METINVEST SOCIAL REPORT 2009-2010 1

METINVEST'S CSR REPORT FOR 2009-10 HAS BEEN PREPARED IN ACCORDANCE WITH THE SUSTAINABILITY REPORTING GUIDELINES OF THE GLOBAL REPORTING INITIATIVE AND MEETS THE GRI'S B+ APPLICATION LEVEL 2 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 3 METINVEST AT GLANCE 2009-10

* STRONGER NEW GLOBAL №1 STRATEGIC PRESENCE Today Metinvest exports a large part of its IN THE TOP 100 output to more than 1,000 consumers in 75 UKRAINIAN BUSINESS PROSPECTS countries. Metinvest has approved a development strategy to 2020 Metinvest, is introducing quality-control and FOR MORE DETAILS, SEE PAGE 18 that targets long-term sustainable growth through the LEADERS RATING production-safety programmes at its PRODUCT QUALITY economic cycle. Each goal includes objectives for doing enterprises, and it works with consumers in Metinvest's Ukrainian enterprises paid business responsibly. various different ways. *For more on Metinvest's global presence, see www.metinvestholding.com MORE THAN SEE PAGE 12 FOR MORE ABOUT THE STRATEGY FINANCIAL CONSOLIDATED REVENUE: HIGHLIGHTS US$1,389.4m US$9,358m FOR 2010 ADJUSTED EBITDA IFRS: IN TAXES US$2,552m

JOINT OPERATIONAL 35.7mt Iron ore IMPLEMENTATION HIGHLIGHTS concentrate PROJECTS FOR 2010 In 2010 in the first phase of the joint implementation project to utilise coal-gas at Krasnodon Coal, Metinvest received€ 598,000. Over the five years of the first commitment period of the Kyoto Protocol, it expects to reduce greenhouse-gas emissions across 10.1mt 8.7mt all joint projects by more than 8 million tonnes of CO2 Coking coal equivalent. 2.9mt Steel Steam coal PAGE 60 FOR MORE ON OUR PROJECTS, SEE SEE PAGE 8 Container gas utilisation plant at Krasnodon Coal FOR DETAILS 4 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 5

WE AIM TO PRODUCE HIGH-QUALITY PRODUCTS LETTER WHILE GIVING DUE CONSIDERATION TO THE INTERESTS FROM THE CEO OF SOCIETY, OUR EMPLOYEES AND ALL STAKEHOLDERS

Dear readers, suffered in the process. Metinvest's and corporate standards, which are set Global Compact in 2010 was a overriding priority is the health and based on the experience of leading significant move for us, marking CONTENTS welcome to Metinvest's second safety of its employees, and we companies in the global business another step toward to forming a new corporate social responsibility (CSR) continue to work systematically towards community. culture in our relations with state and OUR COMPANY report for 2009-10, which has been our strategic goal of reducing injuries to non-government organisations, as well prepared to the B+ Application Level of zero. I believe that we still have much to The key factor underpinning Metinvest's as society at the national and STAKEHOLDER ENGAGEMENT the Global Reporting Initiative (GRI). It do, despite the steady reduction in the success in both production and international level. details the areas where we have made injury rate. sustainable development is the PRODUCT QUALITY notable improvements in our CSR professionalism of our employees. An I am confident that this CSR report EMPLOYMENT RELATIONS activities, as well as the tasks that still During the reporting period, we devised important strategic goal for us is to represents an excellent opportunity for lie ahead. numerous corporate standards aimed build a united team that is motivated to Metinvest to provide you, our readers, HEALTH AND SAFETY at preventing injuries, at assessing and achieve common goals. Over the past with information about what we do and After we successfully overcame the reducing the risks stemming from our two years, we have drafted a how we envision our social ENVIRONMENT global economic downturn, our financial production processes, and at improving development plan for our HR system, responsibility. We always welcome and operating performance stabilised in the accountability of our contractors. have almost completed work to responses and comments that help us ENERGY EFFICIENCY AND ENERGY SAVING 2010, and the Company met all its The comprehensive “Strategy for introduce a transparent remuneration to improve our approaches and find obligations to the state, employees, Developing the Healthcare System at system, and continued to run the Talent more efficient solutions along the road CLIMATE CHANGE partners, and local communities. Group Enterprises” was also drafted Pool programme. I am confident that to sustainable development. We have adopted a strategy for our and began to be introduced in 2010. this programme will help to ensure SOCIAL INVESTMENT long-term sustainable development. continuity in our managerial decisions KEY RESULTS AND PLANS FOR THE FUTURE The focus of Metinvest's new strategy, We recognise the problem of global and in the Company's management A business in the global which runs to 2020, is to improve the climate change and are taking style, as well as promote leadership ABOUT THE REPORT efficiency of what we do and to measures to minimise our impact over skills and innovative thinking. AND REPORTING PROCESS marketplace needs to constantly improve our business the long term. I am proud to say that establish internal stan- processes. All of our declared strategic Metinvest today leads Ukrainian As the major employer in many TABLE OF GRI INDICATORS dards matching those of goals set out objectives for doing companies in the use of Kyoto Protocol Ukrainian towns, we continue to play an business responsibly. mechanisms. Based on joint important role in urban development, INDEPENDENT the leaders in its sector implementation projects at the Group's and we maintain close ties to the ASSURANCE REPORT A business in the global marketplace coal and metals enterprises greenhouse people who live and work alongside us. needs to establish internal standards gas emissions are expected to fall by This report details the progress that we

matching those of the leaders in its more than 8 million tonnes of CO2 have made in developing partnership sector. We aim to produce high-quality equivalent. We are thus making a relations with local communities over products while giving due consideration noticeable contribution to meeting the the past two years. A “Social to the interests of society, our obligations that Ukraine has assumed. Investment Strategy” has been drafted employees and all stakeholders. For us, and approved, a portfolio of new this is driven primarily by moral and Alongside emissions-reduction and corporate programmes has been put ethical considerations, and also by our energy-efficiency programmes, our together, and strategic social and awareness that in the 21st century a environmental work targets efficient economic urban development projects business's sustainability depends management of water resources, waste have been launched in collaboration directly on its ability to function safely products and land reclamation. An with international partners. These and with minimal environmental impact. integrated management system initiatives open up great opportunities to We therefore consider our investments certified to OHSAS 18001 and involve a wider range of stakeholders. I in protecting people and the ISO 14001 has been introduced at the consider this to be of great importance, environment to be investments in the Managing Company and major since we can change our life for the future, and we are striving to build a production facilities. better only if we do so together. corporate culture in which all workers feel part of a common cause and In 2010, the Managing Company's HSE We must also not forget that many of approach their work responsibly. Internal Audit department was today's development goals are global, established. The enterprises' activity in and achieving them requires combined We do not consider work to have been these areas is monitored continually, as efforts with reliable partners focused on done successfully if people have is their compliance with legal obligations a common result. Signing the UN 6 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 7

METINVEST GROUP IS AN INTERNATIONAL, VERTICALLY INTEGRATED OUR METALS AND MINING COMPANY WITH 24 ENTERPRISES IN UKRAINE, EUROPE AND THE US. THE COMPANY CONTROLS EACH STAGE COMPANY OF THE PRODUCTION CHAIN, FROM MINING IRON ORE AND COAL AND PRODUCING COKE AND STEEL TO MAKING HIGH VALUE-ADDED PRODUCTS

24 ENTERPRISES INTERNATIONAL TALENT IN UKRAINE, EUROPE QUALITY POOL AND THE US STANDARDS DEVELOPMENT Metinvest is a global vertically The Company is introducing and During the reporting period, personnel integrated metals and mining com- certifying quality management development became a priority for the pany. systems that meet ISO 9001 stan- Company. Last year, an integrated dard. development programme was developed in conjunction with a leading Russian business school.

SEE PAGE 8 SEE PAGE 20 SEE PAGE 26 FOR DETAILS FOR DETAILS FOR DETAILS

REDUCTION SYSTEMATIC OF APPROACH TO WASTE INJURIES MANAGEMENT

During the reporting period, Metinvest Last year Metinvest started the major reduced the injury rate by 11.5%. environmental project MONTIS to process and recycle slag at metal production enterprises.

SEE PAGE 34 SEE PAGE 50 FOR DETAILS FOR DETAILS

PARTICIPATION IN THE USAID PARTNERSHIP PROGRAMME

Metinvest has entered into a partner- ship with USAID to devise a strategic social and economic development plan for Krasnodon.

SEE PAGE 68 FOR DETAILS 8 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 9

TODAY, WE ARE ALREADY ONE OF UKRAINE'S LARGEST METINVEST COMPANIES AND A MAJOR EXPORTER AND TAXPAYER. TODAY THE COMPANY'S SUCCESSFUL DEVELOPMENT IN THE FUTURE WILL CONTRIBUTE TO AN INCREASE IN UKRAINE'S STANDING

Metinvest is an international vertically assets with Ilyich Iron and Steel Works, Metinvest recognises the importance of Metinvest's management believes that integrated metals and mining company1 one of Ukraine's largest metals appropriate corporate management an effective internal control and risk with 24 enterprises in Ukraine, Europe enterprises. These decisions were and supports high levels of management system will provide and the US. The Company controls dictated by the Company's long-term transparency and communications in reliable support for the Company to each stage of the production chain, strategy of strengthening vertical accordance with global best practices. achieve its strategic and operational from mining iron ore and coal and integration, achieving maximum goals, as well as sustainable financial producing coke and steel to making production efficiency in Ukraine, and In the reporting period, the Company's results. This system is being introduced flat-rolled steel, shapes and sections, strengthening its global market corporate management structure to help diagnose and manage large-diameter pipes and other high positions. remained unchanged. The Supervisory substantial risks in a timely and efficient value-added products. Board includes two independent way. It is based on the best examples Metinvest exports a large part of its directors. The involvement of from global practice, such as the Metinvest includes enterprises across output to more than 1,000 consumers independent directors ensures the “Enterprise Risk Management – Heat treatment of rolled plate steel three sectors of the metals and mining in 75 countries. impartiality of decisions taken at board Integrated Framework” developed by industry, and is structured into three meetings. Minority shareholders' rights the Treadway Commission's Committee divisions: Coke and Coal; Iron Ore; and In 2010 and 2011, the Company are guaranteed under the articles of of Sponsoring Organisations (COSO). Steel and Rolled Products. successfully placed Eurobonds in the associations, which were recently US, Europe and Asia. The funds were brought up to date and into line with The Internal Control and Risk In the reporting period, the Company raised mainly to finance capital changes to the Ukrainian Law on Joint Management Department actively made numerous changes from the investment programmes. Stock Companies. The timeframe for supports the introduction of this system information presented in its first CSR adopting the new charters was at both the Managing Company and report. In 2009, it acquired United Coal extended to allow all minority most of the production enterprises. Company (UCC), a producer of coking shareholders the opportunity to coal in the US; the Bulgarian steel mill familiarise themselves with them. Promet; and Makiivka Steel Works (MMZ). In 2010, Metinvest combined its

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS IN 2008-102 CORPORATE GOVERNANCE

Supervisory Board Committees General meeting Operational, mt 2008 2009 2010

Crude steel 8.2 7.0 8.7 Strategy and Investment Health, Safety and Environment

Iron ore concentrate 31.3 30.7 35.7 Supervisory Board

Coking coal 6.2 9.5* 10.1 Audit Remuneration and Nomination

Steam coal - 3.0* 2.9 Executive Committee

Financial, US$m 2008 2009 2010

Consolidated revenue 13,213 6,026 9,358

Adjusted EBITDA IFRS 4,769 1,449 2,552

* Metinvest's coking and steam coal production figures fully consolidate the output of UCC, which was acquired in 2009.

1METINVEST HOLDING, is headquartered in Donetsk. 2The Report includes output statistics for all of the Group's production enterprises, including some that did not feature in the 2009-10 CSR report. 10 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 11

OUR GOAL IS TO BECOME EUROPE’S LEADING HOW WE WORK INTEGRATED STEELMAKER, AND WE INTEND TO ACHIEVE IT BY USING MODERN BUSINESS CULTURE AS A GUIDE

The Company's strategy targets transparency and the opportunity to THROUGH HIGH-QUALITY BUSINESS These transactions undergo mandatory Lean production principles have been KEY AWARDS sustainable long-term growth. Today, employ global best practices and MANAGEMENT, METINVEST: scrutiny by the supervisory boards of introduced using simple mechanisms. AND ACHIEVEMENTS we are already one of Ukraine's largest develop partnership relations. enterprises and the Managing In the near future, a strategy and action companies and a major exporter and enhances the image of Ukraine Company. To make decisions about plan will be developed at the Group IN 2009-10: taxpayer. In 2010, we paid US$1,389.4m As the only Ukrainian member of the as a reliable producer and supplier purchases, Metinvest holds open level. in taxes, which according to the World Steel Association (WSA), the of high-quality products tenders and publishes announcements Ukrainian State Tax Service represented Company supports the Global Sectoral on its corporate website. All interested 11% of total contributions to the state Approach Initiative, and it has been improves the country's investment parties may participate in tenders. budget. Metinvest has a decentralised certified as a Climate Action Member climate and forms positive CSR management system. under the programme since 2009. expectations of Ukrainian business An important factor in the Company's among Western partners and investors sustainable development is the The Executive Committee sets strategic Metinvest's commercial activity is on an establishment of a new corporate goals and defines promising areas for international scale; the Company has culture that will change relations among development. Policies have been acquired assets abroad and entered introduces new technologies and best employees, between the business and practices for doing business №1 adopted, or are in the process of being international financial markets. the environment, and between the developed to establish principles and business and society. Metinvest takes a Metinvest came first in the Top 100 performance indicators in each key Metinvest conducts business with holistic approach to this goal. One such Ukrainian Business Leaders rating area: labour safety, environmental partners responsibly through numerous method is the introduction of 'lean and second in the Top 100 safety, personnel support and mechanisms controlled by the production' philosophy, a widely used Companies in Ukraine development, and improving the quality management. Annual results are technique for optimising business of social investment. published to International Financial processes based on a continuous effort Reporting Standards (IFRS), and to reduce losses arising during Policies are implemented at each level independently appraised by a leading production. 9OUT OF 500 of management by the Company's auditor. functional business units. For example, The successful implementation of lean Metinvest ranked ninth among the the Corporate Communications Conflicts of interest are avoided using production will rationalise the use of 500 largest companies by revenues in directorate is responsible for the Social procedures laid down by the Conflict of resources, reduce our environmental Central and Eastern Europe in 2009, Investment Strategy, while the Health, Interest Manual, where Metinvest has footprint, and increase production according to the Deloitte Top 500 Safety and Environment directorate is defined types of transaction that could safety and quality by involving every responsible for the HSE Strategy, and lead to such issues. member of staff in making small so on. As such, strategic goals are changes on a daily basis. broken down into action plans for the 11% functional business units, which develop measures at the enterprise OF ALL UKRAINIAN level. TAXES Directors of business units are INTRODUCTION experience allowed them to develop Since September 2010, the plant has members of the Executive Committee, approaches adapted to the demands been using new lean production In 2010, Metinvest's enterprises paid thereby ensuring execution, OF LEAN PRODUCTION of the plant. For example, responsibility methods: total productive maintenance US$1,389.4m in taxes to the state coordination and direct control over the for maintaining the conditions of (TPM) and single-minute exchange of budget programmes. The Supervisory Board AT KHARTSYZSK PIPE working areas was divided between die (SMED). also monitors the implementation of key shifts, and competitions were held projects and programmes. Introduction of lean production across among employees of divisions. As a result overall changeover times at the Company began at Khartsyzsk several units have been reduced by Signing the UN Global Compact in Pipe. Staff from the enterprise Thanks to 5S, the enterprise is 30%. To support workers' initiatives to 2010 was another step in the underwent training on the “5S” adopting rules about tidying working reduce losses, a suggestions system development of CSR activity for methodology – Sort, Shine, Set, areas regularly, and sorting and was introduced in 2011, allowing Metinvest. For us, participation in this Standardise and Sustain – and also removing unnecessary objects, while employees to highlight potential ways UN initiative means greater visited various companies where such optimal locations and numbers of tools in which their work could be improved. methods have been successfully put used in production have also been into practice. This exchange of established. 12 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 13

