russia metals and mining weekly[1]

Russia & CIS Metals and Mining Weekly © 2010 by Interfax Ltd. 2, Pervaya Tverskaya-Yamskaya, Moscow, Russia Tel: 250-98-40, fax: 250-97-27, e-mail: [email protected] Internet: www.interfax.com

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ISSN 1072-2645 February 19 – February 25, 2010 Vol. XX, Issue 7 (926)

CONTENTS

PRECIOUS METALS

NONFERROUS METALS

FERROUS METALS

FERROUS ORES

PIPE

GEMSTONES

AUCTIONS & TENDERS

LAWS & REGULATIONS

STATISTICS

METAL COMMODITY PRICES

CURRENCY RATES

ANALYTICAL REPORTS

RUSAL cuts aluminum output 11% in 2009, expects 3% rise in 2010 UC RUSAL reduced aluminum production 11% to 3.946 million tonnes in 2009 and alumina and bauxite output 36% and 41%, respectively, but expects production to grow this year as markets recover, the Russian aluminum giant said this week. RUSAL said aluminum output fell in 2009 in part due to the temporary suspension of the least cost-efficient smelters. Production was also cut at rela-tively high cost alumina facilities, mainly abroad, where RUSAL also suspended some of its operations.

Alrosa to become OJSC soon – property agency The Russian Federal Property Agency (Rosimuschestvo) said this week that Alrosa, Russia's Yakutia-based dia-mond monopoly, will become an open joint-stock com-pany (OJSC) before long. The agency said it is still honor-ing an amicable agreement with Yakutia's government re-garding disputed assets that are on Alrosa's books, and that one of the agreement's conditions was that Alrosa, which is currently a closed joint-stock company (CJSC), become an OJSC, saying the situation where the federal govern-ment owns shares in a CJSC was not acceptable.

TMK subsidiary to expand presence in U.S. shale gas project TMK IPSCO, a member of Russia's TMK, one of the world's top-three oil and gas industry pipe producers, is set to expand its presence in the Marcellus Shale gas project in the United States. TMK IPSCO said in a statement that it would launch a new ULTRA Premium Connections Production Facility, capacity 100,000 tonnes of threaded pipe per year, in the Marcellus Shale Region in the second quarter of 2010. It has signed a lease on a building in Brookfield, Ohio where it will install new equipment which will further expand the threading capacity of its ULTRA Premium Connections product line.

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Russia & CIS Metals and Mining Weekly, February 19 – February 25, 2010 2

CONTENTS

PRECIOUS METALS 4 Polymetal adds 337,000 oz gold to Omolon portfolio 4 Highland Gold acquires gold section in Khabarovsk Territory for 3.25 mln rubles 5 Severstal ups stake in Crew Gold to 26.6% 5

NONFERROUS METALS 7 RUSAL cuts aluminum output 11% in 2009, expects 3% rise in 2010 7 RUSAL-Bratsk rethinks placement of 60 bln rubles in bonds 8 Guinea, RUSAL forming commission to foster cooperation 8 Ufaleynickel signs $122 mln in nickel contracts with Alpicom 9 Kazakhstan to launch 300 bln tenge worth of metal projects in 2010 9 Negative reaction from Zambia could present risk to ENRC transaction - analysts 10

FERROUS METALS 11 Investment in Russian steel industry could top 100 bln rubles in 2010 11 S&P Downgrades Evraz L-T Rtg To 'B'; Outlook Stable 11 Fitch maintains Evraz on Rating Watch Negative 12 Severstal places 15 bln rubles in commercial paper 13 Severstal could have to pay $160 mln for 20% of Lucchini - analysts 13 Severstal resumes U.S. enterprise-modernization projects 14 NLMK taking bids for 10 bln rubles in commercial paper, guidance 8.25%-8.75% 14 ArcelorMittal Temirtau could boost steel output 20% in 2010 15

FERROUS ORES 16 VTB gives 125.6 bln rubles in loans under state guarantees 16

PIPE 17 TMK subsidiary to expand presence in U.S. shale gas project 17 CHTPZ Group boosts pipe sales 41% in Jan on better markets, pipeline contracts 18

GEMSTONES 19 Alrosa to become OJSC soon – property agency 19 Alrosa sells $550 mln in rough diamonds to India in 2009, to up supply in 2010 20

AUCTIONS & TENDERS 21 Polyus Gold wins Irkutsk placer licenses at auction 21 Kazakhmys announces tender for drilling, exploration operations at Nurkazgan deposit 21

LAWS & REGULATIONS 22 Oman not to impose restrictive sanctions on Ukrainian steel products 22

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STATISTICS 23 Russian international reserves up $0.9 bln in week 23 Gold in CB reserves up 0.5% in Jan 23 Tajikistan cuts aluminum production 4% in Jan 23 Armenia slashes cut diamond exports 70% in 2009 24

METAL COMMODITY PRICES 25 Trading on Moscow exchanges 25

CURRENCY RATES 26 Official exchange rates for CIS and Baltic nations as of 25.02.2010 26

ANALYTICAL REPORTS 27 In-depth analysis on Russian markets and industries 27

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PRECIOUS METALS

Polymetal adds 337,000 oz gold to Omolon portfolio MOSCOW. (Interfax) - Polymetal has completed a preliminary audit of reserves at its Tsokol gold-silver deposit in the Magadan region to JORC standards, the Russian gold and silver miner said in a statement.

The deposit contains a resource of 1.3 million tonnes containing 337,000 oz Au metal graded at 8.1 g/t and 552,000 oz Ag metal graded at 13.3 g/t, a significant portion of which is near surface ore.

The Tsokol zone was first discovered in 1984. From 1987 to 1992 the project was considered to be a portion of the Kubaka deposit and prospecting was incorporated in the same exploration program. Tsokol was part of the Kubaka package acquired from Kinross Gold Corporation in 2008.

"The Tsokol resource is an excellent addition to the portfolio of high-grade open-pit properties surrounding our Omolon processing hub," said Vitaly Nesis, CEO of Polymetal. "Tsokol is par-ticularly attractive as it is located within direct eyesight from the Kubaka plant and can be brought into production easily and cheaply," Nesis said.

Polymetal plans to complete a feasibility study for the Omolon hub in Q3 2011.

Resource estimate for Tsokol: Tonnes (Mt) Au grade, g/t Au metal, Koz Ag grade, g/t Ag metal, Koz Measured 0,45 9,6 140 15,5 226 Indicated 0,59 6,4 122 10,9 207 Measured and Indicated 1,05 7,8 262 12,9 434 Inferred 0,25 9,3 75 14,8 118 Total 1,30 8,1 337 13,3 552

Resource estimate by mining type: Tonnes (Mt) Au grade, g/t Au metal, Koz Ag grade, g/t Ag metal, Koz Open pit 1,07 7,3 249 12,4 424 Underground pit 0,23 11,8 88 17,2 128 Total 1,30 8,1 337 13,3 552

Russia's Federal Antimonopoly Service (FAS) recently cleared Polymetal to merge two subsidi-aries, CJSC Ayaks and CJSC Silver of Magadan, in the Magadan region, where the company has a number of small to medium size high-grade deposits.

