MMK Growth Prospects - Magnitogorsk Iron & Steel Works

Magnitogorsk Steel (MMK)
June 2011

Global Steel Industry Highlights
World Steel Production, mln tonnes
Finished Steel Production/Consumption in China, mln tonnes
1 000
750
500
250
0
656
787 810
574
627
ROW
China
2009 2010 2011Е
685
800
700
600
500
400
300
200
100
0
-100
632
657 677 680 685 690
602 620 630 639 649
576
573
535
-24 -24 -25 -26 -27 -28 -29
2009 2010 2011E 2012E 2013E 2014E 2015E
Production Consumption Export
Source: WSA, Nomura
World Steel Consumption, mln tonnes
Apparent Steel Consumption Growth, % y-on-y
1 500
1 400
1 300
1 200
1 100
World steel consumption
continues to grow
1 215 1 207
1 119
15%
1 284
6%
1 359
6%
1 441
40%
35%
30%
25%
20%
15%
10%
5%
38%
33%
10% 11%
10%
7%
Russian market demonstrates the
highest growth rates
24%
6% 7% 6%
5% 4%
5% 5% 4%
1 000
2007 2008 2009 2010 2011E 2012E
0%
Russia NAFTA EU-27 China Middle East
2010 2011E 2012E
Source: WSA
Source: WSA, Nomura
2

Russian Steel Dynamics
Steel Consumption in Russia and Export, mln tonnes
Russian Import Structure, mln tonnes
80
60
40
20
0
30,0
3,2
10,4
13,7
27,3
4,0
13,7
30,1
4,4
15,1
32,9
16,5
19,8 21,9 24,0
2009 2010 2011E 2012E
Flat steel Long steel Other steel products Export
4,8
7
6
5
4
3
2
1
2,7
1,7
1,9
0,6
0,7
0,5
1,3
0,9
1,0
0,4 0,3
0,3
0,9 1,2 1,2
Russia sees solid import
volumes, mostly of HVA
products
1,0
0,4
0,9
0,2
0,8
HVA products
2,0
1,8
1,7
0,8
0,8
0,7
1,0
1,2
1,3
0,4 0,4 0,5
1,4 1,5 1,6
0
2006 2007 2008 2009 2010 2011E 2012E
Coated products C/r products Thick plate H/r products Long products
Source: Metal Expert
BOF Shop
Source: Metal Courrier
Domestic Flat Steel Consumption, mln tonnes
24,0
25
21,9
0,2
19,8
0,2
2,7
20
0,2
2,5
3,2
2,3
13,7
2,9
15
2,6
0,1
8,6
2,2
7,7
1,4
6,7
10
4,9
5
5,1
8,0 8,5 9,3
0
2009 2010 2011E 2012E
Construction Pipe plants Machinery Coating and metalwork Other
Source: Metal Expert
3

Jan 09
Feb 09
Mar 09
Apr 09
May 09
Jun 09
Jul 09
Aug 09
Sep 09
Oct 09
Nov 09
Dec 09
Jan 10
Feb 10
Mar 10
Apr 10
May 10
Jun 10
Jul 10
Aug 10
Sep 10
Oct 10
Nov 10
Dec 10
Jan 11
Feb 11
Mar 11
Apr 11
May 11
Jun 11
Russian Market Growth Prospects
Domestic Steel Price Dynamics, USD/tonne
Russian Steel Consumption by Industry, mln tonnes
1 200
1 000
800
600
400
Re-bar H/r Flat Steel C/r Flat Steel Galvanized steel
12,0
10,0
8,0
6,0
4,0
2,0
0,0
11,0
10,4
9,1
6,1 6,2
9,4
8,6
7,8
2,8
2,5
2,1
1,1
Steel consumption by major
industries is bound to grow
by 20% on average
3,2
2,9
2,6
2,2
Pipe making Construction Machine building Metalware
(incl. car-makers)
2009 2010 2011E 2012E
1,4
1,3
1,2
0,9
Bridge&Ship
building
Source: Metal Torg
Capacities Utilization in Russia, %
100%
90%
80%
70%
Source: Metal Courrier
MMK Finished Products Output, th. tonnes
1 000
800
600
400
60%
50%
Pipe-making hits 100% utilization rate
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
200
0
Source: Chermet
Cast Iron Crude Steel Rolled Steel Steel Pipes
Source: MMK
4

