UPDATE 1-Russia Norilsk to cut nickel, palladium output

By Aleksandras Budrys

MOSCOW, Dec 1 (Reuters) - The world's top producer of nickel and platinum group metal palladium, Norilsk Nickel , will cut output of the metals this and next year, Norilsk said on Monday, as demand falls amid the global financial crisis.

Nickel output is expected to fall to 298,000 tonnes this year from previously planned 300,000-305,000 tonnes, and palladium output to 2.764 million ounces from the earlier forecast 3.00-3.05 million ounces.

In 2009, Norilsk expects to produce 290,000-305,000 tonnes of nickel and 2.610-2.625 million ounces of palladium, it said in a presentation on its web site www.nornik.ru.

Norilsk intends to keep copper output at the planned level of 420,000 tonnes this year, but plans to cut output to 385,000-400,000 tonnes in 2009 due to completion of mining rich cuprous ores.

It sees platinum output falling to 625,000 ounces this year from the previously planned 710,000-720,000 ounces and to 600,000-620,000 ounces in 2009.

CUTTING CAPEX

Norilsk intends to keep steady levels of nickel production at the Polar and Kola divisions.

In 2009, 16,000 nickel production capacity will be put on care and maintenance. It will be offset by increased production from purchased intermediates, Norilsk said.

Further reduction of platinum group metals production in 2009 will result from falling PGM content in ore, it said.

Norilsk said its main objective in 2009 will be cash conservation without compromising future growth.

It estimates cutting costs in Russia by more than $800 million in 2009. It aims to reduce headquarters staff by 16 percent or 220 people and to keep all production staff.

Norilsk plans to cut foreign capital expenditures by 34 percent to $460 million in 2008 from the previously planned $696 million and by a further 48 percent to $240 million in 2009.

Norilsk said it targets more than a 15 percent decrease in direct foreign units operation costs and reducing approximately 1,150 staff.

It will focus on cash-generating assets while suspending production at other operations and reducing capital expenditures to critical committed amounts with an option for fast future recovery, as well as postponing exploration and early stage projects.

Norilsk warned last month that it would axe its dividend this year and cut its foreign output, warning that its net profit in 2009 might only be a quarter of this year's level.

Interros, an investment vehicle of billionaire Vladimir Potanin, owns around 30 percent in Norilsk. UC RUSAL, controlled by tycoon Oleg Deripaska, owns a 25 percent-plus-two-shares stake in Norilsk.

23 CANDIDATES FOR NEW BOARD

Norilsk's board approved on Monday a list of 23 candidates for a new 13-member board to be elected on Dec. 26, after its main shareholders settled their differences last month, a Norilsk spokeswoman said.

The board recommended minority shareholders to support only two independent candidates proposed by Interros: Gerard Holden, head of an investment unit of Barclays Capital, and Brad Mills, CEO of Lonmin Plc.

The board abstained from recommendations on other candidates, which include powerful Kremlin deal-broker Alexander Voloshin and the head of state car-to-mining conglomerate Sergei Chemezov.

The new board will be chaired by one of three independent directors. Interros and UC RUSAL would put forward four candidates each to join CEO Vladimir Strzhalkovsky and a state representative on the 13-person board.

The current board comprises nine directors, three of whom represent UC RUSAL.

Interros also has three official representatives, although UC RUSAL argues that at least one of three remaining independents is also affiliated with Potanin's company.

(Reporting by Aleksandras Budrys; editing by Jim Marshall) Keywords: NORILSK CRISIS/

(aleksandras.budrys@reuters.com; +7 495 775 1242; Reuters Messaging: aleksandras.budrys.reuters.com@reuters.net)

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