Evraz Regulatory News (EVR)

Proposed guarantee of the obligations of MC EVRAZ Mezhdurechensk LLC ("EVRAZ Mezhdurechensk"), an indirect wholly owned subsidiary of EVRAZ plc (the "Company" and together with its subsidiaries the "Group"), under certain management contracts and publication and posting of shareholder circular

The Company announces that on 29 December 2017 its indirect wholly owned subsidiary, EVRAZ Mezhdurechensk entered into management contracts (the "Management Contracts") with nine companies owned by LLC Sibuglemet Group involved in mining, processing and trading coal (the "Counterparties").

This followed a tendering process in August 2017 where EVRAZ Mezhdurechensk emerged as the successful bidder to manage and operate the mines, open pit mines, enrichment plants and coal trading companies on behalf of the Counterparties. EVRAZ Mezhdurechensk previously entered into nine separate management contracts in December 2015 with the Counterparties on a similar basis and the Management Contracts relate to the future provision of the management services. The fees payable to EVRAZ Mezhdurechensk under the Management Contracts comprise a fixed fee, a variable fee (which depends on the coal prices, EBITDA and free cash flow of the Counterparties and is payable in full if certain key performance indicators ("KPIs") are satisfied) and a long-term bonus arrangement (based on performance).

The Management Contracts require EVRAZ Mezhdurechensk to pay certain amounts to the Counterparties by way of liquidated damages if EVRAZ Mezhdurechensk is in breach of certain provisions of the Management Contracts. On the basis that EVRAZ Mezhdurechensk is a subsidiary without substantial assets, the Management Contracts require the Company and its indirect subsidiary, JSC EVRAZ Consolidated West-Siberian Metallurgical Plant, to enter into a RUB 30 billion (US$ 488.5 million million) joint guarantee of EVRAZ Mezhdurechensk's obligations under the Management Contracts (the "Proposed Guarantee").

Due to its size, the Proposed Guarantee is a "class 1" transaction for the purposes of the Listing Rules of the Financial Conduct Authority and requires shareholders' approval. A shareholder circular (the "Circular") relating to the Proposed Guarantee has been approved by the UK Listing Authority.

As the Proposed Guarantee will not be provided by 28 May 2018, EVRAZ Mezhdurechensk will incur financial penalties of RUB 1 million per day (approximately US$ 16,000) under each Management Contract from 29 May 2018 until the earlier of (a) such time when the Proposed Guarantee is provided or (b) the date as of which the Management Contracts are terminated. As set out below, the Proposed Guarantee is subject to the approval of the Company's shareholders. The financial penalties that EVRAZ Mezhdurechensk will incur from 29 May 2018 until the date of the general meeting of its shareholders to consider the Proposed Guarantee will equal RUB 198 million (US$ 3.2 million). If such approval is not obtained, the Company will procure that EVRAZ Mezhdurechensk exercises its right to terminate each of the Management Contracts by giving 180 days' notice and further financial penalties accrued up to the date of termination will be payable by EVRAZ Mezhdurechensk. The maximum additional financial penalties payable by EVRAZ Mezhdurechensk under the Management Contracts would be RUB 1,620 million (US$ 26.4 million). The aggregate financial penalties payable by EVRAZ Mezhdurechensk in the event of termination of the Management Contracts would therefore be RUB 1,818 million ((US$ 29.6 million).

The Board believes that the Proposed Guarantee is in the best interests of the Company and shareholders as a whole for the following reasons:

· the Proposed Guarantee and ongoing performance of the management services under the Management Contracts (the "Management Services") supports the overall strategy of the Group:

o it creates mutual synergies for Sibuglemet and the Group;

o it helps to stabilise the coal mix at the Group's steelmaking plants;

o it provides the Group with more flexibility for its customers, enabling it to sell a wider range of coal grades;

o it creates logistical synergies and allows the Group to optimise the use of coal washing capacities and facilitate sharing of operational best practices across multiple production facilities; and

o it will establish a deeper partnership with Sibuglemet and allow the Group to explore new strategic options in relation to the coal assets of Sibuglemet, with the aim of increasing the security of supply of all coal grades required for its operations;

· performing the Management Services provides the Group with ready access to the raw materials and coking coal necessary for it to stabilise its steel production in line with the Group's growth strategy;

· the management fees payable under each of the Management Contracts and the bonus element payable on conclusion of the Management Contracts will, if paid, increase the Group's earnings; and

· the potential liabilities arising under the Management Contracts which are subject to the Proposed Guarantee are within the control of EVRAZ Mezhdurechensk which has existing expertise and has been providing the Management Services to the Counterparties since 2015. Accordingly, EVRAZ Mezhdurechensk has already demonstrated its ability to manage the Counterparties and their underlying assets effectively and the Directors have no reason to believe that EVRAZ Mezhdurechensk would engage in any activity in breach of the Management Contracts. In addition, the Group has a sound control environment and appropriate corporate governance and board policies in place which it continues to review and enhance. These policies and procedures include preventative and detective activities, periodic risk assessment and other procedures which are designed to protect the Group's assets. These procedures and policies are observed by EVRAZ Mezhdurechensk.

Copies of the Circular will be posted to the Company's shareholders by no later than 29 May 2018. The Proposed Guarantee is subject to the approval of the Company's shareholders, and accordingly, the Circular contains a notice convening a general meeting, which is to be held at 9:30 a.m. on 19 June 2018 at Chelsea Football Club, Stamford Bridge, Fulham Road, London SW6 1HS. Shareholders may appoint a proxy by completing the form of proxy enclosed with the Circular. Alternatively, proxy appointments may be completed electronically. The procedures and timings for the appointment of a proxy are set out in the notes to the notice of the general meeting at the back of the Circular.

The Circular will be made available on the Company's website www.evraz.com and will be submitted to the National Storage Mechanism, where it will be available for inspection at www.morningstar.co.uk/uk/NSM. Copies of the Circular will also be available for inspection during usual business hours on any business day, free of charge, at the offices of Morrison & Foerster (UK) LLP, City Point, One Ropemaker Street, London EC2Y 9AW from the date of this announcement up to and including the date of the General Meeting.

For further information:

IMPORTANT NOTICE

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the Financial Conduct Authority and the PRA in the United Kingdom, is acting as sponsor and broker to EVRAZ plc and no one else in connection with the Circular. In connection with such matters, Morgan Stanley, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than EVRAZ plc for providing the protections afforded to clients of Morgan Stanley nor for providing advice in connection with the Circular, the contents of this document or any matter referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed upon Morgan Stanley by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, Morgan Stanley does not accept any responsibility whatsoever or make any representation or warranty, express or implied, concerning the contents of this document, including its accuracy, completeness or verification, or concerning any other statement made or purported to be made by it, or on its behalf, in connection with the Company and the Circular, and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Morgan Stanley accordingly disclaims, to the fullest extent permitted by law, all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to herein) which it might otherwise have in respect of this document or any such statement.