Key Events 2014

Efficient development of the iron ore base

The Company is making a gradual transition to the use of high-load, highcapacity equipment.

January

As part of its programme to improve the efficiency of its mining and transport complex, Lebedinsky GOK added two new locomotive units to its stock of railway vehicles.

May

Heavy-duty Japanese Hitachi excavators, with 23 cubic metre buckets were introduced at the open-pit mines of Lebedinsky GOK and Mikhailovsky GOK. Metalloinvest’s mining and processing plants did not previously use excavators of similar capacity, as they used vehicles with a load capacity of 10–12 cubic metres or less.

September

A new hydraulic hammer fitted to a Hitachi excavator, designed to break large pieces of ore, was introduced at the open-pit mine of Mikhailovsky GOK.

October

Lebedinsky GOK began the trial operation of a bespoke EKG-20 KM excavator manufactured by P. G. Korobkov IZ-KARTEX Ltd., with a 20 cubic metre bucket. This test will help to evaluate the viability of using this type of mining equipment in the specific conditions of the enterprise’s open-pit mine.

Consolidating positions in the high value-added products segment and adopting new technologies

The Company is modernising its production facilities, implementing a long-term investment programme.

August

OEMK started the industrial operation of a cooling tower at the third-stage water recycling cycle in OEMK’s pelletising and metallising production facilities. The new four-section cooling tower manufactured by FANS (Czech Republic) has a capacity of 4,800 cubic metres of water per hour, and will allow cooling of water to be recycled for the major process equipment of Shaft Furnaces #1 and #2, creating conditions for its safe and stable operation.

October

Metalloinvest entered into an active phase of construction of the third hot-briquetted iron plant (HBI-3 Plant) at Lebedinsky GOK. This HBI unit will become the world’s largest. Its production capacity will be 1.8 million tonnes per year.

More details on HBI-3 project

The Primetals Technologies1 and Midrex Consortium is the main supplier of the equipment. The Urban Institute of Steel Plant Design (Gipromez), part of Metalloinvest, also participated in the project. Total investment in the project will amount to approximately USD 650 million2.

Ural Steel began a trial operation of Coke Oven Battery #6 (CB-6). The commissioning of CB-6 will enable the enterprise to produce approximately 690,000 tonnes of high-quality coke per year, meeting all needs of the blast furnace shop that is increasing its pig iron production capacity. The enterprise will no longer need to buy coke from outside suppliers. The battery unit is fitted with state-of-the-art equipment, and its environment-friendly design minimises the unit’s impact on the environment.

1 Primetals Technologies Limited was incorporated in 2015 as a joint venture of Siemens VAI Metals Technologies and Mitsubishi Hitachi Metals Machinery.
2 The cost of the project is reported USD and is subject to change due to RUB/USD exchange fluctuations in 2014–2015 as part of the project costs is nominated in RUB (e.g., Russian-manufactured equipment).

More details on CB-6 project

November

OEMK started the trial operation of an oxygen facility equipped with a cryogenic air-separation unit (ASU #3). The works were done by LindeIngineering Dresden GmbH (Germany) and Gipromez. The new unit will produce 20,000 cubic metres of oxygen, 20,000 cubic metres of nitrogen and 1 tonne of crystallised argon per hour. With the ASU #3 fully operational, the enterprise will increase its total production of oxygen by 75% and of nitrogen by 24%, and it will also be able to commence its own production of argon to fulfill both current and prospective OEMK needs for these products of air separation.

More details on ASU #3 project

December

An M1 trunk conveyor was overhauled at the crushing and sorting plant (DOK) of Mikhailovsky GOK. As a result of the overhaul the plant increased its transportation capacity from 2,900 tonnes to 5,000 tonnes per hour.

Customer base development

The Company aims to conclude long-term contracts with its customers to ensure a stable level of sales.

April

Metalloinvest secured a one-year contract to supply iron ore concentrate to KOKS Group. Under the agreement, the total amount of the product to be supplied will exceed one million tonnes.

June

Metalloinvest and Kosaya Gora Iron Works signed a three-year pellet supply contract. Under the agreement, the total amount of pellets to be supplied to Kosaya Gora will be 1.9 million tonnes.

August

Metalloinvest and Italian steel factory Ferriere Nord S.P.A. (part of Pittini Group) signed a longterm contract for the supply of HBI.

