RASPADSKAYA 
By
Key Highlights:
· In 1H2013 overall raw coal production amounted to ca. 4 million tonnes, 15% higher than in 1H2012.
· In 2Q2013 raw coal production decreased by 25% compared to 1Q2013 mainly due to the temporary suspension of mining works at the Raspadskaya underground mine and the scheduled repositioning of a longwall at the underground mine MUK-96.
· In 1H2013 coal concentrate sales volumes increased by 36% versus 1H2012 and surpassed 2.7 million tonnes. In 2Q2013 coal concentrate sales volumes decreased by 5% only as a result of deliveries from stockpiles.
· The Company has fulfilled all its obligations under existing supply contracts.
· Due to sluggish domestic demand and changes in intragroup shipments to EVRAZ's enterprises, the Company's split of sales shifted in the period, with export share increasing to 40% of the Company's total sales in 1H2013, including supplies to the Ukrainian assets of EVRAZ.
· Given the challenging market environment and as a result of temporary suspension of production at Raspadskaya mine the Company has revised production plans and adjusted its forecast to 8 million tonnes of raw coking coal in 2013.
Operational Review
In 1H2013 coal extraction at the Raspadskaya mine amounted to 1.1 million tonnes including 342 thousand tonnes in 2Q2013. The Raspadskaya mine output in the reporting period was affected by the temporary suspension of the mine operation. On 6 May during the regular check of the coal seam #9 an excessive concentration of carbon monoxide was detected in an isolated area.
In May and June 2013, the Company completed the required actions to rectify the situation, namely:
-chemically inert in-mine atmosphere was created in the mined area of face 4-9-23 by drilling additional wells from the surface and injecting nitrogen gas into the mined area;
-coal pillars left in the mined area of the seam were treated with fire resistant inert foam pumped into the mined space through the wells additionally drilled from the surface;
-follow-up monitoring of the mine's atmosphere was ensured in the isolated segment of the face 4-9-23.
Following the implementation of these measures the Company has resumed its mining operations at Raspadskaya mine on 5 July 2013.
The reduced raw coal production in 2Q2013 due to the suspended operation at the Raspadskaya mine and planned repositioning of a longwall at MUK-96 mine was partially offset by higher output from other operations of the Company.
Raw coal sales volumes significantly grew in 2Q2013 due to increased output at the Raspadskaya-Koksovaya mine following the launch of the new face 0-5-3 in late February 2013. This face has reserves of approximately 1.37 million tonnes of coal with KO grade.
The 36 percent increase in the sales of coal concentrate in 1H2013 compared to the same period of 2012 was largely due to higher export shipments from stockpiles, resulting in export share amounting to approximately 40 percent of the total sales in 1H2013. 70% of export sales were directed to the Asian Pacific region and 30% to Ukraine.
In 2Q2013 the weighted average selling price of the coal concentrate decreased by 12% in rubles and 15% in US dollars compared to 1Q2013. The challenging coal market conditions were the primary reason for the decline of weighted average selling price.
The Company's domestic prices in 1H2013 were at 3,000 rubles per tonne of semi-hard coking coal concentrate (FCA, Mezhdurechensk). In the environment of continuing volatility in the global market, the Company managed to agree domestic shipments for 3Q2013 at a discount of less than 10-15% compared to 1H2013.
The Company continues to set prices for some of its export shipments on the international pricing basis calculated according to the following formula: price of hard grade coking coal concentrate (HCC) FOB Australia ($172/tonne in 2Q2013 and $145/tonne in 3Q2013) less the quality discount for Company's semi-hard coking coal concentrate (SHCC) equaling 10-12%.
Raspadskaya's CEO, Gennady Kozovoy, commented on the results:
«We continue to gradually increase our economically efficient production capacity and investing in the preparation of new faces and open pit operations. While the production at Raspadskaya3
mine was temporarily suspended and the MUK-96 mine underwent the scheduled repositioning of a longwall, we promptly adjusted our plans to increase output at our other operations and revised the stockpiles which helped us confidently meet our contract obligations to all our clients.
However, the global supply surplus and softening domestic demand for coal, as well as the continuing coal price deterioration in all regional markets, especially in China, have prevented us from profitably fulfilling our previously announced production plans.
In light of the above, we have adjusted our production expectations down to 8 million tonnes of raw coal. At the same time, we have taken steps to considerably reduce operating costs and capital expenditure in 2013»
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About the Company
Raspadskaya is a compact integrated coal mining and enrichment complex located in the Kemerovo region of Russia. The company comprises three underground mines, one open-pit operation, a coal preparation plant, as well as a coal transportation network and a number of integrated infrastructure companies. Raspadskaya is a subsidiary of a vertically integrated steel, mining and vanadium company EVRAZ.
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For further information please visit www.raspadskaya.com or contact:
