Evraz Regulatory News (EVR)

EVRAZ Q1 2013 PRODUCTION REPORT and INTERIM MANAGEMENT STATEMENT

18 April 2013 - EVRAZ plc (LSE: EVR) today releases its operational results for the first quarter of 2013 and the Interim Management Statement.

Q1 2013 OPERATIONAL HIGHLIGHTS and RECENT DEVELOPMENTS:

·; Both consolidated crude steel production and output of steel products (net of re-rolled volumes) increased by 11% due to lower downtime at steelmaking capacities in Q1 2013 compared to Q4 2012

·; Consolidated production of finished steel goods slightly increased (+2% vs. Q4 2012)

·; Production at EVRAZ ZSMK rail mill recommenced on 15 January 2013 following the successful completion of the modernisation project

·; EVRAZ NTMK completed the implementation of the PCI project

·; Consolidated output of iron ore products remained broadly flat at 5.2 million tonnes of saleable iron ore products

·; Raw coking coal production rose by 9%, with a 14% increase at Yuzhkuzbassugol and 3% at Raspadskaya

·; In February 2013, the Company commissioned Yerunakovskaya VIII mine which has a full production capacity of 2.5 million tonnes of coking coal per annum to be reached by the year-end

·; Average selling prices for most key steel product groups marginally increased or remained flat compared to Q4 2012

·; In January 2013, EVRAZ completed the acquisition of an indirect controlling interest in Raspadskaya for US$964 million, payable in equity and cash consideration, bringing effective interest to 82%

·; In March 2013, EVRAZ executed a non-binding term sheet for potential sale of EVRAZ Highveld

·; In April 2013, the Company acquired a 51% stake in Timir, a joint venture with Alrosa, created for the development of iron ore deposits in Yakutia, Russia for ca. US$160 million

·; In April 2013, Evraz Group S.A., a wholly owned subsidiary of EVRAZ, priced an issuance of US$1,000 million 7-year Eurobonds with a coupon of 6.50% per annum

·; In Q1 2013 preliminary* capital expenditure totalled US$255 million

* Estimate as EVRAZ IFRS books are not yet closed

STEEL

Note. Numbers in this table and the tables below may not add to totals due to rounding.

* Gross volume of steel products in the tables includes those re-rolled at other EVRAZ's mills. However, such volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results.

** Consolidated production volumes of semi-finished products are preliminary as intra-group re-rolling volumes are yet to be finalised

In Q1 2013, EVRAZ's overall production of crude steel increased by 11% compared to Q4 2012, mainly due to absence of overhauls and lengthy maintenance works at EVRAZ's Russian and Ukrainian steel mills. The resumption of operations of theEVRAZ Vitkovice steelmaking shop in the Czech Republic also contributed to higher crude steel output in Q1 2013.

Consolidated production of finished steel goods was largely flat quarter-on-quarter, while total steel products (including semi-finished) increased by 11% primarily due to higher output of semi-finished products in Russia. As a result, the share of finished steel products as a percentage of total production of steel products totalled 74% in Q1 2013 compared to 80% in Q4 2012.

RUSSIA

In Q1 2013, pig iron output was marginally above that of Q4 2012, as blast furnaces operated at full capacity. Meanwhile, crude steel output rebounded to normalised levels compared to Q4 2012, as the results of the latter quarter were impacted by scheduled maintenance at converter No 4 and the billet caster at EVRAZ ZSMK.

In Q1 2013, gross production of steel products increased by 9% vs. the previous quarter, with the volume of steel products, net of volumes re-rolled into finished products within the Russian steel mills, up by 7%.

The production of saleable semi-finished goods increased by 21% as a result of higher crude steel output by EVRAZ ZSMK and growing demand and prices for slabs in export markets.

In the reporting quarter, output of construction products decreased by 5% vs. Q4 2012 due to weak demand for beams, including from export markets.

In Q1 2013, production of railway products increased by 4% compared to Q4 2012 following the commissioning of the EVRAZ ZSMK rail mill after a large-scale modernisation programme that ran from April 2012 to January 2013. Currently the rail mill is in the ramp-up stage and is expected to reach its full capacity of 950,000 tonnes of rails per annum by Q1 2014. The first 100 metre rail was re-rolled in mid-March and currently the certification process is under way. The Company reiterates its production target of 720,000 tonnes of rails at the EVRAZ ZSMK rail mill in 2013.

The production of coke saleable to third parties grew by 27% compared to Q4 2012 due to a decrease of internal coke consumption in blast furnaces at EVRAZ NTMK after the completion of PCI project. Starting from April 2013 the PCI equipment is operating in the consumption mode of 310 kg coke and 140 kg PCI coal per tonne of pig iron as compared to 405 kg coke per tonne of pig iron before the implementation of the PCI project. In addition, the consumption of the natural gas has decreased from 130 m3/t to 55 m3/t of pig iron. The estimated overall cost saving effect is approximately US$10/t crude steel.

