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Coal Mining Sector Russia

November 2013



Table of Contents

I. Sector Overview

1. Sector Highlights

2. Economic Importance

3. Main Sector Indicators

4. Main Coal Basins

5. PPI

6. Average Producer Prices

7. CPI

8. IPI

9. Foreign Trade

10.Employment and Wages

11.Government Policy

II. Coal Production and Consumption

1. Coal Production Highlights

2. Coal Output

3. Coal Consumption and Supply Highlights

4. Coal Consumption

5. Thermal (Steam) Coal

6. Coking Coal and Metallurgical Coal Highlights

7. Biggest Coking Coal Producing Countries and Companies

8. Coking Coal and Metallurgical Coal Production

9. Lignite and Brown Coal

III. Coal Market

1. Coal Reserves Worldwide

2. Biggest Coal Producing Countries and Companies

3. Biggest Russian Producers and Exporters

4. Best Performing Russian Coal Producers

IV. Main Players

1. SUEK

2. Mechel

3. Evraz

4. Ruscoal

5. Severstal

V. Regional Distribution

1. Coal Output by Region

2. Regional Distribution (2012)



I. Sector Overview



In January 2012, Russia's then Prime Minister Vladimir Putin said the country will spend over USD 8 billion on coal industry development by 2030

as part of a wider investment programme. As a result, Russia plans to boost its coal output to 430 million tons by 2030 to meet growing domestic

and global demand.

The investment programme focuses on developing the country's traditional coal mining centres – Kuzbass, Eastern Donbass, Vorkuta, as well as

exploring new fields in Tuva and Yakutia.

Coal mining is carried out in 121 open-pit and 85 underground mines with a total annual production capacity of about 383 million tonnes. Coal in

Russia is currently mined primarily by open-pit mining (65%) due to its relatively lower production costs.

The 2012, coal output amounted to 353 million tonnes, up by 4.7% on the year. The coal supplies increased by 3.1% to 316 million tonnes, of which

127 million tonnes were exported (up by 19%).

As a result of restructuring of the coal industry and privatisation of coal assets, the entire sector is in private hands. As much as 78% of the sector is

controlled by the 11 biggest mining companies and 5 steel smelters.

The biggest coal reserves in the world can be found in the United States, Russia, China and India. Russia is estimated to have 500 years of

remaining reserves. The country has 193.3 billion tonnes proven reserves of coal and 4.451 billion tonnes of prognosed coal reserves, which on a

global scale corresponds to 12% and 30%, respectively. Its proven reserves include brown coal (101.2 billion tonnes), bituminous coal (85.3 billion

tonnes, of which 39.8 billion tonnes are coking coal) and anthracite coal (6.8 billion tonnes).

The country's coal reserves are widely dispersed and coal mining is now carried out in 25 regions and 16 coal basins. The bulk of coal deposits is in

Siberia (64%) and the Far East region (30%). The European part of the country and the Urals account for 6% of the coal deposits.

Reserves

Production

Investments



Source:

Economic Importance

Economic importance of coal mining sector

Federal State Statistics Service, Federal Customs Office, CEIC

2007 2008 2009 2010 2011 2012

PPI 125.1 93.0 113.9 116.7 112.0 105.1

PPI of mining and quarrying 152.3 61.6 149.2 117.1 126.3 109.3

PPI of energy producing material mining 158.1 57.8 161.0 116.1 128.1 110.5

Coal exports, USD mn 5,354.7 7,751.8 7,367.1 9,180.5 11,373.3 13,015.1

Coal imports, USD mn 466.7 885.3 465.7 483.4 402.2 818.5

FDI total, USD mn 27,797.0 27,027.0 15,906.0 13,810.0 18,415.0 18,666.0

FDI in mining and quarrying, USD mn 13,933.2 4,978.7 3,174.8 2,034.9 4,627.0 3,529.1

FDI in energy producing materials, USD mn 13,669.7 4,644.8 2,798.7 1,755.2 3,896.9 2,740.5

Gross domestic product , RUB bn 33,247.5 41,276.8 38,807.2 46,308.5 55,799.6 62,599.1

GDP: gross value added (GVA) , RUB bn 28,484.5 35,182.7 33,831.3 40,040.1 47,505.5 53,284.5

GDP: annual: GVA: mining and quarrying , RUB bn 2,865.5 3,284.6 2,885.4 3,842.8 5,157.3 5,801.4



Source:

Main Sector Indicators

Mining and quarrying value, RUB bn

Main sector indicators, mn tonnes

Revenue breakdown per subsector

Federal State Statistics Service, CEIC, Coal Age

Energy producing materials

88.5%

Mining except energy

producing materials

11.5%

3,886 4,524 4,356

5,246

6,746

7,720

489 595 525 749 969 1,003

4,374

5,119 4,882

5,995

7,714

8,723

2007 2008 2009 2010 2011 2012


Mining, excl nergy producing materials

Total

1988 2000 2008 2009 2010 2011 2012

Total mining 425.4 257.9 328.9 3026 323.4 334.7 352.7

- open-pit mining 178.7 167 224 195.2 220.9 235.8 255.1

- underground mining 246.7 90.9 104.9 107.4 102.1 100.9 99.6

Stocks - 190.4 191.4 176 790.6 188.3 194.2

Domestic power demand - 103.3 98.8 91.6 95.9 95.8 96.3



Source:

