Annual report 2015

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Annual report 2015

Four success factors

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Key events

The Company

Strategy 2023

Metalloinvest presented Strategy 2023, an updated development strategy. It is focused on pursuing greater shareholder value, higher sales margins, improved operating and management efficiency, as well as increased investment attractiveness.

Fitch – "BB", Moody’s – "Ba2", Standard & Poor’s – "BB"

The Company’s long-term ratings were affirmed by Fitch ("BB", stable outlook), Moody’s ("Ba2", stable outlook) and Standard & Poor’s ("BB", outlook revised from stable to negative due to increasing uncertainty stemming from lower iron ore prices, higher country risk and limited access of Russian corporates to capital markets).

Dagong Global Credit Rating – «BBB+»

China’s Dagong Global Credit Rating Co. assigned the Company a "BBB+" long-term issuer credit rating in local and foreign currencies with a stable outlook.

2 million tonnes supply contract

Metalloinvest and ArcelorMittal signed a contract to supply iron ore to ArcelorMittal’s European operations. As agreed by the parties, the total amount of iron ore products to be delivered by April 2016 is over 2 million tonnes.

Five-year agreement with EVRAS

Metalloinvest and EVRAZ signed a five-year formulabased agreement for the delivery of steel grinding balls. The products will be supplied to Mikhailovsky GOK, Lebedinsky GOK and OEMK.

Launch of a business transformation programme with SAP CIS

Metalloinvest and SAP CIS announced the launch of a business transformation programme whereby a SAP-based integrated corporate management system will be introduced in the Company. The contract was signed at the 2015 St Petersburg International Economic Forum (SPIEF).

60th anniversary of Ural Steel

Ural Steel celebrated its 60th anniversary.

Production and upgrades

+ 5 million tonnes of production capacity

Mikhailovsky GOK launched Pellet Plant No. 3, the largest such facility in Russia, with an annual capacity of 5 million tonnes of pellets.

For more details about strategic investment projects
+ 0.5 million tonnes of production capacity

Сasting Machine No. 5 was commissioned at the blast furnace shop of Ural Steel. It will increase the Company’s pig iron casting capacity by 0.5 million tonnes per year.

25 million tonnes of HBI

Lebedinsky GOK produced its landmark 25-millionth tonne of HBI. The plant produced its first iron ore briquettes in 2001.

Shaft furnace

A shaft furnace was installed at Lebedinsky GOK’s HBI-3 Plant, which is currently under construction. It will serve as the main component of the HBI production process.

Financial activities

Long-term pre-export financing

Metalloinvest signed a USD 750 million long-term pre-export credit facility (“PXF”) agreement with a syndicate of international banks. The PXF is divided into two tranches: USD 600mn five-year tranche with a two-year grace period and USD 150 million sevenyear tranche with a five-year grace period.

Credit facility of up to EUR 267mn

A club of international banks provided the Company with credit facilities of up to EUR 267 million. The funds will be used to finance the purchase of equipment for the Company’s HBI-3 investment project at Lebedinsky GOK. The agreement with the banks stipulates that the loans will be repaid within 10 years following the launch of HBI-3 Plant.

BO-01 series bonds

Metalloinvest issued BO-01 series bonds for a total amount of RUB 10 billion. The bonds have a maturity period of 10 years (3,640 days) and a put option in 6 years. The coupon rate was set at 11.85% to be paid every six months.

New loan maturity date

Metalloinvest and Rabobank signed an agreement to extend the maturity schedule of a USD 131 million loan. Under the agreement, repayment will now be due in April 2017–October 20181.

Management systems

Compliance with international standards

Mikhailovsky GOK confirmed the compliance of its integrated quality and HSE management system with ISO 9001, OHSAS 18001 and ISO 14001 international standards. The audit was carried out by TÜV SÜD Management Service GmbH (Germany). The auditors observed no deviations and made no additional comments.

Inspection audit of Lebedinsky GOK

Lebedinsky GOK successfully passed an annual inspection audit of its environmental management system (EMS) for compliance with GOST R ISO 14001:2007 and MS ISO 14001:2004. The Company’s EMS complies with international environmental standards.

Lebedinsky GOK compliance with international standard

Lebedinsky GOK successfully passed an inspection audit of its occupational health and safety management system for compliance with OHSAS 18001:2007 carried out by the British Standards Institution (BSI).

