Q1 2012 Mechel OAO Earnings Conference Call

Jun 20, 2012 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D   V E R S I O N

MTLR.MZ - Mechel PAO
Q1 2012 Mechel OAO Earnings Conference Call
Jun 20, 2012 / 02:00PM GMT 

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Corporate Participants
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   *  Vladislav Zlenko
      Mechel OAO - Director - IR
   *  Yevgeny Mikhel
      Mechel OAO - CEO
   *  Stanislav Ploschenko
      Mechel OAO - CFO
   *  Oleg Korzhov
      Mechel OAO - SVP - Economics & Management

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Conference Call Participants
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   *  Sergey Donskoy
      Societe Generale - Analyst
   *  Anton Rumanse
      Troika - Analyst
   *  Andrey Lobazov
      Alfa Bank - Analyst
   *  Oleg Petropavlovsky
      BCS - Analyst
   *  Bernard Zonneveld
      ING Bank - Analyst
   *  Daniel Yakub
      Citibank - Analyst
   *  Vasily Kuligin
      Renaissance Capital - Analyst
   *  Andrey Kulakov
      Uralsib Capital - Analyst
   *  George Buzhenitsa
      Deutsche Bank - Analyst
   *  Paul Carr
      Amoris Management - Analyst

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Presentation
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Operator   [1]
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 Welcome to the Mechel Report, Q1 2012 financial results. My name is [Ena], and I'll be your coordinator for today's conference. For the duration of the call, you'll be on listen-only. And at the end of the call, you'll have the opportunity to ask questions. (Operator Instructions). I'll now hand you over to Vladislav Zlenko to begin. Please go ahead, sir.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [2]
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 Thank you, and good day, everyone. I would like to welcome you to Mechel's conference call to discuss our first quarter, 2012 financial results which we're reporting today. With us from management today are Mr. Yevgeny Mikhel, CEO, Mr. Stanislav Ploschenko, CFO and Mr. Oleg Korzhov, Mechel's senior vice president for economics and management.

 After management has made their full remarks, we will take your questions to the presentation team. Please note that during this call, management will make forward-looking statements, some of which may have been made in the press release. Some of the information on this conference call may contain projections, or other forward-looking statements regarding future events, or the future financial performance of Mechel as defined in the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.

 We should caution you that these statements are only predictions, and that actual events or results may different materially. We don't intend to update these statements. I'll refer you to the documents Mechel files from time to time with the United States Securities and Exchange Commission, which contain identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

 In addition, we will be using non-GAAP financial measures, including EBITDA, in our discussion today. Reconciliations of non-GAAP financial measures to the most directly-comparable US-GAAP financial matters are contained in the earnings press release, which is available on our website at Mechel.com.

 At this point, I would like to turn the call over to Mechel's CEO, Mr. Mikhel. Please go ahead.

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 Yevgeny Mikhel,  Mechel OAO - CEO   [3]
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 (interpreted) Good morning, and good day, ladies and gentlemen. Welcome to the conference call, where we will discuss company's performance in the first quarter of 2012.

 We have to recognize the fact that on the whole, the first quarter of this year proved to be rather challenging. Significant reduction of quality prices on coking coal was predetermined by prolonged weakness of the global economy, and lower demands from major customers. This works against Mechel mining financial performance.

 On the other side, in the first quarter, steel feedstock prices were falling at a time when steel product prices were relatively stable. This contributed to high financial results of Mechel steel.

 We succeeded in our efforts at optimizing the production on sales program with a view to reduce the inventory, which accumulated at the end of last year in Mechel service global. And this also had a positive effect. We managed to release working capital to improve operational cash flow of the group.

 Overall, we achieved the full-end results in the first quarter of 2012. Mechel's consolidated revenue was around $3 billion. EBITDA was $463 million. Net income, $218 million.

 Concerning all activities in the key areas of strategic business development, especially in mining, I have to note that at the end of last year, a railroad linking Baikal-Amurby Mainline, and Elga deposit was opened. Earlier this year, we started construction of the seasonal washing plant, another infrastructure facility that is essential for Elga development. We expect to complete construction by the end of July, which will enable shipments of ready-made coking coal concentrate directly from the deposit already in this year, thus, enhancing the project's efficiency.

