Statement of the President and Chairman of the Management Board102–14

The year 2018 was in many ways important for Nornickel. First, we prepared for major production growth associated with the commissioning of new mining capacity, expansion of concentration facilities and greenfield development. Second, we launched a number of large-scale modernisation and environmental initiatives, the most important of which was the Sulphur Project at our Copper Plant.

I believe that we owe our last year’s success to both favourable market for our metals and real progress achieved in labour productivity improvement. I am sure that Nornickel will continue enhancing production efficiency, while our best management practices, unique know-how, and digitalisation efforts will drive up the Company’s value no less than our vast ore reserves do.

Last year we made great progress in developing human capital, our key resource. Similar to other business areas, we are working towards boosting staff performance and engagement and developing a safety culture. Nornickel maintains traditionally high social security standards guaranteed by a new collective bargaining agreement signed between the Company and its employees in 2018. The document preserves and standardises employees’ rights and benefits, as well as enhances them by offering extended health insurance coverage and adding other companies of Norilsk Nickel Group to the agreement.

Nornickel’s high social security benefits cement its leading position among the industry’s most attractive employers. Wages and salaries, which the Company always pays in time, remain among the highest industry-wide and average over RUB 111,000.

Health and safety is another domain that saw some major changes. In 2018, we reinforced the trend towards reduction in the number of production-related accidents. For the first time in the Company’s history, Polar Division saw zero fatalities in the reporting year. The lost time injury frequency rate (LTIFR) decreased by 48%, reaching an all-time low. The management of the Company views occupational safety and zero workplace fatalities as its key strategic objective and keeps running dedicated health and safety programmes.

As for production, 2018 saw an increase in the output of our key metals, primarily copper, thanks to the overall improvement in production efficiency. After we reconfigured our production facilities, we were able to almost completely abandon the practice of low-margin third party feedstock processing and increase the output of nickel and copper from the Company’s Russian feedstock. As a result, our revenue and EBITDA grew 28% and 56% to USD 11.7 bn and USD 6.2 bn respectively, making Nornickel one of the most profitable companies among global diversified mining majors. Strong performance in 2018 and current macroeconomic trends strengthen our robust position and secure investments in sustainable development, primarily in environmental initiatives.

In 2018, we launched the second stage of our ambitious environmental programme, which will help us to achieve a fourfold reduction of sulphur dioxide emissions in Norilsk by 2023. The Company plans to halve its emissions in the settlement of Nickel (Kola Peninsula) already by the end of 2019. To this end, we started constructing a concentrate separation facility in 2018 to reduce the throughput at our Smelting Shop.

All what is said above proves that after Nornickel joined the UN Global Compact in 2016 it has remained truly committed to the Ten Principles of the UN Global Compact in the areas of human rights, labour, environment and anti-corruption. Nornickel has always strived to keep pace with change and keeps looking to seize new development opportunities. With projects launched in 2018, Nornickel is well positioned to become a technology leader in the mining sector both nationally and internationally. The new strategic cycle we are currently entering will make Nornickel a growth story in the eyes of the investment community.