GUIDE TO THE WORLD OF EVRAZ Annual Report and Accounts 2010 Red Deer Ostrava Hot SpringsNizhny TagilRegina Nakhodka NovokuznetskKuzbassCalgary Sheregesh Camrose San Giorgio di Nogaro PortlandPueblo eMalahleniKachkanarClaymont 2 ANNUAL REPORT AND ACCOUNTS 2010 +37% +90% –64% +9% revenue growth EBITDA growth short-term debt steel sales increase in 2010 in 2010 decrease in 2010 in 2010 for more info see page 35 for more info see page 35 for more info see page 12 for more info see page 12 #1 #1 LEADING LARGEST Long steel Rail producer world vanadium crude steel producer in Russia in Russia and the USA producer producer in Russia for more info see page 35 for more info see page 35 for more info see page 35 for more info see page 87 BB-/Stable B1/Positive B+/Stable by Fitch Ratings by Moody’s By Standard & Poor’s for more info see page 79 for more info see page 79 for more info see page 79 165° 180° 165° 150° 135° 120° 105° 90° 75° 60° 45° 30° 15° 0° 15° 30° 45° 60° 75° 90° 105° 120° 135° 150° 165° 180° 165° 150° 135° 120° 90° EVRAZ 90° OPeraTIONS MAP (As of 30 April 2011) 75° 75° 60° 60° ZSMK EVRAZ Red Deer NKMK Moscow EVRAZ NTMK Evrazruda EVRAZ Calgary VanadyTula EVRAZ Camrose 45° 45° Raspadskaya Nikom EVRAZ VGOK EVRAZ Regina Yuzhkuzbassugol EVRAZ Surrey EVRAZ Vitkovice Steel EVRAZ Bagliykoks EVRAZ KGOK EVRAZ DMZ Petrovskogo1 EVRAZ NMTP EVRAZ Portland EVRAZ Claymont East Metals EVRAZ DKHZ EVRAZ Sukha Balka EVRAZ Pueblo EVRAZ Palini e Bertoli 30° 30° Stratcor 15° EVRAZ’S WORLD MAP 15° 0° 0° 15° 15° Vametco EVRAZ Highveld Steel and Vanadium Type of business: Mapochs Mine Steel Production 30° 30° Iron Ore Mining and Enrichment Coal Mining Equity Investment (coal) 45° Coke Production 45° Vanadium Production Logistics 60° 60° 0 800 1 600 2 400 4 800 1 : 100 000 000 1 From 1 April 2011 EVRAZ DMZ Petrovskogo includes production facilities of Dneprokoks coking plant 165° 180° 165° 150° 135° 120° 105° 90° 75° 60° 45° 30° 15° 0° 15° 30° 45° 60° 75° 90° 105° 120° 135° 150° 165° 180° 165° 150° 135° 1 ANNUAL REPORT AND ACCOUNTS 2010 CONTENTS 4 COMPANY OVERVIEW 61 CORPORATE GOVERNANCE 4 Who We Are 61 Introduction 6 Key Events 62 The Board of Directors and Senior Management 8 Corporate Structure 63 The Board 9 Major Assets 65 Role of the Board 10 Production by Region 2010 66 Senior Management 11 Key Performance Indicators 2006-2010 71 Board and Senior Management Remuneration 73 Board Committee Reports 14 MESSAGES 76 Risk Management 15 Chairman’s Statement 76 Internal Control 17 Chief Executive’s Report 78 Shareholder Information 22 ECONOMIC AND INDUSTRY 82 MANAGEMENT REPORT OVERVIEW 82 Responsibility Statement of the Directors in 22 Overview of the Global Macroeconomic Respect of the Annual Report and the Financial Environment Statements 25 Overview of the Steel Industry 83 Independent Auditor's Report on Legal 26 Overview of the Coking Coal Market and Regulatory Requirements Related to 28 Overview of the Iron Ore Market Consolidated Annual Management Report 30 Overview of the Vanadium Market 84 Selected Consolidated Financial Information 87 Management’s Discussion and Analysis of 33 BUSINESS OVERVIEW Financial Condition and Results of Operations 33 Our Vision and Strategy 35 Our Business 110 CONSOLIDATED FINANCIAL 36 Steel STATEMENTS 36 Steel: Russia 110 Contents 38 Steel: Ukraine 112 Independent Auditor's Report 39 Steel: Western Europe 113 Consolidated Financial Statements for the Years 39 Steel: South Africa Ended 31 December 2010, 2009 and 2008 40 Steel: North America 121 Notes to the Consolidated Financial Statements 41 Mining for the Years Ended 31 December 2010, 2009 41 Mining: Coal and 2008 42 Mining: Iron Ore 45 Vanadium 194 EVRAZ GROUP S.A. PARENT 47 Outlook for 2011 COMPANY FINANCIAL 48 Key Investment Projects STATEMENTS 194 Contents 50 CORPORATE RESPONSIBILITY 195 Responsibility Statement of the Directors 50 Introduction in Respect of the Annual Accounts of Evraz 51 Economic Prosperity Group S.A. 54 HSE Information and Developments 196 Independent Auditor's Report 54 Health and Safety 197 Parent Company Financial Statements 56 Environment 199 Notes to the Annual Accounts for the Year Ended 58 Our People 31 December 2010 211 Abbreviations and Acronyms 212 Glossary of Selected Terms 214 Interesting Facts about EVRAZ Symbols Address Geographic latitude Diagram Flora Phone and longitude Table Fauna Fax Greenwich Mean Time Data source Sights Weblink Founded Food and drinks E-mail Population Active leisure Information Area The photograph on Pages 52-53 is one of the winners of EVRAZ’s Photo & Picture competition which attracted entries from employees on a global basis and was organised by the EVRAZ Talent Committee. The authors of the photo are Ludmila Chirkina and Anna Chirkina of EVRAZ NTMK page 41 page 7 KACHkaNar RUSSIAN FEDERATION page 5 General Information About KachkanarRUSSIA Kachkanar is a town in Sverdlovsk Oblast, situated The original meaning of Kachkanar, the