562005NORILSK NICKEL • ANNUAL REPORT •NORILSK NICKEL • ANNUAL REPORT •200557EnrichmentTaimyr PeninsulaThe existing production facilities of two enrichment plants atthe Taimyr Peninsula provide for the processing of all types ofextracted ore (rich, cuprous and disseminated ores) with anoutput of 14 million tonnes a year and secondary raw materials(previously stored pyrrhotite concentrates) with an outputof up to 900,000 tonnes a year.Due to the growth of ore extraction volumes in 2005, theprocessing of raw ore at the enrichment plants exceeded the2004 level by 697,000 tonnes of ore. As for the productionof metal concentrate:• nickel in nickel concentrate was up by 3,000 tonnes; and• copper in copper concentrate was up by 4,000 tonnes.Extraction of nickel to collective concentrate within the enrichmentcycle in 2005 was 84.3%, an increase by 0.3% on theprevious year.Extraction of copper to collective concentrate within the enrichmentcycle in 2005 was 96.7%, an increase by 0.1% on theprevious year.Following the approval in 2004 of the temporary atmosphericsulfur dioxide emission limits for the Taimyr Peninsula entitiesfor the period up to 2009, the Group proposed organizationaland technical measures to ensure compliance with thelimits subject to preservation of the current production levels.Implementation of those measures allowed the Group to operatewithin the agreed limits in 2005.Key measures include:• transfer of rich ore processing (ore swapping) from theNorilsk Enrichment Plant to the Talnakh Enrichment Plant;• reconstruction of the nickel floatation system at the TalnakhEnrichment Plant, introducing additional crushing of thecore nickel concentrate.Norilsk Enrichment PlantAlongside with the 6.2% increase in raw ore processing in 2005compared to 2004, the plant slightly reduced the processingof stored pyrrhotite concentrate by 6.3%.In 2005, the quality of nickel and copper concentrates sankbelow the level of commodity concentrates observed in 2004.The content of nickel in nickel concentrate fell from 4.7%(2004) to 4.0% (2005); copper in copper concentrate – from25.1% (2004) to 24.2% (2005). The extraction rate of nickelto nickel concentrate fell from 70.4% (2004) to 65.7%(2005), and copper to copper concentrate – from 71.9%(2004) to 66.6% (2005).Key reasons for the decline in production indicators at theNorilsk Enrichment Plant include the complete transfer of richore processing from the Norilsk Enrichment Plant to the TalnakhEnrichment Plant and the deterioration in the technicalcharacteristics of stored pyrrhotite concentrate due to changesin its material and granular composition.To stabilize the production process at the Norilsk EnrichmentPlant and to increase the extraction rate of nickel to nickel concentrateduring the enrichment of stored pyrrhotite concentrate,the Group developed an investment project expected tobe implemented in 2006–2007, which will help to improve thequalitative and quantitative characteristics of enrichment.Talnakh Enrichment PlantIn 2005, the processing level of raw ore at the TalnakhEnrichment Plant was 4.4% higher than in 2004. Throughoutthe year the Talnakh Enrichment Plant continued to developthe selectively-collective-selective ("SCS") enrichment process,which allowed the Plant to increase nickel extraction to nickelconcentrate and reduce metal loss in tailings as comparedto the direct selection method. The content of nickel in nickelconcentrate increased from 9.0% (2004) to 9.6% (2005);the content of copper in copper concentrate remained at the2004 level. The extraction of nickel and copper to the respectiveconcentrates corresponds to the 2004 level.The SCS process development makes it possible to further usethe waste in the tailings to fill in the developed mining areas.Kola PeninsulaThe capacities of the enrichment factory of the Pechenganickelcombined plant provide for the processing of all extractedore and approximately 500,000 tonnes of poor ore (nickelcontent – 0.4%, copper content – 0.1%) from the wastestock piles of the Tsentralny mine.In 2005, the enrichment plant completed the implementationof measures aimed at improving the quality of concentratewhile preserving the metal extraction rate; as a result,nickel content in nickel concentrate increased from 8.4%(2004) to 8.5% (2005) and copper content in copper concentrateincreased from 3.6% to 4.1%. However, the extractionof nickel to nickel concentrate fell from 74.5% to 72.7%and extraction of copper increased from 74.7% to 77.5%.The reduction of the extraction rate of nickel to nickel concentrateduring the re-equipment of the enrichment processesin 2005 was mainly due to changes in the structure of rawore processed represented by the increased share of hardcleaningores caused by the growth of ore extraction at thefacilities of Severny-Gluboky mine in 2004 and the reductionin extraction volumes in the Tsentralny mine.To stabilize the production process at the Enrichment Plant andto increase the extraction rate of nickel to nickel concentrate,the Group and JSC Gipronickel Institute developed an actionplan expected to be implemented in 2006–2007.MetallurgyIn 2005, the Group undertook measures to improve the productionprocesses and