EVRAZ

EVRAZ employs its best endeavours to comply with all environmental laws and regulations applicable in the territories within which it operates. The Group is aware of the possible environmental consequences of its production processes and energy consumption. Accordingly, the Group has set a number of targets in this context, namely:
– to continuously monitor the Company’s environmental impact at all levels, ranging from individual smelters to the global environment;
– to eliminate environmental incidents; and
– to operate processes which make the most efficient use of natural resources and energy.

In keeping with these targets every year the Group pays constant attention to various aspects of the environment with a view to the prevention or minimisation of any adverse influences. One of EVRAZ’s key objectives is to achieve a consistent reduction in waste emissions alongside the introduction of modern, environmentally-friendly technologies. A significant amount of obsolete equipment, which failed to meet environmental standards, has already been withdrawn as part of the modernisation of EVRAZ’s production facilities and, by the end of 2008, closure of all open-hearth furnaces at the Russian steel plants had been completed.

EVRAZ continues to invest in modern, environmentally friendly and energy-efficient technologies and gradually withdraws obsolete equipment which may not be compatible with environmental standards. Total air emissions from the Group’s asset base showed a 4% reduction in 2010 compared with 2009. The Group actively develops plans to reduce waste generation volumes and ensure proper waste storage. In 2010, 96.6% of waste (Excluding dumped rocks and grounds) and by-products generated as a result of the Group’s operations were reclaimed or reused (Russian steel mills reclaimed or reused 107.6% of waste taking into account waste generated before 2010). Nonrecyclable waste was stored in facilities that have been specifically designed for storage to prevent any harmful substances from escaping into the environment.

One major accident, involving the release of tailings, occurred at Evrazruda (Russia) towards the end of 2010. Significant amounts of tailings have already been recovered and further clean-up and rehabilitation activities will be completed in 2011 post the winter period. During 2010, the Group was able to take advantage of its quotas for carbon dioxide emissions within the framework of the Kyoto Protocol. An arrangement, known as the ‘joint implementation project’, was initiated by the Russian government in its endeavours to encourage factories to deploy energy-efficient technologies. Companies that decrease greenhouse gas emissions through the use of their own funds receive a certain amount of quotas, which can be sold on the international market, as a bonus. In 2010 EVRAZ NTMK‘s project was submitted to the quota administrator – Sberbank (state savings bank of the Russian Federation). EVRAZ NTMK was included in the register of sellers, in line with the list of approved projects carried out in accordance with Article 6 of the Kyoto Protocol to the UN Framework Convention on Climate Change. Approval of the project will allow EVRAZ NTMK to exercise its right to sell Emission Reduction Units (ERUs). The Group expects that total revenues from the sale of ERUs under the EVRAZ NTMK project could be in the region of US$28 million.

EVRAZ Vitkovice is also involved in a similar process: each year the Government provides EVRAZ Vitkovice with carbon quotas and EVRAZ Vitkovice benefits from emission reduction attainments by selling additional quotas on the market.

Environmental compliance and commitments

The Group believes its operations are in compliance in all material respects with the applicable Environmental legislation of the countries and regions where the Group’s plants are situated. The overall Environmental commitments (the capital and operational expenditure the Group would have to make over a five-year period to address existing environmental issues) may constitute approximately US$326 million (see Note 31 of the 2010 Financial Statements of EVRAZ Group S.A.).

Mining operations require large areas of land for mining and waste storage. The mining, extraction and processing activities of the Group normally give rise to obligations for site closure or rehabilitation. The Group’s accounting policy requires the recognition of provisions for the restoration and rehabilitation of each site when a legal or constructive obligation exists to dismantle the assets and restore the site. The provision represents management’s best estimate of the value to retire the assets as they exist at the time of estimation. This provision is periodically reviewed and updated. Information regarding EVRAZ’s closure provisions can be found in Note 25 of the 2010 Financial Statements of EVRAZ Group S.A. in view of the fact that regulatory standards and expectations are constantly evolving, the Group may be exposed to new litigation, increased compliance costs and/or other unforeseen environmental expenses. The level of air emissions typically associated with steel roduction (nitrogen oxides, sulphur oxides, carbon monoxide and volatile organic compounds VOC) showed a reduction of more than 30% in 2010 compared with 2007.