- Revenue amounted to $4.3 billion
- Consolidated EBITDA amounted to $781 million
- Net income attributable to shareholders of Mechel OAO amounted to $121 million

Moscow, Russia – October 5, 2010 – Mechel OAO (NYSE: MTL), a leading Russian mining and steel group, today announced financial results for the 2010 first half ended June 30, 2010.

Mechel’s CEO Yevgeny Mikhel commented on the first half of 2010 results: “First half of the year was the period of hard and intense work for us. As a result we succeeded in resolving a number of challenging tasks. To be more specific, we restored coal production volumes to pre-crisis levels, brought down costs in the mining segment to their normalized levels, strengthened the position of the steel segment through new acquisitions and launch of new equipment at the existing steel plants and continued geographic expansion of our distribution network. At the same time we continued with our Capex program and streamlining of the Group’s management structure.

During the reported half-year period pricing environment on our main markets has been rather favorable, which allowed us to improve the company’s operational and financial results considerably”.

Consolidated Results For the First Half of 2010

⁽¹⁾ See Attachment A.

⁽²⁾ Starting from 2010 Mechel changed the method of EBITDA calculation. Here we give the EBITDA cleaned of effects of CVR change, forex gain/(loss) and interest income.

The net revenue in the first half of 2010 increased by 76.1% and amounted to $4.3 billion compared to $2.5 billion in the first half of 2009. The operating income rose by 1 455.9% and amounted to $555.1 million or 12.82% of the net revenue, compared to the operating loss of $40.9 million or -1.66% of the net revenue in the first half of 2009.

For the first half of 2010, Mechel reported the consolidated net income attributable to shareholders of Mechel OAO increased by 125.6% to $120.8 million compared to the consolidated net loss attributable to shareholders of Mechel OAO of $471.4 million in the first half of 2009.

The consolidated EBITDA in the first half of 2010 increased by 377.0% to $781.0 million, compared to $163.8 million in the first half of 2009. Depreciation, depletion and amortization in the first half of 2010 for the Company were $240.6 million, an increase of 39.6% compared to $172.3 million in the first half of 2009.

Mining Segment Results For the First Half of 2010

⁽¹⁾ In the second quarter of 2010, the Group’s management made a decision to transfer the Group’s coke producing facilities Moskoks and Mechel-Coke to the Mining segment. In prior periods, they were included in the Steel segment. The comparative data for the six months ended June 30, 2009 was restated accordingly to account for the coke producing facilities in the Mining segment.

⁽²⁾ See Attachment A.

⁽³⁾ Starting from 2010 Mechel changed the method of EBITDA calculation. Here we give the EBITDA cleaned of effects of CVR change, forex gain/(loss) and interest income.

⁽⁴⁾ EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Mining Segment Output For the First Half of 2010 ⁽¹⁾

⁽¹⁾ In 1Q 2010 Mechel implemented a new reporting way for coal products output volumes based on the international standards. The data provided includes output volumes of coal products supplied to the market (saleable products).

⁽²⁾ Data includes output volumes of various types of anthracite and PCI.

⁽³⁾ Some of the steam coals mined are counted as PCI and included into the “Various types of coal for steel production” line.

⁽⁴⁾ Starting from the second quarter we include coke production data to Mining Segment operational results because of transfer of coke production facilities from the Steel segment to the Mining one.

Mining segment’s revenue from external customers for the first half of 2010 totaled $1.3 billion, or 29.7% of the consolidated net revenue, an increase of 77.9% over net segment’s revenue from external customers of $723.4 million, or 29.4% of the consolidated net revenue in the first half of 2009.

The operating income in the mining segment in the first half of 2010 increased by 609.7% to $468.7 million, or 28.01% of total segment’s revenue, compared to the operating income of $66.0 million, or 7.5% of total segment revenue for the first half of 2009. The EBITDA in the mining segment in the first half of 2010 went up by 262.4% and amounted to $586.2 million compared to segment’s EBITDA of $161.8 million in the first half of 2009. The EBITDA margin for the mining segment in the first half of 2010 was 35.03% compared to 18.30% in the first half of 2009. Depreciation, depletion and amortization in the mining segment amounted to $141.5 million that is 56.9% higher than $90.2 million in the first half of 2009.

Chief Executive Officer of Mechel Mining Management Company Boris Nikishichev commented on the mining segment’s results: “Targeted increase in production volumes and prices growth in the first half of 2010 coupled with our efforts to produce higher value-added types of coals, such as anthracites and PCI, used in steel production, eventually crystallized in the positive dynamics of the mining segment’s financial performance.

In the first quarter we were actively accelerating coal production by intensifying stripping works and equipment reparation. Consequently in the second quarter we achieved 2008 production volumes. Beginning from there group’s monthly production volumes were continuously exceeding pre-crisis levels. Simultaneously we managed to decrease production costs to their normalized levels.