key production equipment at its metallurgicalplants: the Group completed the first stage of thereconstruction of the 2nd production line of the flash smeltersat Nadezhda Metallurgical Plant and the reconstruction ofproduction line No. 1 for the production of elemental sulfurat the Copper Plant.At the Taimyr Peninsula, extraction of nickel to final productsincreased from 94.7% to 95.0%, and nickel increased from92.9% to 93.0%. The rate of nickel extraction to high-gradematte at the smelting plant was 96.2%, which is 0.03% upfrom previous year.The Group continued its efforts aimed at reducing losses andincreasing base metal extraction, Severonickel increased nickelextraction to final products by 0.2% in comparison to theprevious year and increased copper extraction to final productsby 0.07%.Extraction of metal by the Group's enrichment plants (excluding Polus and Stillwater)(%)Taimyr Peninsula2005 2004 2003Norilsk Enrichment PlantRecovery from nickel concentrateNickel 65.7 70.4 72.7Copper 24.9 20.5 21.6Recovery from copper concentrateNickel 8.2 7.7 7.6Copper 66.6 71.9 72.2Talnakh Enrichment PlantRecovery from nickel concentrateNickel 73.5 73.9 73.4Copper 20.7 21.0 21.0Recovery from copper concentrateNickel 5.1 5.0 5.4Copper 76.3 76.4 76.2Recovery from pyrrhotite concentrateNickel 8.9 7.3 7.2Copper 1.7 1.1 1.2Total metal recovery onthe Taimyr PeninsulaNickel 84.3 84.0 84.2Copper 96.7 96.6 96.7Extraction of metal from concentratesin the metallurgical processesNickel 93.0 92.9 93.2Copper 95.0 94.7 94.5Kola PeninsulaPechenganickel Enrichment Plant No. 1(from ore to matte)Recovery from collective concentrate to matteNickel 73.3 75.5 76.3Copper 82.1 80.7 82.6Severonickel metallurgical operationsNickel 97.0 97.2 96.9Copper 96.1 96.7 96.5MMC NORILSK NICKEL NOT INCLUDINGGOLD MINING ASSETS (POLUS)8
58 2005 NORILSK NICKEL • ANNUAL REPORT •NORILSK NICKEL • ANNUAL REPORT •200559Metal productionIn 2005, the Group continued its efforts to reduce work-inprogressat the metallurgical plants on the Taimyr Peninsula –6,700 tonnes of nickel (6,400 tonnes in 2004) were used inprocessing. Increased volumes of extracted and processed rawores (4.4% up from 2004) facilitated the growth of internallyproduced nickel by 0.8%, including the tolling processingof high-grade matte at the refining facilities of the KolaPeninsula. The growth of copper production by 1.3% (includingtolling) in comparison to the previous year is explained byincreased supplies of raw ores with copper. The 3.3% increaseof metallic nickel production at the Kola Peninsula is due tothe growth in deliveries of high-grade matte at the TaimyrPeninsula and the production of metals from its own raw ores.The 3% decrease in copper production is explained by thereduction in processing of purchased copper scrap.Volume of metal produced by the Group (excluding Polus and Stillwater)('000 tonnes or as noted)2005 saw an increase in the production of platinum group metals(PGM) both at the Taimyr Peninsula and the Kola Peninsulain comparison to 2004, which was due to increased deliveriesof PGMs with raw ores for processing and the completionof work-in-progress.<strong>Gold</strong> production at MMC Norilsk Nickel (excluding Polus) grewby 12% due to the increase in its supply for processing andthe depletion of work-in-progress at the Taimyr Peninsula.2005 2004 2003Taimyr PeninsulaNickel 123 127 132Copper 361 353 345<strong>Gold</strong> ('000 ounces) 144 123 122Kola PeninsulaNickel (1, 2)From own ores 37 36 35From other materials 83 80 71Total nickel 120 116 107CopperFrom own ores 35 16 15From other materials 56 78 91Total copper 91 94 106<strong>Gold</strong> ('000 ounces) 8 12 14Total volume of metal produced by the Norilsk Nickel Group(excluding Polus and Stillwater)Nickel (1) 243 243 239Copper 452 447 451Palladium ('000 ounces) 3,133 – –Platinum ('000 ounces) 751 – –<strong>Gold</strong> ('000 ounces) 151 135 136Volume of metal produced by Stillwater MiningCompanyIn 2005, Stillwater Mining Company, in accordance with theproduction plan, produced an aggregate of 554,000 ouncesof palladium and platinum. In 2004, 569,000 ounces of palladiumand platinum was produced. The decrease in the aggregateproduction volumes reflects the allocation of operatingresources to improve mining conditions in 2005.Volume of metal produced by Stillwater Mining Company('000 ounces)The production of PGM at Stillwater mine in 2005 fell by 6% toapproximately 381,000 ounces as compared to 405,000 ouncesin 2004. Production of PGM at East Boulder mineincreased by 5% to approximately 173,000 ounces comparedto 2004.The volume of secondary processing of PGM grew in 2005 by27% to 209,000 ounces as compared to 165,000 ounces in2004.2005 2004 2003Stillwater minePalladium 293 311 163Platinum 88 94 49Total 381 405 212East Boulder minePalladium 135 128 63Platinum 38 36 18Total 173 164 81Total volume of metal produced byStillwater Mining CompanyPalladium 428 439 226Platinum 126 130 67Total 554 569 293MMC NORILSK NICKEL NOT INCLUDINGGOLD MINING ASSETS (POLUS)8Notes:(1) Excludes nickel produced from purchased materials.(2) Totals may differ from the sum of the components due to rounding.
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