NorNickel GMK · RUS:GMKN
NorNickel GMK — Norilsk Nickel — FY2020 Earnings Presentation
61 slides from NorNickel GMK's earnings presentation, February 2021
Slide 1: Norilsk Nickel 2020 Financial Results Presentation
Norilsk Nickel 2020 Financial Results Presentation February 2021
Slide 2: Disclaimer
Disclaimer The information contained herein has been prepared using information available to PJSC MMC Norilsk Nickel (“Norilsk Nickel” or “Nornickel” 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
Slide 3: 2020 Financial Performance Highlights
2020 Financial Performance Highlights Consolidated Revenue Free Cash Flow Realized metal prices (Pd, Rh) $15.5bn $6.6bn High operating cash flow Ramp-up of Bystrinsky Project Decreased income tax payments Production volume up 15% vs 2019 up 36% vs 2019 Higher CAPEX Inventories build-up (Ni, Pd) EBIT
Slide 4: Sustainable Development
Sustainable Development
Slide 5: Health & Safety Update: Steady Improvement of Safety Records
Health & Safety Update: Steady Improvement of Safety Records LTIFR Reduced to Record Low Levels Accident Statistics Improved Significantly LTIFR (1*10-6) Employees ~ 75% ~ 72% Fatal 0.80 Lost time injury 0.62 12 0.48 0.44 ~ 38% 14 ~ 32% 0.36 0.32 8 8 0.23 0.20 13 94 74 9 56 52 6 8 43 35 26 22 2013 2
Slide 6: Health & Safety: Strong Performance Relative to Industry
Health & Safety: Strong Performance Relative to Industry LTIFR Remains Below the Global Mining Industry Average Assessment of Occupational Safety Culture: Score Significantly Improved Since 2014 LTIFR(1) per 200k Hours As of 1H 2020 Bradley Curve Indicator 0.69 Industry average 3.0 2.8 Industry aver
Slide 7: Environmental Program: Reduction of SO2 Emissions on Track
Environmental Program: Reduction of SO2 Emissions on Track Polar Division: Sulphur Dioxide Emissions Decreased Against 9% Growth of Processed Kola Division: Sulphur Dioxide Emissions More Ore Volumes Since 2015 Than Halved Since 2015 SO2 Emissions, kt SO2 Emissions, kt -4% -53% 160 1,950 -1% 140 1,8
Slide 8: HPP-3 Incident: Key Milestones of Clean-Up and Rehabilitation
HPP-3 Incident: Key Milestones of Clean-Up and Rehabilitation 2020 2021+ Phases 1&2: Clean-up completed (May 29th – June) Phase 4: Rehabilitation (in-progress) Phase 3: Collection of the residues, transportation and utilization (June – October) 2021+ Over 90% of leaked fuel was collected and conta
Slide 9: Great Norilsk Expedition – Assessing Impact of Fuel Spill Incident
Great Norilsk Expedition to Norilsk Region – Assessing the Impact of Fuel Spill Incident Expedition results: Report published in December 2020 Research focus: geophysics and geochronology, permafrost soils, hydrobiology, surface waters, soil and vegetation cover, bottom sediments, and bio and zo
Slide 10: Climate Change: Maintaining Industry Lowest GHG Footprint
Climate Change: Maintaining Industry Lowest GHG Footprint Scope 1&2 GHG Emissions Reduced in 2020 2030 Strategic Objectives: mt CO2e 10.3 10.0 10.0 9.7 10 • Maintain absolute GHG emissions from operations (1) (Scope 1,2 of 10 Mt CO2e) at one of the lowest levels among global diversified metals & min
Slide 11: Emissions Intensity (t CO2e/t Ni-eq.)