 We mustn't forget that in the coming years, Mechel's mining segment was developed not only by building up production at Elga, [job] reserves of the Southern Kuzbass are estimated to be around 700 million tons. From the start of the year in the Southern Kuzbass we made progress with one of our most important current projects, construction of the second line and Sibirginskaya mine.

 By May, we completed tunneling of the vertical shaft. That took us several years. And at this moment, we begin to reinforce it. We expect to launch the second line at Sibirginskaya mine in 2014, thus doubling its production, and bringing it to 2.4 million tons of coal a year.

 Considering a series operation production of coal in the coming years, we focus on development of own port facilities to ensure efficient access to the most promising markets. From the start of the year, we managed to make progress in expanding the capacity of Port Posiet, our gates to the Asian-Pacific region.

 To the end of the year, we plan to increase port's capacity from current 4 million tons to 7 million tons a year. When dredging in the harbor is done next year, the port's capacity will reach 9 million tons. And the port will be able to receive Panamex class vessels with [dead] weight of up to 60,000 tons, which will significantly improve the efficiency of logistics through the port.

 In the first quarter, the Company also succeeded in strengthening its position in the construction steel products. Despite the lower seasonal market, Mechel Service Global, through its direct access to more than 28,000 end customers in Russia and Europe, managed to raise sales, and substantially reduce inventory, which at the end of the year, were at 1.325 million tons of steel products.

 Between January and March, Mechel Service Global stock lost more than 200,000 tons. This trend continued in April and May, when Michel Service Global scaled down its inventory by another 107,000 tons, bringing it to just over 1 million tons as of June. As I have already mentioned, this had a positive impact on the working capital and group's operational cash flow.

 In accordance with the updated strategy approved by the board of directors on the 10th of May, in parallel to the development of the above-mentioned priority areas, we continue the process of reviewing all our assets in terms of the alignment with the fundamental parameters of the strategy. This is done with the view to determine the most optimal ways to refine the current asset structure, towards improvement of operational cash flow of the group's enterprises.

 It will take some time to work out specific proposals, and it would be too early now to talk about any results. All findings will be presented to the board of directors for their consideration.

 I am confident that further potential for Mechel's development is contained in key strategic projects. These will be prioritized along with measures for improvement of operational cash flow and debt reduction. By strategy we'll have the most positive impact on the growth of shareholder value.

 Now, I pass the floor to Stanislav Ploschenko, who will cover the details of the financial results for all segments of our business. Thank you.

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 Stanislav Ploschenko,  Mechel OAO - CFO   [4]
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 Good morning, and good evening, ladies and gentlemen. On the slightly more than a month ago, we reported a full-year results of 2011, where we stated the measures the Company was taking in order to adjust its operations to the volatile market environment, and improve its cash flow.

 Now, reporting the first quarter of 2012, we are proud to deliver the first results of these measures. We will traditionally start our discussion with the mining segment. The overall negative price dynamics on the key products could not leave its revenue and profitability unaffected, with coking concentrated FCA price down 22% quarter-on-quarter, anthracites and PCI down 9%, and iron ore concentrate down 19%.

 On the steam coal realized price beat the trend with 20% quarterly rise, which was largely attributable to increased export sales. Volume-wise, coking coal sales to third parties held fairly steady, down by less than 2%, despite the fact that production decreased in the first quarter, due to temporary halt of Sibirginskaya mine in Southern Kuzbass, and idling of certain mines Bluestone. That was compensated by a rundown on stock, which also helped to release cash.

 PCI and anthracite volumes were down by about 20%. Thermal coal sales down by 18% tonnage wise as internal consumption of steam coal are more than doubled, driven by high season for power generation.

 Additionally, we experienced increased demand in Turkey and Kazakhstan due to an unusually cold winter. This negative variances were somewhat offset by 30% increase in iron ore sales, as internal consumption decreased, releasing more volumes for export sales. That actually is reflected in a 14% quarter-on-quarter reduction in intersegment sales to $226 million.

 It is notable, though, that in comparison to the first quarter of 2011, the third-party sales of coking concentrate still showed a hefty 29% growth in physical terms, while PCI and anthracite sales almost doubled, largely at the expense of thermal coal, where sales volumes went down by 60%.

 However, coming back to the reporting period, our mining segment revenue from sales to third parties fell by 12%, quarter-on-quarter, to $933 million. The markets for our mining products continue to be quite difficult, due to the fallout from the European sovereign debt crisis, and a continuing slowdown in Chinese demand.