METINVEST'S STRATEGIC VISION IS TO BECOME THE LEADING COMPANY DEVELOPMENT VERTICALLY INTEGRATED EUROPEAN STEELMAKER, DELIVERING STRATEGY SUSTAINABLE GROWTH AND PROFIT THAT IS RESILIENT TO BUSINESS CYCLES AND PROVIDING INVESTORS WITH RETURNS AND CSR ACTIVITY AT ABOVE THE INDUSTRY BENCHMARKS

The Group overcame the economic integration are currently enough to At the time of publication, open-hearth themselves. During the initial phase, NEW downturn thanks to its main competitive ensure a decent market position, in the production had been fully guaranteed order volumes help them to STRATEGIC advantage: vertical integration, which longer term this may be too little. We decommissioned as part of the reach a level of quality that will allow enables it to remain sustainable and are therefore taking proactive steps overhaul of Azovstal. There are plans to them to attract other clients. We PROSPECTS resilient regardless of fluctuations in today by adopting a new Company increase steel volumes produced using consider this approach to be our market prices. strategy to 2020. Each of our declared converter methods. contribution to reducing unemployment goals contains our responsibilities to at a time when the structure of the The unification of Metinvest's different groups of stakeholders, Another important condition for labour market is changing visibly. enterprises into a single production including the state, local communities, improving business efficiency is to focus chain minimises production losses, shareholders, clients, market Metinvest's financial and human while the stability of relation among participants and workers. resources on its main activity. This is them has ensured relatively even being achieved through restructuring, indicators. Another important factor in by moving support services such as sustainability was the Company's maintenance and transportation from balanced borrowing policy, which the Company's core business to meant that its budget was not placed professional subcontractors. under great strain. Metinvest is helping small firms that will At the same time, we understand that, specialise in the development of the while the advantages of vertical support-services sector to establish

Influencing sectoral cyclicality is • greater opportunities to make new Metinvest intends to increase the share programmes at its enterprises, and it GOAL 1 impossible in a market economy, so it is in-demand products and improve GOAL 2 of finished high value-added steel works with consumers in various important for any metals producer to quality. products in its output. To become a different ways. See the Production Sustain a competitive keep costs low. This guarantees Strengthen positions in preferred supplier in key markets, we Quality section for more information on competitiveness regardless of the This reflects the economic, strategic markets need to offer products and associated Metinvest's activity in this area. Various advantage in steelmaking influence of external and internal environmental and social components services of the highest quality, and to initiatives in the Technological Strategy through greater vertical factors. of the Group's CSR activity. through increased sales be flexible enough to adapt to the also aim to achieve high indicators in of finished steel and by integration and efficiency development of the market. this field. Today, most Ukrainian steelmakers use With this in mind, Metinvest has obtaining preferred- production technologies dating from the approved a new investment programme supplier status in key To do this, we must anticipate our 1960s and 1970s. This makes it that will come to over US$1 billion in clients' needs and take early action to impossible to achieve maximum 2011 alone. We are also completing sales markets change product lines and technological efficiency, because they are outdated work on a Technological Strategy, as processes. The Company is introducing compared with global best practices in well as defining a technological quality-control and production-safety production, the use of energy and other configuration target and production and resources, waste management, etc. quality requirements for incoming raw This strategic goal includes the This report presents the management materials. GOAL 3 introduction of several fundamental approaches and main programmes that As such, the plans detailed in our concepts for improving the business, Metinvest is applying in all areas of its strategy include, above all, large-scale First, we plan to introduce pulverised Achieve world class including a wide range of socially CSR activity. modernisation that will have numerous coal-injection technology at all of our business excellence responsible management practices. important effects for both the Company iron ore facilities, to increase the Such practices include a modern HR and society: utilisation rate for energy that we through the introduction management system, the introduction generate and buy, and to remove of a single culture and of best approaches to production and • increased production efficiency; inefficient steelmaking technologies. system of values, efficient environmental safety, and innovative HR management, and ways of working with local • reduced energy consumption and communities. rational usage of raw materials; the optimisation of internal processes • reduced environmental footprint; 14 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 15 STAKEHOLDER Metinvest uses modern ENGAGEMENT communication tools widely

BUILDING CONSTRUCTIVE RELATIONSHIPS WITH KEY STAKEHOLDERS including employees, customers, suppliers, local communities, authorities and regulatory bodies – with the help of modern communication tools is highly important for Metinvest.

Regular cooperation with certain stakeholders is an integral part of the main business processes. These relationships are governed by formalised procedures and agreements, as well as other ways of ensuring better mutual understanding. With local communities, for example, we have well established partnerships that the Company works constantly to develop.

In 2010, the Company organised a reputation audit, an independent assessment of the awareness of key audiences about its activities. We received positive feedback regarding our business practices as well as advice about improving approaches to raising SEE NEXT PAGE awareness of them FOR DETAILS 16 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 17 STAKEHOLDER ENGAGEMENT We conduct an open dialogue, which minimises the risks of potential conflicts and allocates resources to the most important and urgent social issues

At Metinvest, the main principle in Given the wide range of stakeholders, We consider it important to exchange and major projects. Participants can agreements, changes in the salary engaging with stakeholders is monitoring articles in leading Metinvest employs tailor-made experience and information with also suggest other topics for structure, internal regulations, etc. information transparency. We are general interest and business approaches to convey its position to international partners, which we do by discussion. Corporate media outlets are also a publications committed to maintaining an open them, receiving feedback via a system taking part in international conferences convenient way to announce dialogue, which minimises the risks of of internal and external communication and associations. Metinvest joined the One effective tool for promoting the innovations and discuss them with ensuring feedback potential conflicts and helps to allocate and responding to reports tools. American Chamber of Commerce in Company, enhancing its reputation and employees. resources to address the most in the corporate media 2009 and the European Business raising its investment attractiveness is a important problems in society. In 2010, the Company organised a Association in 2010. road show, which includes meetings In 2010, the Managing Company conducting surveys reputation audit, an independent with potential investors and analysts in conducted its first employee We identify the most pressing social assessment of the awareness of key On the regional level, we discuss key various cities worldwide. Such meetings engagement survey. The results issues using the following methods: audiences about its activities. We issues with local governments, give these stakeholders an opportunity showed that personnel consider organising road shows received positive feedback about our environmental agencies, the expert to learn about Metinvest's business and Metinvest to have an extremely positive business practices and advice about community and other organisations, talk to its executives. reputation and are prepared to analysing requests and enquiries how to improve approaches to raising while regularly evaluating their recommend it as an employer. They sent to the Metinvest enterprises awareness about them. The audit satisfaction with working with our An important channel for maintaining noted that the following issues need to and the Managing Company results will be used to improve our Company. In 2010, a public survey relations with employees is internal be addressed: employees' roles and communications strategy. regarding Krasnodon Coal’s social communications. Regular meetings with achievements need recognising; more holding internal discussions programmes was conducted in executives of the production assets career and additional education (for example, with PR specialists at enterprises) Krasnodon. The results identified the help to identify the most important and opportunities are required; and the types of social assistance that residents urgent issues, as does liaising with remuneration system needs improving, need and expect most, and the trade unions and conducting opinion particularly the salary payment system. information will be used to plan future polls. The Company is using the poll results to social investment programmes. develop its HR management strategy. Importantly, half of the respondents Our enterprises widely use corporate would like to be involved in joint social media (newspapers, radio, own TV STAKEHOLDER initiatives by Metinvest and the city. channels), which ensures effective feedback. For example, in response to ENGAGEMENT We communicate actively with the letters and phone calls, the newspaper METHODS international, national, regional and local Noviy Azovstalets published reports media. Each year, senior managers about Azovstal's plans to improve meet representatives of electronic and working conditions, explaining the print media to talk about salary and benefit payment procedures Participation in Negotiations and the Company's development strategy established in the collective Raising awareness Consultations events/activities partnership Ÿ corporate publications Ÿ meetings of senior managers with Ÿ employee conferences Ÿ collective DEVELOPING INTERNAL COMMUNICATIONS Ÿ internal web-portals employees and trade unions Ÿ corporate events agreements Ÿ corporate radio and TV Ÿ hotlines In March 2010, the Steel and Rolled operational meetings and the corporate channels Ÿ opinion polls Products division launched a project to media as the best sources of Ÿ information stands Ÿ questionnaires

Internal develop an internal communications information. Other useful sources system. Before the project began, a include meetings with the CEO,

communications working group consisting of PR and HR information stands, posters and specialists and internal consultants was communication with colleagues. As a Ÿ corporate website Ÿ product complaint filing system Ÿ participation in conferences Ÿ discussion of social established. result, the division will focus on these Ÿ events and regular Ÿ meetings of representatives of and forums and economic communication channels in the future. Ÿ cooperation meetings with media enterprises with the public membership in associations Questionnaires from over 2,500 Ÿ financial, annual and social Ÿ public liaison office Ÿ participation in law-making agreements employees across all of Metinvest's In terms of priority topics to be covered, reports Ÿ public opinion polls process Ukrainian steel businesses, the employees highlighted social and Ÿ reports of enterprises at Ÿ key audience surveys External town council sessions Ÿ answers to requests from the public, Managing Company and the divisional environmental initiatives of the division Sales function showed that over 70% and the Company in general, as well as

communications media, etc of employees view their line managers, HR development programmes. 18 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 19 PRODUCT The Company has introduced and QUALITY certified its quality management systems to the ISO 9001 standard

THE QUALITY OF METINVEST'S PRODUCTS IS MONITORED AT EACH STAGE OF THE PRODUCTION CHAIN,

from coal and iron ore mining to finished goods. Our product strategies seek to increase supplies to high-tech industries, such as rail-wagon building, heavy 67% engineering, shipbuilding, bridge building and production of oil and gas pipelines. 63.7%

For example, by employing Metinvest's products are used in the appropriate technology to enrich different types of various industries in the iron ore separately, Ingulets European Union. As this is a GOK has increased the iron content of the concentrate priority target market for the from its second processing Company, meeting all of its plant from 63.7% to 67%. requirements is strategically important

SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 PRODUCT QUALITY

Our policy aims to involve customers with long-term plans for partnership with the Company in joint projects to make new types of products

GOALS As regards production, the Company factor that has a direct and indirect When customers have design quality is controlled and managed, and focuses on introducing new effect on the end result, such as work TECHNICAL specifications, they should approve obtain documents to recognise AND APPROACHES technologies, upgrading equipment and organisation, employee engagement, VISITS product parameters before the Metinvest as a potential supplier. installing modern facilities to make new consumer interests, service conditions, Company delivers them. Technical visits TO QUALITY steel products and supply the entire etc. AND AUDITS and audits have proved highly popular After a technical audit, customers range of goods demanded by the as a way of cooperating in such analyse the results, which helps to MANAGEMENT market. As the objective is significant, a The Company has introduced and situations, and we view them an identify any corrective measures New Product and Market Development certified its quality management extremely important type of interaction, required. This ensures continuous department was established within the systems to the ISO 9001 standard. as they lay the foundation for long-term improvement of quality in line with their Steel and Rolled Products division. partnership. As such, we have needs. established a corporate procedure to Modern approaches to quality organise system-wide work in this area. management are not limited to ensuring that products comply with established During the visits and audits, customers technical standards. They include every can go to the Company's facilities, check the production setup, see how

In 2009, the Steel and Rolled Products sales by taking into account current and CUSTOMER division adopted a policy detailing the projected customer needs in terms of ORIENTATION fundamental approaches to key volume and quality of steel products. MARKET The Sales function and enterprises For example, the Flat Product group customers and the principles of working work together to meet the new market initiated an increase in output of high- POLICY with them. In the reporting period, the division GROUPS requirements for products as much as resistance steel plate, is developing a devised and received approval to possible. In particular, CEOs of programme to make flat products with It aims to involve customers with long- introduce certain procedures that will enterprises, functional managers from thermo mechanical rolling technology, term plans for partnership with the help to develop the quality the Steel and Rolled Products division, and has created an internal catalogue Company in joint projects to make new management system. and representatives of the Sales of steel and rolled products. In addition, types of products and improve current function and engineering teams from the Long Product group has improved ones, as well as to build partnerships facilities collaborate in groups for flat the quality of rails and expanded its with clients based on exchange of and long products. They discuss major range of goods. practices, joint efforts and risk quality parameters and opportunities for distribution. Metinvest is also new products. Their decisions are taken committed to improving the flexibility of into account when developing quality management programmes.