Lowest Quartile Emissions Intensity Base Metals Producer Nornickel’s CO2 Nickel Emissions (per tonne of Ni-eq.) 25% 50% 75% Combined leadership of Nornickel on both cost and GHG intensity Emissions Intensity (t CO2e/t Ni-eq.) curves to ensure unique competitive advantage in the economy of “Tomorrow”
Slide 12: Managing Carbon Footprint
Managing Carbon Footprint • Strong starting point: large share of renewable energy in total energy consumption in the Norilsk region (55%) and the Group as a whole (46%) in 2020 Maintaining Low Carbon Intensity • Increasing energy efficiency: replacement of turbines at Ust-Khantayskaya HPP, replacem
Slide 13: Selected Social Initiatives
Selected Social Initiatives: Safeguarding Employees and Supporting Local Communities Shutdown of Renovation Engagement with Response to smelting operations program in Norilsk Coronavirus Indigenous People in Nickel Town in region Kola • №1 rated by Forbes- • Employment Centre • Renovation of Russia
Slide 14: Social Case Study: Shut Down of Smelting Operations in Nickel Town
Social Case Study: Shut Down of Smelting Operations in Nickel Town at the Norwegian Border Employment Centre was launched in 2020 660 employees • Informing employees of the smelting shop and support • Career guidance and training functions will be affected by the closure • Providing new career oppor
Slide 15: Most Recent ESG Agencies' Actions (1/2)
Most Recent ESG Agencies’ Actions (1/2) • ESG rating 61/100 as of June’20 • ESG rating «B» confirmed as of (33% score improvement since 2015) December’20 in line with peers (improvement from CCC since 2015) • ESG Risk Rating «High» Reiterated • Industry average – «B» • Industry position -27/57, Aver
Slide 16: Most Recent ESG Agencies' Actions (2/2)
Most Recent ESG Agencies’ Actions (2/2) 7 • ESG score «C»/medium (improvement from «C-» since October 2019) 4 • Environmental score 3/10 (1) 3 3 3 3 • Social score 3/10 (1) • Governance score 4/10 (1) June 2020 February 2021 Governance Environment Social • Norilsk Nickel joined United Nations Global
Slide 17: Advancing ESG Agenda Towards Best Practices
Advancing ESG Agenda Towards Best Practices Progress in 2020 2021 Targets • New long-term sustainable development strategy with specific targets announced • Management KPIs for 2021 to include zero • New climate change strategy with specific targets environmental accidents announced • Develop long t
Slide 18: Markets Update
Markets Update
Slide 19: COVID-19: Major Distortion to Commodity Markets in 2020
COVID-19: Major Distortion to Commodity Markets in 2020 Global Supply: PGMs Impacted the Most due to Global Demand: PGMs Down Sharply on a Major Quarantine in SA, Little Impact on Base Metals Contraction of Autos, Base Metals More Resilient Supply 2020E vs 2019 Consumption 2020E vs. 2019 Low grade N
Slide 20: Global Economy on Track with a V-shape Recovery
Global Economy on Track with a “V-shape” Recovery Quarterly GDP Growth: Strong Rebound Ongoing COVID-19 Impact on Global Economic Growth: a through 1H 2021 One-off GDP Growth, % Y-o-Y IMF Forecast for 2021-2022 GDP Growth, % Consensus forecast 20 8.1 15 5.6 5.1 5.2 5.2 10 4.2 3.1 5 2.3 2.5 0 (5) (10
Slide 21: Macro Environment: Strong Recovery in Industrial Production
Macro Environment: After a Sharp Contraction in Industrial Production in 2020, a Strong Recovery Under Way Sharp Contraction in Global Industrial Production, China – the Largest Consumer of Base Metals, Euro Zone Leading the Recovery Europe and US – Main PGM Consumers Manufacturing PMI, Monthly Data
Slide 22: Metal Markets Outlook — View on Fundamentals
Metal Markets Outlook — View on Fundamentals Metal Ni Cu Pd Pt 21% 4% Share of Nornickel metal sales 2020 21% 42% Stocks, kt +60 kt +400 moz -0.6 moz +0.5 days of Other consumption Non- Non- elastic exchange exchange Other Other non-elastic Exchange 35 40 28 Exchange 5 ETF ETF 115 164 5 4 25 23 18 1
Slide 23: Nickel Exchange Stocks Back to Elevated Levels
Nickel Exchange Stocks Back to Elevated Levels Exchange Inventories Restored on Stock Nickel Exchange Inventories Rising on Market Reallocation and Market Surplus Surplus kt Ni Days of consumption +40kt 92 262 222 36 (2) 37 15-25 (1) 94 4 Jan-19 LME SHFE Nov-19 LME SHFE Feb-21 Cu Ni Normal Ni Spot N
Slide 24: Nickel in Stainless: Sustainable Recovery of 300 Series Production
Nickel in Stainless: Sustainable Recovery of 300 Series Production in China and Indonesia China: Growth in 300s Driven by Stimulus Package, Stainless Stocks in China: Significant Decline in 200s Impacted by Weak White Goods Demand(1) Since Q2 Due to the Recovery of Consumer Demand kt Y-o-Y % kt STS
Slide 25: Nickel in Batteries: Europe Leading the Growth
Nickel in Batteries: Europe Leading the Growth, China Is Recovering Global BEV Equivalent Sales(1) Rebounded Strongly China: LFP Surged on Higher Offtake by Chinese in 2H20 Primarily Owing to Europe and China Automotive and Stationary Applications (5G), NCM Increased on the Recovery of NEV Sales `00
Slide 26: Nickel Supply: Ramp-Up of New NPI Production in Indonesia
Nickel Supply: Ramp-Up of New NPI Production in Indonesia is Well Ahead of Reducing NPI in China Chinese NPI: Lower Ore Availability and Rising Indonesian NPI: Significant Growth Due to the Ore Prices Drive NPI Output Lower Ramp-Up of Tsingshan, Delong Facilities and Weda Bay kt Ni Y-o-Y % kt Ni Y-o
Slide 27: Nickel Market Newly Emerged Surplus to Sustain Through 2021
Nickel Market Newly Emerged Surplus to Sustain Through 2021 Market Surplus in 2020 Exacerbated by COVID Global Demand: Recovery Will Depend on the Impact and Surge of Indonesian Supply Epidemic Impact on Consumer Demand in 2021 kt Ni Surplus kt Ni Y-o-Y % • Low grade nickel (LG) +9% +8% • High grade
Slide 28: Copper: Marginal Impacts of COVID-19 on Demand and Supply
Copper: Marginal Impacts of COVID-19 on Demand and Supply Global Consumption: Reduced Industrial Activity Had China Was the Main Driver of Global Consumption Only a Slight Impact on Cu Consumption in 2020 in 2020, Europe Should Lead in 2021 mt Y-o-Y % mt Y-o-Y % -1% +3% +4% +1% 12.5 12.6 24.0 China
Slide 29: Copper Market Remains in Balance
Copper Market Remains in Balance: Overall Resilience to Coronavirus-Related Turbulence Copper Supply Disruptions: Refined Cu Inventories Reduced to 2020 Above Historical Average Multi-year Lows in 2020 kt USD/t 1,000 12,000 Copper mine disruptions (ex.cost related closures), Mt 10,000 800 8,000 600
Slide 30: Auto Industry Contraction Caused Sharp Reduction in PGM Demand
Auto Industry Contraction Caused Sharp Reduction in PGM Demand Global Auto Production to Rebound in 2021, Global Auto(1) Sales Down 14% in 2020 Full Recovery to Pre-epidemic Level in 2022 mln units Y-o-Y % mln units LMCA base case scenario(2) Potential loss of 600-700k vehicles due to a shortage in
Slide 31: Fleet Electrification Targets Still Implies Active Hybridization
Fleet Electrification Targets Still Implies Active Hybridization Long Term Outlook for NEVs Improved Significantly Industry Expectations: Hybrids to Dominate in the in the LTM (NEVs mix, %) Electric Vehicles Mix in the Long-term XX% Change in forecast mln units (%) share in global LV production 21%(
Slide 32: PGMs ETF Holdings
PGMs ETF Holdings Palladium ETF Holdings decreased by 124koz in Platinum ETF Holdings increased by 500koz in 2020 on Market Running a Deficit 2020 as Investors Were Buying Platinum Lows koz USD/oz koz USD/oz 1,000 3,000 4,000 1,500 750 2,500 3,000 1,250 500 2,000 2,000 1,000 250 1,500 1,000 750 0 1,
Slide 33: Palladium Deficits Reduced as Auto Demand Contracts
Palladium Deficits Reduced as Demand from Auto Industry is Experiencing the Biggest Contraction in Decades Global Palladium Market: Re-emergence of Deficits Demand: Palladium Among the Metals Disrupted after Value Chain Destocking in 2020 the Most by COVID-19 Moz Moz Y-o-Y % +12% -13% 11.1 10.9 0.1
Slide 34: Platinum Major Surpluses Mitigated by Reviving Investment Demand
Platinum Major Surpluses Mitigated by Reviving Investment Demand Global Platinum Market Balance: Demand: Sharp Reduction on Weak Global Car Sales Apparent Surpluses Expanding in 2021 and Chinese Jewelry in 2020 Moz Y-o-Y % Moz -15% +8% 7.6 Forecasted investment 7.1 (0.6) demand will ease the (0.4) 6
Slide 35: Global Decarbonisation per IEA Sustainable Development Scenario
Global Decarbonisation per IEA Sustainable Development Scenario: Implied Electrification of Light Vehicles via Hybridisation SDS Targets for the Reduction of CO2 Emissions by Light Implied Autos Mix by 2040: BEVs – 30%, ICE Containing Vehicles: 20% by 2030 and 60% by 2040 (1) Vehicles (Including Hyb
Slide 36: Global Decarbonisation – Risk Assessment for Nornickel's Metals
Global Decarbonisation – Risk Assessment for Nornickel’s Metals 2040: Ni PGMs Cu Growth of market share of BEVs Growth of hybrids Fuel cells Growth of renewables/low carbon fuel in power generation Storage and grid expansion to support growth of xEVs Net impact 36
Slide 37: A New Era in Metal Trade
A New Era in Metal Trade Nornickel staged for the new era of digital transactions, which will optimize supply chain efficiency and transparency • Nornickel, has joined the Responsible Sourcing Blockchain Network (RSBN), an industry collaboration among members across the minerals supply chain using b
Slide 38: 2020 Financial Results
2020 Financial Results
Slide 39: Metal Sales Volumes and Realized Prices
Metal Sales Volumes and Realized Prices Base Metals Sales: Copper Up on the Ramp-up PGM Sales: Reduced on Weak Demand Due to of Chita Project, Ni Down on Weak Demand COVID-19 Epidemic Impact Nickel [kt] Copper(1) [kt] Palladium(3) [koz] Platinum [koz] -5% +4% -12% -4% 486 506 3,062 244 231 7 6 14 46
Slide 40: Metals Revenue: Strong Palladium Rally
Metals Revenue: Mixed Performance Except for Strong Palladium Rally Nickel Revenue: Down 7% on Lower Prices and Copper Revenue: Up 7% on Higher Prices and Sales Volumes Sales Volumes [USD mln] [USD mln] -7% +7% 128 3,388 3,144 2,877 3,078 -77 -167 78 123 2019 Realized Sales 2020 2019 Realized Sales
Slide 41: Consolidated Metal Revenue
