OREANDA-NEWS. On April 24, 2009 General Director of MMC Norilsk Nickel (hereinafter – MMC Norilsk Nickel” or the Company) Vladimir Strzhalkovsky took part in the 5th Regional Corporate Forum (hereinafter - the Forum), an annual meeting of the Company’s labor teams and the management, reported the press-centre of Norilsk Nickel.

This year the Forum gathered about 550 representatives of labor teams from 40 subdivisions of the Polar Division, subsidiaries, and dependent companies of MMC Norilsk Nickel. Alexander Khloponin, the Governor of the Krasnoyarsk Territory, who came to Norilsk on a business visit on April 24, attended the Forum. The meeting of the Governor with General Director of MMC Norilsk Nickel resulted in signing of the Agreement on the social and economic cooperation between the region and the Company.

Delegations of the regional government and the Taimyr Municipal Region also attended the Forum.

Vladimir Strzhalkovsky delivered a speech reflecting the position of MMC Norilsk Nickel management  regarding urgent and critical aspects of the Company’s development. He emphasized that at the time of crisis it is especially important to understand the goals and objectives the members of the labor team are facing and to discuss them openly. Therefore, the Corporate Forum gains special significance. In the course of the Forum General Director also answered the questions of the Company’s employees.

Highlights of General Director’s report  "Efficient Management and Social Responsibility  - the basis of the Company’s business strategy at the time of crisis":

The global economic recession:
The global crisis that began as the financial downturn of the American stock market affected almost all industries, including major players of mining and metals sector. The decline in metals demand accompanied by substantial price depreciation was the first manifestation of crisis in non-ferrous metals industry. Currently, the global nickel and copper outputs significantly exceed the demand.

However, Norilsk Nickel has demonstrated a considerable safety margin and its position is without bias better than that of many other operations in the industry. The Company is one of the lowest cost producers of nickel in the world mainly due to its unique mineral base.

Changes within the Company:
The ownership structure of MMC Norilsk Nickel changed considerably, the management was renewed, the new management team  is currently working in difficult conditions. The management’s position is distinct – to work for the benefit of the state, all shareholders, and the Company’s employees as an organic whole.

Relations with the government:
For a national-scale company, a high degree of trust from the government is essential, especially in the period of crisis. It is important to note that we have not turned to the government for direct financial assistance and we are not going to shovel onto the government the problems that the Company can and has to solve on its own.

In the current situation we developed the proposals that can raise the competitive power of the Company’s products on the international markets. We are satisfied with the cooperation with the government bodies but at the same time we understand that the government is ready to support economically viable promising companies but will avoid having to sponsor those incapable of surviving on their own. The Company will maintain constructive relations with the government.

Crisis relief measures and main problems facing the Company:
Having approved the 2009 Budget, the Company’s management actually outlined the crisis management action plan involving the following:

optimization of production and reduction of production cost,

enhancing investments efficiency and personal responsibility for the implementation of investment plans,

strict control over procurement,

enhancing management and labor efficiency, achieving production targets,

optimization of transport flows,

stringent financial discipline,

prevention of theft at all levels,

enhancing production and labor safety measures to reduce the number of injury accidents at work,

maintaining the Company’s social obligations to the employees,

balanced personnel policy aimed on the one hand at retaining and hiring the employees with a responsible attitude, and on the other hand, personnel consolidation wherever necessary,

fulfilling the Company’s obligations aimed at the reduction of environmental impact.

Investments and modernization:
It is the main aspect defining the Company’s future. Therefore, we believe that all measures that are essential for the long-term development of MMC Norilsk Nickel must be taken. There may be changes as regards terms and volumes, but none of the production or technological projects that are fundamental for the Company’s future will be cancelled. Most importantly, we intend to work towards improving investments efficiency. Any project is regarded as viable provided that it is economically justified and its implementation will contribute to the Company’s successful development.

The priority projects of the Polar Division for the near future include capacity expansion and profound modernization of the Talnakh Concentrator and Nadezhda Mettallurgical Plant and the ongoing construction of Skalisty Mine on the Taimyr Peninsula.

Sales diversification:
Currently the European market, once a traditional distribution target for the Company, reduced its demand for our metals. Therefore, we set our hopes on Asian markets, especially on China. Six weeks ago a new sales office of Norilsk Nickel opened in Shanghai, and from the moment of opening of our first sales office in Hong Kong back in 2004, the Company’s sales to China tripled. Today they amount to about 27% of primary nickel imports in China. According to experts, the Chinese market will see recovery earlier than other markets and will become the driver of demand for base metals during the post-crisis period.

Retention of highly qualified personnel, fulfillment of social obligations:
Retention of highly qualified personnel is our strategic task. Currently the number of personnel was reduced only in the Head Office - by more than 20%, and the payroll was reduced to a still greater degree. However, the quality of management was not affected.

As for the Company’s operations, no large-scale staff reductions are planned. None of the Russian operations has been shut down. Only Australian operations were put on care and maintenance, because the production cost is too high at the current levels of prices for our products. The production processes in Africa and Finland are under optimization.

No salary reductions are planned. I consider the fact that despite the difficult financial situation salaries are paid without delay and in full as the Company’s prominent achievement, and we are not going to step back in this respect.

The financing of social programs will not be reduced as well. On the contrary, their efficiency will be enhanced so that they meet 100% of our employees’ requirements. A lot has been done to improve the quality of recreation and medical treatment services for our employees. Zapolyarie, the corporate health resort, is undergoing a major modernization of both infrastructure and health & recreation.

A project of special importance we are currently implementing is the organization of the Company’s flights from Norilsk to Moscow and Krasnoyarsk by Taimyr airlines at a price considerably lower than existing market offers. This project is aimed at restraining the growth of prices for air services and ensure affordable flight commuting between Norilsk and “the mainland”.

Interaction with the local and regional authorities:
The Company has always paid taxes to the budgets of all levels abiding by relevant regulations and in due course. However, the reduction of revenues as a result of price downfall led to the decrease in the general amount of tax deductions and local budgets are now facing serious problems in terms of social financing. We are aware of that and ready to make advances and look for mutually acceptable options.

Traditionally, we maintain constructive businesslike relations with Norilsk authorities. Our general mission is to minimize the effects of the crisis for local residents. In order to restrain the price growth for consumer goods the Company adopted a resolution to keep tariffs for their transportation and storage at existing levels throughout 2009. This will help stabilize the situation with the procurement in Norilsk. The Company continues to participate in the municipal general repairs program. Last year alone, 23 sports facilities, many residential and social facilities were repaired in the city with the support from MMC Norilsk Nickel.

Success recipe:
The components of the success are well known: new technologies, cost reduction, high professional qualification and labor efficiency, industrial and environmental safety. The Company’s objective is not merely to survive at the time of crisis but to emerge reaching for a new quality level and address the challenges of tomorrow.