Introducing EuroChem
Bank of America Merrill Lynch Fertilizer Forum London, January 26, 2011 2
Disclaimer
This presentation has been prepared by OJSC MHK EuroChem (“EuroChem” or the “Company”) for informational purposes, and may include forward- looking statements or projections. These forward-looking statements or projections include matters that are not historical facts or statements and reflect the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements and projections involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements and projections are not guarantees of future performance and that the actual results of operations, financial condition and liquidity of the Company and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements or projections contained in this presentation. Factors that could cause the actual results to differ materially fromthose contained in forward-looking statements or projections in this presentation may include, among other things, general economic conditions in the markets in which the Company operates, the competitive environment in, and risks associated with operating in, such markets, market change in the fertilizer and related industries, as well as many other risks affecting the Company and its operations. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements or projections contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm expectations or estimates or to update any forward-looking statements or projections to reflect events that occur or circumstances that arise after the date of this presentation.
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By participating in this meeting, you agree to be bound by the foregoing. 3 Contents
EuroChem Overview Potash Segment Nitrogen Segment Phosphate Segment Logistics & Distribution 4
Summary
Top 10 agrochemical company globally by Revenue* EBITDA* 1,600 1,485 nutrient capacity: 4,000 3,761 1,400 3,500 3,279 . 2 Nitrogen plants in Russia (2.8 MMT of 1,200 ammonia) 3,000 1,003 2,475 2,467 1,000 2,500 . 2 Phosphate plants in Russia and 1 in Lithuania 752 2,000 1,790 800
(2.2 MMT of MAP/DAP) US$m 554 US$m 1,500 600 . 1 Apatite and iron ore mine in Russia 371 1,000 400 . P O -rich (37%-38%) apatite ore (2.7 MMT pa) 2 5 500 200 covers c.85% of own P production needs 0 0 . Up to 6MMT of iron ore (Fe content 64%), a 2006 2007 2008 2009 2010E 2006 2007 2008 2009 2010E co-product of apatite mining EBITDA margin Sales by Region . Construction of own Potash (K) capacity is 45% 40% 2,7% 0,4% well underway (production to start 2013, reaching 40% 5,0% Africa ROW N Amer up to c.8 MMT pa of product by 2021) 35% 23,9% 30% 31% Russia . Vertical integration: own raw materials, 30% 14,4% production, port terminals, rail stock, repair shops 25% 22% 21% LatAm and distribution in CIS 20% US$m . Privately owned by Andrey Melnichenko (95%) 15% and CEO Dmitry Strezhnev (5%) 10% 17,8% 14,2% Europe CIS . Expected 2010 EBITDA: USD 1bn, +80% over 5% 2009 0% 21,5% 2006 2007 2008 2009 2010E Asia . Latest Net Debt / LTM EBITDA: 1.13x *Revenue and EBITDA translated into US$ using 20 JAN 2011 exchange rate of 29.8252 RUB/US$ . As of 30 September 2010 EuroChem directly owned 9.998% of K+S AG 5
Position in Sector
