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Ferroniobium productionSince January 2008, the Mining segment also includesferroniobium production, carried out by OAO StalMag,in Krasnoyarsk, East Siberia, Russia. The company hasreserves with an estimated life of 12 years, according toour geological statistics report.StrategyAs the principal supplier of raw materials for theSeverstal Russian Steel segment, the Mining segmentforms the foundation of our vertically integratedKey performance indicatorsbusiness model. Our key strategic priorities for thesegment are:• Improving the quality of industrial safety, labourand environmental protection• Further strengthening our position in the coal andiron ore markets• Making good use of our mining expertise bydiversifying our ferrous metals production businessand expanding our presence in the non-ferrousmetals market, gold in particular.Our aim is to ensure the sustainable development of ourexisting mining assets, and to enable growth into newminerals and geographies.2008 2007 Change year-on-year %Revenue (US$ million) 2,452.7 1,849.1 32.6Gross profit (US$ million) 1,081.4 667.0 62.1Profit from operations (US$ million) 606.4 282.0 115.0Operating margin (%) 24.7 15.3 n/aEBITDA (US$ million) 859.4 497.0 72.9EBITDA per tonne (US$/tonne) 41 20 105EBITDA margin (%) 35.0 26.9 n/aAverage product prices (FCA) (US$/tonne)Coking coal (concentrate) 144 84 71.4Steam coal 36 26 38.5Iron ore concentrate 72 59 22.0Pellets 103 75 37.3Ferroniobium 24,658 n/a n/aGold (US$/oz) 887 n/a n/aEBITDA margin (%)Coal 26.2 8.1 n/aIron ore concentrate 39.5 41.4 n/aPellets 40.6 39.6 n/aFerroniobium (80.8) n/a n/aGold 41.6 n/a n/aIn 2008, our Mining segment’s revenue increased by 2008 amounted to US$161 million, with EBITDA margin32.6%, to US$2,452.7 million. This was primarily due to of 39.5%, and the Vorkutaugol contribution in 2008higher sales prices for our products. EBITDA amounted amounted to US$213 million, with EBITDA margin ofto US$859.4 million, 72.9% higher than in 2007, and 29.9%. These increases were due to higher productionour EBITDA margin increased from 26.9% in 2007for the first nine months of 2008 and higher sellingto 35.0% in 2008. Our gold business added US$82 prices.million to the EBITDA increment in 2008 with an EBITDAmargin of 41.6%. OAO Karelsky Okatysh contribution The average number of employees in the Miningto EBITDA in 2008 amounted to US$425 million, with segment in 2008 was 24,040, which was 2,765 feweran EBITDA margin of 40.6%. OAO Olkon contribution in than in 2007.Production resultsProduction volumes, thousand tonnes 2008 2007 Change year-on-year %Coking coal 723 1,847 (60.9)Coking coal concentrate 4,574 5,789 (21.0)Steam coal 2,222 1,827 21.6Iron ore concentrate 4,674 4,651 0.5Pellets 9,363 10,045 (6.8)Ferroniobium (tonnes) 147 - n/aGold (tonnes) 6 - n/aThe 60.9 % decrease in coking coal production wasdue to sale of Kuzbassugol, lack of Moschny (strong)seam mining at the Severnaya mine, and a decrease inthe average number of development longwalls at ourVorkutaugol entities. The sale of Kuzbassugol, and aOur production of iron ore concentrate increased byonly 0.5%. The production of pellets decreased by 6.8%due to reduction in demand in the fourth quarter – yetefficiency measures led to higher production during thefirst 10 months of 2008.global sales decline in the fourth quarter of 2008, alsocontributed to this decrease. The 21.0% coking coalconcentrate decrease was due mainly to the sale ofKuzbassugol. Addition of PBS Coals Ltd led to increaseFerroniobium and gold production growth was due tothe incorporation of OAO StalMag and a number of goldproducing companies into the Mining segment.in coking coal production by 235 thousand tonnes inNovember-December 2008.Steam coal production grew 21.6% due to increasedextraction of steam coal at Vorkutaugol and addition ofPBS Coals Ltd.50 51