News

29 March 2006

Novolipetsk Steel (NLMK) agrees to acquire 82% interest in coke producer JSC "Altai-koks" and 100% interest in Group of Coal Companies "Prokopievskugol"

OJSC Novolipetsk Steel NLMK (LSE: NLMK) is pleased to announce that it has agreed to acquire from a group of investors an 82% interest in "Altai-koks", coke-chemical plant, and a 100% interest in holding company Kuzbass Asset Holdings Limited, Gibraltar, which owns 100% of interest in "Prokopievskugol" Coal Company for about USD 750 million. The acquisition is to be financed in full from NLMK’s existing cash funds.

JSC "Altai-koks" is the leader among coke-chemical plants in Russia. It produces high-quality coke and chemical products. In 2005 JSC "Altai-koks" production of coke amounted to 3.8 million tonnes. By the end of 2006 a new coking plant with capacity of 1.14 million tonnes per year will be put in operation. As a result, total capacity of JSC "Altai-koks" will amount to almost 5 million tonnes per year.

As of today, NLMK has already accumulated approximately 6.12% interest in JSC "Altai-koks" through the market purchases. As a result of today's transaction, the total stake in JSC "Altai-koks" on NLMK balance sheet will amount to 88%.

"Prokopievskugol" Group is the leader in high-grade coking coal production and processing in the Kemerovo region. It produces more than 5 million tonnes of coal per year and has about 350 million tonnes of coal reserves including 220 million tonnes of high-grade coking coal. "Prokopievskugol" Group owns seven mines and three processing plants. The total production volume of coking coal concentrate is over 3 million tonnes per year, which is about 50% of NLMK’s requirements. Together with Zhernovskoe-1 coal deposit (expected to reach the planned production capacity in 2009) NLMK will achieve total self-sufficiency in coking coal.

Dr. Vladimir Lisin, NLMK’s Chairman, commented

“This acquisition is an important step in the implementation of NLMK’s vertical integration strategy. It enables us to secure additional competitive advantage through the stable supply of key raw materials at lower cost. We believe that these new assets will enable NLMK to become fully self-sufficient in coke and optimize production process within the company, as well as to become an important player on Russian coke products market”.