6M 2010 Revenue (US$m) Top 10 by nutrient capacity globally Agrium Yara PRIMARY PRODUCT CAPACITY, MMT OF NUTRIENTS Mosaic* K+S 02468101214 PotashCorp ICL PotashCorp CF Industries EuroChem Mosaic Acron Silvinit+Uralkali 0 2000 4000 6000 8000 CF Industries 6M 2010 EBITDA (US$m) PotashCorp Yara Mosaic* Yara Belaruskali Agrium ICL Agrium K+S Ammonia (N) OCP CF Industries Phos Acid (P2O5) EuroChem Israel Chemicals Potash (K2O) Acron EuroChem 0 500 1000 1500 6M 2010 Net Profit (US$m) K+S AG PotashCorp TogliattiAzot Yara Mosaic* PhosAgro Agrium K+S Sinopec ICL EuroChem UralChem CF Industries Acron 0 200 400 600 800 1000 *Data for Mosaic is for Q3’10-Q4’10. Source: Bloomberg, company reports 6
Vertically Integrated Producer
Kovdorsky GOK Verkhnekamskoe deposit
Products Volume Products Volume Iron ore 5,700 MOP - Phase I 2,000 Murmansk Apatite 2,700 Kovdor MOP – Phases I and II 3,400 Baddeleyite 8.9
Phosphorit Gremyachinskoe deposit
Products Volume Products Volume Ust-Luga MOP – Phase I 2,300 MAP, DAP, NP 740 Tallinn Perm Kingisepp MOP – Phases I and II 4,600 Feed phosphates 220 Moscow Kedaynyay Novomoskovsk Lifosa Nevinnomyssk Azot Products Volume Volgograd Nevinnomyssk Products Volume DAP 980 Belorechensk Ammonia 1,164 Feed phosphates 150 Tuapse Urea 861 Ammonium Nitrate 1,313 EuroChem-BMU UAN 1,022 Products Volume Nitrogen Novomoskovsk Azot MAP, NP 510 Phosphate Products Volume Potash Ammonia 1,627 Apatite / iron ore mining Urea 1,440 Transhipment terminals Ammonium Nitrate 1,285 UAN 427
Note: all volumes expressed in thousands of tonnes 7
Key Competitive Advantages
. Low-cost raw materials (natural gas, phosphates and, in future, potash)
. Further cost advantages through vertical integration (own port terminals, rail stock, repair/maintenance units)
. Distribution in the world’s fastest-growing large fertilizer market (Russia and CIS)
. Iron ore (6 MMT pa) as co-product of apatite mining adds to profitability
. Future global cost leadership in potash expected at Gremyachinskoye field due to:
. Proximity to port (~650 km)
. K2O-rich ore . Flatness and thickness of potash layer
. Thick protective salt layer
. Growing production flexibility allows to quickly adapt to changes in market demand 8
The EuroChem Story
Growth . 2.1% of the world’s nutrient capacity today . 3.0% by 2020
Earnings power . Sustained competitiveness in N and P in Western Hemisphere . Benefits from iron ore as a co-product of apatite mining . Future global cost leadership in K
Key Risks . Potash construction (mines) -? . Natural gas cost differential between Russia and US/Europe -? . Limited free cash flow in 2011-2013 on heavy capex -? 9 EuroChem: Corporate Governance
EuroChem is a private company implementing the best-in-class corporate governance expected of a public company
Shareholding structure and influence Shareholding structure and influence
Best-in-class approach to corporate governance Transparent and open ownership structure
– Management develops and executes strategy Long term shareholder commitment
– Board of Directors performs overall oversight Prudent dividend policy, consistent with the financial situation of the company Half of the Board is represented by independent directors with long standing reputation and experience Transparency and disclosure Three Board committees: Audit, Governance and Personnel, Strategy
IFRS reporting since 2002
Annual reports issued since 2005, audited by PwC
Financial statements and majority of corporate governance documents are publicly available on website, which is regularly updated