Main Coal Basins

Coal production, mn tonnes

Coal mining development is concentrated in the main coal

basins – Kuznetsk and Kansko-Achinsk. New deposits that will

be subject to further development are located in Eastern Siberia

and the Far East (Urgalskoye, Elegestskoye, Elginskoye,

Apsatskoye deposits) alongside with the main coal basins. If

economically feasible, coal mining can be developed at

Seidinskoye (the Republic of Komi) and Sosvinskoye (the

Khanty-Mansi Autonomous Area – Yugra) deposits, as well as

in the Bering coal basin (the Chukot Autonomous Area). The

energy strategy also envisages the construction of required port

infrastructure (the ports of Vostochny, Vanino and Ust-Luga, the

Murmansk deep-water port) and construction of new ports with

high-capacity coal terminals, including ports on the Black Sea

coast, and, should the economic efficiency be proved, on the

North Pacific coast.

The Pechora basin spans over an area of some 90 thousand sq

km near the northern Ural Mountains in a region with severe

climate, which results in 85% of the basin being under

permafrost. It is being developed as an underground mine. In

addition to being a significant reserve, the basin is also close to

markets.

The Kuznetsk Basin has an area of 26.7 thousand sq km and is

located near Novosibirsk. There are both open-pit and

underground mines, from which a variety of coals with variable

ash content and low sulphur content are being extracted.

The Kansk-Achinsk Basin contains significant deposits of brown

(sub-bituminous) coal with medium-to-low ash content and

generally low sulphur content. Some of the mines ate connected

with power stations and carbo-chemical plants.

Coal Age, Energy Strategy 2030, World Energy Council

Coal basin Coal

types

Resources

(bn tonnes) Mining in

2012

(mn

tonnes)

Ash

content

(%)

Sulfur

(%)

Heating

capacity

(micro joule/kg) A+B+

C1* C2*

Kansk-Achinsk

(Krasnoyarsk

Territory, Kemerovo region)

brown and

black 79.4 38.8 41.1 6-15 0.3-1 12.6-17.7

Kuznetsk or

Kuzbass

(Kemerovo area)

brown and

black 51.5 1.7 201.5 10-16 0.3-0.8 22.8-29.8

Irkutsk (Irkutsk

region) brown and

black 7.6 4.6 14.2 7-15 1.5-5 17.6-22.6

Pechora (Komi

Republic) brown and

black 7.2 0.48 13.6 8.5-25 0.5-1 18.1-26.7

Donetsk (Rostov

region) brown and

black 6.6 3.1 4.7 10.5-29 1.8-4.2 18.5-20.1

South Yakutia

(Republic of Sakha) black 4.5 2.8 9.2 10-18 0.3-0.5 22-37.4

MINUSA (Republic

of Khakassia) black 5 0.35 12.3 6.6-29.7 0.5-0.6 18-32

*Note: Russia divides mineral concentrations into seven categories, in three major groups, based on the

level of exploration performed: fully explored reserves or resources (A, B, C1), evaluated reserves or

resources (C2) and prognostic resources (P1, P2, P3).



Source:

PPI

PPI, prev month=100

PPI, prev Dec=100

PPI, same month, prev year=100

Federal State Statistics Service, CEIC

125

93

114 117

112 105

152

62

149

117

126 109

158

58

161

116

128 110

116

136

89

127 133

94

55.0

75.0

95.0

115.0

135.0

155.0

2007 2008 2009 2010 2011 2012

Total

Mining and quarrying


Coal

75

85

95

105

115

125

Mining and quarrying Energy producing materials

0

50

100

150

200

250

Total Mining and quarrying Energy producing materials



Source:

Average Producer Prices

Coal, RUB/tonne

Coking coal, RUB/tonne

Bituminous coal, RUB/tonne

Brown coal, RUB/tonne


0

200

400

600

800

1,000

1,200

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

100

200

300

400

500

600

700

800



Source:

CPI

CPI for coal, prev month=100

CPI for coal, same month prev year=100


96

98

100

102

104

106

108

100

105

110

115

120

125

130



Source:

IPI

IPI, 1991=100

IPI in mining and quarrying, prev month=100

IPI, prev year=100


105.2 105.6 105.0

108.8 110.8

112.0

117.4 117.6 118.0

121.7 123.3

124.8

2007 2008 2009 2010 2011 2012


103.3

100.4

99.4

103.6

101.9

101.1

102.7

100.1 100.4

103.1

101.3 101.2

2007 2008 2009 2010 2011 2012


90

95

100

105

110

115



Source:

Foreign Trade

Coal exports volume and value

Exports by destination

Coal imports volume and value

Imports by destination

Federal Customs Agency, CEIC

23.4

30.9

23.8

14.8

1.7

21.4

466.7

885.3

465.7 483.4 402.2

818.5

2007 2008 2009 2010 2011 2012

Volume, mn tonnes Value, USD mn

98.0 97.4 105.1 115.7 110.5

130.4 5,354.7

7,751.8 7,367.1

9,180.5

11,373.3

13,015.1

2007 2008 2009 2010 2011 2012

Volume, mn tonnes Value, USD mn

2007 2008 2009 2010 2011 2012

CIS

thou tonnes 11,169 13,869 8,342 13,084 10,462 11,565

USD mn 787 1,428 593 1,150 1,407 1,411

Non-CIS

thou tonnes 86,824 83,571 96,801 102,602 100,010 118,844

USD mn 4,567 6,324 6,774 8,031 9,966 11,604

2007 2008 2009 2010 2011 2012

CIS

thou tonnes 23,249 29,917 23,762 14,063 117 20,361

USD mn 436 656 450 332 18 590

Non-CIS

thou tonnes 192 998 51 707 1,568 1,007

USD mn 31 230 16 151 384 229



Source:

Employment and Wages

Number of employees

Average monthly wage, RUB


2007 2008 2009 2010 2011 2012

Mining and quarrying 974,526 975,753 914,739 897,873 917,314 935,110

Energy producing materials 619,418 621,799 590,477 579,210 588,442 598,975

Coal and Peat 197,552 190,802 173,238 166,524 168,111 168,276

- Coal 193,276 186,570 169,217 162,728 164,984 165,176

- Bituminous 166,412 161,887 147,396 142,124 144,820 145,537

- Brown 26,864 24,683 21,821 20,604 20,164 19,639

- Peat 4,277 4,232 4,024 3,796 3,129 3,103

2007 2008 2009 2010 2011 2012

Mining and quarrying 28,108 33,206 35,363 39,895 45,132 50,401

Energy producing materials 33,276 39,051 41,568 46,271 51,588 57,210

Coal and Peat 18,397 22,574 23,172 27,067 32,251 35,697

- Coal 18,628 22,866 23,486 27,415 32,611 36,094

- Bituminous 19,301 23,584 23,945 28,018 33,365 36,943

- Brown 14,456 18,157 20,386 23,254 27,196 29,803

- Peat 7,959 9,706 9,964 12,149 13,224 14,564



Source:

2030

development

programme

Transportation

Modernisation

In January 2012 , the government adopted a long-term programme for development

of coal industry until 2030. The document, which was prepared by the energy ministry,

consists of eight sub-programmes and encompasses the related existing federal

programmes and sectoral strategies into one complex strategy.

The implementation of the programme relies heavily on public-private partnerships, as

the state’s participation in its RUB 3.7tn budget is less than 9 % or RUB 251.8bm.

The programme suggests that by 2030 coal production will increase to 430 mn tonnes

as a result of the increase in productivity and new coal extraction equipment.

The programme also tackles one of the main price factors in a country with a vast geography such as Russia, planning measures to reduce transportation costs and improve the efficiency of coal supplies. As a result, the average of coal transportation is projected to decrease 1.2 times, including in the domestic market – by 1.4 times. Some of the measures include boosting the local use of mined coal, the construction of power plants with integrated utilisation of energy resources, especially coal and methane. Considering the trends in the formation of new centers of coal mining , coal production will shift towards the eastern part of the country, especially Eastern Siberia, whose share in coal share in coal mining is expected to increase from 25.8 % to 32% and the Far East – from 9.7% to 15.2 %. With China slowly turning into a net importer of China, Russia will also secure supplies to this potentially significant market.

Another major goal of the programme is putting an end to the use of obsolete

equipment and technologies. The government will demand from new coal production

facilities to have modern enrichment equipment in order to boost enrichment level in

coal to 60% from the current 40%. The programme also sets as a goal that 80% of the

mined coal pass through some sort of processing.

Stages of implementation:

1st stage – 2011-2015

2nd stage – 2016-2020

3rd stage – 2021-2030



II. Coal Production and Consumption



Coal Production Highlights

Soviet times Following the collapse of the Soviet Union, Russian coal production dropped from 425 mn tonnes in 1988 to 232 mn tonnes in

1998. The output reached 329 mn tonnes in 2003 and since then fluctuates in both directions.

Current

situation

At present, coal mining is carried out in 25 regions of the Russian Federation and 16 coal basins. Regardless of its sizeable

reserves, Russia produces a relatively low amount of coal. In 2012, output amounted to 353 mn tonnes, up by 4.7% from the

previous year. The coal supplies increased by 3.1% to 316 mn tonnes, of which 127 mn tonnes were exported (up by 19%).

Producers

As a result of restructuring in the coal industry and the privatisation of coal assets, the entire sector is controlled by privately-

owned joint stock companies. These changes resulted in the formation of a number of large corporations and holding

companies that own coal assets. In addition, all coking coal producers are integrated in metallurgical producers.

The largest 16 mining coal mining companies account for 78% of the total coal output in the country, including five steel

smelters.

Risks

The country's energy strategy outlines the following trends for the coal sector: depletion of the potential for development of

existing coal basins in the European part of the country and in the Urals; slowing down of the rates of new coal deposits

development; increase in coal mining and transportation costs; reduction in domestic demand for thermal coal; dependence of

coal companies on the amount of export revenues; high share of transport costs in the price of coal products; low quality of coal

products as compared with the world level; insufficient rates of fixed assets renovation and investment for large-scale

infrastructure projects.