MMK – Russian Steel Leader
Largest single-site steelmaker in Russia with current crude steel capacity of 14 mln tonnes
Currently planned production growth of more than 70% by 2017 (45% by 2013) from 2010
Production of HVA products currently expected to almost double by 2013 from 2010, representing 45% share of
total production volumes
Import substitution strategy: favorable geographical location to meet strong demand from the most intensive steel
consuming regions of Russia – the Urals and Volga regions
Great play on Russian infrastructure:
• 17.7% domestic steel market share enables MMK to benefit from premium pricing for domestic sales
• Largest exposure to pipe-manufacturing, auto-building and heavy machinery
Disciplined investment strategy with priority given to investments in high-return projects and high-quality assets
investments approach
The most modern asset base – over USD 7 bn of investments over the last 4 years
Mill 5000 Shop Mill 5000 Galvanizing Line
5

ММК Geography
Interkos-IV
Metals service center
and stamped-product
factory with 250 th.
tpy capacity.
69%
Profit
Covers 100% of MMK
scrap needs.
Belon
Prioskolsky GОК
Largest iron-ore
deposit, more than 2
bn tonnes of reserves.
6%
15%
6%
4.2 mln tonnes of
coking coal mined in
2010. Covers 50% of
MMK needs.
ММК Metiz
MMK (Turkey)
2.3 mln tpy capacity
by 2012.
Steel making complex
and two service
centers.
ММК trading house
Profit’s scrap collecting yards
% Share of MMK shipments,
mln tonnes
1%
High-priority (domestic)
Priority (export)
Other (export)
ММК (2010)
№1 by rolled products output in Russia
11.4 mln tonnes of steel
10.2 mln tonnes of finished products in Russia
Markets
MMK benefits from a central location,
with proximity to Russian industrial
heartland and proximity to export
markets
CAGR (2010-15) = 6.7%
CAGR (2010-15) = 5.5%
CAGR (2010-15) = 5.0%
One of Russia’s
largest hardware
producers.
450 th. tonnes
produced in 2010.
ENRC
Currently MMK’s main
iron-ore supplier.
Long-term agreement
with ММК (until 2017).
Fortescue MG
ММК controls 5%
оf Fortescue Metals
Group, one of
Australia's largest
iron-ore producers.
Source: MMK
6

MMK Growth Prospects
Product Structure Dynamics, %
Crude Steel Growth Drivers, th. tonnes
100%
80%
60%
40%
20%
0%
11% 10% 12% 13% 13% 14% 14%
58% 51% 50% 47% 45% 42% 41%
5%
13% 14% 14% 14% 13%
15%
12% 10% 9% 11% 11% 13%
9%
13% 14% 13% 17% 18% 19% 19%
2009 2010 2011E 2012E 2013Е 2014Е 2015Е
Downstream products Flat cold-rolled products Thick plate (Mill 5000)
Flat hot-rolled products Long products Slabs and billets
20 000
18 542
15 000
11 419
10 000
5 000
0
2010 2011E 2012E 2013E 2014Е 2015Е 2016Е 2017Е
ММК, currently run capacities MMK, upside on current capacities MMK, new capacities MMK-Turkey
Sourсe: MMK
Finished Steel Products Structure Evolution, th. tonnes
Sourсe: MMK
EBITDA per ton of Finished Steel Products, USD
18 000
16 000
14 000
12 000
10 000
8 000
6 000
4 000
2 000
0
70% output growth by 2017
HVA share ≈ 45% by 2013
8 831
34 %
45 %
17 282
2009 2010 2011E 2012E 2013E 2014Е 2015Е 2016E 2017E
MMK MMK (Turkey) HVA products
300
250
200
150
100
50
0
118
Long steel
91 95
HR flat
steel
CR flat
steel
EBITDA/t (LHS)
HVA (Higher Value-Added products)
156
Mill 5000
plate
228 236
Galvanized
steel
Formed
sections
EBITDA margin (RHS)
272
Colour -
coated steel
35%
30%
25%
20%
15%
10%
5%
0%
Sourсe: MMK
Sourсe: MMK, 2010
7

MMK Growth Prospects
Russian Import / Export Balance, th. tonnes
MMK Growth in RF by Product Type vs. Import Structure, th. tonnes
2 000
1 000
0
-1 000
-2 000
-3 000
-4 000
-5 000
-6 000
-7 000
-5 381
-5 932
-6 496
-1 583
-1 746
-1 911
453
500 547
995 1 097 1 202
Hot-rolled steel Long product Thick plate Coated steel
Russia remains net exporter of ordinary steel,
while shortage of HVA products persists
2010 2011E 2012E
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
214
323
288
1 839
752
1 157
415
1 495
Expected imports
provide more than
enough room for
MMK HVA output
growth
435
370
211
283
2 014
823
1 266
455
1 638
ММК 2011Е Import 2011Е ММК 2012Е Import 2012Е
(growth to 2010)
(growth to 2010)
Coated steel Cold-rolled steel Thick plate Hot-rolled steel Long product
Source: Metal Expert, MMK
Source: Metal Expert
MMK Production Portfolio Change y-on-y, th. tonnes MMK Share in Russian Production, %
12500
27
12000
221
149
82
11500
458
11000
66
239
214
323
10500
288
10000
2011Е
2012Е
Coated steel Cold-rolled steel Thick plate Hot-rolled steel Long product Other
50%
40%
30%
20%
10%
0%
11%
7% 8%
41%
40%
32%
Dominating position on the Russian
market
32%
34%
29%
31%
26%
22%
34%
32%
51%
Long steel H/r steel Thick plate C/r steel Coated steel
2010 2011E 2012E
Source: MMK
Source: MMK
8