The company has said its development strategy involves setting up a number of regional proc-essing hubs.

Polymetal has said that the rationale to create these hubs is to overcome high capital expendi-ture, a lack of skilled labor and infrastructure restrictions to create single processing facilities with multiple feed sources. The hubs would achieve significant capex savings and would enable the company to leverage regional synergies.

The Omolon Regional Hub will include the Lunnoye and Dukat silver mines, operated by Silver of Magadan; Goltsevoye, operated by Ayaks, which Polymetal bought from Ovoca Gold last

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year for $11 million cash plus 7.5 million shares; and the Birkachan, Oroch, Sopka Kvartsevaya and Dalnyi deposits.

The rationale behind the creation of the Omolon hub is to create an 850 Ktpa CIP plant and 2Mpta heap leach facility. The hub is intended to achieve synergies with Dukat operations in terms of human resources, supply chain and contractors, Polymetal has said.

Highland Gold acquires gold section in Khabarovsk Territory for 3.25 mln rubles MOSCOW. (Interfax) - Highland Gold, a gold producer in Russia, has acquired the license to explore and develop the Blagodatnoye gold-bearing section in the Khabarovsk Territory for 3.25 million rubles, the company said in a statement.

Forecast resources at the section, which went up for auction on February 19, come to five tonnes of gold (161,000 ounces), with average gold content at 1.5-2 grams per tonne. "Earlier data from exploration operations already shows potential for increasing the section's mineral resources," the statement said.

The section is located near the company's fields Mnogovershinnoye and Belaya Gora.

Highland intends to focus on developing its current assets in the Khabarovsk Territory. It was earlier reported that the company plans to sell its fields Dvoinoye and Vodorazdelnoye in Chu-kotka. This transaction could go through in April.

In 2009, Highland Gold increased gold output by 2.7% to 163,208 ounces. For 2010, the com-pany plans to produce 200,000-210,000 ounces of precious metals factoring in the start of gold production at the Novoshirokinskoye and Belaya Gora fields.

Severstal ups stake in Crew Gold to 26.6% MOSCOW. (Interfax) - Severstal has bought another 6.8% of Crew Gold to increase its stake in the company, which is domiciled in the UK but trades on the Toronto and Oslo stock exchanges and mines gold in Guinea, to 26.59%, Crew Gold said.

Severstal paid NOK1.1 per share or a total of NOK160 million ($27 million) for 145.3 million shares and plans to offer to buy shareholders out for the same price, the statement said. Details about the offer will be released in the next two weeks. Severstal will have to pay around $290 million to buy the remaining 73.4% of Crew Gold if all shareholders take the offer up.

The Russian steel producer's Bluecone subsidiary said early February that it had bought just un-der 336 million ordinary shares of 15.7% of the company for $51 million to increase its stake to 19.79%.

Severstal's upstream division Severstal Resource told Interfax at the time that it considered the transaction to be an "interesting investment," but it did not say what its plans were for the com-pany, which produced around 179,000 oz of gold at the Lefa deposit in Guinea last year.

Bluecone said it might reduce or increase its stake in Crew Gold, depending on prevailing mar-ket conditions and the miner's performance.

Severstal has assets in Russia, North America, Europe and Ukraine. The main beneficiary is the general director, Alexei Mordashov, with more than 82% of shares. About 18% are in free float.

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Severstal Resource controls Severstal's iron ore, coal and gold mining assets.

It is thought Severstal may float up to 50% of the shares in its gold mining segment this year. Analysts have estimated an IPO for 50% of the shares could raise $1.1 billion-$1.4 billion and that the segment is worth $2 billion-$3 billion in total.

Severstal said before its gold segment was formed that it would, in time, look at various options for developing this segment, including an IPO, spin-off or sale to a strategic investor.

The segment includes existing mines Aprelkovo (TransBaikal territory), Neryungri-Metallik (Yakutia), Suzdal, Zherek and Balazhal (Kazakhstan) and several greenfield projects in the same regions and the Irkutsk region. Severstal also owns 50.1% of Canada's High River Gold Mines, which owns Buryatzoloto, which is licensed to develop the Zun Holba and Irokinda vein gold deposits and Tsipikan placer in Buryatia, the Novofirsov property in the Altai territory and the Prognoz silver deposit in Yakutia.

The gold segment produced 368,000 oz of gold in January-September 2009.

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NONFERROUS METALS

RUSAL cuts aluminum output 11% in 2009, expects 3% rise in 2010 MOSCOW. (Interfax) - UC RUSAL reduced aluminum production 11% to 3.946 million tonnes and alumina and bauxite output 36% and 41%, respectively, in 2009, but expects production to grow this year as the markets recover, the Russian aluminum giant said in a statement.

RUSAL said aluminum output fell in 2009 in part due to the temporary suspension of the least cost-efficient smelters, the Novokuznetsk, Bogoslovsk and Urals aluminum smelters in Russia and the Zaporozhye smelter in Ukraine.

Output at RUSAL smelters, '000 tonnes: 2009 2008 Change, % Bratsk 986 1 002 -2% Krasnoyarsk 952 1 000 -5% Sayanogorsk 530 537 -1% Novokuznetsk 230 320 -28% Irkutsk 349 358 -2% Khakas 297 297 0% Bogoslovsk 117 186 -37% Volgograd 145 166 -12% Urals 82 134 -39% Nadvoitsy 57 81 -30% Kandalaksha 56 75 -26% Volkhov 12 24 -49%

Total attributable alumina output for UC RUSAL amounted to 7.279 million tonnes in 2009, a decline of 36% as compared to 2008. Production was cut at relatively high cost alumina facili-ties, such as Aughinish (Ireland) and the Zaporozhye Alumina Refinery (ZALK, Ukraine). Pro-duction was temporarily suspended at Eurallumina (Italy), Windalco (Jamaica) and Alpart (Jamaica).

Due to weakened demand, the company's overall bauxite production was reduced by 41% to 11.3 million tonnes in 2009 as compared to 2008.

"The past year tested the resilience of the aluminium industry and forced every company to re-spond to the downturn. RUSAL acted decisively to address the consequences of the global eco-nomic downturn and enhanced its long term competitiveness through its cost-cutting pro-gramme, successful restructuring of its debt and its share listing on the Hong Kong and NYSE Euronext Paris stock exchanges. We have laid a solid foundation for the further sustainable de-velopment of our business," said Oleg Deripaska, CEO of RUSAL.

"We are seeing the first signs of a recovery in demand, as more countries emerge from reces-sion, reflected in an increasing number of orders from our clients in Europe and the U.S. as well as continued economic growth in Asia which encourages our optimism about prospects for the

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aluminum industry. We believe that the stabilization that is now being seen will lead to con-sumption growth exceeding the pace of production increases," Deripaska said.

RUSAL will continue implementing its core investment project - the construction of the Bogu-chanskaya Hydro Power Plant. The Company is also actively seeking project financing to revive the construction of the Taishet and Boguchansky Aluminium Smelters.