Source:

Coal Output

Coal production, mn tonnes

Coal production by type, mn tonnes

Coal production, mtoe

Federal State Statistics Service, CEIC, Coal Age, BP Statistical Review of World Energy June 2013, *EIA, **D&B

313.8 328.6

301.2

321.7 334.8

354.3

1.3%

4.7%

-8.3%

6.8%

4.1%

5.8%

2007 2008 2009 2010 2011 2012

Coal production, mn tonnes Change y/y, %

148.0 153.4 142.1 151.1 158.0 168.1

1.9%

3.7%

-7.4%

6.3%

4.6%

6.4%

2007 2008 2009 2010 2011 2012

Coal production, mtoe Change y/y, %

2007 2008 2009 2010 2011 2012

Hard coal* 240.1 245.2 267.7 275.0 282.4 n/a

- Bituminous coal 238.6 240.3 229.2 240.8 257.3 275.8

- Anthracite coal n/a n/a n/a 6.8 10.1 11.2

Lignite coal** n/a 82.5 68.8 76.4 76.9 77.8

Enriched coal n/a n/a n/a n/a 140.6 121.1

Coking coal 69.1 64.7 60.6 67.0 64.7 71.5

Metallurgical coke 33.9 32.0 27.4 27.0 27.0 27.1



Coal Consumption and Supply Highlights

Power

generation

Coal is one of the major energy resources in Russia's power generation sector with about 14% share of the nation's energy

consumption. Its role is expected to increase with the support of the government, whose strategy for the coal sector

development until 2030 envisages an increase in coal production and the construction of coal-fired plants, which will free up

natural gas for exports.

Russia's energy matrix varies across regions. Siberia and the Far East rely heavily on coal-fired power utilities (about half of

electricity production), while in the European part and the Urals, electricity and heating come mostly from gas.

In addition to the energy sector, the other main consumer of coal is the metal processing sector.

Transportation

Russia intends to upgrade its port and railway infrastructure in the Far East in order to boost coal exports to Asia. The uneven

distribution of coal deposits and the location of many of them far from markets results in transportation making up 60% of the

cost of coal. This burden makes the otherwise cheaper to produce Russian coal, a more expensive and, therefore, a less

competitive export item.

In order to deal with this issue, the country is undertaking measures to encourage the local use of coal at its production

location and also plans to expand its transportation infrastructure to support exports, particularly to the east.

Exports Russian coal is mainly exported via two terminals: Nakhodka (Eastern port) and Saint-Petersburg (port Ust-Luga). The main

bottlenecks for Russian coal exports to Asia are the insufficient capacities of the railways and ports.



Source:

Coal Consumption

Coal consumption, mn tonnes

Coal consumption breakdown by users

Coal consumption, mtoe

Electricity production from coal sources

Dun & Bradstreet, EIA, BP Statistical Review of World Energy June 2013, World Bank, CEIC

93.4 100.4

91.9 90.2 93.7 93.9

-3.3%

7.4%

-8.4%

-1.8%

3.8%

0.2%

2007 2008 2009 2010 2011 2012

Coal consumption, mtoe Change y/y, %

177,889 169,128 196,286

163,651 165,603 163,659

17.9% 16.7%

18.9%

16.5% 16.0% 15.5%

2006 2007 2008 2009 2010 2011

Electricity production, GWh % of total

190.5 205.2

184.1 200.3 198.3 188.2 -1.6%

7.7%

-10.3%

8.8%

-1.0%

-5.1%

2007 2008 2009 2010 2011 2012

Coal consumption, mn tonnes Change, %

51.4% 48.6% 48.6% 48.0% 51.4%

19.2% 20.9% 19.5% 19.6% 19.8%

12.7% 13.1% 12.5% 12.0% 12.9%

2008 2009 2010 2011 2012

Others

Householdsand agriculture

Metallurgy

Power utilities



Source:

Thermal (Steam) Coal

Top 10 steam coal producing countries, mn tonnes (2012e)

Thermal coal consumption, mn metric tonnes

Thermal coal production in Russia in 2012

Comments

World Coal Association, SUEK, Russian Coal Market Research Institute, Promishlenie Vedomosti

Thermal coal accounts for the bigger portion of Russia's coal

reserves – 3,641.9bn tonnes or 89%.

According to Russia's biggest coal producer SUEK, the domestic

market for thermal coal in 2012 was shaped by soaring exports and

weaker domestic demand.

Due to the favourable situation on the foreign markets, the exports of

thermal coal increased by 12.1 mn tonnes (12% on the year).

However, the unusually warm winter in 2011/2012 resulted in a lower

demand from domestic utilities.

SUEK 34%

Kuzbassrazrezugol 14%

Mechel 3%

Evraz 1%

SDS Coal 8%

Sibuglmet 1% RusskiyUgol

3%

Others 36%

68

85

108

200

201

258

440

504

782

3,039

Poland

Colombia

Kazakhstan

Australia

Russia

South Africa

Indonesia

India

USA

China

137 132 164

201 232 247 26 23

20

18 16

14

25 30

36

37 38

40

3 4

4

4 6

11

191 189

224

259

293 312

2008 2010 2015f 2020f 2025f 2030f

Other

Industry

Utilities

Power

Total

Russia



Coking Coal and Metallurgical Coal Highlights

Internal

demand

As much as 447.1bn tonnes or 11% of Russia's prognosed coal reserves are coking coal. The country exports less than 30%

of the output with its largest foreign consumer being Ukraine. The reasons for the low exports volumes , according to research

firm Ignatov & Company Group is the deficit in Russia's own coking coal production – it suffered from a temporary decline in

steel production during the global economic crisis, caused by a slump in demand for steel products from the construction,

automotive and machine building industries.

