METALLOINVEST ANNOUNCES FINANCIAL RESULTS FOR THE FULL YEAR 2015

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1 METALLOINVEST ANNOUNCES FINANCIAL RESULTS FOR THE FULL YEAR 2015 Moscow, Russia 16 March 2016 Metalloinvest ( the Company ), a leading global iron ore and HBI producer, and a regional high quality steel producer, today publishes its audited IFRS financial results for the full year ended 31 December FINANCIAL HIGHLIGHTS o Revenue USD 4,393 mn (-31.0% y-o-y 1 ) o EBITDA 2 USD 1,432 mn (-27.0%) o EBITDA margin 32.6% vs. 30.8% in 2014 o Net Income USD 218 mn vs. USD 66 mn in 2014 o Net Debt USD 3,563 mn (-14.9% compared to 31 December 2014) o Net Debt / EBITDA 2.49x vs. 2.13x as of 31 December 2014 o Capital Expenditure USD 417 mn (-29.9%) o Total Assets USD 6,619 mn (-8.9% compared to 31 December 2014) PRODUCTION HIGHLIGHTS o Iron ore mn tonnes (+1.9%) o Pellets 23.8 mn tonnes (+5.0%) o HBI/DRI 5.4 mn tonnes (+3.1%) o Hot metal 2.5 mn tonnes (+7.6%) o Crude steel 4.5 mn tonnes (-0.1%) KEY CORPORATE HIGHLIGHTS Operating activities and capital expenditures o Signing of a new long-term iron ore products supply contract with ArcelorMittal o Increase in shipments to major domestic customers, including MMK, NLMK, Severstal and Evraz o Completion of a construction and the launch of Pellet Plant #3 at MGOK o Active phase of construction of HBI-3 at LGOK Financing o Net Debt reduction of USD 622 mn o Exercise of put option for series 01, 05 and 06 bonds in RUB 25 bn issue o ECA 4 facility agreement for up to EUR 267 mn to finance HBI-3 construction at LGOK o Pre-export finance facility (PXF) agreement with a club of international banks for USD 750 mn o Issue of BO-01 series bonds for a total amount of RUB 10 bn o Confirmation of long-term credit ratings at BB/Ba2 levels by Standard & Poor s, Fitch and Moody s o Assignment of a long-term issuer credit rating of BBB+ by Dagong Corporate governance and information disclosure o Reelection of the Board of Directors and the Board Committees o Presentation of Metalloinvest s renewed strategy (Strategy 2023) o Completion of Udokan spin-off Social responsibility o Execution of social partnership programmes with the administrations of the Kursk, Belgorod and Orenburg regions and Zheleznogorsk, Stary Oskol, Gubkin and Novotroitsk 1 Hereinafter comparison with 2014 unless indicated otherwise 2 Hereinafter EBITDA stands for EBITDA adjusted according to IFRS requirements. For more details please refer to IFRS statements 3 Iron ore refers to iron ore concentrate and sintering ore 4 ECA export credit agency 1

2 Pavel Mitrofanov, Deputy CEO Chief Financial Officer of Management Company Metalloinvest, commented: Substantial declines in iron ore and steel prices had a negative impact on Metalloinvest s revenue and EBITDA. However, our vertically integrated business model with a focus on high value-added products and strict cost control allowed us to keep our EBITDA margin above 30%. In 2015, we worked to optimise our debt structure and sustain our liquidity position. We successfully raised funds in the local and international markets and extended our maturities. This year, we are continuing to further improve our debt portfolio. To this end, we have signed a new PXF facility agreement and issued rouble bonds in 1Q We are progressing with our capacity development programme. Following the launch of Pellet Plant #3 at Mikhailovsky GOK last year, we plan to complete HBI-3 construction at Lebedinsky GOK in the end of 2016 early These projects will enable us to support top-line growth going forward. INCOME STATEMENT USD mn Change Revenue 4,393 6, % EBITDA 1,432 1, % EBITDA margin 32.6% 30.8% +1.8 ppt Net Income x Revenue In 2015, the Company s revenue decreased by 31.0% y-o-y from USD 6,367 mn in 2014 to USD 4,393 mn, mostly on the back of a 42% y-o-y drop in global iron ore prices and a 32% y-o-y decrease in steel prices 5. The Mining Segment accounted for 47.6% of the Company s consolidated revenue, compared to 48.7% in A decrease in revenue from mining operations by 32.7% y-o-y was due to lower global iron ore product prices and the rouble depreciation. The Steel Segment accounted for 48.3% of the Company s consolidated revenue, compared to 48.1% in Revenue from the Steel Segment declined by 30.6% y-o-y to USD 2,123 mn, mainly as a result of decreased pig iron and steel prices and the rouble depreciation. In 2015, the share of domestic sales in the Company s consolidated revenue grew to 42.7% from 41.1% in Europe and the Middle East represented 22.0% and 16.4% of 2015 revenue, respectively. Asia accounted for 5.8%. Cost of sales, distribution, general and administrative expenses In 2015, the cost of sales amounted to USD 2,275 mn, representing 51.8% of total revenue for the period vs. 53.1% in the previous year. The decline in the cost of sales by 32.7% compared to the previous period was related to the weakening rouble and the results of the operational improvement programme, which includes natural gas, energy and other cost cutting measures. In 2015, distribution expenses amounted to USD 690 mn, a decrease of 28.5% y-o-y. This was mainly due to the rouble depreciation and partial reorientation of shipments to the domestic market under existing long-term contracts. Distribution expenses represented 15.7% of revenue, versus 15.2% in the previous year. 5 Source: Platts Fe62% CFR China for iron ore, square billet FOB Black Sea for steel 2