RUSAL said a number of experts are forecasting that 2010 will see considerable growth of the aluminum market generated by rising demand from the automotive and packaging sectors. As-suming the gradual restoration of the market in 2010, RUSAL plans to increase production of aluminum by 3% in 2010, compared to 2009. The increase is expected to include an increase in production at the Siberian plants, Alscon (Nigeria), KUBAL (Sweden) and potline 5 at the Irkutsk Aluminium Smelter (IrkAZ) in Russia reaching its full production capacity.

On the basis of the same assumption, RUSAL expects to increase alumina output by 7% in 2010 compared to 2009, by stabilization of alumina production at the Achinsk Alumina Refinery and Bogoslovsk and Urals Aluminium Smelters as well as restoring production at the Boksitogorsk Alumina Refinery in Russia and Aughinish Alumina Refinery in Ireland.

RUSAL-Bratsk rethinks placement of 60 bln rubles in bonds MOSCOW. (Interfax) - OJSC RUSAL Bratsk, which is a subsidiary of UC RUSAL, has de-cided against placing six bond issues worth a combined 60 billion rubles, which were registered a year ago, the company said in a statement.

"The company no longer needs to use this financial instrument," a company representative said.

RUSAL-Bratsk registered six bond issues each worth 10 billion rubles on February 19, 2009. The issues received the following state registration numbers: 4-01-20075-F, 4-02-20075-F, 4-03-20075-F, 4-04-20075-F, 4-05-20075-F and 4-06-20075-F. The first and second series were to be placed for five years, third and forth - seven years and fifth and sixth series - 10 years.

It was announced a year ago that the bonds were being issued in order to solve the company's heavy debt burden.

Guinea, RUSAL forming commission to foster cooperation MOSCOW. (Interfax) - The government of Guinea and United Company RUSAL (UC RUSAL) will form a commission to foster long-term cooperation before March 1, the company said in a press release.

"The decision to establish this commission was reached during negotiations between the Gui-nean Government and RUSAL. Guinean Prime Minister Jean-Marie Dore and RUSAL's Head of Alumina Division Pavel Ovchinnikov took part in the negotiations. The parties confirmed their strategic partnership and underscored the need to continue the cooperation between RU-SAL and Guinea," the press release says.

RUSAL, the world's biggest aluminum producer, owns the ACG/Friguia complex and man-ages Societe des Bauxites de Kindia in Guinea. The Friguia complex has capacity to produce

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1.9 million tonnes of bauxite a year. The two operations supply 63% of the bauxite that RUSAL consumes.

It was reported earlier that the new government of Guinea believes the privatization of Friguia was illegal. It commissioned an independent appraisal that found economic damages totaled $860 million.

In April 2009 Guinean President Moussa Camara ordered the Justice Ministry to open a case against RUSAL's purchase of Friguia in 2006. Camara said RUSAL paid $19 million for Friguia, although the complex had been independently valued at $257 million.

In September 2009 lower court in Conakry invalidated the transfer of shares in the Friguia com-plex to RUSAL. Camara's advisor Momo Sacko later told Bloomberg that Guinea might seek a new partner for the project.

RUSAL appealed that ruling and is simultaneously seeking international arbitration in Paris, as the privatization agreement concluded in 2006 is regulated by French law.

Ufaleynickel signs $122 mln in nickel contracts with Alpicom CHELYABINSK. (Interfax) - OJSC Ufaleynickel, a nickel and cobalt producer that is part of the Industrial Metallurgical Holding (IMH), has signed supply contracts worth $122 million with Switzerland's Alpicom S.A. for delivery in the next 12 months.

Ufaleynickel said in official materials that it had signed one deal worth $57.07 million on De-cember 31, 2009 to ship 2,500-3,500 metric tonnes during 2010 and a deal worth $63.6 million on January 18 to ship another 2,500-3,500 metric tonnes between January 2010 and January 2011.

The company idled its five furnaces when the crisis hit in October 2008. Two of the furnaces went back into operation in February 2009, one in the summer and one on February 12 this year.

Ufaleynickel, which produces nickel and cobalt, has the capacity to produce 14,000-15,000 ton-nes of nickel per year, but the plant was not producing more than 300 tonnes per month in the first quarter of 2009.

IMH controls metallurgical, coke and coal enterprises in Russia and Slovenia. They include coke producer Koks, Ufaleynickel, Tulachermet, metals companies Polema and Tulachermet-Vanadii in the Tula region, Rezhnikel in the Sverdlovsk region.

Kazakhstan to launch 300 bln tenge worth of metal projects in 2010 ALMATY. (Interfax) - The Kazakh Ministry of Industry and Trade has pledged to commission 23 metal projects costing a total of 300 billion tenge by the end of 2010.

"The largest projects are Vasilkov Mining-Processing Complex and the second production line of the Pavlodar electrolysis plant, followed by the production of steel radiators and aluminum rod," Kazakh Minister of Industry and Trade Aset Isekeshev told the Cabinet on February 23.

"Each project is being implemented according to an individual schedule. All of them are in pro-gress," he said.

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Negative reaction from Zambia could present risk to ENRC transaction - analysts ALMATY. (Interfax) - A possible negative reaction on the part of Zambia's authorities could present a risk for Kazakh company ENRC's purchase of the Zambian copper and cobalt pro-ducer Chambishi Metals PLC and its trading company, analysts at Troika Dialog Kazakhstan said.

"A possible negative reaction from the Zambian authorities could be a risk for this plan. It is possible that they will not be pleased by the plans to redirect Chambishi Metals towards refine-ment of imported materials," the analysts said in a note.

"The economic feasibility of this transaction is entirely credible. It remains to be seen how ef-fective the co-operation of the two assets will be. We believe that the market will react to this news positively," analysts said.

The note said that ENRC would have the opportunity to refine a large amount of its own cobalt concentrate, which is currently sold to other companies for secondary processing.

Chambishi Metals' production capacity is located along the border between Zambia and Congo near to cooper and cobalt fields owned by ENRC.

ENRC is acquiring a 90% stake in the Zambian copper and cobalt producers Chambishi Metals PLC and a 100% stake in its marketing and trading company Comit Resources FZE, which is located in Dubai.

Until the end of 2011, the company intends to invest an additional $80 million in Chambishi Metals in order to increase copper output from 25,000 tonnes to 55,000 tonnes a year. The in-crease in Chambishi Metals' capacity will allow ENRC to save on investment in future devel-opment of its copper smelting capacity in the Congo while also speeding up a general boost it overall output.

ENRC was created in late 2006 as a result of reorganization of Eurasian Industrial Association and now also includes the assets of Kazchrome, Aluminum of Kazakhstan, Kazakhstan Elec-trolysis Plant, Sokolov-Sarbai Mining and Processing Integrated Works, Zhairem Mining and Processing Integrated Works, Eurasian Energy Corporation, ENRC Logistics and ENRC Mar-keting & Sales. The company has owned a controlling stake in Russia's Serov Ferroalloy Plant and its affiliates since April 2008. It also owns 50% of a joint venture to mine iron ore in Brazil with Bahia Minerals BV and 50% of China's Xinjiang Tuoli Taihang Ferroalloy Company.

