Research Notes

Despite the spin-off of gold assets into a standalone business the market value of NorNickel has not fallen. We believe that the auspicious environment on the metals market and its expansion into other areas of business will drive increaed earnings. We remain upbeat on the company. According to our estimate, the company’s fair share value is $159 and our recommendation is Hold.

• NorNickel is a well-diversified company, with core products including nickel, copper, platinum and palladium.

• Over the past year the major event was the spin-off of gold assets into a standalone company, Polyus Gold. The procedure was successfully carried out.

• Record high metal prices have contributed to a spike in NorNickel’s earnings and improved business efficiency. For example, the metal major’s EBITDA margin could top 60% in 2006.

• At present, NorNickel stocks are the only option available to investors looking to cash in on rising prices for base and PGM metals by entering liquid stocks.

• NorNickel continues its business expansion, setting up JVs with the world’s largest metal producers (Rio Tinto and BHP Billiton), which could exert a positive impact on the Russian metal major’s business activities.

• In line with the recently announced strategy for expansion of production facilities, the company is committed to boosting the operating efficiency of its Russian assets.

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Nataly Kocheshkova

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