MANAGEMENT PRESENTATION
May 2014
DISCLAIMER
This presentation does not constitute or form part of and should not be construed as,
an offer to sell or issue...
MECHEL AT A GLANCE
Mining
32%
Steel
58%
Ferroalloys
1%
Power
9%
Mining
66%
Steel
29%
Ferroalloys
1%
Power
5%
LEADING VERTICALLY INTEGRATED
MI...
INVESTMENT HIGHLIGHTS
5
Best-in-class global coking
coal producer and exporter
with attractive growth profile
• One of the...
Port Temryuk
Russian Federation
Lithuania
Kazakhstan
Elga Coal Complex
Yakutugol
Korshunov Mining Plant
Southern Kuzbass
C...
TSO
%
of Total
Ordinary 416,270,745 75%
Preferred 138,756,915 25%
Preferred Publicly Trading 57,209,577 10%
Preferred held...
NARROWED STRATEGY USING KEY COMPETITIVE ADVANTAGES
FOR VALUE GROWTH
GROWTH IN SHAREHOLDER VALUE
BASED ON VERTICALLY-INTEGR...
VERTICALLY INTEGRATED MINING & STEEL
BUSINESS MODEL WITH FOCUS ON COMPETITIVE ADVANTAGES
Production Consumption
Source: Co...
4 361
3 690
2 576
1 602
1 500
1112
1 082
826
411
350
0 1 000 2 000 3 000 4 000 5 000
BMA
Mechel
Evraz
Vale
Alpha Natural R...
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
LOW COST COKING COAL PRODUCER
Sourc...
Mechel
Bluestone
Mechel
Bluestone
Port Posiet
Yakutugol
Southern
Kuzbass
Indonesia
Brazil
USA
Canada
Europe
Australia
Indi...
• Logistics flexibility on the Sea of
Azov and Black Sea
• Potential to increase export of coking
coal, PCI and anthracite...
KEY PROJECT CHARACTERISTICS
4.7
7.0
1.8
1.8
10.0
0,0
5,0
10,0
15,0
20,0
2012 2013
Posiet Temryuk Vanino
6.5
18.8
TEMRYUK P...
Source: Company data
MECHEL SERVICE GLOBAL -- MAP OF DISTRIBUTION HUBS
110 storage sites and service centers throughout Ru...
4 569 5 156
6 632 7 755 8 576 8 972 9 624
2 377
3 262
3 910
3 974
3 908 4 140 4 071
60 58
62
66 67 69 71
0
20
40
60
80
0
2...
ALIGNING ASSETS STRUCTURE WITH STRATEGY
Mining Segment
Korshunov Mining
Plant
Iron Ore
Yakutugol
Southern Kuzbass
Coal Com...
KEY DEVELOPMENTS
2013 2018E
ELGA DEPOSIT: RAMP UP SECURED BY VEB PROJECT FINANCING
CURRENT STATUS
FIRST STAGE PRODUCTION RAMP-UP, ROM MMtKE...
CAPACITY
PRODUCTS
CAPEX
TARGET
CONSUMERS
High-speed and low-temperature up to 100 meter long rails
H-beams, channel bars, ...
BUSINESS UPDATE
21
Comments
Mining segment
 Run-of-mine coal production flat
 PCI sales grow by 36% on the back of incre...
FINANCIAL HIGHLIGHTS
-3
15
0.6
23
5
33
-4
0.3
11
SEGMENTS OVERVIEW
REVENUE FROM THIRD PARTIES EBITDA BY SEGMENTS
$ Mln
$ Mln
(1) Adjusted EBITD...
MINING SEGMENT
$ Mln
CASH COSTS, US$/TONNE COS STRUCTURE
$2,128 mn $1,842 mn
24
REVENUE, EBITDA(1)
678
770
693 695
626
142...
MINING SEGMENT
25
REVENUE BREAKDOWN BY REGION AVERAGE SALES PRICES FCA, US$/TONNE
*Restated to include middlings
EXTERNAL ...
STEEL SEGMENT
26
CASH COSTS, US$/TONNE COS STRUCTURE
REVENUE, EBITDA(1)
$5,644 mn $4,379mn
$ Mln
1,492
1,343
1,359
1,225
1...
60% 65% 66% 68%
19%
18% 18% 18%
4%
2%
10%
12% 13% 12%
6% 3% 2% 1%1% 1% 1%
FY12 FY13 3Q13 4Q13
Russia Europe Asia CIS Middl...
AVERAGE FERROSILICON SALES PRICES AND CASH COSTS, US$/TONNE
FERROALLOYS SEGMENT*
REVENUE, EBITDA(1)
28
$ Mln
19
20
22
20 1...
POWER SEGMENT
29
AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS (RUSSIA), US$/MWH COS STRUCTURE
REVENUE, EBITDA(1)
$ Mln
...
CONSOLIDATED P&L
30
REVENUE DYNAMICS REVENUE, EBITDA(1) AND NET PROFIT
Consolidated EBITDA down 38% q-o-q to $122 mn due t...
CASH FLOW STATEMENTS
31
NET CASH FLOW
Continuing working capital management added another $108 mn
in Q4 to the CFO that to...
0 49 - - - -
685
1 674 1 527
1 308
578
175
645
580
101
225
38
212
281
-
-
-
103
-
-
-
123
111
70
51
32
1 070
2 745
2 459
1...
Revenue 1,885 2,089 -9.8%
Cost of sales (1,315) (1,445) -9.0%
Gross margin 30.2% 30.8%
Operating profit / (loss) (136) 39 ...
APPENDIX
OPERATIONAL RESULTS OVERVIEW
SALES, thousand tonnes FY 2013 FY 2012
FY 2013 vs.