Metinvest uses several types of after- Metinvest continued to develop this NEW TECHNICAL CUSTOMER sales service: analysis of verbal and area in the reporting period. In SOLUTIONS SERVICE written requests, complaints and particular, it started expanding its demands from customers; customer care and after-sales service to One of Metinvest's key business areas accelerated cooling facility to increase questionnaires; and meetings with deal with complaints and introduce is supplying rolled steel to pipe plants the strength of its rolled steel and cut suppliers, consumers and independent organisational and technical measures in Ukraine, the Middle East and South production costs by using alloying auditors. The questionnaires, one way to improve product quality. The America. Global requirements for pipe components in steelmaking. In of exchanging information with buyers department's objective is to devise an products are becoming increasingly addition, the plant has built a new lab regularly, work as follows: once effective customer feedback stringent: consumers need high- to test the resistance of some completed, they are sent to specialists mechanism and improve after-sales strength materials that can resist products (hot-rolled plate and steel at the Company's enterprises so that cooperation. adverse conditions. To meet this pipes) in acidic environments. disadvantages can be eliminated and demand, the Company is applying technologies improved in line with new technical solutions. In 2011, customer needs. They also help to Azovstal plans to launch an assess customer satisfaction. 22 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 23 PRODUCT QUALITY

In 2006, the new EU regulation REACH took effect. In 2010, our businesses registered their products as REACH-compliant with the European Chemicals Agency

JOINT The Sales function has introduced and consumers of flat products and coil. In accordance with Ukrainian law, sheets (SDSs) in line with the new is developing the practice of organising The conferences establish committees PRODUCT product safety is ensured with the help REACH format and are creating a CONFERENCES conferences for customers. with various areas of focus, and SAFETY of radiology tests, inspections of database of them that can be accessed customers can learn about the incoming raw materials, monitoring of through the Group's website. In 2009-10, Makiivka Steel held Company's plans to develop the production process, acceptance conferences with consumers of wire production, technologies and customer tests, etc. At present, Metinvest is working to rods and Metinvest Ukraine, with service, as well as discuss quality, apply the EU regulation on buyers of rolled coil. There are also logistics, the service system, etc. Metinvest's products are used in classification, labelling and packaging plans for a major conference with various industries in the European (CLP). According to it, all substances Union. As this is a priority target market that are delivered to the EU and subject for the Company, meeting all of its to registration under REACH in 2013 As competition in the global market for For example, Ingulets GOK decided to requirements is strategically important. and 2018 should be included in a QUALITY iron ore products is intensifying enrich different types of iron ore classification and labelling notification OF IRON ORE continuously, enhancing their quality is separately, which increased the iron In 2006, the new EU regulation REACH submitted to the European Chemicals becoming increasingly important. The content of the concentrate from its took effect. In 2010, our businesses Agency. PRODUCTS quality of the pellets and concentrate second processing plant from 63.7% to registered their products as REACH- produced by Metinvest's iron ore 67%. Another important project at the compliant with the European Chemicals enrichment works (GOKs) meets plant is the construction of a second Agency, enabling them to continue international standards. At the same magnetic flotation refining facility to deliveries beyond that year. The time, the demands of today’s market increase the quality of marketable raw enterprises also developed safety data mean that product quality and range material to 67%. needs to be improved continuously. Enterprises regularly monitor the As such, Metinvest's GOKs have long- characteristics of products in special term quality programmes to analyse labs, enabling accurate information to customer demands, their trends and be provided to customers. the Company's ability to meet them. The analysis then forms the basis for decisions, including about investments in new technology.

Steel angles produced by Makiivka Steel Works 24 SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 EMPLOYMENT Our purpose is to make our employees feel part of the Group RELATIONS and to understand, accept and embrace its values in their daily activities

OUR PRODUCTS ARE MADE BY OUR PEOPLE, AND THE NET RESULTS DEPEND ON THEM

Metinvest employs specialists from numerous countries with different mindsets and views. A diversity of opinions and expertise is the best way towards our goal, which is to create a united, professional and motivated team of innovative thinkers who are ready for change and able to realise the Company's new strategy.

We strive to maintain a social climate where every employee feels protected and can fulfil his or her professional or creative potential SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 EMPLOYMENT RELATIONS

In 2008-09, the Company appraised managers and created a pool of talent

Building a corporate culture and enhance the corporate culture The programme covers two groups of management skills by implementing STRATEGIC relations with employees is the managers (88 people in total), includes actual strategic projects of the HR cornerstone of the HR management six modules over a year, and offers Company. After each module, strategy, which we started to develop in develop common internships at one of the most participants defend their projects before MANAGEMENT the reporting period. An employee HR management approaches successful international steel holdings. the Metinvest Executive Committee. survey conducted last year provided The trainees will learn modern Every participant will have a personal In 2010, Metinvest employed feedback about changes at Metinvest, ensure the presence of a skilled management practices and strategic mentor (a senior executive from measured the satisfaction and workforce (through recruitment, planning, as well as how to build the Managing Company) and an engagement of employees, and adaptation and creation effective business models to meet the individual development and career plan. 67, 652 revealed areas that need special of a talent pool) Company's strategic goals, etc. In addition, there will be mechanisms attention. As a next step, the Company for consistent promotion and rotation devised a plan to develop a HR road build a corporate HR training Courses are taught by professors from within the Group. 3 PEOPLE map, which takes into account the and development system the best international business schools. survey results. (including a talent pool) Leading metals and mining specialists All of Metinvest's businesses will apply 3Number of full-time employees at Metinvest's Ukrainian as well as representatives of a holistic approach to the talent pool businesses covered in this report, except for Ilyich Iron and Steel Works, at the end of 2010 Metinvest's main objective today is to international companies, government programme starting from 2011. standardise processes and procedures develop a system of authorities, and scientific and cultural The Company will select participants while taking into account its expertise remuneration and motivation organisations are invited as experts. based on an appraisal of their (financial and non-financial) and best global practice. Alongside theoretical studies, the performance in the previous period and programme includes practical tutor-led of their potential. The Group's goals and priority introduce an perfomance lessons in which trainees can gain assessment system objectives in HR management are to:

BUILDING Metinvest's enterprises have traditional which will help to achieve the corporate cultures that involve different Company's strategic goals. A CORPORATE management styles and relations among employees. Our purpose is to In early 2011, we formulated corporate CULTURE make our employees feel part of the values and developed an integrated Group and to understand, accept and programme to transform our culture in embrace its values in their daily line with them. A task group of talent activities. pool managers has started to examine the existing corporate cultures at our To this end, we began to build a assets, to align the approved corporate culture based on common development plan with the current values and principles, while retaining situation at every enterprise. the best practices of our enterprises,

The successful implementation of In 2008-09, the Company appraised TALENT POOL Metinvest's strategy will depend on the managers and created a pool of talent. availability of professional managers In 2010, we developed an integrated and specialists able to achieve the set development programme in objectives. As such, building and cooperation with a leading Russian developing the talent pool has become business school to ensure that our a priority. internal expertise is sufficiently strong for managers to deliver on the corporate strategy. Training session of talent pool development programme SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 EMPLOYMENT RELATIONS

Metinvest is finalising the development of its remuneration system based on 'position appraisal', which ensures common rules for managing remuneration with the principle of fairness at their core

HR TRAINING Training and developing leadership skills improve the plant's operations. Metinvest is finalising the development Our enterprises apply a broad range of in our employees consistently are REMUNERATION of its remuneration system based on non-financial motivation, including AND DEVELOPMENT important aspects of being a Workers can also increase their AND MOTIVATION “position appraisal”, which ensures competitions in which employees can competitive and sustainable business. qualifications and gain new common rules for managing show their skills and compensation of We give our staff opportunities to specialisations and skills to remain PROGRAMMES remuneration with the principle of educational costs. For example, improve their skills, gain new competitive in the Company and the fairness at their core. This underpins the Azovstal pays the tuition fees for knowledge and achieve professional labour market. common approaches that determine promising young employees wanting to excellence. the contribution of every position to the study for a second degree. 82,573 Metinvest has launched a range of end result of the Company's One area of focus is training line training programmes focused on new operations. Metinvest meets this In addition, young specialists at trainings were conducted in managers and specialists of all levels management approaches introduced in principle by setting a common set of enterprises in the Iron Ore division have 2009-10, of these: using modern programmes and the Group (HR efficiency management salary ranges for positions within the the opportunity to prove themselves as methods. In the Iron Ore division, the system, the 'lean production', HSE same grade. self-starters and committed employees Line Manager School, School of Core strategy, etc) and the development of by developing projects that are Services, School of Young Specialists managers' new functional AVERAGE MONTHLY SALARY, US$ important for production processes and 13,521 and Open Business School have competencies. For example, in submitting them to managers for

continued to function at the enterprises. cooperation with Mariupol State Metinvest Group 480.7 consideration. They spend six months were in new specialisation The results and efficiency of University, the Company launched a Ukrainian industry working on their projects under the programmes are regularly assessed, new programme, “The Fundamentals of guidance of mentors (managers) and and their content is aligned with the Effective Public Speaking”, for senior defend them at an annual conference

368.7 current needs of businesses. executives at Azovstal. for young specialists. In 2010, 24

324.0

3,491 322.7 projects were submitted to Central

265.1 GOK and Northern GOK. The authors In the reporting period, Metinvest In the near future, the Managing 411.7 were in further professional 261.9 development focused mostly on enhancing the Company plans to set up a training of the best initiatives join project

342.2

quality of training courses. Northern centre for senior managers across the 307.7 implementation teams.

Under the Company approach, adopted data reflects the total GOK improved its “Fundamentals of Group, based on best practices at 240 amount of trainings provided to the eployees Effective Management” and “Foreman enterprises. in Modern Production” courses. At Ingulets GOK, a survey of young specialists helped to introduce a programme supporting projects developed by such employees to 2006 2007 2008 2009 2010 Source of average monthly salary in Ukrainian industry: State Committee of Ukraine (www.ukrstat.gov.ua)

INVESTMENTS IN TRAINING EMPLOYEES, US$m TRAINING PROJECT OF SENIOR MANAGERS A YOUNG SPECIALIST 2.74 A young specialist at Central GOK, an can protect tyres from cuts and In 2010, Northern GOK adopted regulations on training and developing heads assistant shovel operator at the punctures and give them more road of business units, chief engineers, heads of departments and senior specialists. Petrovskiy open pit, developed a adherence. Ultimately, one set of tyre- 1.75 Following the appraisal of their abilities, the plant devised individual project to use wear-resistant tyre- protective chains can save US$26,400 development plans and a comprehensive training programme. It engaged a protective chains on special vehicles at on operating costs. The enterprise is 1.23 European management school to create individual programmes for managers the deposit. studying the feasibility of the project to develop strategic thinking, enhance negotiation skills, study innovative and the possibility of engaging its management techniques, etc. In 2010, 141 managers attended courses under The main idea is to expand the useful author as a specialist in the technical this programme and 11 of them were promoted after completion. life of tyres on open-pit vehicles from department at Petrovskiy pit 2,000 to 8,000 service hours through the use of wear-resistant chains, which SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 EMPLOYMENT RELATIONS

Key performance indicators based on the Company's strategic goals are set for every employee for the year ahead

EMPLOYEE Appraising the efficiency of employees' competencies of employees of the Our enterprises' trade union We continue to assist other employees' performance is an essential element of Group's core businesses are appraised. WORKING organisations take part in drafting and organisations (such as youth PERFORMANCE a modern HR management system. The results are used as the basis for fair WITH TRADE UNIONS approving collective agreements, associations, councils of veterans, and Quantifiable objectives based on the career decisions for the next period, resolving disputes and fostering the women's associations) that support APPRAISAL Company's strategic goals are set for including changes to salaries and AND NGOs appropriate cultural environment for particular social groups and local every employee for the year ahead. At bonuses, inclusion in the talent pool, employees. They have become a citizens (see our first social report for the end of the year (starting from 2011), etc. valuable partner for the Company in the details of their activities). During the the performance and corporate process of introducing a new reporting period, Khartsyzsk Pipe remuneration system and helped to establish the Khartsyzsk Pipe reorganisation. Engaging the trade Women's Association, which protects AGE OF WORKFORCE, 2010 unions in these processes in the the rights of women, engages them in SOCIAL We strive to maintain a social climate reported period helped to safeguard social activities, promotes healthy where every employee feels protected employees' interests and resolve lifestyles and provides help to SUPPORT and can fulfil his or her professional or potential disputes. orphanages, asylums and children's FOR EMPLOYEES creative potential. homes. Despite the difficult economic environment in 2009, the Company did not amend its social programmes significantly. The elements of the social The restructuring at Metinvest fully benefits set in collective agreements) for 36.6 package are set in collective RESPONSIBLE US$ m complied with the corresponding a year at least. Also, employees of our agreements and include support for industry-specific agreements, collective GOKs reserve the right to receive invested in social services employees and pensioners, bonuses RESTRUCTURING bargaining agreements and legislation. voluntary medical insurance, while for employees in 2009-10 paid on major dates, opportunities for One of the main tools used in the Azovstal continued its residential loan holidays at resorts, meals at discount restructuring process was the programme. prices, sports and cultural activities, Under 30 outsourcing of non-core activities, etc. 30-50 US$17. 1 Over 50 which involved around 10% of Metinvest's enterprises organise m employees in 2009 and 5% in 2010. information campaigns through their Some provisions were improved. For The Company made every effort to corporate media and via meetings with invested in maintaining its social example, Ingulets GOK increased ensure transparency and consider the employees, senior managers and the facilities in 2010 allowances for newly born children, GENDER OF WORKFORCE, 2010 NUMBER OF EMPLOYEES interests of all parties. heads of HR. All employees can receive while the number of enterprises paying AND SUPERVISED WORKERS, 2010 answers to any questions that they for medical and life insurance for Non-core functions were transferred to have. For example, to support their employees partly or fully also increased. external contractors (outsourcers). In staff, Northern GOK and Central GOK In the event of relocation or promotion the reporting period, we outsourced established public coordination to another region, some categories of cleaning, medical, security, catering and councils, which considered all employees receive extra compensation maintenance services. employees' requests. (rent, one-off travel expenses, etc). Outsourcers were selected by tender The Company also supports Our enterprises continued to finance according to certain criteria. We also outsourcers at the initial stage by cultural, sports and household facilities: work closely with them to ensure a securing guaranteed orders, prioritising recreation centres, sports complexes, smooth transition for our employees to contractual payments and providing community centres, children's camps, those companies. The agreements preferential rent terms. etc. Our cultural and sports facilities between our enterprises and often provide services to both Men Employees (managers, engineers) outsourcers ensure that Metinvest's employees and local citizens. Women Supervised workers outsourced employees retain their job profile (work schedule, salary and social SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 HEALTH Metinvest has devised four new corporate H&S standards based AND on international best practice SAFETY

A FOCUS ON OCCUPATIONAL HEALTH AND SAFETY IS CRITICAL TO THE SURVIVAL AND COMPETITIVENESS OF A BUSINESS It is instrumental in reducing the risk of 82.1 injuries, accidents and man-made disasters causing damage to society and the 66.1 environment. Ultimately, it guarantees sustainable and socially responsible 59.0 business development.