3 In 2015, general and administrative expenses declined by 35.9% y-o-y to USD 289 mn. These costs accounted for 6.6% of revenue, slightly lower than the 7.1% figure in Profitability In 2015, the Company s EBITDA decreased by 27.0% to USD 1,432 mn from USD 1,961 mn in The decline in EBITDA was largely the result of a USD 494 mn decrease in Mining Segment EBITDA At the same time, the EBITDA margin increased by 1.8 ppt compared to 2014 and amounted to 32.6%. Mining Segment EBITDA amounted to USD 872 mn, a decrease of 36.2% y-o-y. The share of the Mining Segment in consolidated EBITDA declined to 60.9% compared to 69.7% in This drop was largely the result of the fall in the global iron ore price. Steel Segment EBITDA declined by 6.9% y-o-y to USD 392 mn and accounted for 27.4% of consolidated EBITDA. A slightly lower decrease in Steel Segment EBITDA in comparison to Mining Segment EBITDA was due to lower raw material prices, higher volumes of pig iron sales and a change in the structure of steel product shipments. In 2015, net income amounted to USD 218 mn vs. USD 66 mn in Despite a considerable decline in operating profit, the Company achieved an increase in net income mostly due to a decrease in FX non-cash items related to the USD-denominated part of the Company s debt and lower net interest payments. FINANCIAL POSITION As of 31 December 2015, the Company s total assets amounted to USD 6,619 mn, a decrease of 8.9% compared to USD 7,266 mn as of 31 December The decline in the USD amount of the Company s total assets was related to the rouble depreciation. As of 31 December 2015, the proportion of long-term debt slightly declined to 83.9% compared to 86.4% the year before. At the end of the reporting period, cash and cash equivalents amounted to USD 424 mn vs. USD 550 mn as of 31 December The Company s total liquidity amounted to USD 824 mn, including short-term bank deposits of USD 400 mn. At the end of the reporting period, the Company s Net Debt decreased to USD 3,563 mn vs. USD 4,185 mn in The Net Debt / EBITDA ratio amounted to 2.49x 6 compared to 2.13x as of 31 December In February-May 2015, international rating agencies Standard & Poor s, Fitch and Moody s confirmed the Company s long-term corporate credit ratings at BB/Ba2 level. In November 2015, Metalloinvest received a long-term issuer credit rating in domestic and foreign currencies of BBB+ with a Stable outlook from Dagong Global Credit Rating Co. Ltd, a Chinese credit rating agency. LIQUIDITY AND CAPITAL RESOURCES In 2015, Metalloinvest s net cash generated from operations amounted to USD 952 mn, a decrease of 29.4% y-o-y compared to USD 1,348 mn in Net cash used in investing activities amounted to USD 987 mn vs. USD 427 mn in The difference was related to the proceeds from disposal of financial assets in Short-term bank deposits amounted to USD 400 mn are taken into account at a Net Debt / EBITDA ratio calculation 3

