KTK presentation for 1:1 meetings. Jan31-12

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KTK presentation for 1:1 meetings. Troika Dialog Russia Forum 2012. Jan31-12; English version.

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KTK presentation for 1:1 meetings. Jan31-12

  1. 1. КТК КТКRTS/MICEX: “KBTK” Troika Dialog. The Russia Forum 2012 Presentation Moscow, January 30 – February 4, 2012www.oaoktk.ru/en© OJSC “Kuzbasskaya Toplivnaya Kompaniya”, 2012 { }
  2. 2. DisclaimerIMPORTANT: You must read the following before continuing.The following applies to the management presentation (the “Management Presentation”) following this important notice, and you are, therefore, advised to read this important notice carefully before reading, accessing ormaking any other use of the Management Presentation. In accessing the Management Presentation, you unconditionally agree to be bound by the following terms, conditions and restrictions, including any modifications tothem any time that you receive any information from OJSC “Kuzbasskaya Toplivnaya Company” (the “Company”) as a result of such access.The information contained in this Management Presentation has been prepared by the Company.This Management Presentation is an information document presenting information on the Company.This Management Presentation (i) is not intended to form the basis for any investment decision and (ii) does not purport to contain all the information that may be necessary or desirable to evaluate the Company fully andaccurately and (iii) is not to be considered as a recommendation by the Company or any of its affiliates that any person (including a recipient of this Management Presentation) participate in any transaction involving theCompany or its securities. The Company has not independently verified any information contained herein and does not undertake any obligation to do so.This Management Presentation is not directed to, or intended for distribution to or use by, any person or entity that a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution,publication, availability or use would be contrary to law or regulation or which would require registration of licensing within such jurisdiction.Neither the provision of this Management Presentation, nor any information in connection with the analysis of the Company constitutes or shall be relied upon as constituting, the giving of investment (or other) advice byCompany, or any other shareholders, employees, representatives or affiliates thereof.Neither the Company nor its respective subsidiaries, associates, directors, employees, agents or advisors (such directors, employees, agents or advisors being hereafter referred to as “representatives”), makes anyrepresentation or warranty (express or implied) as to the adequacy, accuracy, reasonableness or completeness of the information contained in this Management Presentation or of any additional information, and such partiesor entities expressly disclaim any and all liability (other than in respect of fraudulent misrepresentation) based on or relating to any representations or warranties (express or implied) contained in, or errors or omissions from,this Management Presentation or any additional information or based on or relating to the recipients use or the use by any of its associates or representatives of this Management Presentation or any additional information, orany other written or oral communications transmitted to the recipient or any of its associates or representatives or any other person in the course of its or their evaluation of an investment in the Company.FORWARD-LOOKING STATEMENTSThis Management Presentation includes statements that are, or may be deemed to be, “forward looking statements”. These