Steel industry

demands

Russia relies on domestic steel production to meet the internal demand, and therefore, the self-supply with ore and coke is

deemed very important. Also, most of the Russian coke is being produced directly with its direct consumers, the steel mills.

Main

producers

The Russian market of metallurgical coke has more than a dozen manufacturers. The market leaders are: CMI, Mechel, NLMK,

Severstal MC Industrial Metallurgical Holding and Eurasia. The six biggest steel producers in the country currently control ¾ of

the coking coal output and almost 100% of iron ore output, Ignatov & Company Group estimates show.

Capacities The major coking coal exporting countries expanded their new capacities in 2012. Russia raised its capacities by 13% to 16 mn

tonnes, coal miner Evraz said in its annual report. Other major expansions took place in Australia (up by 8% to 144 mn tonnes)

and North America (up by 5% to 95 mn tonnes).



Source:

Biggest Coking Coal Producing Countries and Companies

Top 10 coking coal producers, mn tonnes (2012e)

Share of coking coal imports, mn tonnes (2012)

Share of coking coal exports (2012 )

Top 10 coking coal exporters, mn tonnes (2012)

World Coal Association, Evraz

12

13

18

21

31

47

75

81

147

510

Poland

Kazakhstan

Ukraine

Mongolia

Canada

India

Russia

USA

Australia

China

Australia 49%

North America 32%

Others 8%

Russia 6%

Mongolia 5%

Total exports: 294mn tonnes

Japan, S.Korea and Taiwan 29%

Others 22%

China 18%

EU-27 14%

India 13%

Total imports: 278mn tonnes 11

11

12

13

13

15

18

18

25

38

Xstrata

Rio Tinto

Walter Energy

Peabody

BHP Billiton

Mechel

Anglo American

Alpha Natural Resources

Teck

BMA

Russia



Source:

Coking Coal and Metallurgical Coal Production

Coking coal output in Russia, mn tonnes

Biggest coking coal producers in Russia

Top 10 metallurgical coke producers by reserves, mn metric tonnes

Top 10 metallurgical coke producers by output, mn metric tonnes (2012)

Federal State Statistics Service, CEIC, Evraz, World Coal Association, Ignatov & Company Group, MetCoke

Others 42%

Sibuglmet 10%

Yakutugol 9% Severstal 9%


Yuzhny Kuzbass 8%

Yuzhkuzbassugol 7%

Raspadskya 7%

69.1

64.7

60.6

67.0

64.7

71.5

2007 2008 2009 2010 2011 2012526

895

896

1,034

1,271

1,361

1,602

1,938

2,541

3,357

Peabody

Anglo American

JSW

Teck

Rio Tinto


Vale

Evraz

Mechel

BMA

11

11

12

13

13

15

18

18

25

38

Xstrata

Rio Tinto

Walter Energy

Peabody

BHP Billiton

Mechel

Anglo American


Teck

BMA



Source:

Lignite and Brown Coal

Lignite coal production, mn tonnes

Brown coal producers, mn tonnes

Share of electricity from brown coal by company (May 2012)

Comments

D&B, World Coal Association, TU Delft

According to the U.S. Energy Information Agency, Russia's

power sector includes over 440 thermal power plants, of which

77 are coal-fired.

There are no official statistics about the number of power plants

in Russia that run on brown coal but researches indicate their

number is about 25.

RAO Energy Systems of the

East, 24.1% Gazprom,

14.2%

E.ON Russia, 13.8%

Ogk-2, 12.7%

Siberian Generating Co,

12.7%

Others, 22.5% Fortum (formerly TGC-10), 5.7%

Energopromsbyt, 4.8%

Kuzbassenergo (TGC-12),

4.60% En+ Group,

3.7%

Ogk-3 (third Generation Co), 2.20%

Inter RAO UES, 0.80%

Quadra-PGC, 0.60%

38

43

43

62

64

66

72

73

78

185

Serbia

Czech Republic

India

Greece

Poland

Turkey

USA

Australia

Russia

Germany

Total production: 905mn tonnes

82.5

68.8

76.4 76.9 77.8

2008 2009 2010 2011 2012



III. Coal Market



Source:

Coal Reserves Worldwide

Proven recoverable reserves according to World Energy Council, mn tonnes (end-2011) Proven recoverable coal reserves according to International Energy Agency

World Energy Council, IEA

Bituminous

including

anthracite

Sub-

bituminous Lignite Total

Australia 37,100 2,100 37,200 76,400

Brazil n/a 6,630 n/a 6,630

Canada 3,474 872 2,236 6,582

China 62,200 33,700 18,600 114,500

Colombia 6,746 n/a n/a 6,746

Germany 48 n/a 40,500 40,548

Greece n/a n/a 3,020 3,020

India 56,100 n/a 4,500 60,600

Indonesia n/a 28,017 n/a 28,017

Kazakhstan 21,500 n/a 12,100 33,600

Poland 4,178 n/a 1,287 5,465

Russia 49,088 97,472 10,450 157,010

Serbia 1 10 13,400 13,411

South Africa 30,156 n/a n/a 30,156

Turkey 322 n/a 8,380 8,702

Ukraine 15,351 16,577 1,945 33,873

USA 108,501 98,618 30,176 237,295

Total world 403,197 287,333 201,000 891,530

Hard Coal Brown Coal Total Coal

OECD Europe 18,322 54,820 73,142

OECD North America 218,818 35,614 254,432

OECD Pacific 41,477 38,033 79,510

Russia 69,946 91,607 161,553

China 167,000 25,000 192,000

India 95,399 467 95,866

Rest of Asia 10,283 10,664 20,947

South America 19,769 124 19,893

Africa / Middle East 52,846 202 53,048

Total world 736,112 283,184 1,019,296



Source:

Biggest Coal Producing Countries and Companies

Top 10 coal producing countries, mn tonnes (2012e)

Top coal exporters (2012e)

Biggest coal producers worldwide, mn tonnes

Biggest companies by sales worldwide, mn tonnes

World Coal Association, SUEK

Steam Coking Total

Indonesia 380 3 383

Australia 159 142 301

Russia 116 18 134

USA 51 63 114

Colombia 82 0 82

South Africa 74 0 74

Canada 4 31 35

97.5

99.3

106.9

110.5

133.0

140.7

176.0

248.5

436.0

470.0

SUEK

Anglo American

BHP Billiton

Alpha

Datong

Arch Coal

Chin Coal

Peabody Energy

Coal India

Shenhua

32.8

36.5

38.8

41.0

50.6

52.4

61.0

69.3

72.7

76.0

Banpu

Adaro

SUEK

Peabody Energy

Rio Tinto

Anglo American

Glencore

Bumi Resources

BHP Billiton

Xstrata

126

144

197

259

359

421

443

595

935

3,549

Kazakhstan

Poland

Germany

South Africa

Russia

Australia

Indonesia

India

USA

China

Total coal production

worldwide: 7,830 mn tones

Russia



Source:

Biggest Russian Producers and Exporters

Biggest Russian companies by output, mn tonnes

Market shares of Russian companies by exports volume

Coal production in Russia in 2012

Comments

SUEK

Russia's biggest coal producer is SUEK with 27.5% of coal output. It is

also the country's biggest coal exporter with 38.8mn tonnes sold abroad,

which corresponds to a 27.6% market share.

Others 130.8

Mechel 24.2

SDS Coal 23.4

Kuzbassrazrezugol 45.4

SUEK 97.5

Others 30%

Mechel 8%

SDS Coal 13%


SUEK 29%

SUEK 27%


Mechel 7%

Evraz 5%

SDS Coal 6%

Sibuglmet 3% Ruscoal 3%

Severstal 3%

Others 33%



Source:

Best Performing Russian Coal Producers

Top 15 coal producers by sales revenue in 2012, USD mn Top 15 coal producers by net income in 2012, USD mn

Dun & Bradstreet, SPARK Database, Interfax-CNA

Company IFRS or

RAS 2011 2012 2012/ 2011

1 SUEK RAS 2,074 2,217 68.7%

2 Kuzbassrazrezugol RAS 1,135 1,764 106.9%

3 SUEK-Kuzbass RAS 1,324 1,083 155.5%

4 Sibuglemet RAS 1,480 1,052 81.8%

5 Southern Kuzbass (Mechel) RAS 1,198 983 71.1%

6 Vorkutaugol (Severstal) RAS 1,153 955 82.0%

7 Yuzhkuzbassugol (Evraz) RAS 812 768 82.9%

8 Kuzbass Fuel Company IFRS 1,177 742 94.7%

9 Yakutugol (Mechel) RAS 788 584 63.0%

10 Belon (MMK) RAS 354 567 74.1%

11 SUEK-Krasnoyarsk IFRS 723 542 160.3%

12 Raspadskaya IFRS 638 531 75.0%

13 Zarechnaya Mine RAS 528 468 83.2%

14 Russian Coal RAS 415 375 88.7%

15 Mezhdurechye (Sibuglemet) RAS 2,074 2,217 90.3%

Company IFRS or

RAS 2011 2012 2012/ 2011

1 SUEK RAS 579 581 100.4%

2 Kuzbassrazrezugol RAS 281 324 115.5%

3 Yakutugol (Mechel) RAS 447 222 49.6%

4 SUEK-Krasnoyarsk IFRS 8 172 2257.6%

5 Mezhdurechye (Sibuglemet) RAS 197 142 72.1%

6 SUEK-Kuzbass RAS 172 122 70.9%

7 Vorkutaugol (Severstal) RAS 378 94 24.9%

8 Southern Kuzbass (Mechel) RAS 479 94 19.5%

9 Kuzbass Fuel Company IFRS 69 60 87.5%

10 Sibuglemet RAS 283 37 13.1%

11 Yuzhkuzbassugol (Evraz) RAS 343 13 3.8%

12 Russian Coal RAS 35 9 24.5%

13 Belon (MMK) RAS 62 0.3 0.4%

14 Zarechnaya Mine RAS 4 -13 -

15 Raspadskaya (Evraz) IFRS 136 -31 -



IV. Main Players



Highlights

Source:

SUEK

Financial performance (RUB bn)

Key operating indicators, tonnes

The Siberian Coal Energy Company (SUEK) is Russia's

largest coal company (among top 10 worldwide) with a 27.5%

share (92.2mn tonnes) in Russian total coal production,

covers 41% of thermal coal demand from the domestic energy

generation industry and a 28% share in Russian thermal coal

exports in 2011.

