New Strategy and Sale of Australian Assets
In early July Norilsk Nickel announced the sale of its Black Swan and Silver Swan assets in Western Australia to Poseidon Nickel, an Australian company. This is both a lucky break for junior player Poseidon Nickel and a strategic move for Russia’s Norilsk Nickel.
Poseidon Nickel was looking for a boost after laying off 45 workers last year, and the purchase of the Black and Silver Swan assets seems to be exactly what they were looking for. This young company will be saving $250 million in expenditure by acquiring the assets from Norilsk Nickel. The new assets allow the company to reopen their Windarra mine and process ore from both mines on the new site. Poseidon chief David Singleton said “It’s the answer we needed. It probably takes a quarter of a billion dollars out of our capital requirements and a year out of the schedule, so for us it’s a huge step forward.”
While the benefit seems to lie with the purchaser in this case, this is also a huge strategic move for Norilsk Nickel. They receive both the material gain from the sale of the mine, but also through the release of environmental obligations (now absorbed by Poseidon) that are required for the Australian mine. The mine itself has been on care and maintenance since the 2009 financial crisis after their initial acquisition in 2007. Norilsk Nickel’s overall strategy is to turn their focus back to their less expensive Tier 1 assets at home in Russia. Pavel Fedorov, First Deputy CEO at Norilsk Nickel has said, “Adding to our previous disposals in Australia, the sale of Black Swan/Silver Swan marks another step forward in the implementation of our strategy focusing on Tier-1 mining assets. In addition to cash proceeds, we will realize significant value from the transfer of associated environmental obligations to the new buyer.”
Seeing the strategy play out for both of these players is an exciting win-win for both companies as well as investors, having their plans come to fruition only means better productivity with these assets in the future.