On 24 June 2008 the new crushed granite plant of OJSC Granit-Kuznechnoye (a company of LSR Group) has been formally put into operation in the Zabolotnoye area of the Gavrilovo deposit in the Vyborgsky district, Leningrad region. For the first time in over more than fifty years of its history, the company has started production of crushed granite in this area. Investment in the project including plant supply, infrastructure work and equipment purchase totalled over US$ 12 million.

The opening ceremony of the plant was attended by Ivan Khabarov, Chairman of the Legislative Assembly of the Leningrad Region, Igor Levit, CEO of LSR Group, Georgy Vedernikov, Managing Director of LSR Group, and Vassily Kostritsa, CEO of OJSC Granit-Kuznechnoye and others.

The new Granit-Kuznechnoye production facility, the fifth of its kind, is part of the strategy of LSR Group to expand into new territories and strengthen its market positions. The plant, with a capacity over 600,000 cub.m, will meet the growing demand for crushed stone* this year due to increased construction activity including infrastructure projects, and will increase the company's market share, which as of the end of 2007 was 33%, according to the Reshenie consulting and research company.

The new production facility features state-of-the-art equipment and is one of the most advanced in the industry with its equipment supplied by world leaders such as Telsmith, Volvo, Metso Minerals and Atlas Copco. OJSC Granit-Kuznechnoye plans to produce around 5 million cub.m of crushed granite already this year benefiting, inter alia, from the commissioning of the new plant. At the planned levels of production the proved reserves of the new Gavrilovo deposit will be sufficient for 20 years.

The first shipments of crushed granite were made by the new plant already in early May during the trial operation of the equipment. Currently the output is nearing its designed capacity of over 600,000 cub.m of crushed granite per year. Provided there is sustainable demand in the future, it is planned to double the capacity by optimizing existing operations and launching new plants, increasing the supplies of crushed granite to the market of Moscow and the Moscow region.

Commenting on the announcement, Vassily Kostritsa, CEO of OJSC Granit-Kuznechnoye, said:

"Today OJSC Granit-Kuznechnoye is one of the most dynamically developing companies in Northwest Russia: on average, every two or three years we put into service new production facilities, helping us to consolidate our leading positions in the growing markets of Northwest Russia (St. Petersburg and the Leningrad region) and Central Russia (Moscow). Already the demand for the crushed stone supplied by the new Vyborgsky plant during its trial has strongly confirmed the need of the market for this new plant's production."

The opening of a new plant has made it possible to create over 150 jobs for the residents of the Leningrad region. As a result of future expansion the number of employees is planned to reach 200 people. The average monthly wages at the Vyborgsky branch are RUB 33,000.

Another benefit of the new plant is the nearly 100 percent utilization of raw materials. The production process is based on environmentally friendly technologies, with full recycling of waste materials. Consultant studies showed that the quality of crushed rock from the deposit met the highest requirements on physical properties and therefore, the products of the new plant can be used for all types of construction including residential construction. Moreover, the new plant has an advantageous location in the Vyborgsky district helping to establish an efficient logistics system providing for crushed granite delivery by both rail and motor transport as well as for direct delivery to construction sites in the northern districts of St. Petersburg.

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*In 2007, according to the Reshenie consulting and research company, the crushed stone market in St. Petersburg and the Leningrad Region was 10.45 million cub.m (OJSC Granit-Kuznechnoye alone produced more than 4million cub.m), the preliminary forecast for 2008 is 11.050 million cub.m.

Notes to Editors:

OJSC Granit-Kuznechnoye is the largest crushed granite producer in Northwest Russia. The company exploits three deposits in the Priozyorsky district, Leningrad region. Crushed granite is produced by four plants including two foreign-made plants.  The aggregated volume of proved reserves in the deposits operated by OJSC Granit-Kuznechnoye is over 360 million cub.m. In 2007, the company sold 4.275 million cub.m of crushed stone. The key markets are the Northwest and Central regions of Russia.