Inspection audit of Ural Steel

Ural Steel confirmed the compliance of its integrated quality and HSE management system with ISO 9001, STO Gazprom 9001-2012, ISO 14001, OHSAS 18001 international standards. The comprehensive audit was carried out by Bureau Veritas Certification Rus and Pronap.

Sustainable development

Social and economic partnership programmes

Metalloinvest signed social and economic partnership agreements for 2015 with the Kursk, Belgorod and Orenburg Regions.

Climate Action Programme

Metalloinvest confirmed that it will take part in the international Climate Action Programme of the World Steel Association. Under this Programme, Metalloinvest collects, calculates and discloses annual data on greenhouse gas emissions (CO2).

Investment project implementation

OEMK launched an upgrade project at the second gas purification unit in the electric arc furnace shop.

Partnerships with educational institutions

Metalloinvest continues to support comprehensive programmes implemented in partnership with educational institutions in the regions where it operates and in Moscow. The Company is financing the construction of the main building of the Stary Oskol Technological Institute, a branch of the National University of Science and Technology MISiS. In addition, Metalloinvest awards monthly scholarships to the 12 best performing students from the Moscow State Institute of International Relations MGIMO.

10th Person of the Year competition

In 2015, the 15 best employees from the Company’s subsidiaries and business units were honoured and awarded generous bonuses.

Dobro conference

Metalloinvest co-organised the first Dobro Educational Conference for charitable foundations and non-profit organisations.

Awards

Metalloinvest
  • Winner of the 9th Russian Mining Excellence Awards in the Corporate Social Responsibility category;

  • Runner-up in the overall rankings of the 8th annual Leaders in Corporate Charity international competition;

  • Winner of the Russian Business Leaders: Dynamics and Responsibility 2014 national competition in the Environmental Responsibility category;

  • Winner of the international Vision Awards Annual Report Competition (League of American Communications Professionals, USA);

  • Winner of the prestigious WebAwards 2015 international competition (Web Marketing Association, USA); the Company’s corporate website was among the top 25 global internet projects and won in two categories: B2B Standard of Excellence and Manufacturing Standard of Excellence. The Company’s corporate website also won the Digital platform: B2B corporate website category at the 3rd annual Digital Communications AWARDS (Germany).

Enterprises

Mikhailovsky GOK

Named the Most Environmentally Responsible Company in the Kursk Region at the 3rd Russian Industrial and Environmental Forum RosPromEco 2015.

Ural Steel
  • Winner of the Orenburg Quality Leader 2015 regional competition in the Stable Quality and High Level of Competitiveness category (in non-food products) for rolled steel used in bridge construction;
  • Winner of the 12th Metals and Mining Companies with a High Level of Social Efficiency industrial competition in the Environmental Activity and Resource Conservation category.
OEMK

3rd place in the “Russian Organisation with Highly Effective CSR" regional competition in the “For contribution to solving social problems in local communities and corporate charity development” category.

Events after the reporting date2

BO-07 series bonds

Metalloinvest issued BO-07 series 10-year bonds for a total amount of RUB 5 billion with a coupon rate of 11.90% and an early redemption option for the issuer in 7 years.

Standard & Poor’s credit rating

Standard & Poor’s affirmed the Company’s longterm foreign and local currency ratings at BB with a negative outlook.

Long-term pre-export financing

Metalloinvest signed a USD 400mn long-term preexport credit facility (“PXF”) agreement with a syndicate of international banks with an option to increase the amount up to USD 450 million. The PXF is divided into two tranches: USD 150 million five-year tranche with a three-year grace period and USD 250mn seven-year tranche with a five-year grace period. UniCredit Bank Austria AG and Sberbank of Russia acted as coordinators and mandated lead arrangers of the deal.

BO-02 and BO-08 bonds

Metalloinvest issued BO-02 and BO-08 series bonds totalling RUB 15 billion. The bonds have a maturity period of 10 years (3,640 days) and a put option exercisable in 5 years (1,820 days) at the bondholders’ request.

Winner of the Russian Business Leaders: Performance and Responsibility 2015 competition

Metalloinvest was victorious at the Russian Business Leaders: Performance and Responsibility 2015 nationwide contest, winning the “For contributions to solving regional social problems” category.

Moody’s Investors Service credit rating

Moody’s Investors Service affirmed the Company’s corporate rating at Ba2 with a stable outlook.



1 July 2015–October 2016 under the previous maturity schedule.

2 from 1 January to 1 April 2016

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