PROVEN
LEADERSHIP
ANNUAL REPORT 2015
/ CONtENt
UNIQUE RESOURCE BASE
DEMAND-DRIVEN PRODUCtION
LOW CONtROLLABLE CASH COStS
DIVERSIFIED SALES GEOGRAPHY
NO. 2 IN tHE WORLD 01The Company owns the world’s second-largest proven iron ore reserves – approximately 14.2 billion tonnes, which ensures a mine life of around 150 years at current production levels.
INDUStRY LEADER 03Metalloinvest is a leading global producer of merchant hot briquetted iron (HBI), iron ore, metallised products and high-quality steel.
UNRIVALLED PRODUCtION 02HBI/DRI and pellet production costs at Metalloinvest are significantly lower than at global peers’ operations.
LEADING SUPPLIER 04Metalloinvest’s products are supplied to all major markets worldwide. Russia, Eastern and Western Europe, Asia and the Middle East are its priority regions.
PROVEN LEADERSHIP
Metalloinvest is Russia’s largest iron ore producer. Metalloinvest is a global player in the metals market focusing on high value-added products, such as merchant HBI/DRI and pellets.
5.4million tonnes
of HBI/DRI
39.5
million tonnes of iron ore
2.5
million tonnes of pig iron
are produced across
Metalloinvest’s enterprises
4.5
million tonnes of steel
23.8
million tonnes of pellets
>2,000 steel grades
Above figures refer to Metalloinvest’s 2015 operating results.
14.2
billion tonnes of iron ore reserves
/ CONtENt / 12ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
Vale (Brazil)
~50 years
Metalloinvest (Russia)
~150 years
BHP Billiton (Australia)
~15 years
19.6 billion tonnes
14.2billion tonnes
5.4billion tonnes
4.2billion tonnes
Rio tinto (Australia)
~20 years
Cliffs Natural Resources(USA)
FMG(USA)
ERG (ENRC)(Kazakhstan)
Ferrexpo(Ukraine)
Kumba(South Africa)
Reserve supply based on production lev-
els
Largest iron ore reserves
Proven and probable reserves (billion tonnes)
2.6billion tonnes
2.4billion tonnes
1.5billion tonnes
1.4billion tonnes
0.9billion tonnes
~15 years ~20 years~5 years
39.5 million tonnes
of iron ore produced in 2015
14.2
billion tonnes
2nd largest iron ore reserves globally
UNIQUE
RESOURCE BASE
Source: Company data
/ CONtENt / 32ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
200
0
400
0 5 10 15 20 25 30 35
100
0
200
0 50 100 150 200 250
EXTENsIvE HIGH-QUALITY REsOURCE BAsE
IN-HOUsE MINE DEvELOPMENT WITHOUT THIRD PARTY INvOLvEMENT
UsE OF LOW-COsT MAGNETIC sEPARATION IN IRON ORE BENEFICIATION
Mining segment(Pages 38–39)
Asset structure(Page 14)
Mining segment(Page 39)
AvAILABILITY OF REQUIRED INFRAsTRUCTURE (GAs, ENERGY, ROADs)
HBI/DRI market(Page 36)
ADvANCED PRODUCTION TECHNOLOGIEs
R&D (Page 46)
LOW IRON ORE sHIPMENT COsTs
51.8%
(UsD 2,275 million)
Cost to revenue ratio in 2015
Pellet cash cost (USD/DMt)*HBI/DRI cash cost (USD/DMt)
(Lebedinsky GOK) (Lebedinsky GOK)(Mikhailovsky GOK)Metalloinvest Metalloinvest Metalloinvest
Metalloinvest (OEMK)
Production (million tonnes)
Production costs (USD/t)
Production (million tonnes)
Production costs (USD/dmt)**
* CRU, Company data for 2012** DMT – dry metric tonne
CONtROLLABLE LOW
CASH COStS
/ CONtENt / 54ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
DEMAND-
PRODUCtIONDRIVEN
Iron ore Pellets HBI/DRI
PRODUCtION (MILLION tONNES)
SHIPMENtS (MILLION tONNES)
For an interactive version
of the operating results,
see the Company’s website
at www.metalloinvest.com
Pig iron Steel products
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
40.1 39.8 38.4 38.7 39.5 22.4 22.6 22.6 22.7 23.8 5.0 5.2 5.3 5.3 5.4 2.5 2.1 2.2 2.3 2.5 5.8 5.6 4.7 4.5 4.5
Iron ore concentrate and pellets are used
to produce pig iron.
HBI/DRI, pellets, pig iron and scrap metal
are used to produce steel products.
12.7 12.5 11.1 11.0 10.8 13.6 14.1 13.7 13.9 14.4 2.3 2.3 2.4 2.3 2.4 1.1 0.8 1.4 1.8 1.8 5.2 5.1 4.3 4.2 4.2
/ CONtENt / 76ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
>50
large consumers
in Russia, CIs, Asia, Africa and Middle East
18.3
million tonnes of iron ore products
shipped across Russia in 2015
DIVERSIFIED
SALES GEOGRAPHY
19%
19%
28%
66%
Europe AsiaRussia
See a detailed interactive map
on the Company’s website
www.metalloinvest.com/
business/geography/
4%
29%
10%
3%
Middle East and Africa
sTEEL PRODUCTs IRON ORE PRODUCTs
Source: WSA
Other
1%
27%
/ CONtENt / 98ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
ABOUT THE REPORT
Reporting standardsMetalloinvest’s Annual Report1 (the “Report”) has been
prepared in accordance with the Federal Law On
the securities Market, Federal Law On Joint stock Companies
and Regulation On Information Disclosure by the Issuers
of Issue-Grade securities2. MICEX and LsE Listing Rules,
the Company’s by-laws and internal procedures, GRI G4
Guidelines, including GRI G4 Metals and Mining sector
Disclosures, were also used in preparing this report.
Scope and boundaries of the ReportThe Report for 2015 has been prepared on the basis
of the consolidated IFRs financial statements and addressed
to a diverse range of stakeholders. It covers the Company’s
key financial and operating results, as well as its sustainable
development performance in Russia and abroad in 2015.
The information provided by the Company’s subsidiaries
is aligned with the IFRs reporting boundaries. The Report
is published annually covering the period from 1 January
to 31 December each year.
Liability of the Board of Directors The Report contains certain projections and forward-
looking statements, particularly (but not limited to) relating
to anticipated demand and consumption, global economic
recovery, commodity prices, management aims
and objectives, strategy, production, anticipated
investment and the anticipated completion of previously
announced transactions. Actual results may differ from
those expressed in such statements depending
on a variety of factors and risks affecting the Company
and/or any of its affiliates, and their respective operations.
Accuracy of informationThe Report has been prepared in good faith, but has
not been independently verified. The IFRs consolidated
financial statements have been independently audited.
Neither the Company nor its affiliates make any statements,
give guarantees, assume any responsibility, explicit
or implicit, regarding the reliability, accuracy, completeness
or correctness of the information or opinions contained
in the Report.
Material disclosuresThe Report’s material disclosures include changes
in the market environment, improvements in operating
efficiency, stronger investment attractiveness
and development outlook, competitive working conditions,
health, safety and environment, management framework,
risk management, and regional development.
Sustainability reportHolding Company Metalloinvest is in the process
of preparing a Corporate social Responsibility Report
to outline the key areas of its approach to sustainability
issues.
The Company follows a two-year reporting cycle for
non-financial disclosure. The previous report was prepared
for the 2013–2014 reporting period. starting from 2016,
the Company plans to publish its Corporate social
Responsibility Reports on an annual basis. Reports
are available online on the Company’s website:
http://www.metalloinvest.com/en/sustainability/ csr-reports/
2 Under Regulation of the Bank of Russia No. 454-P dated 30 December 2014.
CONTENTs
01 Company profile . . . . . . . . . . . . . . . . . . . . . . . 12
Metalloinvest Holding Company – structure 2015 14
Key events during the reporting period 15
Performance overview for the reporting period 20
Business model 22
02
Development overview . . . . . . . . . . . . . . . . 24
Chairman’s statement 26
CEO’s statement 28
strategy 30
strategic achievements in 2015 31
Key projects 33
Market overview 34
Iron ore market 34
HBI and DRI market 36
steel market 37
Key operating assets 38
Mining segment 38
steel segment 40
strategic investment programmes 42
Mining segment 42
steel segment 44
R&D 46
03 Financial and operating results . . . . . . . . . . 48
Operating performance 51
Production 51
shipments 53
Financial performance 56
04 Corporate governance
and investor information . . . . . . . . . . . . . . . 60
Corporate governance structure 62
Board of Directors 63
Committees of the Board of Directors 69
Management Board 72
Internal control and audit 74
Risk management 76
share capital and investor relations 80
share capital 80
Credit ratings 81
Investor relations 82
Debt capital markets 82
05 Sustainable development . . . . . . . . . . . . . . . 84
Approach to sustainable development 86
HR management 88
staff structure and headcount 88
Incentivisation 90
Personnel assessment and development 91
Employee engagement 93
Occupational safety 94
Environment 96
External social programmes 96
Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
1 For the purpose of this Report, the term Metalloinvest shall include the following entities: Metalloinvest Holding Company, Metalloinvest Management Company, Lebedinsky
GOK, Mikhailovsky GOK, Ural Steel, OEMK, Metalloinvestleasing and Ural Scrap Company.
The members of the management team mentioned in this report are the management of Metalloinvest Management Company.
/ 1110ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
No. 1
producer of merchant HBI/
DRI globally
5.4 million tonnes produced in 2015
No. 2
by iron ore reserves globally
(proven iron ore reserves) 14.2 billion tonnes
~150 years of operating lifetime
No. 3
producer of iron ore
pellets globally
23.8 million tonnes produced in 2015
METALLOINvEsT Is A GLOBAL LEADER IN MERCHANT HOT BRIQUETTED IRON
(HBI) PRODUCTION, A MAJOR PRODUCER AND sUPPLIER OF IRON ORE
AND METALLIsED PRODUCTs, AND A REGIONAL PRODUCER
OF HIGH-QUALITY sTEEL.
METALLOINvEsT HAs A DIvERsIFIED PORTFOLIO OF HIGH vALUE-ADDED
PRODUCTs, ENsURING ITs MARKET LEADING POsITION IN LOCAL
AND GLOBAL MARKETs.
vale(19.6)
Metalloinvest (14.2 )
BHP Billiton(5.4)
Rio Tinto(4.2 )
FMG(2.4 )
4.5million tonnes
2.5million tonnes
Regional producer of high-quality steel
Regional producer
of pig iron
39.5million tonnes
Regional leader in iron ore production
» For more details on shareholder structure,
see the section Information for investors (p.84)
54.2% 23.6%
16.0%
3.2%
3.0%
Shareholder structure as at 31 December 2015
USM METALLOINVEST LLC
USM HOLDINGS LIMITED
LEBEDINSKY GOK JSC
OEMK JSC
USM INVESTMENTS LIMITED
Global iron ore reserves in 2015, bn t
Cliffs Natural Resources(2.6)
Kumba(0.9 )
Ferrexpo(1.4)
ERG (ENRC) (1.5)
1 COMPANY PROFILE
ANNUAL REPORT 2015 / 1312
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ CONtENt
Structure of Holding Company Metalloinvest in 20153
Holding Company MetalloinvestManagement Company Metalloinvest
Mining segment
Steel segment
Auxiliary business and other assets
• OEMK JSC• Ural Steel JSC• Ural Scrap Company LLC
• Lebedinsky GOK JSC• Mikhailovsky GOK OJSC
• Metalloinvest Trading AG – 100%• Metalloinvest Logistics DWC LLC – 100%• The Urban Institute of Steel Plant Design (Gipromez) – 100%• Metalloinvest Leasing JSC
• Nautilus Minerals Inc. – 20.9%• Hamriyah Steel FZC (UAE) – 80% • Norilsk Nickel (3.2% stake)
Russia’s largest ore mining and processing enterprises by iron ore, concentrate and pellet volumes.Lebedinsky GOK is the only HBI producer in Russia and the CIS.
OEMK and Ural Steel are major produc-ers of steel products for niche markets in Russia, offering over 2.000 steel grades. Ural Scrap Company is a modern ferrous scrap metal processing enterprise.
These companies are responsible for supplying maintenance services and raw materials to the mining andsteel-making facilities, as well as to the auxiliary assets.
Lebedinsky GOKGubkin
Belgorod
Mikhailovsky GOKZheleznogorsk
Kursk
100%
99.3%
OEMK
Stary Oskol
Belgorod
Novotroitsk
Orenburg Ural Steel
100%
100%
3 Company structure as at 31 December 2015.
Key events during the reporting period
the Company
Metalloinvest and EvRAZ signed a five-year formula-
based agreement for the delivery of steel grinding
balls. The products will be supplied to Mikhailovsky
GOK, Lebedinsky GOK and OEMK.
Strategy 2023
Fitch – "BB", Moody’s – "Ba2", Standard & Poor’s – "BB"
"BBB+"
The Company’s long-term ratings were affirmed
by Fitch ("BB", stable outlook), Moody’s ("Ba2", stable
outlook) and standard & Poor’s ("BB", outlook revised
from stable to negative due to increasing uncertainty
stemming from lower iron ore prices, higher country
risk and limited access of Russian corporates to capital
markets).
China’s Dagong Global Credit Rating Co. assigned
the Company a "BBB+" long-term issuer credit rating
in local and foreign currencies with a stable outlook.
Metalloinvest and ArcelorMittal signed
a contract to supply iron ore to ArcelorMittal’s
European operations. As agreed by the parties, the total
amount of iron ore products to be delivered by April
2016
is over 2 million tonnes.
2 million tonnes supply contract
Metalloinvest presented strategy 2023, an updated
development strategy. It is focused on pursuing
greater shareholder value, higher sales margins,
improved operating and management efficiency,
as well as increased investment attractiveness.
Ural steel celebrated its 60th anniversary.
Metalloinvest and sAP CIs announced the launch
of a business transformation programme whereby
a sAP-based integrated corporate management system
will be introduced in the Company. The contract was
signed at the 2015 st Petersburg International Economic
Forum (sPIEF).
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 1514
/ CONtENt
Production and upgrades Financial activities
4 July 2015–October 2016 under the previous maturity schedule.
Management systems Sustainable development
Mikhailovsky GOK launched Pellet Plant No. 3,
the largest such facility in Russia, with an annual
capacity of 5 million tonnes of pellets.
» For more details, see p. 42
Сasting Machine No. 5 was commissioned
at the blast furnace shop of Ural steel. It will increase
the Company’s pig iron casting capacity by 0.5
million tonnes per year.
+ 0.5 million tonnes of production capacity
A shaft furnace was installed at Lebedinsky GOK’s
HBI-3 Plant, which is currently under construction.
It will serve as the main component of the HBI
production process.
Shaft furnace
Lebedinsky GOK produced its landmark 25-millionth
tonne of HBI. The plant produced its first
iron ore briquettes in 2001.
25 million tonnes of HBI
BO-01 series bonds
Metalloinvest issued BO-01 series bonds for
a total amount of RUB 10 billion. The bonds have
a maturity period of 10 years (3,640 days) and a put
option in 6 years. The coupon rate was set at 11.85%
to be paid every six months.
Metalloinvest and Rabobank signed
an agreement to extend the maturity schedule
of a UsD 131 million loan. Under the agreement,
repayment will now be due in April 2017–October
20184.
New loan maturity date
Metalloinvest signed a UsD 750 million long-
term pre-export credit facility (“PXF”) agreement
with a syndicate of international banks.
The PXF is divided into two tranches: UsD
600 million five-year tranche with a two-year grace
period and UsD 150 million seven-year tranche with
a five-year grace period.
Long-term pre-export financing
A club of international banks provided the Company
with credit facilities of up to EUR 267 million.
The funds will be used to finance the purchase
of equipment for the Company’s HBI-3 investment
project at Lebedinsky GOK. The agreement
with the banks stipulates that the loans will be repaid
within 10 years following the launch of HBI-3 Plant.
Credit facility of up to EUR 267mn
Compliance with international standards
Mikhailovsky GOK confirmed the compliance of its
integrated quality and HsE management system
with IsO 9001, OHsAs 18001 and IsO 14001
international standards. The audit was carried out
by TÜv sÜD Management service GmbH (Germany).
The auditors observed no deviations and made
no additional comments.
Inspection audit of Lebedinsky GOK
Lebedinsky GOK successfully passed an annual
inspection audit of its environmental management
system (EMs) for compliance with GOsT R IsO
14001:2007 and Ms IsO 14001:2004. The Company’s
EMs complies with international environmental
standards.
Lebedinsky GOK successfully passed
an inspection audit of its occupational health
and safety management system for compliance
with OHsAs 18001:2007 carried out by the British
standards Institution (BsI).
Lebedinsky GOK compliance with international standard
Ural steel confirmed the compliance of its integrated
quality and HsE management system with IsO 9001,
sTO Gazprom 9001-2012, IsO 14001, OHsAs 18001
international standards. The comprehensive audit
was carried out by Bureau veritas Certification Rus
and Pronap.
Inspection audit of Ural Steel
Social and economic partnership programmes
Metalloinvest signed social and economic partnership
agreements for 2015 with the Kursk, Belgorod
and Orenburg Regions.
In 2015, the 15 best employees from the Company’s
subsidiaries and business units were honoured
and awarded generous bonuses.
10th Person of the Year competition
Metalloinvest confirmed that it will take part
in the international Climate Action Programme
of the World steel Association. Under this Programme,
Metalloinvest collects, calculates and discloses annual
data on greenhouse gas emissions (CO2).
Climate Action Programme
OEMK launched an upgrade project at the second gas
purification unit in the electric arc furnace shop.
Investment project implementation
Metalloinvest continues to support comprehensive
programmes implemented in partnership
with educational institutions in the regions where it
operates and in Moscow. The Company is financing
the construction of the main building of the stary
Oskol Technological Institute, a branch of the National
University of science and Technology MIsis.
