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Irkutsk, Russia – May 28, 2008 – Mechel OAO (NYSE: MTL), one of the leading Russian mining and metals companies, announced that its Bratsk Ferroalloy Plant OOO subsidiary has won the tender to acquire the rights to utilize the subsoil plot on the Uvatsk deposit of quartzite and quartz sandstones.
The tender was announced by the Irkutsk Region Subsoil Use Agency (Irkutsknedra). According to the tender results, determined by the final meeting of the Tender Commission on May 28, 2008, Bratsk Ferroalloy Plant OOO (BFP OOO) was granted the right to use the subsoil plot of the Uvatsk deposit for geological exploration and mining of quartzite and quartz sandstones. BFP OOO submitted in its bid an economically viable, strong technological and environmentally sound solution to develop the Uvatsk deposit.
The deposit is located in the Nizhneudinsk District of the Irkutsk Region, approximately 30 kilometers from the town of Nizhneudinsk, in the interfluvial area between the Kamenka and Uvat rivers. The explored reserves of quartzite in the Uvatsk deposit amount to about 7.0 million tonnes, with previous estimates indicating the potential for about 120.0 million tonnes. Quartzite ore is used to produce ferrosilicon, required in manufacturing metal products.
According to the terms of the tender, in the next few years Mechel is required to build and commission a plant in the deposit area to mine quartzite. The planned capacity of Phase 1 of the plant will be about 400,000 tonnes of ore annually.
“This acquisition is in line with the development of the ferroalloy division of our business and implementation of Mechel’s strategic objective to increase its base of mineral resources. Following the commencement of the Uvatsk deposit development, we will completely cover Bratsk Ferroalloy Plant’s need for high quality quartzite ore. Moreover, the plant’s close proximity to the Uvatsk deposit and the available direct railroad communication significantly increases the entire economic efficiency of the project. Currently, each of Mechel’s ferroalloy subsidiaries has their own raw material bases. The acquisition enables Mechel to decrease its dependence on market fluctuations, provides Mechel with additional competitive advantages, and strengthens its market positions as a whole,” said Mechel Management OOO Chief Executive Officer Vladimir Polin.
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