Investor Presentaiton
NPI: Key Swinging Factor in Nickel Market Equation
NPI emerged as response to nickel price escalation in mid-
2000s and is currently produced and consumed by China
only
NPI is high cost production due to significant energy
intensity of process and transportation costs for ore
sourced from Philippines and Indonesia and costs are
expected to upward
Key components of cash costs for BF - coking coal (58%),
ore (15%), transportation (13%), for EAF - power (30%),
ore (26%), coking coal (20%) and transportation (17%), for
RKEF - power, ore, transportation (30% each)
Majority of NPI producers' break even costs range from
$17,000/t up to $20,000/t, but RKEF costs are ~$15,500/t
Brook Hunt estimates that at price level $18.3k/t Ni,
production of 110kt of Ni in form of NPI is uneconomic and
cash burning
Announced export taxes (25% in 2012, 50% in 2013) to be
followed with export ban on nickel ore from Indonesia in
2014 (53% of Chinese ore import in 2011) provide efficient
long-term floor to nickel price
Source: Brook Hunt, VTB Capital, Macquarie Capital
$/lb ex-VAT
NPI costs forward trends
13
22
12
11
10
Cost pressures upwards
7
6
5-
2007
2008
2009 2010 2011
2012 2013F 2014F
2015F 2016F
6% Ni 10% EAF Coast 10% EAF IM *12% EAF
Source: Macquarie Capital
12% RKEF
NPI production
168
2010
Source: Company estimates
335
320
270
2011
2012E
2013F
NORILSK NICKEL
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