Competitive Cost Position (Continued)
Integration in Coking Coal, mln tonnes
Integration in Iron Ore, th. tonnes
7
6
5
4
3
2
1
0
Coal concentrate production to grow by
6,2
more than 50% by 2017 compared to 2010
-19
5,1 5,1
4,6
4,5
4,2
3,9 3,9 3,9
3,6
3,7 3,7
3,4
3,0
2,7 2,8 2,8
2,5
2009 2010 2011Е 2012Е 2013Е 2014Е 2015Е 2016E 2017E
Coking coal production
Concentrate production
6 000
4 000
2 000
0
Iron ore mined to grow by more than
25% by 2013 compared to 2010
2008 2009 2010 2011E 2012E 2013E
M. Kuibas Podotvalnoe Slag Processing Sosnovskoe Bakal
Sourсe: MMK
Self-sufficiency Level, %
100%
75%
50%
25%
0%
Sourсe: MMK
70%
30%
ENRC
MMK
50%
10%
40%
SBU
RASP
MMK
(Belon)
100%
MMK
(Profit)
25%
75%
Iron ore Coal Scrap Electricity
Own
Purchased
Federal
Grid
MMK
Sourсe: MMK
Prioskolsky Iron Ore Deposit Development Project
• 2006 - purchase of the license for Prioskol iron ore
deposit development;
• One of the largest iron-ore deposits – more than 2 bn
tonnes of reserves;
• Pre-feasibility study performed by HATCH;
• Projected capacity – up to 50 mtpa of iron ore;
• >100% MMK needs in iron ore covered;
• Optional iron ore supplies to MMK-Atakas.
Sourсe: MMK
9

Leading Positions in the Russian Steel Industry
Leader in Finished Steel Production, th. tonnes MMK Share of Russian Steel Market, %
12 000
11 000
10 000
MMK retains leadership in Russia
while drastically changing its
product mix
NKMK; 2,3%
Others; 19,5%
ММК; 17,7%
Severstal;
17,5%
9 000
8 000
Chelyabinsk
MK; 5,4%
NLMK; 16,2%
7 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ММК Severstal NLMK
NTMK; 7,2%
ZSMK; 9,5%
Urals Steel;
4,5%
Source: Company data, Nomura, CS Source: ММК, Metal Courier, 2010
Diversified Product Mix
Leading Position on Domestic Market
Picture
Long products: 1.1 mln tonnes (10%)
MMK's share
in Russia
Share in MMK's
total production
Place in
Russia
Picture
Picture
Picture
Hot-rolled sheet: 5.5 mln tonnes (54%)
Plate (mill 5000): 0.9 mln tonnes (9%)
Cold-rolled sheet: 1.1 mln tonnes (11%)
Downstream: 1.4 mln tonnes (14%)
Hot-rolled sheet 37% 63% 1
Cold-rolled sheet 22% 11% 3
Galvanized flat products 27% 6% 1
Cold-rolled narrow strip 50% 1% 1
Tin plate 100% 2% 1
Colour-coated rolled products 25% 2% 3
Source: ММК, 2010
Source: ММК, Metal Courier
10

MMK’s Dominating Domestic Market Position
MMK Domestic and Export Sales, mln tonnes Domestic Sales Structure, 2010
8
7
6
5
4
3
2
3,7
2,1
Source: MMK
MMK organically grows its share in
Russian market as demand in export
markets remains sustainable
1996 1998 2000 2002 2004 2006 2008 2010
Domestic market (Russia + CIS)
Coated &
Downstream
products
19%
Source: MMK
C/r steel
11%
HVA
Products,
43%
Thick plate
13%
Domestic Sales by Region, 2010 Domestic Sales by Sector, 2010
7,3
4,9
Export
7,0
3,2
H/r steel
43%
Long steel
products
14%
Total: 7,044 kt
MMK is located in most intensive
steel consuming region of Russia
Food industry;
1%
Automobile
sector; 6%
Fuel and
energy
companies;
0,37%
Bridge
building;
0,34%
Pipe
production;
34%
Metalware and
semiintegrated
factories; 9%
Spot sales in
Russia; 16%
Machine
building; 13%
Construction
sector; 11%
Spot sales in
CIS; 10%
Total: 7,044 kt
Source: MMK
Source: MMK
11

