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Key projects

In 2016, the Company’s capex totalled USD 290 million

Major investment projects

Metalloinvest continues to implement its extensive capex programme aimed at improving operational efficiency and increasing the share of high value-added products. In 2016, Lebedinsky GOK’s HBI-3 Plant, the Company’s key investment project, entered the final stage of construction. The Company continued with its projects to improve the quality, expand the range and boost output of highmargin steel products.

Andrey Ugarov

First Deputy CEO and COO

Mining Segment

Mikhailovsky GOK

  • Ramp up of production at Pellet Plant #3 to design capacity
  • Construction of a crushing and conveyor facility
  • Construction of a concentrate reception facility

Lebedinsky GOK

  • Construction of a third hot briquetted iron plant (HBI-3 Plant)
  • Development of an external power supply system
  • Cyclical and continuous mining transportation system

Steel Segment

Ural Steel

  • Construction of Rolling Heat Treatment Furnace #1 and Quenching Press 1
  • Upgrade of Continuous Casting Machine #1 and the vacuum degasser

OEMK

  • Upgrade of Metallisation Unit #2 involving the replacement of reformer tubes and construction of a pellet reception section
  • Installation of a reduction and calibration unit in the medium section of Rolling Mill 350
  • Upgrade of gas purification units at electric arc furnaces (DSP–150) #1 and 2

Mining Segment

Boosting our HBI market position


Construction of HBI-3 Plant at Lebedinsky GOK

In 2016, HBI-3 Plant entered the final stage of construction. Its launch will enable Metalloinvest to meet increasing demand from steel companies for high-quality metallised raw materials and strengthen its leading position globally in merchant HBI production.

The project is being implemented in strict compliance with the approved timeline. In 2016, the main construction works and installation of HBI units were completed, and the core systems were cold-tested. In 2017, the Company plans to complete testing and commissioning works and bring the plant to its operational capacity.

The project is being implemented by a consortium made up of Primetals Technologies and Midrex Technologies (contract signed in 2012), and Russian design company GIPROMEZ (part of Metalloinvest). Rudstroy (also part of Metalloinvest) is responsible for construction, assembly and equipment installation works.

The plant’s production capacity is set to amount to 1.8 million tonnes per year.

The project includes upgrading the existing process flow, including beneficiation and pellet plants. In particular, the launch of fine screening at the concentrate production stage enabled the Company to bring new products to market, including high-grade concentrate with an iron content of over 70%, and high basic iron ore pellets with an iron content of 65.8%, while the upgrade and renovation of pellet plants boosted production efficiency and iron ore pellet output.

The project is scheduled to be completed for 2017.

Strengthening our position in the high valueadded iron ore product segment


Ramp up of Mikhailovsky GOK’s Pellet Plant #3 to design capacity

The construction of Pellet Plant #3 is a unique project, both in terms of scale and significance, encompassing all processing stages, from iron ore concentrate filtration and pelletisation to pellet roasting and shipments to customers.

The new pellet plant embraces the newest technological solutions, including automated systems to monitor technological data and manage production processes. When compared with the existing pellet plants, Pellet Plant #3 boasts higher productivity, an enhanced energy-efficiency profile, and state-of-the-art gas flow systems minimising air pollutant emissions. Notably, Pellet Plant #3’s process systems were all designed, developed and built by Russian companies.

The plant will enable Metalloinvest to increase Mikhailovsky GOK’s pellet production capacity to 15 million tonnes per year (up 50%). In 2016, Pellet Plant #3 reached its design capacity.

Construction of a concentrate reception facility at Mikhailovsky GOK

In 2016, Mikhailovsky GOK started to construct a concentrate reception facility, to meet growing demand for high-quality iron ore raw materials from both Russian and international producers. This project will ensure timely redistribution of inventory flows within the Company, balanced utilisation of its capacities, more flexibility in responding to market needs, and additional output of value-added products offered to consumers. At the same time, the Company will be able to retain its traditional iron ore concentrate sales markets.

The project set to be completed in 2017.

Efficient development of iron ore resources


Construction of a crushing and conveyor facility at Mikhailovsky GOK

In 2015, Metalloinvest began the construction of the crushing and conveyor facility in Mikhailovsky GOK’s open pit mine. The project envisages two crushing and conveyor facilities at the south-eastern and north-eastern tips of the open pit.

The facilities will help the Company reduce the cash cost of production, achieve annual magnetite concentrate production targets, ensure the required quality, bring down the stripping ratio, improve railway transport performance, reduce the number of mining vehicles and loading devices, and start developing previously inaccessible ore reserves to provide an industry-leading ore charge makeup.

The project is set to be completed in 2019.

Continuous cycle ore mining at Lebedinsky GOK’s open pit mine (construction of continuous cycle mining facilities at Lebedinsky GOK’s open pit mine)

In 2015, Lebedinsky GOK launched pre-project planning to introduce a continuous cycle mined materials transportation system. The new continuous cycle mining facilities and related infrastructure will reduce ore production costs by increasing the efficiency of mining materials transportation technology, reducing the number of mining vehicles and using them more efficiently, and addressing the issue of maintaining the production capacity of a non-oxidised quartzite open-pit mine.

In 2016, the Company selected key technical solutions related to this project, held a tender to appoint a design and survey contractor, and began to look for the supplier of key technological equipment.

The project is scheduled to be completed in 2020.

