We buy Norilsk Nickel shares on correction


Norilsk Nickel was hit again. If the news about the maximum fine in recent history was already included in the quotes and did not prevent them from reaching historic highs, then an accident at one of its subsidiaries caused a drop in Norilsk Nickel’s shares by 3.8% in one day, accelerating the overdue correction.

How will Norilsk Nickel’s shares behave now? Will it all end with a normal correction or will the reputation losses cause a trend reversal? Alexey Kalachev, an analyst at FINAM Group, answered the question of Fortrader magazine.

– Reputational losses, of course, have an impact on the company’s value, especially against the background of the environmental agenda and UN ESG goals, but so far Norilsk Nickel has managed to improve its reputation by accepting an upgrade to its investment program and holding presentations for investors focusing on these issues.

Investors first of all assess the company’s ability to pay dividends and earn on the rise in metal prices. The accident at TPP-3 led to a large fine, which reduced profits in 2020, but at least that accident did not affect Norilsk Nickel’s actual production indicators.

With the new failure of the crushing plant of the concentrating plant in Taimyr, not everything is so simple. The Norilsk plant processes about 7 million tons of ore per year. The shutdown could lead to a decrease in copper and PGM production more than Norilsk Nickel planned in 2021. The dynamics of metal prices, of course, will help the company, but it is still a loss from what investors are counting on. And this week, two more mines had to be stopped due to the threat of flooding.

There is no insoluble problem here. I am sure that Norilsk Nickel will cope with this. But the correction in stocks may be deeper.

Nevertheless, there is no big threat to Norilsk Nickel’s business yet. Industrial metals have good prospects, prices are reaching multi-year highs. There is no reason for a real trend reversal. I think the correction in Norilsk Nickel shares should be used to buy them cheaper.

Libertex [CPS] WW

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