INVESTMENTS IN OCCUPATIONAL All of the Group's enterprises have HEALTH AND SAFETY, US$m a standard for safety audits in place. In accordance with this, managers of all levels, including senior executives in the Managing Company (the Board) and at enterprises, regularly visit the production facilities to see how people work and what the working conditions are like SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 HEALTH AND

SAFETY The foundation of Metinvest's approach to managing HSE issues is the belief that the main factor in a safety system is people. The vast majority of incidents are caused by a human factor

Our health and safety (H&S) philosophy This philosophy is outlined in the In 2008, the Group adopted a health Company, divisions and enterprises and METINVEST'S is that we work not only to meet the Group's Policy and Principles of Health, APPROACHES safety and the environment (HSE) form a single vertical chain of PHILOSOPHY legal requirements, but also to enhance Safety and the Environment4 . Metinvest TO H&S strategy for 2008-11 (“the Strategy”), command. Comprising the managers of the safety culture considerably, thus focuses on all aspects of safety at which identified priorities in this area. production and functional units, the making our business even more work, including equipment MANAGEMENT That same year, the Managing commissions are collective governance reliable. Drawing on international best performance. We regard changes in the Company set up a HSE directorate to bodies that represent interests and take practice, Metinvest is building a H&S attitude of all employees to their own assist the senior management in advantage of the expertise of all management system based on the and other people's safety as a priority. implementing the Strategy. production and functional executives. following main principles: We rely upon the statistically proven VERTICAL STRUCTURE and globally accepted opinion that only OF HSE CENTRAL COMMISSIONS The Strategy can be fulfilled only if an Governance through the central • leadership at all levels plays a pivotal 15% of accidents have technical efficient and effective management commissions helps to ensure effective role in H&S management; causes (hazardous working conditions), system is in place. As such, in 2009, decision-making and immediate control while the remaining 85% are caused by Metinvest started building an integrated over enforcement of decisions as they • every employee is involved in unsafe acts of people. At the same SUPERVISORY management system (IMS). Integration are made by the managers directly enhancing safety at work: safety is time, hazardous working conditions can BOARD means consolidating two areas in one responsible for H&S at work. To everyone's responsibility; be a consequence of someone's Chairman and members of the committee5 : system: health and safety, on one hand, address certain issues, the Supervisory Board unsafe actions or a past oversight. and environment, on the other, as well commissions can set up task groups • enterprises take systemic and as integrating the management systems chaired by commission members and planned actions to identify, assess The Company dedicates financial and MANAGING of the enterprises and the Managing engage specialists with the requisite and reduce risks; human resources to improving the H&S COMPANY Company. H&S competencies to work in the management system. The commitment Chairman: groups, including external experts and • accidents are analysed carefully to and abilities of the senior management CEO At the initial stage, in 2009, the IMS contractors. learn lessons and prevent them in the regarding these issues are our Commission members: was introduced at Metinvest Holding members of the Executive Committee: future; advantage and the key to success. directors of divisions and functional directorates and certified to OHSAS 18001 and One excellent example of our ISO 14001. By late 2010, all of the achievements in this area is the • the Company liaises constructively Group's main production facilities had contractor H&S task group created at with all stakeholders, including DIVISION OHSAS 18001 certificates. Yenakiieve Steel in 2009. It organises contactors, to achieve the best weekly H&S check-ups by members results. Chairman: The next step included introducing a and authorised representatives of the divisional director Commission members: range of corporate standards that are contractors. Top managers of the directors of enterprises and functional managers binding upon the Managing Company contractors devised measures for of the division and enterprises and set common introducing a safety standard for work RATIO OF LOST DAYS OVERALL NUMBER OF ACCIDENTS OVERALL NUMBER OF ACCIDENTS requirements for some elements of the completed (the Contractor Job Safety INVOLVING A LOSS OF WORKING CAPACITY INVOLVING FATALITIES management systems. Standard). In addition, the enterprise ENTERPRISE checked the compliance of contracts 21 97 Among other things, the IMS creates a and agreements with the standard. . 385 Chairman: director of the enterprise single channel for management through 17 27 16 62 Commission members: HSE central commissions, which are . . managers of production and functional 259 15 subdivisions of the enterprise established at the level of the Managing 201 12 9 5The Supervisory Board has a Health, Safety and Environment Committee. For more information about its work, see: 2.00 1.77 www.metinvestholding.com/en/about/governance/committee 0.10 0.08

LTIFR FIFR

4For more information about the Policy and Principles, visit the Company's website To ensure that information is comparable, the accident figures for 2008-09 include enterprises that were not part of the Group in the reporting period: Inkor Chemicals (2008) and Makiivka Steel Works (MMZ; 2008-09). To ensure that the Company's figures are comparable with those of international players, as of 2009, the CSR report features ratios for the frequency of lost-time incidents (LTIFR) and fatal incidents (FIFR), which are calculated per 1 million man-hours worked (and not per 200,000, as recommended by the GRI). SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 HEALTH AND SAFETY One of our managers' tasks is to encourage workers to take the right actions, create incentives for safe behaviour and avoid dangerous practices in a timely manner. One method used to do this is safety audits

SAFETY All of the Group's enterprises have a The standard also covers audits that Being mandatory elements of the facilities, while “accident conclusions” standard for safety audits in place. In focus on hazardous conditions, which analysis, the corrective and preventive outlining analysis results are announced AUDITS accordance with this, managers of all mean the state of equipment, measures are put in place to eliminate after root causes are identified. levels, including senior executives in the compliance/non-compliance with safety defects in the management system. If Managing Company (the Board) and at rules when carrying out certain work, necessary, they are introduced across Managers at all levels are trained to use Behavioural safety audits enterprises, regularly visit the etc. These are “target safety audits” all areas and operations where similar this methodology, with some attending carried out in the Group in 2010: production facilities to see how people conducted according to checklists accidents are possible. advanced training programmes and work and what the working conditions approved by the standard and are acting as methodology experts are like. binding upon all Group entities. In The procedures also set rules for thereafter. This demonstrates that root 50,041 addition, each asset develops its own disseminating accident information causes are identified in line with the Safety audits are supplementary to H&S additional specific checklists. For across the Group. “Top priority notices” methodology. check-ups conducted within the three- example, Ingulets GOK has developed include initial information that help Target safety audits in 2010: stage control mechanism (required by and now uses checklists for managers and employees to identify Ukrainian law). They focus on employee transporting large and hazardous cargo and rectify similar situations in their actions, while check-ups and as well as people, issues that are critical 64,305 inspections concentrate primarily on the for it. state of equipment, sites, buildings and structures. The audits help managers to The audits help to foster a modern H&S RISKS In 2010, the Company developed a The standard “Production Risk correct unsafe acts by employees and safety culture: to identify and correct methodology framework for identifying Assessment and Reduction” has a give credit for safe approaches, thus unsafe acts at work promptly; and to and reducing risks. The standard “Job narrower target audience – production showing that safety at work is important analyse inputs, identify the most Hazard Analysis” (JHA) ensures that all managers and specialists – as they to them. Personnel learn how to identify pressing areas, and set priorities for employees assess the risks and need higher-level expertise and a hazards and that managers see and further actions to improve H&S at work. hazards of their work in a simple, but mandate to implement it. As part of the appreciate concern about safety. As a effective, way before and during any standard, the Company developed result, employees develop a behaviour operation. guidelines on how to use several pattern, where proper attention to the international risk assessment methods health and safety of themselves and One special feature is a focus on such as HAZID, ENVID, Bow-Tie and others becomes a part of their personal workers, who must have strong skills in HAZOP. beliefs and values. For this reason, the conducting JHA and cease to be audits are called “behavioural safety passive recipients of instructions from audits”. managers.

ROOT CAUSES Alongside our efforts to prevent accidents, THE ROOT CAUSES OF ACCIDENTS we seek to learn lessons from the MEET THE FOLLOWING CRITERIA: OF ACCIDENTS incidents that were not avoided and use this information to build a better system MAJOR Metinvest's strategy envisages for accident prevention. they are weaknesses implementing large investment projects in the management system INVESTMENT to build and retrofit production facilities. Metinvest has put in place the standard In line with the strategy, the Company “Procedures for Identifying Root Causes removal of them allows similar PROJECTS has developed the standard “HSE of Accidents” (IRCA). It enshrines analysis accidents to be avoided Management in Investment Projects”, methodology that helps the Company to or the chance of recurrence to be minimised which will ensure strict compliance with focus on identifying defects in Ukrainian law and the requirements of management systems that have caused international investors (if projects involve an accident or injury. We call these the problem should be addressed external financing), particularly banks defects the root causes of accidents. by senior managers of a business unit, enterprise or the Group embracing the Equator Principles. The standard regulates risk management at all stages of projects. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 HEALTH

AND Any change or innovation should be made clear to SAFETY people, otherwise it will fail to meet the new requirements. Since 2009, Metinvest has had in place a continuous HSE training programme for line managers across the Group

TRAINING Any change or innovation should be line managers, with the classes taught In 2010, Metinvest adopted the In 2011, Metinvest plans to time the first made clear to people, otherwise it will by directorate specialists and internal EMPLOYEE Regulation on the CEO's Prize for HSE final of the competition to coincide with EMPLOYEES fail to meet the new requirements. We trainers. INCENTIVES Achievements. All employees may take its fifth anniversary celebrations. invest in training managers and part in a competition to win the prize by employees in new safety management The Company focuses on training HSE submitting projects that have tools and safe work practices and specialists, as they need to be significantly improved H&S at work, procedures. professionals and effective managers at prevented industrial accidents and 64,890 the same time. In 2010, Metinvest occupational diseases, or reduced the Last years, the Company placed a developed a model of competencies for Company's environmental footprint. greater emphasis on training managers them and assessed their managerial MAN-HOURS of all levels, from top to line managers. and professional abilities. The results invested in training employees The introduction of every corporate were used to devise individual Metinvest provides employees with quality of PPE, and suggests providing in corporate H&S standards in 2010 standard was accompanied by development plans and training NEW STANDARDS work clothes and personal protective additional protective equipment not respective training programmes. Since schedules. FOR WORK CLOTHES equipment (PPE) in accordance with the covered in the national industry-specific 2009, Metinvest has had in place a national standards. Meanwhile, we are standards. 8,525 continuous HSE training programme for AND PERSONAL committed to ensuring the best protection for our employees and thus The project had the following PROTECTIVE set more stringent standards in this mandatory stages: employees taught by internal NUMBER OF MANAGERS TRAINED IN CORPORATE H&S STANDARDS EQUIPMENT area. To tackle the issue, in 2009, the trainers in 2010 enterprises in the Iron Ore division • a diagnostic audit, which identified launched a pilot project to provide risks and hazards at workplaces; 4 720 higher-quality work clothes and PPE to 3 904 , , 3,900 US$313,992m their employees. • development of a list of requirements for PPE; invested in training employees Based on this practice, the Managing Company developed a new standard • analysis of PPE given to employees to in H&S in 2010 257 last year, “Standards of Work Clothes, check whether it meets the 100 Footwear and other Personal Protective requirements in full; Equipment for Employees of the Metinvest Group”. It covers all • development of a list of new PPE that production jobs in the Group, meets the requirements in full; Role of the manager Basis and methodology for IRCA Blocking determines the level of protection and in overseeing HSE Grading/Checking • on-site and laboratory tests involving a leading industry-specific institute. extensive production expertise. During knowledge. At present, Metinvest has 53 internal When developing the standard, the “TRAIN the preliminary preparations, the coaches, and they in turn trained Company placed greater emphasis on internal trainer studied corporate HSE In addition, the program has an 8,525 employees in 2009-10. THE TRAINER” the comfort and ergonomics of the new standards and the fundamentals of important social effect: 6 PPE. In 2011, the Group's enterprises PROGRAMME andragogy , familiarised themselves will receive new work clothes and PPE • trainers have a new, interesting and with interactive training methods, and that meet the corporate standard. The introduction of corporate improved their presentation skills. sought-after job; standards gave rise to a need for training many people at the same Our innovative and effective solution to • they have the opportunity to earn time. Given the vast amount of work to this has been to engage retirees with additional income; be done in a short time, the Company extensive leadership experience at decided to launch “Train the Trainer” Metinvest's enterprises to do the job. • the programme helps to stimulate programme. An internal trainer is a Their potential helps the Company to retirees and make them feel valued. specially trained employee with accumulate and share practical

6Andragogy is a part of pedagogy that describes how adults learn and how a teacher as facilitator manages the learning processes. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 HEALTH

AND Our moral obligation is to protect people, working at Metinvest production sites, SAFETY from injuries, irrespective of who they are employed by. As such, we work actively with contractors on safety issues

Contractors carry out a lot of work on HSE requirements are included in CONTRACTOR NUMBER OF All mines will have underground rooms The second element of the strategy Metinvest's industrial sites, and any agreements with the contractors. When OCCUPATIONAL ILLNESSES equipped with stretchers, splints and suggests measures to prevent RELATIONS accident that they have could affect our deciding about further cooperation, our bandages for non-medical staff to cardiovascular diseases and promote a employees and production facilities. We businesses take into account a provide emergency aid. Surface healthy lifestyle. It focuses on raising believe that we should work actively contractor's safety level, due care and 193 medical stations are equipped with awareness of managers and employees with contractors on safety issues. This efforts made to tackle problems. automated external defibrillators and of the risks related to smoking, obesity, is not only part of our moral 140 modern portable first aid bags. low physical activity, stress, etc. We will commitment to protect people, working This interaction continues at the 129 draw employees' attention to managing for Metinvest from injuries (irrespective execution stage: we carry out joint Experts of the R&D Centre for Disaster risks that do not require any medical of who they are employed by), but also audits, check-ups and accident Medicine have devised an emergency intervention and depend on their of our obligation to ensure business investigations and develop measures to 0.26 0.23 0.23 aid training programme for treating knowledge and skills. sustainability. improve safety. heart failures and injuries. Developed in accordance with international The third element of the strategy To this end, the Group has developed The results of these joint efforts are standards, it has been adapted for all focuses on improving medical (and will put in place in 2011) the discussed at regular meetings involving trainees irrespective of their knowledge examinations. We will work closely with corporate standard “Contractor Job the respective managers of our and skills in this area. Training courses the Institute for Medical and Social Safety”. In line with it, our enterprises enterprises and contractors. Ratio of occupational will be held for medical staff and Problems in the Donbass to develop interact with contractors before entering illnesses employees who are near workers in additional rules for preliminary and into a contract, i.e. at the stage of emergencies (foremen, shop managers, regular medical check-ups. The contractor assessment and selection. etc). In the long term, the Company approach will include preliminary health Specialists at the enterprises assess plans to train all employees working in assessments for new employees and potential partners based on compliance hazardous areas. In 2010, Krasnodon further occupational health monitoring. with laws and the ability to meet internal Coal trained 100 medical officers and The Company has planned measures to corporate requirements imposed by launched training courses for 50 office improve examinations regarding work Metinvest. workers (including senior managers). ability, health surveys and occupational pathology diagnostics, as well as to In 2011, all Group enterprises will prevent disease progression. EMPLOYEE The environment in which metallurgists • improving the existing system of initial conduct such training. The trained and miners operate differs greatly from and regular medical examinations to medical officers become internal HEALTHCARE ordinary working conditions (due to determine ability to work coaches who teach volunteer medical vibration, high temperature, humidity, (cardiovascular diagnostics); assistants and production workers. confined space, etc). As such, we need systemic approaches to prevent • introducing a cutting-edge system to occupational illnesses and maintain prevent cardiovascular disease and employees' health. In the reporting promote a healthy lifestyle; period, we analysed the existing healthcare system to bring it in line with • reviewing and adjusting the system EMPLOYEE HEALTH PROTECTION STRATEGY the latest standards and international for work-related illnesses. best practice. I. Emergency aid II. Healthy lifestyle promotion III. Occupational health The analysis results underpin the Our conclusion was that certain “Strategy for Developing the Healthcare Reducing emergency response time Screening programmes Expanding the schedule of preliminary elements of it are in place at all Group System at the Group Enterprises”, and regular medical check-ups enterprises. At the same time, we found which was introduced as a pilot project Providing the healthcare service Thematic campaigns: Using collective protective equipment that the following steps need to be at Krasnodon Coal in 2010. with state-of-the-art: • cardiovascular diseases taken: • equipment • smoking • means of connections • alcohol Three mines have created 24-hour • transport facilities • physical activity • introducing a common up-to-date underground medical stations. • balanced diet • stress management standard for emergency aid at the Training: pre-hospital stage; • medical staff • volunteer medical teams • production workers and office employees SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

