Norilsk revenues up

In its consolidated financial results for the year ending 31 December 2007 released this week, the Group's revenue was up by 44 percent.

During the year under review, Tati Nickel Mine produced 14,000 tonnes of saleable nickel. Saleable copper from the same mine was 9,000 tonnes, while platinum was at 6,000 ounces. Tati Nickel contributed 31, 000 ounces of palladium to the overall Norilsk production for the year. 

Norilsk shocked Botswana last week when it announced that it has postponed construction of the Activox project that was touted as a major copper and nickel beneficiation milestone for the country.

The Russian company said reasons for postponing the project were short-term energy capacity constraints and escalating construction materials, equipment and project management costs worldwide. 

Norilsk said subsequent to its acquisition of LionOre, an extensive feasibility review of the Activox Refinery project at Tati Nickel was conducted by the management of the Group and an independent third party.

The review, the company said, highlighted a substantial project cost escalation from the feasibility study conducted by previous owners. Major contributing factors to the substantial cost escalation were an increase in construction and equipment costs worldwide and project management costs worldwide. 

In addition, short-term energy capacity constraints being experienced in southern Africa have been assessed as a risk that could adversely affect commissioning time to production and the overall economies of the Activox Refinery Project.

 'Based on these facts and circumstances, (the) management of the Group made a decision to postpone the project indefinitely,' the company said.

As a result, as at 31 December 2007, mineral rights presented within mining assets and goodwill recognised on acquisition of LionOre were impaired in the amounts of USD 765 million and USD 325 million respectively.

On June 28, 2007 the Group acquired 90.7 percent of the issued ordinary shares of LionOre Mining International, a large producer of nickel with production facilities in Australia, Botswana and South Africa for a consideration of USD 5.25 billion.

In the time period from July to August 2007, the Group acquired an additional 9.3 percent of LionOre for USD 543 million, thus consolidating 100 percent of the issued share capital of LionOre.

The Group recognised an impairment of net assets attributable to minority holders of USD 334 million with the difference of USD 209 million charged to goodwill.   In July and August 2007, holders of convertible bonds issued by LionOre exercised their right and converted the bonds into 23.5 million ordinary shares which were repurchased immediately by the Group for USD 613 million.

LionOre contributed USD 407 million revenue and USD 907 million loss before taxation from the date of acquisition to 31 December 2007.

The financial report said goodwill arising from the acquisition of LionOre represents the expected future cash flow benefits to be derived from the business synergies.