Strong Presence on Export Markets
Share of Export Sales in Shipments, % Export Sales Structure, 2010
100%
75%
46% 41% 39% 34%
28%
36% 31%
Long products
2%
Slabs and
billets
6%
50%
25%
0%
Source: ММК
54% 59% 61% 66%
72%
64% 69%
2004 2005 2006 2007 2008 2009 2010
Domestic Exports
Downstream
products
2%
Source: ММК
Cold-rolled
steel
11%
Domestic Price Premium, USD/tonne Regional Sales Structure, 2010
Hot-rolled steel
79%
Total: 3,201 kt
250
225
200
225
190
Americas
3%
Africa
1%
175
150
125
100
75
50
78
162
150 156
158
Domestic price premium makes Russian market
attractive. Q1 2011 domestic market price
premium equaled to 227 USD/t
2004 2005 2006 2007 2008 2009 2010
Europe
6%
Far East &
Asia
6%
Middle East
15%
Russia &CIS
69%
Total: 10,245 kt
Source: MMK
Source: ММК
12

Building Value
MMK (TURKEY)
Investments
Market
Profile
USD 2.1 bn
Middle East, EU, Africa
state-of-the-art full-cycle steel
production
Capacity, mtpy finished steel 2.3
Product types
Rationale
MMK’s investment approach is…
HRC, galvanized, colour-coated
increase presence in key export
regions
geographical diversification
Mill 5000 (RUSSIA)
CAPEX
Market
Profile
USD 1.5 bn
Russian oil&gas infrastructure, ship and
bridge building
HVA rolling facilities
Capacity, mtpy finished steel 1.5
Product types
Rationale
Heavy plates up to x120 strength class
#1 supplier to pipe sector
imports replacement
FOCUSED
STRENGTHENING LEADERSHIP
BEATING THE CYCLE
ENJOYING STATE SUPPORT
WELL - THOUGHT OUT
VALUE - ADDING
CREATING SYNERGIES
TARGETTING KEY MARKETS
CONSISTENT
HIGH RETURN RATE
Belon (RUSSIA)
Acquisition cost
USD 0.543 bn
Market
Russia
Profile
growing producer of high-quality coal
Capacity, mtpy coking coal 4.2 in 2010, 6.2 by 2017
Rationale
Vertical integration and higher profitability
Mill 2000 (RUSSIA)
CAPEX
Market
Profile
USD 1.5 bn
Russia, EU, automotive industry,
construction, white goods production
HVA rolling facilities
Capacity, mtpy finished steel 2
Product types
Rationale
CR galvanized high strength steel
#1 supplier to automotive sector, imports
replacement
13

Plate Mill 5000
ММК is one of 10 producers of premium quality thick plates globally
Specifications
Start-up 2009
Capacity, mln tpy 1,5
Max Plate Width, mm up to 4,800
Plate Length, m 24
Plate Thickness, mm 8-160
Rolling force, tonnes 12 000
Strength class
up to Х120
• Project completion time under SMS Demag contract - 32 months
• November 2007 – May 2009: construction of the mill
• July 2009: first production start up
• December 2009: launch of Continuous Slab Caster # 6
• February 2010: launch of secondary steel-treatment complex
Use of Thick Plate in Russia by Sector, th. tonnes
LDP
Bridge building
6 000 Boiler building
Ship building
Other
MMK market share (RHS)
4 000
2 000
0
2008 2009 2010 2011Е 2012Е 2013Е 2014Е 2015Е
Source: pipe-producers’ estimates, ММК
Consumers of Mill 5,000 Products
120%
90%
60%
30%
0%
Agreements with major customers
• Cooperation agreement with Gazprom
• Strategic cooperation agreement with TMK
• Cooperation agreement with ChTPZ
• Government suggested pipemakers to reduce share of imported
plate
14

