In July 2007, a Canada-domiciled mining company was acquired by a Russian group for $5,2-billion. That company was LionOre, and it had assets in Southern Africa – an 85% share in Tati Nickel, in Botswana, and a 50% stake in Nkomati Nickel, in South Africa.

LionOre's buyer was the giant Russian mining and metallurgical group, OJSC MMC Norilsk Nickel (Norilsk). Thus it is that one of Russia's biggest mining companies is now a player in the South and Southern African mining game.

In fact, Norilsk is now one of the world's biggest mining groups, being ranked by Price- waterhouseCoopers as the seventh-biggest in terms of market capitalisation last year, with a value around $50-billion on December 31, 2007. In 2006, Norilsk's revenues totalled $11,55-billion, up from $7,17-billion the previous year.

It is the world's number one producer of nickel (accounting for 18,8% of global production last year) and of palladium (46,3%), the number four producer of platinum (12%), a significant copper producer (2,7%), and produces cobalt, rhodium, silver, gold, tellurium, selenium, iridium, and ruthenium as by-products.

Its total proved and probable ore reserves amount to 465 701 000 t, and measured and indicated mineral resources to 1 911 186 000 t (as of December 31, 2006, and independently audited in terms of Australia's Joint Ore Reserves Committee code, for both these and the following metals reserves figures). Nickel metal proved and probable reserves amount to 6 055 000 t, while for copper metal the figure is 9 125 000 t, palladium totals 63 375 000 oz, and platinum 16 596 000 oz.

The group undertakes the exploration, mining, refining, metallurgical processing, production, marketing and sales, of base and precious metals.

Norilsk can trace its history back to 1935, and started production in 1939. It was restructured into a State-owned company in 1989 and further restructured into a joint stock company in 1993, being partially privatised in 1994 and fully privatised by 1997.

Since then, Norilsk has broken out of its Arctic fastness (the operations of the group's largest division are located above the Polar Circle) and gone global. In 2003, Norilsk acquired 55,4% of Stillwater Mining, based in the US state of Montana, and North America's only dedicated platinum-group metals producer. But last year was when the group truly became global.

In March, it bought the Harjavalta nickel refinery, in Finland, and its purchase of LionOre in July brought it operations in Australia as well as Southern Africa.

As part of its globalisation, Norilsk has decided to establish Norilsk Nickel International, which will have overall responsibility for its operations and development projects in Australia, Botswana, Finland and South Africa. Very significantly for South Africa, Norilsk Nickel International will be based in Johannesburg and its first CE (with effect from September 1) will also be South African – Ralph Havenstein.

In 2006, Norilsk's aptly named Polar Division, centred on Norilsk city in the Krasnoyarsk region of Russia's Taimyr Peninsula, produced 122 000 t of nickel and 351 000 t of copper. The Kola Mining & Metallurgical Division, on the Kola Peninsula, west of Murmansk and close to the Norwegian border, also produced 122 000 t of nickel but 74 000 t of copper in 2006. Stillwater Mining produced 138 000 oz of platinum and 463 000 oz of palladium in 2006 (the figures for 2007 being 124 000 oz and 413 000 oz respectively).

Norilsk Nickel Australia has four operations – Lake Johnston, Waterloo, Black Swan and Cawse. In 2007, Lake Johnston produced 6 065 t of saleable nickel metal – the concentrate it produces all goes to Vale Inco (previously CVRD Inco), in Canada. Likewise, Waterloo, which produced 3 150 t of saleable nickel metal last year, sends all its production to BHP Billiton under an ore treatment and concentrate purchase agreement. Black Swan and Cawse send their concentrates to Norilsk Nickel Finland's Harjavalta refinery for processing.

Harjavalta has a nickel production capacity of 60 000 t/y. In 2007, it produced 34 550 t of nickel from Norilsk concentrates and 20 414 t for other companies under tolling arrangements. Norilsk is evaluating an expansion programme for Harjavalta, which would double its capcity to 120 000 t/y. Norilsk Nickel Finland also holds 7,2% of the Nunavik Nickel project in north-east Canada, and 5,46% of the Talvivaara Mining Company, in Finland.

