MOSCOW – Norilsk Nickel said on Friday that Russian Platinum had withdrawn from talks about creating a joint venture for their Arctic palladium project due to a lack of approval from Rusal, one of Nornickel's shareholders.

Nornickel is the world's largest producer of palladium, which has been hit hard by the economic fallout from coronavirus. Prices have plunged 45% since February as investors started dumping the precious metal for cash.

Aluminium producer Rusal, which holds 27.8% of Nornickel, has not issued corporate approvals for the miner to participate in the joint venture, Nornickel said in a statement.

"We were ready to support the deal if Nornickel's share was relevant to its real input in the project," Rusal said, adding that it had asked the two partners to increase Nornickel's share in the 50-50 venture.

Nornickel and Russian Platinum, backed by Russian businessman Musa Bazhaev, were preparing the project with President Vladimir Putin's support. It was expected to require $2.8 billion-$3.2 billion by 2024.

"In spite of the current and, we hope, temporary turbulence in the commodity markets, we maintain a very positive view on palladium fundamentals, which should remain strong in a strategic perspective," Sergey Dubovitsky, Nornickel's vice president for strategy, said in the statement.

"Being a responsible palladium producer and the market leader we intend to develop a long-term operating and commercial partnership with Russian Platinum," he said.

Russian Platinum will proceed with the development of its two Siberian deposits - the Chernogorskoye and the southern part of the Norilsk-1 - on its own, but Nornickel will consider measures to support Russian Platinum's project and its potential partners, Nornickel said.

Investors from the United Arab Emirates and Saudi Arabia were previously interested in the project.

The support may include an off-take of produce from the two Siberian deposits, Nornickel said, adding that such cooperation should still help to bring more metal to "the market running a structural deficit."

Russian Platinum confirmed it had withdrawn from the project. It plans to maintain a long-term cooperation with Nornickel, it told Reuters.

Nornickel is investing heavily in increasing its output, with capital spending, excluding the palladium project, expected to peak in 2022-2025.

Rusal, the world's largest aluminium producer outside China, relies on Nornickel's dividend payments in tough years and has come through a number of shareholder rows on this issue with Vladimir Potanin, Nornickel's co-owner.

These dividend payments may become more important for Rusal, as it recently posted a quarterly loss and warned the coronavirus could hit global demand for aluminium.