MMC Norilsk Nickel: 2010 performance of transportation and logistics

MMC Norilsk Nickel summarized the performance of Transport and Logistics Unit in 2010.

The Transport and Logistics Unit ensures the water, rail, truck and air transportation of all cargoes of the Company. In 2010, the unit’s cargo turnover amounted to 2.5 million tons with 1 million tons transported along Northern Sea Route, and approximately 1.5 million tons – along the Yenisei River.

Norilsk Nickel’s Arctic transport fleet consists of five ice-class vessels with freight-carrying capacity of 16 thousand tons, and provides an all-season regular service between seaports of Dudinka, Murmansk, Arkhangelsk, Rotterdam and Hamburg.

In 2010, the Company’s own vessels made 54 voyages, 12 direct voyages to European ports and one to South-East Asia.

The 2011-2012 plans envisage modernization of the fleet, i.e. refitting of arctic container vessels with additional equipment, such as cargo cranes with freight-carrying capacity of 40 tons each. That will allow vessels handling without bringing them alongside an equipped berth, for example with a fast ice belt, or over undeveloped beach, or at anchorage.

The Company carries out construction of an Arctic tanker in addition to the available marine vessels. It is planned to complete the project and put the tanker into operation by the end of Q3 of this year.

In 2010, the Company initiated a construction project for a fuel storage terminal in Arkhangelsk were close to 50 thousand cubic meters of oil products can be stored at the same time. Together with oil products stockpiling and shipment to Norilsk Industrial Area, the terminal will be used for bunkering of the Company’s icebreaking cargo vessels. The storage terminal is planned to be completed at the end of 2012. The investment project estimated cost amounts to RUB790 million.

The Company continues implementation of a project related to construction of its own transshipment terminal in Murmansk. The volume of investments at stage one amounted to RUB1.1 billion. Upon completion of the first stage of construction (late 2011), all Norilsk Nickel’s cargoes transporting through Murmansk will be handled in the Company’s own terminal.

In 2010, in the course of modernization and reconstruction of the Company’s own terminal in Murmansk, ten Norilsk Nickel’s ships were handled here; the volume of transshipments amounted to 104 thousand tons of freight. In 2011, the volume of cargo transshipments is forecasted to grow up to 200 thousand tons, and starting from 2012 - up to 750 thousand tons per year.

In 2010, the Company initiated a number of investment projects to upgrade the port fleet of the Polar Transport Division, as well as developed and approved business plans for the construction of liquid fuel bunk with capacity of 1.1 thousand tons (the project’s cost amounts to RUB300 million), of seagoing docking tug with power of 2,750 horse power (the cost amounts to RUB216 million), and a river tug with power of 600 horse power (the cost amounts to RUB140 million).

River cargo fleet is localized in OJSC Yenissei River Shipping Company (the Norilsk Nickel’s subsidiary). As of January 01, 2011, 676 fleet units are put on balance sheet of the Yenisei River Shipping Company. These include towing, dry cargo and oil-carrying self-propelled and non-propelled vessels. The River Shipping Company carries out freight transportation by all navigable rivers of the Yenisei river basin. OJSC Yenisei River Shipping Company is the largest river carrier of the Krasnoyarsk Territory. In 2010, the company transported about 3,200 thousand tons of freight.

Based on transportation and logistics programs developed by Oracle Corporation, in 2010 MMC Norilsk Nickel began modernizing the system of transportation arrangement and transport infrastructure management. The system will include all the Company’s transport infrastructure and links to its components. Norilsk Nickel is planning to build an interactive transport network that will display a real-time status of shipments. As a result of the system implementation, the transportation costs are expected to drop by at least 2.5% per year.

Construction of the Company’s own fleet, replacement of old gantry cranes with modern mobile cranes as well as replacement of the forklift fleet, set a task to reequip the container fleet of the Company and to change-over to freight transportation primarily in containers. Containerization provides safety and security of products at all the stages of transportation, and reduces products delivery period by decreasing the time of cargo handling operations at ports of transshipment, as well as reduces the transportation cost for one ton of cargo on the average by 15% due to exclusion of costs related to bulk cargo handling at ports of transshipment.

In 2010, the Company began to transport steel products for export in large-tonnage containers of international shipping lines directly from the producer’s stockpile to bases of delivery in Shanghai and Baltimore. The Company’s logistics office in Europe, Norilsk Nickel Logistics BV, provides cooperation with the services of international shipping lines and monitoring of the transportations.

Rail subdivision was established on the basis of Murmansk Transport Division. The subdivision will provide transportation of the Company’s freight in containers by rail – to bring matte to Severonickel Combine of Kola MMC, and to take final products from the combine. For these purposes, the Company has envisaged the acquisition of one 2ЭСSK Ermak mainline electric locomotive, one 2M62 diesel locomotive and 95 container platforms. The total investment will amount to about RUB350 million.

ABOUT MMC NORILSK NICKEL:

MMC Norilsk Nickel, a company incorporated under the laws of the Russian Federation, is the largest diversified mining and metals company in Russia, the world's largest producer of nickel and palladium and one of the world's largest producers of platinum, rhodium, copper and cobalt. In addition to this, MMC Norilsk Nickel produces a large number of other by-products, including gold, silver, tellurium, selenium, iridium and ruthenium.

The key production units of the Company’s group in Russia are at the Polar and Kola Peninsulas. MMC Norilsk Nickel international assets include operations in Finland, Australia, Botswana and South Africa.

MMC Norilsk Nickel’s shares are traded at MICEX and RTS. ADR’s on the Company’s shares are traded on the other the counter market in the US and at the London and Berlin stock exchanges.