Board of Directors Andrey Melnichenko–Chairman of the Board of Directors Richard Sheath–Chairman of Audit Committee, Member of Corporate Governance Beneficiary of a 95 percent interest in EuroChem and Personnel Committees Co-founder and former Chairman of the Board of Directors of MDM Bank Prior to Eurochem, worked as risk management consulting partner with PwC In partnership with Sergey Popov, built EuroChem, SUEK and founded TMK Began professional career with the Bank of England and the Ministry of Finance George Cardona–Chairman of the Strategy Committee Vladimir Stolin–Chairman of Corporate Governance and Personnel Committees Founder and CEO of London-based Cardona Lloyd & Co. Author of various scientific works on management and corporate behavior Previously worked at HSBC Group, as Head of Strategy, and also as General Manager Previous work experience includes being a professor at the and working as a consultant at RHR responsible for international banking International Keith Jackson–Member of the Audit and Strategy Committees Charles Adriaenssen–Member of Corporate Governance and Personnel Committees From 1996 to 2005, Senior VP and a divisional CFO of Anglo American Currently, member of the Boards of EPS SA, Green Facts Foundation, Outhere SA., and Sebastien Extensive experience across several sectors and regions. Previous positions held Holdings, President of VLORO and Chairman of Bastille Investments include Chairman of Cleveland Potash, CFO of Cape plc Extensive experience in diplomatic affairs Dmitry Strezhnev–Chairman of the Management Board Nikolay Pilipenko–Member of the Audit Committee Head of EuroChem since August 2003 CFO of EuroChem from 2006 to 2008 Co-founder and General Director of RusPromAvto, 1999-2003 Extensive international experience with trading and industrial companies Previously worked as Head of Likinskiy Bus Manufacturing Plant Previously worked at ABB Group 10 Main Strategic Objectives
Become top 5 global • Build and launch own potash production agrochemical company by • M&A: opportunistic approach revenue and profitability
Maintain cost advantage in N • Improve existing production efficiency and P through vertical • Add new capacity for higher-value / lower integration and investment in gas content products (e.g. melamine, LDAN, NPK) efficiency • Enhance distribution in core markets (CIS, Europe) • Improve logistics (Baltic port, rail car fleet) • Improve access to phosphate rock (Kazakhstan) • Own natural gas production? 11
EuroChem Overview Potash Segment Nitrogen Segment Phosphate Segment Logistics & Distribution 12
Project Overview: Volgograd region (Gremyachinskoye)
Gremyachinskoye cumulative capex Project Overview Phases I+II (2010-completion) 3,500 . License area of 96,9 km2 located in Volgograd 3,000 region 2,500 Mining starts Now 2,000 . Russian reserves (B+C1+C2): 1,613 mmt; 1,500 US$ m . Unbooked reserves (C1+C2): 74,5 thmt 1,000 500 . JORC proven and probable reserves: 492 mmt 0 measured and indicated resources: 1,337 mmt prior to 2010 2011 2012 2013 2014 2015 2010 . Sylvinite ore Phase II cumulative capex Phase I cumulative capex
. KCl average content: 37% Phase I: capacity of 2.3 mmt p.a., involves . NaCl average content: 54% construction of social infrastructure, cage shaft, . MgCl average content: 0.2% skip shafts and processing facility . CaSO4 average content: 6-7% Phase II: capacity doubled to 4.6 mmt p.a., involves . Depth of 1,000–1,250 meters construction of additional skip shaft and expansion of . Mining to start in 2013 processing facility . Phase I full capacity in 2016
. Phase II full capacity in 2018
. Total investment for both phases est. US$ 3.4bn 13
Project overview: Perm region (Verkhnekamskoye)