In addition, Metalloinvest awards monthly scholarships
to the 12 best performing students from the Moscow
state Institute of International Relations MGIMO.
Partnerships with educational institutions
+ 5 million tonnes of production capacity
Metalloinvest co-organised the first Dobro Educational
Conference for charitable foundations and non-profit
organisations.
Dobro conference
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 1716
/ CONtENt
Awards Events after the reporting date*
• Winner of the 9th Russian Mining Excellence
Awards in the Corporate social Responsibility
category;
• Runner-up in the overall rankings
of the 8th annual Leaders in Corporate Charity
international competition;
• Winner of the Russian Business Leaders:
Dynamics and Responsibility 2014 national
competition in the Environmental Responsibility
category;
• Winner of the international vision Awards
Annual Report Competition (League
of American Communications Professionals,
UsA);
• Winner of the prestigious WebAwards 2015
international competition (Web Marketing
Association, UsA); the Company’s corporate
website was among the top 25 global
internet projects and won in two categories:
B2B standard of Excellence and Manufacturing
standard of Excellence. The Company’s
corporate website also won the Digital platform:
B2B corporate website category at the 3rd annual
Digital Communications AWARDs (Germany).
Metalloinvest
Mikhailovsky GOK
Named the Most Environmentally Responsible Company
in the Kursk Region at the 3rd Russian Industrial
and Environmental Forum RosPromEco 2015.
Metalloinvest issued BO-07 series 10-year
bonds for a total amount of RUB 5 billion
with a coupon rate of 11.90% and an early
redemption option for the issuer in 7 years.
standard & Poor’s affirmed the Company’s long-term
foreign and local currency ratings at BB with a negative
outlook.
Metalloinvest signed a UsD 400mn long-term
pre-export credit facility (“PXF”) agreement
with a syndicate of international banks
with an option to increase the amount
up to UsD 450 million.
The PXF is divided into two tranches:
UsD 150 million five-year tranche with a three-year
grace period and UsD 250 million seven-year
tranche with a five-year grace period. UniCredit
Bank Austria AG and sberbank of Russia acted as
coordinators and mandated lead arrangers of the deal.
Metalloinvest issued BO-02 and BO-08 series
bonds totalling RUB 15 billion. The bonds have
a maturity period of 10 years (3,640 days)
and a put option exercisable in 5 years (1,820 days)
at the bondholders’ request.
Metalloinvest was victorious at the Russian Business
Leaders: Performance and Responsibility 2015
nationwide contest, winning the “For contributions
to solving regional social problems” category.
Moody’s Investors service affirmed the Company’s
corporate rating at Ba2 with a stable outlook.
BO-07 series bonds
Standard & Poor’s credit rating
Long-term pre-export financing
BO-02 and BO-08 bonds
Moody’s Investors Service credit rating
Winner of the Russian Business Leaders: Performance and Responsibility 2015 competition
Ural Steel
• Winner of the Orenburg Quality Leader 2015 regional
competition in the stable Quality and High Level
of Competitiveness category (in non-food products)
for rolled steel used in bridge construction;
• Winner of the 12th Metals and Mining Companies
with a High Level of social Efficiency industrial
competition in the Environmental Activity
and Resource Conservation category.
OEMK
3rd place in the “Russian Organisation with Highly
Effective CsR” regional competition in the “For
contribution to solving social problems in local
communities and corporate charity development”
category.
Enterprises
* from 1 January to 1 April 2016
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 1918
/ CONtENt
Performance overview
2011 2012 2013 2014 2015
EBITDA margin, %
3331
33 31
39
2011 2012 2013 2014 2015
Net income, USD billion
0.20.1
1.7
1.1
1.4
2011 2012 2013 2014 2015
Revenue, USD billion
4.4
6.4
8.2
7.3
9.9
2011 2012 2013 2014 2015
EBITDA, USD billion
1.4
2.0
2.7
2.3
3.8
Financial highlights Operating highlights
2011 2012 2013 2014 2015
Capital expenditure, USD billion
0.4
0.6
0.5 0.5 0.5
2011 2012 2013 2014 2015
HBI/DRI production, million tonnes
5.45.3 5.2 5.3 5.0
2011 2012 2013 2014 2015
Pig iron production, million tonnes
2.5
2.3
2.1 2.2
2.5
2011 2012 2013 2014 2015
Iron ore production (including sintering ore),
39.538.7 39.8 38.4
40.1
million tonnes
2011 2012 2013 2014 2015
Pellet production, million tonnes
23.822.7 22.6 22.6 22.4
2011 2012 2013 2014 2015
Crude steel production, million tonnes
4.54.5
5.6
4.7
5.8 « When developing Strategy 2023, we factored in a possible
decline in global iron ore prices. A sharp drop in ore prices
in 2015 reaffirmed our strategic focus on high value-added
products.
Andrey VarichevCEO
«In the challenging market environment, the Company’s
management focused on deleveraging and maintaining
the EBITDA margin at the current level. In 2015, the Company
exceeded its target and improved its EBITDA margin to 32.6%.
Ivan StreshinskyChairman of the Board of Directors
« «
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 2120
/ CONtENt
Business model
METALLOINVEST — IS AN EFFICIENT MINING COMPANY WITH FULL-CYCLE PRODUCTION:
FROM IRON ORE MINING AND PROCESSING TO PRODUCTION OF HIGH-QUALITY STEEL
FOR A VARIETY OF INDUSTRIAL CONSUMERS BOTH IN RUSSIA AND ABROAD.
The Company’s mining and processing plants develop the reserves of the unique Kursk Magnetic
Anomaly, home to magnetite ores with an average
iron content of 34–39%. The Company owns the world’s
second-largest proven iron ore JORC5 reserves – about
14.2 billion tonnes, which guarantees approximately
150 years of operation at current production levels.
The iron ore concentrate is mostly processed into products
with high added value, such as pellets and HBI/DRI
shipped to third-party consumers or further processed
at the Company’s steel segment operations.
Metalloinvest’s metallurgical plants produce pig
iron and steel products, including long steel, pipe
and metal billets, bridge and bearing steel, rail track
and casting billets.
The combination of iron ore mining, processing into high added-value products and manufacture of advanced steel products give the Company a strong
competitive edge. The Company’s mining and processing
facilities meet the needs of its steelmaking plants
in iron ore and HBI/DRI.
Сo-ordination of operations and centralised marketing
and sales functions ensure effective cost control
and management of volatility risks in the feedstock
and steel markets.
A diversified sales system enables the Company
to adjust promptly to customer demands and benefit
from developments in the domestic and international
markets.
5 Company data calculated as at 31 December 2015 based on Mineral Expert’s Report
by IMC Group Consulting Ltd. in 2010.
» For more details on global iron ore reserves, see p.34
ProductionIron ore
ProductionMetallIsed raw MaterIals
Productionsteel products
SalescoMMercIal products
pelletIsIng
Pellets
BenefIcIatIon
Concentrate
productIon
pellets
sInterIng
Sinter
procureMent
Scrap
DRI Pig iron
HBI
HBI
steel productIon
Steel
concentrate
including other products
sInterIng ore
including blast furnace ore
reserves 14.2 BIllIon tonnes
drI
pIg Iron
flat products
long steel
square BIllets
Mining segment
Lebedinsky GOK/Mikhailovsky GOK
Creating added valueFor saleFor processing
Steel segment
OEMK /Ural Steel /Ural Scrap Company
Commercial products
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 2322
2 DEVELOPMENT OVERVIEW
Metalloinvest’s Development Strategy strives to increase output of products with high added value
20132011 2015Source: Company data
25 25
30 30
35 35
40 40
45 45
20 20
15 15
1010 10
55 5
Production and shipments, million tonnes
Production and shipments,
million tonnes
HBI/DRI production
Pellet production
5.45.0 5.3
22.4
12.7
40.1
22.6
11.1
38.4
23.8
10.8
39.5
Iron ore shipments
Iron ore production
Increase in HBI/DRI production from 2011 to 2015
Increase in pellet production from 2011 to 2015
Iron ore shipments from 2011 to 2015
6 %
8 %
15 %
/ CONtENt
Statement from Ivan Streshinsky, Chairman of the Board of Directors
Dear shareholders and colleagues,
Yours faithfully,
Ivan Streshinsky
Chairman of the Board of Directors
Management Company Metalloinvest
In 2015, metals and mining companies faced a challenging
macroeconomic environment, including lower global
demand for steel, unprecedented growth in iron ore
production, and volatile exchange rates. Together, these
factors put significant pressure on businesses in the sector.
In 2015, Metalloinvest presented an updated strategy 2023,
focused on growing shareholder value, increasing investment
attractiveness, achieving higher sales margins and driving
improved operating and management efficiency. The targets
set out in the strategy are aligned with the current market
situation and macroeconomic fundamentals. In the face
of increased price volatility, we will be adjusting our
strategy implementation plans subject to emerging risks
and opportunities, but keeping our key strategic priorities
unchanged.
In the reporting period, the Company’s EBITDA declined
by 27% to UsD 1,432 million, largely as a result of lower
EBITDA in the mining segment due to a sizable drop in global
iron ore prices. Against this backdrop, the management
team focused on deleveraging and maintaining the overall
EBITDA margin at above 30%. In 2015, the Company
improved its EBITDA margin by 1.8 p.p. year-on-year to 32.6%,
thus exceeding its target. Moreover, the Company received
strong credit ratings from international rating agencies,
which attested to its balanced credit policy and financial
stability.
Metalloinvest is committed to corporate governance
best practices and the diversity and effectiveness
of the Board of Directors is on par with Russia’s leading
public companies. The pro-active approach and expertise
of the members of the Board of Directors’ and the involvement
of individual committees in resolving the most important
issues have been instrumental in maintaining growth
momentum in these challenging market conditions.
I would like to thank all members of the Board of Directors
and the Management Board of the Company for their
professionalism and hard work in 2015.
Commitment to the principles of sustainable development
is another important element of strategy 2023. In
2015, Metalloinvest continued its social and economic
co-operation with the Kursk, Belgorod and Orenburg
regions, which has proved its efficacy. To foster the social
and economic well-being of communities where the Company
operates, we implement joint initiatives together
with the residents of stary Oskol, Gubkin, Zheleznogorsk
and Novotroitsk, also involving the authorities, NGOs, trade
unions, environmental organisations, industry associations
and other stakeholders. Metalloinvest continues to support
comprehensive programmes in partnership with local
and federal educational institutions.
Our effective governance framework, strong qualifications
and the co-ordinated efforts of our people, along
with consistent progress in implementing our
production and investment programmes mean that we
can look to the future with confidence.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 2726
/ CONtENt
Statement from Andrey Varichev, CEO
Dear colleagues and partners,
Yours faithfully,
Andrey Varichev
CEO
Management Company Metalloinvest
In 2015, Metalloinvest faced a number of considerable
challenges.
Lower steel consumption and a significantly higher global
iron ore supply resulted in an almost 50% drop in iron ore
prices. To succeed in such an environment, a business must
have a strong corporate culture and maintain maximum
production efficiency, along with strict financial discipline.
Looking back at our performance in 2015, I am pleased to say
that our business model incorporates all of these elements.
When developing strategy 2023, we factored in a possible
decline in global iron ore prices. Our analysis has shown
that products with low added value are most affected
by volatility. so, a sharp drop in ore prices in 2015 and lower
volatility in high-quality product prices have reaffirmed
our focus on high added value products as a strategic
priority for the Company. The stress tests carried out as part
of the strategy update showed the viability of investment
in high added value products.
Our key investment projects in 2015 included
the construction of Pellet Plant No. 3 at Mikhailovsky
GOK, which launched in september last year and boosted
pellet output capacity by 5 million tonnes per annum,
and the construction
of a third HBI plant at Lebedinsky GOK.
Both projects are aimed at strengthening Metalloinvest’s
position in the global arena, where the Company is the leader
in merchant HBI production and No. 3 in pellet production.
Another focus area of strategy 2023 is improving
the Company’s corporate governance framework. We have
launched a large-scale transformation programme designed
to reduce costs, boost margins and ensure business process
transparency and timely decision-making. The programme
will also improve and automate business processes, create
a cross-functional shared services centre to enhance planning
accuracy and manage the implementation of the Company’s
plans.
Metalloinvest maintains high standards of corporate
social responsibility. We partner with local governments
for sustainable development programmes. As part of this
long-term social and economic cooperation, we develop
and implement social initiatives that address key challenges
in local regions. The most effective initiatives and practices
are then rolled out across our locations.
Minimising the Company’s environmental footprint is also
a top priority for Metalloinvest.
In 2015, the Company passed compliance audits launched
across its operations to measure the efficiency of the existing
environmental management system.
The audits certified that our production processes
are complaint with IsO 14001 requirements. As a member
of the World steel Association’s Climate Action Programme,
Metalloinvest collects, calculates and discloses
data on greenhouse gas emissions (CO2).
Overall, a balanced development strategy, meaningful
governance framework at all levels, high qualifications
and the co-ordinated efforts of our people allow us to achieve
strong results today and in the future.
I would like to thank our employees, customers and partners
for their invaluable cooperation.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 2928
/ CONtENt
Strategy
The updated strategy presented in 2015 is designed
to strengthen the Company’s global leadership
in the merchant hot briquetted iron segment, increase
output of high value-added products, increase
product quality and improve the efficiency of R&D
and production operations.
The Company has updated its strategic priorities,
long-term goals and objectives to respond to the latest
trends in the global iron ore, HBI and steel products
markets and utilise its competitive advantages,
such as industry-leading cash costs for HBI/DRI
and pellets.
Metalloinvest is focusing on further deleveraging
and seeks to finance investment projects primarily
from internally-generated cash flow. The Company
plans to maintain its EBITDA margin above 30%
by boosting operational efficiency and sales margins,
and reducing costs.
Corporate social responsibility remains an important
prerequisite for the Company’s sustainable growth.
strategy 2023 provides for the launch of projects
designed to minimise the Company’s environmental
impact in the regions where it operates, maintain safe
working conditions and ensure fair salaries, sufficient
recreation and healthcare opportunities for its
employees, and an improved social and cultural
environment for local communities.
Increase the Company’s value:
• Enhance the scale and quality of business
• Ensure sustainable growth and higher long-term
value
Grow sales margins:
• Increase share of the global market for high-quality
Metallics stocks, mainly HBI/DRI
• strengthen the Company’s position
in the high-quality rolled steel market
Improve operational and management efficiency:
• Focus on efficient development of existing
iron ore deposits
• Reduce cash cost of production and processing
operations
• Optimise existing processes and integrate new
technologies
Increase investment attractiveness:
• Improve transparency
• Promote a balanced approach to ensure talent
development and protection of communities
and the environment
•
Strategic activity in 2015
Efficient development of existing iron ore deposits
Increase in global market share for metallised feedstock
Increase in global market share
Optimisation of production processes and introduction of new technologies
Decrease in production costs
Strategic priorities
» FOR MORE DEtAILS ON StRAtEGY IMPLEMENtAtION AND KEY PROJECtS, SEE P. 32–33
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 3130
/ CONtENt
Efficient development of existing iron ore depositsMetalloinvest develops 14.2 billion tonnes of JORC-compliant iron ore reserves,
which guarantees approximately 150 years of operation at current production levels.
Larger share in the global market for metallised raw materialsLong-term sustainable demand for HBI will be driven by:
° an increase in the share of steel produced in electric furnaces;
° stricter environmental and product quality requirements;
° higher demand for scrap, as well as lower quality of scrap materials.
Wider global reachA large product mix and flexible logistics chain (multimodal - land and sea - routes to Asia and Europe via the Black sea and Baltic
sea ports) make the Company a strong competitor against both leading global suppliers and local producers.
The Company seeks to significantly enlarge the share of high-quality, high-margin products that it produces. For this purpose,
it is upgrading Rolling Mill 350 at OEMK and Rolling Mill 2800 at Ural steel, it is constructing HBI-3 Plant at Lebedinsky GOK and has
launched Pellet Plant #3 at Mikhailovsky GOK .
Improved production processes and new technologiesTo boost the efficiency of the Company’s operations to develop its iron ore deposits, Metalloinvest is implementing
a beneficiation technology improvement programme and plans to market new products such as high-quality concentrate
from Lebedinsky GOK with an iron content of over 70%, high basic iron ore pellets with an iron content of over 65.8%
and basicity between 0.9 and 1.1. The modernisation and replacement of equipment at OEMK and Ural steel will improve
the quality of the products.
Lower production costsHBI/DRI and pellet production costs at Metalloinvest’s enterprises are significantly lower than those of its global
peers. According to Company data, in 2015 Metalloinvest maintained its cash cost position in the top quartile of global
manufacturers. The key factors supporting the low cost of pellet and HBI/DRI production are:
° availability of an extensive high-quality resource base;
° in-house mine development;
° use of low-cost magnetic separation as the primary method of iron ore beneficiation;
° “zero operational costs” for shipping iron ore concentrate from Lebedinsky GOK to OEMK through a 26 km slurry
pipeline;
° energy-efficient production technologies;
° availability of necessary infrastructure (natural gas, electricity, railways and roads, etc.).
Introduction of a cyclical and continuous transportation methodDesign and pre-project planning works are taking place at Lebedinsky GOK and Mikhailovsky GOK
to introduce a cyclical and continuous method of transporting rock mass from mine to beneficiation plant.
This method will allow the Company to significantly decrease the cash cost of iron ore products due
to the optimisation of mining and transportation processes.
» For more details on the Company’s investment projects, see p. 42
Building an optimal structure with separation of powers and responsibilitiesTo improve business unit performance, Metalloinvest is creating a shared centre for repair planning
and control. The new centre will streamline repair services, standardise planning and repairing processes
and put in place a unified repair schedule co-ordination system. Going forward, the Company plans to unify
the equipment and technologies used across its operations.
Increased efficiency and productivity due to automation of business processesThe Company plans to implement an ERP-based planning system to increase the overall efficiency
of interrelated management processes, switch to a rolling planning process and enable partners
and customers to track their orders and delivery.