October

Metalloinvest and Novorossiysk Commercial Sea Port (NCSP) signed agreement letter of intent, as part of which NCSP plans to implement a project to construct a new bulk freight port complex at the port of Novorossiysk, and Metalloinvest will use it to export iron ore and pig iron to overseas buyers. The facility is scheduled to be operational in 2018.

December

Metalloinvest and Novolipetsk Steel (NLMK) extended their long-term contract for supply of pellets to December 31, 2015. Under the agreement, the amount to be supplied will total 6.6 million tonnes. Previously in 2011, Metalloinvest and NLMK signed a four-year contract for the supply of approximately 21.6 million tonnes of pellets.

Stable financial position and growth of investment attractiveness

Positive changes in the Company’s credit ratings reflect its efforts aimed at enhancing the efficiency of its operations.

February

Standard & Poor’s upgraded Metalloinvest’s long-term corporate rating from BB- to BB with a Stable outlook. According to Standard & Poor’s report, Metalloinvest expressed readiness to conduct a more predictable financial policy and improved its debt repayment schedule. Standard & Poor’s upgraded the rating of Metalloinvest’s public debt instruments (Eurobonds) from BB- to BB.

More details on credit raitings

March

Metalloinvest closed a two-tranche pre-export credit facility with a syndicate of international banks including Deutsche Bank, ING, Société Générale, BNP Paribas, Credit Agricole CIB, UniCredit Bank, BTMU and Credit Suisse. The new facility for the amount of USD 1.15 billion shall be repaid between 2016 and 2019. It was drawn down at interest rates considerably lower than the interest rate on the preceding syndicated pre-export facility maturing in 2015–2016, which will be refinanced with the funds received. The margin over the one-month LIBOR rate on the new facility is within the range of 125–165 bps.

More details on credit portfolio

May

Fitch upgraded Metalloinvest’s credit rating from BB- to BB with a Stable outlook. The upgrade reflects the Company’s strong operational profile. Fitch also raised the Company’s senior unsecured foreign currency rating from BB- to BB with a Stable outlook (Eurobonds’ rating).

July

Two issues of the Company’s Eurobonds were included by Sberbank in its Lombard list. The list includes Metalloinvest’s Eurobonds for a total amount of USD 750 million, maturing in 2016 with a coupon rate of 6.5% per year, and its Eurobonds for a total amount of USD 1 billion, maturing in 2020 with a coupon rate of 5.625% per year.

Compliance with international standards of corporate governance

The Company gradually adopts international best practices of corporate governance and highly values them as a powerful tool for ensuring sustainable development of the business and increasing the Company’s value.

March

A new executive body — the Management Board — was formed at Metalloinvest. Andrey Varichev, CEO of Management Company Metalloinvest, was appointed Chairman of the Management Board. The formation of the new executive body is aimed at further enhancing the Company’s corporate governance and reinforcing its focus on operational activity. The inclusion of the Managing Directors from Metalloinvest’s divisions on the Management Board will enable the Company to find more efficient ways for future development.

More details on management board

April

The Company’s new Board of Directors was elected. Sergey Soldatenkov and Dmitry Tarasov joined the Board of Directors as independent non-executive director and executive director respectively. The Remuneration Committee was established with Sergey Soldatenkov as its Chairman. These changes were undertaken to improve Metalloinvest’s operational efficiency and to develop and motivate the Company’s personnel.

More details on the board of directors

June

On June 27, the Holding Company Metalloinvest held its annual general meeting of shareholders that resolved to pay dividends from net profit for 2013 and retained profits of the previous years. The amount of dividends to be paid to the companies of USM Holdings (which controls 100% of HC METALLOINVEST OJSC shares) is USD 502 million. The funds were used to repay the loans that the Company previously made to its shareholders.

With a view to improve the Company’s corporate governance and organisational structure, on July 1, 2014, Management Company METALLOINVEST LLC became the sole executive body of Holding Company METALLOINVEST OJSC.

December

In compliance with the requirements of Federal Law #376-FZ dated November 24, 2014 “On Amendments to Parts One and Two of the Tax Code of the Russian Federation (Relating to Taxation of Profit of Controlled Foreign Companies and Revenues of Foreign Organisations)”, which came into force on January 1, 2015, 24% of the shares of Holding Company Metalloinvest JSC, which were previously owned by METALLOINVEST LIMITED, were transferred to the jurisdiction of the Russian Federation and were put on the balance sheet of Lebedinsky GOK JSC (15%), Holding Company Metalloinvest JSC (6%) and OEMK JSC (3%). The transactions required by the transfer were effected within one group of legal entities.

