OREANDA-NEWS. October 5, 2007. Open Joint Stock Company (“OJSC”) Mining and Metallurgical CompanyNorilsk Nickel (“MMC Norilsk Nickel”, or the “Company”) and its subsidiaries (the “Group”) issued consolidated interim financial statements (the “financial statements”) for the six months ended
30 June 2007 in compliance with International Financial Reporting Standards (“IFRS”). The financial statements have been reviewed in accordance with International Standard on Review Engagements 2410 by Deloitte & Touche, who have issued a review report without any qualifications.

The individual financial statements of each subsidiary are presented in its own functional currency. It was determined that the Russian Rouble (“RUR”) is the functional currency of the Company and all foreign subsidiaries of the Group, except for Stillwater Mining Company, LionOre Mining International Limited,
Norilsk Nickel Harjavalta Oy, Norilsk Nickel Finland Oy, Norilsk Nickel Cawse Proprietary Limited and MPI Nickel Proprietary Limited. Those companies use the functional currencies of the economies in which they operate - US Dollar, Australian Dollar, Botswana Pula and South African Rand.
The presentation currency of the consolidated interim financial statements is the United States of America Dollar (“USD”). Using USD as a presentation currency is common practice for global mining companies.
In addition, USD is a more relevant presentation currency for international users of the consolidated interim financial statements of the Group.

On 24 September 2007, the Board of Directors of MMC Norilsk Nickel adopted a resolution to convene an Extraordinary General Meeting of shareholders on 14 December 2007 to approve the Company’s reorganization plan involving the spin-off of its non-core energy assets into a separate company, shares of which will be distributed between MMC Norilsk Nickel shareholders on a proportional basis. The
strategic energy assets engaged in power supply to the Group’s production facilities in the Taimyr Peninsula will not be subject to spin-off. The project time schedule and final list of the energy assets to be spun-off will be determined in November 2007.

Those shareholders that abstain from voting or vote against the reorganization will be entitled to present their ordinary shares to MMC Norilsk Nickel for redemption. The redemption price has been established by the Board of Directors of MMC Norilsk Nickel at RUR 5,300 per share.
A separate classification of the energy assets to be disposed will be presented in the Group’s consolidated financial statements for the year ending 31 December 2007.

Reflection of the inclusion of OMG Harjavalta Nickel Oy, OMG Cawse Proprietary Limited and 20% share of MPI Nickel Proprietary Limited results in MMC Norilsk Nickel consolidated interim financial statements. On 1 March 2007, the Group acquired 100% of the voting shares of OMG Harjavalta Nickel Oy
(“OMG Harjavalta”), a company engaged in nickel refining operations in Harjavalta, Finland, and OMG Cawse Proprietary Limited (“OMG Cawse”), a company engaged in nickel mining and processing operations in Western Australia, for a consideration of USD 408 million.
OMG Harjavalta and OMG Cawse jointly contributed USD 475 million of revenue and USD 180 million of profit before income tax from the date of acquisition to 30 June 2007.