 In particular, the turbulence in the eurozone was the main driver for the falloff in PCI and anthracite shipments, which resulted in European share of sales contract to 14%, as you can see on the slide number six. Demand for these types of coal, however, is relatively strong in the Pacific Rim, and we intensifying our marketing efforts so as to improve the geographic diversification of demand. Additionally, we are beginning to see signs of price support in the market, giving us reasons to be cautiously optimistic with respect to an improved top line during the second half of the year.

 Given the difficulty of the overall operating environment, we have tried to maintain an even sharper focus on our cash cost. However, depreciating dollar and temporary mine shutdowns at Southern Kuzbass, which push the share of fixed cost up, led to $5 increase in the cash cost to file Kuzbass operations to $40 a ton.

 This was combined with a slightly higher shipping ratio at open pit mines incurred as we ramped up production in them to compensate for lost underground production. Yakutugol cash cost increased by 3% to $35 per ton, due to frontloading of certain Russian payroll taxes, and additional drilling at Neryungrinsky open pit in order to allow us to optimize the blend going to the washing plant.

 The dollar depreciation was accountable for $1 of that increase, which was pretty much the case for all our Russian operations. Korshunov mining plant also saw a $3 per ton increase, $2 of which was due to higher maintenance expense. At Bluestone, however, we were able to reduce cash cost by $13 per ton through implementing an intensive expense management exercise and temporarily closing two of our high-cost mines.

 The above factors led to a 19% decrease in gross profit to $603 million. Sales and distribution expenses increased quarter-on-quarter to $249 million. The increase is explained by growth of sales to China on CIF and CFR basis. The China share of sales grew from 23% in Q4 to 28% in Q1, as well as annual increase in rail and other transportation-related tariffs.

 Growth in selling and distribution expenses was partially offset by $24 million in administrative and other operating expenses. Main reason for that decrease was absence of $7 million negative effect on disposable fixed assets posted in the fourth quarter, as well as less amounts of repairs performed in the first quarter, over the previous one.

 These factors culminated in a 40% reduction in EBITDA to $358 million in the first quarter of 2012. Net interest expenses grew by 49% quarter-on-quarter to $30 million, due to three factors. Firstly, all the net debt as of the end of 2011 grew by $234 million, or 3%, as compared to the end of Q3. Gross debt increased by 4% to over $375 million. That was the result of the management decision to draw on available credit facilities and put cash on deposits in order to protect the Company's liquid position, should the situation in the financial markets, characterized by sharp increase volatility in Q4, worse further.

 This resulted in negative [carry] in Q1, exacerbated by general rise in interest rates, leading to an increase in net interest expenses. As the situation improved in Q2, coupled with the successful renegotiation of the covenant package, and refinancing of short-term debt, the cash cushion created in Q4 was reduced, bringing the gross debt back down.

 Secondly, the efforts taken by the management in Q1 and Q2 to replace short-term debt with longer-term one, naturally led to an increase in the average cost of debt. This rise in interest rates was further augmented by rather sharp appreciation of ruble during the reporting period, with half of our credit portfolio denominated in Russian currency. These three factors affected all the segments.

 The income tax expense in the mining segment increased by 28% -- excuse me -- $28 million, which was due to utilization of the tax loss carried forward, and the deferred tax benefit related mostly to change of future corporate tax rate, and Bluestone recorded in Q4.

 Net profit decreased by $198 million, from $439 million to $241 million, by the factors just discussed, as well as a $64 million quarter-on-quarter increase in FX gain, due to ruble appreciation.

 Now let's turn to the steel segment. I'm happy to say that the efforts taken by the Company to optimize its production in sales policy in the fourth quarter, as well as reduce its inventory levels, bore fruit in the reported period. The third-party sales grew by 7% quarter-on-quarter to $1.649 billion, despite low season exacerbated by an exceptionally harsh weather conditions in February in Russia and Eastern Europe.

 In particular, we managed to increase sales of engineering steel by 22%, carbon flat steel by 31% tonnage wise, both on the domestic and export markets. At the same time, the biggest fall in physical sales volumes was demonstrated by alloyed long steel, down by 17%, all at the expense of the domestic market, where demand was traditionally subdued due to the seasonal factors and smaller number of sales base in the reported period.