ENVIRONMENT Reclaiming disturbed land is an important aspect of our environmental programmes

In 2010, we adopted a methodology for targeted environmental audits, which seek to determine the environmental aspects of our enterprises' activities, SINCE ITS INCEPTION, THE communicate information to COMPANY HAS STRIVED TO senior managers, and suggest DEVELOP ITS ENVIRONMENTAL how to improve the system MANAGEMENT CONTINUOUSLY

Our strategic approach is to reduce waste generation, emissions and contaminant discharges gradually by improving production processes, optimising equipment operation modes and introducing modern technologies.

SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ENVIRONMENT

Alongside the obligatory measures, our enterprises conduct research to prevent risks

MANAGEMENT As a part of Metinvest's HSE strategy The production facilities and the ENVIRONMENTAL Controlling environmental safety is an showed that these waste disposal sites and the integrated management Managing Company hold quarterly absolute priority for Metinvest. To meet provide a high level of protection. APPROACHES system, environmental management meetings with environmental managers CONTROL this objective, we conduct different follows the principles adopted for health from all of Metinvest's assets. In 2010, types of monitoring: analysing air quality Compared with the previous reporting INVESTMENTS IN ENVIRONMENTAL and safety. Senior executives at all the meetings focused on identifying at the borders of sanitary buffer zones period, some of the Company's MEASURES, US$m levels – from the Supervisory Board to environmental aspects and planning between businesses and residential environmental performance indicators foremen – are responsible for managing long-term environmental costs, as well areas, water quality, wastewater, the increased insignificantly due to the environmental issues through central as introducing special measures to state of water collectors, etc. decline in output in 2009 and its commissions. During the reporting improve the efficiency of environmental increase in 2010. In addition, some 254.96 period, every enterprises in the Group departments. Working groups Alongside the obligatory measures, our indicators increased in 2010 because established environmental consisting of representatives of the enterprises conduct research to prevent we expanded the scope of reporting to 193.51 subcommittees, which began Managing Company and enterprises risks. Central GOK engaged the include two more businesses, Makiivka 167.81 functioning in 2011. have been established to address the Ukrainian Environmental Research and Steel (MMZ) and Inkor Chemicals. At most important issues. Development Institute to check its the same time, our enterprises' Environmental department helps the production zone and detect high-risk environmental programmes have Company's executives to fulfil the The environmental management contamination sources. The work led to helped to stop emissions and environmental aspects of the Strategy: systems of the Group's enterprises suggestions about creating a discharges at some sources and set common objectives, develop have been certified to ISO 14000. At monitoring and early warning system. significantly reduce them at others. environmental standards and guide the end of 2010, all enterprises of the Case studies about reducing our their implementation. Our enterprises Iron Ore division, two steel plants Northern GOK analysed the tailing environmental footprint are given further deal with specific environmental issues (Khartsyzsk Pipe and Yenakiieve Steel) ponds and dumps of the Pervomaiskiy in this section. included in their annual environmental and Inkor Chemicals had compliance and Annovskiy open pits and assessed protection programmes. This ensures certificates. their impact on the air, surface and both a systematic and a flexible ground water, and soil. The results approach aligned to the particular activities and conditions of each entity.

ENVIRONMENTAL Over the past two years, we have Optimising the procedures for obtaining closely analysed the environmental environmental permits and licences is ASPECTS aspects of the production cycles at another important area supervised by every asset. Based on this, we the Managing Company. We have AND RISKS compiled a register of environmental established a database of permits and aspects and assessed and rated them, licences of all enterprises and monitor as well as developed and tested a every document that is received. The methodology to determine systemic approach is described in the environmental risks. Following the procedure “Organising Work to Obtain assessment, the environmental Environmental Permits and Licences”. departments at our enterprises introduced the necessary changes and We regularly monitor changes in additions to their environmental environmental laws and update our e- programmes. library of regulations. We have also developed special e-forms for In 2010, we adopted a methodology for calculating environmental payments for targeted environmental audits, which enterprises in accordance with the new seek to determine the environmental Tax Code. aspects of our enterprises' activities, communicate information to senior managers, and suggest how to improve the system. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

Our enterprises’ ENVIRONMENT environmental programmes have helped to stop emissions and discharges at some sources and significantly reduce them at others

AIR Our ore mining and processing plants Meanwhile, Krasnodon Coal focused In addition, the Duvannaya mine One technique enables world-leading have continued their ongoing mostly on preventing spontaneous conducted an experiment to extinguish synthetic composite liquid fuel to be EMISSIONS environmental measures and launched combustion and extinguishing burning combustion sources using an innovative produced from black coal. Metinvest is a comprehensive programme to waste rock dumps, preparing them for method: injecting a clay mud solution to studying the British programme modernise dust-collection equipment. further reclamation and realising the a depth of three metres. The mine will “Cleaner Fossil Fuels” and techniques In 2009, Northern GOK installed Kyoto Protocol projects7 . Extinguishing assess the effectiveness of this for treating chemical coal to derive modern electric filters on the roasting waste rock dumps will help to stop approach in 2011. synthetic fuel. If the Company approves machine in the pelletising shop. The emissions of carbon and nitrogen any of these methods, the use of coal in facilities are regarded as one of the best oxides, sulphur dioxide and hydrogen Studying new clean technologies of boiler houses will be increased in the world, with a cleaning efficiency sulphide generated during combustion. using coal in boiler houses is an substantially. of up to 98%. In 2010, the plant started Krasnodon Coal works constantly on important and promising area. installing a similar filter on the second nine operating dumps in close roaster. These measures were listed in cooperation with R&D institutes and the “Programme to Improve the specialist organisations. GROSS AIR EMISSIONS, THOUSAND TONNES Environmental Situation in Dnepropetrovsk Region by Reducing For example, the Orekhovskaya mine Emissions from Major Polluting has reduced emissions of different Businesses in 2007-15”. substances by 17% to 90% (the project is ongoing). Meanwhile, our steel and coke plants have overhauled and modernised their facilities and installed new equipment. Khartsyzsk Pipe installed a third induction furnace in place of an outdated gas heating furnace, which allows nitrogen and carbon oxide emissions caused by gas combustion to be removed. Alongside having a significant environmental effect and contributing to greater production efficiency (less time to heat the furnace), Total Nitrogen oxides Sulphur oxides Carbon oxides Particulate matter the induction furnaces reduce gas consumption.

In addition to investment projects aiming to reduce emissions noticeably REDUCING EMISSIONS AT AVDIIVKA COKE or eliminate them completely, the Company attaches great In 2010, Avdiivka Coke completed the improving the quality of water contamination were eliminated – importance to permanently maintaining construction of coke-gas final cooling purification. cooling towers in two shops); the efficiency of gas cleaning facilities facilities (it built three of them over used in different production cycles. The 2008-10), which enabled any contact The overall results were as follows: • no more need to blow dirty water safe operation of gas cleaners and of contaminated gas with water in the from the recycling system to compliance with emissions limits cooling cycle to be avoided. As a • reduced losses of benzene biochemical facilities at 80 m 3/hour. directly depend on timely and quality result, the enterprise stopped air hydrocarbon; repairs. For example, during the emissions from its open coke coolers. The technology reduced chemical reporting period, Azovstal overhauled • no direct contact of contaminated emissions by over 2,000 tonnes of and repaired its gas cleaning facilities in The new approach also reduced the coke gas with recycled water; a year. its blast-furnace and sinter shops, while workload at the plant's biochemical Yenakiieve Steel rebuilt a gas-exhaust facilities, where the process water is • no air emissions during recycled duct in its converter shop. cleaned, increasing their reliability and water cooling (the sources of air

7See chapter on Climate Change SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

ENVIRONMENT STUDYING NEW CLEAN TECHNOLOGIES OF USING COAL IN BOILER HOUSES IS AN IMPORTANT AND PROMISING AREA FOR THE COMPANY

WATER Our enterprises source water mostly operates stably, the plant installed a In 2009 and 2010, we discharged 770 To clean mine water discharged into the from surface reservoirs and central new pump house for recycling water in and 876 million cubic metres of Bolshaya Kamenka river, Krasnodon MANAGEMENT water supply systems. Most of the 2010. All water pipes have meters to wastewater, respectively. Metinvest Coal uses a complex of purification water is used in recycling processes measure the actual volume of process understands that wastewater from its facilities, which are able to clean 69% of and to cool equipment without water supplied. facilities has a negative impact on water water at the Barakov mine and 76% at exposure to contamination. bodies, including the Sea of Azov. To the Orekhovskaya mine. Some water is used in the production reduce this footprint, our enterprises To avoid consuming water from surface process. The wastewater generated apply technical solutions and different Each year, the Krasnodon Coal sources and discharging wastewater goes through several cleaning stages types of multi-stage wastewater develops an action plan to reduce the into them, Northern GOK has a water and is then discharged into open-air cleaning (mechanical, biological, content of suspended matter. In 2010, supply recycling system in place. The water facilities. electrochemical, etc). it cleaned settlers and catch facilities of water is sourced from a special pond settlement ponds, thus improving the with clarified water channelled from the efficiency of the cleaning facility by 30% tailing dump. To ensure that this system by ensuring an equal supply of water for purification during the day. As a result, the time that the water remains in the WATER CONSUMPTION, MILLION CUBIC METRES VOLUME OF REPEATEDLY RECYCLED AND RE-USED WATER, MILLION CUBIC METRES pond has increased. Laboratories at our enterprises regularly measure the quality of mine water discharged from all water outlets into the Severskiy Donets and Bolshaya Kamenka rivers. Specialists from the municipal sanitary administration also take samples of the mine water for chemical and bacterial analysis.

Total volume Surface water Ground water Municipal facilities Other sources Total volumeRecycled Re-used

REDUCING production and increase wastewater secondary treatment of wastewater and makes sludge removal from the A laboratory certified to protect air and cleaning. In particular, the plant received from the blast-furnace plant, dump more efficient. water regularly monitors the quality of THE ENVIRONMENTAL stopped using sea water to cool its converter and rolling shops. The the wastewater discharged into the batch furnaces, optimised sea water settled sludge is taken from the dump Biochemical treatment of wastewater Sea of Azov. It does this by measuring IMPACT consumption by gas cleaners of blast and used as secondary iron ore in the coke production shop is the concentration of pollutants in ON SURFACE WATER furnaces, and switched some material at the sinter plant. The performed at a biochemical unit with samples taken in line with the production components to process integration of Ilyich Steel into the the help of microorganisms in special standards established by the Ministry water. Group in 2010 significantly increased aerated facilities. The microorganisms of Environmental Protection of Reducing the impact of production the extraction and dispatch of iron make contact with pollutants in the Ukraine. processes on the Sea of Azov is of For mechanical wastewater treatment, sludge to the asset's sinter plant. wastewater and destroy them with particular importance for Azovstal. the plant uses a sludge dump, which Annual sludge consumption totals biological catalysts. All of the cleared removes suspended substances and 375,200 tonnes, which is much more water (100%) is used to extinguish The enterprise's main actions aim to oil products via a settlement process, than Azovstal can produce. This coke and is not discharged into optimise the use of sea water in as well as cleans and conducts reduces waste disposal at the plant natural water bodies. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ENVIRONMENT

In 2009-10, Metinvest reclaimed 35.7 hectares of land in Kryvyi Rih and Krasnodon

