Geological prospecting and development

• TAIMYR PENINSULA (Krasnoyarsk region)
• KOLA PENINSULA (Murmansk region)
• KINGASHSKY NICKEL PROJECT (Krasnoyarsk region)
• CHITA PROJECT (Zabaikal Region)
• INTERNATIONAL COOPERATION

The geological exploration activities in Russia are mostly conducted in Krasnoyarsk and the Zabaikalsk regions of Siberia, as well as at the Kola peninsula in the Murmansk region. The exploration activities are carried out by four specialized subsidiaries of the Company.

TAIMYR PENINSULA (Krasnoyarsk region)

The aim of the geological exploration activities carried out at the Taimyr Peninsula, is increasing the copper, nickel and other mineral resources of the Polar division and ensuring that the whole mining and metallurgical complex in Norilsk is running smoothly.

Maslovskoye deposit

Upon completion of the drilling activities at Maslovskoye in 2008, a prefeasibility study was drawn up and a resource assessment was submitted to the State Reserves Committee.

Resources at the Maslovskoye deposit

Maslovskoye deposit

Oktyabrsky, Talnakh, Norilsk-1 deposits

As a result of exploration drilling of operating deposits in 2008 (Oktyabsky, Talnakh, Norilsk-1), additional ore resources were discovered totaling 5.7 million tonnes with average nickel grade 3.42%, copper – 3.57%, PGMs – 9.88 g/t.

KOLA PENINSULA (Murmansk region)

Last year, Norilsk Nickel continued its geological exploration activities at the Kola Peninsula in order to increase its resource base there. The main targets are the Yugo-Vostochnaya Gremyakha and Vuruchuaivench deposits.

The Yugo-Vostochnaya Gremyakha titanium deposit is in the north of the peninsula, 40 kilometers outside of Murmansk. It contains ilmenite and titanomagnetite.

In 2008, the geological exploration and a feasibility study were completed. In December 2008, a resource assessment was sent to the “State Reserves Committee” for inclusion onto its books. The В+С1+С2 resources are as follows:

Vuruchuaivench deposit

The Vuruchuaivench PGM, copper and nickel deposit is in the center of the Kola Peninsula, 10 kilometers outside of Monchegorsk and five kilometers from the site of the Severonickel plant.

Last year, the State Reserves Committee confirmed the deposit’s resources as follows:

The deposit is to be developed by open-pit and followed by underground mining. The first ore will be processed at an ore-concentration plant with a capacity of 520,000 tonnes per annum, implying an life span of 19 years. Thereafter, concentrate and other metals mined will be processed at Severonickel and Pechenganickel, both subsidiaries of the Kola MMC.

In 2008, the discovery of the Vuruchuaivench deposit Norilsk was confirmed.

KINGASHSKY NICKEL PROJECT (Krasnoyarsk region)

The Kingashsky nickel project comprises numerous industrial-scale fields of cobalt, copper, nickel, PGMs and gold in the southern part of the Krasnoyarsk Region, 280 kilometers from the regional capital of Krasnoyarsk and 125 kilometers from the railway station of Sayansk (on the Abakan-Taishet railroad).

The project currently features two deposits: Verkhnekingashskoye and Kingashskoye, which reserves were confirmed by geological exploration activities in 2008, including the international auditor Micon International Co Limited (“Micon”).

In 2008, the discovery of the Verkhnekingashskoye copper and nickel deposit was confirmed. The geological resources in the peripheries have been added to the state’s books. Last year, Norilsk Nickel also applied for a license to explore and mine the resources at the deposit.

In 2008, Norilsk Nickel completed geological exploration of Kingashskoye and made a preliminary estimate of its В+С1+С2 resources.

Total inferred mineral resources in the peripheries of the Kingashkoye and Verkhnekingashkoye deposits

⁽¹⁾  Average nickel content is 0.37 – 0.45%

This year, Norilsk Nickel intends to finish the resource assessment, after which the “State Reserves Committee” should confirm the numbers and add them to its books.

CHITA PROJECT (Zabaikal Region)

One of Norilsk Nickel’s largest investment projects is the development of various polymetallic deposits (containing copper, molybdenum, gold and iron one) in the Zabaikalsky Krai: Bystrinkoye, Bugdainskoye, Kultuminskoye, Lugokanskoye and Solonechenskoye. The realization of this project will result in the creation of a major mining complex beyond the main areas where the Company traditionally operates.

The project is part of a partnership between the state and the private sector. The main parameters are given in a passport approved by government decree 1708-r (of November 30, 2006), with amendments in government decree 1596-r (of November 10, 2007). Alongside building ore-concentration plants, the project involves laying railroad infrastructure to access the deposits.

The creation of Bystrinskoye and Bugdainskoye ore-concentration plants should become a hub of the project.

Bystrinskoye deposit

The Bystrinskoye deposit is located in the Gazimur-Zavodsky district of the Zabaikalsky Krai. The nearest inhabited areas are the Novoshirokinskoye settlement, 14 kilometers to the northeast, and Gazimursky Zavod, the district center, 25 kilometers to the northwest.

The resources of the deposit under B+C1+C2 categories are the following: 292,000,000 tonnes of ore, 2,037,000 tonnes of copper, 236 tonnes of gold, 1,060 tonnes of silver, 68,000,000 tonnes of iron ore.

