21 April 2011 NLMK Group

NLMK acquires full control over rolling assets of its joint venture with Duferco

NLMK (LSE: NLMK) (“NLMK” or “the Company”), one of the world’s leading steel companies, has signed definitive agreements to purchase a 50% interest in Steel Invest and Finance (“SIF”) from Duferco Group (“Duferco”) for an all cash consideration of c.$600m, payable in four equal annual installments. The transaction will result in SIF becoming a 100% owned subsidiary of NLMK. The Company will finance the transaction out of existing cash funds. The transaction is subject to customary regulatory approvals in the EU and is expected to close in Q2 2011.

The transaction will significantly enhance NLMK’s international downstream portfolio through the complete integration of 7 rolling and several distribution facilities with total rolling capacity of over 5,5 m tpa and 2010 combined output of 3,2 m tpa. At the closing of the transaction SIF will transfer to a Duferco company certain non-core assets consisting of long products operations of 0.3 m tpa capacity and an Electric arc furnace with 0.9 m tpa of steelmaking capacity, and will transfer to a shareholder of Duferco the Belgium-based Carsid steelmaking operations with 2.1 m tpa slab capacity.

As part of the consideration for the transfer of the non-core assets, SIF will cancel approximately EUR230 million of Duferco shareholder loans.

Rationale for the transaction

This acquisition fits the Company’s ongoing strategy to create a dynamic international business further enhancing its competitive strengths on the world’s market. It will reinforce NLMK’s positions as a supplier to its core markets in Western Europe and the USA and substantially improve the Company’s downstream product offering.

This acquisition will enable NLMK to:
• Secure further processing and distribution of crude steel (slabs) to be produced with the commissioning of the new 3.4 million tpa BF in Lipetsk, Russia in 2011;
• Significantly increase global finished steel capacity with an emphasis on premium clients in automotive, energy and machinery building industries in the European and North American markets;
• Increase the speed and quality of supply of finished products to the European and American customers;
• Mitigate risks associated with concentration on one single product (slabs) and single market (S.E.Asia);
• Use the acquired distribution operations in Europe as a basis for building a modern distribution network on the established and premium European markets;
• Improve quality of earnings and deliver significant growth in turnover and cash flow; and
• Continue further efficiency improvements through the adoption of management best practices and technology transfer across the Group.

Alexey Lapshin, CEO of NLMK, said: “NLMK is actively growing its business and this acquisition is in line with our strategy to deliver sustainable long term growth.

“This move makes us a truly global steel player with a footprint in 3 continents, positioned to exploit geographic advantages. Our mining and steelmaking operations are located in one of the best places to produce crude steel efficiently while the rolling assets are now located in close proximity to our key clients. Such a combination can allow cost advantages to be leveraged across the value chain.

“Since the formation of the JV we have been growing our sales to the acquired rolling assets and this


Maria Simonova

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