forward looking statements can be identified by the use of forward-looking terminology, includingthe terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case their negative or other variations or comparable terminology. These forward-looking statements include allmatters that are not historical facts. They appear in a number of places throughout this Management Presentation and include statements regarding the intentions, beliefs or current expectations of the Company. By theirnature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances, which may or may not occur in the future, are difficult or impossible to predict, and are beyondthe Company’s control. Forward-looking statements are not guarantees of future performance. The Companys actual performance, results of operations and financial condition may differ materially from the impressioncreated by the forward-looking statements contained in this Management Presentation.Subject to its legal and regulatory obligations, the Company expressly disclaims any obligation to update or revise any forward-looking statement contained herein to reflect any change in expectations with regard thereto orany change in events, conditions or circumstances on which any statement is based.Any recipient of this Management Presentation is solely responsible for assessing and keeping under review the business, operations, financial condition, prospects, creditworthiness, status and affairs of the Company.In no circumstances shall the provision of this Management Presentation imply that no negative change may occur in the business of the Company after the date of provision of this Management Presentation, or any date ofamendment and/or addition thereto.ROUNDINGSome numerical figures included in this Management Presentation have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of thefigures that preceded them. {2}
  3. 3. Presenters Eduard Alekseenko First Deputy Chief Executive Officer Vasily Rumyantsev Investor Relations {3}
  4. 4. Table of contents I. KTK at a glance 5 II. Production growth prospects 6 III. Market overview 7 IV. Sales and distribution 11 V. Business strategy and investment program 16 VI. Operational and financial highlights 19 Contacts 26 Appendix Unaudited IFRS Financial Statements for 9M 2011 27 {4}
  5. 5. I. KTK at a glanceOne of the fastest-growing thermal coal producers in Russia. Coal production history with open-pit mine breakdown 9.0 8.7One of major suppliers of coal in Western Siberia. . 8.0 .In 2011 the Company became 7th largest coal producer in Russia.(1) 6.8 7.0 . 6.2 3.7Since its establishment in 2000, the Company has launched 3 open-pit mines and 6.0 . 5.5 mln tonnesdeveloped an extensive production and distribution infrastructure: 2.5 5.0 . 4.3 4.3 1.0 2.1 4.1  8.74 mln tonnes of thermal coal produced in 2011; . 4.0 1.8 3.1 1.9 1.5 1.8 1.6 1.4 1.4  100% high-quality grade “D” thermal coal under Russian classification; 3.0 . 2.3 2.4 0.4 2.0 . 1.3  402 mln tonnes of coal resources and 185 mln tonnes of proven and 3.2 2.3 2.4 2.7 2.6 2.6 2.7 2.6 2.7 2.8 probable reserves(2); . 1.0 0.4 1.3  Structural capacity(3) of 11 mln tonnes; 0.0 . 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011  Developed railway network and facilities; Всего Cheremshansky Vinogradovsky Source: Company  Enrichment plant with 2 mln tonnes input capacity. Key operating and financial indicators(1)Utilization of modern and high-performance equipment fleet supporting efficientlow-cost production - US$17 per tonne of coal VS US$26 per. tonne average in US$ mln 2008 2009 2010Russia.