Consolidated Metal Revenue Metal Revenue Up on Higher Pd & Rh Prices, Geographical Breakdown: Growing Share of Asia and Offset Negatively by Lower Sales America due to Decline of European Volumes [USD mln] [% of USD sales] 2019 2020 Company Macro performance factors USD -493 mln 5% 4% 52% 45% Russia
Slide 42: EBITDA – Negative Impact of Environmental Provision
EBITDA – Negative Impact of Environmental Provision EBITDA and EBITDA Margin in 2016-2020 58% Realized metal prices [USD mln] 53% 49% -9 p.p. (+USD2,619 mln) 47% 44% 7,923 7,651 11% depreciation of RUB against USD 6,231 -3% (+USD412 mln) 3,899 3,995 Ramp-up of Bystrinsky (Chita) project to 63ktpa of
Slide 43: Operating Cash Costs: Withstanding Inflation Pressure
Operating Cash Costs: Withstanding Inflation Pressure Operating Cash Costs Increased 2% in 2020 2020 Cash Costs Breakdown [USD mln] Macro One- Operating [%] factors offs factors Other -245 +55 +268 17% 3,886 Labour 3,808 97 52 156 34% 55 -37 7% 69 -314 Services 3,886 22% Materials 20% 2019 Forex Dom
Slide 44: Net Working Capital Changes in 2020
Net Working Capital Changes in 2020 [USD mln] Macro factors Operating factors -594 +321 985 234 55 347 712 -290 -260 -359 31 Dec Forex Commodity Income tax Increase Accounts Other 31 Dec 2019 prices & payable in metal receivable/ 2020 inflation inventory payable 44
Slide 45: Allocation of Capital Investments
Allocation of Capital Investments CAPEX(1) Allocation: Commercial and CAPEX(1) Breakdown by Projects Stay-in-Business [USD mln] 1,760 [USD mln] 1,760 38 154 273 622 1,324 1,324 Talnakh enrichment plant 14 24 Environmental program 36 Mine development 206 98 114 Commercial 522 154 Kola commercial 108
Slide 46: Financial Results Sensitivity to USD/RUB Exchange Rate
Financial Results Sensitivity to USD/RUB Exchange Rate At USD/RUB rate of 73.9, 1% change in exchange rate translates CAPEX and OPEX Break Up by into EBITDA change of USD60.8 mln, FCF change of USD64.4 mln Currency [USD mln] OPEX(1) 90 Non- Non- RUB 12 RUB 8% 79.3 % 80 73.2 2019 2020 74.8 68.0 88% 9
Slide 47: Free Cash Flow Increased to USD 6.6bn
Free Cash Flow Increased to USD 6.6bn [USD mln] 606 6,640 1,673 4,889 436 92 2019 CAPEX Other Cash from Income tax 2020 investing activities(1) operations paid (2) Note: 1. Mainly changes in bank deposits 2. Decrease in income tax payments due to lower taxable pretax profit 47
Slide 48: Balance Sheet Management
Balance Sheet Management Historical Leverage: Proactive Debt Management ND/EBITDA Reduced to 0.6x [USD bn] 2.1x • In February 2020, terms of the December 2017 syndicated loan facility with a group of international banks were amended, increasing the limit from USD 2.5 billion to USD 4.15 billion, red
Slide 49: Finance Costs Reduced Significantly
Finance Costs Reduced Significantly Gross Debt and Net Debt (1) Average Cost of Debt reduced… average for the period [USD bn] Gross Debt +22.2% … by 2.2% starting from the year-end of 9.9 2016 by the end of 2020 8.7 9.1 8.1 8.5 … well ahead of 0.6% reduction of base interest rates (LIBOR) over t
Slide 50: Operations and Strategy Update
Operations and Strategy Update
Slide 51: South Cluster Project Update
South Cluster Project Update Large-scale, long life (25+ years) brownfield asset at the bottom of the global PGM cost curve O/P and U/G operations leverage synergies from existing infrastructure FS and detailed engineering completed. Open-pit ore mining to commence in Q2, 2021 Pre-stripping