In the preparation of consolidated interim financial statements at 30 June 2007 and for the period then ended, the excess purchase price paid over the Group's share of net assets of OMG Harjavalta and OMG Cawse was provisionally accounted for as:
• mineral rights and resources in the amount of USD 13 million; and
• attributable deferred tax liabilities in the amount of USD 4 million;
As part of the business combination the Group entered into five-year supply agreement with OM Group
(former controlling owner of OMG Harjavalta and OMG Cawse).
At 1 March 2007, the value attributable to these contracts was provisionally determined at
USD 96 million.
On 1 March 2007, as part of the acquisition of nickel business of OM Group Incorporated the Group
acquired 20% of share capital of MPI Nickel Proprietary Limited. On 28 June 2007, an additional 80% of
share capital of MPI Nickel Proprietary Limited held by LionOre Mining International Limited
(“LionOre”) was acquired by the Group through the acquisition of LionOre.
Reflection of the inclusion of the LionOre Mining International Limited results in MMC Norilsk Nickel
financial statements
On 28 June 2007, the Group acquired 90.7% of the voting shares of LionOre, an international nickel
concentrates producer with operations in Australia, Botswana and South Africa and a gold mine Thunderbox
in Australia, for a cash consideration of USD 5,233 million.
The business combination was accounted for as if it had taken place on 30 June 2007. The contribution of
LionOre and its subsidiaries to the consolidated revenue and profit before income tax for the six months
ended 30 June 2007 is USD nil million.
In the preparation of consolidated interim financial statements at 30 June 2007 and for the period then
ended, the excess purchase price paid over the Group's share of net assets of LionOre was provisionally
accounted for as:
• mineral rights and resources in the amount of USD 6,464 million; and
• attributable deferred tax liabilities in the amount of USD 1,464 million.
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Reflection of the Polus Group results in MMC Norilsk Nickel consolidated interim financial statements
In accordance with IFRS the Polus Group financial results are presented in MMC Norilsk Nickel consolidated interim financial statements for the first half of 2006 and for the year of 2006 in the following way:
• Consolidated income statement
The financial results of operations of Polus Group for the period from 1 January 2006 to 17 March 2006 (date of completion of the spin-off transaction) are not consolidated, and are shown separately as profit for the period from discontinued operation.
• Consolidated balance sheet
The consolidated balance sheet of the Group as at 31 December 2006 is presented excluding Polus
Group.
• Consolidated statement of cash flows
The consolidated cash flow statement of the Group is presented inclusive of the Polus Group data for the period from 1 January 2006 to 17 March 2006 (date of completion of the spin-off transaction).
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
Revenue from metal sales
Nickel 5,254 2,026 159 6,228
Copper 1,174 1,095 7 2,841
Palladium 660 559 18 1,265
Platinum 512 474 8 1,116
Gold 45 37 22 100
Revenue from metal sales 1 7,645 4,191 82 11,550
Cost of metal sales 2 (1,805) (1,375) 31 (3,158)
Gross profit on metal sales 5,840 2,816 107 8,392
Gross profit margin, % 76% 67% 73%
Selling, general and administrative expenses 3 (668) (472) 42 (1,090)
Other net operating expenses 4 (148) (133) 11 (272)
Operating profit 5,024 2,211 127 7,030
Net finance (cost)/benefit 5 (52) 2 (21)
Net income/(loss) from investments 6 68 (368) (199)
Share of profit/(loss) of associates 7 34 6 (33)
Profit before income tax 5,074 1,851 174 6,777
Income tax 8 (1,266) (477) (1,805)
Profit for the period from continuing operations 3,808 1,374 177 4,972
Profit for the period from discontinued operation - 993 993
Profit for the period 9 3,808 2,367 61 5,965
Attributable to:
Shareholders of the parent company 3,792 2,370 5,989
Minority interests 16 (3) (24)
3,808 2,367 5,965
Profit margin, % 50% 56% 52%
Weighted average number of ordinary shares in issue
during the period 181,417,913 188,750,738 188,767,177
Basic and diluted earnings per share from continuing
and discontinued operations attributable to
shareholders of the parent company (US Dollars) 20.9 12.6 31.7
Basic and diluted earnings per share from continuing
operations attributable to shareholders of the parent
company (US Dollars) 20.9 7.3 26.5
Note:
(1) Period-on-period (p-o-p) comparison.
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1. METAL SALES
In 1H2007, revenue from metal sales totaled USD 7,645 million, which represented an 82% increase as compared to 1H2006. There are two major factors for the revenue growth in 1H2007. The first and main factor which contributed 75% of the growth was the overall increase of sales prices for the metals produced by the Group. The second factor that accounted for about 7% of the growth (or 11,000 tonnes nickel and 2,000 tonnes of copper) was the acquisition on 1 March 2007, of Harjavalta Nickel Oy and
Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries).
The favorable situation in the metals market, expansion of the production and sales geography and the focus on end customers enabled the Group to realise a revenue increase for all metals of USD 3,454 million, of which USD 3,307 million (96%) was for base metals, and USD 147 million (4%)
for platinum group metals (“PGMs”) and gold.
Adjusted (1) average selling prices of metals (excluding Polus Group) for the period
Metal
MMC Norilsk Nickel
Nickel (US Dollars per tonne) (1) 44,708 17,330 158 24,081
Copper (US Dollars per tonne) 6,770 5,848 16 6,689
Palladium (US Dollars per ounce) 356 326 9 321
Platinum (US Dollars per ounce) 1,214 1,083 12 1,133
Gold (US Dollars per ounce) 666 583 14 608
Stillwater Mining Company
Palladium (US Dollars per ounce) 374 265 41 350
Platinum (US Dollars per ounce) 1,048 1,048 ─ 993
Gold (US Dollars per ounce) 661 ─ N/A 603
Harjavalta Nickel Oy (2)
Nickel (US Dollars per tonne) 47,340 ─ N/A ─
Copper (US Dollars per tonne) 6,850 ─ N/A ─
Physical volumes of metal sales (excluding Polus Group) for the period
MMC Norilsk Nickel
Nickel (‘000 tonnes) (1) 103 117 (12) 257
Copper (‘000 tonnes) 172 187 (8) 424
Palladium (‘000 ounces) 1,545 1,446 7 3,220
Platinum (‘000 ounces) 314 336 (7) 750
Gold (‘000 ounces) 62 63 (2) 153
Stillwater Mining Company
Palladium (‘000 ounces) 294(3) 332(3) (11) 662(3)
Platinum (‘000 ounces) 125 105 19 268
Gold (‘000 ounces) 6 ─ N/A 11
Harjavalta Nickel Oy (2)
Nickel (‘000 tonnes) 11 ─ N/A ─
Copper (‘000 tonnes) 2 ─ N/A ─

Nickel in 2003 as part of the purchase consideration paid for the acquired shares of Stillwater Mining Company.