FY 2012, % 4Q2013 3Q2013 4Q2013vs. 3Q2013,...
LARGEST INFRASTRUCTURAL PROJECTS IN RUSSIA
TO SUPPORT GROWTH IN STEEL CONSUMPTION
36
(1) Source: Goldman Sachs Russian Inf...
37
ELGA DEPOSIT: RAILWAY, TECHOLOGICAL BASE,
OPEN-PIT, MINING WORKS
ELGA WASHING PLANT
38
CHELYABINSK UNIVERSAL MILL
39
FIRST SHAPES PRODUCED AT UNIVERSAL ROLLING MILL
40
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Mechel presentation (May, 2014)

  1. 1. MANAGEMENT PRESENTATION May 2014
  2. 2. DISCLAIMER This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Mechel OAO (Mechel) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. Any purchase of securities should be made solely on the basis of information Mechel files from time to time with the U.S. Securities and Exchange Commission. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Mechel or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions. The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. 22
  3. 3. MECHEL AT A GLANCE
  4. 4. Mining 32% Steel 58% Ferroalloys 1% Power 9% Mining 66% Steel 29% Ferroalloys 1% Power 5% LEADING VERTICALLY INTEGRATED MINING & METALS COMPANY MECHEL INTEGRATED BUSINESS MODEL OPERATING HIGHLIGHTS, SALES Mining Segment Source: Company data - Production share of divested assets 719 586 2012 2013 Crude Steel, production Long products Billets Flat products 16.4 16.6 5.9 5.9 4.4 4.2 2012 2013 Met Coal Steam Coal Iron ore concentrate Steel Segment ‘000tonnes 4 Steel Mining Ferroalloys Power FINANCIAL HIGHLIGHTS 2013 Revenue Breakdown2013 EBITDA Breakdown Mining Steel SALES & MARKETING LOGISTICS 6.5 4.1 2.6 4.7 3.5 690 ‘000tonnes
  5. 5. INVESTMENT HIGHLIGHTS 5 Best-in-class global coking coal producer and exporter with attractive growth profile • One of the largest metallurgical coal producers globally • One of the leading exporters on the seaborne market • Developing one of the largest coking coal deposits globally Superior asset quality • One of the largest coal reserves base globally • Core assets positioned at the lower bound of the global cost curve • Ability to supply steel producers with a full range of metallurgical coal • First newly built rolling mill for high-speed long rails in Russia Strategically positioned to supply both Asia-Pacific and Atlantic seaborne markets • Uniquely positioned to supply metallurgical coal to attractive Asia Pacific markets • Access to key Far Eastern, European and US ports • Lower transportation cost to supply key growth markets in Asia • Own infrastructure including ports and rolling stock, secures access to end customers and export markets Vertically integrated steel business model • Steel business is virtually self-sufficient in coal and iron ore • Established distribution and sales platform in core markets Leading steel producer • Largest specialty steel producer in Russia • Second largest long steel producer in Russia • Largest distribution platform in Russia
  6. 6. Port Temryuk Russian Federation Lithuania Kazakhstan Elga Coal Complex Yakutugol Korshunov Mining Plant Southern Kuzbass Coal Company Chelyabinsk Metallurgical Plant Urals Stampings Plant Beloretsk Metallurgical Plant Izhstal Moscow Coke and Gas Plant Vyartsilya Metal Products Plant Port Posiet Port Vanino* Port Kambarka Bratsk Ferroalloy Plant Southern Kuzbass Power Plant Moscow Mechel Coke Ukraine Mechel Nemunas BROAD GEOGRAPHIC FOOTPRINT TARGETING GROWTH MARKETS USA Mechel Bluestone West Virginia REVENUE BREAKDOWN BY MARKET (2013) Mining Segment Russia 27% Europe 14% CIS 9% China 29% Asia w/o China 12% Middle East 5% Other 4% Steel Segment Russia 60% Europe 19% Asia 4% CIS 10% Middle East 6% Other 1% Source: Company data Mining Steel Ferroalloys Power Port Head office 6 *Access to port secured by contractual agreements Mongolia China
  7. 7. TSO % of Total Ordinary 416,270,745 75% Preferred 138,756,915 25% Preferred Publicly Trading 57,209,577 10% Preferred held by Justice family 26,044,572 5% Preferred Share held by Mechel as treasury 55,502,766 10% Total 555,027,660 100% CAPITAL STRUCTURE CAPITALIZATION AND OWNERSHIP STRUCTURE Preferred Shares Ordinary Shares Public Float 32.6% Igor Zyuzin 67.4% Public Float 41% Justice Family 19% Mechel 40% Source: Company data OWNERSHIP STRUCTURE 7
  8. 8. NARROWED STRATEGY USING KEY COMPETITIVE ADVANTAGES FOR VALUE GROWTH GROWTH IN SHAREHOLDER VALUE BASED ON VERTICALLY-INTEGRATED BUSINESS MODEL TOP-3 global metcoal producer1 Leader in Russia and CIS construction steel market2 Leader in specialty steel, stainless steel and hardware production3 Optimization of asset structure to deleverage Net debt/EBITDA below 2:1 in the medium term4 8