 The same factors stood behind the 11% fall in stainless flat, and the 9% reduction in [y] sales volume-wise. The similar situation was expectedly observed on the domestic market for rebar, where physical sales volumes went down by 8%. However, as the fact -- effect in the Russian market for long steel were less pronounced in Europe, our efforts to unload the stock and release working capital led to almost a two-fold growth in European rebar sales, which more than compensated the fallout in Russian sales.

 As input cost outplays a downward price, dynamics of semis, we took advantage of the situation by rapidly increasing sales of billet purchase from third parties, largely from Estar, which grew by 23% quarter-on-quarter on physical terms adding $46 million to the segments revenue.

 The scale of success can be better assessed if we compare the first quarter of 2012 to the same period of 2011, where market conditions were sensibly better. The physical sales volumes of rebar grew by 30%, carbon slide by 14%, engineering steel by 18%. At the same time, sales of semi-finished products, like billet and wire rod, despite a quarter-on-quarter increase in Q1 of 2012, fell by 37% of the same period of last year, as more processing capacity was being added at our own facilities, and out-putted finished goods grew.

 To add the final touch to the achievements of the first quarter, 2012, I need to know that we managed to bring about that increase in sales in spite of the low season for our products, avoiding an impact on pricing. The FCA price on our products remained largely flat quarter-on-quarter. Only wire rod and engineering steel notching down by 8% and 4% respectively.

 To a large extent, it was the achievement of Mechel Service Global, which demonstrated its pricing resilience and sales capacity using its sizable distribution network in Russia and Europe.

 Despite growth in revenue, the cost of sales decreased by 1%, as prices for raw materials consolidated. Extra efforts were taken to minimize the cost of raw materials by increasing the share of [OM] center, replacing more expensive billets, following to the increase of productivity of the center-planted Chelyabinsk, which together with lower prices for coke and iron ore, led to fall in billet cash cost to $497 per ton.

 Cash costs of rebar did not change much, as a decrease in price of input materials was upset by increased share of fixed cost, as some of the rolling facilities were temporarily idled in order to reduce the stock of products for sale. For the combination of higher sales and lower costs doubled the gross income quarter-on-quarter to $249 million, with the same effect on the gross margin that increased to over 14% of the revenue.

 The selling and distribution expenses grew by 10%, to $162 million, as sales of semis on CIF and CFR basis to Eastern Asia grew. The share of these expenses in the revenue stayed at about 10%, as in the previous period. The administrative expenses grew by 16% quarter-on-quarter to $63 million, due to the absence in Q1 of one-off income for reduction of pension liabilities posted in Q4, 2011.

 The efforts taken by the Company to improve the performance of the steel segments resulted in a negative EBITDA of $50 million posted in Q4 of 2011, reverse into earnings of $49 million in the reported periods. Net interest expenses grew by 18% quarter-on-quarter to $84 million, due to the factors described above, as well as one that relates in particular to the steel segment.

 In the first quarter, we posted an additional $5 million accrued expense resulting from discounting the long-term payables for the Donetsk plant acquired in the end of Q4, where no such expense was accrued.

 The income tax expense increased by almost $11 million quarter-on-quarter, largely due to the utilization of tax loss carried forward at Chelyahinsk plant, as well as absence of almost $3 million tax income at Mechel Service Russia, posted in Q4, due to sharp decrease in profitability as compared to the first nine months, resulting in a tax ride-back.

 The segment posted a $91 million FX gain in Q1, due to sharp depreciation of dollar versus ruble, which can be compared to a $22 million loss in the previous quarter. That all led to a 92% quarter-on-quarter decrease in the segment's net loss to just $16 million, a significant improvement, even despite the FX gain. With that factor stripped off, the bottom line still shows a 38% quarter improvement.

 The ferroalloy segment demonstrated better revenue dynamics in the first quarter as compared to the previous one. [FCA's] sale price of nickel were up 6%, and fled on chrome, quarter-on-quarter. At the same time, the re-launch of the refurbished furnace at Bratsk in March, as well as lower sales to the steel segment, led to 9% rise in third-parties sales of ferrosilicon. Sales of nickel and chrome grew by 4% and 2% respectively in physical terms in combination with slightly higher FCA prices, driving segmental revenue from third parties up almost 8% to $125 million.

 Intersegment revenue increased dramatically by almost 74% to $28 million, largely as a result of almost doubled quarter-on-quarter sales of nickel, which had fallen sharply in Q4, as more than sufficient stock was created at our steel plants in Q3. That stock was consumed in the following quarter, and then replenished in Q1, resulting in a sharp rise in the sales to the steel business.

