Trading Update for the Period Since March 31, 2009

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Trading Update for the Period Since March 31, 2009

July 8, 2009 – Evraz Group S.A. (LSE: EVR) (“Evraz”) today issued a trading update for the period since March 31, 2009.
The financial information in this press release has been prepared in accordance with management account policies. The following results may differ from financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). The numbers in this press release have not been audited or reviewed.

Current Trading and Material Developments

Evraz continues to manage its steel mills in Russia and internationally with the aim of achieving optimal capacity utilisation and maximising the benefits of its vertical integration and captive iron ore and coking coal supply, seeking to achieve positive cash margins.

Russian Production
Following the restart of blast furnace #3 at Zapsib, announced on June 22 and which became effective from July 1, Russian steelmaking operations reached full capacity utilisation at 13.5 million tonnes of crude steel per annum, 2 million tonnes per annum less than last year’s maximum capacity.
Increasing capacity utilisation of our Russian steelmaking operations is driven by growing export demand for semi-finished products and relatively stable demand from Russian customers for construction and railway products.
Due in part to our increasing degree of vertical integration in raw material supply, the mining division continues to enjoy high utilisation rates. Russian iron ore mining assets are currently operating at approximately 80% of total capacity, and Russian coal mining assets are at nearly 100%.

Russian Domestic Sales
Sales volumes of finished steel products to the Russian market in the second quarter of 2009 were approximately 50% of the second quarter of 2008 level, representing an increase of approximately 15% compared to the fourth quarter of 2008 and flat volume compared to the first quarter of 2009. Domestic prices in the second quarter of 2009 remained essentially flat compared to the first quarter of 2009.

Russian Export Sales
Low cost of production and relatively more favourable pricing trends on the international market for semi-finished products have enabled Evraz to increase export sales volumes by approximately 10% in the second quarter of 2009 compared to the first quarter of 2009. We expect to see further increases in export volumes in the third quarter of 2009 as the end products of the recently-restarted Zapsib blast furnace are expected to be sold on export markets. South-East Asia (including China) and the Middle East remain key export destinations for Evraz.
The pricing environment for billet exports from Russia has moderately improved in the second quarter of 2009 relative to the first quarter of 2009, while prices for slab export have been relatively flat. Evraz benefited from its production flexibility, which allowed it to shift its product mix to higher marginal billet production.

Non-Russian Operations
Our steelmaking capacity utilisation in North America declined in the second quarter of 2009, and is currently averaging 55%. Demand varies across different product groups, which explains different utilisation rates of rolling mills. Order books for rails and large diameter pipes (LDP) remain robust with current rolling capacity utilisation being in the region of 78% and 80%, respectively. At the same time, demand for oil country tubular goods (OCTG pipe) and commercial plate remains weak, resulting in capacity utilisation declining to approximately 25% in June 2009. Evraz believes that it is well positioned to benefit from the anticipated infrastructure investments in the US, expected to be undertaken pursuant to the US Government’s economic stimulus packages.
The capacity utilisation of Evraz’s Ukrainian steelmaking operations is currently around 80%. Steelmaking operations in the Czech Republic are running at approximately 40% with significant improvement in steel-making capacity utilisation expected already in July, while the rolling mill in Italy is now almost 100% utilised. The capacity utilisation of the South African operations is around 70%.

Evraz continues to implement measures aimed at increasing cost efficiency and reducing costs, including: renegotiations with suppliers of goods and services; operating at reduced working hours; temporary leaves and holidays for employees; salary and staff reductions in Russia and internationally to sustain operations in a weak economic environment and to position itself for the longer-term recovery. The Group is targeting a 40% reduction of labour costs and 50% reduction of services and auxiliary materials costs in 2009 compared with the previous year.
There have been some signals of firming market conditions in some regions recently that Evraz expects to benefit from in the second half of the year. In Russia, the volumes have increased, the prices for some steel products and the product mix have improved. In the first half of the year there was a recovery of demand and pricing for semi-finished products in some markets, which has supported Evraz’s exports. However, the unfavourable developments of the second quarter in the North American market may offset the gains achieved by the Russian operations.
Assuming there are no major changes in the global market conditions, Evraz’s financial performance in the second half of 2009 is expected to be better than in the first half of the year.

Liquidity and Refinancing Update

According to the management accounts, total debt as of June 30, 2009 amounted to approximately US$8.49 billion, including approximately US$3.79 billion of short-term debt and current portion of long-term debt. Cash and cash equivalents as of June 30, 2009 amounted to approximately $665 million with additional $1.08 billion available under undrawn credit facilities.
On June 1, 2009, the Supervisory Board of VEB approved, subject to fulfilment by Evraz of certain conditions precedent, the potential extension of maturity of the US$1.8 billion loan facilities granted to Evraz in the fourth quarter of 2008 from one year to two years. These facilities consist of a US$0.8 billion loan granted in December 2008 and five tranches of US$201 million each disbursed quarterly starting from November 2008. As at June 30, 2009, US$1.4 billion is outstanding. Evraz has been informed by VEB that the relevant documentation is expected to be finalised by September 2009, subject to Evraz’s submission of certain documentation. Evraz also received a term sheet from VTB confirming ongoing negotiations to extend a 10 billion RUR (approximately US$321 million) loan due in October 2009 for another four years.
Giving effect to the anticipated extension of the VEB and VTB facilities as well as repayments of two tranches of the Deutsche Bank syndicated loan, which are covered by the remaining tranches of the VEB loan, our short-term debt and current portion of long-term debt as of June 30, 2009 would decline to approximately US$1.66 billion. Out of this amount approximately US$446 million is represented by trade finance and other revolving debt, which we expect to continue rolling as a part of the normal course of business. The remaining US$1.21 billion of expected maturities are more than covered by our cash and cash equivalents and undrawn credit facilities.
Evraz is currently in compliance with all terms and conditions under its outstanding bonds and credit facilities. However, based on the current economic environment and Evraz’s outlook, when Evraz’s consolidated financial statements for the year ended December 31, 2009 are published, Evraz may not be in compliance with financial covenants in certain of its debt instruments, which, if not resolved, could also constitute a cross default under its other debt instruments. Such an event would permit Evraz’s lenders to demand immediate payment of the outstanding borrowings under the relevant debt instruments. Evraz is considering a number of alternatives to proactively address this situation, including a waiver from its lenders. Evraz may incur additional costs related to these alternatives.

This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Evraz Group, including statements relating to trends in prices and demand for our products. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts, including future price changes, economic conditions, the current regulatory environment, available liquidity and our ability to comply with covenants in our debt instruments. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements. Nothing in this announcement should be construed as a profit forecast.