Project Overview Verkhnekamskoye cumulative capex Phases I+II (2010-completion) 3.4 MMT . License area of 132.9 sq km located in Perm 3,000 2.0 MMT region, home of Russian potash industry 2,500 Mining starts Now 2,000 . Russian reserves (A+B+C1): 1,524 mmt 1,500
. JORC proven and probable reserves: 420 mmt US$ m 1,000 measured and indicated resources: 1,075 mmt 500 0 . Sylvinite and carnallite ore prior 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 to . KCl average content: 30% 2010 Phase II cumulative capex Phase I cumulative capex
. NaCl average content: 62% Phase I: capacity of 2.0 mmt p.a., involves . MgCl average content: 0.3% construction of social infrastructure, cage shaft, . CaSO4 average content: 2.2% skip shafts and processing facility
. Insoluble residue: 4.9% Phase II: additional capacity of 1.4 mmt p.a., involves . Depth ~500 meters construction of additional skip shaft and expansion of
. Mining to start in 2016 processing facility
. Phase I full capacity in 2018
. Phase II full capacity in 2021
. Total investment for both phases est. US$ 2.7bn 14
Future Cost Position in Potash
KCl Delivered Cost to India, 2010 KCl Delivered Cost to China, 2010 300 300 250 250 200 200 150 150 100 100 50 50 0 0 APC APC Silvinit Silvinit Mosaic Mosaic Uralkali Uralkali Perm Perm K+S Kali K+S Kali Volga-Kali Volga-Kali EuroChem EuroChem EuroChem EuroChem ICL (DSW) ICL (DSW) PotashCorp Belaruskali* Belaruskali* PotashCorp
Freight to India Export Duty Delivery to FOB Site Cost Freight to China Export Duty Delivery to FOB Site Cost
KCl Delivered Cost to Brazil, 2010
EuroChem’s intended global cost leadership in K would help withstand prolonged periods of depressed potash price (<$350 CFR China), if necessary APC Silvinit Mosaic Uralkali Perm K+S Kali Volga-Kali EuroChem EuroChem * export duty for Belaruskali is 50 euro per tonne ICL (DSW) Belaruskali* PotashCorp Source: company reports, British Sulphur, Fertecon, EuroChem estimates Freight to Brazil Export Duty Delivery to FOB Site Cost 15 Visual Update
Employee housing Skip shaft construction site and cooling system
Skip shaft pre-sink Cage shaft construction site 16
EuroChem Overview Potash Segment Nitrogen Segment Phosphate Segment Logistics & Distribution 17
Nitrogen Segment
EuroChem nitrogen operations
Murmansk Novomoskovsk Azot Kovdor Products Volume Ammonia 1,627 Urea 1,440 Ammonium Nitrate 1,285 Ust-Luga Tallinn Perm UAN 427 Kingisepp Moscow
Kedaynyay Novomoskovsk
Nevinnomyssk Azot Volgograd Products Volume Nevinnomyssk Ammonia 1,164 Belorechensk Urea 861 Tuapse Ammonium Nitrate 1,313 UAN 1,022
Nitrogen
Phosphate
Potash Mining operations
Transhipment terminals
Note: all volumes expressed in thousands of tonnes 18
Key 9M 2010 Results
Sales by region*, 9M 2010 Revenue*, RUBbn (in brackets – change in percentage points relative to 9M 2009) 32,9 Africa Australasia 4% (-2) 1% (-1) 29,3 North America 9% (-1)
Latin America Russia and CIS 15% (-4) 38% (+11) 11,0 12,1 9,9 10,3 9,3
Europe Asia 9M 2010 9M 2009 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09 22% (+3) 11% (-8) Sales by Product*, 9M 2010 EBITDA margin
(in brackets – change in percentage points relative to 9M 2009) 31% Methanol 6% (+3) Acetic Acid 25% 25% 26% 4% (-1) 21% Other Urea 19% 10% (+2) 28% (-3) 17%
Ammonia 11% (+1)
Complex Ammonium 9% (-) Nitrate 24% (+1) UAN 9M 2010 9M 2009 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09 8% (-2) *including sales to other segments *Revenue and sales volumes include sales to other segments
Nitrogen segment includes nitrogen fertilizers and organic synthesis products.