Mill 5000 - Strengthening Positions in Pipe Sector
Growth in LDP Consumption in Russia, th. tonnes Key Steel Suppliers to Pipe-builders in Russia, 2010
4 000
3 000
Demand for LDP remains
strong
MMK produces 43% of
steel, used for pipe-making
in Russia
MMK; 43%
2 000
1 000
0
Other; 39%
-1 000
Production of LDP
LDP exports
LDP imports
Consumption of LDP in Russia
Import; 18%
Source: pipe-producers’ estimates, MMK
Use of LDP Produced in Russia by Project, th. tonnes
3 500
3 000
2 500
2 000
1 500
1 000
500
0
3 400
3 025
1 882
2009 2010 2011Е
Nord Stream
Yamal-Europe
Sakhalin-Khabarovsk-Vladivostok
VSTO-2
BTS-2
Current pipelines replacement
Export
Source: pipe-producers’ estimates, MMK
Source: MMK
Geography of Main Pipelines
Nord Stream
BTS-2
Yamal-Europe*
Russia
* - Incl. Pochinki-Gryazovets and Bovanenkovo-Uhta
MMK steel is used in
construction of all pipelines
VSTO-2
Sakhalin-Khabarovsk-Vladivostok
15

Strengthening Position in Auto Industry
Mill 2,000 Complex
Private Car Ownership, vehicles per 1,000 people
Key Mill 2,000 specifications
Capacity, th. tpa 2,000
Sheet width, mm 850-1,880
800
700
600
765
565
519
Russia is on the way to
diminish the lag to
developed countries
Sheet thickness, mm 0.28 – 3.0
HSLA, IF, HSS, BH, DP, CP,
Steel grades
ТRIP
Production volumes:
• 700,000 tpy of galvanized steel annealed
• 400,000 tpy cold-rolled (after annealing) products
• 900,000 tpy unannealed products
Key customers:
• Car-makers, White goods producers
500
400
300
200
100
0
Source: UNO, 2010
426
399
261
156
67
12 10
Russian Vehicle Fleet by Age, %
Mill 2000 Construction
more than 20
yrs; 23%
less than 10 yrs;
44%
more than 10
yrs; 33%
Source: Rosstat, 2010
16

Mill 2000 Cold Rolled Steel Complex
Russian Cold-rolled Automotive Steel Consumption, % Car-making Projects in Russia by 2015E, %
100%
75%
50%
2%
7%
17%
75%
25%
3%
22%
24%
49%
10%
40%
10%
60%
13%
12%
Volga federal region
North-west federal
region
Central federal region
25%
0%
High strength steel
types to reach 60% in
overall consumption
51%
40%
2010 2015Е 2020Е
Mild Steel AHSS HSS UHSS
15%
60%
Other
Source: MMK estimates
High Strength Steels Use
Source: MMK estimates
Russian Car-makers Steel Consumption
HSS
44.5%
Mild Steel
30.8%
4 000
3 000
Steel consumption to reach 2.7 mln tonnes by
2012 and more than double by 2020 from 2010
4 240
3 678
2 000
1 824
1 400
AHSS
15.6%
UHSS
9.1%
1 000
0
2008 2009 2010 2011Е 2012Е 2013Е 2014Е 2015Е 2020Е
All vehicle types output, th.pieces
Steel consumption by car-makers
Source: boronextrication.com
Source: WSA
17

Entry to Rapidly Growing Turkish Market
Locations of Key Markets
Turkish Flat Steel Market Structure, %
Europe
Istanbul
Boiler making;
6%
Other; 12%
Pipe
production;
25%
Priority export markets
Important export markets
Flat Steel Market in Turkey, mln tonnes
14
12
10
8
6
4
2
0
-2
-4
-6
4,0
8,0
5,5
Source: Metal Expert
8,6
Africa
6,8
9,2
Iskenderun
9,9
8,7
Middle East
MMK will focus on flat steel in
Turkey, where there is a
structural shortfall
12,2
11,3
10,6
9,2 9,2 9,2
2009 2010E 2011E 2012E 2013E 2014E 2015E
-1,2 -1,4
-2,4
-2,1
-3,1
-2,9
-4,0
Flat steel production Flat steel consumption Balance
Source: ING
Packaging; 7%
Auto industry;
13%
Long Steel Market in Turkey, mln tonnes
30
25
20
15
10
5
0
20,5
24,0 24,5 24,9
Spot sales;
18%
Metal Service
Centers; 19%
25,7 25,7 25,7
12,5
13,8 13,7 13,6 13,8 13,2
13,2
9,7 10,2 10,7 11,3 11,9
12,5
10,8
2009 2010E 2011E 2012E 2013E 2014E 2015E
Long steel production Long steel consumption Balance
Source: Metal Expert
18