Technical upgrade

In 2016, Mikhailovsky GOK’s mining transportation division was boosted by the acquisition of two locomotive units equipped with dump cars, a 130-tonne dump truck, and an EKG–15 excavator. The Company signed contracts for new high-performance equipment, including three 220-tonne large dump trucks and an excavator with an 18m3 bucket, to be delivered to Lebedinsky GOK in 2017.

Enhanced energy security and power supply reliability


Development of an external power supply system at Lebedinsky GOK

The development of the external power system will provide a reliable and efficient power supply for the enterprise’s growing production capacities.

Stage-by-stage project delivery will help synchronise the launch of new production and generating capacities, and optimise resource utilisation.

The project includes the construction of the 110 kV main stepdown substation #7, whose busbars consolidate the electric capacity of three regional master substations; the reconstruction of the existing 110 kV power lines for an even power load distribution at Lebedinsky GOK; the construction of two new 110 kV power lines; and the reconstruction of the existing Lebedi-330 substation.

Steel segment

Boosting customer-centricity and maximising steel segment returns


Installation of a reduction and calibration block in the mid-size production line at OEMK’s Rolling Mill 350

In 2016, OEMK completed the design and pre-installation work for the reduction and calibration block in the mid-size production line at Rolling Mill 350. The project will improve the quality and properties of rolled steel (most notably, SBQ bars), reduce metal losses from turning, and ramp up production at Rolling Mill 350 and the finishing shop.

For the purposes of this project, SMS MEER GmbH (Germany) was contracted as an equipment supplier and service provider, while GIPROMEZ, a Metalloinvest subsidiary, was engaged to provide design specifications and estimates.

The project is scheduled to completed in 2017.

Construction of Roller Treatment Furnace #1 and Heat Treatment Machine #1 Сomplex at Ural Steel

This new facility will allow Ural Steel to retain its position in the heat-treated rolled steel market, increase the share of highgrade rolled steel in its total output, and ensure the stability of the mechanical properties of its heat-treated rolled steel by improving heating conditions in the new furnace and cooling conditions in the new heat treatment machine.

In 2016, the Company signed an equipment supply contract with LOI Thermprocess (Germany) and a design contract with GIPROMEZ (Moscow).

The project is scheduled to be completed in 2018.

Upgrade of Continuous Casting Machine #1 (CCM #1) and the Vacuum Degasser at Ural Steel

The upgrade of Continuous Casting Machine #1 and the Vacuum Degasser is aimed at expanding the Company’s presence on the Russian and CIS steel product markets, diversifying its production capacities, and increasing the efficiency of Ural Steel. The launch of the Continuous Casting Machine will enable the enterprise to supply wheel billets to Vyksa Steel Works (part of OMK) and rail billets to Aktobe Rail and Section Works (Kazakhstan).

In 2016, Metalloinvest signed contracts with SMS Concast AG and Danieli for the delivery of key equipment to upgrade Continuous Casting Machine #1 and the Vacuum Degasser, and a design contract with GIPROMEZ. Design work began on CCM #1 and the Vacuum Degasser.

The first product shipments are scheduled for 2017.

Technical upgrade

As part of the steel segment’s production programme, the Company purchased mill rolls for OEMK and Ural Steel and upgraded the capital assets, machinery and equipment of its scrap enterprises.

Increased steel segment efficiency


Upgrade of DRI Unit #2, involving the replacement of reformer tubes and the construction of a pellet reception section at OEMK.

The project focuses on enhancing the efficiency of the steel segment through a more intensive utilisation of the Company’s own iron ore feedstock in the production of high value-added products.

In 2016, Metalloinvest completed design work and signed purchase contracts with Aerzen RUS for process and inert gas compressors, with Schmidt-Clemens Spain for reformer tubes, with FLSmidth Wiesbaden (Germany) for a settling tank drive, and with Ventilatorenfabrik Oelde GmbH (Germany) for a fume extractor. Construction and installation has begun.

The project is scheduled to be in completed in 2017.

Environmental responsibility


Upgrade of gas purification units at OEMK’s electric arc furnaces (EAF 150) #1 and 2

The Company has completed the upgrade of OEMK’s gas purification units.

The first stage of the project was implemented in June 2013, covering gas purification systems at electric arc furnaces #3 and 4. As a result, the residual dust content of waste gases fell by 60%, while the furnaces’ dust emissions dropped by more than a third. Workplace dust exposure among steelworkers decreased by an average of 50%.

The upgrade of the gas purification units at electric arc furnaces (EAF 150) #1 and 2 was commissioned in April 2016, reducing dust content from waste gases by over 75%.

Increased efficiency of business processes Industry 4.0 Programme

In 2016, the Company launched its Industry 4.0 Programme to create an integrated management system. The programme is designed to reduce costs, boost margins and ensure accounting transparency and timely decision-making.

The Programme focuses on transformation, increasing the efficiency of the Company’s business processes, and enhancing planning accuracy and plan execution management.

The Programme includes three components:

  • creating an integrated financial and business management system, including the development of methodology for budgeting and IFRS account consolidation;
  • setting up a multifunctional shared service centre;
  • developing methodology for strategic corporate KPIs.

The integrated management system, based on SAP principles, creates a shared information space for all of Metalloinvest’s enterprises based on uniform rules and standards. The information system helps improve the speed and efficiency of managerial decision-making, simplify data entry and sharing between units, and accelerate report preparation.

The multifunctional shared service centre consolidates standard transactions for all subsidiaries. This centralisation will help standardise services used company-wide.

Andrey Varichev, CEO of Management Company Metalloinvest, chairs the Programme’s Governing Board and supervises its implementation personally.