(4) Coal sales (mln tonnes) 7.5 7.4 8.5 incl. purchased coal 2.3 1.4 2.2Diversified sales capabilities balanced between domestic market (4.21 mln tonnes Revenue 344 336 466sold in 2011) and export markets (6.45 mln tonnes sold in 2011). % of growth 128% -2% 39%One of the largest retail coal distribution networks in Western Siberia. EBITDA (2) 87 69 70 % margin 25% 20% 15%Employing about 4,000 people. Net Income 44 21 27KTK shares are quoted on RTS and MICEX (ticker: KBTK). % margin 13% 6% 6%66% of share capital is owned by the management (I. Prokudin - 50%, V. Danilov – Source: audited IFRS FS for 2009-2010 in which all amounts are presented in RUB, Company16%), free-float – 34%. (1)- In the table US$ are converted from RUB using average Central Bank of the Russian Federation exchange rates for each year (2008: 24.86 RUB/US$; 2009: 31.72 RUB/US$; 2010: 30.38 RUB/US$)(1)- Metal Expert, January 2012 (2)- EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and loss on disposal of property, plant and equipment(2)- Run-of-mine coal, JORC classification;(3)- Here and further the presentation structural capacity means the maximum production capacity that the Company believes could be achieved (taking into account projected stoppages for planned repair and maintenance) in an annualperiod if the Company were able to process all the coal that could be mined using the Company’s existing mine facilities after acquisition of certain mining and transportation equipment in accordance with its current capital expenditureprogram(4)- AME Mineral Economics, Thermal Coal Cost Report 2010, for KTK – Company {5}
  6. 6. II. Production growth prospects Historical production volume and attainment of structural capacity (1)The Company has established a well-developed production, logistics and distributioninfrastructure required to sustain production capacity of the existing mining facilities 12.0 . 11.0– 11 mln tonnes per year 10.0 10.0 . 10.0 9.3 8.7  Modern high-performance mining and transportation equipment mln tonnes (Komatsu, P&H and BelAZ); . 8.0 6.8 6.2 5.5  100% of coal transported to the Russian Railway network by the Company’s . 6.0 4.1 own railway company (70 km of railroads, 6 railway stations, 12 mln tonnes . 4.0 p.a. capacity); . 2.0  Own repair and maintenance services; . 0.0  Own power infrastructure. 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015FThe intra-year volatility of production and stripping ratio, driven by a seasonality of Source: СompanyRussian coal market should become lower with the growth of export volumes.Further expansion of the production will be based on existing facilities, licenses, and Targeted production compositioninfrastructure and will not require significant capital expenditure, other than intoadditional mining and transportation equipment. The total value of Company’s 2011 2015(2)investment program for 2011-2015 is RUB 8.6 bln (US$ 287 mln). ROM coal (3) Enriched coalIn Q3 2010 the Company has commissioned its 1st coal enrichment plant with 2 mlntonnes annual capacity. Furthermore, in the period of 2012-2013, the Company plans 68%to commission another 2 coal enrichment facilities that will increase the total 28%installed annual capacity to 10.1 mln tonnes. Enriched coal 8% 8.7 mln 11.0 mln tonnes tonnes 7% 64% 25% ROM coal (3) Sorted coal Sorted coal Source: Сompany (1) - subject to production on 3 current open-pit mines (2) - subject to the attainment of the structural capacity by 2015 and CAPEX plan (3) - Run-of-mine coal, ready for sale upon extraction without any processing {6}
  7. 7. КТКSection IIIMarket overview {7}
