Key highlights of the transaction include the following:
   ·  Indirect ownership of MMK in a large Russian producer of coal and coal concentrates “Belon” increased to 41.3% for a consideration of USD230.4 m
   · Strategic investment advances MMK’s long-term raw materials security for its steel production
   · The move secures supplies of coal concentrates to MMK  
   · The planned investment will result in Belon’s coal production capacity increasing almost three-fold to 14.4 m tonnes pa by 2012
   · The transaction will secure 55% of MMK’s requirement of coking coal, and 60% of steam  coal, by 2012

   Victor Rashnikov, Chairman of the MMK Board of Directors,  said: “This transaction represents a major strategic step for MMK towards our declared goal of securing supplies of essential raw materials. This acquisition gives MMK an opportunity to share in Belon’s profitability and the development of its coal interests, which will meet a sizeable part of our raw material requirement. Strengthening our strategic partnership with Belon will provide us with additional advantages in terms of our competitive ability.”

   Structure of the Transaction

   MMK acquired a 50% interest in Onarbay Enterprises Ltd., the 82.6% owner of Belon Coal Company (“Belon”), Russia. The share package was purchased from Sapwood Investments for USD 230.4 m. This investment  provides MMK with an important  source of coal supplies for steel production, raising fuel self-sufficiency in line with its long-term strategy.
   As part of a REPO transaction in October of 2007, Sapwood Investments exercised its right of a 10.75% share repurchase of Belon shares from MMK contributing this package to the equity of Onarbay Enterprises Ltd, and thus making it an owner of 82.6% of Belon’s shares.

About MMK
The Magnitogorsk Iron and Steel Works OJSC (MMK) ranks 20th among the world's largest steel producers (according to IISI) and is one of the leaders of Russia's steel industry (according to Chermet data). The Company is a large steel producing complex encompassing the entire production chain, from preparation of iron ore to downstream processing of rolled steel.  MMK turns out a broad range of steel products with a predominant share of value added goods. In 2007 the Company produced 13.2 m tonnes of crude steel, and 12.2 m tonnes of commercial products.

About Belon
The Belon Group is a  rapidly developing coal and coal concentrate producer and one of major Russian steel traders. In 2007 the company produced 4.655 m tonnes of coal, including 2.003 m tonnes of coking coal. Belon’s 2006 IAS proceeds stood at USD 396 m, with the net profit at USD 46 m.  The company is currently undergoing a massive investment programme, valued at about USD 500 m, through to 2012 to drive production efficiency and increase market share. The programme forecasts an increase in annual production capacity of up to 10.8 m tonnes of coal, 10 million tonnes  of coal concentrate, including up to 5.1 million tonnes of coking coal concentrate.