As of the end of 2008, the budget allocated to build the Bystrinskoye ore-concentration plant amounted to USD 39 million, including USD 32 million for geological exploration and USD 7 million for planning and surveying. The following activities enabled Norilsk Nickel to gather the initial information required to plan the project:

• public meetings have been held to discuss the location of the Bystrinskoye ore-concentration plant. The head of the Gazimursky Zavod municipal body has signed an act selecting the site and land-lease agreements have been signed;
• the information required to lease land from the forestry fund during construction has been handed to the Forestry Commission. Documents are being prepared to change the status of land plots from residential and agricultural to industrial and transportation;
• all technical tests have been completed and operating procedures devised, as well as audited by international experts;
• all the surveying needed for stage P has been conducted, namely:
  • checks for barren deposits;
  • radiation tests on construction sites; and
  • environmental checks;
• an assessment of the electricity and building material requirements have been completed.

Bugdainskoye deposit

The Bugdainskoye molybdenum deposit is located in the Alexandrov-Zavodsky district of the Zabaikalsky Krai on the northern flank of the Kukulbeisky range, on the left side of the upstream Unda River, between its left tributaries, the Kudikan and Bugdaya springs.

In 2006-07, geological exploration was conducted at the deposit with a view to prepare for commercial development. In December 2007, the State Reserve Committee confirmed B+С1+C2 resources of 600,000 tonnes of molybdenum, 11 tonnes of gold, 194 tonnes of silver and 41,000 tonnes of lead.

As of the end of 2008, the amount budgeted to build the Bugdainskoye ore-concentration plant amounted to USD 22 million, including USD 18 million for geological exploration and USD 4 million for planning and surveying. Norilsk Nickel has carried out the following project-planning work:

• public meetings have been held to discuss the location of the Bugdainskoye ore-concentration plant. The head of the Alexandrov-Zavodsky municipal body has signed an act selecting the site;
• the land-lease agreements have been signed with residents for the duration of the project-planning work;
• the environmental surveys have been conducted at the construction site, as well as audited by international experts;
• various surveying work has been carried out, namely:
  • checks for barren deposits;
  • geological, geophysical and geodesic surveys on the building sites and linear structures;
  • an evaluation of local building materials;
  • checks for underground water sources are being completed; and
  • radiation tests on construction sites.

Kultuminskaya area

The Kultuminskaya area is located in the Gazimur-Zavodsky district of the Zabaikalsky Krai, 90 kilometers north of Gazimursky Zavod, district center.

Following geochemical, geophysical and drilling activities in 2006-2008, the Kultuminskoye polymetallic skarn deposit (containing gold, iron ore, copper and some silver) was discovered. A pre-feasibility study was conducted and a resource assessment was prepared. The “State Reserves Committee” (Rosnedra) reviewed the study in November 2008, confirming С1+C2 resources of 587,000 tonnes of copper, 121 tonnes of gold, 948 tonnes of silver and 33,000,000 tonnes of iron ore.

As of the end of 2008, the amount set aside for geological exploration amounted to USD 16 million.

Lugokanskaya area

The Lugokanskaya area is located in the Gazimur-Zavodsky district of the Zabaikalsky Krai, 280 kilometers outside of Gazimursky Zavod. The deposit lies in the basin of the Budyumkan river, on the east flanks of the Gazimursky mountain range.

The Lugokanskoye gold, copper and silver skarn deposit was appraised in 2006-08. A prefeasibility study and a resource assessment are being done. The initial information suggests С1+C2 resources of 300,000 tonnes of copper, 30 tonnes of gold and 650 tonnes of silver.

As of the end of 2008, the budget for geological exploration amounted to USD 17 million.

Solonechenskoye ore field

The Solonechenskoye ore field is located in the Gazimur-Zavodsky district of the Zabaikalsky Krai, near the Lugokanskaya area.

The on-site geochemical and geophysical research activities started up in 2006, followed by evaluation and exploration activities in 2007-2008. Currently, a prefeasibility study and a resource assessment are being conducted. The initial estimates indicate C1+C2 resources of 70,000 tonnes of antimony and 3 tonnes of gold.

As of the end of 2008, the amount budgeted for geological exploration amounted to USD 7 million.

The exploration activities conducted on the Lugokansky and the Solonechensky deposits have not confirmed mineral resources sufficient for commercially efficient production. According to the pre-feasibility study, the development of the Kultuminsky deposit is efficient at copper prices above USD 6 500 per tonne.

In 2009, the Company plans to additionally study the economic efficiency of the whole Chita project taking into account the economic conditions that have substantially changed.

INTERNATIONAL COOPERATION

In 2008, Norilsk Nickel continued to focus on cooperating with a number of the leading international mining companies in relation to commercial exploration activities.

The Company continued its joint venture with Rio Tinto. The aim is to examine the potential of copper, porphyry and gold deposits, particularly in the Far East of Russia.

The joint venture has conducted geological exploration and identified possible gold, copper and porphyry targets.

In 2008, the alliance with BHP Billiton has continued exploration activities on a number of sites in the Northwest of the Russian Federation as well as in the Krasnoyarsk region.