  8. 8. III. Thermal coal: global industry overview and prospects (I) Japan and China are expected to continue their dominance in the traded thermal coal market. Their combined market share of thermal coal demand is expected to remain close to 40%. Indonesia and Australia are expected to remain the major suppliers with the combined share of world thermal coal export of around 50%.Export (mln tonnes) Import (mln tonnes)Indonesia Japan 256 270 125 125 130 196 2007 2010 2013 2007 2010 2013Australia China 119 100 141 162 112 45 2007 2010 2013 2007 2010 2013Russia South Korea 97 91 88 90 76 66 2007 2010 2013 2007 2010 2013 Global thermal coal export split evolution Global thermal coal import split evolution 2010 2013 2010 2013 95Mt 96Mt 125Mt 130Mt 13% 12% 17% 17% 270Mt 271Mt 307Mt 65Mt 37% 256Mt 74Mt 35% 40% 9% 36% 10% 119Mt 100Mt 67Mt 78Mt 13% 17% 9% 10% 97Mt 91Mt 88Mt 92Mt 53Mt 13% 141Mt 12% 161Mt 65Mt 12% 55Mt 12% 7% 90Mt 20% 21% 9% 7% 12% Indonesia Australia Russia South Africa Colombia Japan China South Korea Taiwan India RoWSource: UBS Research {8}
  9. 9. III. Thermal coal: global industry overview and prospects (II)Industry fundamentals outlook Thermal coal prices Global traded thermal coal demand is forecasted to lift 2.4% in 2011 and 200 2-3% per year out to 756 mln tonnes in 2013:  India’s import is expected to increase at 12% per year to 90 mln tonnes in 2013 160 and is a dominant growth driver; US$ / tonne  China’s net imports increased 171% in 2009 to 92 mln tonnes and further 120 (US$/t) increased to 116 mln tonnes in 2010:  Expected to ramp up domestic coal production capacity undermining 80 demand for coal imports.  Japan’s power sector consumes 18% of the thermal coal’s trade: 40  Short-term downside following earthquake damage to some facilities – 2% of seabornes trade is at risk; 0  Longer-term potential uplift in demand due to partial switch away from 2006 2007 2008 2009 2010 2011 2012 2013 (2) nuclear. Newcastle Richards Bay Consensus forecast ² Global thermal coal supply is forecasted to lift only 1% in 2011; next three years CAGR expected at 2.1%:  Dominated by Indonesia and Australia which account for 55% Supply/demand balance (1) of global exports; 0.7 0.4 0.8  Indonesia’s wet season and Australian infrastructure issues still constraining 0.0 Market balance mln tonnes supply growth; 0 Market balance (Mt)  Supply side likely to respond to the market’s relatively high stable prices as key (0.7) infrastructure issues are resolved. (4) Main drivers of merchant market balance: (5.5)  Continuing rail constraints in Australia and South Africa and barging constraints (8) in Indonesia; (8.0)  China domestic production – high cost, but remains a big swing factor; (9.2) (12)  Indonesia and South Africa may need to redirect exports to domestic markets 2010E 2011E 2012E 2013E 2006 2007 2008 2009 to meet growing domestic demand.Source: UBS Research, Broker notesNotes:1 Defined as traded supply less traded demand2 Average of forecasts from 8 brokers {9}
  10. 10. III. Thermal coal: Russian industry overview and prospects Rising share of thermal coal in the Russian fuel balance: Liberalization of domestic gas and electricity markets:  Share of coal in the Russian fuel balance is expected to increase due  Potential increase of domestic gas prices to export net-back parity to the rising power generation, gas export and liberalization of the level and growth of gas exports. domestic gas prices.  Domestic liberalization of power generation market may lead to growth in coal prices. Fuel consumption by the Russian power generation Domestic wholesale gas price forecast 2008 2030 180 165 28% Coal 32% Coal CAGR 2010-2015 – 15% 2% Oil fuel 142 1% Oil fuel 150 124 US$/mcm 120 108 94 82 70% Gas 90 67% Gas 60 2010 2011 2012 2013 2014 2015 Source: Russian Energy Balance Forecasting Agency, November 2010, Base scenario Source: UBS, 2011 Coal consumption by the Russian power generation Electricity price forecast in Russia 30 26.6 CAGR 2008-2030 – 1.5 - 2.7% 261 260 25 CAGR 2010-2030 – 7.2% 234 21.4 US$ cents/kWh 210 20 17.3 220 203 193 199 12.3mln tonnes 15 11.1 180 8.8 9.8 157 10 7.8 146 151 6.6 140 5 100 0 2008 2015F 2020F 2025F 2030F 2010 2011 2012 2013 2014 2015 2020 2025 2030 Base scenario Max scenario Source: Russian Energy Balance Forecasting Agency, 2010 Source: Russian Energy Balance Forecasting Agency, November 2010 Note: converted from RUR to US$ at exchange rate 30.38 RUR/US$ for 2010, 30 RUR/US$ for 2011-2030 { 10 }