Prompt response to internal and external changesIn 2015, Metalloinvest continued to develop its corporate risk management system as planned.
The Company has launched a mechanism to categorise possible risk events and issued guidelines
and policies to regulate related processes. Metalloinvest is also introducing risk response procedures
and implementing quantitative assessments of potential damage.
» For more details on the risk management system, see p. 76
Key projectsImplementation of Strategy in 2015
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 3332
/ CONtENt
Market Overview
METALLOINVEST SELLS ITS PRODUCTS IN ALL OF THE WORLD’S LARGEST MARKETS.
RUSSIA, EASTERN AND WESTERN EUROPE, ASIA AND THE MIDDLE EAST ARE PRIORITY
REGIONS FOR THE COMPANY.
Iron ore market
The global iron ore market remains highly consolidated.
Four leading companies (vale, BHP Billiton, Rio Tinto,
and FMG) control over 72% of the world iron ore trade. The
leading countries that produce commercial iron ore are
Australia, Brazil, China, India and Russia, together
accounting for around 80% of total global output. In 2015,
global iron ore production fell to 2 billion tonnes, down 3%
y-o-y due to lower global demand for steel and pig iron.
However, taken separately, Australia and India recorded
higher output, while other countries saw relative
stabilisation (Brazil, Russia) and considerable decline
(China, others) in output.
Metalloinvest continues to assess the factors influencing
the iron ore raw materials market to take them into account
for the purpose of mid-term and long-term growth
planning.
2011 2012 2013 2014 2015
Iron ore production of leading producing countries, million tonnes
*
AUSTRALIA
BRAZIL
CHINA
INDIA
RUSSIA
OTHERS
450
365
338
158
93
410
495
375
343
131
94
420
582
362
354
121
93
471
700
392
328
95
92
460
759
383
246
116
95
403
Key fundamentals such as lower global demand for steel
and an unprecedented ramp-up of iron ore output by major
producers contributed to further iron ore price decreases,
aggravated by a sharp decline in energy and ferroalloy
prices and currency depreciation in producing countries.
Higher supply of iron ore with low iron content resulted
in the deterioration of the average quality of iron ore raw
materials. The drop in global metal prices constrains
mid-term investment in commodity assets. In addition,
the global slump in rolled steel prices and weaker financial
performance of the majority of steel producers had
a negative impact on the premium paid for high quality
raw materials.
2011 2012 2013 2014 2015
Price for iron ore 62% Fe, CFR China (USD/t)
55
97
130135
169
Source : Bloomberg
In 2015, the average annual price for iron ore dropped
from UsD 97 to UsD 55 per tonne CFR China as compared
to 2014. On 15 December 2015, the price dipped
to its lowest level of UsD 38.5 per tonne.
In Q1 2016, global prices returned to growth and exceeded
UsD 40 per tonne CFR China.
Iron ore marketvarious factors affect the iron ore market in the long
term. On the one hand, ore quality in the global market
is gradually deteriorating. Lower quality raw materials
increase the cost of steel production and lead to higher
harmful emissions by steelmakers. On the other hand,
environmental requirements are becoming more stringent.
In particular, China, the driving force of the world’s
demand for iron ore, has set the course for tougher
environmental requirements purporting to mitigate
the harmful environmental impact of metallurgical
facilities, inter alia, by improving the quality of consumed
iron ore.
2011 2012 2013 2014 2015
Steel output in China, million tonnes
803.8822.8
731.0
822.0
702.0
Source: WSA
stricter environmental requirements looming over
the ferrous metals industry and lower iron ore quality
will lead to higher margins for raw materials with high
iron content.
At present, price levels are determined by spot
market prices in China, using the steel Index,
MetalBulletin or Bloomberg indices. The transition to price
formation on the spot market continues as price-related
information becomes more accessible. Metalloinvest
closely monitors the physical markets on a daily basis as
well as commodity trading across global exchanges.
The Company’s wide range of products, consistent efforts
to increase product quality and long-term partnerships
with key consumers enable us to maintain our sales margins
even in a highly volatile market environment.
Nazim EfendievFirst Deputy CEO, sales Director
«
«
Source: AME,
* – estimates
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 3534
/ CONtENt
Hot briquetted and direct reduced iron market
HBI/DRI is an important component
in the production of high-quality steel grades that help
to cut the cost of steel production. HBI/DRI is a multi-
purpose, high-quality and viable alternative to pig
iron and scrap metal that can be used at integrated
facilities in blast, basic-oxygen and electric arc furnaces
and at mini plants.
This enables the Company to ensure the high quality
of its products, while also keeping its environmental
impact to a minimum.
Global production and export of HBI/DRI, million tonnes
2011 2012 2013 2014 2015*
PRODUCTION
EXPORT
73.2
8.2
73.4
9.0
73.8
7.2
73.2
6.9
70.0
4.8
Source: WSA,
* – estimates
Global HBI/DRI production is highly concentrated.
According to preliminary data from the World steel
Association (WsA), HBI/DRI produced in 2015
totalled 70.0 million tonnes, two thirds of which was
manufactured by five countries (India – 25%, Iran – 20%,
Mexico – 8%, saudi Arabia – 7%, and Russia – 7%).
At present, the majority of metallised raw materials
(over 90%) are consumed by captive integrated metal
manufacturers with only a limited amount shipped
to third-party consumers.
In 2015, lower production of HBI/DRI was observed
in traditional producing counties such as India,
saudi Arabia, Egypt, and Trinidad and Tobago.
Output stabilised in venezuela. Lower supply of HBI/DRI
allowed Metalloinvest to strengthen its position
in the global merchant HBI market.
Metalloinvest has at its disposal high quality iron ore
resources and access to a gas pipeline to secure
uninterrupted supply of natural gas used in the direct
iron reduction process.
Metalloinvest not only possesses the required resources,
but also the necessary expertise and technologies
for HBI/DRI production. The Company’s long-term
strategy is largely focused on the development
of production of iron ore products with high added value,
primarily HBI.
In 2015, its HBI/DRI output reached 5.4
million tonnes, up 3.1%. HBI production volumes
amounted to 2.6 million tonnes, 12% of which was
shipped to the Company’s own steel segment. The
largest consumers are steelmaking companies
in Russia and Western Europe. With a 50% share
of the world’s commercial HBI market in 2015*,
Metalloinvest pursues all available opportunities to meet
the growing demand from high-grade steel producers.
Source: WSA
Steel output growth by region, 2011–2015, %
2011
2.8
6.4
9.8
–5.4
15.0
8.4
2012 2013 2014 2015
–5.2
2.4
–3.7
–2.5
7.4
3.1
–1.4–2.1
–1.3
4.6
7.3
9.4
1,7 2.0
–1.4–0.7
7.7
1.4
–1.8
-–8.6
–2.5–1.8
–2.4–2.3
EU NORTH AMERICA SOUTH AMERICA AFRICA MIDDLE EAST ASIA
HBI – key benefits:• stable homogeneous chemical composition,
low content of harmful elements
• High bulk density (ca. 5 g per cubic cm)
and homogeneous size
• Energy-efficient and environmentally-safe
production process
• No seasonality factor influencing supplies
Steel market
According to the WsA, steel output in 2015 declined
by 2.9% to 1,599.5 million tonnes. In Asia, the largest
steel producing region in absolute terms, output declined
by 2.3% y-o-y (1,096.3 million tonnes). The highest
production decline rate was recorded in North America,
where steel output in 2015 dropped by 8.6% to 110.7
million tonnes.
* Source: Company’s estimates.
Output in the EU, south America and the Middle East,
declined by 1.8%, 2.5% and 2.4%, respectively.
In China, it dropped by 2.3% to 803.8 million tonnes.
Lower domestic consumption of rolling steel and China’s
currency policy aimed at yuan depreciation contribute
d to higher steel exports totalling 112.0 million tonnes
in 2015.
2011 2012 2013 2014 2015
Russia 68.9 70.2 69.0 71.5 71.1
China 702.0 731.0 822.0 822.8 803.8
Japan 107.6 107.2 110.6 110.7 105.2
UsA 86.4 88.7 86.9 88.2 78.9
India 73.5 77.3 81.3 87.3 89.6
south Korea 68.5 69.0 66.0 71.5 69.7
Others 430.1 415.6 413.2 395.2 381.2
Steel output by major producing countries, 2011–2015, million tonnes
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 3736
/ CONtENt
Key production processes at Lebedinsky GOK
Ка р ь е р
Об о г а ти те л ь н а яф а б р и к а (ОФ)
Ком п л е к с с у ш к и к о н ц е н тр а та ОФ
Пу л ь по н а с о с н а я с та н ц и я ОЭМК
Фа б р и к а о к о м к о в а н и я
За в о д ГБЖ
Отд е л е н и е ф и л ь тр а ц и ид оо б о г а щ е н н о г ок о н ц е н тр а та
Отд е л е н и е ф и л ь тр а ц и и р я д о в о г о к о н ц е н тр а та
Це х о б о г а щ е н и я №4 ОФ д о о б о г а щ е н и ер я д о в о г о к о н ц е н тр а та
Не о ф л ю с о в а н ны е о к а ты ш и
Оф л ю с о в а н ны е о к а ты ш и
Су ш е н ы й ко н ц е н тр а т
Ко н ц е н тр а т
Пульпа на ОЭМК
Бр и к е ты
Пр о и зв о д с тв о То в а р н а я п ро д у к ц и я
Key operational assets
Mining segment
Lebedinsky GOKLebedinsky GOK is the only supplier of hot
briquetted iron in Russia and the CIs, as well as
Russia’s largest iron ore mining and processing
facility producing high-quality iron ore and metal
products. Through open-pit mining, Lebedinsky GOK
develops an iron ore deposit with proven reserves
of 3.9 billion tonnes.
In 2015, Metalloinvest continued to implement
the programme to upgrade and renovate its mining
transportation systems, under which Lebedinsky GOK
received two locomotive units, 70 dump cars and two large
frontal loaders with 9.3 cubic metre buckets.
Mikhailovsky GOKMikhailovsky GOK is one of the largest iron ore mining
and processing facilities in Russia and the CIs.
Through open-pit mining, Mikhailovsky GOK
develops an iron ore deposit with proven reserves
of 10.3 billion tonnes.
Under the 2015 production modernisation programme,
Mikhailovsky GOK’s mining transportation division receiv
ed two NP–1 locomotive units equipped with dump cars,
one EKG–15M excavator and two sBsH–250 MNA drilling
rigs.
Key production processes at Mikhailovsky GOK
Пр о и зв о д с тв о То в а р н а я п ро д у к ц и я
Ка р ь е р
Оф л ю с о в а н ны е о к а ты ш и
Су ш е н ы й ко н ц е н тр а т
Не о ф л ю с о в а н ны е о к а ты ш и
Ко н ц е н тр а т
Дробильно-обогатительный комплекс (ДОК)
Дробильно-сортировочная фабрика
Доменнаяруда
Доменныйко н ц е н тр а т
Агломерационнаяруда
Фа б р и к а окомкования
Отделение флотации ДОК
open-pIt MIne
BrIquettes
slurry at oeMK
concentrate
BenefIcIatIon plant
BenefIcIated concentrate fIltratIon sectIon
roM concentrate fIltratIon sectIon
pellet plant
drIed concentrate
concentrate dryIng facIlIty at tHe BenefIcIatIon plant
unIt #4 at tHe Ben-efIcIatIon plant (roM concentrate BenefIcIatIon)
slurry puMp statIon at oeMK
HBI plant
non-fluxed pellets
fluxed pellets
Blast furnace concentrate
fluxed pellets
drIed concentrate
crusHIng and BenefIcIa-tIon plant (cBt)
concentrate
pellet plant
sInterIng ore
open-pIt MIne
non-fluxed pellets
Blast furnace ore
cBt flota-tIon unIt
crusHIng and sortIng plant
Production
Commercial products
Production
Commercial products
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 3938
/ CONtENt
Steel segment
OEMKOEMK is the only full-cycle steelmaking company
in Russia that uses direct iron reduction technology
and electric arc furnaces for smelting. This enables
OEMK to produce steel that is virtually free from harmful
impurities and residual elements.
In 2015, OEMK completed a number of projects to upgrade
its existing production facilities:
• Purchased the required amount of mill rolls for Rolling
Mill 700 to ensure smooth mill operation and achieve
OEMK’s long steel output targets.
• Revamped the ventilation system
at the pelletisation and metallisation shops’
filtration section, and upgraded process gas
compressors as part
of the DRI Unit #4 overhaul.
Ural SteelUral steel is a full-cycle company operating sintering, coke,
blast furnace, steelmaking and metal rolling facilities.
In 2015, Ural steel took steps to upgrade and revamp
its existing production facilities:
• Purchased the required amount of mill rolls for QUARTO
and DUO cages of Rolling Mill 2800 at Rolling Mill #1
to ensure seamless mill operations.
• Constructed a new surplus furnace gas burning bleeder
stack #2 to improve occupational safety and ensure
uninterrupted operation of blast furnaces in case
of an accidental failure of bleeder stack #1.
• Replaced a steam turbine of TK turbocharger #8
at Ural steel’s thermal power plant to ensure a reliable
supply of suitable hot blast to the blast furnace shop.
• Constructed an automated coal concentrate sampling
section at the coke production site enabling Ural steel
to check the quality of coal concentrate coming from
suppliers upon receipt and thereby mitigate the risk
of deteriorating coke quality due to the poor charge
composition.
Key production processes at Ural Steel
Коксующий уголь
Окатыши ЛГОКаи МГОКа
Металлолом УралМетКома
Концентрат ЛГОКа и МГОКа, аглоруда МГОКа
Пр о и зв о д с тв о То в а р н а я п ро д у к ц и я Сы р ь е д л я п р о и зво д с тв а
Литая заготовка
Листовой прокат КоксЧугун
Агломерационный цех
Космохимическое производство
Прокатное производство
Сталеплавильное производство
Доменныйцех
Key production processes at OEMK
Пр о и зв о д с тв о То в а р н а я п ро д у к ц и я Сы р ь е д л я п р о и зво д с тв а
ПВЖ Литая заготовка
Трубная и квадратная заготовка, высокока - чественный сортовойпрокат
Офлюсованные окатыши ЛГОКа
Металлолом УралМетКома
Прокатное производство
Сталеплавильное производство
Дообогащенный концентрат ЛГОКа по 26-километровому пульпопроводу
Отделение окомкования
Отделение металлизации
Production
Commercial products
Raw materials
BenefIcIated concentrate froM leBedInsKy goK vIa a 26-KM long slurry pIpelIne
pellet sectIon
scrap froM ural scrap coMpany
MetallIsatIon plant
steelMaKIng
Metal rollIng
drI
cast BIllets
pIpe and square BIllets, HIgH-grade long steel products
fluxed pellets froM leBedInsKy goK
concentrate froM lgoK and MgoK, and sInterIng ore froM MIKHaIlovsKy goK
sInterIng plant
Blast furnace sHop
Blast furnace sHop
steelMaKIng
Metal rollIng
pIg Iron
cast BIllets
flat rolled products
pellets froM lgoK and MgoK
Production
Commercial products
Raw materials
СoKInIg coal
scrap froM ural scrap coMpany
coKe productIon
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 4140
/ CONtENt
Mining segment
Boosting HBI market position
Construction of HBI-3 Plant at Lebedinsky GOKThe project will enable Metalloinvest to meet increasing
demand from steel companies for high-quality metallised
raw materials and retain its leading position globally
in merchant HBI production.
The project is being implemented by a consortium made up
of Primetals Technologies and Midrex Technologies (contract
signed in 2012), and Russian design company GIPROMEZ
(part of Metalloinvest). Rudstroy (also part of Metalloinvest)
is responsible for construction, assembly and equipment
installation works.
The Plant’s production capacity is set to amount
to 1.8 million tonnes per annum.
HBI–1 Plant: briquetting system upgradeIn 2015, the Company completed the upgrade of HBI–1
Plant’s briquetting system. This allowed the Company
to reduce unscheduled briquetting equipment downtime,
boost customer satisfaction due to the improved marketable
appearance of HBI briquettes, and keep the briquettes’
strength properties unchanged while increasing furnace
output rates. The overhaul of HBI–1 Plant made it possible
to increase production capacity by 22,000 tonnes per annum.
Strengthening position in the high added-value iron ore products segment
Construction of Pellet Plant #3 at Mikhailovsky GOKThe construction of Pellet Plant #3 is a unique project,
both in terms of scale and significance, encompassing all
processing stages, from iron ore concentrate filtration and pe
lletisation to pellet roasting and shipments to customers.
The new roasting plant embraces the newest technological
solutions, including automated systems to monitor
processing data and manage production processes.
When compared with existing roasting plants, Pellet Plant #3
features higher output rates, an enhanced energy efficiency
profile, and state-of-the-art gas flow systems minimising air
pollutant emissions.
The plant will enable Metalloinvest to increase
Mikhailovsky GOK’s pellet production capacity
to 15 million tonnes per annum (up 50%).
Beneficiation technology improvement programme
»tHE PLANt’S PRODUCtION CAPACItY IS SEt tO AMOUNt tO 1.8 MtPA.
at Lebedinsky GOK The programme is expected to launch new products
into the market, including high-grade concentrate
with an iron content of ca. 70% and high basic iron ore
pellets with an iron content of 65.8%.
Efficient development of iron ore resources
Construction of a crushing and conveyor facility at Mikhailovsky GOKIn 2015, Metalloinvest began the construction of a crushin
g and conveyor facility at the south-eastern tip of the open
pit for Mikhailovsky GOK’s mining transportation division.
The project envisages two crushing and conveyor facilities
– one each at the south-eastern and north-eastern tips
of the open pit.
The facilities will help the Company achieve annual
magnetite concentrate production targets, ensure
the required quality, bring down the stripping ratio, improve
railway transport performance, reduce the number of mining
vehicles and loading devices, and start developing
previously inaccessible ore reserves to provide an industry-
leading ore charge makeup.