WASTE The largest part of the waste generated choose a partner with the necessary construction sector and to support the Central GOK). feasibility study in 2012. According to by our coal, ore and steel plants is non- expertise in recycling different slag development of small and medium- the results of the feasibility study, MANAGEMENT hazardous (99.97% belongs to class 4). (dump, hot, etc). In 2011, we plan to sized enterprises in Ukraine. Our enterprises also implemented Ingulets GOK will decide whether to At the same time, its disposal requires launch a pilot project at Makiivka Steel investment projects to study how they modernise its processing shops to land, which can otherwise be used for (MMZ) to gauge the effect of the In addition, in the reporting period, our can use waste and reduce the volume ensure the integrated use of raw beneficial purposes. technology and confirm estimated data. assets continued all long-term waste generated. materials and use oxidised quartzite in Metinvest will use the latest slag treatment programmes and activities its treatment cycles, which is not We manage waste by minimising the treatment equipment from international outlined in the first social report (pre- In 2010, Ingulets GOK started an processed in Ukraine at present. environmental footprint of disposal sites producers. MMZ was chosen for the concentration of iron-bearing sand at investment project to determine with the help of new solutions, using pilot project because it has the largest Central GOK; planting trees and grass whether processing its oxidised ore waste in our production processes, and volume of dump slag in the Company. on Avdiivka Coke's waste dumps; makes sense. It plans to conduct a transferring waste to third parties for operating the AMCOM facility at range of studies involving international further use. If the results are successful, other steel Azovstal; reclaiming open pit no. 2 at specialists in 2011 and then develop a mills in the Group will take part in the Since 2010, Metinvest has applied a project. The objective of the next stage system-wide approach to treating and is to process all of the hot slag recycling slag (solid waste) generated in generated in the daily operations of our the steelmaking process. We have plants. At the same time, we will deal RECLAIMING LAND At the end of the reporting period, the and biological reclamation of 9.88 launched a strategic project called with treating the slag on our waste Company had 104.8 hectares of land hectares, laying fertile soil and planting MONTIS (mountain in Latin) to eliminate dumps. The scope of this activity AND for reclamation 8. Reclaiming disturbed 40,000 trees. In addition, reclamation of slag stored in waste dumps and depends on many factors, primarily land is an important aspect of our open pit no. 2 with overburden rock optimise the process of treating and whether our partner can develop a GREEN PLANTING environmental programmes. To reduce from the Gleyevatskiy open pit allowed recycling hot slag. sufficient market to sell the treated the amount of it, Metinvest applies the Central GOK to store 1.24 million cubic products. As such, we also see following methods: metres of overburden rock in 2010 This long-term project comprises MONTIS as an opportunity to create a alone. The pit stores all of the waste several steps. At the first stage, we will recycled resources market for the • backfilling mined open pits; produced by Gleyevatskiy, saving 140 hectares of land. • reshaping the waste rock dump with further reclamation; Krasnodon Coal has reclaimed land after drilling degasification holes in the • covering the area with plants and mines of the Samsonovskaya- grass. Zapadnaya mine. Before drilling, it VOLUME OF WASTE, MILLION TONNES In 2009, the volume of waste produced rose due to a large amount of stripping operations by the mining enterprises. removed and stored the upper fertile Ore mining plants continued their long- layer. Once the hole is no longer in use, In accordance with changes in the way that the state calculates statistics about waste, as of 2010, the “amount utilised” category is not calculated separately, but included as secondary material term programmes to reclaim open pits the land is reclaimed and in the volume processed. in Kryvyi Rih, rehabilitate the land acknowledged as suitable for further disturbed by open mining and reduce use as intended. the area allocated for disposal dumps. Trees and shrubs will be planted on the land reclaimed from open pits. Waste rock dumps reclaimed by Krasnodon Coal In 2010, Northern GOK reclaimed the openings at the Pervomaiskaya mine, thus reducing the amount of overburden rock by 6.05 million tonnes. Ingulets GOK conducted a technical

Total volume Volume disposed Volume transferred Volume utilised Volume processed to third parties 8Land subject to reclamation is land on which economic activity has ceased and which should be reclaimed under dedicated projects (by law, it must be transferred to the land reserve). SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

Key scheduled ENERGY EFFICIENCY projects to modernise our production facilities are expected to AND ENERGY SAVING reduce energy use by an average of 4-6 GJ per tonne of steel

One important innovation was setting up energy committees comprising representatives of WE CONSIDER ENERGY the Managing Company and SAVING AND ENERGY enterprises. They hold meetings to EFFICIENCY PRIMARILY AS AN consider investing in energy-saving INDISPENSABLE MEANS TO measures and analyse their ACHIEVING OUR STRATEGIC consistency OBJECTIVE OF IMPROVING THE OPERATING EFFICIENCY OF PRODUCTION CYCLES

Lower fuel consumption also has a major environmental benefit.

In the foreseeable future, the global trend in steel and mining industries towards lower energy consumption will affect the competitiveness of businesses. Amid energy price hikes and greater demand, metals and mining companies will have to look for solutions.

SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ENERGY EFFICIENCY The new Technology AND ENERGY SAVING Strategy will determine concrete technical and technological solutions to reduce the energy intensity of production facilities

ENERGY All of our assets develop and implement Following the pilot project, the division the use of excess coke gas. We are energy saving projects each year. Our approved a methodology for identifying analysing several options for using it as EFFICIENCY key focus is the overall modernisation the energy density of products across an energy resource at the coke facilities of our mining and steel businesses. The its business units. According to the (to produce electricity or use instead of PRIORITIES new Technology Strategy will determine document, the division: natural gas in direct-reduced iron concrete technical and technological production) as well as an energy source solutions to reduce the energy intensity • analysed its energy consumption by One important innovation was setting at the steel businesses. of production facilities. purchased fuel resources over the up energy committees comprising past decade; representatives of the Managing Another energy source is hot coke, Energy intensity in steelmaking Company and enterprises. They hold which emits steam if cooled in coke Investments in energy depends on the technology applied • determined the factors that meetings to consider investing in dry-quenching plants. The steam can saving in 2010 and the ratio of the materials used. significantly influence changes in energy-saving measures and analyse be used to produce electricity and thus In general, our facilities use over 70% energy intensity and began to develop their consistency. recycle around 80% of the heat, which of all energy (including process fuel) to a strategy to meet the highest is otherwise lost. 62.1m make pig iron, the major energy European standards; In contrast to steelmaking, the US$ resources being coke and natural gas. enterprises of the Coke and Coal Electricity is saved through greater • set key performance indicators for division have two different processes: efficiency of the combined heat and In the reporting period, the Steel and enterprises for 2011. producing coke and chemicals and power (CHP) plant. Steam condensers Rolled Products division focused on mining coal. As such, their energy are installed on turbine generators, improving energy efficiency Divisional managers monitor changes in efficiency is improved in different ways. increasing the capacity of the turbine management. Its single methodology energy consumption for each end The division sets common goals that and allowing more steam to be for assessing energy consumption at product and control their influence on the enterprises align to their specific exploited. its enterprises is based on the the aggregate indicator across the environment. EU approaches detailed in the business units. document “Best Technologies for One of the objectives in coke Energy Efficiency”. Yenakiieve Steel was The division also approved a common production is increasing the efficiency of the first to test the methodology. In form for describing the energy saving coke gas use. This secondary energy particular, it determined the production programmes of its assets. From 2011, resource is produced during high- stages where the main and indirect long-term strategic energy saving temperature coking of coal. At the date losses occur and where positive results measures will be included into division of publication, the Coke and Coal are achieved. investment programmes. division had begun to develop a programme to maximise profits from

DIRECT ENERGYCONSUMPTION , THOUSAND TONNES OF FUEL OIL EQUIVALENT

Natural gas Mazut Coal Coke Diesel Gasoline SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

Energy efficiency is ENERGY EFFICIENCY ensured through new technologies, energy AND ENERGY SAVING management and ongoing operational improvement

Many electrical devices are used in coal Together with electricity (45-55 Energy saved as a result INVESTMENT PROJECTS INVESTMENT PROJECTS This allowed some of the water to be mining (fans, water pumps, transport, kWh/tonne), the pellet firing process of energy efficiency programmes AT AVDIIVKA COKE: AT KRASNODON COAL: delivered without using the pump house etc). Krasnodon Coal's primary consumes a lot of natural gas of the recycling water supply system, in 2009–2010: objective is to minimise energy (11.5-19.5 cubic metres per tonne). meaning that two pumps, with electric expenses (in terms of cost and in Greater requirements for product rebuilding the quenching unit an automated electricity metering drives of 1600 kW and 1000 kW, could in coke dry-quenching facility no. 3 system has been introduced that absolute figures), which it does by quality (content of iron in the will deliver 22.5 tonnes of can measure electricity usage be placed on standby. As a result, the 61,323 enhancing the performance of fixed concentrate) and more complex power-generating steam an hour, differentiated by day hours. plant saved 22.3m kWh of electricity. equipment at mines and optimising the mining conditions affect energy or 3,750 kWh of electricity It saves US$ 1.3 million a year operations of coal preparation plants. consumption indicators at ore To cut consumption of natural gas, MW/HOUR For example, the Duvanskaya coal mining and processing plants. Northern GOK is upgrading its roaster. electricity preparation plant saved 1,361,000 kWh Its specific gas consumption has fallen annually by installing energy-efficient At the same time, unlike the steel installing an oil heating system by almost 2 cubic metres per tonne of businesses, ore mining technologies on the electrode pitch granulation electrical equipment. One particular machine will yield an additional products, or around 4 million cubic focus for the enterprise is recycling cannot be dramatically modernised. As 1,000 kWh metres per year. At the second stage of 311,958 methane as part of Kyoto Protocol a result, energy efficiency is ensured implementation (in 2011), the enterprise projects (for more information, see the through energy management and is going to reduce its specific GJ section on climate change). ongoing operational improvements in consumption by another 2 cubic metres the production processes. per tonne. thermal energy Pellet production is the most energy- intensive process at ore mining plants For example, Central GOK and (the specific energy density of the Northern GOK launched an experiment 31, 80 , 426 product requires 95-140 kWh per tonne to replace steel coating with rubber of concentrate). coating on ball mills at the second and third crushing stages. The project does GJ not involve any additional financial cost fuel and reduces electricity consumption at mills by 5-7%.

Ingulets GOK built two gravity water conduits to supply process water to its ore preparation plant, taking advantage of the natural elevation difference.

Construction of two gravity water conduits to supply process water to the ore preparation plant in Ingulets GOK SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

We expect to reduce CLIMATE greenhouse gas emissions by over 8 million tonnes

of CO 2 equivalent, equal CHANGE to 7 million MW/hour or 2.5 million tonnes of coke

METINVEST RECOGNISES THE IMPORTANCE OF CLIMATE CHANGE

and intends to contribute significantly to resolving it.

We view joint implementation projects (JIPs) as an efficient way of minimising our environmental footprint.

Projects aimed at reducing greenhouse gases open new opportunities to both Metinvest and society. By implementing JIPs, we can minimise our environmental footprint, raise additional investment to modernise production, introduce energy-saving technologies at steelmaking facilities, improve H&S, and use alternative fuel (coalmine methane) at coal mining enterprises.

We regard Metinvest's work on Joint Implementation Projects (JIPs) as our contribution to meeting the Kyoto commitments of Ukraine: in 2008-09, the country topped the Point Carbon JI country rating

SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 CLIMATE CHANGE

The sale of joint implementation projects is expected to generate around€ 100 million

In the reporting period, two divisions – the framework of JIPs by our The Group plans to continue JOINT GREENHOUSE GAS REDUCTION THROUGH JIPs METINVEST STEELMAKERS Coke and Coal, and Steel and Rolled steelmakers (Azovstal and Yenakiieve implementing JIPs through 2012 (the IN CO EQUIVALENT, MILLION TONNES IMPLEMENTATION Products – implemented different Steel) include: Kyoto protocol period). In the long term, 2 stages of 10 JIPs. As regards coal we also plan to keep implementing the PROJECTS projects, the Kyoto element is of • modernising and reconstructing blast projects under international rules, which 2004-07 2008-12 2008 to the first (early emission (Kyoto period, six months of 2010 paramount importance: most of the furnace shops (the key area, which will be applied after 2012. cuts, verified) expected reduction 9 ) (verified) Since 2003, the projects would not have been reduces the specific consumption of conducted but for Kyoto investments coke per tonne of pig iron produced) We believe that the carbon market will Azovstal 4.7 4.5 2.6 Group has invested over (for example, burning methane at the continue to develop, despite the expiry flare), as they would not have been • upgrading oxygen shops of the Kyoto Protocol in 2012. For Yenakiieve Steel 0.3 2.2 0.9 profitable without the funds obtained example, local and regional emission €620m from selling emission reduction units. • modernising energy-generating trading markets are in place and still Source: JIP design documents and verification reports prepared by independent international auditors facilities, etc new markets emerge. 9Emission reduction unit is equal to one tonne of CO in JIPs The main projects at Krasnodon Coal 2 focus on dust catching and utilising Azovstal has been implementing these We see real opportunities for Ukrainian coalmine methane to generate activities since 2004 and Yenakiieve emission reduction projects electricity and heat. Steel since 2007. In 2009-10, all formal participating in European emissions INTERNATIONALLY VERIFIED GREENHOUSE GAS REDUCTION (WITHIN THE SCOPE OF THE JIP PROJECTS) IN CO EQUIVALENT, MILLION TONNES The Sukhodolskoye-Vostochnoye mine procedures were finalised. Following trading after 2012 via bilateral 2 launched a JIP back in 2006 (as approval from the National agreements between Ukraine and detailed in our first social report), and it Environmental Investment Agency of the EU. We are also confident that the 2004-07 2008 2009 2010 (early emission (six months) is expected to reduce greenhouse Ukraine, the projects were registered in use of flexible market mechanisms to cuts) GREENHOUSE GAS EMISSIONS IN CO 2 gases by around 300,000 tonnes early 2011. implement Kyoto principles is one of the EQUIVALENT, MILLION TONNES of CO 2 equivalent overall by the end of most effective tools to combat climate 2012. At the first stage of the project, We regard Metinvest's work on JIPs as change. Emission reduction - 1.4 1.0 1.2 the enterprise received€ 598,000 our contribution to meeting the Kyoto 17 0 following verification of the reduction in commitments of Ukraine: in 2008-09, . the country topped the Point Carbon Overall volume 15.6 emissions, which took place in 2006- in the period, verified 5.0 3.6 13 0 08. The buyer of the carbon credits was JI country rating. . ING Bank (Holland). The proceeds will be used to develop degasification systems and improve occupational safety.

Under an EU programme, the Samsonovskaya-Zapadnaya mine developed a project to utilise coalmine JOINT will require less coke, natural gas, organisation, verified the reduction in methane through flare units to generate electricity and other resources and emissions as 1.2 million tonnes of CO2 heat and electricity. IMPLEMENTATION materials, while the volume of equivalent obtained over 2007-10 (six greenhouse gases will decrease. months of 2010). The potential The rise in greenhouse gas emissions in 2009 was Our steelmaking facilities account for PROJECT AT revenues from selling these emission due to the inclusion of new sources that had not reduction units are over€ 10 million. been identified during the calculation in 2008. 80% of the reduction in greenhouse YENAKIIEVE STEEL gases across the Group, so All national and international approval implementing JIPs at them is of procedures needed for the project Over 2007-12, emission cuts from strategic importance. Revenues As part of a JIP, Yenakiieve Steel plans were completed in 2011. The National implementing the Kyoto project at obtained as a result of JIPs help to to modernise blast furnaces, Environmental Investment Agency of Yenakiieve Steel are expected to total implement pulverised coal injection Ukraine issued a letter of approval to mitigate risks and overcome the barriers 2.5 million tonnes of CO2 equivalent, to implementing new technologies. technology, rebuild a central heat and Yenakiieve Steel on January 26, and worth over€ 25 million. The enterprise Key activities being implemented within power plant and steam blower, install the project was registered on February plans to use the funds to finance a Linde oxygen block, and build a new 24. Bureau Veritas, an independent, energy efficiency and energy-saving compressor. As a result, production UN-accredited international programmes. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010

We believe that the most promising approach to social SOCIAL investment is corporate social programmes and partnership projects, which use grant-based financing INVESTMENT mechanisms

Metinvest has always helped local communities by financing their needs. Despite the METINVEST'S OPERATIONS GO HAND challenging IN HAND WITH AND economic situation, DEFINE THE FUTURE OF we have continued THE VARIOUS TOWNS to provide this AND CITIES WHERE THE support GROUP'S ENTERPRISES ARE MAJOR EMPLOYERS This is of paramount importance for the Company, as responsibility to local communities also means responsibility to our employees.

