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Severstal to Invest in West African Iron Ore Deposit

05/28/2008 - OAO Severstal will purchase up to a 61.5% stake in African Iron Ore Group, which owns, through subsidiaries, the exploration rights for an iron ore deposit in the Putu Range area, in Western Africa.

OAO Severstal has reached agreement to purchase up to a 61.5% stake in African Iron Ore Group Ltd (AIOG) which owns, through subsidiaries, the exploration rights for an iron ore deposit in the Putu Range area, in Liberia, Western Africa.
 
Severstal also will acquire a 6.29% stake in Mano River Resources Inc. (which currently controls AIOG) together with share warrants exercisable within a period of 18 months. If exercised in full, the warrants would convert into shares representing approximately 6.29% of the current issued share capital of Mano River Resources Inc. (prior to giving effect to the issuance of shares to Severstal).
 
Severstal will pay US$37.5 million for the 61.5 % stake in AIOG and £2 million for the 6.29% stake in Mano River Resources Inc. Severstal will carry out its purchases through its indirect wholly owned Dutch subsidiary, Lybica Holding BV. 
 
According to preliminary data, it is estimated that the Putu Range deposit contains at least 500 million tonnes of iron ore. This number may substantially increase as a result of a detailed exploration exercise that is planned by Severstal Resurs (which operates Severstal’s mining assets).
 
“The purchase of this iron ore deposit in Western Africa is a significant step in the dynamic development of the Severstal mining business,” said Roman Deniskin, CEO of Severstal Resurs. “From this new region we will supply production to the European and North American markets”.
 
The agreement to purchase the AIOG stake contains customary warranties and indemnities provided by Mano to Severstal. Completion of the deal is subject to Mano River Resources converting its exploration license into a Mineral Development Agreement, as well as customary conditions to closing, including approval of the TSX Venture Exchange and completion of satisfactory due diligence by Severstal.
 
OAO Severstal, an international mining and steel company, focuses on high value-added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. Severstal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007 Severstal produced 17.5 million tonnes of steel.
 
Severstal Resurs manages Severstal‘s mining assets, which include three high-quality mining complexes in northwest Russia. In 2007 Severstal's Mining division produced 5.8 million tonnes of coal concentrate, 1.8 million tonnes of coking coal, 1.8 million tonnes of steam coal, 10.0 million tonnes of iron ore pellets and 4.7 million tonnes of iron ore concentrate.  The reserves and resources of the company were estimated to be 1.8 billion tonnes of iron ore as at January 1, 2006 and 0.7 billion tonnes of coal as at April 1, 2006. 
 
Mano River Resources Inc. is a junior mining company engaged in the acquisition, exploration and development of gold, diamond and iron ore properties located in Liberia, Sierra Leone, and Guinea.