Personnel development, social and environmental responsibility

The Company credits its long-term financial success to its commitment to principles of sustainable development, including protection of the environment, occupational safety, healthcare for its employees and responsibility towards communities.

January

Metalloinvest introduced a KPI system that sets out those of the Company’s operational targets that are shared by all of its managers and those that will be pursued by individual functional units. The KPI system includes more than 100 key managers of the Management Company as well as the key functional managers at Metalloinvest’s enterprises (Lebedinsky GOK, Mikhailovsky GOK, OEMK, Ural Steel and Ural Scrap Company).

February

Metalloinvest, the Kursk Region administration and the Zheleznogorsk town administration signed a social partnership programme for 2014. The document formalised certain mutual obligations regarding priority investment projects to support the social development of the region and of the towns in which one of the Company’s key enterprises, Mikhailovsky GOK, operates.

More details on social partnership

March

Metalloinvest and the Government of the Belgorod Region signed a social partnership programme for 2014. The document formalised certain mutual obligations related to priority investment projects to support the social development of the region and the towns where the Company is present, Stary Oskol and Gubkin.

Metalloinvest won the Russian Business Leaders: Dynamism and Responsibility 2013 competition organised by the Russian Union of Industrialists and Entrepreneurs (RUIE). The Company was recognised in the Socially Responsible Business category for its contribution to regional development.

More details on social partnership

November

The Company implemented a project, based on international best practices, to develop and introduce a remuneration grade system. The project aims to make the Company’s compensation structure more transparent and to form an efficient jobs structure at the Company. The Management Company and Mikhailovsky GOK were selected as pilot platforms for the project.

Metalloinvest won three awards in the seventh annual international contest Leaders of Metalloinvest won three awards in the seventh annual international contest Leaders of Corporate Charity. The Company received diplomas as the most generous charity giver in the industry, in the Best Programme that Reflects the Corporate Charity Policy and in the Principles of Social Responsibility category. The Company was also awarded second place in the overall ranking.

More details on the company's social projects

December

Metalloinvest won the PEOPLE INVESTOR competition of corporate projects in the Developing Local Communities category for the School of Communal Good project and in the Employees’ Health category for the Women’s Health project. The award presentation ceremony took place at the VII Business Forum of companies investing in people.

Certification audits passed in 2014

LGOK

Сompliance of quality management system with the requirements of ISO 9001:2008

Сompliance of management system of occupational and industrial safety with the requirements of OHSAS 18001:2007 international standard

Compliance of environmental management system with the requirements of GOST R ISO 14001 — 2007 State Standard and with МS ISO 14001:2004

MGOK

Compliance of quality management system and occupational health and safety management with the requirements of ISO 9001:2008 and OHSAS 18001:2007 international standards

Compliance of environmental management system with the requirements of ISO 14001:2004 international standard

OEMK

Compliance of occupational health and industrial safety management system with the requirements of OHSAS 18001:2007 international standard

Ural Steel

Compliance of quality management system with the requirements of ISO/TS 16949

Compliance of environmental management system with the requirements of ISO 14001:2004 international standard

Compliance of occupational health and safety management system with the requirements of OHSAS 18001:2007 international standard

Compliance of quality management system with the requirements of ISO 9001:2008 international standard STO Gazprom 9001-2012 industry standard

Certification audit

Consequent Events

January

Works to modernise the second gas purification unit in the electric arc furnace shop started at OEMK. Modernisation of the second unit is the final stage of a large-scale investment project to build a new steel furnace exhaust gas purification system at OEMK. The implementation of the project will make it possible to increase steel production, reduce the enterprise’s impact on the environment and improve the working conditions significantly for OEMK personnel. Metalloinvest received a certificate confirming its participation in the international Climate Action programme. Climate Action, a data collection programme, is the basis for a global initiative to reduce CO2 emissions in the steel industry. As a participant in the programme, Metalloinvest gathers and computes data on emissions of greenhouse gasses generated in the production processes in accordance with the methodology of the World Steel Association, a global steel producers’ organisation. Comparing data collected at different enterprises will help determine the most efficient methods to reduce CO2 emissions.