In the reporting quarter the works on the PCI project at EVRAZ ZSMK continued, with commissioning expected in Q1 2014.

In Q2 2013, there will be a week-long maintenance works at EVRAZ NTMK's blast furnace 6 and EVRAZ ZSMK's blast furnace 1 that will result in lower pig iron output. However, crude steel production will not be much affected due to an improved conversion pig iron/crude steel ratio at EVRAZ ZSMK.

Average selling prices

In Q1 2013, average selling prices for most key steel product groups slightly improved quarter-on-quarter. Prices for railway products remained at a high level.

NORTH AMERICA

In Q1 2013, EVRAZ's North American steelmaking mills continued to operate at high utilisation rates with output of steel products improving by 6% compared to Q4 2012 while crude steel production slightly decreased (-2%) as a result of some minor unplanned outages at our steelmaking facilities.

Decrease in construction products was due to lower production of rod and bar (9,000 tonnes) as a result of constrained volumes of crude steel output.

In Q1 2013, the output of railway products remained broadly in line with Q4 2012.

The increased production of flat-rolled products in Q1 2013 (+31%) vs. Q4 2012 was due to lower volume of rolling in the end of 2012 to match production with reduced demand and improve inventory levels. The flat-rolled order book in Q1 2013 improved quarter to quarter which resulted in higher flat-rolled products output.

Production of tubular products decreased by 6% caused primarily by lower spiral large diameter and line pipe sales. Such performance is of a temporary nature as the order book for large diameter pipes and line pipes remains strong.

In Q2 2013, steel output will grow to target levels as technical issues at crude steelmaking facilities have been resolved. Tubular production volumes can be affected by lower drilling activity in Canada in Q2 2013 due to seasonal slowdown, as well as due to increased imports in the North American market.

Average selling prices

In Q1 2013, the pricing for EVRAZ North America's products was mixed - while prices for construction and railway products followed upward movement in scrap price in the USA and Canada, prices for flat-rolled and tubular products softened slightly following global trends.

Tubular products experienced some price pressure, in particular in OCTG product group, due to some overcapacity, increased import volumes and relatively high inventory levels at distributors.

UKRAINE

In Q1 2013, crude steel production increased by 46% vs. Q4 2012 as in the reporting quarter there were no repairs in the converter shop. This resulted in substitution of external pig iron sales by internal consumption and higher output of both finished and semi-finished steel products. The rolling facilities were running at the full utilisation rate in the reporting quarter.

Overall the steel products' market in Ukraine remained strong throughout Q1 2013.

In Q2 2013, no major overhauls are planned at the EVRAZ DMZ steel shop. A 45-day overhaul is scheduled in May-June at one of EVRAZ DMZ's rolling mills.

Average selling prices

EUROPE

In January 2013 the EVRAZ Vitkovice Steel (EVS) steelmaking shop, which was temporarily suspended in Q4 2012 to optimise slab inventory, resumed operation and produced 140,000 tonnes of crude steel in Q1 2013. The agreed purchased volumes of pig iron were sufficient to cover the needs of the steel shop from January to March 2013, and from April 2013 EVS steelmaking shop has been idled again, as EVRAZ continues to run its steelmaking operation in Czech Republic in on-and-off mode to adjust the business to changing market conditions. However the rolling mills at EVS continued to operate irrespective of output of own crude steel.

Production of steel products in Q1 2013 increased compared to Q4 2012 by 10%, while flat-rolled product output increased by 14%, production of construction products fell by 12,000 tonnes due to overhaul of the EVS heavy section mill in mid- March 2013.

In Q1 2013, output of flat-rolled products at EVRAZ Palini e Bertoli in Italy remained largely flat vs. Q4 2012 amounting to 100,000 tonnes of plate.

Prices for products of EVRAZ Europe were largely unchanged in Q1 2013 compared to Q4 2012.

Average selling prices

SOUTH AFRICA

In Q1 2013 output of crude steel at EVRAZ Highveld Steel and Vanadium improved by 5% vs. Q4 2012, as EVRAZ Highveld largely overcame the negative impact of an industrial action and a transportation strike in 2012. The production of flat-rolled products increased by 4% due to improved demand for plate and coil in South Africa.

Average selling prices

MINING

IRON ORE

Overall production of saleable iron ore products by the Company remained largely flat in Q1 2013 compared to Q4 2012.

In Q1 2013, production of saleable concentrate in Russia decreased by 8% compared to Q4 2012 as a result of lower Fe grades in the ore mined at EVRAZ VGOK and preparation for the closure of Irba mine of Evrazruda, which is expected in mid-2013.