Kachkanar 58°42’18”N 59°28’59”E between the Isa and Vyya Rivers, 205 kilometres Mountain that gave birth to the Kachkanarsky Ore (127 miles) north of Yekaterinburg in the Tura River Mining and Processing Plant (now EVRAZ KGOK), GMT+05:00 basin. Originally founded as an ore mining settlement is unclear. The Tatar translation is ‘Hidden’ or in 1957, Kachkanar received urban-type settlement ‘Disappearing’ mountain while the Turco equivalent 1957 status in 1959 and town status in 1968. is 'kesh-kener’ or ‘double-humped camel'. Curiously, the Ukrainian version is 'kachka' which translates 42,563 people into ‘Duck Mountain’. The exploration of Kachkanar’s 2 titanomagnetite ores commenced in 1957, and KGOK 318,39 km subsequently pioneered the enrichment of low-iron content ores. 4 ANNUAL REPORT AND ACCOUNTS 2010 COMPANY OVERVIEW WHO WE ARE EVRAZ Group S.A. is a global, vertically-integrated, steel, I mining and vanadium business with operations in the Russian Federation, Ukraine, the Czech Republic, Italy, the USA, Canada and South Africa. We are ranked by Steel Business Briefing the 20th largest steel company in the world, based on 2010 crude steel production volumes. Following an Initial Public Offering in June 2005, EVRAZ Group’s shares are listed and traded on the London Stock Exchange in the form of Global Depositary Receipts. Each GDR is equivalent to one third of one Ordinary share in EVRAZ Group S.A. Our Business Our principal activities, which span four continents, are: The manufacture and sale of steel and steel products Iron ore mining and enrichment Coal mining and processing The manufacture and sale of vanadium products Trading operations and logistics EVRAZ is a premier producer of infrastructure products, one of the world’s leading manufacturers of construction steel and the world’s No 1 producer of rails. In 2010: Group revenues achieved US$13.4 billion W Employees worldwide totalled 110,000 The steel division produced 16.3 million tonnes of crude steel and sold 15.5 million tonnes of rolled steel NY products The mining division produced 19.8 million tonnes of iron ore, 7.5 million tonnes of raw coking coal and 3.8 million tonnes of steam coal The vanadium division produced 20,969 tonnes A of vanadium1 and sold 19,776 tonnes of vanadium products. The majority of EVRAZ’s iron ore and coking coal requirements for steel making is supplied by its mining RVIE operations. Our Story The Company’s history dates back to 1992 when Evrazmetall, a small Russian metal trading firm, was founded. In the space of almost 20 years this company, the forerunner of the EVRAZ Group, has been VE transformed, via a programme of domestic and cross border acquisitions, into a multinational steelmaking and mining corporation with a US$17.6 billion asset base. 1 Primary vanadium (slag) production COMP O 5 ANNUAL REPORT AND ACCOUNTS 2010 COMPANY OVERVIEW The acquisitive growth of EVRAZ, focused on the creation of a geographically diversified steelmaking capability Our Mission alongside a complementary resource of raw material We are a global steel and mining Company delivering provides us with a stable platform for further growth. value to our infrastructure customers. Our Values We make the world Stronger, Safer and Cleaner. EVRAZ is a distinctive company with distinctive values. We believe that our responsibilities encompass all our stakeholders including shareholders, customers, employees and communities in the areas where we operate. We endeavour to deliver ongoing growth and value while, at the same time, pursuing environmentally responsible policies within a framework of sustainability. KacHkanaR DEPOSIT Although Mount Kachkanar’s iron ore deposits would The systematic study of ore deposits at Kachkanar began have been visibly apparent to the Mansi, the indigenous in the early 1930s as did research into ways in which to people of the region, they used the mountain primarily as enrich the Kachkanar ores and sinter the iron-vanadium a sanctuary. After the Middle Urals and Trans-Urals were concentrate. Various pilot projects were introduced integrated within the principality of Moscow during the which proved the technical feasibility of mining and 16th century, Russian mining industrialists focused their processing ores that possessed a low iron content. During attention on Kachkanar. Akinfiy Demidov, a member of 1946-1953, company Uralchermetrazvedka, carried out a the prominent family dynasty of industrialists, wanted to detailed exploration of the Kachkanar deposits. buy the entire mountain from the Mansi but the deal never materialised. The development of titanium magnetite ores at Mount Kachkanar was first undertaken in 1957 under the Platinum fever subsequently broke out and led to the initiative of a group of mining industry executives and construction of the historic Kachkanar mine, owned by professional representatives of the Urals Institute for Count Shuvalov.