  9. 9. VERTICALLY INTEGRATED MINING & STEEL BUSINESS MODEL WITH FOCUS ON COMPETITIVE ADVANTAGES Production Consumption Source: Company data 5.6 4.3 Iron Ore Feed, 2013Coking Coal Concentrate, 2013 MMt MMt Coke, 2013 4 11.3 1.9 2.8 MMt Sea Port capacity, 2013 MMt Cargo turnover, 2013 MMt 5th largest metallurgical coal producer globally* with ability to supply steel producers with a wide range of metallurgical coal types, coke and iron ore concentrate. Own infrastructure helps to establish access to end customers. 42.3 12.7 12.1 5.7 3.6 9.3 Production Consumption Production Consumption Shipped through own ports Shipped overall (excl. US ports) Own rolling stock Overall 9 Power, 2013 blnKWh 6.1 4.0 Production Consumption - Volumes shipped through Vanino port *Ex-China
  10. 10. 4 361 3 690 2 576 1 602 1 500 1112 1 082 826 411 350 0 1 000 2 000 3 000 4 000 5 000 BMA Mechel Evraz Vale Alpha Natural Resources Peabody BHP Anglo-American Walter Energy Glencore Xstrata 33,8 31,2 25,6 20,1 16,4 15,9 12,1 11,8 11,6 7,9 0 10 20 30 40 BMA Anglo-American Teck Alpha Natural Resources Mechel Peabody Rio Tinto Xstrata Walter-Energy BHP LEADING GLOBAL METALLURGICAL COAL PRODUCER 2nd largest metallurgical coal reserve base 5th largest metallurgical coal producer globally with superior leverage to metallurgical coal One of the largest global exporters of coking coal Top Ten Metallurgical Coal Exporters in 2013Ten Largest Metallurgical Coal Producers in 2013Ten Largest Metallurgical Coal Producers by Metallurgical Coal Reserves MMtMMt Source: Wood Mackenzie 2013 (1) Including 50% share of BMA (2) Including PCI and anthracite export Source: Company Filings All production numbers shown on an attributable saleable basis unless otherwise disclosed (1) Met coal with some minor thermal coal production (2) Small part may be third-party purchased coal (3) 100% for consolidated entities and attributable for JVs and associates (4) South Walker+Poitrel. BHP/Mitsui – 80/20 (5) Coking coal concentrate+PCI+Anthracites (6) Met coal only (7) With IIIawarra project Source: Company Filings, IMC All reserve numbers shown on a 100% run-of-mine basis unless otherwise disclosed (1) Assumes 100% of disclosed reserves are metallurgical (2) On a saleable, attributable basis (3) Reserves as of 30 June 2012 (4) Adjusted for acquisition of Raspadskaya 10 (1) (2) MMt (1) (1) (1) 65 22 22 18 17 15 14 14 13 11 0 20 40 60 80 BHP Billiton Teck Anglo American Peabody Alpha Glencore Xstrata Rio Tinto Walter Energy Mechel Vale S.A. (3) (4)) (3) (4) (6) (2) (1) (2) (5) (7) (6)
  11. 11. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LOW COST COKING COAL PRODUCER Source: AME Notes: (1) FOB excluding land freight and port costs Source: AME Cumulative Production (%) Australia USA & CanadaRussia Other Cumulative Production (%) Australia USA & CanadaRussia Other 0 50 100 150 200 0 50 100 150 200 Yakutugol MechelBlended 0 50 100 150 200 0 50 100 150 200 MechelBlended U$/t Yakutugol post - Elga About 80% of coking coal by open pit Access to cheap labor Low production cost Low raw material costs ESTIMATED EXPORT COKING COAL COST CURVE (FCA(1)) ESTIMATED EXPORT COKING COAL COST CURVE (FOB) U$/t 11 150 100 50 150 100 50
  12. 12. Mechel Bluestone Mechel Bluestone Port Posiet Yakutugol Southern Kuzbass Indonesia Brazil USA Canada Europe Australia India Japan China Russia 99.8 mn t(1) 211.7 mn t(2) ABILITY TO SUPPLY ALL METCOAL MARKETS Major coking coal exporting regions Target markets for Mechel’s coking coal supplies Target markets for Mechel’s steam coal supplies Major coking coal importing regions Mechel’s routes 3rd parties routes Size of respective seaborne coking coal markets Notes: (1) total seaborne met coal imports (2013 est), Europe (incl. CIS), Latin America, Mexico (2) total seaborne met coal imports (2013 est), China, India, Japan, South Korea. * FY2013 coal production Source: MCQ47 Diversification / enhancement of sales channels to the fast-growing Asian and European markets Extensive range of metcoal grades allow for diversified product portfolio to serve a variety of customer needs Mechel’s own ports on the Sea of Japan and Azov Sea serve as a stable gateways to export markets Freight rates from port Norfolk (Panamax 75 000 t) to Brasil $14 pmt to Rotterdam $15 pmt to Northern China $38 pmt Freight rates from port Posiet (Handysize 22 000 t) to Northern China $12.25 pmt to Yangtze River $13.25pmt to Southern China $16.35 pmt to Thailand $17.65 pmt to Philippines $18 pmt to Indonesia $19.75 pmt India (West Coast / East Coast) $33 / $27 pmt to Japan $12 pmt 2.4 mn t* 15.1 mn t * 9.9 mn t * 2.4 mn t * 12 Freight rates from port Vanino (45 000 t) to Northern China $13 pmt to Yangtze River $13.75 pmt to Southern China $15 pmt to Thailand $16 pmt to Philippines $16.50 pmt to Indonesia $16.50 pmt India (West Coast / East Coast) $25/ $20 pmt to Japan $12 pmt Port Vanino