Financials
IFRS Summary
Financial Highlights, USD mln
Q1 2011 2010 2009 2008
12 000
10 550
Crude steel output, kt 3,092 11,419 9,618 11,957
Finished steel, kt 2,707 10,245 8,764 10,911
10 000
8 000
8 197
7 719
Revenues, $ mln 2,216 7,719 5,081 10,550
6 000
5 081
EBITDA, $ mln 403 1,606 1,309 2,204
EBITDA margin, % 18.2% 20.8% 25.8% 20.9%
Net profit, $ mln 134 232 219 1,081
Net margin, % 6.0% 3.0% 4,3% 10.2%
Assets, $ mln 18,082 16,738 14,833 14,197
Credit & loans, $ mln 3,951 3,548 2,118 1,726
short-term* 1,498 1,087 828 1,295
long-term* 2,453 2,461 1,290 431
Shareholder capital, $ mln 10,953 10,257 9,957 9,663
Cash, $ mln 460 515 165 1,106
* includes leasing
Source: MMK 2006-2007 financials under US GAAP, from 2008 – under IFRS
MMK credit ratings
BB+, outlook Stable
(changed from BB on May 19, 2011)
Ba3, outlook positive
(outlook changed from “stable” on July 22, 2010)
4 000
2 000
0
Source: MMK
Financial Highlights, USD mln
2 300
1 800
1 300
800
300
-200
965
100
Source: MMK
2 407 2 204
1 306
1 081
1 309 1 606
219 232
2007 2008 2009 2010
Revenues EBITDA Net profit
1 038
1 404
319
213
34 76
1 674 1 652
677
219
374
2 068 2 055
1 944
2216
437 388 407 403
94 53 43 42
-110
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Revenues EBITDA Net profit
134
19

Investment Highlights
• Key beneficiary of steel market recovery – production growth currently planned at 70% by 2017,
>45% by 2013
• Growing volumes and share of HVA products (45% by 2013) to secure sustainably high efficiency
• Focus on specialty steel products to replace imports in Russia and to capture domestic market price
premium
• Access to lucrative Turkish flat steel market with high-quality steel products
• Emphasized direct exposure to growing industry sectors in the domestic market – pipe-building,
automotive and heavy machinery industries
• Technological flexibility to address raw-material market fluctuations – crude steel production using
iron ore/coking coal vs. scrap
• Strong balance sheet well-positioned to finance further growth
• Plans for further strengthening in commodities
20

Magnitogorsk Steel (MMK)

MMK Group Cost of Sales Breakdown and CAPEX Programme
Cost of Sales Q1 2011, m USD Flexible CAPEX Programme till 2015
2000
1500
Others; 92
Amortisation; 215
Labour costs; 211
2 000
1 500
1000
500
0
-500
Sourсe: MMK
Other Group
Companies
material costs ;
-237
Change in
uninvoiced
products balance;
-98
MMK material
costs; 1 593
MMK Q1 2011 Material Costs Breakdown, %
1
Total: USD 1,775 m
1 000
500
0
2010 2011 2012 2013 2014 2015
maintanance downstream processing volume growth
cost-saving Belon coal MMK Turkey
Other subsidiaries
Sourсe: MMK
Hot Rolling Mill #10
Auxilary
materials
8%
Power
3%
Fuel
8%
Sinter
14%
Pellets
15%
Sourсe: MMK
Other main
materials
14%
Scrap
14%
Coals
24%
22

Coking Coal Price Change
Competitive Cost Position
Slab Cash-cost and Raw-material Price, USD/tonne
Slab Cash-Cost Sensitivity, Q1 2011, USD/tonne
400
300
287
323
362 362
450
200
180
160
140
Iron Ore Price Change
-30% -20% -10% 0% 10% 20% 30% 40%
-20% 393 407 422 436 451 465 480 495
200
120
-10% 399 414 428 443 457 472 487 501
100
0
60
Q1 10 Q2 10
Slab Cash-cost
Q3 10
Scrap
Q4 10 Q1 11
Iron ore (RHS)
Pellets (RHS)
Coal (RHS)
100
80
0% 406 420 435 450 464 479 493 508
10% 413 427 442 456 471 485 500 515
20% 419 434 448 463 478 492 507 521
30% 426 440 455 470 484 499 513 528
Sourсe: MMK
* - Q1 2011 slab cash-cost
Galvanizing line Slab Cash-Cost Structure, 1Q 2011, %
Wages; 3%
Others; 2%
Iron ore; 36%
Fuel and
energy
purchased; 8%
Other raw
materials; 16%
Scrap
purchased; 8%
Coal; 27%
Cash cost: 450 USD/t
Sourсe: MMK
23

MMK Group Debt
MMK Debt Structure by Maturity, USD mln Debt Structure by Currency, Q1 2011
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
MMK improved its debt structure with shortterm
debt at 38% only
431 1 290
1 295
828
2 461
1 087
2 453
1 498
2008 2009 2010 Q1 2011
Short-term debt
Long-term debt
RUR
32%
Source: MMK Source: MMK, as of April 1, 2011
Euro
26%
USD
42%
3,951 m USD
Debt Structure by Interest Rate, Q1 2011
Maturity of MMK Long-term Borrowings, USD mln
1250
1236
1000
Fixed
53%
750
594
763
778
Floating
47%
500
250
312
3,951 m USD
0
2011 2012 2013 2014 2015 and after
Source: MMK, as of April 1, 2011
Source: MMK, as of April 1, 2011
24