  11. 11. КТКSection IVSales and distribution { 11 }
  12. 12. IV. 2011 Coal sales breakdown { { Coal re-sale Domestic market 19.5% 60.5% 10.66 mln 10.66 mln tonnes tonnes 39.5% 80.5% Export market { Own coalDomestic market Export market Power generating companies (TGK/OGK) Asia-Pacific Region Retail customers 45.3% 13% 31% 4.21 mln 6.45 mln tonnes tonnes 55% 54.7% Public utilities Eastern Europe Source: Company { 12 }
  13. 13. IV. Average realised prices vs benchmarks KTK realized export prices vs. international FOB and CIF benchmarks, US$/t 120 101 101 100 93 87 83 82 US$ / t. 80 70 79 77 79 62 60 64 62 61 60 57 40 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 Jul-11 Aug-11 Sep-11 (1) (2) CIF ARA 6,000 kkal/kg FOB Indonesia 5,800 kkal/kg KTK Eastern export (CPT Vostochniy) KTK Western export (DAF) Source: Company, Argus for FOB Indonesia and CIF ARA KTK FCA prices vs. Russian EXW benchmark, $US/t 42 44 42 38 37 34US$ / t. 31 31 32 30 30 26 26 22 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 Jul-11 Aug-11 Sep-11 KTK - domestic price, FCA Meret Average price EXW in Russia, based on 4,500-5,000 kkal/kg Source: Company, Metal Expert for average EXW prices in Russia (1) - Average KTK realized Eastern shipments price CPT Vostochniy { 13 } (2) - Average KTK realized quarterly Western shipments price DAF, excluding shipments to Ukraine
  14. 14. IV. Distribution map KTK’s transport flows North-West FD Omsk region Domestic sales3.53 mln tonnes (1) 0.11 Domestic market Asia-Pacific Export sales HeadquartersEastern European Countries Moscow Central FD mln tonnes (1) 4.21 Railroad to the Urals FD mln tonnes (1) Polish border 0.01 0.10 Russia mln tonnes (1) (1) mln tonnes Volga FD 0.15 Tomsk Region 2.52 mln tonnes(1) 2.92 mln tonnes (1) Siberian FD mln tonnes (1) Omsk Region Asia-Pacific Novosibirsk Region Kemerovo Region Railroad to the station at Altay Region Nakhodka-East port Source: Company (1) - sales volumes FY 2011 (incl. purchased coal) Quarterly coal sales breakdown by market Average quarterly domestic and export prices comparison (2) 11 10.66 1,300 , 1,213 1,237 1,228 10 , 1,200 $42 8.54 2.08 $41 $42 9 7.41 , 1,100 1,021 8 977 2.16 2.13 1,000 970 943 7 1.38 , 892 $34 mln tonnes 6 900 848 $31 $32 $31 5 2.63 $27 4 3.33 800 $28 3 6.45 700 2 3.75 1 2.69 600 0 500 2009 2010 2011 2009 2010 2011 Series4 Russia (purchased coal) Russia (own coal) Average domestic price Average export price Average general price Source: Company (2) - prices are net of VAT and railroad tariffs; domestic prices include costs associated with retail distribution network; prices are converted to US$ using average Central Bank of the Russian Federation exchange rates for each year (2009: 31.72 RUB/US$; 2010: 30.38 RUB/US$; 2012: 29.39 RUB/US$) { 14 }