Slide 52: Bystrinsky Project: Target Capacity Achieved
Bystrinsky Project: Target Capacity Achieved One of the largest greenfield projects in the Russian mining industry Ore reserves: 301 Mt @ Cu ~0.7%; Fe ~22.4%; Au ~0.84 g/t (1) Full ramp-up achieved in 2Q 2020 2020 EBITDA: USD 0.7 bn Operating Performance Outlook 2021E 2022E Ore Mt(2) 10 10 C
Slide 53: Kola Nickel Refinery Upgrade – Status Update
Kola Nickel Refinery Upgrade – Status Update Upgrade of Tankhouse-2 to a more efficient and environment- friendly electrowinning technology Construction completed Production of high quality nickel cathodes commenced 85% of design capacity achieved (145 ktpa). Technical retrofitting program u
Slide 54: Energy Infrastructure Modernization: Interim Delivery and Plans
Energy Infrastructure Modernization: Interim Delivery and Plans 2013-2020 Delivery 1 P e l ya tki nskoye G as C o n densate F i el d 2 Severo -Soleninskoye Gas Condensate Field TPP-2 Replacement of 6 power- 3 Y u zh n o -S ol e ni n sko ye G a s C o n d e nsa te F i e l d generating units at hydro
Slide 55: Production Guidance for 2020-2023
Production Guidance for 2020-2023(1) Ni Pt+Pd Cu Including Bystrinsky project kt t kt Bystrinsky project 225 233 113 499 220-230 215-225 109 105-111 487 100-110 208 103 43 399 63 65-70 68-73 (2) 390-410 380-410 2016-2018 2019 2020 2021E 2022- 2016-2018 2019 2020 2021E 2022- 2016-2018 2019 2020 2021E
Slide 56: Sulphur Programme 2.0: Environmental Roadmap
Sulphur Programme 2.0: Environmental Roadmap Smelter Nickel town Copper Plant Kola Division Copper line (Refinery) Norilsk Monchegorsk Nadezhda Smelter 2020 Polar Division Nickel Plant (Shut down in 2016) Optimization of smelting 2021 On track operations to cut SO2 emissions in Russia- Shutdow
Slide 57: Sulphur Programme 2.0: Construction Status
Sulphur Programme 2.0: Construction Status Nadezhda Smelter Flagship project to capture furnace gases and establish acid neutralization facilities and infrastructure: CAPEX (1) - ~85% contracts legally binding ~$3.6 bn - Project design allows for expansion of the smelter (3rd Furnace) - Piling, st
Slide 58: Modern Concentration Facilities: 3rd Stage of Talnakh Concentrator
Modern Concentration Facilities: 3rd Stage of Talnakh Concentrator Concentration Smelting Refining Polar Division Talnakh Capacity expansion to Norilsk +8 Mtpa accommodate for ore production growth (“South Cluster”) +3 Mtpa Additional capacity: +8 Mtpa Targeting higher recoveries for all key m
Slide 59: CAPEX Guidance
CAPEX Guidance Growth projects Environmental projects Base investment program & other projects USD bn 3.5-4.0 3.0-3.4 <2.0 1.8 2020 2021F average 2022F-2025F average 2026F-2030F 59
Slide 60: 2021 Outlook
2021 Outlook Metals market outlook Neutral Positive Negative 2021 Metal Production Guidance (1) Market to remain in surplus as the Ni rapid expansion of Indonesian NPI will outpace demand recovery driven by 65-70 (Chita) growth of stainless in Indonesia and 2,715-2,843 battery sectors. The bat
Slide 61: IR Contact Details
IR Contact Details Vladimir Zhukov Mikhail Borovikov Vice-President Investor Relations Head of Investor Relations Department Deputy Head of Investor Relations MMC Norilsk Nickel MMC Norilsk Nickel Tel: +7 495 797 8297 Tel: +7 495 787 7662 E-mail: ZhukovVLS@nornik.ru E-mail: BorovikovMA@nornik.ru 61