METINVEST'S SOCIAL GOAL IS TO ACHIEVE THE FOLLOWING PUBLICLY IMPORTANT OBJECTIVES:

create jobs and raise living standards in the regions where we operate

implement modern management standards in activities related to social projects and programmes

develop the competitiveness of the areas where we are present

raise the quality of human capital

SEE NEXT PAGE FOR DETAILS SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 SOCIAL INVESTMENT We intend to help municipal authorities and public organisations to expand their opportunities and improve skills to manage or participate in the social development of their cities

In 2010, our Ukrainian enterprises The Company does not regard social To implement the Social investment As such, we are striving to ensure the THE PRIMARY AREAS OF METINVEST'S STRATEGY SOCIAL INVESTMENTS INCLUDE: employed over 67,000 people. Together investment as charity: for us, it means strategy, a task group comprising most efficient distribution of resources with their families, they account for economically viable participation in the IMPLEMENTATION representatives of Metinvest's key by tackling the most pressing issues. around one third of a million Ukrainian life of local communities. This influences businesses was established. Its primary We also intend to help municipal social infrastructure citizens. In Yenakiieve, for example, one various public and private areas, as well MECHANISMS objective is to implement modern authorities and public organisations to development in six families is somehow connected as creates social and economic benefits approaches to social investment and expand their opportunities and improve healthcare with Yenakiieve Steel. In this light, we for a wide range of stakeholders. develop new corporate social skills to manage or participate in the are interested in increasing the social programmes. social development of their cities. welfare of the people who live and work We believe that our investments should education with us. be in line with the Company's business The group developed a single format for We believe that the most promising goals and the long-term strategy and social investment budgets and drafts of approach to social investment is culture and sports Metinvest's social goal is to achieve the have a comprehensive effect social investment regulations and policy corporate social programmes, which following publicly important objectives: (economic, social, and environmental). (both documents are subject to use grant-based financing mechanisms, To ensure this, we have a systemic approval in 2011). As a result, as well as partnership projects, • create jobs and raise living standards approach in place to deliver sustainable enterprises will keep implementing involving multiple resources. in the regions where we operate; achievements, which can be applied to programmes for social assistance to The company has been implementing other areas and target groups. third parties using a more transparent these since 2011. This year, there will • implement modern management and systemic approach. be a particular emphasis on developing standards in activities related to social For us, it is important that social corporate volunteering. projects and programmes; investments are focused on Today, Metinvest uses several forms of implementing modern social social investment and is gradually • develop the competitiveness of the technologies and solving real problems switching to new advanced areas where we are present; in which all stakeholders have an programmes, which envisage long-term interest and wish to participate in the development and more active • raise the quality of human capital. projects planned. engagement of people in the process.

Metinvest has always helped local weaknesses. Based on the results for METINVEST’S SOCIAL INVESTMENT STRUCTURE SOCIAL communities by financing their needs 2010, the “Strategy for Increasing The INVESTMENT (for example, we buy medical Efficiency of Social Investments to 2015” equipment for municipal hospitals or was developed. SOCIAL INVESTMENT PROGRAMMES STRATEGY improve city areas at the request of local councils). Despite the challenging Our immediate objective is to introduce SOCIAL INVESTMENTS, US$m economic situation, we have continued a single approach to social investment to provide this support: in 2009-10, our at all enterprises and to switch from Social assistance to third parties Corporate Corporate volunteering social investments totalled over one-off initiatives and short-term social programmes 11. 1 US$ 9.1 million. projects to a systemic method using transparent and understandable In the reporting period, our priority was mechanisms. One-off financing (for Municipal Charitable to elaborate a plan for gradual changes example, purchasing goods and support: support: in the social investment management services for third parties) is considered Ÿ social agreements Ÿ non government 51. system to boost its quality. In 2009, we a transitional form of support for local organisations and funds analysed the approaches and social communities. Ÿ partnership 40 Ÿ . models used by our assets and programmes targeted assistance assessed their strengths and

The fall in social investments in 2009-10 compared with 2008 was due to the completion of major investment projects in Kryvyi Rih. As of 2009, the term “social investment” includes all types of assistance given to third parties. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 SOCIAL Consolidated efforts of partners who share the same goals and are INVESTMENT ready to make commitments can create new incentives for the city's development

In the reporting period, the Company's and the infrastructure project “Our Town The first stage of reconstruction illuminated musical fountain and CORPORATE board approved a portfolio of corporate in Our Hands” will be launched in included the Oktyabrskiy residential reconstructed sport sites, recreation SOCIAL social programmes to be implemented Avdiivka, Kryvyi Rih and Yenakiieve. Metinvest’s Social investments area, where the Company built the zones and public gardens near simultaneously in all regions where we Once the programmes are completed, city's first kart-racing track and residential houses. One major PROGRAMMES are present. These are brand-new we will assess and discuss the results in 2009-10, over reconstructed the beach area, installing endeavour is the reconstruction of programmes and programmes with representatives of the public. The volleyball pitches. In 2009, Metinvest Musorgskogo Street, where Metinvest developed on the basis of best practices practice will be followed by other carried out reconstruction work in the created a park and opened the of Metinvest enterprises that had already Metinvest enterprises. A new youth US$9.1m Damanskiy residential area. For more Employee Alley of Fame. Wasteland shown a significant social effect. programme, "The World of detailed information, see our 2008 was used to build volleyball and Opportunities", launched in all regions social report. The third stage of the basketball pitches and the city's first In 2011-12, new pilot corporate where we operate at the time of programme is under way in city area rollerdrome for skateboarding and bike programmes, such as the publication, will be assessed in a similar 44. In the reporting period, the trials. environmental programme "Our way. Company built a park with an Environment is Everyone's Business" CORPORATE Metinvest employees participate in money to buy New Year gifts for young Businesses that are the main employer Coke, Krasnodon Town Council and volunteer projects that provide support patients of the regional tuberculoses SOCIAL in particular location have traditionally Krasnodon Coal, and Mariupol City VOLUNTEERING to people in need and carry out social hospital, as well as for children under played a significant social and Council and Azovstal). activities: in 2010, the contribution to the patronage of the Chernobyl Union AGREEMENTS WITH different programmes amounted to over organisation. economic role in the area, and they Metinvest employees' contributions TOWNS AND CITIES continue to do so, including by defining Each year, the enterprises and mayors UAH900,000. the principles and structure of city meet to discuss the results of the in 2010, over In 2010, employees of the Managing support programmes. In 2008, a new previous year and cooperation Youth organisations of enterprises also Company participated in a campaign method for interaction was introduced: prospects for the next one. Priority is develop and implement volunteer organised by the Foundation for the Metinvest enterprises started signing given to large infrastructure and US$113, 037 projects. The Council of Young Workers Development of Ukraine. The campaign 11 (Khartsyzsk Pipe) organises events to was timed to coincide with Children's cooperation agreements with mayors , strategic projects that will have a collect funds for gifts for children under Day and aimed to raise funds for a making stakeholder engagement more significant and tangible social effect. 16 in the local orphanage. Another children's heart centre. systemic and consistent. The campaign ("A Nest for Every Bird") was agreements are extended annually In 2008, based on opinions sought from enjoyed by both adults and children: In 2011, Metinvest launches a based on the results of the previous citizens, a comprehensive programme journalists, young specialists from the comprehensive Corporate Volunteering year. Four agreements were signed at was launched in Kryvyi Rih to create plant, and children from the local programme to provide employees with the end of 2010 (between Khartsyzsk decent residental areas for Metinvest orphanage installed nesting boxes. additional opportunity to develop and Town Council and Khartsyzsk Pipe, employees. implementtheir own social projects. Avdiivka Town Council and Avdiivka Northern GOK employees donated

BEST PRACTICE Since 2007, in partnership with Football contributes to the there are plans to improve a Shakhtar Football Club, Metinvest has development of leadership skills and methodology for training young DEVELOPMENT: been financing subsidiaries of the determination to win as a team: coaches in-house. We also intend to children's and youth football the children's and youth teams have hold an annual Metinvest Football Cup CHILDREN'S AND academies in Kryvyi Rih, Yenakiieve won different competitions on many in cooperation with FC Shakhtar. This YOUTH FOOTBALL and Mariupol, hiring professional occasions. will involve all football clubs of coaches, maintaining existing football enterprises and allow coaches and pitches and building new modern In 2010, this practice underpinned a children to demonstrate their ones, providing team kits and meals to corporate social programme that is achievements. children, etc. As such, over 600 young more consistent than previous people aged from 7 to 15 from the endeavours by enterprises: our neighbouring villages and towns have businesses will support the opening of the opportunity to participate in football classes in other towns as well. outdoor activities. To strengthen the coaching collective,

11For a more detailed description, see our first social report SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 SOCIAL INVESTMENT We are open to innovative ideas and joint projects proposed by experienced and well established organisations

Through its focus on partnership institutions, small and medium-sized Metinvest promotes interaction with Europe". It was arranged by several PARTNERSHIP programmes, Metinvest has become a businesses, banks, utility companies, PARTNERSHIP non-profit and non-governmental organisations, including the Academy of PROGRAMMES participant of a USAID programme to local government authorities and public WITH CHARITIES organisations. We are open to Business in Society (EABIS), the CSR help city councils in strategic planning organisations, as well as leaders of local innovative ideas and joint projects Ukraine Community and other. and raising their investment communities and representatives of AND PUBLIC proposed by experienced and well attractiveness. Krasnodon Coal. established organisations. The Following the project, the organisers ORGANISATIONS Company is a partner with local and published a collection of case studies In 2010, an agreement was signed by An approach based on stakeholder international organisations. highlighting the best CSR practices for the mayor of Krasnodon city, engagement will allow particular use in manager training programmes Krasnodon Coal and the Head of the features of the region, plans of For example, in cooperation with and corporate HR development USAID project “Local Investment and municipal authorities, and the position AIESEC, Azovstal launched the first programmes for mid-level and senior National Competitiveness”. Under the of local citizens and businesses to be joint environmental project "I Care!"” in staff. The case studies have also been agreement, the parties will cooperate to considered. Consolidating the efforts of Mariupol in 2010. The project aims to included in academic programmes on update the regional strategy for the partners who share the same goals and foster environmental responsibility CSR by leading Ukrainian universities. city's development to 2015. To achieve are ready to make commitments can among young people. Students invited this, they plan to develop and create new incentives for the city's by AIESEC from the US, the Philippines, One of the best examples of interaction implement a strategic plan for economic development. We believe that such India and Georgia attended thematic between businesses and universities development and improvement of the systemic social investments are in line training workshops in educational was the "School-University-Enterprise" city's competitiveness. This will help to with the needs and values of a institutions, excursions, conferences, programme implemented by Azovstal. create a favourable environment in contemporary society. environmental project contests and For more information, please see our Krasnodon, raise investment and other events. To develop the project, 2008 social report. develop small and medium-sized In 2010, the first project committee AIESEC representatives worked businesses. meeting discussed the need to update together with environmentalists of the and develop the Krasnodon strategic enterprise. The strategic plan is being developed development plan and outlined areas with the involvement of all stakeholders. for further cooperation. In 2010, Metinvest was a partner in the The project is run by the Coordination project "Development of Training Case Council, headed by the city mayor. This Studies on CSR in Central and Eastern body includes over 40 representatives of municipal and educational

In 2009-10, Metinvest continued to Children's Playground Together”, invest in public health, education, city which aims to improve recreational infrastructure and sports projects that areas for children. It also bought a are important for the regions where it multi-media centre, by means of which is present. school teachers can use modern educational methods. Inkor Chemicals financed the repair of a river bridge, which is now used to Azovstal, Khartsyzsk Pipe and transport cargo between Donetsk and Krasnodon Coal continued to invest in Dzerzhinsk. long-term programmes aimed at developing their cities' roads, including Yenakiieve Steel joined an initiative by repairs of tram tracks. the municipal authorities and the public organisation “Let's Build a SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 KEY RESULTS OF CSR WORK AND PLANS FOR THE FUTURE

Core business areas Achievements in the reporting period Objectives for the future Timeline

Build a common corporate culture 2011-15

Completed the main stages of developing a common grade-based remuneration system Introduce a common staff appraisal system 2011-13 Human resources Launch a single talent-pool building and development programme, which will cover both the Managing Company and all key enterprises of the Group 2011 - 13 Launched a development programme for managers and the talent pool Create a management training centre 2011 - 12

Developed various corporate standards based on international approaches. Two of these standards - Behavioural Safety Audit and Procedures for Identifying Root Causes of Accidents - were implemented Implement the standards 2011 at all Group enterprises within the reporting period Health and safety Created an internal audit subdivision to deal with HSE issues Conduct targeted HSE audits Since 2011

Approved the Strategy for Developing the Healthcare System at Group Enterprises Implement the Strategy for Developing the Healthcare System at the Group Enterprises 2011 - 15

Carried out an in-depth analysis and assessment of the environmental aspects of production Develop and implement environmental protection measures based on the analysis results Since 2011 processes at enterprises

Developed a standard for HSE Management in Investment Projects Implement the standard for HSE Management in Investment Projects Since 2011

Environment Developed a single approach to waste disposal by steelmaking facilities Launch MONTIS, a pilot project that focuses on processing steel slugs 2011

Implement existing and initiate new Joint Implementation Projects Since 2011 Rolled out Joint Implementation Projects Engage in greenhouse gas reduction mechanisms that are to be determined for the post-Kyoto period Since 2011

Introduce a common approach to social investment 2011 - 13 Developed and approved a Strategy for Increasing the Efficiency of Social Investments to 2015 Improving the quality Implement new corporate social programmes 2011 - 12 Launched the project for the Krasnodon strategic development plan with USAID and the Krasnodon Expand the portfolio of partnership programmes based on joint resources 2011 - 12 and efficiency of City Council social investments Since 2011 Developed the Regulations and Policy of Social Investment Introduce the Regulations and Policy of Social Investment

2011 Introduce regulations on social reporting Introduced a single format for collecting information for social reporting purposes Non-financial Established a social report task group 2011 reporting Extended the scope of the report Extend the scope of the report Ensured independent assurance of the report