  13. 13. • Logistics flexibility on the Sea of Azov and Black Sea • Potential to increase export of coking coal, PCI and anthracite to Europe • Existing port capacity – 2 mln tonnes • Target capacity - 4 mln tonnes • Rolling stock of more than 8,500 railcars • Ensures uninterrupted transportation • Reduces dependency on Russian Railways, state-owned and independent freighters • Increase access to Asian coal customers via seaborne market • Existing port capacity – 7 million tonnes per year • Target capacity - 9 mn tonnes (Panamax vessels) after 2nd stage of modernization MECHEL’S INFRASTRUCTURE ALLOWS SECURED ACCESS TO FINAL CUSTOMERS • Increases logistics flexibility to Asian coal customers via seaborne market securing exports from Elga • Total turnover up to 10 million tonnes of cargo per year • Shorter transportation distances – lower rail and vessel freights TEMRYUK PORT MECHEL TRANS TRANSPORTATION COMPANY POSIET PORT VANINO PORT* 13 * Access to port secured by contractual agreements
  14. 14. KEY PROJECT CHARACTERISTICS 4.7 7.0 1.8 1.8 10.0 0,0 5,0 10,0 15,0 20,0 2012 2013 Posiet Temryuk Vanino 6.5 18.8 TEMRYUK POSIET VANINO EXISTING CAPACITY 1.8 MMt per year 7.0 MMt per year 10.0 MMt per year TARGET CAPACITY 4.2 MMt per year 9 MMt per year na DEVELOPMENT STAGE Modernization Modernization na VESSEL TYPE River-to-sea vessels Panamax (post modernization) Panamax TIMING 2017 na na Source: Company data Notes: * Volumes secured by contractual agreements Elga Coal ComplexYakutugol Southern Kuzbass Port Posiet Port Vanino Port Temryuk OWN SEAPORT FACILITIES OWN SEAPORT ANNUAL TURNOVER CAPACITIES, MMt * MECHEL TRANS – ACCESS TO SEABORNE MARKET 14 Access to main customers in Asia-Pacific and Europe secured through own ports infrastructure Port capacity aligned with expected growth in export volumes
  15. 15. Source: Company data MECHEL SERVICE GLOBAL -- MAP OF DISTRIBUTION HUBS 110 storage sites and service centers throughout Russia, CIS & Europe Real time market intelligence and pricing feedback Opportunity to address specific customer needs and sell more high-marginal, value-added products ADVANTAGES PRODUCT PRODUCTION VOLUME, 2013 ‘000 tonnes RUSSIAN PRODUCTION SHARE RANK Spring wire 162%51 Wire products 133%631 Wire rod 135%947 High- tensile wire 246%55 Flat stainless steel 165%31 Rebar 219%1,502 LEADER IN SPECIALTY, STAINLESS STEEL & HARDWARE 15 Geographies of presence of Mechel Service Mechel Service facilities to remain within Group Mechel Service facilities to be divested Disposal of East-European steel assets deprived MSG of existing synergies with Mechel Group Selling inventory - additional funds for deleverage Focus on higher opportunity costs projects MECHEL SERVICE GLOBAL (ex Russia) DIVESTMENT RATIONALE
  16. 16. 4 569 5 156 6 632 7 755 8 576 8 972 9 624 2 377 3 262 3 910 3 974 3 908 4 140 4 071 60 58 62 66 67 69 71 0 20 40 60 80 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000 2009 2010 2011 2012 2013 2014 2015 Rebar Shapes Residential Construction LEADER IN RUSSIA & CIS CONSTRUCTION STEEL MARKET REBAR CONSUMPTION IN RUSSIA 16 Source: Company data, Ministry of Transport of the Russian Federation, Russian Railways data ‘000 tonnes E E Source: Metal-Courier, Company data #2 LONG STEEL PRODUCER IN RUSSIA WITH 19% SHARE IN REBAR PRODUCTION Growth in residential construction – CAGR 3% 2018 FIFA World Cup expected rebar consumption 1.8 mln tonnes The government of Moscow is expected to invest up to US$20 billion in 2014-2015 for road construction in the city Ministry of Transport of the Russian Federation announced updated transport development strategy until 2030 where investment in high speed and ultra-high speed railways may reach $270bn, of which $197bn will be spent on ultra-high speed (350-400km/h) and $73bn on high-speed railways. Main projects: • Ultra-high speed railway Kazan-Samara (560 km); • Moscow-Kazan-Ekaterinburg ultra-high speed rail link; • 13 high speed links (main investment on Khabarovsk- Vladivostok railway line of 774 km); • Ultra-high speed railway Moscow-Kazan (770 km); • High speed railway Moscow- Nizhny Novgorod (400 km). Growing long steel consumption in Russia is driven by… 37% 5% 5% EXPECTED RUSSIAN MARKET SHARE BY 2017 Rails Angles Channels Spring wireSteel rope 36% RUSSIAN MARKET SHARE IN 2013 Rebar 19% 62% 34% Beams