Norilsk Nickel Africa comprises Tati Nickel, in Botswana (85% Norilsk, 15% Bostwana government), and Nkomati, in South Africa (50% Norilsk, 50% African Rainbow Minerals). Last year, Tati Nickel produced 15 129 t of nickel, 11 395 t of copper, 53 571 oz of palladium, and 8 657 oz of platinum (in all cases, the figures are total production, not attributable, and are for saleable metal). Nkomati's production (attributable to Norilsk, in this case) was 1 861 t of saleable nickel metal in 2007.

Southern Africa

Speaking to Mining Weekly last August, Norilsk management board member and deputy general director Tav Morgan stated that the group saw South Africa and Botswana as its bridgeheads in Africa. "South Africa and Botswana are healthy and stable environments for mining and for metals processing. They are also a base to gain experience and from which to further extend into other parts of Africa."

Not that Norilsk had no in-house experience of the continent. "Within our group, we have quite a few individuals with experience in Africa," he pointed out. "Given our appetite for risk, and our ability to operate in countries with challenging regulatory or technical environments, we are open to working in many African countries.

For competitive reasons, we won't say which ones. Obviously, Southern Africa and South Africa are a natural focus." The decision to establish Norilsk Nickel International in Johannesburg will clearly intensify that focus.

In early June, Norilsk announced the indefinite postponement of the Activox refinery project at Tati Nickel. Tati lies some 30 km east of Francistown, and hosts the Activox demonstration plant. The new technology was expected to improve metal recoveries, reduce operating costs, allow exploitation of marginal orebodies, treat impurities and produce London Metals Exchange-quality nickel and copper cathodes.

The news was a blow to Botswana, because construction of the commercial-scale Activox plant would have involved an investment of $482-million, and would have created scores of skilled jobs. Instead, the postponement has resulted in the loss of about 1 000 construction jobs.

Developed in Perth, Western Australia, by LionOre, the Activox technology simplifies – and so reduces the costs of – the processing of the ore. "With the Activox process, instead of smelting the concentrate and producing matte, thereafter refining the matte into metal, we go straight from the concentrate to the metal," Norilsk Process Technology MD Gary Johnson told Mining Weekly last year.

"Basically, we take the concentrate, grind it finely to make it active, and then dissolve it in an autoclave, whereupon we use hydrometallurgy in a series of well-established metallurgical steps to purify these solutions, separate the metals, and finally we retrieve the metal by electro-winning, giving us nickel cathodes and copper cathodes."

Originally, the Activox process was expected to increase Tati's reserves by 97% and so extend its life-of-mine by at least five years, to 2016, although there was potential for the mine to remain in operation past 2030. Annual nickel production was also forecast to increase by 97% while total mine lifetime production of nickel was projected to soar 331%.

In the official announcement of its decision, Norilsk stated that it had undertaken "an extensive review of the Activox refinery project . . . ." "This included internal and independent third-party reviews which highlighted a substantial project cost escalation from the September 2006 bankable feasibility study estimate of $498-million . . . . The major contributing factors to the substantial cost escalation were an increase in construction, equipment, and project management costs worldwide.

In addition, short-term energy constraints, as a result of the tight energy balance currently being experienced in Southern Africa, were assessed as a risk that would have adversely affected the commissioning, time to production and overall economics of the Activox Refinery Project."

Further, the group stated that applying the technology in a brownfield development would result in only incremental recovery gains, which did "not economically justify the capital expenditure increase." A Botswana press report estimates that the cost escalation was some 150%.

This decision, however, does not mean the end of either the Tati Nickel mine or the Activox technology. Not all the Tati eggs were placed in the Activox basket. In addition, the company developed a project for a new 12-million-ton-a-year dense-media separation (DMS) plant.

This is now being commissioned, on time, and within budget. It will increase Tati's production from 14 500 t/y of contained nickel in concentrate to 22 000 t/y from 2009, extend the mine's life to 2019, and reduce total cash operating costs.