Iskenderun Istanbul
Schedule of MMK Project in Turkey and Construction Costs
Project highlights
• Main production site – near Iskenderun (2.3 tpa)
• 2 service centres: Iskenderun, Istanbul
• Product types: HRC, galvanized & colour-coated steel
• Start of production – 2010
• Ramp up to reach full capacity – 2012
• Cost of Project – USD 2.1 bn
2 500
2 000
1 500
1 000
500
0
2 282
686
68
156
2009 2010 2011Е 2012Е
Flat hot-rolled products Galvinized steel Colour-coated steel
Start-up schedule
• Color-coating line
• Galvanizing line
• Establishment
• Metal service center
• Metals service center
• Mill for hot rolled coil
• Etching line
• Reverse mill
• Hot galvanizing line
• Polymer coating line
• Steel making facilities
2007 2008 2009 2010 2011E 2012E
USD 100 mln USD 195 mln USD 242 mln USD 565 mln USD 113 mln
Total construction expenses: USD 1,215 mln
Source: MMK estimates
25

Contacts
MMK (Magnitogorsk Iron & Steel works)
Ordinary shares listed at MICEX and RTS in June 2006.
GDRs listed at LSE in April 2007
ISIN / СUSIP US5591892048/559189105
Tickers
MICEX, RTS: MAGN
LSE: MMK
Bloomberg: MMK:LI
Contacts at MMK
Andrey Serov Head of IR
Tel +7 (3519) 24 52 97 serov.ae@mmk.ru
www.mmk.ru
GDR Depositary - BNY Mellon
Contact person at the depositary
Ludmila Leliavskaia
Vice President
Tel +1.212.815.4493
ludmila.leliavskaia@bnymellon.com
Disclaimer
THIS PRESENTATION IS FOR INFORMATION ONLY.
•THIS PRESENTATION IS FOR DISTRIBUTION IN UK ONLY AMONG THE PEOPLE HAVING PROFESSIONAL SKILL IN THE ISSUES RELATED TO INVESTMENTS WITHIN THE MEANING OF ARTICLE 19(5) OF DIRECTIVE ON FINANCIAL ADVERTISEMENT APPROVED IN 2005 ON THE BASIS OF LAW
ON FINANCIAL SERVICES AND MARKETS 2000, OR THOSE PEOPLE, AMONG WHICH IT MAY BE LAWFULLY DISTRIBUTED. THIS INFORMATION IS CONFIDENTIAL AND PROVIDED TO YOU EXCLUSIVELY FOR YOUR REFERENCE. BY ACCEPTANCE OF THIS INFORMATION THE RECIPIENT
HEREOF CONFIRMS THAT HE OR SHE IS A SPECIALIST IN THE SPHERE OF INVESTMENTS WITHIN THE MEANING OF ARTICLE 19(5) OF DIRECTIVE ON FINANCIAL ADVERTISEMENT APPROVED IN 2005 ON THE BASIS OF LAW ON FINANCIAL SERVICES AND MARKETS 2000, ACTING IN HIS OR
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•THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER OR A PART THEREOF, OR INVITATION TO SELL OR TO ISSUE, OR TO SUBSCRIBE FOR OR OTHERWISE PURCHASE ANY SHARES IN THE COMPANY OR ANY OTHER SECURITIES AND NOTHING CONTAINED HEREIN SHALL FORM
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REFLECTED THEREIN COULD BE CHANGED WITHOUT ANY NOTIFICATION THEREABOUT.
•THIS PRESENTATION SHOULD REMAIN CONFIDENTIAL UNTIL THE REPORT IS PUBLISHED. SOME INFORMATION CONTAINED HEREIN IS STILL A DRAFT INFORMATION AND WAS NOT LEGALLY CONFIRMED AND WILL BE FINALY DETERMINED ONLY AT THE MOMENT OF FILING THE
APPLICATION FOR FINAL ACCEPTANCE FOR TRADING AT THE STOCK EXCHANGE.
•THIS INFORMATION DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES TO BE SOLD IN RUSSIA, THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933,AS AMENDED, AND
