Metalloinvest

Overview

METALLOINVEST is one of the largest iron ore and HBI producers and suppliers in the world. The company’s proven iron ore reserves according to JORC comprise 14.9 billion tones.

In 2010, according to CRU Group, the company was:

• the fifth largest commercial iron ore producer in the world,
• the largest commercial iron ore producer in Europe and the CIS,
• the largest supplier of merchant HBI in the world,
• the largest producer of HBI/DRI in Europe, Russia and the CIS,
• the fifth largest steel producer in Russia.

The company is a leading producer of beneficiated iron ore products, processing the majority of its primary iron ore concentrate production into value-added products, such as high-grade iron ore concentrate, iron ore pellets and HBI/DRI. The company also produces niche steel products.

History

Formation

From 1999 till 2006, METALOINVEST’s shareholders consolidated the company’s major assets - Oskol Elektrometallurgical Plant (OEMK), Lebedinsky Mining and Processing Plant (Lebedinsky GOK), Ural Steel, and Mikhailovsky GOK (MGOK) - through a series of mergers and acquisitions. In 2008, Joint Stock Company Gazmetall, which controlled the assets, was renamed into Joint Stock Company «Holding Company «METALLOINVEST».

History of operations

In 2000, the first facility for producing hot briquetted iron started operation at Lebedinsky GOK. Two years later a new steel-rolling mill-350 was put into operation at OEMK. Construction of HBI plant-2 at Lebedinsky GOK started in 2005. In 2007, HBI plant #2 started production and the company introduced long-term contracting standards for foreign and Russian customers. The company modernised Rolling mill 2,800 and electric arc furnace and extended their capacity up to one million tonness of steel per year in 2008. The same year, METALLOINVEST started construction of burning kiln No. 3 at Mikhailovsky GOK, and launched of construction works at Hamriyah Steel Plant in the UAE. In 2009, METALLOINVEST and Rosnedra signed a license agreement for development Udokan copper deposit, and Russian government approved a decision to provide state support to Lebedinsky GOK, Mikhailovsky GOK, OEMK and Ural Steel. METALLOINVEST and CHTPZ Holding - Russian producer of welded and seamless steel tubes & pipes – agreed on cooperation in implementation of strategic infrastructure projects. In 2010, the company became the first ferrous metal company in Russia to complete REACH registration procedure. The same year IMC confirmed the increase of METALLOINVEST’s iron ore JORC reserves from 13,8 billion tonnes to 14,9 billion tonnes.

Operations

Location of assets

METALLOINVEST's main production facilities at LGOK, MGOK and OEMK are located in the European part of Russia. Ural Steel is located in the Ural region of Russia.

Lebedinsky GOK

Lebedinsky GOK (LGOK) is Russia’s largest iron ore production facility (by production volume), according to Rudprom, with an output of approximately 19.8 million tonnes of iron ore concentrate and 8.8 million tonnes of iron ore pellets. In 2010, LGOK produced 20% of sintering ore and concentrate in Russia. LGOK has iron ore reserves of approximately 4.2 billion tonnes according to JORC. The plant is the only Russian producer of high value-added HBI, a direct substitute for ferrous scrap materials, which does not contain impurities, such as nonferrous metals.

LGOK’s HBI operations began in 2001 with the opening of the HYL-III facility with the production capacity of 1.0 million tonnes of HBI per year. In 2007, LGOK completed the construction of HBI plant #2, utilising MIDREX technology, with a production capacity of 1.4 million tonnes of HBI per year. LGOK’s current capacity is 2.4 million tonnes of HBI per year. Due to the growing demand in the CIS, Europe, Asia and the Middle East, the company is planning an expansion of HBI production at LGOK.

LGOK’s products:

• Iron ore concentrate
• High-grade iron ore concentrate
• Dried ordinary iron ore concentrate
• Non-fluxed pellets
• Fluxed pellets
• HBI
• Screening of iron ore pellets and HBI fines

Mikhailovsky GOK

Mikhailovsky GOK (MGOK) is Russia’s second largest iron ore production facility (by production volume), according to Rudprom, with an output of approximately 15.3 million tonnes of concentrate and 9.7 million tonnes of iron ore pellets in 2010. MGOK has the largest measured proven and probable iron ore reserves in Russia with 10.7 billion tonnes according to JORC.

From 2001, the company implements an investment programme aimed at upgrading MGOK’s equipment and introducing modern technologies for iron ore mining and processing. The company completed construction of the plant for emulsion explosives components in 2001. In 2006, the flotation technology for re-dressing of magnetite concentrate. In 2007, MGOK started construction of pelletising machine #3 for iron ore pellets and put into operation a flotation unit designed to boost the output of hematite concentrate from the tails of its own magnetite concentrate production. This unit is used in production of high grade concentrate for flotated high grade iron ore pellets. In 2008, the first hematite concentrate was produced from the production wastes at the crushing and dressing complex. In 2010, MGOK commenced construction of a pelletising plant with capacity of 5.0 million tonnes per year.