Nickel
The revenue from nickel sales increased by 159% and reached USD 5,254 million in 1H2007 as compared to USD 2,026 million in 1H2006 due to a significant growth in the adjusted average selling price of nickel by 158% – from USD 17,330 per tonne in 1H2006 to USD 44,708 per tonne in 1H2007. During 1H2007
the physical volume of nickel sales (excluding sales of metal purchased from third parties) decreased by 3% (or 3,000 tonnes) to 114,000 tonnes as compared to 117,000 in 1H2006, of which 10% (or 11,000 tonnes) was generated by the acquisition of the ex-OM Group nickel subsidiaries.
Copper
Revenue from copper sales increased by 7% from USD 1,095 million in 1H2006 to USD 1,174 million in 1H2007. In 1H2007, a decrease in physical copper sales by 7% (or 13,000 tonnes) to 174,000 tonnes as compared to 187,000 tonnes in 1H2006 was offset by an increase in the average selling price by 16% from
USD 5,848 per tonne in 1H2006 to USD 6,770 in 1H2007.
Palladium
Palladium sales increased by 18% from USD 559 million in 1H2006 to USD 660 million in 1H2007. Palladium sales excluding sales of Stillwater Mining increased by 17% from USD 471 million in 1H2006 to USD 550 million in 1H2007. In physical terms, sales of palladium produced by the Group in Russia
amounted to 1,545,000 ounces in 1H2007, which is 7% higher compared to the sales for 1H2006 which amounted to 1,446,000 ounces. This increase in physical sales was supported by the growth of the average
sales price.
Palladium sales by Stillwater Mining Company increased by 25% from USD 88 million in 1H2006 to USD 110 million in 1H2007. The increase in revenue is explained by a 41% growth in the average sales price which was partially offset by 11% decrease in physical volumes of sales, which was due to the sales
in previous periods of metal received by the company from the Group as part of the purchase price consideration paid for the acquisition of Stillwater Mining Company shares, and an increase in the sales of palladium received from processing scrap. In 1H2007, Stillwater Mining Company sold 294,000 ounces of
palladium as compared to 332,000 ounces in 1H2006, including 63,000 ounces received from the Group in 2003.
Platinum
Platinum sales increased by 8% from USD 474 million in 1H2006 to USD 512 million in 1H2007. Sales of platinum produced by the Group in Russia increased by 5% from USD 364 million in 1H2006 to USD 381 million in 1H2007. The increase is explained mainly by the growth of the sales price by 12%
from USD 1,083 per ounce in 1H2006 to USD 1,214 per ounce in 1H2007. There was a slight decline in the physical sales volume by 7% (or 22,000 ounces) from 336,000 ounces in 1H2006 to 314,000 ounces in
1H2007.
Platinum sales by Stillwater Mining Company increased by 19% from USD 110 million in 1H2006 to USD 131 million in 1H2007. The main growth factor is the increase of sales in physical terms by 19% (or 20,000 ounces) from 105,000 ounces in 1H2006 to 125,000 ounces in 1H2007, which relates primarily
to the growth of sales of platinum received from processing secondary material.
Gold (excluding Polus Group)
Gold sales increased by 22% from USD 37 million in 1H2006 to USD 45 million in 1H2007. The increase is explained mainly by an increase in sales prices of 14% from USD 583 per ounce in 1H2006 to USD 666 per ounce in 1H2007. In physical terms, sales of gold produced by the Group in Russia
amounted to 62,000 ounces and by Stillwater Mining Company to 6,000 ounces or 68,000 ounces in total as compared to 63,000 ounces of gold in 1H2006.