The Company signed a contract with NKMZ to prepare
a feasibility study and supply equipment for the upcoming
crushing and conveyor facility at the south-eastern tip
of the open pit.
Construction of cyclical and continuous ore mining facilities at Lebedinsky GOK’s open pitIn 2015, Lebedinsky GOK launched pre-project planning
to introduce a cyclical and continuous method of rock
mass transportation. The new cyclical and continuous
mining facilities and related infrastructure will bring ore
production costs down and address the issue of maintaining
the production capacity of a non-oxidised quartzite open-pit
mine.
Strategic investment projects
Construction of the cyclical and continuous mining facilities
at the southern tip of Lebedinsky GOK’s open-pit mine will
make it possible to deliver most of the crushed ore straight
from the open pit to the beneficiation plant, significantly
reducing ore transportation costs.
Production of up to 10 mtpa of concentrate from oxidised quartzites at Mikhailovsky GOKIn 2015, the Company continued commercial testing
of a technology to beneficiate oxidised ferruginous
quartzites at the reconstructed processing section #14
of the crushing and beneficiation plant. The testing
utilised the combined beneficiation process involving
the application of low- and high-intensity magnetic
separation, and reverse cationic flotation. To beneficiate
quartzites in the strong magnetic field, the Company used
high-intensity magnetic separators produced by Eriez
Maqnetics, Longi and Outotec.
The testing at processing section #14 proved the possibility
of obtaining iron ore concentrate from oxidised ferruginous
quartzites with a mass fraction of 66.0%. The tests
also provided the data required to develop an optimal
ore processing scheme and the beneficiation technology
for oxidised ferruginous quartzites.
Technical upgrade
In 2015, Lebedinsky GOK received two locomotive
units, 70 dump cars and two large frontal loaders
with 9.3 cubic metre buckets as part of the Company’s
programme to upgrade and renovate its mining
transportation facilities. Mikhailovsky GOK’s mining tra
nsportation division received two NP–1 locomotive units
equipped with dump cars, one EKG–15M excavator and two
sBsH–250 MNA drilling rigs.
IN 2015, THE COMPANY’S CAPEx
TOTALLED USD 417 MN.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 4342
/ CONtENt
Construction of Coke Oven Battery #6 (COB–6) at Ural SteelCOB–6 reached its design capacity of 690,000 tonnes
per annum of 6% moisture bulk coke. Quality targets
for the produced coke have also been met. The project
enabled the Company to normalise the quality of blast
furnace charge, reduce its dependence on third-party
suppliers, and cut production costs. Merchant coke is now
also shipped to external consumers.
Construction of Casting Machine #5 at Ural Steel’s blast furnace shopIn Q4 2015, Casting Machine #5 (CM–5) was commissioned
at the blast furnace shop to cast molten iron into ingots.
This investment project will increase casting capacity
for merchant pig iron by 0.5 million tonnes per annum.
The machine’s design draws on the know-how of Russia’s
leading market players, with operation and control
processes being completely automated and computerised.
The machine operator can choose between different
casting modes and speeds. During the construction,
the Company paid special attention to environmentally
friendly solutions in order to mitigate its environmental
impact.
Renovation of Blast Furnace #4 at Ural SteelThe Company completed the first-class renovation of Blast
Furnace #4 (BF–4) with a design capacity
of 1.5 million tonnes of pig iron per annum. The BF–4
overhaul and CM–5 construction are part of Ural steel’s
modernisation and development programme. The
completion of these two projects will enable the Company
to process its own iron ore and achieve higher pig
iron production and shipment volumes.
Steel segment
Maximising returns in the steel segment
Installation of a reducing and sizing block (RSB) in the medium section of OEMK’s Rolling Mill 350The RsB in the medium section of Rolling Mill 350
will allow the Company to significantly improve the quality
of rolled steel (most notably, sBQ bars), reduce metal
losses from turning, and ramp up production at Rolling Mill
350 and the finishing shop.
For the purposes of this project, sMs group GmbH
(Germany) was contracted as an equipment supplier
and a service provider, while GIPROMEZ, a Metalloinvest
subsidiary, was tasked with the preparation of design
specifications and estimates.
The focus on medium-sized products is due to the high
demand for this product category in the Company’s key
sales markets.
The project completion is scheduled for 2017.
On top of that, the Company continues to assemble
a hydraulic descaling unit at Rolling Mill 700 and started
the upgrade of the second gas purification unit
in the electric arc furnace shop.
Construction of an air separation unit at OEMKOEMK commenced the commercial operation of an oxygen
plant complete with a cryogenic air separation unit (AsU).
The plant can produce 20,000 cubic metres of gaseous
oxygen or nitrogen and 1 tonne of liquid argon per hour.
The equipment was supplied by Linde Engineering
Dresden GmbH (Germany).
The new plant was constructed to replace the old one,
which had exceeded its useful life. The project enabled
the Company to increase total production volumes
by 75% for oxygen (required to make steel and metallised
products) and 24% for nitrogen, and start its own
argon production. The plant is designed to satisfy OEMK’s
current and prospective air separation needs.
Environmental responsibility
Upgrade of gas purification units at OEMK’s electric arc furnaces (DSP–150) #1 and #2A project is underway to upgrade gas purification units
at OEMK. so far, general construction works, steelwork
assembly and installation of key production equipment
have been completed.
The project’s first stage was implemented in June 2013
and covered gas purification systems at electric arc
furnaces #3 and #4. As a result, residual dust content
from waste gases fell by 40%, whereas the furnaces’ dust
emissions fell by more than two-thirds. Workplace dust
exposure decreased by an average of 50%.
The commissioning of upgraded gas purification units
at electric arc furnaces #1 and #2 is scheduled for 2016.
It is expected to reduce dust content from waste gases
by over 75%.
Technical upgrades
Along with large-scale investment projects, OEMK
took steps to upgrade and revamp its existing
production facilities, including the purchase of mill rolls
for Rolling Mill 700, modernisation of the ventilation
system at the pelletisation and metallisation shops’
filtration section, and upgrade of process gas compressors
as part of the metallisation unit #4 overhaul.
As part of a programme to upgrade and revamp existing
production facilities, Ural steel purchased mill rolls
for the QUARTO and DUO cages of Rolling Mill 2800
at rolling shop #1; constructed the new surplus furnace
gas burning bleeder stack #2 to improve occupational
safety in case of an accidental failure of bleeder stack #1;
replaced a steam turbine of TK turbocharger #8 at Ural
steel’s TPP to ensure a reliable supply of suitable hot blast
to the blast furnace shop; and constructed an automated
coal concentrate sampling section at the coke
production site to ensure incoming checks for concentrate
coming from third-party suppliers and reduce the risk
of deteriorating coke quality due to the poor charge
composition.
OEMK IS CONSTANTLY WORKING
TO REDUCE ITS ENVIRONMENTAL IMPACT.
THE MODERNISATION OF GAS PURIFICATION
SYSTEMS DECREASES POLLUTANT EMISSIONS
AND BOOSTS PRODUCTION VOLUMES.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 4544
/ CONtENt
Structure and content of Plans for R&D, Feasibility Studies and Production-Related Science and Technology Services in 2015
Topic 1Strategic
development
Research seeking to define Metalloinvest's strategic
development options
Topic 2Environment
and occupational safety
Research seeking to bolster environmental and occupational safety
(including in line with statutory requirements)
Topic 3Improvements in production
efficiency
Research seeking to boost performance and improve production processes
at existing sites
Key focus areas:
-
Key focus areas:
-
Key focus areas:
• enhance the strength of iron ore pellets at Lebedinsky GOK (improve methods of heat treatment, introduce strengthening additives to the furnace charge);
• launch production-based research to develop technology ensuring compre-hensive processing of mineral raw materials at Mikhailovsky GOK;
• seek to optimise the mining transpor-tation network at Lebedinsky GOK;
• carry out regular studies to improve heat treatment of rolled metal for bridge construction at Ural Steel.
• launch environmental research (specify transformation ratios for air contaminants in the area surrounding Lebedinsky GOK, etc.);
• support mining operations as required by para. 6 of Safety Rules No. 03–498–02 and the Federal Law on Occupational Safety at Hazardous Production Sites;
• build geomechanical models and develop production procedures for mining operations at deposits with planning horizons of 20–30–50 years.
• develop technical solutions to bolster the reliability of production-related equipment (power supplies to OEMK, etc.);
• improve equipment capacity and production processes (increase the efficiency of metal-cutting tools used by OEMK, improve technologies used in Ural Steel's coke production shops, etc.);
• certify finished products and confirm their compliance with standards and regulations by engaging third-party laboratories (corrosion resistance tests at Ural Steel, etc.).
In 2015, a total of 23 R&D projects were completed
at the Company’s initiative with eight more nearing
completion. The research on 20 focus areas was started
in 2015 and will continue through 2016.
Research & Development (R&D)
Number of projects in Plans for R&D, FS and Production Related Science and Technology Services
MGOKLGOK OEMK Ural Steel
6
11
5
15
5
13
10
14
2014 2015
Actual costs of Plans for R&D, FS and Production Related Sci-Tech Services, RUB million
STRATEGIC DEVELOPMENT
ENVIRONMENT AND OCCUPATIONAL SAFETY
IMPROVEMENTS IN PRODUCTION EFFICIENCY AT EXISTING SITES
15.7
2.9
10.6
7.2
17.9
0.5
5.1
7.2
19.5
MGOKLGOK OEMK Ural Steel
Metalloinvest’s R&D production support function is
responsible for making quarterly adjustments
to the Company’s plans for R&D, feasibility studies
and production-related science and technology services,
which enables the Company to promptly include critical
orders in its planning. such orders may require changes
to the existing process and technology modes to ensure
the high quality of produced goods.
Given the scale and complexity of orders, Metalloinvest
is expanding its co-operation with leading R&D institutions
and industry experts. In 2015, the Company collaborated
with a number of R&D institutions and universities,
including:
• NPvP TOREX (Yekaterinburg);
• Branch of the National University of science
and Technology MIsis (stary Oskol);
• MIPT Centre for Engineering and Technology
of Hard-to-recover Reserves (Moscow);
• Bardin Central Research Institute for Ferrous Metallurgy
(Moscow);
• Techno-Chermet (Moscow);
• NORD Engineering Company (Moscow);
• vIOGEM (Belgorod);
• Branch of the National University of science
and Technology MIsis (Novotroitsk);
• Ivs (st Petersburg);
• GIPROMEZ (Moscow, part of Metalloinvest), and others.
In addition, Metalloinvest is working to consolidate its R&D
base. For example, the Company refitted its facilities
with new laboratory and analysis equipment to enhance
the potential of its in-house facilities. The Company’s
technical experts participate in laboratory tests,
piloting and applied scientific research. Going forward,
Metalloinvest seeks to further develop its in-house R&D
capacities.
The Company places orders for R&D projects focusing
on three key topics:
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENTOVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 4746
3 FINANCIAL AND OPERATIONAL RESULTS
Despite the drop in global iron ore prices, the Company’s EBItDA margin remains consistently high
of products are high added value 88 %
of the Company’s costs denominated in roubles80 %
of revenue in USD57 %
Drop in Company revenue (2015 vs 2013)–36 %Drop in EBItDA (2015 vs 2013)–36 %
2014 2015
%USD/t
130
100
70
2013
10
20
EBITDA margin
Source: Bloomberg (62% Fe, CFR China), Company data
Adjusting to market conditions
Ore price
31.3 % 30.8 % 32.6 %
30
Maintaining operational efficiency despite the changing market environment with an EBITDA margin of over 30%
Drop in global iron ore prices (2015 vs 2013)–54 %
/ CONtENt
FINANCIAL AND OPERATIONAL REsULTs
A major part of the Company’s revenue is earned from
shipments to Russian consumers, which is why the state
of the Russian economy has a significant impact
on the Company’s performance.
International sanctions and low oil prices resulted in lower
economic growth rates forecast by the International
Monetary Fund for Russia (-3.7% in 2015, -1.0% in 2016,
1.0% in 2017).
However, the obvious need to support economic activity
in Russia will result in the development of infrastructure
projects. In view of this, Metalloinvest closely monitors
the largest federal investment programmes and strives
to take advantage of the opportunities provided by these
projects.
In 2015, the Company continued to implement its initiatives
aimed at decreasing ore extraction and processing costs
and improving competitiveness in the global market through
the optimisation of ore processing and by increasing
operational efficiency.
The modernisation of the Company’s production assets
and better operational efficiency enabled us
to achieve our production targets in 2015. With
the commissioning of key production facilities, we are
able to expand production and improve the quality of our
iron ore, HBI/DRI and steel products.
Andrey UgarovFirst Deputy CEO, Production Director
«
» IN 2015, tHE COMPANY CONtINUED tO WORK tOWARDS DECREASING ORE EXtRACtION AND PROCESSING COStS.
Production at Lebedinsky GOK in 2011–2015, million tonnes
CONCENTRATE
PELLETS
HBI
2011 2012 2013 2014 2015
21.8
8.9
2.3
21.2
8.8
2.4
20.3
8.9
2.6
20.5
9.0
2.4
21.1
9.0
2.6
Production at Mikhailovsky GOK in 2011–2015, million tonnes
CONCENTRATE
PELLETS
SINTERING ORE
2011 2012 2013 2014 2015
16.4
9.9
2.0
17.0
10.1
1.6
16.6
9.9
1.5
16.7
9.9
1.5
16.8
11.0
1.5
Production
In 2015, the Company increased output
of key products y-o-y:
Annual HBI production at Lebedinsky GOK increased
by 8.1% y-o-y (in 2014, the enterprise was undergoing
long-term renovation and partial upgrade of HBI-2 Plant).
Operational results
Mining segment
Both Lebedinsky GOK and Mikhailovsky GOK increased
concentrate production. At Lebedinsky GOK, this was
due to higher magnetic iron content in the ore and its
recovery into concentrate. At Mikhailovsky GOK, the results
came on the back of shorter repair times and higher
production rates driven by a change in the physical,
mechanical and technological properties of the ore
mixture. In 2015, concentrate production at Mikhailovsky
GOK grew by 0.6% to 16.8 million tonnes.
The launch of Pellet Plant #3 and the scheduled
reduction in repair time significantly increased pellet
production at Mikhailovsky GOK (up 10.3% y-o-y). Pellet
production at Lebedinsky GOK increased by 0.3% due
to optimisation works at the pellet plants.
Core products, million tonnes
IRON ORE (INC. SINTERING ORE)
PELLETS
HBI/DRI
hot metal
crude steel
38.7
22.7
5.3
2.34.5
39.5
23.8
5.4
2.54.5
2014 2015
«
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5150
/ CONtENt
Steel segment
Pellet production at OEMK reached 3.8 million tonnes
(up 2.4% y-o-y) on the back of shorter repair times
and the improved performance of the pellet plant.
OEMK saw a record growth in steel production: up 2.6%
y-o-y to 3.5 million tonnes due to improved productivity
at its electric arc furnaces. steel production at Ural
steel dropped by 8.1% y-o-y, down to 1.0 million tonnes
following changes in the demand structure.
scheduled renovation of metallisation units led to a minor
drop in OEMK’s DRI production by 1.1% y-o-y.
Improved blast furnace processes resulted in higher output
at the blast furnace shop at Ural steel, thus boosting pig
iron production by 7.6%.
Production volumes at OEMK in 2011–2015, million tonnes
DRI
STEEL
PELLETS
2.7
3.3
3.7
2.8
3.3
3.7
2.8
3.2
3.8
2.9
3.4
3.7
2.8
3.5
3.8
2011 2012 2013 2014 2015
Production volumes at OEMK in 2011–2015, million tonnes
2011 2012 2013 2014 2015
STEEL
PIG IRON
2.6
2.5
2.3
2.1
1.5
2.2
1.1
2.3
1.0
2.5
» RECORD GROWtH IN StEEL PRODUCtION At OEMK: 3.5 MIL-LION tONNES
Shipments
Iron ore product shipments
In 2015, pellets accounted for the majority of iron ore
products shipped by Metalloinvest (52.2% of the total
volume), with iron ore (concentrate and sintering ore),
HBI/DRI and other products making up 39.1%, 8.6%
and 0.1%6, respectively.
Iron ore product shipments, billion tonnes
2011 2012 2013 2014 2015
IRON ORE
PELLETS
HBI/DRI
OTHER
12.7
13.6
2,3
0.4
12.5
14.1
2.3
0.3
11.1
13.7
2.4
0.04
11.0
13.9
2.3
0.2
10.8
14.4
2.4
0.2
2011 2012 2013 2014 2015
Iron ore product shipments in 2011–2015,
27.627.5 29.2
27.3
29.1
billion tonnes
In 2015, the share of domestic iron ore shipments grew
to 66% (59% in 2014). These changes are attributable
to an increase in shipments to Russian consumers
(MMK, NLMK, Evraz and severstal). shipments
to European and Asian customers decreased on a pro-
rata basis by 4 p.p. and 1 p.p., respectively, amounting
to 19% and 10%. shipments to the Middle East and North
Africa (MENA) remained flat y-o-y.
Shipments from Lebedinsky GOK in 2011–20157,
2011 2012 2013 2014 2015
IRON ORE
PELLETS
HBI/DRI
OTHER
11.2
5.3
2.4
0.5
10.7
5.2
2.4
0.5
9.5
5.0
2.6
0.5
9.6
5.4
2.4
0.5
10.4
5.2
2.6
0.3
billion tonnesShipments from Mikhailovsky GOK in 2011–20158, billion tonnes
2011 2012 2013 2014 2015
CONCENTRATE
PELLETS
SINTERING ORE
5.4
10.1
1.7
5.8
10.2
1.4
5.7
9.9
1.9
5.8
9.9
1.3
4.7
10.9
1.3
6 HBI and pellet fines.7 Including intra-group shipments.8 Including intra-group shipments.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5352
/ CONtENt
Iron ore product shipments by region in 2011–2015, billion tonnes
2011 2012 2013 2014 2015
РОССИЯ ЕВРОПА АЗИЯ БЛИЖНИЙ ВОСТОК И СЕВЕРНАЯ АФРИКАПРОЧИЕ
9,1
7,0
10,9
1,1 0,9
14,8
6,6 6,9
0,6 0,3
16,2
5,44,7
0,7 0,3
16,2
6,3
3,1
1,1 0,7
18,3
5,2
2,7
1,00,4
Shipments of pig iron and steel products
steel products still account for 70% of steel
segment shipments. In 2015, this figure fell slightly
with a proportional increase in pig iron shipments.
