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Evraz Calls Off Yuzhkuzbassugol and Raspadskaya Merger

03/20/2008 - Evraz Group decides to terminate the merger negotiations between its fully owned coal mining subsidiary Yuzhkuzbassugol, and Raspadskaya, Russia's second-largest coking coal producer.

Evraz Group SA announced that it has decided to terminate the merger negotiations between Yuzhkuzbassugol, a fully owned coal mining subsidiary of Evraz, and Raspadskaya, Russia's second-largest coking coal producer. Merger negotiations were originally announced in June 2007.
 
Evraz stated its belief that the proposed merger is not in the best interests of the Group’s shareholders at this time. The company said that favorable market conditions and recent Group developments—including the acquisition of selected production assets in Ukraine—led management to conclude that further integration of  Yuzhkuzbassugol with Evraz’s steel operations and with Ukrainian coke production assets would yield more immediate value and long-term synergies than combining the Yuzhkuzbassugol and Raspadskaya businesses.
 
“Yuzhkuzbassugol and Raspadskaya will provide more value for our shareholders as separate businesses,” said Alexander Frolov, Evraz’s Chairman and CEO. “Yuzhkuzbassugol has already become an important part of our vertically integrated business model. We at Evraz are committed to grow both parts of Yuzhkuzbassugol businesses—metallurgical coal and steam coal mines—capitalizing on the significant potential of the company’s existing mines, as well as the new deposits. It is equally important for us that Raspadskaya will remain Evraz’s strategic partner and a reliable supplier of coal to the Group’s mills in Russia”.
 
Evraz also announced that Gennady Kozovoy has resigned as Yuzhkuzbassugol’s CEO. Andrey Borschevich will become the new acting CEO of Yuzhkuzbassugol, effective March 20, 2008.  Borschevich, who previously served as Chief Production Officer at Yuzhkuzbassugol, has 25 years of experience in the coal industry.
 
“We express our sincere gratitude to Gennady Kozovoy for his contributions to Yuzhkuzbassugol,” said Frolov. “In particular, we would like to thank Gennady for implementing strict occupational health and safety standards at our coal mines.”