We continue with the implementation of our key investment projects. Elga Coal Deposit development and construction of Ulak-Elga railway track remain the priority project in the mining segment. By the end of the year we intend to begin mining first volumes of coal there. We also continue construction of the second stage of Sibirginsk mine of Southern Kuzbass Coal Company, upon completion of which the mine’s production volumes should reach 2.4 mln tones per annum.

Current price trends for our mining products allow us to anticipate continued strong operating performance of the segment through the remainder of this year”.

Steel Segment Results For the First Half of 2010

⁽¹⁾ In the second quarter of 2010, the Group’s management made a decision to transfer the Group’s coke producing facilities Moskoks and Mechel-Coke to the Mining segment. In prior periods, they were included in the Steel segment. The comparative data for the six months ended June 30, 2009 was restated accordingly to account for the coke producing facilities in the Mining segment.

⁽²⁾ See Attachment A.

⁽³⁾ Starting from 2010 Mechel changed the method of EBITDA calculation. Here we give the EBITDA cleaned of effects of CVR change, forex gain/(loss) and interest income.

⁽⁴⁾ EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Steel Segment Output For the First Half of 2010

Mechel’s steel segment revenue from external customers in the first half of 2010 amounted to $2.5 billion, or 57.3% of the consolidated net revenue, an increase of 84.1% over the net segment’s revenue from external customers of $1.3 billion, or 54.8% of consolidated net revenue, in the first half of 2009.

In the first half of 2010 the steel segment’s operating income increased by 171.2% and totaled $101.8 million, or 3.93% of total segment’s revenue, versus the operating loss of $142.8 million, or -10.05% of total segment’s revenue, in the first half of 2009. The EBITDA in the steel segment in the first half of 2010 increased by 353.5% and amounted to $165.9 million, compared to the negative EBITDA of $65.5 million in the first half of 2009. The EBITDA margin of the steel segment was 6.40% for the first half of 2010, versus the EBITDA negative margin of 4.60% for the first half of 2009. Depreciation, depletion and amortization in steel segment rose by 12.0% from $52.3 million in the first half of 2009 to $58.6 million in the similar period of 2010.

Commenting on the results of the steel segment Andrey Deineko, Chief Executive Officer of Mechel-Steel Management Company, noted: “Positive price trends that we have witnessed from the beginning of the year allowed us to demonstrate steady growth of financial indicators in the first half of the year. We continued to operate our plants at full capacity and at the same time to improve the product mix – throughout the year we have been gradually increasing production of high value-added products. As a result the average monthly volume of hardware production reached record high levels, which we had never achieved before.

We continue to focus on modernization of our steel assets. Stable operations of our plants and favorable market conditions in the first half of the year allowed us to go ahead with our renewed investment program. Among the latest achievements in this field we should mention the commissioning out-of-furnace steel processing machines and slab concaster #2 in July of this year as part of the reconstruction of the arc-furnace smelting shop #6 of Chelyabinsk Metallurgical Plant. It will allow us to increase plant’s annual output of continuously-cast slabs to 1.2 million tones. In September a new electric steelmaking complex with annual slab production capacity of 300,000 tonnes was commissioned at Izhstal OAO instead of the open-hearth workshop put out of operation in April 2009.

Throughout the year we continued to strengthen the steel division not only through modernization of the existing plants but also through acquisition of new production and trading facilities. Only in 1H 2010 our distribution company “Mechel Service Global” added three new countries to the area of its market presence, acquiring metal service centres and opening trading offices. At the same time Mechel Service - being Russia’s biggest steel distribution company – is reaping additional benefits from cooperation with other steel mills through adding their products to its assortment. Thus, we are constantly enlarging the range of high value-added products we offer to our broad customer base and reinforcing our presence in strategically important regions.

Before the end of the year we might see some weakening of demand for steel products due to seasonality and other factors. However, based on Mechel’s diversified product portfolio, strong positions on the distribution market as well as limited scale of price correction we anticipate stable results for the segment overall for the year

Ferroalloys Segment Results For the First Half of 2010

⁽¹⁾ In the second quarter of 2010, the Group’s management made a decision to transfer the Group’s coke producing facilities Moskoks and Mechel-Coke to the Mining segment. In prior periods, they were included in the Steel segment. The comparative data for the six months ended June 30, 2009 was restated accordingly to account for the coke producing facilities in the Mining segment.

⁽²⁾ See Attachment A.

⁽³⁾ Starting from 2010 Mechel changed the method of EBITDA calculation. Here we give the EBITDA cleaned of effects of CVR change, forex gain/(loss) and interest income.