4 Net cash used for financing activities amounted to USD 24 mn vs. USD 550 mn in The decrease was mostly the result of dividend payments in In 2015, Metalloinvest worked on improving its debt maturity schedule and portfolio optimisation. In March 2015, the Company exercised the put option on series 01, 05, and 06 RUB-denominated bonds at 100% of nominal price in the amount of RUB 25 bn. In June 2015, Metalloinvest and a club of international banks, which included Société Générale, Sumitomo Mitsui Banking Corporation Europe, The Bank of Tokyo-Mitsubishi UFJ Ltd., Crédit Agricole Corporate and Investment Bank, UniCredit Bank Austria AG, and ING Bank, a Branch of ING-DiBa AG, signed an agreement for the provision of credit facilities of up to EUR 267 mn to finance the purchase of imported equipment for HBI-3 construction at LGOK. Under the terms of the deal, the loans repayment will be executed within 10 years after the launch of the HBI-3. Oesterreichische Kontrollbank AG (OeKB) and the United Kingdom s Export Credits Guarantee Departmen (UKEF) are guarantors of the credit facilities. In July 2015, the Company and Rabobank signed an agreement for the extension of the maturity schedule for a USD 131 mn loan due in April 2017-October In July 2015, Metalloinvest and a club of international banks, which included Bank of China (Hungary) Close Ltd., ING Bank N.V., Sberbank Europe AG, Société Générale, UniCredit Bank Austria AG, Deutsche Bank AG (Amsterdam Branch), Intesa Sanpaolo Bank Ireland Plc, JSC Nordea Bank, Bank of America Merrill Lynch International Limited, China Construction Bank (Russia) Limited, Credit Suisse AG, SGBT Finance Ireland Limited, ZAO Industrial and Commercial Bank of China (Moscow), signed an agreement to provide a USD 750 mn pre-export finance facility (PXF). Under the terms of the deal, this PXF includes a USD 600 mn five-year tranche with a two-year grace period and a USD 150 mn seven-year tranche with a five-year grace period. Raised funds were used for a USD 515 mn advanced repayment of the PXF-2014 and the rest fulfilled the Company s liquidity position. In October 2015, the Company issued 10-year BO-01 series bonds for a total amount of RUB 10 bn with a 11.85% coupon rate per annum for the first 12 periods. The terms of the BO-01 series issue provide for a call option (in 4 years) and a put option (in 6 years). Gazprombank acted as the Lead Manager and Underwriter of the placement. OPERATIONAL RESULTS tonnes Change Production Iron ore 39,464 38, % Pellets 23,791 22, % HBI/DRI 5,436 5, % Hot metal 2,465 2, % Crude steel 4,501 4, % Shipments Iron ore 10,786 11, % Pellets 14,427 13, % HBI/DRI 2,386 2, % Pig iron 1,837 1, % Steel products 4,197 4, % 4

5 In 2015, the Company grew iron ore production to 39.5 mn tonnes, an increase of 1.9% compared to Metalloinvest increased pellet production by 5.0% y-o-y to 23.8 mn tonnes as a result of the launch of Pellet Plant #3 at MGOK, which contributed 0.9 mn tonnes to annual output. An increase in HBI/DRI production by 3.1% y-o-y to 5.4 mn tonnes was mainly due to the completion of scheduled major maintenance and partial modernisation works at HBI-2. In the reporting period, crude steel production remained practically unchanged, compared to the level of 2014, and amounted to 4.5 mn tonnes. At the same time, the Company increased hot metal output by 7.6% y-o-y to 2.5 mn tonnes. This was due to the intensification of blast-furnace processes at Ural Steel. In February 2015, Metalloinvest and ArcelorMittal signed a new long-term iron ore product supply contract. The total volume of shipped iron ore products will amount to more than 2 mn tonnes. DEVELOPMENT PROGRAMME In 2015, the Company s capital expenditures decreased by 29.9% to USD 417 mn, compared to USD 595 mn in In September 2015, Pellet Plant #3 was officially launched. The unit covers all technological stages of pellet production and has an annual capacity of 5 mn tonnes. The construction of Pellet Plant #3 at MGOK is constituted a significant part of capital expenditures at the amount of USD 33 mn (approximately 7.9% for the reporting period). At the end of the period, HBI-3 construction at LGOK represents largest and key investment project for Metalloinvest. The costs associated with this project amounted to approximately USD 161 mn or 38.6% of total capital expenditures in During the reporting period, the active stage of construction was taking place. As of the end of 2015 foundations at key technological units were completed, hydraulic tests at scrubber body frame and the shaft furnace were finished, as well as the construction of supporting reformer structures and purge gas vessels were built too. In 2015, the commissioning works and guarantee tests of the Oxygen station at OEMK were completed, which resulted in industrial operation. In addition, in the reporting period the modernisation at Gas purification unit #2 at electric arc furnace shop at OEMK had started. In 2015, complex of construction works of the Coke Oven Battery #6 at Ural Steel was completed. The unit put into industrial operation. In Q4 2015, major maintenance works at blast furnace #4 were finished, as well as a new pig iron casting machine #5 was commissioned. These will allow to increase iron ore production and shipments. In 2015, Metalloinvest continued to purchase high-performance open-pit mining machinery for its enterprises. Two EKG-15M excavators, two large-size frontal loaders with a 9.3 m 3 bucket, two SBSH 250 NMA drilling machines, locomotives and dumpcars were added to the Company s open-pit machinery fleet. HSE & QUALITY MANAGEMENT In April 2015, Ural Steel successfully passed a certification audit of its quality management system for compliance with ISO 9001:2008 and STO Gazprom standards; its environmental management system with the ISO 14001:2004 standard; and its occupational health and safety management system with the OHSAS international standard. In March-June 2015, OEMK successfully passed a recertification audit of a supervision audit of its environmental management system with ISO 14001:2004 requirements; and its occupational health and safety management system with OHSAS 18001:2007 requirements. 5

