Yury Adno

F

rom the Soviet era Russia inherited a practice under which statistics on most of metals used in the military-industrial complex should be recognized a state secret not subject to divulging. This “blackout area” covers all the information relating to geology, ore reserves, data on production and exploration, domestic ferrous and non-ferrous metallurgy, including its production capacity and performance.
With Russian companies entering the world market, this imposed protection of information has become a serious obstacle for keeping business and commercial operations, reaching economic efficiency and capitalization. One can cite a number of cases when the lack of precise data on the production potential and performance of Russian leading manufacturers affected the world market conditions making it difficult to forecast dynamics of world market prices. Moreover, such secrecy does not facilitate attracting investments. Thus, for example, capital consumptive non-ferrous metal ore deposits are mined mainly at the expense of Russian metallurgical companies without any participation of external investors.
It is no wonder that the Russian business stands for lifting banns on divulging information on production of non-ferrous metals. In this respect Norilsk Nickel is the most consistent leader of the industry. With clear understanding of the importance of transparency, since 2001 this company has published its financial statements in compliance with of IFRS (international financial reporting standards). Upon authorization of the Russian government Norilsk Nickel divulged information on physical volumes of its production and sales of non-ferrous metals and in late 2002 the company was officially permitted to divulge data on reserves of its key deposits, which information was actually revealed, not without difficulty, in mid-2004 (see Table 1).

Andrew Klishas, the Chairperson of the company` Board, called divulgence of information on Talnakhskoye and Oktiabrskoye, two major deposits mined by the company on the Taimyr Peninsula, "an important stage in improvement of the corporate management". Copper-nickel bearing sulphide ores available at the deposits form the basis of the Russian nickel industry to constitute 85% of all the nickel reserves of Russia. Extra 10 % of nickel reserves are available on Zhdanovskoye, another Norilsk Nickel owned nickel bearing deposit located on the Kola Peninsula. The rest 5% are attributed to silicate-nickel ore on deposits in the Ural region.

The above mentioned deposits on the Taimyr Peninsula are unique ones: they contain more than 35% of world proven reserves of nickel, 10% of copper, about 15% of cobalt and more than 40% of world reserves of platinoids. According to estimations, at the current rate of production (that is 240 thousand tones of nickel in 2003) the company can keep production of this metal for at least 27 years without any decrease in the production rate. As to copper, assuming the production rate of 450 thousand tones the copper reserves should be enough for 22 years.
In 2004 nickel as a raw material for stainless steel was in the spotlight on the market. For the beginning of the year the price for the metal at LME exceeded $15 thousand USD per tone to remain at $14 thousand USD per tone during the rest of the year. With the growing demand for stainless steel one can assume that in the foreseeable future such a high price will remain at the same level. According to experts` s estimations, world demand for refined nickel will annually grow by 7% on the average while nickel production volume will increase only by 5% a year. Therefore, over the recent years the market has evidenced a constant shortage of at least 50 thousand tones in nickel to provoke higher prices for the metal.

There is only one way to reduce the shortage, namely to explore new nickel bearing deposits that will call for significant investments currently estimated at $3 bln. USD plus 2-3 years required to equip the newly explored deposits and to start a full-scale mining on them.

At Norilsk Nickel ore production and processing have their own peculiarities. In parallel with nickel the company produces a number of byproducts like palladium, platinum, cobalt, gold and a wide variety of rare metal. By production and sales of platinum-group metals Norilsk Nickel ranks among world leaders to draw about a quarter of its profit from these metals. Naturally, divulgence of information on platinoids could contribute to make the company` s business more attractive for investors. However, for a while all the data on reserves of these metals falls within "The State Secret Act".

Table 1
Ore Reserves on the Talnakhskoye, Oktiabrskoye and Zhdanovskoye Deposits
(as of January 1, 2003ŕ)
Mine Type of Ore Volume, Grades
Mln.t Nickel, % Copper, % Nickel, 000` t. Copper 000` t.

Proven and probable Ore Reserves
The Talnakhskai ore node
Oktiabrski rich 40 2,99 6,11 1197 2445
copper bearing 51,3 1,14 5,2 583 2667
Total 91,3 1,95 5,6 1780 5112
Taimirskai rich 74,8 2,87 3,17 2147 2370
copper bearing 0,4 0,73 1,94 3 7
Total 75,1 2,86 3,16 2150 2377
Komsomolskai
rich 2,2 3,74 3,28 84 74
copper bearing 19,5 0,74 2,54 145 496
Total 21,7 1,05 2,62 229 569
Maiak impregnated 1,3 0,57 1,12 7 14
Skalistai rich 32,3 3,62 3,26 1170 1052
Zhdanovskoye Deposit 173,3 0,75 0,35 1302 600

Proven and Marked Ore Reserves
The Talnakhskai ore node
rich 21,5 4,22 6,01 906 1291
copper bearing 0,3 0,35 3,09 1 10
impregnated 1397,8 0,52 1,04 7238 14468
Total 1419,6 0,52 1,04 8146 15769
Indicated Ore Reserves
The Talnakhskai ore node
rich 67,2 3,16 5,18 2125 3480
copper bearing 108,1 0,8 2,64 864 2853
impregnated 308,5 0,48 0,95 1495 2921
Total 493,9 0,93 1,91 4484 9254
Zhdanovskoye Deposit 63,5 0,73 0,37 466 233
________________
Source: Norilsk Nickel JSC.


To be put on margins:
• According to ISNG in 2004 world nickel production reached 1.28 mln. t (compared tp 1.2 mln. t. in 2003) with nickel consumption totaling 1.3 mln. t. (compared to 1.24 mln. t. in 2003).

• According to the US Geological Survey as of the beginning of 2002 the world proven reserves of nickel totaled about 58 mln. t., including 20 tones in Australia and about 6.6 mln. tones in Russia mainly on the deposits owned by Norilsk Nickel.