The Production Plan is based on the following four principles: adjusting metal production in line with expected market demand, increasing the efficiency of production, addressing the environmental impact of the Company’s operations and ensuring the sustainability and cost-efficiency of the Company’s operations.

Norilsk Nickel is confident that the implementation of the Production Plan to 2015 will provide for the maximum growth of shareholder value and allow to target the following financial criteria:

– return on investments (ROI) and internal rate of return (IRR) of investments into production significantly above 20%,

– investments pay-back period of 4-5 years.

The Production Plan remains subject to future optimization based on the results of an extensive research and commercial testing program to be conducted through the end of 2005.

Production Plan

Adjusting metal production in line with expected market demand: focus on ores richer in the metals that demonstrate strong market fundamentals

Norilsk Nickel will mine approximately 14 million tons of ore per year in the Taimyr Peninsula and approximately 6 million tons of ore per year in the Kola Peninsula, as compared with the current 13.6 million and 6.4 million of ore per year in the Taimyr Peninsula and Kola Peninsula, respectively.

In the Taimyr Peninsula, the Company will continue to mine around 7.6 million tons of rich ores per year and will increase its volumes of cuprous ores from 2.5 million tons per year in 2002 to an average of 5.0 million tons per year. Due to current enrichment capacity constraints, the Company will reduce its volumes of disseminated ores so as to maintain the total amount of ore mined in the Taimyr Peninsula close to the current level of 14 million tons per year.

The production of nickel in the Taimyr Peninsula is expected to average approximately 200,000 tons per year, copper - approximately 400,000 tons per year, PGMs - approximately the current level. Production in the Kola Peninsula from locally mined ores is expected to average approximately 40,000 tons per year for nickel and approximately 20,000 tons per year for copper.

Subject to market developments through 2005, the Company may further increase its base metals and PGMs production through increasing mining volumes and current capacity in the Taimyr Peninsula up to 20 million tons per year in subsequent years and through accelerated processing of stored pyrrhotite and other concentrates.

Increasing the efficiency of production: increase in metal extraction rates, reduction of consumption of resources and raw materials, reduction of costs of production

Norilsk Nickel will develop the smelting facilities at the Copper Plant and the Nadezhda Metallurgical Plant and close the Sinter Factory and smelting shop of the Nickel Plant by 2007. These steps are currently expected to result in a reduction of approximately $50 million a year in smelting costs (mainly energy costs) and substantial reductions in labor and general operating costs.

Based on the results of the research to be conducted by the end of 2005, Norilsk Nickel will make a decision whether to introduce:

- a collective flotation technology at its enrichment plants, which is currently estimated to increase extraction rates at the enrichment stage by 1-5% for base metals and PGMs,

- a high grade matte leach-refining technology at the Nadezhda Metallurgical Plant. This would allow the Company to close down the Nickel Plant fully and realize an estimated reduction in electric power costs at the refining stage of up to 25%, reduction in expenses for materials and reagents of up to 20% and substantial reduction in other operating expenses.

Addressing the environmental impact of the Company’s operations: significant reduction in air and water pollution

By closing down the Sinter Factory and the smelting shop at the Nickel Plant and smelting concentrates in autogenous smelters at the Copper Plant and the Nadezhda Metallurgical Plant, Norilsk Nickel expects to increase the SO2 content in easy-to-capture “rich” gases. As part of this program, Norilsk Nickel plans to construct elementary sulfur production facilities at the Copper Plant and the Nadezhda Metallurgical Plant to utilize sulfur from the “rich” gases in an efficient manner.

Norilsk Nickel estimates that these steps will eliminate atmospheric emissions of solid pollutants and reduce emissions of sulfur dioxide into the atmosphere in the Taimyr Peninsula by 70% from current levels by 2010. Norilsk Nickel expects that the introduction of the high grade matte leaching technology at the Nadezhda Metallurgical Plant, if implemented, would lead to a further reduction in sulfur dioxide emissions.

Norilsk Nickel plans to install salt emissions purification technology which will allow to reduce fresh water consumption, implement closed water circulation scheme and fully eliminate harmful emissions into the water system in the Taimyr Peninsula.

In the Kola Peninsula, Norilsk Nickel is currently modernizing its enrichment and metallurgical capacity under an intergovernmental Russian-Norwegian agreement. The modernization program, which is partly funded through grants and credits from the Norwegian government and the Nordic Investment Bank, is expected to reduce emissions of sulfur dioxide by over 90% from current levels by the middle of 2006.

Sustainability and cost-efficiency of operations

Norilsk Nickel will maintain its substantial energy independence and low energy costs in the Taimyr Peninsula by putting into operation the Peliatka gas field located near Norilsk. Norilsk Nickel will secure the stability of its whole production cycle by investing in transportation and other infrastructure, where necessary.

Capital Expenditure Estimates

Norilsk Nickel expects to finance the necessary capital expenditures from internally generated funds. According to current estimates, capital expenditures will amount to an average of $300-450 million per year through 2015 (including $300-400 million per year in 2003-2005).

Mining:Norilsk Nickel will invest approximately $125 million per year in the Taimyr Peninsula. These investments will be largely targeted at the Oktyabrsky and Taimyrsky mines and the construction of the Skalistaya mine. The Company will invest approximately $25 million per year in the Kola Peninsula, mainly to bring the Severny-Gluboky mine into operation.

In the event Norilsk Nickel chooses to increase the amount of ore mined to 20 million tons per year in the Taimyr Peninsula, as compared with current production of 13.6 million tones per year, this would require additional investments of approximately $30 million per year.

Enrichment:Norilsk Nickel will invest approximately $30 million per year.

To increase the amount of ore mined to 20 million tons per year in the Taimyr Peninsula would require additional investments of approximately $160 million over approximately four years to increase the capacity at the Talnakh Enrichment Factory.

Metallurgy:Norilsk Nickel will invest approximately $400 million over five years to increase and modernize smelting capacities in the Copper Plant and the Nadezhda Metallurgical Plant and to close the Sinter Factory and smelting shop of the Nickel Plant. Beyond these investments the Company expects to make only minimal maintenance investments in its metallurgical plants in the Taimyr and Kola Peninsulas.

Norilsk Nickel currently estimates that the high grade matte leaching technology would require investments of around $600 million. Norilsk Nickel will decide on whether to install such high grade matte leaching technology based on the results of the research and commercial testing to be conducted through the end of 2005. If implemented, these investments would fit within the overall capital expenditure budget of $300-450 million per year.

Research and tests:Investments will total up to $30 million in 2003-2005, including approximately $12 million for a pilot plant to test the high grade matte leaching technology.

Environment and infrastructure:The overall projected capital expenditure budget of $300-450 million per year will include investments in environment and infrastructure.

MMC Norilsk Nickel will host a conference call to discuss Production Plan to 2015 for its operations in the Taimyr and Kola Peninsulas at 18:00 Moscow time (9:00 New York, 15:00 London), April 1, 2003. The conference call dial-in number is 800-553-0326 (US) and 612-332-0226 (International). A replay of the conference call will be available by a telephone replay, dial-in number 800-475-6701 (US) and ? 320-365-3844 (International), access code 680626, for a limited time.

This press release contains statements that express management’s expectations about future events and results in addition to historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected here, and Norilsk Nickel cannot give assurance that such statement will prove correct.

For additional information on factors that could cause Norilsk Nickel’s actual results to differ from expectations reflected in forward-looking statements, please see Norilsk Nickel’s Annual Report for 2001.

Copyright © 2002 JSC MMC "Norilsk nickel"