Volumes of sinter and pellets produced at the Russian operations in Q1 2013 were marginally lower compared to Q4 2012 due to a number of unscheduled minor repairs.

One of the highlights of the reporting quarter was the state approval of the project documentation on the development of the Sobstvenno-Kachkanarskoe deposit which clears the way for the start of construction works.

EVRAZ Sukha Balka production of lumpy ore in Q1 2013 grew by 19% vs. Q4 2012 with the results of the latter quarter being affected by a repositioning of a skip conveyor at the Yubileynaya mine that continued from mid-September to mid-November 2012.

The output of iron ore products at Mapochs mine of EVRAZ Highveld significantly improved, while volumes of fines ore were flat in Q1 2013 vs. Q4 2012, the production of lumpy ore increased by 49%.

Prices for pellets and saleable concentrate in Russia demonstrated positive dynamics in Q1 2013 compared to Q4 2012, while selling prices for sinter remained unchanged.

Average selling prices

COAL*

* Includes 100% of Raspadskaya's production volumes, pro forma numbers for 2012

Coking coal

In Q1 2013, raw coking coal production at Yuzhkuzbassugol increased by 14% compared to Q4 2012, due to increased production at the Alardinskaya and the Yesaulskaya mines, the launch of a new longwall at the Osinnikovskaya mine and commissioning of the Yerunakovskaya VIII mine, all of which offset the loss of some production as a result of a longwall repositioning at the Abashevskaya mine in the reporting quarter.

Tragically a flood at the Ossinikovskaya mine in March 2013 killed 4 people. Consequently, the mining operations were suspended. The estimated loss of raw coking coal mined is ca. 120,000 tonnes, which will be covered from the above ground stockpile. Production is expected to recommence at the end of April. The Alardinskaya mine resumed operation in mid-April after a fire which caused only minor damage and briefly halted operations.

Higher mining volumes of raw coking coal led to higher production of coking coal concentrate. Besides, the increase is also attributable to the start of coal processing at 3rd party coal washing plants, processing of raw coal from stock after debottlenecking, as well as operational improvements such as better concentration yields.

Production of raw coking coal by the Raspadskaya coal company was 3% higher quarter-on-quarter as mining at the Raspadskaya underground mine continued with two longwalls. Production of coking coal concentrate by Raspadskaya was in line with volumes of raw coal mined.

In June 2013, the Uskovskayamine is expectedto suspend miningfor a longwall repositioning that will last approximately two months. 

Steam coal

Production of raw steam coal decreased by 97% in Q1 2013 vs. Q4 2012 due to a combination of two factors: suspension of mining at the Gramoteinskaya mine as a result of a fire in November 2012 and longwall repositioning at the Kusheyakovskaya mine that started in December 2012 and continued throughout Q1 2013.

Steam coal concentrate production decreased due to lower output of raw steam coal.

In Q2 2013, steam coal production is expected to rebound following the end of repositioning of a longwall at the Kusheyakovskaya mine. The Gramoteinskaya mine is to remain suspended.

Average selling prices

VANADIUM

* Calculated in pure vanadium equivalent.

In Q1 2013, EVRAZ's total production of primary vanadium (vanadium in slag) increased by 4% compared to Q4 2012, mainly as a result of higher crude steel production at EVRAZ Highveld Steel and Vanadium.

Totalferrovanadium production increased by 15% due to better slag availability in South Africa and record production at EVRAZ Vanady Tula. 

Production of oxides, vanadium aluminium and chemicals grew in Q1 2013 compared to Q4 2013 due to resumed EVRAZ Stratcor operations at the end of January.

Average selling prices

Notes:

Semi-finished products include slabs, billets, pipe blanks and other semi-finished products.

Construction products include beams, channels, angles, rebars, wire rods, wire, and other construction products.

Railway products include rails, wheels, tyres and other railway products.

Flat-rolled products include commodity plate, specialty plate and other flat products.

Tubular products include large diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products.

Other steel products include rounds, grinding balls, mine uprights, strips etc. For Ukraine they also include railway products, for Europe - slabs and cut shapes; for South Africa - rails.

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For further information:

Media Relations:

Oleg Kuzmin

VP, Corporate Communications

London: +44 207 832 8998 Moscow: +7 495 937 6871

media@evraz.com

Investor Relations:

Sergey Belyakov

Director, Investor Relations

London: +44 207 832 8990 Moscow: +7 495 232 1370

ir@evraz.com

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, USA, Canada, Czech Republic, Italy and South Africa. EVRAZ is among the top steel producers in the world based on crude steel production of 15.9 million tonnes in 2012. In 2012 EVRAZ sold 15.3 million tonnes of steel products. A significant portion of the company's internal consumption of iron ore and coking coal is covered by its mining operations. The company's consolidated revenues for the year ended 31 December 2012 were US$14,726 million, and consolidated EBITDA amounted to US$2,012 million.