Norilsk stresses that the mine has a sustainable long-term future. It comprises the Phoenix open pit mine, a five-million-ton-a-year concentrator, the DMS plant, the Activox demonstration plant, and the Selkirk deposit. Its ore reserves amount to 99-million tons and its mineral resources to 98-million tons. Tati also produces copper, platinum and palladium, as by-products to the nickel.

The Selkirk deposit, which lies some 15 km from Phoenix, has a mineral resource of 231-million tons at 0,24% nickel. From 1989, there was an undeground mine at Selkirk. In 2002, near the end of its life, it was put into care and maintenance, and in 2006, a pillar extraction programme was executed. More than one-million tons of ore was extracted from the Selkirk mine. Now Norilsk is working on a prefeasibility study for a new openpit operation at Selkirk. This should be completed by the end of this year.

In South Africa, Norilsk partners African Rainbow Minerals in the Nkomati nickel operation, in Mpumalanga province, some 300 km east of Johannesburg. In September 2007, the two companies agreed to a large-scale expansion of mining at Nkomati, designated Phase Two, which will increase average annual nickel production from 5 500 t to 20 500 t, and extend the life of the mine by 18 years, to 2027. In addition, 9 000 t/y of copper and 110 000 oz/y of platinum-group metals – mainly palladium – will be by-products.

Mining will continue from the existing underground mine, but two new openpits will be added. Underground production will be 47 000 t/m of ore, while the new openpits will together contribute a further 578 000 t/m at steady-state production. The average mill grade will be about 0,4% nickel, over the life of the mine. The concentrator, which currently has a capacity of 100 000 t/m, will be upgraded to 250 000 t/m, and a new 375 000-t/m concentrator will be added, to give a total capacity of 625 000 t/m. Full production should be achieved by 2011.

Nkomati also produces chrome, with full production of high-grade chrome having started last year.

Research and Development

Regarding Activox, the demonstration plant remains at Tati and will continue to operate.
It will function "as a large-scale test site" producing London Metals Exchange-grade nickel and copper cathodes. Indeed, Norilsk is planning to send a large bulk sample of concentrate from its Kola operations, in Russia, to Tati for testwork at the Activox demonstration plant.

Reportedly, Norilsk has been heavily criticised in Russia for pollution created by its current smelters. Activox technology is much more environment friendly, so adoption of the technology in Russia – if feasible – would be most useful to the group.

This has led to speculation in Botswana that Norilsk will move the demonstration plant to Russia. However, Tati Nickel mine divisional manager Peter Meswele told the Botswana daily newspaper Mmegi that this would not happen. Rather, he indicated, ore concentrates from Norilsk operations around the world would continue to be sent to the demonstration plant for tests.

While it does seem highly unlikely that Norilsk would move the demonstration plant to Russia – it would be expensive, time consuming, and waste all the expertise developed by the management and workforce in Botswana – it is, perhaps, not inconceivable that the company might build a second demonstration plant in its home country.

Should Activox still have any bugs that need sorting out, or optimisation that needs to be done, the group has an impressive research and development (R&D) capability in Russia. Norilsk consolidated its Russian R&D organisations into a separate business unit in 2006 and 2007. Under this unit, there are two institutes, two research centres, and two science and technology libraries.

The group's flagship R&D asset is the Gipronickel Institute, based in St Petersburg, with two branches, in the cities of Monchegorsk and Norilsk. Gipronickel employs 521 people and is one of the biggest R&D institutions in the Russian non-ferrous metals industry – its clients extend far beyond the Norilsk group.

The Norilsk Project Institute is, naturally, based in the city of Norilsk and is the group's general design organisation. It undertakes engineering survey and design of production and auxiliary facilities for the company, but also of residential and municipal buildings in the Norilsk district and the Taimyr region.

The Mining and Metallurgical Research Centre is also located in Norilsk. It employs more than 200 people, and is focused on research into nonferrous metallurgy – it owns more then 350 copyright certificates and has 40 patented inventions to its name.

The Project Development and Research Centre is situated in the city of Monchegorsk and has a staff of 195. Its primary activities include the development of project and design documentation for Norilsk's Kola MMC division (95% of the total) and for the city of Monchegorsk (5%). – Mining Weekly