Pig iron and steel product shipments in 2011–2015, %
2011 2012 2013 2014 2015
1.1
5.2
0.8
5.1
1.4
4.3
1.8
4.2
1.8
4.2
PIG IRON
STEEL PRODUCTS 2011 2012 2013 2014 2015
Pig iron and steel product shipments in 2011–2015, million tonnes
6.05.95.95.7
6.4
Shipments from OEMK and Ural Steel in 2011-2015, million tonnes
2011 2012 2013 2014 2015
DRI (OEMK)
PIG IRON (URAL STEEL)
STEEL PRODUCTS (URAL STEEL)STEEL PRODUCTS (OEMK)
0.1
1.1
2.1
3.1
0.1
0.8
2.0
3.1
0.1
1.4
1.2
3.1
0.2
1.8
1.0
3.2
0.1
1.8
0.9
3.3
Domestic shipments accounted for 28% of the total
volume of steel product shipments (down 4 p.p. y-o-y).
At the same time, shipments to European customers grew
to 20% (up 8 p.p.), mainly driven by increased shipments
to Italy. In 2015, an increase in shipments to Algeria,
Tunisia and Turkey triggered a 3 p.p. y-o-y growth to 29%
in the share of shipments to the MENA region.
Steel product shipments by region in 2011–2015, million tonnes
2011 2012 2013 2014 2015
РОССИЯ ЕВРОПА АЗИЯ БЛИЖНИЙ ВОСТОК И СЕВЕРНАЯ АФРИКАПРОЧИЕ
2,4
0,6 0,5
1,6
1,2
2,3
0,4
0,6
1,4
1,2
2,0
0,6
0,2
1,6
1,4
1,9
0,7
0,2
1,5 1,6 1,7
1,2
0,2
1,7
1,3
повторяющийс абзац
IN 2015, DOMESTIC STEEL PRODUCT SHIPMENTS
INCREASED BY 12.9%, WHILE SHIPMENTS
TO EUROPEAN CUSTOMERS DROPPED BY 17.4%
Over the last four years, pig iron shipments have consistently
grown, while steel product shipments have decreased.
High-margin product shipments remain largely unchanged
since 2012.
Domestic shipments of steel products have substantially
declined over the last five years. In 2015, they declined
by 10%. At the same time, 2015 shipments to the MENA
region grew by 13%.
STARTING FROM 2014, THE SHARE OF PIG IRON
SHIPMENTS FROM URAL STEEL AS A PROPORTION
OF THE TOTAL GREW SUBSTANTIALLY.
IN 2014, IT AMOUNTED TO 28%
AND 1.8 MILLION TONNES, REMAINING
UNCHANGED IN 2015.
2011 2012 2013 2014 2015 2015 vs 2014
Russia 9.1 14.8 16.2 16.2 18.3 +13.0%
Europe 7.0 6.6 5.4 6.3 5.2 –17.5%
Asia 10.9 6.9 4.7 3.1 2.7 –12.9%
MENA 1.1 0.6 0.7 1.1 1.0 –9.1%
Other 0.9 0.3 0.3 0.7 0.4 –42.9%
2011 2012 2013 2014 2015 2015 vs 2014
Russia 2.4 2.3 2.0 1.9 1.7 –10.5%
Europe 0.6 0.4 0.6 0.7 1.2 +71.6%
Asia 0.5 0.6 0.2 0.2 0.2 0.0%
MENA 1.6 1.4 1.6 1.5 1.7 +13.0%
Other 1.2 1.2 1.4 1.6 1.3 –18.7%
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5554
/ CONtENt
IN 2015, METALLOINVEST WORKED TO SUSTAIN
ITS LIQUIDITY POSITION AND OPTIMISE
THE COMPANY’S DEBT STRUCTURE. FUNDS RAISED
ON THE DOMESTIC AND INTERNATIONAL CAPITAL
MARKETS ALLOWED THE COMPANY TO IMPROVE
ITS DEBT REPAYMENT SCHEDULE.
Revenue
In 2015, the Company’s revenue dropped by 31.0%
to UsD 4,393 million (2014: UsD 6,367 million) due to a sharp
slump in global iron ore and steel prices (by 42% and 32%,
respectively).
The mining segment generated revenue of UsD 2,089 million
or 47.6% of the Company’s consolidated revenue
(2014: 48.7%). The 32.7% y-o-y decrease in the segment’s
revenue was due to declining prices for iron ore products an
d the depreciation of the rouble.
20 %
12 %
11 %
41 %
4 % 12 %
2015 revenue by product
IRON ORE
PELLETS
HBI
PIG IRON
STEEL PRODUCTS
OTHER
42.7 %
22.0 % 21.0 %
14.7 %
13.1 % 41.1 %
2014–2015 revenue by market
RUSSIA
EUROPE
ASIA (INCL. CHINA)
MENA
OTHER
16.1 %
16.4 %
5.8 %
7.1 % 2014
2015
The steel segment accounted for 48.3% of the Company’s
consolidated revenue (2014: 48.1%). The decrease
in the segment’s revenue by 30.6% to UsD 2,123 million was
triggered by declining prices for pig iron and steel products
and the depreciation of the rouble.
In 2015, the domestic market share of the Company’s
consolidated revenue increased to 42.7% from 41.1%
in 2014. Europe and the Middle East accounted for 22.0%
and 16.4% of the Company’s revenue, respectively.
Asia generated 5.8% of revenue.
Cost of sales, distribution, general and administrative expenses
In 2015, the Company’s cost of sales amounted
to UsD 2,275 million or 51.8% of revenue (2014:
53.1%). The 32.7% decrease (2014: UsD 3,381 million)
is attributable to the rouble depreciation and implementa
tion of an operational improvement programme to reduce
the cost of natural gas, energy and other items.
Distribution expenses totalled UsD 690 million,
representing a 28.5% decrease y-o-y, primarily due
to the rouble depreciation and partial shift
of iron ore shipments to the domestic market under
existing long-term contracts. In 2015, distribution expenses
made up 15.7% of the Company’s revenue compared
to 15.2% in 2014.
General and administrative expenses in 2015 decreased
by 35.9 % to UsD 289 million, amounting to 6.6%
of the Company’s revenue, which is slightly lower
than the 7.1% figure in 2014.
Cost item, % 2014 2015
Raw materials and supplies 45.4 48.2
Energy costs 20.8 18.5
Labour costs 18.8 18.9
Depreciation,
amortisation and impairment costs9.2 8.9
Land, property and other taxes 2.5 2.5
Amortisation of mineral rights 1.6 1.5
Repair and maintenance 0.4 0.2
Other 1.4 1.2
» GENERAL AND ADMINIStRAtIVE EXPENSES DROPPED BY 35.9%
Despite the challenging conditions in the global
iron ore market and rouble fluctuations, the Company
continued to deliver solid financial results.
Pavel MitrofanovDeputy CEO, Chief Financial Officer
«
«
Cost of sales in 2014–2015
Financial performance
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5756
/ CONtENt
Financial position
As at 31 December 2015, the Company’s total assets
amounted to UsD 6,619 million (as at 31 December 2014:
UsD 7,266 million). The 8.9% decline in the Company’s
Us dollar-denominated total assets is mainly attributable
to the rouble depreciation.
At the end of the reporting period, cash and cash
equivalents stood at UsD 424 million (31 December 2014:
UsD 550 million). The Company’s total liquidity amounted
to UsD 824 million, including short-term bank deposits
of UsD 400 million.
At the end of the reporting period, the Company’s net debt
decreased to UsD 3,563 million (2014: UsD 4,185 million).
The net debt/EBITDA ratio amounted to 2.49x compared
to 2.13x as at 31 December 20149. The share of long-term
debt fell slightly to 83.9% of the total (2014: 86.4%).
In 2015, net cash generated from operations amounted
to UsD 952 million, a 29.4% decrease compared
to UsD 1,348 mn in 2014.
Funds used for investment activities amounted
to UsD 987 mn (2014: UsD 427 million).
Funds used for financing activities totalled UsD
24 million (2014: UsD 550 million). This decrease was
mainly driven by dividend payments in 2014.
9 To calculate the net debt/EBITDA ratio, short-term bank deposits
of USD 400 million were accounted for as cash and cash equivalents.
Margin and net income
In 2015, the Company’s EBITDA declined by 27.0%
to UsD 1,432 million (2014: UsD 1,961 million). The EBITDA
margin grew by 1.8 p.p. y-o-y amounting to 32.6%.
The decrease in consolidated EBITDA was primarily due
to lower EBITDA in the mining segment, hit by a sharp
drop in global iron ore prices. The mining segment’s
EBITDA totalled UsD 872 million, representing a 36.2%
or UsD 494 mn decrease y-o-y. The share of the mining
segment in consolidated EBITDA reduced from 69.7%
in 2014 to 60.9% in 2015.
In 2015, the steel segment share of consolidated EBITDA
was 27.4%. The steel segment’s EBITDA also decreased
y-o-y, amounting to UsD 392 million. However, this decline
was much lower than that of the mining segment due
to lower prices for supplies used in steel production.
In addition, the Company grew sales of merchant pig
iron and changed the structure of its steel product
shipments.
In 2015, the Company earned net income
of UsD 218 million compared to UsD 66 million in 2014.
Despite a considerable decline in operating income,
the Company’s net income increased by 3.3 times,
mainly due to decreases in foreign exchange rate
differences accrued on the Us dollar-denominated part
of the Company’s debt and lower net interest payments.
Capex programme
In 2015, the Company’s capex decreased by 29.9%
to UsD 417 million (2014: UsD 595 million).
A major part of the Company’s capex
(UsD 33 million or 7.9% of total expenditures) was used
for the construction of Pellet Plant #3 at Mikhailovsky GOK,
which was completed in 2015.
At the end of the year, the construction of HBI-3
Plant at Lebedinsky GOK accounted for a large part
of the Company’s capex. In 2015, UsD 161 million or 38.6%
of the total capex was invested in this project.
In 2015, apart from major investment projects,
Metalloinvest continued to purchase high-capacity
equipment for mining and transport operations,
as well as upgrade and modernise existing
production facilities.
» For more details on the Company’s investment projects, see Strategic
Investment Programmes on p. 42.
» EBItDA MARGIN GREW BY 1.8 P.P. tO 32.6%
In July, we signed a USD 750 million long-term pre-export
credit facility agreement with a syndicate of international
banks, which will be drawn on to fully repay all amounts
maturing in 2016.
Pavel MitrofanovDeputy CEO, Chief Financial Officer
«
«
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5958
Metalloinvest is committed to the continuous implementation of best international corporate governance practices. Improvements in stakeholder relations and increased transparency for analysts drive Metalloinvest’s long-term investment case.
4 CORPORATE GOVERNANCE AND INVESTOR INFORMATION
20132011
30
500
600
40
700
800
900
40020
300
20010
100
Investor base by country
total investor
base
73
6
27
34
640
83644.44%33.40%
60
40
20
Metalloinvest Russia
Share of independent directors on the Board
Board structure by gender
92.40%7.60%
66.67%
33.33%
52.853.1
100
80
60
40
20
Metalloinvest Russia
0
48
21
60
40
20
Metalloinvest Russia
Number of Board meetings
54
53
52
Metalloinvest Russia
Average director age, years
Total investor base*
Investor base by country*
2015Source: 2015 Russia Board Index, www.spencerstuart.com Copyright © 2015 Spencer Stuart; Company data
Male Female
*Data based on the Company’s distribution list
/ CONtENt
CORPORATE GOvERNANCE AND INvEsTOR INFORMATION
Corporate governance structureTHE COMPANY VIEWS CORPORATE GOVERNANCE AS A SYSTEM OF INTERACTION BETWEEN
THE COMPANY’S GOVERNING BODIES AND STAKEHOLDERS, REFLECTING THE BALANCE
OF THE PARTIES’ INTERESTS AND AIMED AT IMPROVING THE COMPANY’S PERFORMANCE.
Metalloinvest’s Governance Structure
Общее собрание акционеров
Генеральный директор
Правление
Совет директоров
Департамент внутреннего аудита
КомитетыСовета директоров
Комитет по аудиту
Комитет по финансам, бюджетированию и стратегии
Комитет по компенсациям и льготам
Board of Directors
The Board of Directors is responsible for the strategic
management of the Company. The Board of Directors’
key objectives are efficient corporate governance,
setting and implementation of the Company’s
strategic goals, determination of risk management
principles and approaches, risk assessments,
and creation of favourable conditions for long-term
sustainable development.
The neutrality and independence of the Board of Directors
are the key principles the Company draws on to improve
the efficiency of its governance framework. Independent
and non-executive directors are included on the Board
of Directors to ensure control over the Company’s senior
management. In defining the directors’ independence,
the Company abides by the Corporate Governance Code
recommended by the Central Bank of Russia.
The Board of Directors is balanced in terms of:
• the number of independent and non-executive
directors,
• gender and age.
In 2015, the Board of Directors held 48 meetings
related to the delivery of investment projects,
transaction and budget approvals, operational efficiency,
production and implementation of the Company’s
development strategy.
The Board of Directors has three committees:
• Audit Committee
• Finance, Budgeting and strategy Committee
• Remuneration Committee
By gender
MALE FEMALE
Metalloinvest Russia
66.733.3
92.47.6
Number of Board meetings, %
48Metalloinvest 21
Russia
Share of independent directors on the Board, %
Metalloinvest
Russia
44.433.4
Average director age, years
53.2Russia 52.8
MetalloinvestFOUR OUT OF NINE DIRECTORS
ARE INDEPENDENT
coMMIttees of tHe Board of dIrectors
general MeetIng of sHareHolders
Board of dIrectors
ceo ManageMent Board
audIt coMMIttee
reMuneratIon coMMIttee
fInance, BudgetIng and strategy coMMIttee
Internal audIt departMent
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 6362
/ CONtENt
Natalia Chumachenko
Non-executive director.
Chairman of the Finance, Budgeting and strategy Committee
Valery Kazikaev
Independent non-executive director
Sergey Soldatenkov
Independent non-executive director
Chairman of the Compensa-tion and Benefit Committee
Andrey Varichev
Executive Director
Ivan Streshinsky
Chairman of the Board of Directors
Dmitry tarasov
Executive Director
Nikolai Krylov
Independent non-executive director
Irina Lupicheva
Non-executive director
Galina Aglyamova
Independent non-executive director.
Chairman of the Audit Committee
BOARD OF DIRECTORs
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 6564
/ CONtENt
Members of the Board of Directors
GALINA AGLYAMOVAIndependent non-executive director.
Chairman of the Audit Committee, member
of the Remuneration Committee.
Member of the Board of Directors since October 2013.
Education1985 - Graduated from the Moscow Institute of steel
and Alloys (MIsis) with a PhD in Economics.
ANDREY VARICHEVExecutive Director.
CEO of Management Company Metalloinvest.
Member of the Finance, Budgeting and strategy
Committee.
Member of the Board of Directors since April 2007.
Education1991 Graduated from the Tsiolkovsky Moscow Institute
of Aviation Technology (MATI) with a degree in Aircraft
Mechanical Engineering.
Professional experience2013 – present CEO of Management Company
Metalloinvest.
2009 – 2014 CEO of Holding Company Metalloinvest.
2009 – 2009 CEO of Management Company Metalloinvest.
2008 – 2009 First Deputy CEO of Management Company
Metalloinvest.
2006–2008 Commercial Director at Management Company
Metalloinvest.
2005–2006 CEO of Mikhailovsky GOK.
2003–2004 First Deputy sales Director at Ural steel;
from 2004 - Deputy CCO at Ural steel.
2001–2002 Deputy and Export sales Director
at TD NOsTA-OKhMK.
1991–2001 Held senior management positions
with a number of Russian steelmaking companies,
including InterUral and NTMK.
IVAN STRESHINSKYChairman of the Board of Directors.
Member of the Board of Directors since February 2013.
Education1992 - Graduated from the Moscow Institute of Physics
and Technology with an honours degree in Aeromechanics
and Flight Engineering.
Professional experience2012–present CEO of UsM Advisors.
CEO and member of the Board of Directors of Garsdale services
Investment Limited.
Currently serves as:
Member of the Board of Directors of MegaFon,
Member of the Board of Directors of Management Company
Metalloinvest LLC,
Member of the Board of Directors of Kommersant,
Member of the Board of Directors of UTH Russia Limited,
Member of the Board of Directors of UsM Holdings Limited,
Member of the Board of Directors of Mail.ru Group Limited,
Member of the Board of Directors of CITY.
2008–2012 CEO of Telecominvest.
2006–2008 As a member of the Board of Directors
of Gazmetall and then Metalloinvest, he oversaw
the consolidation of Metalloinvest Holding’s assets.
2006–2007 CEO of Gazmetall.
1994–2006 Held various senior management positions
at Coalco Group.
1993–1994 Member of the Board of Directors of Perm
Motors.
Professional experience2006–2012 vice President for Finance at NLMK.
2005–2006 Deputy CEO for Economics and Finance at NLMK.
2000–2005 Director for Economics and Finance at NLMK.
1997–2000 Deputy Director for Economics at NLMK.
Launched her career in 1985 by joining NLMK as a planning
economist.
VALERY KAZIKAEVIndependent non-executive director.
Member of the Finance, Budgeting and strategy
Committee.
Member of the Board of Directors since October 2013.
Education1976 Graduated from the Moscow Mining Institute
with a PhD in Economics.
Professional experience2015 – present CEO of BMC LLC.
2014 – present Chairman of the Board of Directors
of BMC LLC.
