Evraz takes control of major coking coal supplier

Evraz has acquired an indirect controlling interest in OJSC Raspadskaya, one of Russia's largest producers of coking coal and a supplier to the Russian steel firm.

Evraz has acquired an indirect controlling interest in OJSC Raspadskaya, one of Russia's largest producers of coking coal and a supplier to the Russian steel firm.

Evraz is adding to its existing stake with the acquisition of a 50% interest in Raspadskaya from Adroliv Investments Limited in a deal which will reduce Adroliv's stake to 32%.

As consideration for the purchase Evraz will issue to Adroliv 132.7m new shares, representing 9.9% of the existing issued share capital of Evraz, plus 33.9m new warrants to subscribe for 33.9m new shares representing 2.53% of the existing issued share capital of Evraz. The steel firm will also pay $1,949.80 in cash for each of 103,600 ordinary Corber Enterprises shares, payable in four equal quarterly instalments; Corber is the investment vehicle which owns the stake in Raspadskaya. Evraz already had a 50% interest in Corber prior to the latest deal.

The warrants may be exercised at any time between 12 months and 15 months after completion of the acquisition. Upon exercise of the warrants, it is expected that the sellers would own 11.06% of Evraz.

The acquisition is scheduled to go through in the final quarter of 2012, and is subject to certain conditions, including the share prices of Evraz or Raspadskaya not falling below certain agreed levels.

The deal will supplement Evraz's coal reserves. According to the international consulting firm IMC, as at the end of 2011, the total proved and probable coal reserves of Yuzhkuzbassugol, Evraz's producer of coking coal, were estimated to be around 632m tonnes, while, according to IMC, Raspadskaya's proved and probable coal reserves were 1,314m tonnes.

Evraz is Raspadskaya's biggest customer and Evraz has had a stake in the company since March 2004, and already has representation on the board.

"The acquisition will increase Evraz's coking coal self-coverage, which is consistent with Evraz's stated strategy of growth in the raw materials for steel making," said Alexander Frolov, Chief Executive Officer of Evraz.

"Following completion of this acquisition Evraz will become the largest producer of coking coal in Russia. We believe that the acquisition of Raspadskaya will generate substantial operational synergies to Evraz, including the optimal use of different coal grades in the combined portfolio," Frolov said.

JH

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