  15. 15. IV. Retail network Since its establishment, the Company has been continuously expanding and Retail network in Western Siberia 2011 building its retail sale and storage network:  own 67 points of sale as at the end of 2011; Company’s  additional points of sale planned to be acquired or established. Retail Subsidiary ownership Kuzbasstoplyvosbit 100% Wide distribution network and strong regional presence position the Company Omsk Region TransUgol 51% as one of the principal suppliers of coal to retail costumers, municipalities, and public utilities in Western Siberia. 5 Novosibirsk TK 51% When export prices are high, the Company uses lower quality third-party coal points Altay TK 51% of sale to satisfy domestic demand, while shifting its own higher quality coal to export markets. 0.09 mln tonnes (1) Omsk 26 points of sale 1.24 mln tonnes (1) Novosibirsk Region Kemerovo Kemerovo Region Novosibirsk Breakdown of total sales by produced and purchased coal 5.0 . 4.71 4.79 9 27 4.21 Barnaul points 4.0 . 1.38 points of sale 2.16 of sale 1.43 mln Altay Region 2.08 mln tonnes 3.0 . 0.29 mln tonnes (1) tonnes (1) 2.0 . 3.33 2.63 . 1.0 2.13 Headquarters . 0.0 Source: Company 2009 2010 2011 (1) - including coal re-sale Series3 Purchased CoalSource: Company { 15 }
  16. 16. КТКSection VBusiness strategy and investment program { 16 }
  17. 17. V. Key strategic directions Further production growth at existing mines supported by existing infrastructure capacity.Further Production Growth Expansion of coal reserves through reclassification of existing resources, development of deeper deposits at existing mines, in tenement drilling and acquiring new licenses in the region. Coal quality enhancement through construction of 3 coal processing and enrichment facilitiesEnhancement of Product utilizing steeply inclined and dense-medium separation processes with an aggregate input capacity ofQuality and Entering New 10.1 mln. t. per year. Markets Focus on value-added products with higher profitability margins. Entering new export markets with more stringent coal quality requirements. Strengthening of regional presence through further expansion of retail network, broadening product Further Strengthening of range and improving customer services. Distribution and Sales Widening export capabilities through signing contracts with major global coal traders and power Capabilities companies, and establishing trading representatives at key locations abroad. Further upgrade of mining equipment and optimization of labor, administrative and overhead costs. Cost Optimization and Hedging against transportation costs by entering into long-term leasing contracts for railway cars with JV “Kuzbasskaya Transportnaya Company”. By 2012 the Company plans to export the major Efficiency Improvements volume of coal in railroad cars rented from JV at a 10-year fixed price, thus hedging rent rates growth and railroad cars availability risks. Further Enhancement of Focus on transparency and refining the Company’s corporate governance. Corporate Governance Introducing BoD Investment and Strategy Committee in 2011. { 17 }
  18. 18. V. Investment program In 2011-2015 there will be 2 major investment categories: 1 Equipment procurement plan  Continued procurement of mining equipment to increase production at the existing open-pit mines; 30 June 2011 CAPEX ’11-’15  construction of 2 new coal processing and enrichment facilities to improve Shovels coal quality and raise production efficiency. 25 (2 P&H) 18 (1 P&H) (P&H, Komatsu, EO) Enrichment facilities launching schedule:  Enrichment plant #2 (KNS and Dense-medium technology) with 3.6 mln t Trucks (BelAZ) 105 53 annual capacity planned to be launched in 2012;  Enrichment plant #3 (Dense-medium technology) with 4.5 mln t annual Dozers (Komatsu and 28 14 capacity planned to be launched in 2013. others) Loaders (Komatsu and 36 14 others) New VS previous CAPEX plan 2011(1) Drill Rigs (Ingersoll Rand) 4 2 Variance 82 Source: Company 80 76 + US$ 4 mln – additional land purchase for 12 potential greenfield licenses acquisitions 70 8 2 CAPEX forecast breakdown, 2011-2015(1) 60 14 18 + US$ 4 mln - faster Uba railroad station capacity expansion 7%US$ mln 50 140 40 28 115 4% 120 31 + US$3 mln - faster mining equipment purchase 30 100 27 20 82 41% US$ 291 mln 47% US$ mln - US$5 mln – a part of enrichment plant equipment 80 10 26 21 will be bought in 2012 instead of 2011 60 18 50 0 40 87 18 2011 2011 Correct 31 22 23 20 Total Other Other infrastructure Equipment 21 30 22 23 0 - - 2011 2012 2013 2014 2015 Series5 Other Other infrastructure Equipment Source: Company (1)- net of VAT, US$ are converted from RUR using 30 RUR/US$ exchange rate Source: Company { 18 }