⁽⁴⁾ EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Ferroalloys Segment Output For the First Half of 2010

Ferroalloy segment’s revenue from external customers in the first half of 2010 amounted to $227.5 million, or 5.3% of the consolidated net revenue, an increase of 73.7% compared with segment revenue from external customers of $131.0 million or 5.3% of the consolidated net revenue in the first half of 2009.

In the first half of 2010 the operating income in the ferroalloy segment totaled $4.7 million, or 1.55% of total segment’s revenue, versus operating loss of $30.3 million, or -20.17% of total segment’s revenue in the first half of 2009. The EBITDA in the ferroalloy segment in the first half of 2010 increased by 857.5% and amounted $40.0 million, compared to segment’s EBITDA loss of $5.3 million in the first half of 2009. The EBITDA margin of the ferroalloy segment comprised 13.13% in the first half of 2010 compared to the EBITDA negative margin of 3.51% in the first half of 2009. Ferroalloy segment’s depreciation, depletion and amortization in the first half of 2010 was $32.6 million, an increase of 49.5% over $21.8 million in the first half of 2009.

Gennadiy Ovchinnikov, Chief Executive Officer of Mechel Ferroalloys Management Company, said: “We saw significant improvement of market conditions for our ferroalloy products in the first half of 2010. Combined with sales volumes growth, including our intersegment sales, it allowed us to substantially enhance revenue and to attain operating profit for the period.

However there were some factors which had a negative impact on the results of the ferroalloys segment. In particular raw materials and electricity price growth in the second quarter of this year led to an increase in ferronickel and ferrochrome production costs, although the ferrosilicon production costs on the contrary decreased. In response to the market conditions we reduced the share of 75% ferrosilicon and increased production of 65% ferrosilicon in our sales, which requires less electricity for production.

Difficult mining and geological conditions at Voskhod chromites mine resulted in decrease of chromites ore production and hence reduction of ferrochrome output at Tikhvin Ferroalloy Plant. However, by now we have already reached a new mining layer and are planning to increase ore production in the fourth quarter accordingly.

Overall, we consider the segment’s results for the period to be fairly good. We expect rather favorable market conditions for ferroalloys in the near future and anticipate improvement of the segment’s financial performance for the remainder of the year.”

Power Segment Results for the First Half of 2010

⁽¹⁾ In the second quarter of 2010, the Group’s management made a decision to transfer the Group’s coke producing facilities Moskoks and Mechel-Coke to the Mining segment. In prior periods, they were included in the Steel segment. The comparative data for the six months ended June 30, 2009 was restated accordingly to account for the coke producing facilities in the Mining segment.

⁽²⁾ See Attachment A.

⁽³⁾ Starting from 2010 Mechel changed the method of EBITDA calculation. Here we give the EBITDA cleaned of effects of CVR change, forex gain/(loss) and interest income.

⁽⁴⁾ EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Power Segment Output For the First Half of 2010

Mechel’s power segment revenue from external customers in the first half of 2010 comprised $333.2 million, or 7.7% of consolidated net revenue, an increase of 29.9% compared with the segment’s revenue from external customers of $265.5 million or 10.4% of consolidated net revenue in the first half of 2009.

The operating income in the power segment in the first half of 2010 amounted to $16.9 million, or 3.12% of the total segment’s revenue in the same period, an increase of 37.1% compared to the operating income of $12.3 million, or 3.12% of the total segment’s revenue in the first half of 2009. The EBITDA in the power segment in the first half of 2010 went up by 36.7% totaling $25.8 million, compared to the EBITDA of $18.9 million in the first half of 2009. The EBITDA margin for the power segment amounted to 4.76% compared to 4.78% in the first half of 2009. Depreciation, depletion and amortization in power segment in the first half of 2010 decreased by 0.3% comparing with the same period in 2009 from $7.98 million to $7.95 million.

Viktor Gvozdev, Chief Executive Officer of Mechel Energo, noted: “The power segment demonstrated steady results in the first half of 2010. Softening of financial results in the second quarter was caused by seasonal reduction of heat energy sales after the end of the heating period. During the summer we carried out all the necessary procurement and maintenance works as part of preparation for the winter heating season. We are constantly working on cost optimization – in the second quarter we managed to cut costs of power generation by 8% by using cheaper coal types in our generation. Power generation volume has substantially increased compared to the same period a year ago. Beginning from January 2011, Russian power market will become fully liberalized which will stimulate further economic growth of Mechel’s power segment.”

Recent Highlights

- In July 2010 Mechel announced that visit of Russian Prime Minister Vladimir Putin at Chelyabinsk Metallurgical Plant (CMP), where he launched a high quality and stainless steel production complex in the arc-furnace melting shop #6. Commissioning of the new complex would result in improvement of casted steel quality, boost in annual output of slabs from 600 thousand tonnes to 1.2 million tonnes, significant product range expansion and decrease in consumption of raw materials and power. Investments in the project totaled 3.6 billion rubles.