2013 – present Member of the Board of Directors
of Management Company Metalloinvest.
2010–2013 First Deputy CEO for strategic Development
at sheremetyevo International Airport.
2001–2010 CEO of TZK-sheremetyevo.
NIKOLAI KRYLOVIndependent non-executive director.
EducationMember of the Board of Directors since April 2015.
Doctor of Law, J. D. degree from Yale Law school.
Professional experience2012–present sector Head at the Institute of state
and Law of the Russian Academy of sciences.
1994–1999 various positions at international law firms
in New York, including Paul, Weiss, Rifkind,
Wharton & Garrison LLP, and Cadwalader,
Wickersham & Taft LLP.
IRINA LUPICHEVANon-executive director.
Member of the Audit Committee.
Member of the Board of Directors since February 2013.
SERGEY SOLDATENKOVIndependent non-executive director.
Chairman of the Remuneration Committee, member
of the Audit Committee.
Member of the Board of Directors since April 2014.
Education1986 Graduated from the Leningrad Institute
of Aviation Instruments with a degree in Radio Engineering.
2007 Received an MBA from Moscow Technical University
of Communications and Informatics.
Professional experience2012–present Chairman of the Board of Directors
of MegaFon.
2003–2012 CEO of MegaFon.
2002–2003 vice President at United Company GROs.
2000–2002 Deputy CCO, Acting CEO, and CEO
of Petersburg Telephone Networks (later restructured
into North-West Telecom).
1999–2000 Deputy CEO of Telecominvest.
1994–1999 CEO of Delta Telecom.
1993–1994 CEO of ARs, a Russo-British Jv.
1992–1993 Executive Director at Impex Group.
EducationGraduated from the Moscow state Institute of International
Relations with a degree in International Economics
and holds a postgraduate degree from Moscow Finance
Academy.
Professional experience2012 – present Managing Director, Head of Risk
and Control at AF Holding (UsM Advisors since 2012).
2004–2012 Held senior management positions
in companies later consolidated into UsM Holdings
overseeing finance, internal audit and securities
operations. Participated directly in the creation of UsM
Holdings.
1992–2004 Held senior management positions at MBG
and MB Group Impex.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 6766
/ CONtENt
DMITRY TARASOVExecutive Director.
Member of the Finance, Budgeting and strategy
Committee.
Member of the Board of Directors since April 2014.
Education1985 Graduated from the Moscow Institute of steel
and Alloys (MIsis) with a degree in Metallurgical
Engineering.
1990 Received a PhD in Engineering science from MIsis
specialising in Ore Processing and Development of Rare
and Precious Metals.
Professional experience2005–present Executive Director at Metalloinvest.
2007–2016 CEO of Ukrainian Ore Metallurgical Company.
2005–2007 Chairman of the Board of Directors
of Mikhailovsky GOK.
2002–2007 Member of the Expert Committee for
Metals and Mining of the Russian state Duma; member
of the Co-ordination Committee for the Metal and Mining
sector under the Presidential Administration of Russia;
Deputy Chairman of the Committee for Metallurgy under
the Russian Chamber of Commerce and Industry; member
of the Management Board of the Russian Union of Metal
Product Exporters.
2002–2005 Deputy Director for strategy and Future
Development at Gazmetall.
2001–2002 Deputy CEO of the Agency for
Foreign Investments under the Presidential
Administration of Russia.
1999–2001 Advisor to the Head (Deputy Head)
of the Russian state Fund for Precious Metals and stones
(Gokhran).
1992–1999 vice President for Investments and Capital
Construction at MIsis.
1985–1992 Held various positions with gold-mining
enterprises under the UssR Council of Ministers’
Main Directorate of the Diamond and Gold Mining Industry
(Glavalmazzoloto).
NATALIA CHUMACHENKONon-executive director.
Chairman of the Finance, Budgeting and strategy
Committee, member of the Remuneration Committee.
Member of the Board of Directors since October 2013.
Education1994 Graduated from the voronezh state Academy
of Architecture and Civil Engineering.
2001 Graduated from voronezh state University
with a degree in Management.
A qualified Master Trainer at Door International Training
and Coaching Centre.
Professional experienceJuly 2013 – present First Deputy CEO of UsM Advisors.
2012–2013 vice President for Asset Management
at summa Group.
2011–2012 Executive vice President for Mass Market
Business Development in Russia at vimpelCom.
1999–2011 Held various management positions
at vimpelCom.
Committees of the Board of Directors
The Committees are responsible for the preliminary review
of the most important issues within the remit of the Board
of Directors and provide recommendations on the relevant
decisions.
Report of the Finance, Budgeting and Strategy Committee
Members of the Committee: Natalia Chumachenko (Chairman of the Committee),
Andrey varichev, valery Kazikaev and Dmitry Tarasov.
Committee functions:• draft proposals on the Company’s priority areas;
• assess and draft proposals on investment projects
and M&A transactions;
• draft proposals on selected transactions, such as sale
and purchase of shares in other companies (including
derivatives);
• draft proposals on the conclusion of sPA and supply
agreements for steel, iron ore and other products,
if the value of the transaction or several related
transactions exceeds RUB 1.5 billion (excluding
intra-group transactions);
The updated Strategy 2023 factors in the latest market
scenarios. Focus on output of high value-added products
enables the Company to increase sales margins.
Despite challenging conditions in global markets,
the Company continues to keep its leverage ratio
at an acceptable level. We closed a number of important deals
in the capital markets, which, along with positive cash flow,
ensured Metalloinvest’s financial stability.
Natalia ChumachenkoChairman of the Finance, Budgeting and strategy Committee
«
«
• draft proposals on the conclusion of credit
and loan agreements and security agreements
thereto, bank deposit contracts, agreements
to issue promissory notes and other fund-raising
instruments, if the value of the transaction or several
related transactions exceeds RUB 1 billion (excluding
intra-group transactions);
• draft proposals on the Company’s dividend policy.
Committee activity in 2015In 2015, the Committee held 14 in-person
and 36 in-absentia meetings.
In line with its key functions, the Committee provided
methodological guidance and drafted recommendations
on the development of and updates to:
• the Company’s development strategy focus areas;
• the Company’s annual budget and capex programme
for 2015 and 2016;
• key performance indicators, operational and financial
targets;
• key management tasks with a focus on business
sustainability and operational efficiency, including:
° reorganisation of Management Company
Metalloinvest,
° cost management,
° re-organisation of subsidiaries,
° margin management,
° effective implementation of the investment
programme,
° introduction of a mid- and long-term planning
framework,
° creation of budget responsibility centres across
departments.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 6968
/ CONtENt
Many companies achieve higher labour productivity not only
through more efficient production processes, but also through
dedicated incentive programmes.
The holistic nature of staff development projects boosts
employee engagement, which has a positive impact on labour
productivity. Social programmes, occupational safety
initiatives, employee healthcare plans, and staff recruitment,
motivation and adaptation programmes are all equally important
to us.
Sergey SoldatenkovChairman of the Remuneration Committee
«
«
In addition, the Committee monitored the Company’s
operations (commercial, manufacturing and procurement
functions), analysed costs and sales margins,
and controlled the implementation of department budgets
and the fuilfilment of the Company’s operational targets.
In 2015, the Committee also drafted recommendations
and proposals for the Board of Directors concerning
the conclusion of share sale and purchase agreements,
sPA and supply agreements for steel and iron ore products,
credit agreements and security agreements thereto,
and bank deposit contracts.
Report of the Remuneration Committee
Members of the Committee: sergey soldatenkov (Chairman of the Committee),
Galina Aglyamova and Natalia Chumachenko.
Committee functions:• draft proposals to be approved by the Board
of Directors concerning remuneration policies
for directors, the CEO, and members
of the Management Board.
• draft proposals on staff development and incentives;
• draft HR and social policies;
• draft resource planning principles.
Committee activity in 2015In 2015, the Remuneration Committee held seven
in-person meetings.
In line with its key functions, the Committee provided
methodological guidance and drafted recommendations
on the development of:
• KPIs for key managers at the Company
and its controlled entities, and approaches
to Metalloinvest’s 2015 employee
remuneration system;
• the corporate university concept, principles
for the determination of training needs, multiple
training formats, and principles for the assessment
of training and development efficiency;
• the corporate competency model;
• programmes to boost employee engagement
and performance.
In 2015, the most significant risk for the Company was a potential
drop in product prices. The Company successfully mitigated
the impact of this risk on its financials through comprehensive
sales structure management, involving both sales market
expansion and product mix optimisation (including quality
improvements). Thanks to the Company’s systemic approach
to risk management, investment project implementation,
credit and interest rate risks did not have a material impact
on performance in 2015.
Galina Aglyamova Chairman of the Audit Committee
«
«
Report of the Audit Committee
Members of the Committee: Galina Aglyamova (Chairman of the Committee),
Irina Lupicheva and sergey soldatenkov.
Committee functions:• supervising the preparation of financial statements;
• monitoring the performance of internal control and risk
management systems;
• monitoring internal audit performance;
• making recommendations on external auditor
selection and their remuneration;
• ensuring the independence, neutrality and effective
performance of external auditors.
Committee activity in 2015In 2015, the Audit Committee held 9 meetings
in person and 3 meetings in absentia. In line with its key
functions, the Committee provided methodological guidance
and drafted recommendations on:
• approval of the 2014 IFRs statements and 2015 interim
IFRs statements;
• approval of the Company’s comprehensive risk
management programme, including the level of risk
appetite;
• improvement of the credit risk management system;
• re-organisation of the procurement price control system;
• improvement of accuracy control for management
reports on KPI achievement by the Company’s senior
management;
• assessment of the efficiency of measures taken
by the Company’s senior management to eliminate gaps
in the internal control framework identified by internal
auditors;
• external auditor selection and their remuneration.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 7170
/ CONtENt
Management Board
The Company’s collegial executive body is
the Management Board, which includes the Managing
Directors of Lebedinsky GOK, Mikhailovsky GOK, OEMK
and Ural steel. This enables the Board to identify
the most effective ways to ensure the Group’s overall
development.
The Management Board is responsible for
the resolution of key issues related to the Company’s
ongoing operations and co-ordination of work
ANDREY VARICHEVChairman of the Management Board and CEO
of Management Company Metalloinvest.
Mr. varichev has been in his current role since October
2013 and has been a member of the Board of Directors
since April 2007.
» For more details about the CEO, please see page 66.
Members of the Management Board in 2015
PAVEL MITROFANOVDeputy CEO and Chief Financial Officer.
Graduated from Moscow state University with a degree
in Economics; received a master’s degree in Accounting,
Analysis and Audit, and an MBA from the Business school
of Imperial College London.
Mr. Mitrofanov joined the Company in 2004. He has held
various executive positions since 2008, and has been
in his current role since April 2010.
performed by the management company’s services
and divisions, submission of proposals to the Board
of Directors concerning the key businesses and related
implementation plans.
In 2015, the Management Board held 18 meetings
to review the following items: budgeting, capex
programme, operational efficiency, production,
trade, strategy, implementation of target projects
and organisational changes.
NAZIM EFENDIEVFirst Deputy CEO and CCO.
Graduated from the Military Institute of Foreign Languages;
received an MBA from the Russian Academy of National
Economy and completed a course in International
Management at Kingston University.
Mr. Efendiev has held various executive positions
at the Company and its production operations since 2002,
and has been in his current role since March 2012.
ANDREY UGAROVFirst Deputy CEO and COO.
Graduated from the Lipetsk Polytechnical Institute.
Mr. Ugarov joined the Company in 1999, holding
various executive positions with Metalloinvest
and its production operations since 2004.
He was Managing Director of OEMK in 2004–2011,
and has been in his current role since December 2013.
YEVGENY MASLOVManaging Director of Ural steel.
Graduated from Cherepovets state University.
Mr. Maslov has held various executive positions
at the Company and its production operations since 2007,
and has been in his current role since April 2014.
YURIY NADEEVDeputy CEO, Chief security Officer.
Graduated from the Moscow Law Institute
with a PhD in Law.
Mr. Nadeev has held various executive positions
at the Company since 2009, and has been in his current
role since March 2010.
MARINA NOVIKOVADeputy CEO for Organisational Development
and Human Resources.
Graduated from Maurice Thorez Moscow state
Pedagogical Institute of Foreign Languages. In 2015,
Ms. Novikova obtained a Certificate in Business
Administration from INsEAD.
Marina has held various executive positions
at the Company since 2013, and has been in her current
role since November 2013.
OLEG MIKHAILOVManaging Director of Lebedinsky GOK.
Graduated from the Leningrad Mining Institute.
Mr. Mikhailov has held various executive positions
at the Company and its production operations since 2006,
and has been in his current role since October 2011.
NIKOLAY SHLYAKHOVManaging Director at OEMK.
Graduated from the Lipetsk Polytechnical Institute.
Mr. shlyakhov has held various executive positions
at the Company and its production operations since 1999,
and has been in his current role since April 2011.
SERGEY KRETOVManaging Director of Mikhailovsky GOK.
Graduated from Patrice Lumumba People’s Friendship
University.
Mr. Kretov has held various executive positions
at the Company and its production operations since 1998,
and has been in his current role since July 2006.
YURIY GAVRILOVDirector for strategy and Development.
Graduated from the Moscow Institute of Physics
and Technology with a degree in Aeromechanics and Flight
Engineering.
In 1999, Mr. Gavrilov received a master’s degree
in Finance from the Business and Economy Institute
of the Russian Academy of National Economy, and an MBA
in Business Administration, Finance Option from
the University of California Business school.
He has been in his current role since May 2014.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 7372
/ CONtENt
The Company’s internal control and audit system has been
developed using a risk-based approach. It encompasses
the ongoing processes for:
• identification, monitoring, and assessment of risks;
• development, implementation, and improvement
of internal control tools to prevent risks and mitigate
any adverse impact on the Company’s operations,
as well as to achieve the goals of the Company
and its shareholders.
The management team is responsible for the efficient
implementation of control, risk management,
and corporate governance processes, which are assessed
through internal audit procedures in terms of how they
ensure that:
Internal Control and Audit
• the Company’s assets are protected against
the misconduct of employees and third-parties;
• the Company’s operations comply with internal rules
and regulations, applicable laws and Metalloinvest’s
contractual obligations;
• the Company’s financial and operating activities
are adequately reflected in management accounts
and financial statements.
Metalloinvest’s internal audit framework consists of:
• the Audit Committee of the Board of Directors chaired
by an independent director;
• Internal Audit Department of the Managing Company
reporting to the Audit Committee;
• internal audit functions of controlled entities reporting
to the Director of the Internal Audit Department.
Metalloinvest's Internal Control and Audit Framework
положение о внутреннем аудите
Комитет по аудиту
Управляющая компания «Металлоинвест»
Департамент внутреннего аудита
Службы внутреннего аудита управляемых обществ
Руководители управляемых обществ и структурных подразделений
Контроль и аудит
Оперативное управление
Аудит
Отчет
Internal audIt regulatIon
audIt coMMIttee
Internal audIt departMent
Internal audIt functIons of controlled entItIes
Control and Audit
Audit
Operational Management
Reporting
The internal audit framework is structured to cover
all levels of governance, ensuring the independence
and neutrality of the internal audit functions. Its targets,
objectives and principles are formalised in the Internal
Audit Regulation of the Group.
The internal audit findings are used to produce
recommendations for improving control procedures
and mitigating the adverse impact of risks, and their
fulfilment is monitored on an ongoing basis.
Twice a year, the Audit Committee reviews a consolidated
internal audit report, which covers completed audits, their
findings and remedial actions taken by the management
to deliver on internal audit recommendations. The most
significant findings are also reviewed by the Audit
Committee at its regular and extraordinary meetings.
To determine key focus areas for audits, the Company uses
a risk-based approach, which factors in the Company’s
targets, requests of the Board of Directors, and proposals
of the Company’s management and business units.
In 2015, the internal audit covered material risks
in the following areas:
• operational efficiency management;
• procurement and supply management;
• investment project management;
• inventory management;
• repairs and maintenance of property, plant
and equipment;
• material flow management.
The Board of Directors pays particular
attention to the internal control and audit system to ensure
its effectiveness and compliance with global best
practices.
External Audit
Metalloinvest prepares its financial
statements in accordance with the applicable
Russian and international standards (RAs and IFRs).
The Company engages an external auditor to conduct
an independent review of its financial and accounting
statements. The Audit Committee provides
its recommendations on external auditor candidates
to the meeting of shareholders and the meeting
of members, which eventually approve one
of the candidates. In 2015, the Company’s IFRs financial
statements and RAs accounting statements were audited
by PricewaterhouseCoopers.
The auditor is selected through negotiations
with candidates subject to their credentials and service
fees.
ManageMent coMpany
ManageMent coMpany MetalloInvest
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 7574
/ CONtENt
The Company’s management pays special
attention to the corporate risk management framework
to ensure that it continues to increase efficiency
and compliance with international best practices.
In order to identify, classify and assess potential risks
and make effective management decisions, Metalloinvest
has put in place a multi-level risk management framework
covering the Board of Directors and functional managers
of production operations and business units.
In 2015, the Audit Committee’s mandate was broadened
to include not only financial risks, but also the entire range
of corporate risks and internal controls10.
To ensure timely and accurate risk assessment,
the Company continued to develop and implement
the Corporate Risk Management Framework (CRMF) in 2015.
Due to the CRMF, risk management processes will become
an integral part of ongoing management, internal controls
and audit, annual and strategic planning, and year-round
performance assessments.
In 2015, the Company adopted the Corporate Risk
Management Framework and Risk Management
Procedure standards, which establish a single approach
and methodology to identify, assess and manage risks.
In 2015, the Company’s corporate risk portfolio
included some 100 items that Metalloinvest kept track
of and updated regularly to reflect changes in the business
environment.