 Cash costs were largely under control, changing only insignificantly, with nickel up 4% due to higher gas and electricity consumption. Ferrosilicon down the same 4% as output grew after the furnace return to production. Chrome, flat, while cash cost of a ton of chrome concentrate, down 7%, due to growth of output.

 However, growth of the top line, driven largely by increased sales of nickel, led to 20% -- 22% rise in the cost line. That was just enough to decrease the gross loss by 20% over the previous quarter to just $15 million.

 Operating expenses grew by 10%, mirroring sales growth. Administrative expenses, though they're almost 22% down quarter-on-quarter, largely due to the absence of write-offs on fixed assets posted in Q4. The combination of better gross result is slightly higher operating expenses, still results in the reduction of the negative EBITDA of the segment by one-third, to just $7.5 million, indicating that the segment is well on the path to recovery.

 Net interest expenses grew by $6 million, all due to the factors described in the mining segment discussion. The income tax showed a $7 million gain in the reported period versus $1 million expense in the previous one, due to $9.5 million tax asset carried forward on Voskhod refinery, resulting from a loss recorded in Q1.

 The ferroalloy segment was the only one showing an FX loss, which amounted to $23 million in the first quarter, at the time when ruble appreciated against other currencies. That largely resulted from the revaluation of ruble denominated into company loans, received by the entities whose reporting currency is Kazakk tenge or British pound such as Voskhod chrome, and the holding company, Oriel Resources.

 The FX loss was the dominating factor behind the net loss of $56 million. If the FX effect is stripped from the analysis, the bottom line will still improve by 9%.

 Now, let's turn to the power segment. The first quarter, just like the fourth one, a traditionally high season for power sales. No surprise then that the increased electricity and heat consumption led to 16% quarter-on-quarter growth in the revenue from third parties to 200 -- $300 million. And another 8% growth in revenue from internal consumption to $136 million. The cost of sales grew in line with revenue, which resulted in a flat gross margin of 27%, the gross income rise in 14% to $102 million.

 Selling and distribution expenses grew by 9% to $73 million, reflecting higher sales. Administrative expenses fell dramatically quarter-on-quarter, by almost $18 million. The biggest contributor to that difference was a $7 million loss realized in Q4, due to a reassessment of the financial results of quarters for emission-right sales by Toplofikatsia Rousse in their financial period, as the purchase price allocation of the power plant was finalized.

 Another $5 million were recorded as a provision for environmental claim at Southern Kuzbass power plant in Q4. In Q1, all these items being absent, there was an additional $1.5 million income realized on disposable fixed asset.

 The effect of these economics on the segment EBITDA was a dramatic 9 times increase to $28 million, or 7% of the revenue, versus just 1% in the previous quarter. Net interest expenses grew by $1.5 million. The FX effect was negligible as usual. The income tax rose by $4 million due to overall increase in the segment's profitability. The bottom line results from a $6 million loss in the fourth quarter to $12 million income in Q1.

 On the consolidated level, the reduction in the top line of the mining segment was compensated by growth in all other segments, resulting in just 1% quarter-on-quarter growth, also in line with the results of the first three months of 2011. Gross margin also improved by 1% to 33% of the revenue, which can be compared to almost 35% in Q1, 2011.

 As the net expenses increased by 19% to $661 million, driven largely by the mining segment, as discussed above, it is notable, though, that administrative expenses remain flat, if compared to the first quarter of 2011. Downward trend in the mining segment's economics could not be fully counted by improvements in other segments, driving the consolidated EBITDA 14% down quarter-on-quarter, to $463 million.

 The EBITDA margin contracted to 16% of the revenue. The net interest expense grew by 33% to $142 million, due to the factors discussed above. Income tax expense grew by 49%, quarter-on-quarter, to $103 million, largely due to the mining segment. The FX transaction posted to $171 million gain on the consolidated level, versus only $14 million in Q4, 2011, pushing the net income to $218 million in the reported period.

 As I said in the beginning of our discussion, the first quarter visibly demonstrated the successful results of the measures taken by the Company in the fourth quarter, 2011, aimed at adjusting the production to match current demand and optimization of working capital in order to release cash back into the business.