2. COST OF METAL SALES
Cost of metal sales (excluding Polus Group) for the period
Total cash operating costs
(see table below) 1,861 87 1,504 357 1,259 82 1,259 48 19
Amortisation and depreciation of
operating assets 273 13 268 5 270 18 270 1 (1)
Total production costs 2,134 100 1,772 362 1,529 100 1,529 40 16
Increase in metal inventories (329) (275) (54) (154) (154) 114 79
Cost of metal sales 1,805 100 1,497 308 1,375 100 1,375 31 9
Cost of metal sales increased by 31% from USD 1,375 million in 1H2006 to USD 1,805 million in
1H2007.
Ñash operating costs
Cash operating costs increased by 48% and amounted to USD 1,861 million in 1H2007 against
USD 1,259 million in 1H2006.
The cash operating cost structure changed slightly in 1H2007 compared to 1H2006 mainly due to the effect of the acquisitions of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries), for the details see the schedule of cash operating costs, presented below.
The key reasons for the growth of total cash operating costs of USD 726 million in 1H2007, before revenue from sales of by-products, compared to 1H2006 included:
• consolidation of cash operating costs of Harjavalta Nickel Oy and Cawse (ex-OMG nickel business) –
USD 375 million;
• absolute increase of cash operating costs by USD 278 million; and
• effect of translation to presentation currency by USD 73 million.
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Cash operating costs (excluding Polus Group) for the period
Labour 636 28 628 8 512 33 512 24 23
Consumables and spares 453 20 438 15 418 27 418 8 5
Purchase of nickel concentrate 303 13 - 303 - - - N/A N/A
PGM scrap purchased 160 7 160 - 114 7 114 40 40
Cost of refined metals purchased
from third parties 98 4 98 - 28 2 28 250 250
Transportation 92 4 91 1 78 5 78 18 17
Repairs and maintenance 89 4 79 10 70 5 70 27 13
Exploration expenses 82 4 82 - 18 1 18 356 356
Tax on mining and pollution
levies 78 3 78 - 62 4 62 26 26
Insurance 67 3 67 - 62 4 62 8 8
Utilities 58 3 38 20 39 3 39 49 (3)
PGM toll refining costs 44 2 44 - 40 3 40 10 10
Other costs 96 5 78 18 89 6 89 8 (12)
Total cash operating costs 2,256 100 1,881 375 1,530 100 1,530 47 23
Revenue from the sale of
by-products (395) (377) (18) (271) (271) 46 39
Total cash operating costs 1,861 1,504 357 1,259 1,259 48 19
Labour
Labour remained the most significant item of cash operating costs, decreasing its share of the general structure of operating costs from 33% in 1H2006 to 28% in 1H2007. In 1H2007, labour costs increased by USD 124 million (or 24%) to USD 636 million. The increase is caused by the effect of translation to presentation currency by USD 30 million, consolidation of the results of Harjavalta Nickel Oy and
Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) by USD 8 million and an increase
in the salary level by USD 86 million.
Consumables and spares
Consumables and spares costs in 1H2007 increased by USD 35 million (or 8%) up to USD 453 million.
The increase is mainly caused by the effect of translation to presentation currency by USD 24 million,
consolidation of the results of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel
business subsidiaries) by USD 15 million.
Purchase of nickel concentrate
This item represents the purchases of nickel concentrate from MPI Nickel Proprietary Limited, an
associate of the Group during 1H2007, and other producers, and also includes related transportation
expenses. The full amount of expenses relates to the consolidation of the results of Harjavalta Nickel Oy
(ex-OM Group nickel business subsidiary).
PGM scrap purchased
In 1H2007, purchase of PGM scrap increased by USD 46 million (or 40%) to USD 160 million due to the increase of market prices with a corresponding increase in purchase prices and an increase in the physical volume purchased by Stillwater Mining Company to effectively utilise the existing production capacities and increase PGM production.

Cost of refined metals purchased from third parties
In 1H2007, the cost of refined metal purchased from third parties increased by USD 70 million (or 250%) to USD 98 million due to an increase of market price for nickel with a corresponding increase of physical
volume of nickel acquired.
Transportation
The transportation costs increased by USD 14 million (or 18%) up to USD 92 million in 1H2007. The increase is caused by the effect of translation to presentation currency of USD 5 million and remaining portion to the increase in transportation tariffs. In addition, there was an increase in cargo
insurance, which generally is in line with the growth for metal sales. Repairs and maintenance In 1H2007, repairs and maintenance costs increased by USD 19 million (or 27%) up to USD 89 million due to the effect of translation to presentation currency of USD 4 million, consolidation of results of business combination of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) by USD 10 million and the remaining portion is due to inflation.
Exploration expenses The increase in exploration expenditures in 1H2007 of USD 64 million (or 356%) to USD 82 million as compared with 1H2006 is caused by significant growth of exploration work performed by the Group aimed at expanding its mineral resource base.
Tax on mining and pollution levies Tax on mining and pollution levies increased by USD 16 million (or 26%) up to USD 78 million in
1H2007, which is mainly caused by an increase in the taxable base for mining tax purposes due to the increase in production cost and the effect of translation to presentation currency.
Insurance
Insurance expenses in 1H2007 increased by USD 5 million (or 8%) up to USD 67 million, which is mainly caused by the effect of translation to presentation currency.
Utilities In 1H2007, expenses on utilities increased by USD 19 million (or 49%) to USD 58 million. Without the effect of consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) which contributed an additional USD 20 million the main reason for the decrease was the effect of the acquisition of a 100% in OJSC “Taimyrenergo” after which the utility services were replaced with the respective increase of depreciation charges.
PGM toll refining costs PGM toll refining costs in 1H2007 increased by USD 4 million (or 10%) up to USD 44 million, which is
mainly caused by the effect of translation to presentation currency.
Other cash costs
In 1H2007, other cash costs increased by USD 7 million (or 8%) to USD 96 million, which is practically in line with the effect of translation to presentation currency of USD 5 million and the consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) by USD 18 million.

Revenue from the sale of by-products
Sales of by-products in 1H2007 increased by USD 124 million (or 46%) and totalled USD 395 million mainly is due to an increase of selling prices for by-products.
Amortisation and depreciation of operating assets In 1H2007, amortisation and depreciation of operating assets increased by USD 3 million (or 1%) to
USD 273 million, which is practically in line with results achieved in 1H2006.