3 %
56 %
15 % 21 %
Estimated financial impact of key risks by category
MACROECONOMIC
OPERATIONAL
FINANCIAL
INVESTMENT
LEGAL
CORPORATE GOVERNANCE
2 %
3 %
Product pricing risks
Credit obligation risks
FX risk
Purchases of raw materials
Corporate governance risks
Investment project implementation/efficiency risks
Loss of markets
Changes in legislation / action state bodies
Political risk (sanctions)
Operational risks (accidents and emergencies, lower output, disruptions to production technology)
Estimated financial impact of risks, %
10 Changes are to take effect in 2016.
In the reporting year, Metalloinvest began to upgrade
its risk management system, seeking to further increase
the sustainability of its business. Efficient risk management
is a key focus area of the Company’s strategy.
Yuriy GavrilovDirector for strategy and Development
«
THE COMPANY’S KEY RISKS WERE IDENTIFIED BASED
ON A COMPREHENSIVE ASSESSMENT OF THE TOTAL FINANCIAL
IMPACT WITH A FOCUS ON INTERDEPENDENCIES AND STRESS
SCENARIO MODELLING DELIVERABLES.
Risk management
«
Key risks for Metalloinvest in 2015
The key corporate risks have had their outcomes mapped
to ensure business continuity through the implementation
of the respective risk management action plans.
Product pricing risksRisk factorsFall in demand, excess supply.
Actions:Long-term technical upgrade with a focus on customers,
sales market diversification, entry into new markets,
monitoring of residual risks from diversification and FX,
potential decline in procurement costs.
Credit risksRisk factorsMacroeconomic factors, delays in the repayment
of loan interest and principal from one of the Group’s
companies.
Actions:Respect of compliance regulations for loan documentation.
Prevention of a breach of financial covenants.
FX riskRisk factorsOil price fluctuations, global political instability, negative
statistics, central bank policies.
Actions:Fixing of the exchange rate in the derivatives market,
rebalancing of cash flows to minimise open positions
in non-base currencies.
Political riskRisk factorsBreach of the Minsk Agreements, conflicts in the Middle
East leading to the Company’s inclusion on sanctions lists,
supply of products to sanctioned persons (including those
added to sanctions lists after the signing of agreements).
Actions:Risk monitoring.
Business continuity plans.
A balanced funding policy with a focus on the Company’s
internal development.
Operational risks (accidents and emergencies, lower output, disruption to production technology)Risk factorsEquipment obsolescence and depreciation, non-
compliance with safety rules, low-quality and/or delayed
repairs.
Actions:Metalloinvest comprehensively assesses how various risk
factors affect production processes and output volumes.
To prevent hazardous situations, Metalloinvest applies
health, safety and environmental measures. In order
to maintain its production equipment in satisfactory
operating condition, Metalloinvest has put in place
a centralised maintenance planning, management
and delivery function, which is linked to the overall technical
upgrade and production safety capex programme.
The Company also insures its production suspension risks
as required by generally accepted industry practices.
The insurance programme covering the Company’s
production assets is administered in co-
operation with A-rated reinsurance companies and a leading
AAA–rated insurance company.
Loss of sales marketsRisk factorsForeign countries introducing restrictions or bans on transit
or import of goods, trade wars.
Actions:Technical upgrade with a focus on customers, sales
market diversification, entry into new markets. Monitoring
of political risks (sanctions), which may have a negative
impact.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 7776
/ CONtENt
Regulatory risksRisk factorsCurrent state of the national economy, human factor,
decision-making errors, lobbying.
Actions:Risk monitoring.
Raw materials and supply procurement risksRisk factorsMacroeconomic factors.
Actions:Long-term fixed-price contracts.
Flexible trade policies, long-term partnerships with key
suppliers.
Metalloinvest develops and implements action plans
focusing on cost-cutting initiatives, technological
improvements and optimisation of product flows,
including through import substitution.
Corporate governance risksRisk factorsOverlapping functions, insufficient competencies,
regulation gaps, high transaction costs.
Actions:Adoption and timely updates of a standard
for organisational set-up. Development of a business
process classifier.
Investment project implementation/ efficiency risksRisk factorsChanges in the market environment during project
implementation, primary planning (design) errors,
ill-judged contractor selection, macroeconomic changes.
Actions:Long-term fixed-price contracts, effective supplier
and contractor selection processes, improvements in internal
acceptance procedures, engagement of internal contractors,
regular monitoring of the projects’ investment indicators.
Improvements in project implementation planning and KPI
assessments.
In addition to the key risks, Metalloinvest pays
significant attention to other corporate risks and risks
of controlled entities and subsidiaries. The company
declares zero tolerance for risks associated with HsE
violations, corruption and employee misconduct.
In 2015, Metalloinvest adopted a comprehensive
Anti-Corruption Policy and, while drafting it, analysed
the risks of non-compliance with international
anti-corruption laws. The Company is now looking
into whether the applicable anti-corruption laws
can be applied and complied with across the Group’s
operations.
During 2015, a special emphasis was placed on building
a risk management culture by:
• understanding the risks and their potential financial
and reputational consequences;
• analysing the current state of the internal control
framework;
• identifying factors that could lead to a risk event;
• developing and implementing appropriate risk
management and (or) mitigation measures;
• regularly reporting on changes in risks and progress
in the implementation of risk management and/or
mitigation measures.
To accurately assess the materiality of risks, develop
response strategies and co-ordinate risk-related actions
across divisions, the Company provides conditions
for risk owners to interact in an effective way. In 2015,
the regularly updated risk database had its popu
lation and administration processes automated,
enabling all Company divisions to access relevant
information in a timely manner. During the year,
the divisions also used the feedback tool to analyse
risk-related incidents, review internal audit reports
and thus assess the adequacy and integrity of risk
management action plans.
In order to raise managerial awareness of the CRMF,
the Company developed with a training course for key
executives to identify critical risks and their impact
on the Company’s operations. From 2016, CRMF training
will become part of a mandatory training programme
for new hires.
In order to share expertise and make the Company’s
views known, at the end of 2015, employees
of Management Company Metalloinvest joined leading
Russian risk management experts to collaborate
in the «Russia» working subgroup, an exercise recently
initiated by the IsO international task force to fully
upgrade IsO 31000 Risk Management standard.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 7978
/ CONtENt
Share capital11
Share capital and investor relations
Company Holding Company Metalloinvest
Authorised capital RUB 3,745,853,000
Number of shares 74,917,060,000 shares
Type of shares Ordinary registered uncertificated shares
Metalloinvest Holding Company is wholly-owned
by UsM Holdings Limited. Alisher Usmanov is UsM’s major
beneficiary (48%), and the other major shareholders
are vladimir skoch (30%) and Farhad Moshiri (10%).
At the end of 2015, there were changes in Holding
Company Metalloinvest’s shareholder structure: 23.6%
of its shares previously owned by UsM Investments Limited
were transferred to UsM Holdings Limited, the parent
company.
In 2015, Metalloinvest Holding Company completed
the spin-off of Baikal Mining Company, which holds
a development licence for the Udokan copper deposit (over
26 million tonnes of copper). Baikal Mining Company’s
shareholders are UsM Metalloinvest (54.25%),
UsM Investments Limited (26.60%),
Lebedinsky GOK (15.96%), and OEMK (3.19%).
Share capital structure as at 31 December 2015
23.60 %
15.96 % 54.25 %
USM Metalloinvest
USM Holdings Limited
Lebedinsky GOK
OEMK
USM Investments Limited
3.19 % 3.0%
11 As at 31 December 2015.
Credit ratings
Co-operation with rating agencies is an integral part
of the Company’s work to increase its investment appeal.
Metalloinvest has received credit ratings from international
rating agencies since July 2010.
In 2015, agencies such as standard & Poor’s, Fitch,
and Moody’s upheld their “BB”/”Ba2” long-term
corporate credit ratings of the Company. standard & Poor’s
was the only one to revise their outlook from stable
to negative due to growing uncertainty as a result
of a slump in iron ore prices, higher country risk,
and limited access of Russian corporations to capital
markets. Amid the fall in steel and ore prices, coupled
with peer rating downgrades, Metalloinvest managed
to maintain its ratings by leveraging its vertically integrated
business model, some of the lowest production costs
12 Dagong Global Credit Rating Co., Ltd. was founded in 1994 and is China’s largest rating agency. It employs around 600 people and has 36 branches, two of which are
located outside of China. Dagong provides information on sovereign and corporate credit risks and is an active contributor to the development of the Asian bond market. At
the start of 2015, the agency confirmed Russia’s sovereign rating at “A” with a stable outlook.
on the market, and adequate liquidity levels.
Metalloinvest is strengthening ties with Chinese partners.
In November 2015, it became the first Russian non-
state-owned company to receive a rating from Dagong12.
China’s Dagong Global Credit Rating Co., Ltd. assigned
the Company long-term local- and foreign currency issuer
default ratings of “BBB+” with a stable outlook. A press
release by Dagong’s credit analysts stated that due
to the Company’s diversified sources of financing, western
sanctions against Russia had not restricted Metalloinvest’s
access to external capital markets. According
to the agency, the Company’s cash generating capabilities
may improve on the back of the gradual recovery
of the rouble, product line optimisation and strict cost
control. Dagong’s conclusion was that multiple financing
sources for debt repayment will allow the Company to meet
its obligations towards its creditors in a timely manner.
Credit rating changes
Fitch Moody’s Standard & Poor’s
B+ / B1
BB– / Ba3
BB / Ba2
BB+ / Ba1
BBB– / Baa3
BBB / Baa2
BBB+ / Baa1
A– / A3
Russia:Metalloinvest:
20152014201320122011
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 8180
/ CONtENt
Debt capital markets
In 2015, Metalloinvest worked to improve its repayment
schedule and optimise its debt portfolio.
Under the March 2015 put option, the Company
repurchased the series 01, 05 and 06 rouble bonds
at 100% of their par value for RUB 25 billion.
In June 2015, Metalloinvest and an international banking
syndicate consisting of societe Generale, sumitomo
Mitsui Banking Corporation Europe Limited, Bank
of Tokyo-Mitsubishi UFJ Ltd., CrÜdit Agricole Corporate
and Investment Bank, UniCredit Bank Austria AG and ING
Bank, a Branch of ING-DiBa AG, signed a credit facility
agreement (ECA) for up to EUR 267 million to finance
foreign equipment purchases for HBI-3 Plant at Lebedinsky
GOK. According to the agreement, the facilities will be
repaid within 10 years following the commissioning
of HBI-3 Plant. Austrian (OeKB) and British (UKEF) export
credit agencies acted as guarantors.
In July 2015, the Company signed an agreement
with Rabobank to extend the maturity schedule
of its UsD 131 million facility from April 2017
to October 2018.
Investor relations
Metalloinvest continuously enhances its public disclosure
and interaction with the investment community in a bid
to comply with international best practices of disclosure.
At present, the Company discloses information on its
financial and operational performance, social and other
activities in a level of detail and within the timeframes
that are common for public companies.
Metalloinvest participates in international conferences
organised by investment banks and arranges investor
events, including non-deal road shows and an annual
Investor Day in Moscow, continuously expanding
its base of existing and potential investors. Many
investors and analysts are invited to visit the Company’s
production assets. In 2015, Metalloinvest took part in nine
domestic and international investment conferences
and forums and held meetings with over 200 investors
and analysts.
Metalloinvest’s corporate communications projects
were recognised by the expert community. In 2015,
the Company’s annual report was victorious
at the American MarCom Awards 2015 and the LACP 2015
spotlight Awards Global Communications Competition,
and its website won gold at the World’s Best Corporate
Websites iNOvA Awards 2015 (UsA). The video for
the Company’s annual report won at the 2015 Moscow
Corporate video Forum.
Useful links:» Investor Calendar:
http://www.metalloinvest.com/en/investors/events-calendar/
» site visits:
http://www.metalloinvest.com/en/investors/site-visits/
» Analyst Coverage:
http://www.metalloinvest.com/en/investors/analyst-coverage/
In 2015, we focused on optimising our debt portfolio
and maintaining sufficient liquidity. We successfully raised
cash on the domestic and international capital markets,
and made improvements to our repayment schedule.
Pavel MitrofanovDeputy CEO, Chief Financial Officer
«
«
2016 transactions
In February 2016, Metalloinvest issued BO-07 series bonds
for a total amount of RUB 5 billion. The bonds have a tenor
of 10 years and a coupon rate of 11.90%,
with a call option available in 7 years.
In March 2016, the Company signed
a UsD 400 million long-term PXF agreement
with a syndicate of international banks
with an option to increase the amount up
to UsD 450 million. As per the agreement, the new PXF
facility is made up of a UsD 150 million 5-year tranche
with a 3-year grace period and a UsD 250 million 7-year
tranche with a 5-year grace period. UniCredit Bank
Austria AG and sberbank of Russia acted as co-ordinators
and mandated lead arrangers of the deal. The money
raised through the facility will be spent on optimising
the Company’s debt repayment schedule.
In March 2016, Metalloinvest issued BO-02 and BO-08
series bonds for a total amount of RUB 15 billion.
The bonds have a tenor of 10 years and a coupon rate
of 10.95%, with a put option available in 5 years.
In the same month, Metalloinvest and an international
banking syndicate comprising Bank of China (Hungary)
Close Ltd., ING Bank N.v., sberbank Europe AG, societe
Generale, UniCredit Bank Austria AG, Deutsche Bank AG
(Amsterdam Branch), Intesa sanpaolo Bank Ireland P.L.C.,
JsC Nordea Bank, Bank of America Merrill Lynch
International Limited, China Construction Bank (Russia)
Limited, Credit suisse AG, sGBT Finance Ireland Limited
and Industrial and Commercial Bank of China (Moscow)
signed a pre-export financing (PXF) facility agreement
for UsD 750 million. Pursuant to the agreement, the PXF
facility is made up of a UsD 600 million 5-year tranche
with a 2-year grace period and a UsD 150 million 7-year
tranche with a 5-year grace period. This money was
spent on partial early repayment of the 2014 PXF facility
in the amount of UsD 515 million, and the rest was used
to increase the Company’s liquidity.
In October 2015, the Company issued BO-01 series bonds
for a total amount of RUB 10 billion. The bonds have
a tenor of 10 years and a coupon rate of 11.85% per annum
for the first 12 coupon periods. A call option is available
in 4 years, and a put option in 6 years. Gazprombank acted
as the arranger and underwriter of the offering.
» For more details on the outstanding bonds,
see the Company’s website:
http://www.metalloinvest.com/en/investors/bonds/
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 8382
5 SUSTAINABLE DEVELOPMENT
2013
RUB
2011
10,000
* the reference point is the date of the first social and economic partnership agreement
Average salary at Metalloinvest’s enterprises
Average salary by region
Increase in social investments for the sustainable develop-ment of local communities
30,000
40,000
27,575
16,978
21,683
32,056
+62%
73%of employees view
the working environment
at Metalloinvest positively
20,000
Metalloinvest utilises cutting-edge production technologies that meet the highest labour and safety standards. It partners with authorities and non-profit organisations to carry out projects aimed at improving living standards and creating favourable social and cultural environments for local communities
2015
%
**Source: 2015 Metalloinvest engagement questionnaire by Hay Group
High level of employee loyalty**
25,088
38,665
+68%
of employees are ready and willing to work at Metalloinvest for the long term (5 years or more)
of employees would recommend Metalloinvest as a good employer
of the employees are proud to work at Metalloinvest
80%
78%
73%
/ CONtENt
Metalloinvest’s strategy 2023 aims to strengthen
the Company’s position as a major and highly efficient
international producer of HBI/DRI and a regional
producer of iron ore and high-quality steel. The
Company also focuses on sustainable development
through accomplishing strategic targets while balancing
the interests of all stakeholders.
The strategy focuses on a strong HR policy, improved
occupational health and safety standards, reduced
environmental impact, and social and economic
development of the local communities.
In 2015, Metalloinvest adopted the Corporate social
Responsibility and Charity Policy, which sets out uniform
CsR principles and approaches, and the stakeholder
Engagement Policy, which guides systematic dialogue
with stakeholders to take into account their interests
that may be affected by the Company’s economic, social
and environmental activities.
sUsTAINABLE DEvELOPMENT
Approach to sustainable development
Metalloinvest’s key CSR principles
Alignment with development strategy: the Company’s CsR initiatives correspond with its
business strategy and are aimed at increasing efficiency
and the long-term sustainability of the business.
Legal compliance: the Company strictly adheres to laws
and regulations, industry and ethical standards,
and contractual and other obligations.
Consistency and continuity: the Company carries out
its CsR initiatives on a consistent and continuing basis
with stakeholder involvement.
Regional approach: charitable and social projects are
implemented primarily in the regions where the Company
operates, contributing to the sustainable development
of Metalloinvest and the regions where it operates.
Targeted approach: the Company’s CsR activities centre
around a targeted approach, which includes efficiency
assessments of implemented projects and programmes.
Transparency: the Company maintains regular
communication with its stakeholders, considering their
interests and expectations in the decision-making process.
» For more details on the Company’s sustainable development
and stakeholder engagement, see the 2015 CSR Report.
Andrey VarichevCEO
» For more details on the principles of responsible business
management, see the Corporate Social Responsibility and Charity
Policy, and the Sustainability section fn the Company’s website:
http://www.metalloinvest.com/en/sustainability/
The key principles of the stakeholder Engagement Policy
are consistent communication, transparency, materiality,
completeness and responsiveness.
The Policy identifies the following key stakeholders
of the Company:
SHAREHOLDERS
CUSTOMERS
SUPPLIERS AND CONTRACTORS, OTHER MARKET PARTICIPANTS
LOCAL COMMUNITIES (LOCAL RESIDENTS, NON-PROFIT ORGANISATIONS, MUNICIPAL BODIES)
AUTHORITIES
INVESTOR COMMUNITY
EMPLOYEES
Holding Company Metalloinvest
» For more details on Metalloinvest’s stakeholder profile,
see the Company’s Corporate Social Responsibility Report
for 2013–2014, section 2.4 Stakeholder Engagement, p. 30
http://www.metalloinvest.com/upload/iblock/c86/metalloinvest_
csr_report_2013_2014_eng.pdf
The Company discloses full and accurate information on its
performance using various forms and methods
of communication and feedback.