In November 2009, ENRC completed its purchase of Britain's Central African Mining & Explo-ration (CAMEC). ENRC now owns 91.65% in CAMEC. The transaction came to $955 million.

Patokh Chodiev, Alijan Ibragimov and Alexander Mashkevich are the main beneficiaries in ENRC.

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FERROUS METALS

Investment in Russian steel industry could top 100 bln rubles in 2010 MOSCOW. (Interfax) - Investment in Russia's iron and steel industry this year will be lower than in 2009, but will exceed 100 billion rubles, a Russian Industry and Trade Ministry official said at the CIS Metals summit in Moscow.

The sector received 150 billion rubles investment in 2009, up from 200 billion rubles in 2008, said Alexei Pinchuk, deputy head of the ministry's Base Sectors Department.

S&P Downgrades Evraz L-T Rtg To 'B'; Outlook Stable LONDON. (Interfax) - Standard & Poor's Ratings Services has lowered its long-term corporate credit, bank loan, and senior unsecured debt ratings on Russia-based international steel producer Evraz Group S.A. and subsidiary LLC Sibmetinvest to 'B' from 'B+', the rating agency said in a press release on Feburary 18. At the same time, the Russia national scale rating on Evraz was lowered to 'ruA-' from 'ruA'. In addition, we removed all ratings from CreditWatch, where they were placed with negative implications on Sept. 9, 2009. The outlook is stable.

"The downgrade reflects our view that Evraz faces a period of weak operating results for the next couple of years due to the sharp downturn in the steel industry," said Standard & Poor's credit analyst Alex Herbert. "Together with limited cash flow generation and a legacy of sub-stantial debt from previous acquisitions, we foresee leverage remaining high. Although we be-lieve that the group's operating performance will gradually improve from a low level, in our credit scenario we do not envisage credit metrics being consistent with the previous 'B+' rating, including a ratio of funds from operations (FFO) to adjusted debt of about 15%."

In our view, Evraz' profits and cash flows should slowly recover with a gradual improvement in steel market conditions. However, the global economy has not yet established a sustainable path to growth, which leads to our cautious view of future steel volumes and prices," the press re-lease says.

Downward pressure on the ratings will likely occur if the group faces challenges in refinancing its short-term debt or if headroom under financial covenants becomes tight. Downward pressure would also occur if S&P were to consider the group unable to achieve satisfactory credit metrics in 2010, including a ratio of FFO to adjusted debt of about 10%. Negative free operating cash flow could also put downward pressure on the ratings.

Upward rating potential could occur if Evraz were able to address its liquidity and covenant pressures and show a sustainable improvement in credit metrics. S&P believes that such an im-provement would be driven by a stronger operating environment, together with further correc-tive actions by management.

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Fitch maintains Evraz on Rating Watch Negative MOSCOW. (Interfax) - Fitch Ratings has maintained the Long-term Issuer Default Rating (IDR) and senior unsecured ratings of Russia-based Evraz Group SA (Evraz), which are 'B+' re-spectively, on Rating Watch Negative (RWN), the agency said in a press release.

The international integrated steel producer's Short-term IDR is affirmed at 'B'. The Recovery Rating for the senior unsecured debt is 'RR4'.

The maintenance of the RWN reflects continuing uncertainty regarding the company's ability to secure the necessary funding to refinance debt maturing in 2010 and 2011. Debt maturities are estimated at $1.9bn both in 2010 and 2011 compared with $746m of cash and equivalents and $1.1bn of undrawn committed revolving facilities as at end-FY09. Based on a conservative base case forecast, Fitch expects Evraz to report negative free cash flow (FCF) of $200-250m for FY10. Assuming maintenance of a minimum operational cash balance of $150-200m, Fitch es-timates a potential funding gap of up $500m in 2010 and a gap of up to $2bn in 2011.

Evraz has provided Fitch with a refinancing timetable which includes a combination of domes-tic bank facilities, rouble and foreign bond issues. Completion of this programme, primarily tar-geted for issuance in H1 2010, would largely address the agency's concerns regarding Evraz's liquidity in 2010/11. While the company has demonstrated good access to bank and debt capital markets during 2009 - raising over $2.5bn in new facilities and extending a further $1bn of bank lines - significant execution risks remain in respect of its 2010 programme.

Fitch notes that in Q409 Evraz received consent from a syndicate of bank lenders and Eurobond investors to various covenant waivers and the agency now views Evraz's covenant headroom as adequate.

Evraz benefited from improving steel demand in H209 which resulted in an increase of steel shipments to 7.8mt from 6.8mt in H109 (a 15% increase). Fitch expects Evraz's FY09 revenues to be $9.4-9.5bn (FY08: $20.4bn) and EBITDAR of $1.2-1.3bn (FY08: 5.9bn). Whilst the com-pany's CIS facilities have operated close to full capacity utilization in recent months, profitabil-ity and cash flow levels at the company's North American assets remain weak despite increasing capacity utilizations rates. Fitch expects consolidated cash flow from operations (CFO) of $250-300m in 2009 (FY08: $4.6bn) and capex of $500m (FY08: $1.1bn), implying negative free cash flow of almost $250m (FY08: $2.1bn).

Fitch's base case for 2010 incorporates a conservative 6% assumed growth in revenues based on flat average steel product prices. Production at CIS facilities is anticipated to decline slightly with weaker exports due to a potentially stronger average rouble rate and growing competition. Overseas production is expected to grow by around 10-11% in 2010, albeit from a low run-rate in 2009. Fitch estimates Evraz's 2010 revenues and EBITDAR at respectively $9.5-10.5bn and $1.5-1.8bn.

Fitch currently expects to resolve the RWN over the next three months. Over this period Fitch will assess the trend in the company's operational performance and progress with its debt refi-nancing plans.

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Severstal places 15 bln rubles in commercial paper MOSCOW. (Interfax) - Severstal on February 19 placed 15 billion rubles in commercial paper in the form of exchange bonds, the MICEX Stock exchange said in a statement.

Severstal said on February 17, when the bid book closed, that the first coupon on 10 billion ru-bles in exchange bond series BO-2 and 5 billion rubles in series BO-04 yielded 9.75% p.a.

The price range had been lowered to 9.75%-10% from 10%-10.5% because the issue had been oversubscribed.

Severstal opened the bid book for its BO-02 and BO-04 exchange-bond series totaling 15 billion rubles on February 10. Raiffeisenbank and Citibank are the placement organizers.

Severstal said the proceeds from the placement would be used to optimize the loan portfolio and refinance short-term debt.

MICEX gave Severstal the go-ahead at the end of August last year to place 45 billion rubles in exchange bonds.

Series BO-01 will total 15 billion rubles, BO-02 and BO-03 will be 10 billion rubles each, and BO-04 and BO-05 will be 5 billion rubles each. The notes will all mature in three years and have par value of 1,000 rubles each.

In September, Severstal placed the first issue of exchange bonds totaling 15 billion rubles with a first-coupon rate of 14% pa. The three-year bonds carry a 2-year offer. The company told Inter-fax that the proceeds would be used for general corporate funding and refinancing.