Increase in metal inventories
The main reasons for the increase in the balance of metal inventories in 1H2007 were as follows:
• decrease of PGM and by-product sales from Taimyr and Kola Peninsula in 1H2007 due to renewal of
PGM license resulted in the increase in by-product inventories by USD 168 million; and
• increase in operating expenses at Taimyr and Kola Peninsulas resulted generally in the increase of
unit cost of production, which, in turn, led to the increase in the value of inventories
by USD 108 million;
• the consolidation of the results of Harjavalta Nickel Oy and Cawse Proprietary Limited
(ex-OM Group nickel business subsidiaries) resulted in the increase of metal inventory by
USD 53 million, mainly due to significant growth of nickel and nickel concentrate selling prices.
Taimyr Peninsula
Nickel (US Dollars per tonne) 5,218 4,753 10 4,477 4,637
Copper (US Dollars per tonne) 1,328 1,170 14 1,265 1,020
Palladium (US Dollars per ounces) 82 90 (9) 92 85
Platinum (US Dollars per ounces) 320 384 (17) 350 364
Gold (US Dollars per ounces) 171 191 (10) 183 181
Kola Peninsula
Nickel (US Dollars per tonne) 6,371 5,488 16 5,701 5,177
Copper (US Dollars per tonne) 1,516 2,374 (36) 1,659 2,940
Palladium (US Dollars per ounces) 108 97 11 116 88
Platinum (US Dollars per ounces) 387 409 (5) 439 374
Gold (US Dollars per ounces) 204 212 (4) 227 185
Stillwater Mining Company
Palladium (US Dollars per ounces) 345 301 15 308 268
Platinum (US Dollars per ounces) 994 889 12 918 853
Harjavalta Nickel Oy
Nickel (US Dollars per tonne) 40,874 ─ N/A ─ ─
In 1H2007, the cost of nickel production (per tonne) in the Taimyr Peninsula increased by 10% to
USD 5,218 per tonne, and in the Kola Peninsula the cost of nickel production increased by 16% to
USD 6,371 per tonne.
In 1H2007, the cost of copper production (per tonne) in the Taimyr Peninsula increased by 14% to
USD 1,328 per tonne, and in the Kola Peninsula the cost of copper production decreased by 36% to
USD 1,516 per tonne.
The main reason for the increase in both nickel and copper production cost in the Taimyr Peninsula was the reallocation of production costs between base metals (nickel and copper) and PGM’s, based on the relative sales value of these joint products, to increase the proportionate share of production cost of base
metals (nickel and copper) as a result of the higher prices (158% for nickel and 16% for copper) as compared to prices for PGMs (9% for palladium and 12% for platinum) in 1H2007.
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The increase in the cost of nickel production (per tonne) and decrease in the cost of copper production (per tonne) in the Kola Peninsula is due to the reallocation of costs between nickel and copper, based on the relative sales values of the based metals, to increase the share of production cost of nickel as a result of copper production decline in 1H2007 by 8% mainly as a result of the actual abandonment of the purchased of copper scrap for processing, and the higher nickel price (158%) as compared to copper (16%) in 1H2007.
In 1H2007, the cost of palladium production in the Taimyr Peninsula decreased by 9% to USD 82 per ounce, and increased by 11% to USD 108 per ounce in the Kola Peninsula. The changes in the cost of palladium production in the Peninsulas were due to:
• a general increase in the overall production costs;
• moderate increase of average selling price by 9% compared to the growth demonstrated by base
metals and other PGMs; and
• a large allocation of production cost in the Kola Peninsula to palladium is due to the abandonment of
the purchase and processing of copper scrap.
In 1H2007, the cost of platinum production in the Taimyr Peninsula decreased by 17% to USD 320 per
ounce, and decreased by 5% to USD 387 per ounce in the Kola Peninsula. The decrease in the cost of
platinum production in the Peninsulas was due to:
• a general increase in the overall production costs;
• a large allocation of production cost to nickel is due to the higher nickel prices; and
• an allocation of production cost in the Kola Peninsula to palladium is due to the abandonment of the
purchase and processing of copper scrap.
In 1H2007, the cost of gold production in the Taimyr Peninsula decreased by 10% to USD 171 per ounce, and by 4% to USD 204 per ounce in the Kola Peninsula. Ignoring the effect of translation to the presentation currency, the product unit cost decreased more substantially, which was explained by the reallocation of production costs between base metals (nickel and copper) and PGMs. The increase in prices for nickel and copper significantly outperformed the prices realised for the PGMs (including gold) sold by the Group. The less sharp decrease of the cost of gold production in the Kola Peninsula is explained by the abandonment of the purchase and processing of copper scrap.
3. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In 1H2007, selling, general and administrative expenses increased by USD 196 million (or 42%) to USD 668 million as compared to USD 472 million in 1H2006. The increase due to the effect of translation to presentation currency amounted to USD 27 million. Selling, general and administrative expenses (excluding Polus Group) for the period
Export custom duties 289 43 182 39 59
Salaries 161 24 113 24 42
Advertising 44 7 33 7 33
Taxes other than mining and income taxes and
pollution levies 43 6 41 9 5
Other expenses 131 20 103 21 27
Total 668 100 472 100 42
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Export custom duties
Export custom duties increased by USD 107 million (or 59%) to USD 289 million in 1H2007, which is completely in line with the dynamics of growth of export revenue, which basically form the basis for calculation of custom payments.
Salaries

Labour costs increased by USD 48 million (or 42%) to USD 161 million. The main reasons for the growth was the consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and salary increase.
Other expenses

Other types of expenses such as advertising, taxes, legal, auditing, insurance and other increased
practically in line with inflation.
4. OTHER NET OPERATING EXPENSES
During 1H2007 other net operating expenses increased by USD 15 million to USD 148 million as compared to USD 133 million in 1H2006. The main reason for the growth was the substantial change of donations and expenses associated with maintenance of social sphere facilities in the regions of the
Group’s operations.
Other operating expenses (excluding Polus Group) for the period
Donations 73 32 128 68
Maintenance of social sphere facilities 30 15 100 78
Foreign exchange loss, net 18 18 - 33
Change in allowance for doubtful debts 18 50 (64) 5
Loss on disposal of property, plant and equipment 14 17 (18) 21
Impairment of property, plant and equipment 12 (2) (700) 87
Change in allowance for value added tax recoverable 5 13 (62) 9
Change in provision for tax penalties (4) 8 (150) 19
Excess of acquirer's interest in the fair value of net assets
acquired (9) - N/A -
Operating profit from non-mining entities (27) (12) 125 (28)
Other 18 (6) (400) (20)
Total other operating expenses, net 148 133 11 272
5. NET FINANCE COSTS/(BENEFIT)
During 1H2007 net finance costs increased by USD 54 million to USD 52 million as compared to
USD 2 million finance benefit in 1H2006. The main reason for the increase was the effect of currency
exchange differences during 1H2007 as compared to 1H2006, and as a result, change of the effect from
the revaluation of borrowings denominated in US Dollars. In addition, interest expenses on loans and
borrowings also increased by USD 9 million to USD 43 million as compared to USD 34 million in
1H2006, as a result of the increase of the averaged borrowed amount for the period, which were used for
the acquisition of the shares of OJSC “OGK-3” and other business combinations.
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Net finance cost/(benefit) (excluding Polus Group) for the period
Interest expense on borrowings 43 34 26 60
Unwinding of discount on decommissioning obligations 10 9 11 19
Interest expense on pension obligations 4 4 - 7
Foreign currency exchange gain from revaluation of
borrowings, net (5) (49) (90) (65)
Total finance cost/(benefit), net 52 (2) 21
6. NET INCOME/(LOSS) FROM INVESTMENTS
During 1H2007 the net result from investment activities increased by USD 436 million to USD 68 million
income as compared to loss from investing activities of USD 368 million in 1H2006.
The main reasons for the increase were as follows:
• non-recurring losses of USD 317 million realised by MMC Norilsk Nickel on the disposal of the
investment in Gold Fields Limited in 1H2006; and
• increase of interest income on bank deposits to USD 62 million in 1H2007 compared to the interest
income of USD 22 million in 1H2006, as a result of increase of the deposited amounts for the period.
7. SHARE OF PROFIT/(LOSS) OF ASSOCIATES
During 1H2007 share of profit of associates increased by USD 28 million to USD 34 million profits as
compared to USD 6 million in 1H2006.
The main reasons for the increase were as follows:
• contribution of OJSC “OGK-3” from 1 April of 2007 (date of obtaining significant influence over
the investee) in the amount of USD 17 million; and
• contribution of MPI Nickel Proprietary Limited from 1 March of 2007 (date of obtaining significant
influence over investee) in the amount of USD 12 million.
8. INCOME TAX