6 In November 2015, MGOK successfully passed a recertification audit of its quality management system for compliance with ISO 9001:2008; and its occupational health and safety management system with OHSAS 18001:2007 requirements; and a supervision audit of its environmental management system with ISO 14001:2004 requirements. In October-November 2015, LGOK successfully passed a recertification audit of its quality management system for compliance with ISO 9001:2008; and a supervision audit of its occupational health and safety management system with OHSAS 18001:2007 requirements; and its environmental management system with GOST R ISO and ISO 14001:2004 requirements. CORPORATE GOVERNANCE & INFORMATION DISCLOSURE In April 2015, the annual general shareholder meeting elected a new Board of Directors. Nikolai Krylov joined the Board as an Independent and Non-Executive Director. The newly-elected Board significantly contributed to the implementation of corporate governance best practice at the Company. In April 2015, the annual general shareholder meeting confirmed the composition of the Board Committees. In May 2015, Metalloinvest presented renewed strategy of the Company s development. The key priorities of Strategy 2023 include reinforcing the Company s position as a global leader in the production of merchant hot briquetted iron (HBI), increasing the efficiency of extraction and production of iron ore, growing the share of high added-value products, and increasing product quality. In December 2015, Metalloinvest completed the separation of JSC Holding Company BMC from JSC Holding Company METALLOINVEST. The reorganisation facilitated the spin-off of Baikal Mining Company LLC. SOCIAL RESPONSIBILITY In February-May 2015, Metalloinvest signed social partnership programmes for 2015 with the administrations of the Kursk Belgorod and Orenburg regions and Zheleznogorsk, Stary Oskol, Gubkin and Novotroitsk. SUBSEQUENT EVENTS In January 2016, Metalloinvest and NLMK signed an agreement to extend an existing long-term pellet supply contract (originally signed in 2011) until 31 December Under the terms of the agreement, total supplies will amount to more than 3 mn tonnes. In February 2016, Metalloinvest issued 10-year BO-07 series bonds for a total amount of RUB 5 bn with an 11.90% coupon rate per annum. The terms of BO-07 series issue provides for a call option in 7 years. In February 2016, Standard & Poor s affirmed Metalloinvest s BB long-term foreign and local-currency ratings with a Negative outlook. In March 2016, Metalloinvest and a club of banks signed a USD 400 mn pre-export finance facility (PXF) agreement with an option to increase amount to USD 450 mn. The PXF is divided into two tranches: a USD 150 mn five-year tranche with a three-year grace period and a USD 250 mn seven-year tranche with a five-year grace period. UniCredit Bank Austria AG and Sberbank of Russia acted as Coordinators and Mandate Lead Arrangers. Raised funds will be used to improve the Company s maturity schedule. 6

7 # # # # For more information, please contact the Investor Relations Department: Artem Lavrischev Head of Investor Relations E: ir@metalloinvest.com T: +7 (495) Metalloinvest is a leading global iron ore and HBI producer and supplier, and one of the regional high quality steel producers. The Company has the world s second largest measured iron ore reserve base under its operation with the key-note iron ore production cost efficiency. Metalloinvest is wholly owned by USM Holdings. Alisher Usmanov is the major beneficiary of USM Holdings (48%), with other major beneficiaries being the companies of Vladimir Skoch (30%) and Farhad Moshiri (10%). 7

METALLOINVEST ANNOUNCES 2017 IFRS FINANCIAL RESULTS

METALLOINVEST ANNOUNCES 2017 IFRS FINANCIAL RESULTS Moscow, Russia 15 March 2018 Metalloinvest ( the Company ), a leading global iron ore and HBI producer, and one of the regional producers of high-quality