Severstal redeemed its debut issue of conventional ruble bonds worth 3 billion rubles in June 2007. It currently has Eurobonds worth $1.25 billion and maturing in July 2013 and Eurobonds worth $375 million maturing in April 2014 outstanding.

Severstal has assets in Russia, North America, Europe and Ukraine. The main beneficiary is the general director, Alexei Mordashov, with more than 82% of shares. About 18% are in free float.

Severstal could have to pay $160 mln for 20% of Lucchini - analysts MOSCOW. (Interfax) - Severstal could have to pay $160 million to honor a put option to buy the remaining 20% of Lucchini if it does not manage to sell its 80% of the Italian steel company by April, UralSib said in an analytical note, quoting unnamed sources.

UralSib's sources said six companies were interested in taking Lucchini off Severstal's hands. They include ArcelorMittal, Baosteel, Tata Steel and a number of funds.

The option lapses if Severstal manages to sell the 80% by the end of April.

The analyst say Severstal will have difficulty paying the $160 million that the 20% is worth, and that the Lucchini family does not intend to waive the option.

Severstal declined to comment.

The Russian company said at the beginning of February that it was not ruling out the sale of some of its interest in Lucchini to a strategic investor.

Lucchini generated around 15% of the Severstal group's sales revenue in 2008.

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However the Italian plant has suffered from the drop in demand for steel product caused by the global crisis. Its revenue plummeted to $1.2 billion in 9M 2009 from $3.3 billion in the same period of last year, and its profit margin from 13% to negative 17%. By comparison, Severstal's Russia-based operations had a profit margin of 18% and its North American division had almost 19% in the 9M of 2009.

Severstal resumes U.S. enterprise-modernization projects NEW YORK. (Interfax) - Severstal North America, the Severstal North American division, has resumed projects involving the modernization of its facilities in Dearborn, MI and Columbus, MS, the company said on February 25.

The company expects to wrap these projects up in H2 2011 and 2012 depending on when the building of the corresponding subdivisions begins.

These modernization projects were suspended in the wake of an unprecedented Q4 2008 col-lapse in demand and price for steel.

NLMK taking bids for 10 bln rubles in commercial paper, guidance 8.25%-8.75% MOSCOW. (Interfax) - Novolipetsk Steel (NLMK) opened the bid book for 10 billion rubles in commercial paper in the form of exchange bonds series Bo-06 at 11:00 a.m. on February 25.

The book closes at 3:00 p.m. Moscow time on March 4 and the bonds could be placed on the MICEX Stock Exchange on March 9, the Russian steel major said in a statement.

Troika Dialog and Gazprombank are organizing the offering. Their representatives told Interfax that guidance on the first coupon was 8.25%-8.75% p.a. The three-year bonds do not carry a put option.

NLMK's board of directors in September last year approved plans to place up to 50 billion ru-bles in seven issues of three-year bonds by public subscription. Series 1-4 will be 5 billion ru-bles each and series 5-7 will be 10 billion rubles each.

NLMK places series Bo-05 worth 10 billion rubles at 10.75% at the beginning of November, and series Bo-01, worth 5 billion rubles, at 9.75% in December.

The NLMK group includes the core production facility Novolipetsk Steel, Denmark's DanSteel A/S, iron ore producer Stoilensky Mining and Processing, coke producer Altai-Koks, trans-former steel producer VIZ-Stal and steel mini-mill developer Maxi Group.

Vladimir Lisin's Fletcher Group Holdings and LKB-Invest controls 84.6% in NLMK while the company's management holds 2.5%.

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ArcelorMittal Temirtau could boost steel output 20% in 2010 ASTANA. (Interfax) - ArcelorMittal Temirtau could boost steel output 20% output in 2010.

"I think if the mill operates without interruptions, we will produce 20% more steel than in 2009. This is an increase of 3.6 million tonnes from 2009," the company's general director Frank Pan-nier said at a press conference.

"I view the year of 2010 with cautious optimism," he added. Pannier said output in the first two months of 2010 was already 20% higher than in the same period of last year. The steel market looks like it is stabilizing and sales are going much better than at the end of 2008 and in 2009, he said.

Prices, too, are rising but they are still low, at roughly their 2007 level, so profit margins are not as high as they were in 2008, Pannier said.

Pannier also said capex at ArcelorMittal Temirtau is set to rise to $400 million in 2010, from $300 million last year. The company will finance a number of upgrades, including the expan-sion of the Atasu mine in the Karaganda region, the upgrading of the coal preparation plants in Karaganda and Temirtau, and safety improvement at the mines of Karaganda.

ArcelorMittal Temirtau (formerly Ispat Karmet), the largest steel plant in Kazakhstan, is part of Arcelor Mittal, the world's largest steel company. The group acquired the Kazakh plant in mid 1990s and turned it into a fully integrated metal combine, with early production reaching 5.5 million tonnes. The company owns 15 coalmines and iron ore mines.

ArcelorMittal Temirtau said in October 2008 that it planned to build a new plant in Temirtau, capacity 4 million tpa of steel and costing $7 billion. The company later decided to delay the project due to the global financial crisis.

Pannier said the absence of resources was one factor holding the project back. He said Arcelor-Mittal Temirtau had now begun talks with the national mining holding, Tau-Ken Samruk, re-garding the search for mineral deposits to feed the new steel mill, but that he could not go into more detail on confidentiality grounds.

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FERROUS ORES

VTB gives 125.6 bln rubles in loans under state guarantees MOSCOW. (Interfax) - VTB has provided over 125.6 billion rubles in loans under state guaran-tees, the bank said in a Feburary 18 statement.

The funds were allocated under a state guarantees, worth over 66.8 billion rubles, from the sec-ond half of 2009 to the start of 2010 for 26 clients.

Under state guarantees, VTB provided loans to OJSC Mikhailovsky GOK (MGOK) worth 6.56 billion rubles, Lebedinsky GOK - 7.2 billion rubles, Oskol Electrometallurgical Works - 9.8 bil-lion rubles, OJSC Ural Steel - 4.6 billion rubles, OJSC Motorostroitel - 4.38 billion rubles, OJSC Scientific-Production Union Saturn - 4.3 billion rubles and 2.5 billion rubles, OJSC V.V. Chernyshev MMP - 3.7 billion rubles and CJSC Inteco - 1.5 billion rubles.

In the formation of state guarantees for enterprises in the defense, aerospace, machine-building and automotive industries, the press release said.

State guarantees help cover 50% of the main debt from loans. For military-industrial enterprises the coverage is higher at 70% of total debt.

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17


PIPE

TMK subsidiary to expand presence in U.S. shale gas project MOSCOW. (Interfax) - TMK IPSCO, a member of Russia's TMK, one of the world's top-three oil and gas industry pipe producers, is set to expand its presence in the Marcellus Shale gas pro-ject in the United States.