2013, 2018 Prepare registration dossiers for products that are subject to registration in 2013 or 2018 Registered products of enterprises with the European Chemicals Agency in accordance with REACH Engagement with requirements 2013, 2018 consumers, product Prepare registration dossiers for new products to be delivered to EU quality Established market groups 2011 Launch the customer care and after-sales service Introduced regulations and procedures for technical audits SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ABOUT THE REPORT AND REPORTING PROCESS

GRI REPORT LEVEL APPLICATION

Managing Company (METINVEST HOLDING, LLC) СС+ВВ+АА+ Coke and Coal Division Iron Ore division Steel and Rolled Products division

Avdiivka Coke and Chemicals Plant Northern Iron Ore Enrichment Works Azovstal Iron and Steel Works Self-declared

Krasnodon Coal Ingulets Iron Ore Enrichment Works Yenakiieve Iron and Steel Works

Externally assured Inkor Chemicals Central Iron Ore Enrichment Works Khartsyzsk Pipe

Makiivka Steel Works GRI assured Table 1

DETERMINING SIGNIFICANT ISSUES The following approaches are used to determine significant issues: Ÿ the foundation consists of the priorities for CSR activity enshrined in the Group's This report ("" Report ) is Metinvest's second such CSR publication about the policies and regulations; Group's work in sustainable development. Ÿ results of interactions with stakeholders, found in the corresponding section of The first report covered 2008, while this one looks at the period from 1 January the Report, are used; 2009 to 31 December 2010. As of 2009, the Company will follow a two-year Ÿ reporting cycle. opinions of managers in functional areas and global best practice in the sector are considered; The Report has been prepared using the Sustainability Reporting Guidelines of the Ÿ results of monitoring reports in leading Ukrainian socio-political publications have Global Reporting Initiative (GRI; version 3.0) and meets the GRI's B+ Application been taken into account. Level. Publication of the next report, covering 2011-12, is planned for 2013. MEETING GRI REPORTING PRINCIPLES The Report incorporates information on Managing Company (some indicators) - Completeness of information provided. This publication reflects the most significant METINVEST HOLDING, LLC – and on major Metinvest enterprises (Table 1) results of the Company's CSR activities in the reporting period. It covers all of the Group's main business areas. CALCULATING QUANTITATIVE INDICATORS The quantitative indicators used in this Report have been prepared in accordance Balance. This Report details the main events in the reporting period without excluding with the information provided annually to state statistics bodies. any significant developments or facts.

STREAMLINING THE PROCESS OF NON-FINANCIAL REPORTING Reliability. The reliability of the information given in this Report has been confirmed by an Based on the results of the first CSR report, the Group's system of non-financial independent appraisal by a third party. reporting has been streamlined: the Company has devised and approved a procedure for preparing social reports that details how to organise the collection Clarity. Information is provided in an accessible and understandable way for readers, and review of information, while various responsibilities have been allocated. while prevailing definitions and terminology has been used. SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ABOUT THE REPORT AND REPORTING PROCESS

TABLE OF GRI GRI indicators Compliance with the principles of the Global Compact Section of the Report, other sources and comments Page number INDICATORS 1.1 Principle 10 Letter from the CEO

1.2 “Metinvest Today” subsection. The indicator has been partly reflected, while an evaluation of risks and opportunities has For more about the indicators and been included in the introduction for each of the thematic sections. elements of GRI reporting, visit the GRI website: http://www.globalreporting.org/ 2.1-2.10 “Metinvest Today”, “How We Work” subsections. Corporate website www.metinvestholding.com ReportingFramework/G31Guidelines/ 3.1-3.3, “About the Report and Reporting Process” section, “How We Work” subsection. 3.5-3.8, For more about the principles of the UN Information is also given in notes to separate diagrams. Global Compact, visit the Global 3.10-3.11, 3.13 Compact website: http://www.unglobalcompact.org/AboutT 3.4 Feedback Survey heGC/TheTenPriciples/index.html 3.9 Information is given in the explanations to corresponding indicators.

3.12 Table of GRI indicators 4.1-4.4 “Metinvest Today”, “How We Work”, “Company Development Strategy and CSR Activity” subsections. Principle 10; Measures taken to fulfil Global Compact principles 4.6, 4.8 Metinvest Annual Report 2009 – www.metinvestholding.com Remuneration of the senior management is linked to the Company's financial and economic results. This indicator is 4.5 met in part. 4.7 Metinvest Annual Report 2009 – www.metinvestholding.com

“How We Work” subsection. 4.9 and 4.10 The process for determining results is also included in the procedures defined by management systems (for example, the HSE integrated management system; see the section on Health and Safety). Metinvest Annual Report 2009 – www.metinvestholding.com

The principle of caution is ensured by the corporate standard “HSE Management in Investment 4.11 Projects” (see the section on Health and Safety). Metinvest Annual Report 2009 – www.metinvestholding.com

4.12 “How We Work” subsection, “Product Quality” section

4.13-4.17 “How We Work” subsection, “Stakeholder Engagement” section

EC1 “Metinvest Today” subsection. This indicator is met in part.

EC2 “Climate Change” section

EC5 “Employment Relations” section. The indicator has been renamed.

EC8 “Social Investment” section

EN3, EN5 Principle 9 “Energy Efficiency and Energy Saving” section

EN8, EN10 Principle 7, Principle 8 “Water Management” subsection

EN13 Principle 7, Principle 8 “Reclaiming land and green planting” subsection

EN16, EN18 Principle 7, Principle 8 “Climate Change” section. The indicator EN16 is met in part.

EN20 Principle 7, Principle 8 “Air Emissions” subsection

NEXT PAGE CONTINUED SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ABOUT THE REPORT AND REPORTING PROCESS

TABLE OF GRI GRI indicators Compliance with the principles of the Global Compact Section of the Report, other sources and comments Page number INDICATORS EN21 Principle 7, Principle 8 “Environment” section. This indicator is met in part. CONTINUED EN22 Principle 7, Principle 8 “Waste Management” subsection EN26 Principle 7, Principle 8 “Environmental Control” subsection

EN30 Principle 8 “Environment” section. This indicator is met in part.

LA1 “Employment Relations” section

LA3 Principle 1 “Employment Relations” section

LA4 Principle 3 All of the Group's employees are covered in collective agreements in accordance with existing legislation.

LA5 Principle 3 In line with the Ukrainian Labour Code, the minimum notice period for employees is two months.

LA7 Principle 1 “Metinvest's Philosophy”, “Employee Healthcare” subsections

“Employee Healthcare” subsection. Collective agreements of all Group enterprises feature a section dedicated to occupational health and safety (H&S). They include the administration's obligations regarding H&S policy; measures to LA8, LA9 ensure safe working conditions; the provision of social guarantees; a range of measures to meet occupational H&S requirements; and the reduction of risks and dangers in the area of H&S.

LA10 “HR Training and Development” subsection. The indicator has been reformulated.

LA11 “HR Training and Development”, “Remuneration and Motivation Programmes” subsections

LA12 “Employee Performance Appraisal” subsection “Social Support for Employees” subsection The supreme executive body of the Group is the Supervisory Board. For LA13 more information about its members, see our website: www.metinvestholding.com In the reporting period, Metinvest did not receive any complaints regarding the violation of human rights or discrimination. HR4, HR6, HR7 Principles 1, 2, 4, 5, 6 The Company does not use child or forced labour. SO1 “Social Investment” section In the reporting period, Metinvest did not receive any complaints and was not the subject of any lawsuits regarding the violation PR2, PR4 of requirements about the effect of products on consumer H&S or about the information and classification of product characteristics. PR3, PR5 “Customer Service” subsection

Note: The Company considers the following GRI indicators as irrelevant to its business:

·EC7 (almost all employees are local residents, including managers); ·HR1 (The Company does not have investment agreements); ·HR9 (The Company does not operate in regions that are home to indigenous people or minorities). SOCIAL REPORT 2009-2010 METINVEST METINVEST SOCIAL REPORT 2009-2010 ABOUT THE REPORT AND REPORTING PROCESS

INDEPENDENT ASSURANCE REPORT ON THE 'SOCIAL REPORT OF METINVEST GROUP FOR 2009-2010' OUR PRINCIPAL PROCEDURES WERE: Ÿ Interviews with representatives of Metinvest's management responsible for its sustainability policies, activities, events, TO THE MANAGEMENT OF “METINVEST HOLDING” LLC performance and relevant reporting; Ÿ ENGAGEMENT Analysis of key documents related to Metinvest's sustainability policies, activities, events, performance and relevant At the request of “METINVEST HOLDING” LLC (hereinafter 'Metinvest') we have performed an assurance engagement. reporting; The subject matter of our engagement is the information disclosed in the 'Social Report of Metinvest Group for 2009-2010' Ÿ Benchmarking of the Report against sustainability reports of selected national and international peer companies; (hereinafter 'the Report') except for the following matters: Ÿ Review of a selection of publications with respect to Metinvest's sustainability policies, activities, events, and performance Ÿ Data relating to the prior years; in 2009 and 2010; Ÿ Forward-looking statements on events or planned activities of Metinvest; Ÿ Identification of material issues based on the procedures described above and analysis of their reflection in the Report; Ÿ Independent statements made by third parties which Metinvest included in the text of the Report, and Ÿ Review of data samples for key indicators related to human resources, environment, health and safety, and social investment as well as data collection processes to assess whether these data have been collected, collated and reported Ÿ Correspondence between the Report and the UN Global Compact principles. appropriately at the central office level; Our engagement is aimed to obtain a limited level of assurance that the information in the Report is, in all material aspects, a Ÿ Collection on a sample basis of evidence substantiating the qualitative and quantitative information included in the Report; reliable and sufficient representation of sustainability policies, activities, events and performance of Metinvest during 2009 and 2010. Ÿ Visits to 5 Metinvest entities to gather evidence supporting the assertions made in the Report on Metinvest's sustainability policies, activities, events, and performance. The following entities were visited: "METINVEST HOLDING" LLC (Managing As defined in the International Framework for Assurance Engagements issued by International Federation of Accountants Company), JSC "Ingulets GOK", JSC "Khartsyzsk Pipe Plant", JSC "Krasnodon Coal", JSC “Azovstal Iron and Steel (hereinafter 'IFAC'), evidence-gathering procedures in order to obtain limited assurance are substantially less in scope than Works”; procedures to obtain reasonable assurance and consequently do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Ÿ Assessment of the sustainability reporting principles used by Metinvest; Ÿ Assessment of the Application Level of GRI Framework. CRITERION We have assessed the Report against the Sustainability Reporting Framework issued by the Global Reporting Initiative (hereinafter 'GRI Framework'), as indicated in section 'About the Report and a reporting process' on page 72 of the Report. CONCLUSION We believe that this criterion is appropriate given the purpose of our assurance engagement. Based on our work performed, nothing has come to our attention that causes us to believe that the information in the Report, in all material aspects does not provide reliable and sufficient representation of sustainability policies, activities, RESPONSIBILITY OF THE MANAGEMENT OF METINVEST events and performance of Metinvest during 2009 and 2010 in accordance with GRI Framework. The management of Metinvest is responsible for the preparation of the Report and the information therein. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of a sustainability report that is Nothing has come to our attention that causes us to believe that the Report does not meet the requirements of “B” free of material misstatements, selecting and applying appropriate reporting principles and using measurement methods and Application Level of GRI Framework. estimates that are reasonable in the circumstances. The choices made by the management, the scope of the Report and the reporting principles, including any inherent limitations that could affect the reliability of information, are set out in section 'About the Report and a reporting process' on the page 72 of the Report. Ernst & Young LLC OUR RESPONSIBILITY Our responsibility in performing this assurance engagement is to express a conclusion with regard to the information in the Kyiv Report. We have performed our engagement in accordance with International Standard on Assurance Engagements 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, issued by IFAC. 30 June 2011 We have performed the procedures deemed necessary to provide a basis for our conclusion. FEEDBACK SURVEY SOCIAL REPORT 2009-2010 METINVEST

ABOUT Thank you for taking an interest in Metinvest's CSR report. Your views about its contents and form THE REPORT are important to us, so we would be grateful if you could answer the questions below. AND REPORTING 1. On a scale of 1 to 5, where 5 is the most positive, what is your overall impression of the Report? 5□ Positive PROCESS 4□ Mainly positive 3□ Neutral 2□ Mainly negative 1□ Negative

2. Have you learned anything new about Metinvest from the Report?

YES□□ NO LIST OF ABBREVIATIONS 3. On a scale of 1 to 5, where 5 is the most positive, what is your view of the parameters below for the Report? METINVEST SUBDIVISIONS OTHER TERMS: AND ENTERPRISES TITLES: 1□ 2345 □□□□ Completeness of information EU – European Union 1□ 2345 □□□□ Azovstal– JSC Azovstal Iron and Steel Works Comprehensiveness of information 1□ 2345 □□□□ HSE – Health, Safety and Environment Veracity of information Avdiivka Coke– JSC Avdiivka Coke and Chemicals Plant 1□ 2345 □□□□ Ease of reading □ □□□□ IFRS – International Financial Reporting Standards Design 1 2345 Central GOK– JSC Central Iron Ore Enrichment Works IMS – Integrated Management System Ilyich Steel– JSC Ilyich Iron and Steel Works IRCA – Identifying Root Causes of Accidents Ingulets GOK– JSC Ingulets Iron Ore Enrichment Works 4. Would information from the Report help you in interacting with Metinvest? JIP – Joint Implementation Project Inkor Chemicals – Scientific and Manufacturing Association YES□□ NO NO NEED □ «»,Incor and Co LLC PPE – Personal Protective Equipment Khartsyzsk Pipe – JSC Khartsyzsk Pipe Plant USAID – the United States Agency for International Development Krasnodon Coal – JSC Krasnodon Coal Company 5. Would you like to receive regular information about CSR from the Company? WSA – World Steel Association Makiivka Steel Works (MMZ) – CJSC Makiivka Iron and Steel Works YES□□ NO NO NEED □

Northern GOK– JSC Northern Iron Ore Enrichment Works

UCC– United Coal Company , LLC 6. Would you like to receive the next CSR report from Metinvest?

Yenakiieve Steel– JSC Yenakiieve Iron and Steel Works and YES□□ NO NO NEED □ JV Metalen, LLC

7. What is your relationship with the Company (choose one):

□ Employee □ Supplier □ Partner □ Journalist □ Representative of a state body □ Resident of a town (region) where the Company is present □ Independent expert □ Representative of a not-for-profit organisation □ Representative of an industry association □ Other (please specify)______Please give any comments or suggestions regardingMetinvest CSR reports: NOTES

Please send the completed survey in an envelope marked “CSR report” to the following postal address:

Metinvest Holding LLC Donetsk City Business Centre 130 Artyoma Street, Donetsk 83048, Ukraine

Alternatively, please scan and send it to the following email:

[email protected] NOTES