Stronger Investment Attractiveness

In 2016, Metalloinvest continued to develop its corporate risk management system as planned. The Company has launched a mechanism to categorise possible risk events and issued guidelines and policies to regulate related processes. Metalloinvest is also introducing risk response procedures and implementing quantitative assessments of potential damage.

Long-term ratings confirmation

Cooperation with rating agencies is an integral part of the Company’s work to increase its investment appeal. In 2016, such agencies as Standard & Poor’s, Fitch, and Moody’s upheld their “BB” / “Ba2” long-term corporate credit ratings of the Company.

100% of Holding Company Metalloinvest transferred to the Russian jurisdiction

The full consolidation of JSC Holding Company Metalloinvest on the balance of USM Metalloinvest LLC was a key event of 2016. By streamlining our ownership structure, we will be able to improve the Company’s transparency and the quality of corporate governance.

Metalloinvest continuously enhances its public disclosure and interaction with the investment community in a bid to comply with international best practices of disclosure. At present, the Company discloses information on its financial and operating performance, social and other activities in a level of detail and within the timeframes common for public companies.

Metalloinvest participates in international conferences organised by investment banks and holds its Investor Day annually in Moscow, continuously expanding its base of existing and potential investors.

Metalloinvest projects in the field of investor relations and corporate communications were highly appreciated by the expert community in 2016.

Growth in shareholder value

Stability in highly volatile conditions

Metalloinvest successfully weathered the sharp fall in iron ore prices at the end of 2015 and the start of 2016, demonstrating resilience in an unfavourable market environment. The Company demonstrated the viability and effectiveness of its business model when faced with unstable external conditions.

Metalloinvest continued to pursue its strategic priorities, aimed at growing the long-term value of the business. The Company reduced costs, introduced new technological developments to optimise its operations and cut unit costs. Metalloinvest’s broad, diversified product range enabled it to react flexibly to changes in domestic and international markets.

$4.15 billion – gross debt in 2016: lowest level in five years

The Company’s strong business profile, clear development strategy and high level of transparency for investors has allowed Metalloinvest to restructure its debt portfolio and maintain financial stability in highly volatile market conditions. The Company manages its expenses and debt load effectively and reaches its operational and financial targets.

2016 was a difficult year but it showed that Metalloinvest has strength in depth and is able to react flexibly to external challenges without substantial losses in efficiency.

Increase in operational and management efficiency

Metalloinvest is increasing the efficiency of its iron ore deposit developments, reducing ore mining and development costs, as well cutting expenditure associated with the production of metallised and steel products.

Up to 70.4% - iron content of high quality concentrate produced at Lebedinsky GOK since 2016

The Company is implementing projects to construct a crushing and conveyor complex at Mikhailovsky GOK and continuous cycle ore mining technology at Lebedinsky GOK. Metalloinvest is constantly upgrading its beneficiation equipment, which enabled it to bring new products to market in 2016, including: high quality concentrate with iron content of over 70% and high basic pellets with iron content of 65.8%.

Metalloinvest is in the first quartile of the cost curve among global producers of pellets and HBI/DRI

Pellet and HBI/DRI production costs^* at Metalloinvest’s enterprises are significantly lower than at the Company’s global competitors. In 2016, Metalloinvest maintained its position in the first quartile of the cost curve among global producers of these products.

Metalloinvest is increasing efficiency and productivity by automating business processes. The Company is implementing a project that will introduce an automated planning and management system using ERP technology. This project will enable Metalloinvest to boost the overall efficiency of interrelated management processes, switch to a rolling planning system, and allow customers to track their orders.

In order to increase the efficiency of Metalloinvest’s business units, the Company is creating a unified centre for planning and management of maintenance works. The unified centre will enable the Company to optimise maintenance works, standardise planning processes and repair activities, and create a unified system to co-ordinate repair schedules.

As part of its efforts to become more customer-focused, Metalloinvest is carrying out initiatives to develop its customer service and improve interaction with consumers. The Company regularly holds coordination meetings with key customers, obtains certification for its products in accordance with international and Russian standards, and develops new steel grades.

^{*Excluding shipping costs}

Margin growth

Focus on products with high added value

The launch of the Company's third hot briquetted iron plant (HBI-3) will allow Metalloinvest to increase output of HBI to 4.5 million tonnes per year and secure its leading position in the global market.

Mikhailovsky GOK’s Pellet Plant #3 reached its target output in 2016, increasing Metalloinvest’s total pellet production capacity by 5 million tonnes per year.

The implementation of a number of investment projects at OEMK and Ural Steel will allow the two enterprises to launch new products, such as: round billets, merchant cast rail and moulded billets, as well as increase the quality of SBQ, which will consolidate Metalloinvest’s position in the high-quality rolled steel market.

Optimal supply routes

Metalloinvest selects sales markets based on regional market conditions and economic growth prospects. The Company’s wide range of products and flexible logistics chain (routes to Asia and Europe through ports in the Black Sea and the Baltic Sea) enable it to compete successfully in its major markets with both leading global suppliers and local producers.