During 1H2007, the income tax provision increased by 165% to USD 1,266 million from USD 477
million in 1H2006. This increase was mainly due to the growth of pre-tax income of the Group, the main
reason for which was the growth of the revenue from metal sales.
In 1H2007, the effective tax rate was 25% (1H2006: 27%) and did not change significantly from 1H2006.
9. PROFIT FOR THE PERIOD
Profit for the period increased from USD 2,367 million in 1H2006 to USD 3,808 million in 1H2007 as
a result of the higher prices for metals sold, consolidating the results of Harjavalta Nickel Oy and Cawse
Proprietary Limited (ex-OM Group nickel business subsidiaries) and the release of the effect of
discontinued operation due to spin-off of Polyus Gold assets in 1H2006.
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ASSETS
Non-current assets
Property, plant and equipment 10 15,644 8,134 92
Goodwill 26 25 4
Intangible assets 60 48 25
Investments in associates 11 4,209 208 1,924
Investments in securities and other financial assets 12 2,539 2,615 (3)
Taxes receivable 50 44 14
Deferred tax assets 26 - N/A
Pension plan assets 13 37 - N/A
22,591 65 11,074 68 104
Current assets
Inventories 14 2,235 1,471 52
Trade and other receivables 15 1,249 850 47
Investments in securities and other financial assets 12 390 104 275
Taxes receivable 679 602 13
Cash and cash equivalents 16 7,573 2,178 248
12,126 35 5,205 32 133
TOTAL ASSETS 34,717 100 16,279 100 113
EQUITY AND LIABILITIES
Capital and reserves 17 17,463 51 13,136 81 33
Non-current liabilities
Long-term borrowings 18 4,119 632 552
Employee benefit obligations 13 11 57 (81)
Environmental obligations 19 412 322 28
Derivative financial liabilities 20 82 - N/A
Liabilities associated with acquisition of business
from OM Group 21 74 - N/A
Deferred tax liabilities 22 2,739 881 211
7,437 21 1,892 12 294
Current liabilities
Short-term borrowings 18 2,368 158 1,399
Current portion of employee benefit obligations 13 275 259 6
Current portion of environmental obligations 19 26 - N/A
Trade and other payables 5,847 421 1,289
Taxes payable 412 393 5
Derivative financial liabilities 20 13 15 (13)
Dividends payable 856 5 17,020
Liabilities associated with acquisition of business
from OM Group 21 20 - N/A
9,817 28 1,251 7 685
TOTAL EQUITY AND LIABILITIES 34,717 100 16,279 100 113
The balance sheet total as at 30 June 2007 was USD 34,717 million and increased over the first six months of 2007 by USD 18,438 million (or 113%), of which USD 261 million (or 2%) is due to the effect of translation to presentation currency.
The balance sheet structure has changed dramatically compared to the balance sheet as at 31 December 2006 mainly due to the latest acquisitions and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and LionOre Group and the increase of ownership in OJSC “OGK-3”:
• the share of non-current assets decreased from 68% to 65%;
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• the liquidity of current assets increased (the share of monetary assets in the overall current assets
increased from 42% to 62%);
• the share of capital and reserves decreased to 51% as compared to 81% as at 31 December 2006;
• the share of non-current liabilities increased from 12% to 21%; and
• the share of current liabilities increased from 7% to 28%.
The share of other balance sheet items changed insignificantly.
10. PROPERTY, PLANT AND EQUIPMENT
As at 30 June 2007, property, plant and equipment amounted to USD 15,644 million as compared to USD 8,134 million as at 31 December 2006. The increase of property, plant and equipment by USD 7,510 million was due to an increase of capital construction-in-progress of mining, metallurgical and energy facilities, additions of property, plant and equipment of USD 122 million as a result of the acquisition and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and LionOre Group of USD 7,380 million and the effect of translation to the presentation currency by USD 142 million. The remaining portion relates to the depreciation charge that is in line with year end results and the disposal of property plant and equipment.
11. INVESTMENTS IN ASSOCIATES
As at 30 June 2007, investments in associates amounted to USD 4,209 million as compared to USD 208 million as at 31 December 2006. The increase of investments in associates by USD 4,001 million was mainly due to the increase of Group’s ownership interest in OJSC “OGK-3” from 14.6% as at 31 December 2006 to 46.9% as at 30 June 2007 as well as acquisition of a 50% joint-venture share in Nkomati Nickel Mine through the acquisition of control over the LionOre Group.
The Group’s share in profit/(loss) of associates were as follows:
Share of profit/(loss) of individual investments in associates for the period
(US Dollars million)
12. INVESTMENTS IN SECURITIES AND OTHER FINANCIAL ASSETS
As at 30 June 2007, the current and non-current investments in securities and other financial assets amounted to USD 2,929 million compared to USD 2,719 million as at 31 December 2006. The increase by USD 155 million resulted primarily from the change of classification of investments in OJSC “OGK-3” (from available-for-sale to investments in associates) due to increase of ownership from 14.6% as at 31 December 2006 to 46.9% as at 30 June 2007, acquisition of investments through the acquisitions and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and LionOre Group. The remaining portion reflects results of the valuation, which corresponds to the change in the market value of the respective assets.
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13. PENSION PLAN ASSETS AND EMPLOYEE BENEFIT OBLIGATIONS
Starting from the second half of 2006 financial year all the Group’s pension plans are managed by a non-state Pension Fund “Norilsk Nickel”. Contribution from the Group to this Fund during the period ended 30 June 2007 amounted to USD 109 million (31 December 2006: USD 11 million). Unearned portion in the amount of USD 37 million of these contributions were presented as pension plans assets and remaining portion was settled off against employee benefit
obligations.
14. INVENTORIES
As at 30 June 2007, inventories of finished goods, work-in-process and stores and materials amounted to USD 2,235 million as compared to USD 1,471 million as at 31 December 2006. The increase is due to:
• the consolidation of the inventory balances of Harjavalta Nickel Oy and Cawse Proprietary Limited
(ex-OM Group nickel business subsidiaries) and LionOre Group in the amount of USD 319 million;
• the growth of by-product balances by USD 138 million, primarily due to growth of the value of
by-products stock;
• the growth of base metal stock (nickel and copper) by USD 219 million due to seasonality; and
• the effect of translation to presentation currency by USD 88 million.
15. TRADE AND OTHER RECEIVABLES
As at 30 June 2007, trade and other receivables amounted to USD 1,249 million as compared to USD 850 million as at 31 December 2006. The increase is mainly due to the acquisition and consolidation of accounts receivables balances of Harjavalta Nickel Oy and Cawse Proprietary Limited
(ex-OM Group nickel business subsidiaries) and LionOre Group in the amount of USD 483 million.
16. CASH AND CASH EQUIVALENTS
As at 30 June 2007, cash and cash equivalents amounted to USD 7,573 million as compared to USD 2,178 million as at 31 December 2006. The increase in balances of cash and cash equivalents is mainly due to the July settlement of account payables for the acquisition of 90.7% of LionOre shares in
the amount of USD 5,233 million.
17. CAPITAL AND RESERVES
As at 30 June 2007, capital and reserves amounted to USD 17,463 million (including minority interest of USD 955 million) as compared to USD 13,136 million (including minority interest of USD 319 million) as at 31 December 2006.
Key factors that affected capital and reserves were:
• profit for the period in the amount of USD 3,808 million;
• dividends declared by the Group during the six month period of 2007 amounted to USD 842 million;
• change in minority interest in the amount of USD 623 million due to the acquisition of LionOre;
• increase of the fair value reserve for investments available-for-sale in the amount of
USD 539 million; and
• increase of the accumulated exchange rate differences provision in the amount of USD 261 million.
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18. LONG AND SHORT TERM BORROWINGS
As at 30 June 2007, loans and borrowings of the Group increased by USD 5,697 million (or 721%) against USD 790 million as at 31 December 2006. The major part of loans and borrowings was arranged in the form of syndicated loan by Societe Generale (Paris) for the purposes of the acquisitions of LionOre
Group.
19. ENVIRONMENTAL OBLIGATIONS
As at 30 June 2007, environmental obligations amounted to USD 438 million as compared to USD 322 million as at 31 December 2006. The increase in balance of environmental obligations is mainly due to the acquisition of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel
business subsidiaries) and LionOre Group.
20. DERIVATIVE FINANCIAL LIABILITIES
As at 30 June 2007, derivative financial liabilities amounted to USD 95 million as compared to USD 15 million as at 31 December 2006. The increase in balance of derivative financial liabilities is mainly due to the effect of the acquisition and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and the LionOre Group.
21. LIABILITIES ASSOCIATED WITH ACQUISTION OF BUSINESS FROM OM GROUP
As part of the business combination the Group entered into five-year supply agreement with the OM Group Incorporated (ex-controlling owner of Harjavalta Nickel Oy and Cawse Proprietary Limited).
The value of liabilities under these contracts, at 1 March 2007, was provisionally determined to be USD
94 million.
22. DEFERRED TAX LIABILITIES
As at 30 June 2007, the deferred tax liabilities amounted to USD 2,739 million as compared to USD 881 million as at 31 December 2006. The increase in the balance of deferred tax liabilities is mainly due to the effect of the acquisition and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and LionOre Group.
CONSOLIDATED CASH FLOWS STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007