  19. 19. КТКSection VIOperational and financial highlights { 19 }
  20. 20. VI. Q4 and full year 2011 operational highlights YOY growth of coal In Q4 2011 coal production increased by 5.3% QOQ to 2.57 mln tonnes (Q3 2011: 2.44 mln tonnes). During 2011 it increased 28.4% YOY to 8.74 mln. tonnes (2010: 6.80 mln tonnes). extraction and The coal sorting volume in Q4 remained on the level of Q3 2010 - 1.51 mln tonnes. As for total 2011 – the processing volume increased by 35.4% YOY to 5.56 mln tonnes (2010: 4.10 mln tonnes). KNS enrichment In 2011 the Company’s first KNS enrichment plant worked at full capacity and produced 736 th. tonnes of plant is working at export quality coal (2010: 200 th. tonnes). full capacity During Q4 2011 the sales volume increased by 18.9% QOQ to 3.34 mln tonnes (Q3 2011: 2.81 mln Boost of coal sales tonnes). The volume of coal sales in 2011 increased by 24.8% YOY and reached 10.66 mln. tonnes (2010: 8.54 mln tonnes). volume and increase of average realised In Q4 the average realized coal price (1) increased by 4.5% QOQ to RUB 1,285 per tonne (Q3 2011: RUB price 1,229 per tonne). The average price for 2011 increased by 25.6% YOY to RUB 1,228 per tonne (2010: RUB 977 per tonne). The stripping ratio in Q4 decreased by 0.5% QOQ to 7.35x (Q3 2011: 7.38x). The volume of blasted rock mass increased by 42.3% QOQ to 10.72 mln cbm. (Q3 2011: 7.53 mln cbm.). The average stripping Stripping ratio QOQ transportation distance decreased by 4.1% QOQ to 2.95 km (Q3 2011: 3.08 km) decrease, but slight growth YOY During 2011 the stripping ratio raised by 7.2% YOY to 7.80x (2010: 7.27x). The blasted rock mass grew by 29.0% to 32.79 mln cbm. (2010: 25.43 mln cbm.). The average stripping transportation distance extended by 6.0% YOY to 2.88 km (2010: 2.72 km).Source: Company(1) - excl. VAT, Russian Railways tariff (FCA Meret, incl. KTK retail margin) { 20 }
  21. 21. VI. Financial highlights Q3 Revenue - RUB 6,207 mln 26% QoQ 9M Revenue - RUB 16,389 mln 71% YoY US$ 213 mln(1) US$ 471 mln Due to the seasonal increase in coal sales volumes on the domestic market quarterly revenue increased by 26% to RUB 6,207 mln QOQ (Q2 2011: RUB 4,937 mln). 9M revenue gained 71% YOY up to 16,389 mln (9M 2010: RUB 9,756 mln). Q3 EBITDA – RUB 1,078 mln 105% QoQ 9M EBITDA – RUB 2,551 mln 108% YoY US$ 37 mln US$ 73 mln Growth in revenue and a decrease in production cash costs per tonne of coal resulted in 105% QOQ increase in EBITDA to RUB 1,078 mln (Q2 2011: RUB 525 mln). 9M EBITDA increased by 108% YOY to RUB 2,551 mln (9M 2010: RUB 1,224 mln). Q3 Net Profit – RUB 449 mln 125% QoQ 9M Net Profit – RUB 1,242 mln 252% YoY US$ 15 mln US$ 36 mln In Q3 the Company earned a net profit of RUB 449 mln compared to RUR 200 mln in the previous quarter. Net profit for the 9 month period increased by 252% to RUR 1,242 mln (9M 2010: RUB 353 mln) Net Debt - RUB 2,268 mln 13% QoQ -2% YoY US$ 71 mln(2) Net Debt amounted to RUB 2,268 mln, having increased by 13% QOQ (Q2 2011: RUB 2,012 mln) and decreased by 2% YOY (9M 2010: RUB 2,311 mln). Net Debt to EBITDA ratio remained 0.7.Source: unaudited 3M 2011 IFRS FS(1) - Hereinafter figures were converted to USD using average Central Bank of the Russian Federation exchange rates for Q3 2011 - 29.08 RUR/US$ and for 9M 2011 - 28.74 RUR/US$(2) - Figures were converted to USD using Central Bank of the Russian Federation exchange rates as at 30.06.2011 28.08 RUR/US$ { 21 }