Among other sources, Metalloinvest’s sustainable
development activities are reflected in its CsR
reports (published since 2008), which present
data on the Company’s economic, social and environmental
performance. In 2015, the Company adopted an annual cycle
for its non-financial disclosures.
Metalloinvest is a major employer in the regions where it has
operations and views the welfare of its employees and their
families as one of its key strategic priorities, no less important
than meeting production targets.
We have traditionally focused on creating favourable social
and cultural environments, promoting sports and supporting
healthcare and cultural initiatives in the communities where we
operate.
«
«
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 8786
/ CONtENt
Staff structure and headcount
In building its staff management system, Metalloinvest
focuses on business objectives and the sustainable
development of the regions where the Company
operates. Its key assets are located in the Belgorod,
Kursk and Orenburg regions, home to over 98.8% of its
employees.
The Company is proud of its HR achievements:
• the average length of service at Metalloinvest’s operations
is over 10 years;
• around 50% of employees have university or vocational
training degrees;
• the average monthly wage exceeds the regional average
by over 40%.
Headcount by region of operation (people, '000)
2011 2012 2013 2014 2015
BELGOROD REGION ORENBURG REGION KURSK REGION
21.0
15.8
7.5
21.3
15.4
8.4
21.5
14.0
8.4
22.3
11.7
8.6
22.6
10.9
9.0
HR management
Our values
LeadershipWith the second-largest iron ore reserves in the world,
the Company is a global leader in merchant HBI production,
a regional leader in iron ore raw materials, and a leading
producer of high-quality steel products.
ResponsibilityThe Company ensures that it complies with the law
and principles of social and environmental responsibility
in the regions where it operates, as well as maintains
accountability to its shareholders for the achievement of set
targets.
TeamworkThe Company operates as one whole. It welcomes co-
operation and strives to be a reliable business partner;
it also encourages trust, respect and mutual assistance
among its employees and partners.
EfficiencyThe Company sets goals and achieves them.
The unique expertise of Metalloinvest’s employees coupled
with state-of-the-art production technologies and rich resources
are the Company’s most valuable assets. Metalloinvest continues
to implement large-scale programmes aimed at boosting
employees’ professional growth and increasing labour productivity.
Marina NovikovaDeputy CEO for Organisational Development and Human Resources Management
«
«
Average headcount in 2011–2015 (people, ‘000)*
2011 2012 2013 2014 2015
42.542.6 45.1
43.9 44.4
Average salary (RUB ’000)
2011 2012 2013 2014 2015
38.7
35.2
30.6 32.1
27.6
Staff structure by education level, %
2011 2012 2013 2014 2015
SECONDARY HIGHER VOCATIONAL
13
31
26
31
13
30
25
33
15
31
25
28
14
31
25
29
13
29
24
34
BASIC VOCATIONAL SECONDARY VOCATIONAL
Staff structure by age (people, ‘000)Average age of Metalloinvest employees is 40 years old
10.1
24.2
11.0
9.3
23.9
10.29.0
24.5
10.3
2011 2012 2013 2014 2015
30 OR YOUNGER 30–50 50 AND OLDER
9.6
24.0
12.2
9.5
24.2
12.2
* Headcount at Metalloinvest’s key facilities: Lebedinsky GOK, Mikhailovsky GOK, OEMK and Ural Steel.
As at 31 December 2015, the Company’s total headcount stood at ca. 60,000 people.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 8988
/ CONtENt
Incentives and motivation
Compensation package
Metalloinvest’s remuneration system is based
on the performance and personal contribution of each
employee, as well as on the specifics of regional labour
markets.
In order to maintain the level of employee wages,
the Company indexes its staff salaries in accordance
with collective bargaining agreements and the Industry Tariff
Agreement.
Harmonisation of remuneration system
In 2015, the Company took the decision to harmonise its
employee compensation practices to increase the efficiency
of staff management and labour productivity and introduce
unified approaches to and mechanisms of compensation
and incentivisation. In accordance with the project schedule,
a framework to harmonise the remuneration system
was developed over the course of the year, with all
payments and withholdings made consistent and uniform
calculation algorithms designed. This project will continue
into 2016.
» IN 2015, tHE COMPANY SPENt RUB 1,418 MILLION ON SOCIAL SUPPORt FOR ItS EMPLOYEES, tHEIR FAMILIES AND PENSIONERS (FORMER EMPLOYEES)
Benefits
support for the Company’s employees is an important
aspect of Metalloinvest’s social policy. Collective
bargaining agreements are one of the social policy
instruments that form part of a system of social
programmes aimed at creating and maintaining staff
incentives.
The main areas of the Company’s social support activities
are:
• employee healthcare, welfare and recreation;
• employees’ children’s welfare and recreation;
• financial aid for employees and their families;
• support for retired employees, including regular
financial assistance, healthcare and welfare services;
• incentive-based chair (non-production);
• additional paid leave days for family emergencies;
• sporting and cultural events for employees and their
families;
• meals for employees;
• transportation for employees to and from work;
• social discounts (recreation centres, children’s wellness
camps, sports facilities, etc.);
• other social benefits.
In 2015, the Company spent RUB 1,437 million on social
support for its employees, their families and pensioners
(former employees). Additionally the Company spent
RUB 498 million on the development of the social facilities.
IN 2015, METALLOINVEST WAS RANKED 34TH IN THE RUSSIA’S MOST ATTRACTIVE EMPLOYERS
RATING
13 The corporate scholarship programme for MGIMO students was initiated
in September 2012 by Alisher Usmanov, the founder of Metalloinvest
and a MGIMO graduate, and Anatoly Torkunov, MGIMO’s rector and a member
of the Russian Academy of Sciences.
Staff assessment and development
The Company guarantees competitive and safe working
conditions, uses advanced workplace technologies
and has efficient processes for employee recruitment,
adaptation and development.
Staff recruitment and adaptation
Metalloinvest maintains close ties with over 15 local
universities and colleges. In 2015, the Company organised
several programmes for students and graduates
from universities and colleges, including scholarship
programmes for the most promising students
and internship programmes. Twelve students from
the Moscow state Institute of International Relations
(MGIMO) won named scholarships set up by the Company13
.
since 2012, 85 people have completed internships
at the management company, with over 45% still
working at Metalloinvest and making considerable
progress. One of the programme graduates received
the Person of the Year award. In 2015,
over 2,500 thousand students with relevant degrees
completed their engineering and undergraduate training
at Metalloinvest.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 9190
/ CONtENt
Performance assessment
Metalloinvest has been using a KPI system since 2014.
In 2015, the Company broadened its scope to include all
employees starting from department head and above.
A total of 555 employees received individual targets,
380 (around 70%) of whom were employed at Lebedinsky
GOK, Mikhailovsky GOK, OEMK, Ural steel, Ural scrap
Company and Metalloinvestleasing.
In 2015, in order to improve KPI processes, the Company
conducted an audit of individual targets and key KPIs,
which included analysing target-setting methods
and algorithms, as well as their functional alignment
and synergies. At the end of 2015, having improved
its KPI system, Metalloinvest issued new performance
management guidelines updating the previous target
setting, adjustment and assessment procedures.
In 2016, the Company plans to improve the quality
and transparency of existing processes and to start
working towards their automation.
In 2015, the Company continued to build a uniform job
grading framework14 with the project being successfully
implemented at Lebedinsky GOK, OEMK, Ural steel, Ural
scrap Company and the Mining Equipment Repair Factory.
Over the course of the year, the project team described
and assessed 311 separate jobs and 336 job families,
which in total covered 38,000 employees.
Project management centre
The project management centre is a programme run
by the functional department.
It offers four modules for 60 employees in the investment,
economic and production functions. The first
and second modules, which were completed in 2015,
covered the topics of investment project assessment
and large project management systems. The third
and fourth modules are scheduled for 2016 and will
focus on managing the scope, timeline, costs and risks
of projects, procurement management, and project team
building.
Professional growth and development of management competencies
In 2015, Metalloinvest held over 38,700 individual training
courses (19,500 courses for managers and specialists
and 19,200 for workers). Overall, training programmes
covered 59% of employees during the year.
In December 2015, the Company purchased a distance
learning corporate competency development programme,
which will boost knowledge exchange and increase
the number of trainees, while at the same time maintaining
consistent educational standards across all geographies.
In 2015, Metalloinvest approved its corporate university
concept designed to:
• support strategic change;
• develop management potential and professional skills;
• leverage corporate competencies and transform
corporate culture.
The university has management, functional,
and professional departments.
14 A grade groups jobs based on certain criteria (“weight”, classification) in order
to build an incentive system and compare internal job significance with market value.
Talent pool
In January 2015, Metalloinvest introduced a single policy
for talent pool management for all controlled entities
to ensure the availability of the required workforce for
the next one to three years. As at year-end, the Company’s
talent pool included 901 employees, with 196 people being
given reserve jobs.
Professional skills competition
since 2012, Metalloinvest has held professional skills
competitions aimed at improving the image of blue-
collar jobs, identifying the best workers and honing their
professional skills.
In 2015, the competition between all of the Company’s
enterprises entered its fourth year. The number
of competing professions increased to 11
(from 6 in 2012) and included steel, mining
and auxiliary areas.
During the four-year run of the competition,
250 employees of Metalloinvest’s facilities have
taken part, and 33 of them have been victorious.
The total prize fund for the winners amounts to around
RUB 1.5 million.
Employee engagement
In 2015, all of Metalloinvest’s enterprises conducted
a second anonymous engagement survey,
and 25,633 people, or around 60% of employees,
took part in it. The survey demonstrated high
employee loyalty: 80% are ready and willing to work
at Metalloinvest for the long term, 78% would
recommend Metalloinvest as a good employer, and 73%
are proud to work at Metalloinvest. Around 54%
are ready to put in additional effort and take on tasks
outside of their regular duties.
The proportion of efficient employees at Metalloinvest
totalled 47%, which is in line with the global average.
Out of all the operations taking part in the survey,
Mikhailovsky GOK accounted for the largest number
of efficient employees (69%).
The Company’s 2015 survey delivered results
ahead of the industry average. For example, 73%
of employees highly rate the opportunities offered
by the Company to achieve success, which is 8%
higher than the industry level. 76% highlighted regular
and clear feedback from management versus 58%
across the industry.
Based on the questionnaire results, the Company
developed eight corporate projects aimed at increasing
employee engagement and efficiency, which include
Development of a proposals submission system,
Management talent asset, and Adjusting the course.
In addition, each facility and the management company
have their own projects.
In 2017, a third engagement survey will be held
to measure the effectiveness of these initiatives.
EMPLOYEE ENGAGEMENT IS AN INDICATION OF HOW
PROUD EMPLOYEES ARE OF WORKING FOR
THE COMPANY, THEIR WILLINGNESS TO STAY
AND TO RECOMMEND IT TO OTHERS,
AS WELL AS HOW MUCH ExTRA EFFORT EMPLOYEES
ARE WILLING TO PUT IN TO ACHIEVE RESULTS.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 9392
/ CONtENt
In accordance with the applicable Russian law,
the Company has put in place a system to register
production-related accidents, emergencies and incidents.
In 2012, the Company developed a procedure to report all
incidents that cause downtime of more than four hours.
Lost time injury frequency rates (LTIFR)15
2011 2012 2013 2014 2015
OEMK LEBEDINSKY GOK MIKHAILOVSKY GOK URAL STEEL
0.04
0.06
0.20
0.17
0.040.06
0.03
0.070.06
0.05
0.11
0.07
0.04
0.17
0.04
0.10
0.01
0.08 0.08
0.05
15 Calculated as the total number of lost time injuries occurring
per 200,000 man-hours worked.
Metalloinvest works to improve its occupational health
and safety (OHs) system and ensure better working
conditions at its production sites. The key OHs principle
is to ensure proper management of potential risks, towards
zero production-related accidents and incidents, raise
awareness of safety requirements among all employees,
and enforce compliance with such requirements.
The Company has put in place comprehensive programmes
to improve working conditions, which have been
developed based on occupational risk assessments
and applicable collective bargaining agreement
requirements. The individual enterprises are actively
involved in the assessment of working conditions
and implementation of measures designed to reduce
employee exposure to hazards.
In 2015, the Company allocated over
RUB 300 million in targeted funding to OHs programmes,
and spent some RUB 350 million to purchase
personal protective equipment. On top of that, ca.
RUB 600 million was earmarked for comprehensive
occupational safety programmes and action plans,
and over RUB 260 million for fire prevention purposes.
Occupational safety
Occupational safety is our top priority. The Company has
been committing intellectual and financial resources
to develop dedicated technologies, enforce compliance
with safety requirements, and generally improve our
production culture.
Andrey UgarovFirst Deputy CEO, Production Director
«
«
In 2015, there were no fatal injuries.
All incidents were duly investigated to develop a set
of proactive measures and prevent re-occurrence.
For example, the Company is working to improve safety
culture in the workplace, and streamline the methodology
and the tools for line manager production controls.
The Company has also introduced stricter disciplinary
penalties for managers and workers breaching
the applicable OHs requirements.
Programme Implemented in
Food safety and Healthy Eating Principles, an initiative
to coincide with the WHO-sponsored World Health DayGubkin, stary Oskol, Zheleznogorsk and Novotroitsk
Women's Health corporate programme16 Zheleznogorsk
Beat Diabetes, an initiative to coincide with
the WHO-sponsored World Health DayGubkin, stary Oskol, Zheleznogorsk and Novotroitsk
16 Sponsored since 2012 in partnership with the Kursk region’s government,
the Zheleznogorsk municipality, the National Women’s Health Charitable Foundation,
and Blokhin Russian Cancer Research Centre.
Each year, the Company provides its production stuff
with opportunities for OHs, fire prevention and emergency
response training. The training programmes target
managers, specialists and workers, and are implemented
as and when required by the applicable government
regulations.
The Company pays special attention to programmes
focusing on the employees’ health and prevention of acute,
chronic and occupational diseases. In this connection,
the following initiatives are in place:
In 2015, a total of 574 employees became eligible under
the Freedom of Movement initiative to receive medical
treatment at the Gornyatsky and Belogorye Health Resorts.
In 2015, the rate of occupational diseases was down
13% y-o-y.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 9594
/ CONtENt
Environment
Metalloinvest’s environmental management system
is based on the applicable Russian and international
standards. In 2015, the Company successfully passed
compliance audits launched across its operations
to assess the efficiency of the existing environmental
management system and confirm adherence to IsO 14001.
The Company complies with the applicable environmental
laws and is guided by the principles on sustainable
and efficient use of natural resources, and mitigatio
n of the environmental impact. In 2015, the Company
invested around RUB 2.3 billion in environmental
protection schemes and sustainable and efficient use
of natural resources, while its ongoing environmental
expenses exceeded RUB 6 billion.
The Company strives to reduce its negative impact through
numerous environmental programmes. For example, over
the past few years, Metalloinvest has consistently reduced
its air pollutant emissions and wastewater/contaminant
discharge into surface water bodies. In 2015, material
environmental impact mitigation projects included
the upgrade of gas purification systems at electric arc
furnaces #1–4 (unit 2) and the construction of a new
industrial waste storage site at Ural steel.
External social programmes
17 Stary Oskol and Gubkin (Belgorod region), Zheleznogorsk (Kursk region),
Novotroitsk (Orenburg region).
Metalloinvest is mindful of its contribution to sustainable
development, and seeks to constantly expand and improve
programmes focusing on the economic development
of local communities, creation of favourable social
and cultural environments, improvement of living
standards, use of best practices in addressing critical
social issues, and promotion of environmental health.
The Company collaborates with regional governmental
authorities to initiate and implement programmes
with a focus on reform, the development of local
communities’ potential, and improvements in selected
areas of social life. The key objective of making
the mining and steelmaking towns comfortable and more
appealing for young people is set out in the trilateral
social and economic partnership agreements signed
with the municipal and regional authorities17.
In 2015, the Company allocated ca. RUB 1 billion for
charitable initiatives and social investments in local
communities (including ivestments in development
of social facilities). The Company’s charity and social
investment priorities in the regions where it operates
include:
• creation of comfortable social and cultural environments;
• development of education;
• support for arts and culture;
• improvements in the quality of healthcare services;
• promotion of mass and children’s sport;
• aid for socially vulnerable groups of the population;
• contribution to the development of local communities.
As part of its social policy, the Company seeks to ensure
synergies between all available resources, marrying
financial opportunities with management capacities,
professional expertise, and international best practices
in the realm of sustainable development.
ContactsMANAGEMENT COMPANY METALLOINvEsT
28 Rublevskoye shosse, Moscow, 121609, Russia
Tel.: +7 495 981 5555
Fax: +7 495 981 9992
e-mail: [email protected]
www.metalloinvest.com
LEBEDINsKY GOK
Gubkin–11, Belgorod Region, 309191, Russia
Tel.: +7 472 419 4455
Fax: +7 472 417 5523
MIKHAILOvsKY GOK
21 Lenina st., Zheleznogorsk,
Kursk Region, 307170, Russia
Tel.: +7 471 489 4105
Fax: +7 471 489 4260
OEMK
stary Oskol, Belgorod Region, 309515, Russia
Tel.: +7 472 537 2707
Fax: +7 472 532 9429
URAL sTEEL
1 Zavodskaya st., Novotroitsk,
Orenburg Region, 462353, Russia
Tel.: +7 353 766 2153
Fax: +7 353 766 2789
URAL sCRAP COMPANY
Moscow28 Rublevskoye shosse, Moscow, 121609, Russia
Tel.: + 7 495 789 9997; 789 9998
e-mail: [email protected]
www.uralmetcom.ru
Novotroitsk16 Frunze st., Novotroitsk, 462359, Russia
Tel.: +7 353 760 6200
Fax: +7 353 760 6201
METALLOINvEsTLEAsING
28 Rublevskoye shosse, Moscow, 121609, Russia
Tel.: +7 495 981 5555
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 9796