- In August 2010 Mechel announced signing a cooperation agreement with JSC Federal Grid Company of Unified Energy System (FGC UES) and JSC RusHydro (RusHydro), which regulates the parties’ cooperation while implementing investment projects related to construction of Nizhne-Bureisk hydro power plant (HPP) and Elga coal mining complex. According to this agreement RusHydro will construct Nizhne-Bureisk HPP as well as develop power generation schemes. Mechel OAO will commission power receivers for Elga coal mining complex. FGC UES in its turn will construct external power supply facilities of Elga coal mining complex as well as provide power schemes of Nizhne-Bureisk HPP.

- In September 2010 Mechel announced work suspension at New-Olzherasskaya Underground mine, which produces steam coal and coal grades for PCI, a part of Southern Kuzbass OAO, due to coal self-heating in the long wall face No. 21-1-7. Mining operations are currently suspended. Southern Kuzbass OAO experts developed measures to prevent possible negative consequences of this accident. The production area is temporally isolated. At the present moment the self-heating center is being isolated. The entire mine infrastructure is in working condition and safe. According to the preliminary estimates normalization of underground mine work may take up to 6 months.

- In September 2010 Mechel announced placing its interest-bearing commercial papers of the 13 and 14 series at MICEX Stock Exchange ZAO by public subscription through collection of offers for fixed-price purchase of commercial papers and coupon rate for the first coupon period. The circulation period of commercial papers of the 13 and 14 series is 10 years, a 5-year put option is provided in reference of each series. The total nominal value of the placed bonds is 10 billion roubles. The nominal value of the papers is 1000 roubles each. The 1st coupon rate is 10.0% per year. Commercial papers of 13 and 14 series are included to MICEX quotation list A1.

- In September 2010 Mechel announced that the Russian Prime Minister Vladimir Putin commissioned a new electric steelmaking complex at Izhstal OAO, that consists of electric arc furnace with a capacity of 40 tonnes and continuous slab caster. The facility will have an annual slab production capability of more than 300,000 tonnes. Project investments have totaled 5.8bn rubles ($195.6m).

- In September 2010 Mechel raised the US$2bln pre-export facility for refinancing Mechel Group’s remaining debt obligations. The new facility is split between the borrowers in mining, steel and ferroalloy divisions of Mechel Group and is drawn in two tranches, a 3-year and a 5-year one. Repayment will be done by monthly installments after 9 and 15 months grace periods respectively.

- In September 2010 Mechel announced it has signed a loan agreement to finance a universal rolling mill installation project at its Chelyabinsk Metallurgical Plant OAO (CMP OAO) subsidiary. The new $471.2 million consists of three tranches. The disbursement period under all three tranches is 30 months starting from the date of signing of the credit facility agreement. The repayment will be done by equal semi-annual installments starting at the end of the disbursement period spreading over 6 years for the first tranche and 7.5 years for the second and the third tranches. The purpose of the facility is to finance payments under two contracts: the equipment and technology supply contract signed with Danieli & C. Officine Meccaniche S.p.A. and the general construction contract with MinMetals Engineering Co., Ltd.

Yevgeny Mikhel concluded: “Good operational and financial results that we demonstrated in first half of 2010 prove that we have chosen the right way to meet the challenges of economic crisis. The company’s business segments are working at high levels of capacity utilization, generating operating profit and demonstrating sound financial position, which allows the company to successfully attract financing for its strategically important investment projects. Achievements and success of the first half of the year provided for a reliable base for company’s further development, launch of new capacities, expansion of sales network, improvement of financial performance and increase of the company’s shareholder value.”

Financial Position

Capital expenditure on property, plant and equipment and acquisition of mineral licenses for the first half of 2010 amounted to $508.2 million, of which $298.9 million was invested in the mining segment, $168.4 million was invested in the steel segment, $37.5 million was invested in the ferroalloy segment and $3.3 million was invested in the power segment.

In the first half of 2010, Mechel spent $19.3 million on acquisitions, including $17.6 million spent on acquisition of minority interest in our subsidiaries.

As of June 30, 2010 total debt was at $6.6 billion. Cash and cash equivalents amounted to $273.7 million at the end of the first half of 2010 and net debt amounted to $6.3 billion (net debt is defined as total debt outstanding less cash and cash equivalents).

The management of Mechel will host a conference call today at 10:00 a.m. New York time (3:00 p.m. London time, 6:00 p.m. Moscow time) to review Mechel’s financial results and comment on current operations. The call may be accessed via the Internet at https://www.mechel.com, under the Investor Relations section.