  17. 17. ALIGNING ASSETS STRUCTURE WITH STRATEGY Mining Segment Korshunov Mining Plant Iron Ore Yakutugol Southern Kuzbass Coal Company Elga Coal Deposit Bluestone Coal Coke Mechel Coke Moscow Coke and Gas Plant Steel Segment Vyartsilya Metal Products Plant Beloretsk Metallurgical Plant Urals Stampings Plant Mechel Targoviste (Romania) Mechel Campia Turzii (Romania) Chelyabinsk Metallurgical Plant Buzau Plant (Romania) Otelu Rosu Plant (Romania) Izhstal Donetsk Electrometallurgical Plant Laminorul Plant (Romania) Mechel Nemunas (Lithuania) Ferroalloys Segment Ferronickel Ferrochrome Ferrosilicon Southern Urals Nickel Plant Tikhvin Ferroalloy Plant Voskhod Chrome Mining Plant (Kazakhstan) Bratsk Ferroalloy Plant Uvatskoye Deposit of Quartzite Power Segment Toplofikatsia Rousse Power Plant - Southern Kuzbass Power Plant Kuzbass Power Sales Company Generation Distribution Distribution Mechel Service Global * (ex Russia) Mechel Trading House Mechel Carbon Mechel-Mining Trading House Mechel Trading Mechel Service OOO (Russia) Invicta (UK) Group 1 Group 2 17 Improvement in financial results and cash flow Immediate deleverage Deal closed Deal closed Deal closed Deal closed Deal closed Deal closed Deal signed Deal closed * Divestment in progress through inventory sell down Mothballed Deal closed Deal closed
  18. 18. KEY DEVELOPMENTS
  19. 19. 2013 2018E ELGA DEPOSIT: RAMP UP SECURED BY VEB PROJECT FINANCING CURRENT STATUS FIRST STAGE PRODUCTION RAMP-UP, ROM MMtKEY PROJECT METRICS 0.2 LOCATION OPERATIONAL DETAILS COAL TYPE RESERVES JORC STANDARDS • Country Russia • Location South-East of Yakutia • Mine Type 100% OP • Start of operations August 2011 • High volatile hard coking coal • Steam coal • Middlings • 2.2 billion tonnes as of December 31, 2012 • Elga coal deposit reserves account for 67% of total reserves of Mechel • Russia, Asia-Pacific countries TARGET MARKETS LOCATION OF OPERATIONS Mongolia Yakutugol Elga Port Vanino Port Posiet China JapanKazakhstan Source: Company data 19 12.0  Railroad in place  Wash plant up & running  Workers settlement under construction  Existing capacity up to 2.5 mn tonnes of coal VEB project financing of 1st stage of Elga development: up to12 mn tons of coal mined by 2018 Once 9 mn tons of coal is mined and processed at Elga, the project should become operating cashflow positive FURTHER EXPANSION
  20. 20. CAPACITY PRODUCTS CAPEX TARGET CONSUMERS High-speed and low-temperature up to 100 meter long rails H-beams, channel bars, angles and grooves US$ 715 mn Up to 1.1 mn t Russian Railways Off-take secured by a 20-year supply agreement Russian Railways Strategy till 2030 provides for additional railway construction of more than 20,000 km, including more than 12,000 km of high-speed tracks Construction industry TIMING 2009 – 2013 UNIVERSAL ROLLING MILL – STRUCTURAL SHIFT IN LONG STEEL PRODUCTS PORTFOLIO Increased Output of High Value-Added Products Enhanced Profitability of Steel Division Structural Shift in the Long Steel Portfolio RAILS PRICING KEY PROJECT CHARACTERISTICS Source: Metal-Courier, Company data 20 1044 982 963 920 710 653 637 630 711 652 637 631 1 650 1596 1 597 1386 1 466 1413 1 310 1310 592 530 517 504 0 500 1000 1500 2000 Average 1H2012 Average 2H2012 Average 1H2013 Average 2H2013 Billets (FOB ЧМ Россия) Rails 100m length (DES Vladivostok) Rails 100m length (DES St. Petersburg) L-bar (FOB Турция) Channel bar (FOB Турция) Beams (DAP Казахстан) Mill CURREN PROJECT STATUS • The mill launched in July 2013 • H-beams sales to 3d parties ongoing • Rails to be supplied to Russian Railways for certification in 1H 2014
  21. 21. BUSINESS UPDATE 21 Comments Mining segment  Run-of-mine coal production flat  PCI sales grow by 36% on the back of increased supplies to Asia Pacific and Western Europe offsetting 8% decrease in anthracites sales due to softer demand Weaker domestic demand resulted in decrease of coking coal sales. Growth in export sales is limited due to shipping delays after floods in Russia Far Eastern regions  Coke sales decrease due to the shutdown of one of its largest consumer - Southern Urals Nickel Plant Steel segment:  Decrease in production volumes due to disposal of loss-making Romanian and Ukrainian steel plants  Billets sales down due to the reduction of resale to third parties and most of Chelyabinsk plant’s billets are processed internally in line with strategy of increasing the share of high value added steel products SALES, thousand tonnes 2013 2012 2013 vs. 2012, % Coking coal concentrate 11,051 11,542 -4 PCI 3,308 2,428 +36 Anthracites 2,202 2,391 -8 Steam Coal 5,898 5,910 0 Iron ore concentrate 4,166 4,390 -5 Coke 2,976 3,561 -16 Ferrosilicon 94 78 +20 Long Products 3,541 4,073 -13 Flat products 586 719 -18 Billets 690 2,602 -73 Stampings 102 111 -8 Hardware and welded mesh 852 976 -13 PRODUCTION, thousand tonnes 2013 2012 2013 vs. 2012, % Coal (run-of-mine) 27,516 27,763 -1 Pig iron 3,743 4,161 -10 Steel 4,650 6,532 -29 Sales dynamics reflects market volatility with production stable across all business segments *Excluded are the data on chrome sales due to the sale of Voskhod Mining Plant and Tikhvin Ferroalloy Plant to Turkey’s Yildirim Group, which was announced on August 1, 2013. *Excluded are the data on nickel sales due to the December 2012 halting of Southern Urals Nickel Plant due to negative trends in the global nickel market and unfavorable prognosis for this market in the foreseeable future.
  22. 22. FINANCIAL HIGHLIGHTS
  23. 23. -3 15 0.6 23 5 33 -4 0.3 11 SEGMENTS OVERVIEW REVENUE FROM THIRD PARTIES EBITDA BY SEGMENTS $ Mln $ Mln (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. 23 Steel Mining Ferroalloys Power EBITDA(1) BY SEGMENTS 10,631 8,576 2,089 1,885 32 96 147 124 62 211 127 64 202 148 49 196 83 35 122 Mining Steel Ferroalloys Power Consolidated* 4Q12 1Q13 2Q13 3Q13 4Q13 FY2013 5% 29% 66% FY2012 Consolidated revenue down 19% y-o-y to $8.6 bn on asset disposals and weaker prices Bad debt provisions and write-offs due to assets disposals result in a Net Loss of $2.9 bn for 2013 Mining segment continues to dominate in the consolidated EBITDA with its share of 66% 60% 58% 59% 55% 32% 32% 33% 33% 1% 1% 1% 1% 7% 9% 7% 11% FY12 FY13 3Q13 4Q13 Steel Mining Ferroalloys Power 3% 27% 70%
  24. 24. MINING SEGMENT $ Mln CASH COSTS, US$/TONNE COS STRUCTURE $2,128 mn $1,842 mn 24 REVENUE, EBITDA(1) 678 770 693 695 626 142 136 130 110 149 4% 14% 15% 18% 11% 0% 30% 60% 0 300 600 900 4Q12 1Q13 2Q13 3Q13 4Q13 Revenues (lhs) Intersegment revenues(lhs) Adj. EBITDA margin (rhs) (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposedcompanies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. Segment’s EBITDA down to $83 in 4Q13 largely due to 10% revenue decrease on lower volumes Cash costs at Russian assets up on seasonal factors Cash costs at Bluestone up 29% q-o-q as most of its capacity is idled due to unfavorable pricing environment 41 29 45 115 43 34 52 88 39 31 53 78 34 32 43 86 35 37 51 111 Coal SKCC Coal YU Iron Ore Bluestone 4Q12 1Q13 2Q13 3Q13 4Q13 51% 43% 20% 23% 9% 11% 14% 16% 6% 7% FY12 FY13 Other Depreciation and depletion Energy Staff costs Raw materials and purchased goods
  25. 25. MINING SEGMENT 25 REVENUE BREAKDOWN BY REGION AVERAGE SALES PRICES FCA, US$/TONNE *Restated to include middlings EXTERNAL SALES STRUCTURE 214 93 69 51 59 207 95 63 52 92 199 83 66 52 77 178 71 57 49 78 176 78 66 44 85 Coke Coking coal Anthracite and PCI Steam coal* Iron ore 4Q12 1Q13 2Q13 3Q13 4Q13 Share of met coal sales is stable y-o-y at 64% of Segment’s revenue Anthracite & PCI volumes up 16% y-o-y endorsing our strategy of diversifying met coal portfolio Coal shipments to China grow x1.3 to 39% y-o-y of overall sales as we continue expansion into Asia Pacific Share of 3d party iron ore sales down 43% q-o-q as we switched to supplying our steel segment 43% 39% 37% 40% 21% 25% 26% 27% 11% 8% 7% 8% 2% 2% 2% 3% 8% 9% 9% 9% 13% 15% 17% 11% 2% 2% 2% 2% FY12 FY13 3Q13 4Q13 Coking coal Anthracitesand PCI Coke Coking products Steam coal Iron ore Other 27% 27% 26% 27% 14% 14% 14% 13% 9% 2% 1% 3% 29% 39% 42% 38% 12% 10% 10% 11% 5% 4% 2% 5% 4% 4% 5% 3% FY12 FY13 3Q13 4Q13 Russia Europe CIS China Asia w/o China Middle East Other
  26. 26. STEEL SEGMENT 26 CASH COSTS, US$/TONNE COS STRUCTURE REVENUE, EBITDA(1) $5,644 mn $4,379mn $ Mln 1,492 1,343 1,359 1,225 1,029 72 70 50 50 73 6% 4% 5% 4% 3% -5% -2% 1% 4% 7% 10% 13% 0 500 1,000 1,500 4Q12 1Q13 2Q13 3Q13 4Q13 Revenues (lhs) Intersegment revenues(lhs) Adj. EBITDA margin (rhs) 502 437 444 494 439 447 472 468 479 504 419 425 507 436 448 Billets* Wire Rod Rebar 4Q12 1Q13 2Q13 3Q13 4Q13 78% 76% 8% 9% 9% 10% 2% 2%3% 3% FY12 FY13 Other Depreciation and depletion Energy Staff costs Raw materials and purchased goods (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. Segment’s revenue down 16% due to seasonal demand slowdown and termination of resale business with Estar… …with cash costs slightly up on seasonal factors… …resulting in 4Q13 EBITDA decreasing to $35 mn Bottom line affected by $70 mn of related parties bad debt provision and $17 mn of FX loss * Domestic sales
  27. 27. 60% 65% 66% 68% 19% 18% 18% 18% 4% 2% 10% 12% 13% 12% 6% 3% 2% 1%1% 1% 1% FY12 FY13 3Q13 4Q13 Russia Europe Asia CIS Middle East Other STEEL SEGMENT 27 REVENUE BREAKDOWN BY REGION AVERAGE SALES PRICES FCA, US$/TONNE EXTERNAL SALES STRUCTURE 16% 10% 7% 5% 26% 29% 32% 30% 2% 3% 3% 3% 14% 17% 17% 19% 7% 8% 8% 9% 14% 15% 16% 16% 8% 8% 8% 7% 13% 10% 9% 11% FY12 FY13 3Q13 4Q13 Semi-finished steel products Rebar Stainless flat products Carbon long products Forgings and stampings Hardware Carbon flat Other 511 677 3910 2411 927 700 490 635 3999 2505 912 689 491 620 3776 2391 879 710 533 607 3530 2457 835 663 535 594 3501 2183 873 676 Semi-finished steel products Rebar Stainlessflat products Forgingsand stampings Hardware Carbon flat 4Q12 1Q13 2Q13 3Q13 4Q13 (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. Sales of rebar decrease by 7% y-o-y due to disposal of loss- making Romanian steel plants Share of semi-finished products down 57% y-o-y as we launch the universal mill at Chelyabinsk and terminate resale business with Estar Share of Russia and CIS goes up to 77% of Segment sales as we gradually exit our European operations