Nitrogen Phosphate Distribution 19
Impact of Rising Natural Gas Prices in Russia
Illustrative delivered urea costs to Brazil ($/m tonne)
Gas costs Other cash costs Delivery costs Assuming gas price = $150 per 1,000m3 Nevinnomyssk Azot (equivalent to $340 netback price from Europe)
East European Assuming gas price = $340 producers per 1,000m3
Assuming gas price = $250 per Ukrainian producers 1,000m3 (DAF) . EuroChem maintains significant cost 0 100 200 300 400 advantage over European and Illustrative delivered urea costs to Europe ($/m tonne) Ukrainian producers in its key markets even after domestic gas Gas costs Other costs Delivery costs Import duty prices rise to their “netback” level Assuming gas price = $150 per Novomoskovsk Azot 1,000m3 (equivalent to $340 netback price from Europe)
European producers Assuming gas price = $290 per 1,000m3 (spot/contract mix)
Assuming gas price = $250 Ukrainian producers per 1,000m3 (DAF)
0 50 100 150 200 250 300 350 400
Note: ¹ Gas costs for Western Europe as at German border
Nitrogen Phosphate Distribution 20
Nitrogen Strategy
Key Objectives Key Investment Projects
Ensuring energy efficiency improvements and removal of Recently completed: bottlenecks, leading to lower costs at both plants through CAN – 420 kmt p.a. incremental investment; Granular urea 3 – 2,000 mt p.d. Achieving product flexibility in order to maximize profit margins through alignment of production to market Granular urea 4 – 1,150 mt p.d. conditions; Under Construction:
Ensuring best possible access to attractive markets (i.e. Melamine – 50 kmt p.a. markets where EuroChem is most competitive on a “cash Objectives: build capacity in premium products, diversify cost delivered to” basis); and reduce share of natural gas cost in the product price Securing access to competitively priced natural gas. Other Ideas
Alternative gas supply: Cumulative N capex 2010-2014 (US$ m) Buy or build own natural gas supply in Russia;
86 Contract with independent gas producer in Russia 123 (Novatek, LUKoil); 127 Build or buy new N capacity in region with cheap gas. 185 Additional value added/lower gas content products: 277 LDAN - 200 kmt p.a.;
2010 2011 2012 2013 2014 AdBlue;
Production of Urea, CAN and UAN with sulphur content.
Deep upgrade of Ammonia plants. 21
EuroChem Overview Potash Segment Nitrogen Segment Phosphate Segment Logistics & Distribution 22
Phosphate Operations
EuroChem phosphate operations
Kovdorsky GOK Products Volume Murmansk Iron ore 5,700 Apatite 2,700 Kovdor Baddeleyite 8.9
Lifosa Russia Products Volume
DAP 980 Kingisepp Feed phosphates 150 Moscow – EuroChem HQ Klaipeda Kedaynyay Phosphorit Products Volume Ukraine MAP, DAP, NP 740 Kazakhstan Feed phosphates 220 Belorechensk Tuapse Taraz
EBMU Products Volume Phosphate and mining operations Own transhipment terminals MAP, NP 510 Port facilities rented under a long-term contract
Note: all volumes expressed in thousands of tonnes Nitrogen Phosphate Distribution 23
Key 9M 2010 Results
Sales by region*, 9M 2010 Revenue*, RUBbn (in brackets – change in percentage points relative to 9M 2009) 35.7 North America Africa 2% (+1) 1% (-3) Latin America 14% (+10) 23.9
Europe Russia and CIS 13.9 16% (-6) 35% (-) 12.6 9.2 7.2 8.5
Asia 32% (-2) 9M 2010 9M 2009 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09
Sales by product*, H1 2010 EBITDA margin
(in brackets – change in percentage points relative to H1 2009) Other NP, NPK 4% (-) 39% 3% (-) 36% 33%
Iron ore 19% 31% (+8) 14% 14% MAP, DAP 12% 54% (-5)
Apatite 2% (-1) Feed 6% (-2) 9M 2010 9M 2009 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09
*including sales to other segments Phosphate segment includes included iron or and baddeleyite, byproducts of apatite production at Kovdorskiy GOK mine.
