OREANDA-NEWS. November 3, 2010. Responding to the press release distributed by MMC Norilsk Nickel on due diligence procedures allegedly completed by KPMG, UC RUSAL considers it necessary to issue the following statement:

Norilsk Nickel’s statement contains conclusions that are misleading and incorrect. This has been confirmed by analysis of the draft report as well as during meetings with the representatives of KPMG. The KPMG report has not been finalized, but rather is a draft that will be discussed at the upcoming Audit Committee meeting and then subject to further revision and finalization in accordance with the instructions and additional questions set by the Audit Committee members. It is important to stress that the due diligence procedures at MMC continue. Consequently, the press release distributed by MMC is another attempt to mislead the company’s shareholders and the general public.

In particular, KPMG did not carry out a comparative analysis of pricing options and premiums on metals delivery contracts concluded by Norilsk Nickel. KPMG is not a metals trading expert and does not possess the necessary expertise to analyze and draw relevant conclusions. Further work with independent agencies specializing in analysis of metals marketing operations is required. An appropriate request has been already made by UC RUSAL’s representative on the Audit Committee.

The stated conclusion that there was no sign of affiliation of customers with the employees and shareholders of MMC Norilsk Nickel is also premature, since KMPG was unable to establish the beneficial owners of a large number of MMC’s counterparties. Accordingly, additional analysis is required to determine the true nature of these relationships.

Concerning the insurance contracts, KPMG has confirmed that a tender was held, but did not provide any analysis. A survey of insurance market participants has shown that the tender was organized with limited attendance and negotiated with participants exclusively from a restricted range of companies. Leading insurers, that according to MMC were allegedly invited to participate in the tender, for instance, Ingosstrakh, did not get a tender notification. Therefore, the claim by MMC that insurance contracts were selected on the basis of the lowest insurance premiums is disputable and is not supported by the facts to date. More analysis of the insurance programme of MMC and its comparison of its adequacy to insurance programmes of industry competitors is required.

RUSAL’s representatives on the Norilsk Nickel Audit Committee will insist on detailed and comprehensive due diligence of these issues, with the participation of independent experts on each key issue, including sales and insurance. In addition, the fact that the contract for this KPMG audit was not concluded with the Audit Committee but with the company’s management, which is the subject of the examination, violates the principle of independence. RUSAL will therefore request a renegotiation of the contract to secure the maximum transparency of the examination.