TMK Ipsco said in a statement that it would launch a new ULTRA Premium Connections Pro-duction Facility, capacity 100,000 tonnes of threaded pipe per year, in the Marcellus Shale Re-gion in the second quarter of 2010. It has signed a lease on a building in Brookfield, Ohio where it will install new equipment which will further expand the threading capacity of its ULTRA Premium Connections product line.

"The new facility will be capable of manufacturing both premium connections and API connec-tions and will support TMK IPSCO's growing market share in the Marcellus Shale gas plays, where ULTRA has been one of the first manufacturers to make premium connection sales," the statement said.

The Brookfield site is approximately 40 miles northwest of TMK IPSCO's existing steel mill in Koppel, Pennsylvania.

"As a company, we go where our customers need us and the Brookfield, Ohio facility is in di-rect response to the growing need for infrastructure within the Marcellus Shale and for full ser-vice premium and API threading field service and threaded accessories to be located in close proximity to our customers' well-sites," said Vicki Avril, TMK IPSCO's President and CEO said.

"TMK IPSCO has seen remarkable growth in its ULTRA Premium Connection product line and has become one of the largest manufacturers of premium connections in North America. As a Company, TMK IPSCO has made a commitment to grow with its customer base. The Brook-field, Ohio facility is one more step in that growth. Our investment is not only in new facilities and expanded capacity, it is also in new and innovative products. Each shale play we enter is unique in its requirements, and, with the opening of the new Brookfield facility, TMK IPSCO will introduce new products that are specifically designed for the drilling activity taking place within the Marcellus Shale," said Scott Barnes, Vice President and Chief Commercial Officer.

TMK IPSCO is a leading producer of energy tubulars. It operates one steel mill and nine pipe mills and product finishing facilities in seven states across the United States. TMK IPSCO's pipe mills produce a wide range of seamless and welded energy tubular products including oil and gas well casing and tubing, line pipe, drill pipe, standard pipe and hollow structural sections.

TMK IPSCO also manufactures premium connections for oil and natural gas drilling and pro-duction under the ULTRA brand name.

TMK reduced overall pipe sales 13% in 2009 to 2.8 million tonnes. TMK supplies to companies in more than 65 countries. TMK production facilities are located in Russia, the United States, Romania and Kazakhstan.

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CHTPZ Group boosts pipe sales 41% in Jan on better markets, pipeline contracts YEKATERINBURG. (Interfax) - The ChTPZ Group saw pipe shipments soar 40.9% year-on-year in January to 95,800 tonnes as the market for oil and gas pipeline tubes picked up.

The group's Chelyabinsk Pipe Rolling Plant (ChTPZ) sold 52,700 tonnes of pipes, up 24% year-on-year, and its Pervouralsk Novotrubny Pipe Works (PNTZ) from the Sverdlovsk region sold 43,000 tonnes, up 69%.

The Group shipped a first 13,600 tonnes of pipes for Transneft's Baltic Pipeline System-2 and Eastern Siberia-Pacific Ocean-2 (ESPO-2) projects in January.

Pipe shipments plummeted 23% in 2009 to 1.131 million tonnes, although ChTPZ has said it expects sales, which started to pick up considerably in December, to go on rising this year as it meets major orders for pipeline tubes and puts new capacity on line.

Alexander Fyodorov, general director of CJSC ChTPZ Group, told Interfax late in January that the group's pipe division aimed to boost output by 200,000 tonnes or 18% this year.

"This is what we're planning, but we'll only really be able to see what sort of situation we have at the end of the year," he said, adding that he expected the "implementation of new projects" to spur growth.

Fyodorov told reporters after a meeting with the Chelyabinsk region's governor, Pyotr Sumin, this week that the Chelyabinsk works planned to commission a new division to produce up to 600,000 tonnes of straight-seam large diameter pipes in the middle of July. It will have two pro-duction lines - one for 18-meter pipes with walls up to 38 millimeters thick and the other for 12-meter pipes with wall thickness up to 48 mm.

The Pervouralsk works should commission an electric smelting complex in the fourth quarter of 2010. Work on the smelting shop, which will be capable of producing 950,000 tonnes of feed-stock per year - 650,000 tonnes of it for PNTZ and the rest for the Chelyabinsk mill - began in 2007.

Fyodorov said the cost of each of the projects was approximately EUR 500 million.

ChTPZ Group unites companies specializing in the ferrous metallurgy sector. It consists of the Chelyabinsk and Pervouralsk pipe mills as well as ChTPZ-Meta, a company specializing in scrap metal collection and processing; metal trading company Uraltrubostal Trading House; and oil industry services provider Rimera. Arkley Capital S.a r.l., Luxembourg, manages ChTPZ Group's assets.

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GEMSTONES

Alrosa to become OJSC soon – property agency MOSCOW. (Interfax) - Alrosa, Russia's Yakutia-based diamond monopoly, will become an open joint-stock company (OJSC) before long, Yury Medvedev, deputy chairman of the Russian Federal Property Agency (Rosimuschestvo), said in the State Duma.

Medvedev said the agency was still honoring an amicable agreement with Yakutia's government regarding disputed assets that are on Alrosa's books, and that one of the agreement's conditions was that Alrosa, which is currently a closed joint-stock company (CJSC), become an OJSC.

He said the situation where the federal government owns shares in a CJSC was not acceptable.

Rosimuschestvo and Yakutia do not currently share an understanding on this issue, Medvedev said.

But "conciliatory measures will be taken in the very near future, and the company will become an OJSC," he said.

The Russian Federal Property Agency received a controlling stake in Alrosa when the diamond miner was "federalized". The agency holds 50.9256%, Yakutia's Property Relations Ministry owns 32.0002%, eight districts of Yakutia own 8.0003% and individuals and corporate bodies own the remaining 9.0739%.

Alrosa has not yet commented on February 24's remarks by the property agency official. But the company's representatives have said on several occasions that they think turning the company into an OJSC would make sense. The executive board discussed the issue in December 2009 and concluded that going public would make the company more attractive to investors and help it to ease its debt, for example.

A source at Alrosa told Interfax early December that the governments of Russia and Yakutia had formed a working group to draft the paperwork needed to reorganize the company.

But there are legal impediments, experts have pointed out. Yakutia's parliament passed a law back in 2005 that says it is in the republic's state interests to preserve Alrosa's status as a CJSC. The law pre-dates the amicable agreement, which endorsed the equity distribution between the Yakut and federal governments, but it is technically still in force and would have to be amended in order for the company to become an OJSC.

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Alrosa sells $550 mln in rough diamonds to India in 2009, to up supply in 2010 MOSCOW. (Interfax) - Russian diamond miner Alrosa sold $550 million in rough diamonds to India last year and has committed to larger direct rough diamond supply to the Indian market as part of a wider effort by the Indian industry to ensure direct rough diamond supplies from pro-ducing countries, the International Diamond Exchange (IDEX Online) said, quoting an Alrosa vice president, Yury Okoyomov.

Alrosa, about half of whose sold production in 2009 was to Indian buyers, intends to raise the number of contract Indian buyers from the current seven to about 30, Okoyomov was quoted as saying.