Nitrogen Phosphate Distribution 24
Cost Comparison
Illustrative economics for competing DAP producers Delivered cost to Europe and India (US$/t)
US integrated Morocco EuroChem To To To To India To Europe To India US$ To India To India Europe Europe Europe (Phosphorit) (Lifosa) 356 353 Ammonia cost 470 470 445 445 244 256 334 311 320 Ammonia / tonne DAP 0.22 0.22 0.22 0.22 0.22 0.22 293 Ammonia cost / tonne 103 103 98 98 54 56 DAP
Rock cost / tonne 48 48 49 49 102 80 Rock / tonne DAP 1.73 1.73 1.56 1.56 1.28 1.28 Rock cost / tonne 83 83 76 76 131 102 DAP
Sulfur cost / tonne DAP 60 60 34 34 30 30 Other cash costs / 50 50 60 60 50 60 tonne DAP EuroChem Morocco US integrated Production costs / 296 296 269 269 264 249 tonne Source: EuroChem information
Freight 60 57 43 51 29 85 Total delivered cost / 356 353 311 320 293 334 tonne
Assuming “normalized” across-the-cycle ammonia and sulphur costs for US integrated producers
Nitrogen Phosphate Distribution 25
Phosphate Strategy
Key Objectives Key Investment Projects
Increase supply of own raw materials (phosphate rock, apatite); Feed phosphates at Lifosa: 150 kmt p.a. (completed in mid. 2010);
Reduce conversion cost to improve cost per unit; Increase sulphuric acid capacity: at Phosphorit from 720 to 1,000 kmt p.a.; at EBMU from 520 to 720 kmt p.a.; Grow capacity to increase the benefits of economies of scale; Increase phosphoric acid capacity: at Phosphorit from 350 to 400 kmt Improve cost efficiency through energy-saving technologies; p.a.; at EBMU from 240 to 300 kmt p.a.; Enhance product flexibility with capacity to produce at least two products at each plant (DAP and MCP at Lifosa, DAP/MAP and DFP at Build NPK production at EBMU: 800 kmt p.a. (to correspond to K Phosphorit, MAP and NPK at BMU). production coming online in Volgograd). Objectives: debottleneck, decrease fixed costs per tonne, reduce costs through own energy generation, eliminate reliance on external phosphate rock.
Cumulative P capex 2010‐2014 (US$ m) Other Ideas
Expand phosphate business and with access to low cost phosphate rock in Kazakhstan; 67 91 Discussing development of apatite deposit in Finland close to Russian 142 border with mine owner Yara; Opportunities for access to Moroccan rock under discussion. 170
142
2010 2011 2012 2013 2014 26
EuroChem Overview Potash Segment Nitrogen Segment Phosphate Segment Logistics & Distribution 27
Logistics
Overview and plans
. Assets: Murmansk Bulk Terminal . Murmansk: 1.5 mmt p.a., iron ore TankChem (Sillamae) . Sillamae: 700 kmt p.a., liquid fertilizers and organic chemicals Ust-Luga . Tuapse : 3 mmt p.a., bulk fertilizers Klaipeda Moscow . Klaipeda (long-term contract): 3.5m bulk, 500k tonnes liquid, 1m tonnes phosphate rock
. 3 ships in long-term lease
. Over 6,700-strong rail stock and 42 locomotives
. Own rail stock service depot Tuapse Bulk Terminal . Plans:
. Ust-Luga (planned): 5 mmt p.a., bulk Phosphate rock and iron ore mine Nitrogen plant fertilizers Own shipping terminals Phosphate plant Long-term contract shipping terminal . Use own rail stock only 28
Distribution
Overview and plans Distribution network
. Distribution: 39 distribution Phosphorit centres in Southern and Central Russia and Ukraine Kovdorsky GOK
. Future plans: gradual Moscow
development of distribution in Novomoskovsky Azot other key markets (Europe, US, Brazil) Lifosa
EBMU Nevinnomyssky Azot
Phosphate rock and iron ore mine Nitrogen plant Planned distribution centres Own shipping terminals Phosphate plant Operating distribution centres Long-term contract shipping terminal
Nitrogen Phosphate Distribution 29
Summary: The EuroChem Story
Growth . 2.1% of the world’s nutrient capacity today . 3.0% by 2020
Earnings power . Sustained competitiveness in N and P in Western Hemisphere . Benefits from iron ore as a co-product of apatite mining . Future global cost leadership in K
Manageable . Potash construction (mines) -? Risks . Natural gas cost differential between Russia and US/Europe -? . Limited free cash flow in 2011-2013 on heavy capex -? 30
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