  28. 28. AVERAGE FERROSILICON SALES PRICES AND CASH COSTS, US$/TONNE FERROALLOYS SEGMENT* REVENUE, EBITDA(1) 28 $ Mln 19 20 22 20 19 10 11 10 8 8 -11% 2% 15% 10% 1% -20% -10% 0% 10% 20% 30% 40% 50% 60% 0 4Q12 1Q13 2Q13 3Q13 4Q13 Revenues (lhs) Intersegment revenues (lhs) Adj. EBITDA margin (rhs) * As of December 31, 2013, a number of companies of the ferroalloys segment met criteria for classification as discontinued operations under US GAAP and were disclosed as a separate component from Mechel Group’s continuing operations retrospectively for all comparative periods presented. (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. Revenue down 6% q-o-q due to decrease of FeSi sales and weaker pricing FeSi cash costs up by 5% as electricity price grows $269 mn write-off on disposed chrome assets affects bottom line Nickel and chrome business results deconsolidated as Discontinued operations REVENUE BREAKDOWN BY REGION 1256 1242 1199 1142 1110 907 961 903 823 863 4Q12 1Q13 2Q13 3Q13 4Q13 sales price Cash costs 82% 57% 62% 68% 1% 16% 31% 28% 25% 1% 12% 10% 7% FY12 FY13 3Q13 4Q13 Russia Europe Asia Other
  29. 29. POWER SEGMENT 29 AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS (RUSSIA), US$/MWH COS STRUCTURE REVENUE, EBITDA(1) $ Mln $880 mn $884 mn 220 227 169 149 209 118 123 101 98 115 4% 7% 1% -2% 3% -20% -10% 0% 10% 20% 30% 40% 50% 0 100 200 300 4Q12 1Q13 2Q13 3Q13 4Q13 Revenues (lhs) Intersegment revenues(lhs) Adj. EBITDA margin (rhs) (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. Revenue up 40% q-o-q due to high season Cash cost down 19% as sales of heat and electricity grow EBITDA back to black with $11 mn 53.8 56.2 52.5 54.4 55.4 24.5 26.2 29.0 35.0 28.2 4Q12 1Q13 2Q12 3Q12 4Q13 Sales price Cash costs 88% 88% 3% 4% 6% 6% 1% 1%2% 1% FY12 FY13 Other Depreciation Energy Staff costs Raw materials and purchased goods
  30. 30. CONSOLIDATED P&L 30 REVENUE DYNAMICS REVENUE, EBITDA(1) AND NET PROFIT Consolidated EBITDA down 38% q-o-q to $122 mn due to lower profitability in the mining and steel segments affected by price and sales deterioration 4Q2013 bottom line affected by write offs of $274 mn as a result of discontinued operations, $79 mn of bad debt provisions and FX loss of $14 mn 4Q2013 FINANCIAL PERFORMANCE Q-O-Q HIGHLIGHTS: $ Mln$ Mln 2,089 1,885 -227 22 0 1,000 2,000 3Q2013 Volume Price 4Q2013 2409 2360 2243 2089 1885 147 211 202 196 122 -1114 -321 -1799 -127 -681 6% 9% 9% 9% 6% -30% -20% -10% 0% 10% 20% 30% 40% 50% (1,900) (1,400) (900) (400) 100 600 1,100 1,600 2,100 2,600 4Q12 1Q13 2Q13 3Q13 4Q13 Revenue (lhs) Adj. EBITDA (lhs) Net profit (lhs) Adj. EBITDA (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax.
  31. 31. CASH FLOW STATEMENTS 31 NET CASH FLOW Continuing working capital management added another $108 mn in Q4 to the CFO that totaled $324 mn for FY2013 Inventory reduction release another $101 mn in Q4 to add up to $507 million inventory release for FY2013 CAPEX is halved y-o-y standing at $558 mn in 2013 as main investment projects near their completion stage and Elga CAPEX secured through VEB project financing FY’11* FY’12 FY’13 * Excluding the effect of loan to Estar 399 1,311 324 -1,674 -839 -180 2,079 -792 -162 Operating activities Investment activities Financial activities OPERATING CASH FLOW DYNAMICS $ Mln 249 83 8 223 10 4Q12* 1Q13* 2Q13* 3Q13 4Q13 * Сertain reclassifications to conform with the current period presentation -558 441 -63 -180 CAPEX Asset Disposals Other 2013 Investment Cash Flow 2013 INVESTMENT CASH FLOW BREAKDOWN