Okoyomov did not publicly commit to a specific level of supply or a schedule, however in a press conference in Mumbai on February 23, he said that the company is seeking an agreement with the Russian government to have a flexible supply to the state repository Gokhran, IDEX Online said

This will allow the diamond miner to increase or decrease supply to the market, based on the economic environment, it said, adding that Okoyomov said he still has concerns about the eco-nomic conditions in 2010.

One of the key issues during the recent global recession was the ability of contract buyers, such as DTC Sightholders, to refuse to buy some of the offered goods, if they felt they were not eco-nomical, IDEX Online said. "This is something we have discussed internally, and decided on a shift of policy" Okoyomov was quoted as saying. He said Alrosa would allow contract buyers to turn down goods, depending on the economic situation and the specific goods.

The company will select contract buyers by their manufacturing and financial strength as well as their sales goals, Okoyomov told IDEX Online. The prices of goods will change according to market pricings, he added, with a small periodic tender serving as a way to gauge market prices.

Alrosa, as the rest of the industry, continues to view the recent increase in rough prices with worry, IDEX Online said. "Rough prices are rising faster than polished. This is not good, and we are looking at this with concern," Okoyomov was quoted as saying, adding "if we see prices go up, we will take this into account." As to practical steps, he said the company will take a bal-anced approach. The company will continue to supply the market at reasonable prices, but won't flood it either. Ultimately, buyers will need to act responsibly, was the message. Perhaps under-scoring this, Okoyomov estimates 2010 global rough diamond sales to total $11 billion, IDEX Online said.

Alrosa stopped selling rough diamonds on the market at the end of December 2008 as demand plummeted, and sold the gems to the Gokhran only between then and July 2009. The company later reviewed its sales policy, deciding to focus on direct contracts, which ought to rise to 70% of total sales in 2010.

Alrosa mined $2.244 billion in diamonds in 2009. Revenue from the sale of rough and cut and polished diamonds was $2.187 billion. The company is targeting $2.314 billion in mine output and $3.3 billion in sales revenue in 2010.

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21


AUCTIONS & TENDERS

Polyus Gold wins Irkutsk placer licenses at auction IRKUTSK. (Interfax) - A subsidiary of OJSC Lenzoloto, a placer mining unit of No.1 Russian gold producer Polyus Gold, has won the rights to four of eight gold placers put up for auction in the Irkutsk region, the region's natural resources agency told Interfax.

CJSC Svetly bid just over 656,000 rubles for the properties, which are thought to contain over 361 kilograms of gold between them.

It won licenses to the Upper Vasiliyevsky placer (Ugakhan River) (P2 reserves - 140 kg, starting price 137,000 rubles, highest bid - 151,000 rubles); Upper Shiroky (Sukhoi Mayak, Vacha River) (P2 - 120 kg, starting price - 115,000 rubles, highest bid - 139,000 rubles); Bolshoi Semikach (Khomolkho River) (C1+C2 - 45 kg, starting price - 333,00 rubles, highest bid - 366,000 rubles); and Zhuya Right Bank (P3 - 56 kg, starting price - 19,000 rubles, highest bid - 23,000 rubles).

Lenzoloto raised placer gold output 5.4% to 5.94 tonnes in 2009. CJSC Svetly produced 2.027 tonnes, up 14.5% from 2008.

The Irkutsk region as a whole mined 14.713 tonnes of gold, including vein gold, up 1.6% from 2008.

Kazakhmys announces tender for drilling, exploration operations at Nurkazgan deposit ALMATY. (Interfax) - Kazakhmys Exploration has announced a tender for drilling and explora-tion operations at the Nurkazgan deposit.

Bids will be accepted till March 27, 2010.

According to the tender conditions, the drilling depth is 1800 meters, deadline for drilling work is December 2010, drilling operations to start right after signing the contract.

The copper deposit Nurkazgan is located in the Karaganda region (central Kazakhstan).

Kazakhmys Exploration is part of Kazakhmys.

Kazakhmys is Kazakhstan's largest copper producer. In 2005 the company got listed at the Lon-don Stock Exchange through Kazakhmys Plc that is registered in the UK. Kazakhmys Plc is a holding which also includes gold production and energy business unites and MKM plant in Germany (Mansfelder Kupfer und Messing GmbH, produces half-finished and finished copper products).

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22


LAWS & REGULATIONS

Oman not to impose restrictive sanctions on Ukrainian steel products KYIV. (Interfax) - The Sultanate of Oman will not impose restrictive sanctions on Ukrainian steel products, Sayyid Fahad bin Mahmood Al-Said, the Omani Deputy Prime Minister for the Council of Ministers, has said at a meeting with Ukraine's Foreign Minister Petro Poroshenko.

Proshenko paid an official visit to the Sultanate of Oman on February 21, where he discussed the issue of not imposing restrictive sanctions on Ukraine's steel products under an anti-dumping investigation by the Cooperation Council for the Arab States of the Gulf that was launched on November 7, 2009, the press service of the Foreign Ministry reported.

"It was noted that the export of steel products to the Middle East is of great importance to Ukraine's economy. Due to this fact, Poroshenko asked the Omani side not to support a special safeguard investigation into the import of domestic steel products on the markets of the Persian Gulf countries. The Secretariat-General of the Cooperation Council for the Arab States of the Gulf earlier decided to conduct the anti-dumping investigation," the Foreign Ministry reported.

Kyiv gave a relevant unofficial document to the Omani side, according to the press service.

"The Omani side assured that this decision was not aimed against Ukraine and that Oman would not impose any restrictive sanctions on Ukrainian steel products," reads the statement.

Ukraine's Foreign Minister Petro Poroshenko also met with Maqbool bin Ali Sultan, the Omani Minister of Commerce and Industry and the Chairman of the Omani Centre for Investment Promotion and Export Development. The sides agreed to prepare agreements on avoiding dou-ble taxation, promoting and protecting mutual investments, as well as holding business forums.

At the meeting with Sayyid Badr bin Hamad bin Hamoud Al Busaidi, the secretary-general of the Omani Foreign Ministry, the sides discussed the issue of a simplified visa regime between the two countries, and agreed to sign an agreement on visa-free trips for official delegations in the near future.

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23


STATISTICS

Russian international reserves up $0.9 bln in week MOSCOW. (Interfax) - Russia's international reserves up $0.9 billion to $432.4 billion in the week to February 19, the Central Bank said.

The reserves stood at $431.5 billion on February 12.

They consist of highly liquid financial assets at the disposal of the CB and Russian government, including foreign currency, monetary gold, special drawing rights, the reserve position at the IMF and other reserve assets.

Gold in CB reserves up 0.5% in Jan MOSCOW. (Interfax) - The Central Bank of Russia had 20.6 million Troy ounces of gold in its reserves as of February 1, 2010, up 0.5% from 20.5 million oz on January 1, the CB said on its web site.

The gold was worth $22.316 billion on February 1, down slightly from $22.382 billion on January 1.

The gold and foreign exchange reserves fell $3.204 billion or 0.7% to $435.83 billion from $439.034 billion during January.

