EVRAZ

The pattern of global economic recovery, which drove market dynamics through 2010, has continued in 2011. Global steel markets, while remaining distinctly sensitive, have made a promising start to the year. The prices and availability of steelmaking raw materials – iron ore, coking coal and scrap – remain the principal drivers of steel prices.

Based on our sales at the beginning of 2011, we expect Russian demand for construction steel to increase by more than 10% in 2011 compared with 2010. We are also witnessing improved demand from our international markets as the global economy continues its recovery. In 2011, we expect EVRAZ’s Russian and North American steelmaking operations to continue to run at full capacity, while steelmaking capacity utilisation in the Czech Republic and South Africa are expected to increase as operational issues have been resolved and infrastructure markets recover. Following modernisation, completed in November 2010, EVRAZ’s steelmaking plant in Nizhny Tagil, Russia, increased its annual capacity by approximately 0.5 million tonnes. Consequently, we expect our crude steel production volumes in 2011 to increase by 6% compared with 2010’s output.

EBITDA in respect of 1Q 2011 totalled US$740 million: 75% higher than 1Q 2010 and 27% higher than 4Q 2010. During 2Q 2011 steel prices in the Russian domestic and international markets, having grown in the early part of the year, showed some downward correction although the average price is expected to be slightly higher than that for the first quarter. We therefore expect 2Q 2011 EBITDA to be slightly higher than in 1Q 2011.

Due to the volatility and low visibility of the global commodities and steel markets, we cannot commit to any firm guidance in respect of the second half or full year 2011 financial results.

We continue to refinance our short-term maturities through various longer-term instruments in a market where yields are close to their historic lows. In April 2011, EVRAZ launched an US$850 million issue of Eurobonds, due 2018, carrying an interest rate of 6.75%, the lowest ever coupon in respect of an EVRAZ Eurobond issue. Part of the proceeds from the issue was used to purchase approximately US$622 million in aggregate of the principal amount of the outstanding bonds due 2013. We have also issued RUB20 billion of bonds in early June 2011. The proceeds from this issue were used to repay part of the US$950 million Gazprombank loan due in 2014.

The aforementioned fund raising exercises are solely for refinancing purposes. The Net Debt to last twelve months (LTM) EBITDA ratio is expected to decrease below 2.5 times as of 30 June 2011.

In the medium-term we intend to maintain a Net Debt to LTM EBITDA ratio of below two times.

We are confident that EVRAZ Group, capitalising on its strengths as a cost efficient vertically integrated and geographically diversified company, is well positioned to pursue its growth strategy and benefit from any upturn in world markets.