SUEK runs 29 mines (17 open-pit and 12 underground

mines), 7 preparation plants, a bulk terminal at the Vanino

port, and other industrial transportation and maintenance

facilities. The company has 30,000 employees.

SUEK enterprises produced 97.5mn tonnes of coal in 2012,

which represented an increase of 5.3mn tonnes (6%)

compared to 2011. A substantial part of SUEK’s production in

2012 (approximately 62%) was hard coal; while the

production of brown coal accounted for 38%.

In the next five years, the company intends to increase its

production of high-quality coal for both domestic and export

markets through boosting the capacity of existing mines and

open-pits, and with the concurrent development of

transportation infrastructure. The total investments in coal

production and preparation and in transportation infrastructure

are expected to average USD 650mn per year in the 2013-

2017 period.

Company data

2010 2011 2012

Sales 90.4 88.9 91.7

Domestic sales 61.3 55.2 52.9

Export sales 29.1 33.7 38.8

Production 89.1 92.2 97.5

Hard coal 49.6 53.9 60.2

Brown coal 39.5 38.3 37.3

Transhipment in Vanino Bulk

Terminal 8.0 10.1 12.0

115.96

148.98 131.20

167.01 175.21

-10.

64

3.63

9.05

24.8

7

30.0

2

2008 2009 2010 2011 2012

Revenue Net profit



Highlights

Source:

Mechel

Financial performance (USD bn)

Key operating indicators, thou tonnes

Mechel OAO, founded in 2003, is a mining and metallurgy

company, operating in Russia, the United

States, Kazakhstan and Lithuania.

The company groups some 30 production enterprises,

producing coal, iron ore, steel, rolled products, ferroalloys,

heat and electric power. The holding company also owns

three trade ports, transport operators and international

sales and service networks. The company employs over

80,000 people.

Mechel’s mining segment (Mechel Mining) includes

production and sales of coking coal concentrate, iron ore

concentrate and coke, which are chief raw material for

production of steel and steam coal. Apart from providing for

the needs of the steel and power segments, it also sells raw

materials to third-parties.

The group controls 25% of Russia's coking coal washing

facilities. In 2012, the company produced 27.8 mn tonnes of

coal.

Company data

FY 2011 FY 2012

Coal (run-of-mine) 27,625 27,763

Pig iron 3,728 4,161

Steel 6,118 6,532

11.275 12.541

9.747

5.754

9.951

-1.6

65

0.80

3

0.69

2

0.07

6

1.22

9

2008 2009 2010 2011 2012

Net revenues Net income



Highlights

Source:

Evraz

Financial performance (USD bn)

Coal products sales volumes, kt

Evraz, established in 1992 under the name Evrazmetall, is

a vertically integrated steel, mining and vanadium business

with operations in Russia, Ukraine, the United States,

Canada, the Czech Republic, Italy and South Africa. It

employs about 110,000 people.

A significant portion of the company's internal consumption

of iron ore and coking coal is covered by its mining

operations.

Raw coking coal production increased to 8.5 mn tonnes (up

by 35%) as a result of operational efficiencies, while steam

coal output declined to 2.3 mn tonnes (down by 23%).

The group is listed on the London Stock Exchange and is a

constituent of the FTSE 250.

Company data

36 162 987 702 222 729

1,209 597

1,560 1,439

3,163 3,285

1,215 652

203

8,595 7,566

2011 2012

Steam coalconcentrateSteam coal

Coking coalconcentrateCoking coal

Steam coalconcentrateSteam coal

Coking coalconcentrateCoking coal

Total

Ext

erna

l In

ters

egm

ent

19.990

9.505

13.394

16.400 14.726

3.63

2

0.19

5

0.47

0

0.45

3

-0.3

35

2008 2009 2010 2011 2012

Revenues Net profit



Highlights

Source:

Ruscoal

Financial performance (RUS bn)

Revenue breakdown, RUS bn

Anthracite producer Russian Coal, established in 2002,

operates 6 open-cut mines and а coal enriching facility, and

is also active in the fields of energy supply, transport

enterprises and repair services.

Its main producing assets are located in Kemerovo, Amur

and the Republic of Khakassia. The company employs

around 4,000 people.

In the beginning of 2013, the company estimated its total

reserves – at 444.3 mn tonnes and its ultimate reserves at

313.8 mn tonnes.

Russian Coal mined 10 mn tonnes of coal that year, mostly

anthracite. As much as 8.1 mn tonnes of them were

extracted through the open-cut method and the company

plans to boost this amount by 4% on the year in 2013. The

exports amounted to 1.3 mn tonnes.

Company data, e-disclosure.ru

4.951 5.937

15.503 14.088

-0.2

13

0.19

7

1.03

8

0.26

1

2009 2010 2011 2012

Revenues Net profit

2011 2012 2011 2012

Rostov 3.37 2.05 Domestic market 1.17 1.35

Coal 2.51 1.68 Exports 0.75 0.22

Domestic market 1.41 1.24 Inventories 0.22 0.29

Exports 1.11 0.44 Khakassia 6.58 6.54

Inventories 0.86 0.36 Coal 6.23 6.21

Amur 3.38 3.48 Domestic market 3.16 2.70

Coal 2.85 3.01 Exports 3.07 3.52

Domestic market 2.85 3.01 Inventories 0.35 0.33

Inventories 0.54 0.47 Krassnoyarsk 0.07

Kuzbass 2.13 1.86 Coal 0.07

Coal 1.92 1.57 Domestic market 0.07



Highlights

Source:

Severstal

Financial performance – consolidated (USD bn)

Coal resources and sales

Severstal is one of the world's leading vertically integrated

steel and steel related mining companies.

