Norilsk Nickel to boost investments 50%

The BoD of NorNickel has adopted a decision to approve a new investment program whereby investments in 2007 are to be increased 50% to $1.3 bn. The figure does not include M&A outlays. According to NorNickel, the bigger investments are needed in order to boost ore output in line with plans stretching until 2015, by which time the miner expects to boost ore production by 23% from 21 mn t to 26 mn t. Core projects this year are the construction of the Skalysty mine which is expected to operate at full capacity in 2014-2020, and the building of a second complex of facilities at the Severny-Gluboky mine on the Kola Peninsula, as well as several infrastructure projects, such as the construction of 4 ships, commissioning of new facilities at the company’s processing plants etc.

In analytics opinion, bigger spending could hurt the company’s free cash flow in the short- and mid-term, although such investments will work in NorNickel’s favor in the long term. In only a few years the company will evolve into a transnational mining and metallurgical company similar to Rio Tinto and BHP Billiton.

Furthermore, NorNickel says that it will be gradually cutting investments after 2010 and, therefore, all other things being equal, its cash flow is likely to pick up at a later date.