high enough and are likely to hold onto the assets until market conditions improve.
"The problem right now is that no one will offer enough money for them," a Russia-based analyst said. "It's clear that Norilsk isn't interested in the assets but they won't sell them for $200 million."
Nickel prices are down roughly 75% from record highs in 2007, but they have improved since the start of the year. LME nickel prices ended trade last week at $12,790 a metric ton, which is up 9.3% from end of 2008 prices.
Norilsk said it budgeted nickel at $10,000/ton and copper at $3,300/ton for 2009. Both metals are above that. However, the company said given turbulent market conditions and ongoing demand weakness in Europe - its largest regional consumer - due to the recession, it doesn't plan to change the budget prices.
Sales of metals in volume terms declined. Nickel sales from Russia fell by 2%, while international sale volumes rose by 7% helping to make it nearly unchanged year on year.
However, total company copper ton sales fell by 7% on the year in 2008, platinum fell by 13%, palladium by 7% and gold by 15%.
The company said Monday that it swung to a net loss in 2008, as it wrote down the value of its electricity business and foreign mines. The net loss attributable to equity shareholders totaled $449 million, compared with a net profit of $5.33 billion, in 2007.
Norilsk said it aims to cut costs further without reducing production or employee numbers.
-By Devon Maylie, Dow Jones Newswires; +44 (0)20 7842 9483; devon.maylie@dowjones.com
(END) Dow Jones Newswires
05-25-09 1217ET
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