MGOK’s products:

• Blast-furnace ore
• Sintering ore
• Iron ore concentrate
• Blast-furnace concentrate - a mixture of ordinary iron ore concentrate and sintering ore
• High-grade iron ore concentrate
• Dried iron ore concentrate
• Non-fluxed pellets
• Fluxed pellets

OEMK

Joint Stock Company «Oskol Elektrometallurgical Plant» (OEMK), which started its production in 1982, is located at Kursk Magnetic Anomaly. OEMK utilises MIDREX DRI technology along with electric arc smelting, which allows it to produce metal, which is free of harmful residual elements and impurities. The plant is located in close proximity to LGOK, which supplies OEMK with high-grade iron ore concentrate. In 2010, OEMK was Russia’s seventh largest steel production facility in terms of steel and finished product output, according to Chermet, with an output of 3,3 million tonnes of high-quality crude steel. OEMK produces pipe billets, roller-bearing steel, high quality bars for the automotive industry and steel for the hardware industry. It is the only plant in the CIS which uses significant portion of DRI as a steelmaking feed. The company plans to increase crude steel capacity up to 3.85 million tonnes per annum in the medium term from its current level of 3.3 million tonnes per annum. In 2008, the company put into operation a RH-vacuum degasser. Laddle Furnace #3 was brought online in 2009. In 2010, the company constructed a new finishing line with a capacity of 300 thousand tonnes per annum at the Rolling Mill 350. Ladle Furnace #3 was brought online in 2009, and an RH-vacuum degasser was put into operation in 2008. Larger reaction pipes have been installed on the reformer at DRI-1 plant, which boosted productivity from approximately 57 tonnes per hour to approximately 104 tonnes per hour .

OEMK produces:

• Fluxed and oxidised pellets
• DRI products
• Crude steel (billets)
• Heavy section rolling mill 700 products, including heavy sections, square billets and pipe billets
• Medium and small section rolling mill 350 products, including medium bars, small bars and wire coils for the engineering, automotive hardware and ball bearing industries

Ural Steel

The Joint Stock Company Ural Steel (Ural Steel) was founded in 1955 on the base of a unique naturally alloyed iron ore deposit and commercial reserves of limestone, nickel and fire clay. In 2010, Ural Steel was Russia’s eighth largest steel production facility in terms of steel and finished product output, according to Chermet, with an output of 2.8 million tonnes of crude steel. The plant produces strips for large-diameter pipes, pipe billets, bridge construction steel and heavy plates, as well as square billets, heavy sections, extruded profiles, pig iron, coke and coke by-products. At Ural Steel, METALLOINVEST upgraded the electric arc furnace shop and the Rolling Mill 2800. Currently, the plant is undergoing a gradual reconstruction and replacement of a number of facilities. A new coke-oven battery #6 with capacity of 690 thousand tonnes per annum is under construction. The new battery will utilise dry quenching technology and will be equipped with dedusting system, making it more environmentally friendly. The company constructs a vacuum degasser with capacity of 1.2 million tonnes per annum in the electric arc furnace shop, which will result in improvement of quality of the steel product mix.

Ural Steel produces:

• Sinter
• Coke
• Hot metal
• Crude steel
• Rolling mill products

Other operations

Ural Scrap Company

Ural Scrap Company was founded in 2005 to purchase, process, and deliver ferrous scrap to METALLOINVEST Steel Division companies. Ural Scrap Company’s produces high-quality scrap from the Ural Steel and OEMK drop-hammer shop by-products and by-products collected by Ural Scrap Company. Ural Scrap Company has scrap-processing facilities that allow it to utilise a wide range of sizes of steel scrap. These facilities include special cutting and packaging lines for processing the scrap so that it is ready for use in the smelting process. In 2010, the volume of processing and deliveries of ferrous scrap amounted to 2.1 million tonnes, most of which was sold to OEMK and Ural Steel. In 2010, Ural Scrap Company had a 10% market share of the delivery of ferrous scrap in Russia by volume, according to MetalCourier. Long-term cooperation with leading foreign manufacturers of scrap processing equipment enables the company to process up to 2.5 million tonnes of scrap metal per year.

Hamriyah Steel

Hamriyah Steel Plant in the UAE has a target rebar production capacity of 1 million tonnes per year.

