EVRAZ signs an agreement to sell the iron ore mining asset VGOK

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EVRAZ signs an agreement to sell the iron ore mining asset VGOK

EVRAZ plc (LSE: EVR) (“EVRAZ” or the “Company”) announces that it has signed a binding agreement for the sale of its wholly-owned subsidiary EVRAZ Vysokogorsky Iron Ore Mining and Processing Plant (“VGOK”) to NPRO URAL for US$20 million consideration, calculated on a debt free basis (the “Consideration”) (the “Transaction”). In addition, EVRAZ has agreed to provide of up to RUB400 million (up to approximately US$12.4 million) to VGOK for the purpose of normalising the working capital of VGOK. The Consideration will be payable in several instalments: an initial US$5 million payable at the completion of the Transaction, with the rest to be paid in equal monthly instalments during the next 24 months. The Transaction is subject to receipt of approval by the Russian Anti-Monopoly Service and certain corporate actions and is expected to be completed during October 2013.

EVRAZ will apply the proceeds from the sale for general corporate purposes.
Simultaneously with signing of the sale agreement, VGOK and EVRAZ have executed a three-year agreement for the supply of iron ore concentrate from VGOK to EVRAZ ZSMK on market terms and a 10-year agreement for the processing by VGOK of certain EVRAZ NTMK’s by-products.

Located near the city of Nizhny Tagil, VGOK is one of the largest iron ore mining plants in the Urals region, Russia. It has three mines at the Vysokogorskoye, Yestuninskoye and Goroblagodatskoye iron ore deposits and owns ore processing facilities. In 2012, VGOK mined 4.6 million tonnes of iron ore, from which it produced 1.1 million tonnes of sinter and 1.2 million tonnes of concentrate. In addition, VGOK mined 1.0 million tonnes of limestone. VGOK employs over 4,000 people.

As at 30 June 2013, VGOK had gross assets of US$73 million. For the year ended 31 December 2012, EVRAZ VGOK produced a loss before tax of US$11 million. 
It is expected that the transaction will not affect VGOK’s production plans and workforce. 
Marat Atnashev, EVRAZ’s Vice President for Iron Ore Division and Major Projects, said,
“The current sale of VGOK is in line with EVRAZ’s strategy in mining, whereby we continue to focus our efforts on large scale and low cost operations supporting the efficient vertical integration of the company. VGOK has become a non-core asset for the group, as the iron ore requirements of EVRAZ NTMK are fully met by cheaper supplies from EVRAZ KGOK, while the output of VGOK can be re-directed to the Urals’ regional market. The sale of VGOK represents one step in the ongoing process of optimising our iron ore assets.”


For further information:

Media Relations:
Vsevolod Sementsov
VP, Corporate Communications
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Investor Relations:
Sergey Belyakov
Director, Investor Relations
London: +44 207 832 8990 Moscow: +7 495 232 1370