The company has assets in Russia, the United States,

Ukraine, Latvia, Poland, Italy, Liberia as well as

investments in Brazil. It has about 63,000 employees.

Severstal has 3 divisions: Severstal Russian Steel,

Severstal International and Severstal Resources.

Severstal’s Russian steel operations are almost all self-

sufficient in iron ore and coking coal, respectively. Severstal

Resources is the group's producer of iron ore and coal.

Severstal’s mining division was formed by acquisitions

made over the last 12 years.

Severstal’s key asset is the Cherepovets Steel Mill,

an integrated steel plant with coking coal, agglomeration,

blast furnaces, steel-smelting and rolling facilities.

The group is listed on MICEX/RTS and its GDRs are traded

on the LSE.

Company data

14.104 15.812

12.819

9.076

16.066

0.82

0

2.17

4

-0.5

15

-1.1

00

2.06

2

2008 2009 2010 2011 2012

Revenues Net profit

2011 2012

Production, tonnes

Crude steel 15,293,407 15,140,185

Hot metal 10,543,687 10,256,881

Sales volumes, tonnes

Severstal Resources Coal: 10,634,866 10,479,136

Coking coal concentrate, including: 7,591,670 7,513,436

Vorkutaugol 5,127,440 5,267,442

PBS Coals 2,464,229 2,245,993

Raw coking coal, Vorkutaugol 289,556 622,318

Steam coal, including: 2,753,640 2,343,382

Vorkutaugol 2,028,358 2,191,132

PBS Coals 725,283 152,251



V. Regional Distribution



Source:

Coal Output by Region

Coal mining breakdown by regions, thou tonnes


2007 2008 2009 2010 2011 2012

Coal mining 313,787 328,554 301,227 321,701 334,831 354,330

- Central Federal District (CF) 299 360 201 235 259 226

- North Western Federal District (NW) 12,956 12,929 11,799 13,625 13,494 13,631

- Southern Federal District from 2010 (SF) 7,398 7,081 4,938 4,725 5,281 5,633

- Volga Region Federal District (VR) 534 515 312 387 318 492

- Ural Federal District (UF) 3,459 3,354 2,023 2,154 2,401 2,328

- Siberian Federal District (SB) 256,953 271,982 254,134 268,902 280,865 297,126

- Far East Federal District (FE) 32,188 32,333 27,820 31,673 32,213 34,894

Bituminous coal 238,561 240,256 229,154 240,787 257,266 275,795


- Southern Federal District from 2010 (SF) 0 0 0 4,721 5,282 5,633


Anthracite coal

- Southern Federal District from 2010 (SF) n/a n/a n/a 4,721 5,282 5,633

- Siberian Federal District (SB) n/a n/a n/a 2,086 4,803 5,684

- Far East Federal District (FE) n/a n/a n/a n/a n/a 334

Coking coal




Brown coal n/a n/a n/a n/a n/a 35,928

- Central Federal District (CF) n/a n/a n/a n/a n/a 203

- Volga Region Federal District (VR) n/a n/a n/a n/a n/a 385

- Ural Federal District (UF) n/a n/a n/a n/a n/a 1,930

- Siberian Federal District (SB) n/a n/a n/a n/a n/a 48,140

- Far East Federal District (FE) n/a n/a n/a n/a n/a 12,111

Enriched coal n/a n/a n/a n/a 140,613 121,098

- North Western Federal District (NW) n/a n/a n/a n/a 7,623 5,114

- Southern Federal District from 2010 (SF) n/a n/a n/a n/a 4,099 4,228

- Ural Federal District (UF) n/a n/a n/a n/a 863 730

- Siberian Federal District (SB) n/a n/a n/a n/a 119,768 98,860

- Far East Federal District (FE) n/a n/a n/a n/a 8,260 9,127

Metallurgical coke 33,910 32,017 27,424 27,042 27,011 27,101

- Central Federal District (CF) 5,255 4,889 3,361 3,191 3,159 2,985


- Volga Region Federal District (VR) 2,347 2,345 1,976 2,127 2,163 1,775

- Ural Federal District (UF) 10,946 9,985 9,024 9,050 9,156 9,513




Source:

Regional Distribution (2012)

Federal State Statistics Service, CEIC (data), Wikipedia (map)

Siberian District

Coal mining - 297,126 thou tonnes

Anthracite - 5,684 thou tonnes

Coking coal - 51,928 thou tonnes

Brown coal - 48,140 thou tonnes

Enriched coal - 98,860 thou tonnes

Metallurgical coke - 9,233 thou tonnes

Northwestern District


Bituminous coal - 13,640 thou tonnes




Central District

Coal mining – 226 thou tonnes

Brown coal – 203 thou tonnes

Metallurgical coke – 2,985 thou tonnes

Southern District



Anthracite - 5,633 thou tonnes


North Caucasian District

-

Volga District

Coal mining – 492 thou tonnes

Brown coal - 385 thou tonnes


Urals District



Enriched coal - 730 thou tonnes


Far Eastern District



Anthracite - 334 thou tonnes






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