Metalloinvesttrans

Metalloinvesttrans (MIT) is METALLOINVEST’s transport company founded in 2005. Metalloinvesttrans transports iron ore raw materials for the company’s enterprises (Lebedinsky GOK, Mikhailovsky GOK, OEMK and Ural Steel), as well as for other steel making companies, coal and broken stone mines. As at 31 December 2010, MIT operated 8,266 units of rolling stock. Its transportation volumes increased from 39.7 million tonnes in 2009 to approximately 43.5 million tonnes in 2010.

MetallinvestLeasing

MetallinvestLeasing (MIL) was founded in 2005 and leases technical equipment, custom technologies, vehicles, and railway cars to a wide spectrum of industries. Its main leasing partners include large Russian mining and metallurgical enterprises, transport companies, and financial institutions. According to Expert RA, MetalloinvestLeasing was the 20th largest leasing company in Russia in 2010. In 2006, MIL’s principal customers were MGOK and MI. In 2007, MIL acquired the assets of OJSC Leasing Company Limos-M which provided services to LGOK and OEMK. As of 31 December 2010, the size of its leasing portfolio was RUB 15.7 billion.

FERROBANK

FERROBANK provides banking services to private companies.

Corporate Structure

Board of Directors

• Farhad Moshiri - Chairman
• Andrey Varichev - Member of the Board
• Ken Costa - Independent Member of the Board
• Nikolay Krylov - Independent Member of the Board
• Vadim Levin - Independent Member of the Board
• Pavel Mitrofanov - Member of the Board
• Yuriy Nadeev - Member of the Board
• Eduard Potapov - Member of the Board
• Andrey Prosyanik - Member of the Board
• Andrey Ugarov - Member of the Board
• Sergey Shuvalov - Member of the Board
• Nazim Efendiev - Member of the Board

Management

• Eduard Potapov, Chief Executive Officer, Management Company METALLOINVEST LLC
• Andrey Prosyanik, First Deputy CEO, Sales Director, Management Company METALLOINVEST LLC
• Andrey Ugarov, First Deputy CEO, Chief Operating Officer, Management Company METALLOINVEST LLC
• Pavel Mitrofanov, Deputy CEO, Chief Financial Officer, Management Company METALLOINVEST LLC
• Yuriy Nadeyev, Deputy CEO, Chief Security Officer, Management Company METALLOINVEST LLC
• Nazim Efendiev, Deputy CEO, Government Relations Director, Management Company METALLOINVEST LLC, Managing Director of JSC "Ural Steel"
• Sergey Shuvalov, Deputy CEO, Legal and Corporate Affairs Director, Management Company METALLOINVEST LLC
• Dmitry Babkin, Strategy and Investment Director, Management Company METALLOINVEST LLC
• Julia Mazanova, Social Policy and Corporate Communications Director, Management Company METALLOINVEST LLC
• Andrey Varichev, Chief Executive Officer, Holding Company METALLOINVEST JSC
• Sergey Markov, Deputy CEO, Holding Company METALLOINVEST JSC

Financial Results

(in billion USD)

Production

(in million tonnes)

Sales

METALLOINVEST sells its products in Russia and globally. The largest domestic customers are Evraz, NLMK, KOKS Holding and Mechel. The company also supplies iron ore and HBI products to MMK, Severstal, Kosogorsky Iron Works and LMZ Svobodny Sokol. The largest domestic customers of the Steel Division are Chelpipe, Revyakinskiy MZ, Vyksunskiy MZ and Severstal-Metiz.

The company’s main consumers are:

• China: Baosteel Group, Shagang Group, Hebei Jingye I&S, Tianjin Pipe, Liuzhou I&S, Yanshan I&S, Xilin Group, Jianlong I&S, and Anyang I&S;
• Turkey: Erdemir and Kardemir;
• UK and Holland: plants of Tata Steel Group;
• Bahrain: a plant owned by Gulf Industrial Investment Co.;
• France, Germany, Belgium, and Spain: plants of ArcelorMittal Group;
• India: Varrsana Ispat, Mono Steels and National;
• Japan: Kobe Steel.

In 2010, the company's steel division made approximately 66% of its total sales (by volume) to foreign customers. The main export markets for steel division are the Middle East & North Africa, Asia (excluding China), the CIS, Western Europe. The principal export markets for OEMK’s semi-finished products (blooms, square billets, rolled square billets) are Europe, the Middle East and North Africa and sections and pipe billets are exported to France, Germany, Taiwan, Nigeria, Egypt, India and Pakistan. The principal export markets for Ural Steel’s products are Europe (including Italy, the Baltic countries), Asia (including Japan, Korea, Thailand, Taiwan, Bangladesh and Vietnam), and the Middle East.

Shipments of iron ore, pellets, HBI/DRI, HBI fines and pellets

(in million tonnes)

Competition

Domestic competitors include Evraz Group and Novolipetsk Steel.

External links

• Metalloinvest (English)