MAY NOT BE OFFERED OR SOLD INTO THE UNITED STATES EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT, OR NOT REQUIRED TO BE REGISTERED THERE UNDER, OR PURSUANT TO AND EXEMPTION FROM REGISTRATION REQUIREMENTS THEREOF. NO OFFERING OF
SECURITIES IS BEING MADE INTO THE UNITED STATES. NO SECURITIES WILL BE REGISTERED UNDER THE APPLICABLE SECURITIES ACT OF ANY STATE OR TERRITORIAL ENTITY OF CANADA AND JAPAN. THIS PRESENTATION IS NOT SUBJECT TO MAILING, TRANSFERRING OR OTHER
TYPE OF DISTRIBUTION IN THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, OR TO THE TERRITORY OR FROM THE TERRITORY OF THE SPECIFIED COUNTRIES TO THE NAME OF ANY ANALYST IN THE SPHERE OF SECURITIES OR OTHER PERSON IN ANY OF THE
SPECIFIED JURISDICTIONS. YOU AGREE TO AVOID FROM DISTRIBUTION OF ANY REPORT RESULTING FROM THE SURVEY OR SIMILAR DOCUMENTS ON THE TERRITORY OF THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, SAVE AS IN ACCORDANCE WITH THE
FEDERAL LAWS OF THE UNITED STATES ON SECURITIES INCLUDING SECURITIES ACT, AS WELL AS THE APPLICABLE LAWS OF CANADA, AUSTRALIA AND JAPAN, ACCORDINGLY.
•THIS PRESENTATION INCLUDES THE STATEMENTS RELATED TO THE FUTURE, WHICH REPRODUCE THE INTENTIONS, OPINIONS AND CURRENT EXPECTATIONS OF THE COMPANY. THE STATEMENTS FOR THE FUTURE INCLUDE ANYTHING, WHICH IS NOT A FACT OCCURED. THE
COMPANY TRIED TO HIGHLIGHT SUCH STATEMENTS RELATED TO THE FUTURE BY MEANS OF THE WORDS, SUCH AS “MAY”, “WILL”, “SHOULD”, “EXPECT”, “INTEND”, “EVALUATE”, “ASSUME”, “PLAN”, “TO HAVE AN OPINION”, “TRY”, “FORECAST”, “CONTINUE” AND SIMILAR WORDS OR THEIR
NEGATIVE FORMS. SUCH STATEMENTS HAD BEEN DONE BASING ON THE ASSUMPTIONS AND ASSESSMENTS, WHICH MAY OCCUR FAULTY, THOUGH THE COMPANY CONSIDERS THEM REASONABLE AT THE CURRENT MOMENT.
•SUCH STATEMENTS RELATED TO THE FUTURE ARE LINKED TO THE RISKS, UNCERTAINTIES AND ASSUMPTIONS, AS WELL AS TO OTHER FACTORS, WHICH MAY LEAD TO THE EVENT THAT ACTUAL RESULTS OF THE COMPANY’S ACTIVITY AND ACTIVITY OF THE MARKETS, ON WHICH IT
OPERATES OR INTENDS TO OPERATE IN, THEIR FINANCIAL STATUS, LIQUIDITY, CHARACTERISTICS, PROSPECTS AND ABILITIES COUILD MATERIALLY DIFFER FROM THOSE, WHICH ARE EXPRESSED WITH THE HELP OF SUCH STATEMENTS RELATED TO THE FUTURE. THE IMPORTANT
FACTORS, WHICH MAY RESULT IN SUCH DIFFERENCES, INCLUDE, INTER ALIA, CHANGING BUSINESS CONDITIONS AND OTHER MARKET CONDITIONS, COMMON ECONOMIC CONDITIONS IN RUSSIA, EU COUNTRIES, THE UNITED STATES OF AMERICA OR ANYWHERE ELSE, AS WELL AS
THE ABILITY OF THE COMPANY TO MEET THE TRENDS IN THE INDUSTRY. THE MATERIAL DIFFERENCE OF THE ACTUAL RESULTS, FEATURES AND ACHIEVEMENTS MAY BE THE RESULT OF ADDITIONAL FACTORS. THE COMPANY AND ALL ITS DIRECTORS, OFFICERS, EMPLOYEES AND
ADVISORS HEREWITH STATE THAT THEY ARE NOT OBLIGED TO ISSUE ANY UPDATE OF OR REVISE ANY STATEMENTS RELATED TO THE FUTURE CONTAINED HEREIN, OR DISCLOSE ANY CHANGES IN THE FORECASTS OF THE COMPANY OR EVENTS, CONDITIONS AND
CIRCUMSTANCES, WHICH SUCH STATEMENTS RELATED TO THE FUTURE ARE BASED ON, SAVE AS IN THE CASES PROVIDED FOR BY THE APPLICABLE LAWS.
•RECEIPT OF ANY COPY OF THIS INFORMATION TESTIFIES THE ACCEPTANCE OF THE ABOVE LIMITATIONS.
26