  32. 32. 0 49 - - - - 685 1 674 1 527 1 308 578 175 645 580 101 225 38 212 281 - - - 103 - - - 123 111 70 51 32 1 070 2 745 2 459 1 460 835 0 500 1000 1500 2000 2500 3000 14.5.14 2014 2015 2016 2017 2018 and after Renewable lines Other term loans (w/o VEB) russian Other term loans foreign Expiration of put options on bonds Maturity of bonds Expiration of financial lease SUCCESSFUL REFINANCING AND IMPROVED LIQUIDITY TO SERVICE UPCOMING MATURITIES In 1Q2014 RUR 21.5 bln was redeemed or refinanced. Cash and available credit lines total $0.5 bln as of April 30, 2014. Net debt was reduced by US$560 mn, reaching US$ 8.6 bln as of April 30, 2014. Agreement reached with VTB to refinance $0.5 bln of debt maturing on 2014, reducing short-term debt. DEBT PROFILE AS OF APRIL 30, 2014 RUR 51%USD 42% EUR 7% Russian Banks 68% 32 DEBT MATURITY SCHEDULE AS OF MAY 14, 2014DEBT MATURITY SCHEDULE AS OF DECEMBER 6, 2013 ** Foreign Banks 25% Bonds 7% 78 130 99 1 302 2 139 2 147 1 443 777 427 197 296 - - - - - - - 13 168 118 77 57 24 190 2 027 2 453 2 520 1 499 801 0 500 1000 1500 2000 2500 3000 6.12.13 2013 2014 2015 2016 2017 2018 and afterRenewable lines Other term loans Expiration of put options on bonds Maturity of bonds Expiration of financial lease ** assuming refinancing of GBP lines of 2009 and changes in schedule of VTB – lease from December 20, 2013 69 340 31 440 Cash Other undrawn credit lines 78 394 31 503 Cash Other undrawn credit lines ECA undrawn amount
  33. 33. Revenue 1,885 2,089 -9.8% Cost of sales (1,315) (1,445) -9.0% Gross margin 30.2% 30.8% Operating profit / (loss) (136) 39 - Operating margin -6.1% 1.6% Adjusted EBITDA(1) 122 196 -37.8% Adjusted EBITDA(1) margin 6.5% 9.4% Net Income / (loss) (681) (127) 436.2% Net Income margin -36.2% -6.1% Sales volumes(2), ‘000 tonnes Mining segment 5,279 6,148 -14.1% Steel segment 1,277 1,564 -18.4% FINANCIAL RESULTS OVERVIEW (1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent liabilities at fair value, impairment of long-lived assets and goodwill, result of disposed companies (incl.the result from their disposal) provision for amounts due from related parties and losses from discontinued operations, net of income tax. (2) Includes sales to the external customers only US$ MILLION UNLESS OTHERWISE STATED 4Q13 3Q13 CHANGE, % 33
  34. 34. APPENDIX
  35. 35. OPERATIONAL RESULTS OVERVIEW SALES, thousand tonnes FY 2013 FY 2012 FY 2013 vs. FY 2012, % 4Q2013 3Q2013 4Q2013vs. 3Q2013, % Coking coal concentrate 11,051 11,542 -4 2,702 2,615 +3 PCI 3,308 2,428 +36 741 1,124 -34 Anthracites 2,202 2,391 -8 599 472 +27 Steam Coal 5,898 5,910 0 1,399 1,508 -7 Iron ore concentrate 4,166 4,390 -5 1,083 1,097 -1 Coke 2,976 3,561 -16 685 729 -6 Ferrosilicon (65% and 75%) 94 78 +20 22 24 -8 Flat Products 586 719 -18 118 159 -26 Long Products 3,541 4,073 -13 793 936 -15 Billets 690 2,602 -73 40 91 -56 Hardware and welded mesh 852 976 -13 199 227 -12 Forgings 69 57 +20 16 16 +2 Stampings 102 111 -8 25 25 +1 Electric power generation (thousand kWh) 3,972,285 4,272,610 -7 1,081,517 734,734 +47 Heat power generation (Gcal) 6,694,467 7,945,674 -16 1,966,393 782,421 +151 PRODUCTION, thousand tonnes FY 2013 FY 2012 FY 2013 vs. FY 2012, % 4Q2013 3Q2013 4Q2013vs. 3Q2013, % Coal (run-of-mine) 27,516 27,763 -1 7,086 7,028 +1 Pig iron 3,743 4,161 -10 835 913 -9 Steel 4,650 6,532 -29 1,002 1,098 -9 35
  36. 36. LARGEST INFRASTRUCTURAL PROJECTS IN RUSSIA TO SUPPORT GROWTH IN STEEL CONSUMPTION 36 (1) Source: Goldman Sachs Russian Infrastructure & Construction Report dated May 9, 2012 & Company data # PROJECT TYPE TOTAL SPEND, US$BN CONSTRUCTION TIMELINE 1 High speed Railways (HSR-2) (Moscow-Yekaterinberg) Railways 37.3 2014+ 2 High speed Railways (HSR-1) (Moscow-St.Petersburg) Railways 20.1 2013-2017 3 International transport corridor (Europe-Western China) Highways 19.8 2013-2022 4 Prokhorovka-Bataysk Railways 18.1 2016+ 5 Omsk railway bypass Railways 5.1 2015+ 6 Polunochnoe-Salehard Railways 4.4 2015+ 7 Belkomur Railways 4.4 2013-2017 8 Murmansk transportation hub Ports&Railways 3.7 2012-2015+ 9 Kyzyl-Kuragino railway Railways 3.7 2012-2016 10 Vostochniy transportation hub Ports&Railways 3.5 2014-2015+ 11 FIFA World Cup 2018 stadiums Stadiums 3.5 2010-2017 12 Novorossiysk transportation hub Ports&Railways 2.8 2011-2015+ 13 Obskaya-Salehard-Nadym Railways 2.7 2012-2015 14 Baltysk port Sea port 2.6 2013-2015+ 15 Taman port Ports&Railways 2.5 2013+2015+ 16 Yakutsk railway line Railways 2.4 2012-2015+ 17 Moscow Rail Ring Road Railways 1.5 2012-2016 18 Trans-Siberian route development Ports&Railways 1.4 2015+
  37. 37. 37 ELGA DEPOSIT: RAILWAY, TECHOLOGICAL BASE, OPEN-PIT, MINING WORKS
  38. 38. ELGA WASHING PLANT 38
  39. 39. CHELYABINSK UNIVERSAL MILL 39
  40. 40. FIRST SHAPES PRODUCED AT UNIVERSAL ROLLING MILL 40
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