Tajikistan cuts aluminum production 4% in Jan DUSHANBE. (Interfax) - Talco, Tajikistan's only aluminum smelter and Central Asia's biggest, reduced primary aluminum production 4.1% year-on-year in January to 30,158 tonnes, the com-pany told Interfax.

This was 1.2% above target for the month, the company said.

Tajikistan does not publish official data for Talco, a strategic enterprise that accounts for nearly three-quarters of the country's exports.

Tajikistan's aluminum exports soared 61% year-on-year in January to $68.9 million. Alumina imports fell 72% to $15.6 million.

Talco reduced primary aluminum production 10% in 2009 to 359,385 tonnes. Talco said at the start of February last year that it was idling a tenth of its capacity after cutting power consump-tion by a third in connection with an acute energy crisis in Tajikistan and with the drop in global demand and prices for aluminum.

The state-owned Talco, built in 1975, is capable of producing 517,000 tonnes of aluminum per year.

Nozir Edgori, spokesman for Tajik power utility Barki Tocik (Tajikistan Energy), told Interfax in January that the company had raised electricity charges 20% for households and 25%-27% for industry, and had backdated the increases to January 1, 2010.

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24


The corporate sector in general will pay 0.213 somoni per kilowatt-hour, up from 0.171 somoni, however Talco will pay 0.822 somoni, up from 0.0644 somoni.

Tajikistan puts electricity charges up twice a year "in line with requests by the World Bank and other donors to make the power industry more profitable," Edgori said.

Armenia slashes cut diamond exports 70% in 2009 YEREVAN. (Interfax) - Armenia slashed cut diamond exports 70% to 70,600 carats in 2009 Gagik Kocharian, a senior trade official at the Armenian Economics Ministry, told Interfax.

Kocharian said cut diamond exports, as well as output, which was similar in volume, plum-meted due to reduced demand for jewelry, however Armenia also received small, lower-cost rough diamonds for processing due to the crisis in 2009.

Armenia exports all its cut diamonds.

Rough diamond imports fell 30% in 2009 to 102,000 carats, Kocharian said. Most rough is im-ported from Belgium, Russia and Israel.

Kocharian said a positive tendency was emerging so far this year: Armenia imported 20,000 carats of rough in January 2010 alone, whereas imports did not exceed 17,000 carats on a monthly basis in January-September last year.

"This makes us hopeful that the market is coming to life and that production volumes will in-crease this year," he said.

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25


METAL COMMODITY PRICES

Trading on Moscow exchanges Quoted prices on the Metals Exchange for the week ending March 1, 2010, rose for copper, brass, nickel, aluminum, and tin. Prices remained flat for lead, titanium, and bronze, and fell for zinc.

('000 rubles/tonne, VAT incl.) ME Price 01.03.10 Change, %

COPPER Refined 248 000 1,2 Sheets 328 000 0,0 Scrap 166 000 0,0 BRASS Ingots 150 000 0,7 Sheets 252 000 0,0 Scrap 90 000 0,0 NICKEL Primary 768 000 1,1 Rolls 803 000 1,0 ALUMINUM Primary 77 000 0,7 Rolls 134 000 -1,5 Scrap 45 000 0,0 LEAD Ingots 78 000 0,0 Scrap 38 000 0,0 ZINC 78 000 -2,5 TIN 657 000 1,7 TITANIUM Rolls 1 100 000 0,0 Scrap 55 000 0,0 BRONZE Ingots 197 000 0,0 Rolls 258 000 0,0 Scrap 98 000 0,0 FERROUS METALS Standard Sheet CR 0,5-1,0 mm 22 000 0,0 Standard Sheet CR 1,0-3,0 mm 22 000 0,0 Standard Sheet HR 2,0-3,0 mm 20 000 0,0 Galvanized Sheet 0,7-1,5 mm 34 000 0,0 Stainless Steel Sheet <1,5mm 180 000 2,9 Stainless Steel Sheet >1,5 mm 177 000 4,1 Angles 20-90 mm 20 000 0,0 Channels >18 mm 22 000 0,0 Conversion Pig Iron 13 000 0,0

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26


CURRENCY RATES

Official exchange rates for CIS and Baltic nations as of 25.02.2010 Country Currency For $1 For 1 ruble For 1 EUR Armenia dram 384.37 12.8 518.75 Azerbaijan manat 0.8035 0.0267 1.0824 Belarus bel.ruble 2926 97.43 3962.39 Estonia kroon 11.5982 0.386051 15.6466 Georgia lari 1.7375 0.057857 2.3552 Kazakhstan tenge 147.34 4.91 199.23 Kyrgyzstan som 44.6763 1.4845 60.4132 Latvia lats 0.519 0.0172 0.702804 Lithuania litas 2.5521 0.084952 3.4528 Moldova leu 12.7996 0.4264 17.3504 Russia ruble 30.0309 - 40.6498 Tajikistan somoni 4.3673 0.14647 5.4014 Turkmenistan manat 2.85 0.094524 3.857475 Ukraine hryvnia 7.99 0.26606 10.82405 Uzbekistan sum* 1534.15 50.87 2104.12

* on 22.02.2010

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ANALYTICAL REPORTS

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Russia’s Key Exporting Sectors in 1H2009. August 2009

Major Russian Holdings in 2008-2009: Withstanding Global Recession. July 2009

Russia’s Gas Industry in 2008-2009. July 2009

Russia’s Agriculture in 2008-2009. June 2009

Russia’s Coal Industry in 2008-2009. May 2009

Russia’s Fertilizer Industry in 2008-2009. April 2009

Russia’s Meat and Meat Products Market in 2008-2009. April 2009

Russia’s Gold Industry in 2008-2009. April 2009

Russia’s Non-Ferrous Metals Industry in 2008-2009. March 2009

Russia’s Oil Sector in 2008-2009. March 2009

Russia’s Ferrous Metals Sector in 2008-2009. March 2009

A Comprehensive Insight in Russia’s Retail Market in 2008. January 2009

Russia's Rail Transport in 2008. January 2009

Financial Crisis and Russia’s Export Potential. December 2008

A Comprehensive Insight in Russia’s Markets for Goods and Services: the Day After. November 2008

Russia's Timber, Woodworking, Pulp and Paper Industry in 2007-2008. October 2008

Russia’s Textile and Clothing Industry in 2007-2008. October 2008

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A Comprehensive Insight in Russia’s Construction Sector in 2007-2008. September 2008

Major Russian Holdings in 2007-2008: New Challenges and Opportunities. September 2008

Russia's Seaports in 2007-2008. August 2008

Russia's Gold Industry in 2007-2008. July 2008

Russia's Gas Industry in 2007-2008. July 2008

Russia's Non-Ferrous Metals Industry in 2007-2008. June 2008

Russia's Agriculture in 2007-2008. June 2008

Russia's Automotive Industry in 2007-2008. May 2008

Russia’s Media Sector. April 2008

Russia’s Ferrous Metals Industry in 2007. March 2008

Russia’s Coal Industry in 2007. March 2008

Russia’s Oil Sector in 2007. February 2008

A Comprehensive Insight in Russia’s Retail Market in 2007. January 2008

Russia's Telecommunications in 2007. December 2007

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