February

Metalloinvest began to phase in the key equipment of Pellet Plant #3 (PP-3) at Mikhailovsky GOK. The construction of the PP-3 complex is a unique project in terms of scale and significance. Its completion will increase Mikhailovsky GOK’s pellet production capacity by 5 million tonnes and will create approximately 600 new jobs in the region.

Standard & Poor’s affirmed the Company’s long-term foreign and national currency ratings at BB. The outlook was revised from Stable to Negative. Confirmation of the ratings at BB means that, according to Standard & Poor’s, the weaker ruble and the Company’s efficient product line are good for Metalloinvest’s financial performance. The outlook was revised from Stable to Negative because of increasing uncertainty caused by dropping iron ore prices, the growing geopolitical risk of operating in the Russian Federation and the fact that Russian corporations currently have a limited access to capital markets.

Metalloinvest signed an iron ore supply contract with ArcelorMittal. Total deliveries will exceed 2 million tonnes of iron ore products that will be used at ArcelorMittal’s European enterprises.

Metalloinvest signed a social partnership programme for 2015 with the Kursk Region administration and the Zheleznogorsk town administration. The document formalises certain mutual obligations regarding priority investment projects to support the social development of the region and the town.

Metalloinvest was among the organisers of the first Dobro educational conference for charitable funds and not-for-profit organisations. The conference was held to facilitate dialogue between representatives of business community, government and leaders of charitable and not-for-profit organisations. At the conference, the Company presented its successful models of cooperation between business, the state and communities in the course of implementation of social projects in Russian regions.

Metalloinvest’s corporate website won the 3rd annual Digital Communications AWARDS in the “Digital Platform: B2B Corporate Website category. The award was sponsored by the Association of Communications and Corporate Media Directors of the Russian Federation and the Media Business Publishing House with support from the magazine Media News.

March

In accordance with its corporate policy aimed at increasing the transparency of financial reporting, Metalloinvest released its audited IFRS financial results for 2014, having significantly cut the time for the preparation and disclosure of the Company’s financial information.

Metalloinvest and the administration of the Belgorod Region signed a social partnership programme for 2015. The document formalises certain mutual obligations related to priority investment projects to support social development of the region and the towns where the Company is present, Stary Oskol and Gubkin.

Ural Steel, one of Metalloinvest’s key enterprises, marked its 60th anniversary in March 2015. The enterprise was commissioned in 1955 (it was named Orsko-Halilovsky Steelmaking Plant at the time). Today, Ural Steel is a full-cycle enterprise, including agglomeration, coke production and a blast-furnace, as well as steel making and rolling-mill processes.

Vladimir Putin, President of the Russian Federation, signed a presidential decree awarding Valery Kazikayev, a member of the Company’s Board of Directors, with a letter of acknowledgement. Mr. Kazikayev was merited the prize for “his working achievements, his many years of conscientious work and his active contribution to society”.

Metalloinvest won Russian Business Leaders: Dynamism and Responsibility 2014 Russian contest in the Environmental Responsibility category. The awards were presented during the Russian Business Week in Moscow.

A video of the Company’s annual report for 2013 won the Best Corporate Video — 2015 competition that took place during the Moscow International Festival of Corporate Video 2015, in the “IR-Video: Investors and Shareholders” and “Best Data Infographics” categories. http://www.metalloinvest.com/en/media

April

Moody’s affirmed the Company’s corporate rating at Ba2 with a Stable outlook. It also affirmed at Ba2 the ratings of the debt securities, issued by Metalloinvest Finance Limited, with a Stable outlook. Confirmation of Ba2 ratings reflects Moody’s opinion that the competitive position of Metalloinvest would remain stable in terms of production cost against devaluation of the ruble observed in 2014. These improvements, along with an adequate liquidity level and a continuous reduction of the debt load in 2014 and in the beginning of 2015, allowed the Company to retain its Ba2 rating and will balance to a certain extent the adverse effect of weakening iron ore prices.

Metalloinvest won the Vision Awards Annual Report Competition in the USA. The Company’s interactive report for 2013 won the first prize in the Annual Report Competition — Online Version category. The competition was organised by the League of American Communications Professionals (LACP).

Nikolay Krylov was appointed a new member of the Board of Directors of the Company at the annual general meeting of shareholders (participants) of Metalloinvest.

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