  22. 22. VI. Financial highlights: Revenue Key financial indicators Q3 2011 Revenue breakdown by segments RUB mln. Q3 2011 Q2 2011 9M 2011 9M 2010 68% Revenue 6,207 4,937 16,389 9,576 Growth rate 26% 71% 2% Own coal, Russia Cost of sales (4,942) (4,284) (13,361) (7,968) RUB 6,207 mln Coal resale, Russia US$ 213 mln(1) Gross profit 1,265 653 3,028 1,608 Own coal, export Gross profit margin 20% 13% 18% 17% 19% Other revenue SG&A and other expenses (429) (369) (1,200) (930) EBITDA(2) 1,078 525 2,551 1,224 11% EBITDA margin 17% 11% 16% 13% Operating profit (EBIT) 836 284 1,828 678 Segment revenue dynamics(3) Operating margin 13% 6% 11% 7% Q3 2011/Q2 2011 Net income 449 200 1,242 353 4,937 +26% Net income margin 7% 4% 8% 4% 6,000 , -5% 4,584 682 +140% 5,245 Gross debt 4,080 2,228 4,080 2,576 , 5,000 3,925 404 284 1,203 +247% Net debt 2,268 2,012 2,268 2,311 2,734 347 4,000 , 801 1,053 RUB mln 605 3,000 , 1,013 919 0% , 2,000 4,206 4,227 3,607 2,312 2,594 1,000 , 0 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Series5 Other revenue Coal resale, Russia Own coal, RussiaSource: hereinafter unaudited 3M. 6M, 9M 2010 IFRS FS; audited Full Year 2010 IFRS FS; unaudited 3M, 6M 2011, 9M 2011 IFRS FS(1)- Figures were converted to USD using average Central Bank of the Russian Federation exchange rates for Q3 2011 - 29.08 RUR/US $(2)- EBITDA for each period is defined as results from operating activities, adjusted for amortization and depreciation, impairment loss and loss on disposal of property, plant and equipment(3)The cost of coal purchased from neighboring enterprises on EX-works terms and delivered to coal storages on the Company’s open pit mines for processing and sorting is included in production costs and revenue from its sale is distributed between“Domestic sales of coal produced” and “Export sales of coal produced” segment. Volumes of such coal amounted to 0.43 mln tonnes (9M 2011) { 22 }
  23. 23. VI. Financial highlights: Production cash costs Average realized price and production cash cost per 1 t of coal(1) Quarterly production cash costs volatility 8.7 , 1,300 1,229 8.0 1,175 7.2 7.4 1,200 , 1,155 $42 6.1 , 1,100 1,041 $42 1,000 , 5.0 . 1,010 $40 , 1,000 $34 $33 800 688 900 4.0 . 631 591 RUB / t 800 600 RUB / t. mln tonnes 688 471 441 700 631 2.4 3.0 . 590 $25 591 400 2.2 600 $22 1.9 1.9 $20 1.8 500 $19 441 2.0 . 200 400 $14 300 0 1.0 . Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Production cash costs Average price Pr. сash costs Production Stripping ratio Dynamics of production cash costs per 1 t of coal produced Production cash costs breakdown, Q3 2011 (1) 800 688 Q3 2011/Q2 2011 700 631 29 48 591 - 14% 600 45 Mining and environment taxes 10% 55 57 26- 9% 18% 28 - 41% 500 471 44 85 49 - 13% Other expenses 8% 441RUB / t 38 60 60 - 30% Repair and maintenance 400 18 39 130 5% 38 42 104 - 20% 31 134 Spare parts RUB 591/1 t 87 4% 300 44 19% US$ 20(1) 152 111 - 27% Salary and UST 96 99 200 151 Fuel 95 94 100 188 213 + 13% Production services 99 142 36% 93 - Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Source: Company, cash costs extracted from unaudited 3M-9M 2011, 3M-9M 2010 IFRS FS, audited 12M 2010 IFRS FS (1) - prices are net of VAT and railroad tariffs; domestic prices include costs associated with retail distribution network; prices are converted to US$ using average Central Bank of the Russian Federation exchange rates for each quarter (Q2 2010: 30.24 RUR/US$; Q3 2010: 30.62 RUR/US$; Q4 2010: 30.72 RUR/US$; Q1 2011: 29.16 RUR/US$; Q2 2011: 28.01 RUR/US$; Q3 2011: 29.08 RUR/US$) {23 }

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