SVST.L Regulatory News (SVST)

23 May 2008 07:16



May 23, 2008

Severstal to purchase a controlling stake in an iron ore deposit in Western Africa and to become a shareholder of Mano River Resources

OAO Severstal («Severstal»), one of the world's leading metals and mining companies, announced today that it has reached agreement to purchase up to a 61.5% stake in African Iron Ore Group Ltd («AIOG») which owns, through subsidiaries, the exploration rights for an iron ore deposit in the Putu Range area, Liberia (Western Africa). 

In addition, Severstal will acquire a 6.29% stake in Mano River Resources Inc. (which currently controls AIOG) together with share warrants exercisable within a period of 18 months. If exercised in full, the warrants will convert into shares representing approximately 6.29% of the current issued share capital of Mano River Resources Inc. prior to giving effect to the issuance of shares to Severstal. 

The purchase of the AIOG controlling stake and а 6.29% stake in Mano River will be effected through Severstal's indirect wholly-owned Dutch subsidiary, Lybica Holding B.V.

Severstal will pay US$37.5 million for 61.5 % stake in AIOG and £2 million for the 6.29% stake in Mano River Resources Inc. 

The agreement to purchase the AIOG stake contains customary warranties and indemnities provided by Mano to Severstal and completion is subject to Mano River Resources converting its exploration license into a Mineral Development Agreement in addition to customary conditions to closing, including approval of the TSX Venture Exchange and completion of satisfactory due diligence by Severstal. 

According to preliminary data, it is estimated that the Putu Range deposit contains at least 500 million tons of iron ore. This number may substantially increase as a result of a detailed exploration exercise which is planned by Severstal Resurs (which operates Severstal's mining assets).

Mano River Resources Inc. is a junior mining company listed on the TSX Venture Exchange (MNO) and on AIM in London (MANA). It is engaged in the acquisition, exploration and development of gold, diamond and iron ore properties located in Liberia, Sierra Leone and Guinea.

Roman Deniskin, Severstal Resurs CEO, said: "The purchase of this iron ore deposit in Western Africa is a significant step in the dynamic development of the Severstal mining business. From this new region we will supply production to the European and North American markets".

OAO Severstal is an international mining and steel company. Severstal focuses on high value-added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. Severstal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007 Severstal produced 17.5 million tonnes of steel.

Severstal Resurs manages Severstal's mining assets: three high-quality mining complexes in northwest Russia. In 2007 Severstal's Mining division produced 5.8 million tonnes of coal concentrate, 1.8 million tonnes of coking coal, 1.8 million tonnes of steam coal, 10.0 million tonnes of iron ore pellets and 4.7 million tonnes of iron ore concentrate. The reserves and resources of the company were estimated to be 1.8 billion tonnes of iron ore as at 1 January 2006 and 0.7 billion tonnes of coal as at 1 April 2006.

For further information

Severstal Investor Relations Dmitry Druzhinin,  +7 495 540 7766 

PR Dominic Fry/Tom Murray, Tulchan Communications

tel. +44 (0) 207 353 4200

dfry@tulchangroup.com; tmurray@tulchangroup.com