Net cash generated from operating activities 23 3,399 1,791 90 5,647
Net cash (used in)/generated from investing activities 24 (3,517) 1,548 (327) 378
Net cash generated from/(used in) financing activities 25 5,398 (3,259) (266) (4,909)
Net increase in cash and cash equivalents 26 5,280 80 6,500 1,116
Net cash and cash equivalents at beginning of the period 2,178 922 922
Effect of translation to presentation currency 115 59 140
Net cash and cash equivalents at end of the period 7,573 1,061 2,178
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23. NET CASH GENERATED FROM OPERATING ACTIVITIES
The main source of cash for the Group is net cash flows from operating activities. Due to the significant
increase of revenue from metal sales in 1H2007 net cash generated by operations increased nearly twice
and amounted to USD 3,399 million as compared to USD 1,791 million in 1H2006.
During 1H2007 a considerable growth in operating cash flows enabled Norilsk Nickel to expand the
business through the acquisition and consolidation of Harjavalta Nickel Oy and Cawse Proprietary Limited (ex-OM Group nickel business subsidiaries) and LionOre Group and increase its ownership in OJSC “OGK-3” from 14.6% as at 31 December 2006 to 46.9% as at 30 June 2007. As at 30 June 2007, total amount of cash spent on these acquisitions amounted to USD 3,215 million.
24. CASH USED IN INVESTING ACTIVITIES
Net cash outflow from investing activities in 1H2007 amounted to USD 3,517 million. The main components of the inflow include the sale of the financial investment and proceeds from the sale of property, plant and equipment in the amount of USD 159 million and USD 68 million, respectively.
The cash outflow as a result of investing activities comprised the following key components:
• purchase of shares in subsidiaries and associates for USD 3,215 million; and
• acquisition of property, plant and equipment and intangible assets for USD 306 million.
25. NET CASH GENERATED FROM FINANCING ACTIVITIES
In 1H2007, net cash generated from financing activities amounted to USD 5,398 million. The cash inflow comprised from the proceeds from loans and borrowings in the amount of USD 7,350 million. The cash inflow for financing activities was partially offset by repayment of cash for loans and borrowings
in the amount of USD 1,901 million.
26. NET INCREASE IN CASH AND CASH EQUIVALENTS
Net cash and cash equivalents increased in 1H2007 by USD 5,280 million to USD 7,573 million. The Group used cash to settle an outstanding obligation for the acquisition of LionOre in the amount of USD 5,233 million, increase of ownership in OJSC “OGK-3” and payment of dividends. The Group plans to further invest into extension and maintenance of production assets.
The full version of the consolidated interim financial statements of MMC Norilsk Nickel for the six months ended 30 June 2007 prepared in accordance with IFRS is available on the Company’s web-site (www.nornik.ru/en) under the section Investor Relations/Reports/Financial Statements.
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More information is provided on the official web-site - http://www.nornik.ru/_upload/editor_files/file0813.pdf