Russian Platinum found money for the Arctic

Musa Bazhaev’s Russian Platinum has agreed with VEB.RF and VTB to finance a project for the development of the Chernogorskoye field worth 570 billion rubles. However, the issue of interaction with Norilsk Nickel and the conditions for using its infrastructure remain unclear. Although negotiations between them have not yet been completed, preparations for the industrial development of the field, according to Kommersant’s information, are already underway.

Musa Bazhaev’s Russian Platinum is taking concrete steps to implement a project for the extraction of platinum-copper-nickel ores in the Chernogorsk deposit in the Krasnoyarsk Territory even before the completion of negotiations with Norilsk Nickel, the use of the infrastructure of which is of key importance for the project. On June 3, at the SPIEF, the company signed a memorandum of intent with VTB and VEB.RF on project financing, which could amount to 80% of the total project cost of 570 billion rubles.

The Chernogorskoye field is located 15 km southeast of Norilsk. Ore reserves amount to 131 million tons with an average grade of 0.25% nickel, 0.20% copper, platinum group metals and gold 3.19 g per ton. On the basis of the Chernogorskoye deposit, it is planned to build a mining and processing complex with a processing capacity of 7 million tons of ore per year. According to Dmitry Orekhov, Managing Director of the NKR rating agency, the payback period for such a large-scale project could be more than 15 years.

If the issue of financing can be considered resolved, then the scheme of interaction with Norilsk Nickel remains unclear. In 2018, the companies agreed to establish the Arctic Palladium JV, to which Musa Bazhaev’s company planned to submit licenses for the development of the southern part of the Norilsk-1 field and the Chernogorskoye field, and Norilsk Nickel – a license for the Maslovskoye field. The investments were supposed to amount to $ 15 billion. The agreements were preceded by a long-term conflict, when Norilsk Nickel tried to challenge the right of Mr. Bazhaev’s company to develop Norilsk-1, and Russian Platinum accused the mining and metallurgical complex of not allowing access to the infrastructure.

Although the project was publicly endorsed by President Vladimir Putin, the partnership fell apart. Rusal, which owns a 27.8% stake in MMC, did not support the creation of the joint venture, insisting on an increase in Norilsk Nickel’s stake in it. Russian Platinum was not ready to reduce its share below 50%, as Rusal wanted, since it is its licenses that are the main part of the integrated project. Despite the collapse of the joint venture, Russian Platinum and Norilsk Nickel in July 2020 agreed on an operational partnership: within its framework, Norilsk Nickel will provide access to its energy and transport infrastructure on market conditions, and is also ready to purchase ready-made products under a long-term contract.

On June 3, Musa Bazhaev only announced that negotiations with Norilsk Nickel were continuing. Norilsk Nickel declined to comment, while Rusal stated that they consider it expedient to discuss the formats for Norilsk Nickel’s possible participation in this project. Despite the unfinished negotiations, preparations for the industrial development of the deposits are already underway. According to Kommersant’s sources, production of small volumes may begin this year. According to Mr. Bazhaev, the full launch of the Chernogorsk field is planned until 2024, and the second stage, with the commissioning of Norilsk-1, until 2030.

Moody’s Vice President Denis Perevezentsev says Norilsk Nickel’s involvement in the project may vary. The company may not participate at all at this stage, expecting better conditions for entering the project, or it may limit itself to providing transport and energy infrastructure, provide marketing support, but not enter the capital. The markets for metals, including the platinum group, are on the rise, fueled by the post-coronavirus euphoria and the abundance of cheap money in the world. However, the long-term prospects for platinum, used as catalysts in internal combustion engines, are far from unambiguous given the sharp shift in the priorities of automakers to electric vehicles, concludes Mr. Perevezentsev.

Evgeny Zainullin