NLMK to build pelletizing plant

Press release

NLMK (LSE: NLMK) has approved the construction of a pelletizing plant at Stoilensky, its fully owned subsidiary, with a capacity of 6 million tonnes of iron ore pellets per year. The project will encompass the construction of the pelletizing plant and the development of a number of infrastructure facilities to supply raw materials for the production of high-grade pellets (with Fe content above 65%). A 30% increase in iron ore output as compared to 2011 level at Stoilensky's operating mine is planned to ensure the required raw material supplies for the pelletizing plant.

The project is part of the Group's strategy targeted at strengthening vertical integration and is being executed as part of the third stage of NLMK's Technical Upgrade Program. Construction is expected to be completed in 2014. The plant will be able to fully cover the Company's pellet requirements as early as 2015, even considering the launch of the 3.4 million tonne Blast Furnace # 7 at Novolipetsk, the main production facility of the Group located in Lipetsk.

The project will be jointly executed with Siemens VAI/Outotec, a German-Finnish consortium, responsible for supplying the required equipment and technologies, as well as rendering other construction-related services.

Investments into Stoilensky's operating and infrastructure facilities over 2011-2014 will total some RUR39 billion. Starting from 2015, Stoilensky's average annual output of saleable iron ore will be as follows:

- sintering ore - 2 million tonnes;

- iron ore concentrate - 11 million tonnes;

- iron ore pellets - 6 million tonnes, ensuring NLMK's 100% self-sufficiency in iron ore raw materials.

During the Stoilensky's pellet plant construction, supplies of iron ore pellets to Novolipetsk will be made under long-term contracts between NLMK and Metalloinvest Holding (Lebedinsky and Mikhailovski mining and processing plants).

For reference

Stoilensky is Russia's third largest iron ore producer. Its share in Russia's total iron ore product output in 2010 was 14%. Iron ore concentrate and sintering ore are currently its primary products. Stoilensky's mineable reserves are estimated at 5 billion tonnes. It is located in the Kursk Magnetic Anomaly region, the world's largest iron ore basin. Stoilensky became part of NLMK Group in 2004. For more information please visit www.sgok.ru