 Despite uneasy market environments, and generally downward price trend in commodity markets, these measures resulted in operating cash flow growing by 28% to $345 million quarter-on-quarter, if we take away the effect on the cash flow in Q4, coming from the settlement through loan to Estar.

 It is notable that $118 million of the operating cash flow came from release of working capital. In particular, the reduction in inventory resulted in the release of $176 million, where $137 million came from the steel segment, and $40 million from mining, partly offset by increased receivables as sales in the steel segment grew.

 Investments consumed $276 million, almost entirely for the purchase of fixed assets. The balance of $69 million between cash flow from operations and investments went to debt reduction, [top-top] was repayment of debt from the cash balance, resulting in $305 million of gross debt reduction.

 On the balance sheet side, however, the net debt has risen by $458 million to $9.7 billion that rise, entirely attributable to ruble appreciation versus dollar, and the fact that ruble-denominated loans represented 51% of our gross debt portfolio.

 The trailing net debt to EBITDA ratio deteriorated to 4.2 times, all due to Q1 EBITDA reduction, but still very comfortably within the renegotiated covenants level of 5.5 times for the year 2012. Net interest expenses was 3.3 times EBITDA covered, which was also well within the new governance.

 To recap, ladies and gentlemen, the first quarter proved that despite challenging market conditions, the Company has been able to turn around its operations to counter the downward trend in its key commodity markets, and significantly improve its cash generation capacity through better production planning, and working capital management.

 The flexibility and adaptability of our vertically-integrated business model has demonstrated that even in the current volatile market environment, the Company's capable not only to continue with its key investment projects, but to reduce its debt along with it. The steps that the Company is going to take in order to optimize its business structure in line with the new strategy, announced at the last conference call, will help it to further improve its cash-generating capacity, which will be translated into higher profitability and return for our shareholders.

 Thank you, ladies and gentlemen, for your attention. The team is ready to take your questions.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [5]
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 Thank you. We will now take questions. We'd ask that participants please state their name and company before asking their question, and allow some time after for translation. When questions are answered in Russian, they will follow by translation. So you may ask your question in Russian also, and we will translate for you.



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Questions and Answers
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Operator   [1]
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 Thank you. (Operator Instructions).. And our first question has come from the line of Sergey Donskoy of Societe Generale. Please go ahead, Sergey.

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 Sergey Donskoy,  Societe Generale - Analyst   [2]
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 Good evening, everyone. Thank you for the call. Have two questions at this point. First of all, according to your statement of cash flows, you have repaid during the quarter about $280 million of debt. While looking at balance sheet, I find that gross debt actually increased by approximately $230 million, which results in like $500 million discrepancy. Could you comment on this, how you consolidated some external loans during the quarter or something else happens?

 And second question is, speaking of the working capital reduction during the first quarter, it was a positive achievement, but perhaps not quite enough, given the rising level of financial leverage. Do you have any internal target of working capital reduction you want to achieve this year? Should we expect same, or higher, or lower reduction in the working capital next quarter? And what is the likely amount that you plan to release for entire year? Thank you.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [3]
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 Stanislav Ploschenko will answer the questions.

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 Stanislav Ploschenko,  Mechel OAO - CFO   [4]
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 The reason behind the discrepancy between the balance sheet and cash flow statements is that the items on the balance sheet are translated using the currency exchange rate, so the beginning and the end of the reporting period, whereas in the cash flow statements, the average exchange rate is taken throughout the period.

 Therefore, during the time of high currency exchange rate fluctuation, these discrepancies, very common. And obviously, no additional, or no -- any kind of internal loans, or external loans were consolidated. It's purely a fact of rising ruble-dollar rate.

 As far as the second question is concerned, in order to assess the group's efforts to reduce its working capital, we need to take into account the fact that the measures that led to working capital release were being worked out and implemented during the fourth quarter, and partly during the first one. So a lot of the effect is yet to come.

 And another very important factor, which I mentioned a few times in the discussion, is that most of the reduction came from the steel segment, where we have high stocks of finished products. And the first quarter, as well as the fourth quarter, is a low season for steel market, especially for the construction market. Therefore, this factor is very important, take into account, relating the result from measures taken in order to optimize the working capital.

 We certainly expect that as the construction season began in the second quarter, there will be more capital, working capital release. In the present conditions, we expect that at least half a billion dollars of working capital should be released this year. And obviously, that will depend on the market trends, and the situation on the financial markets as well.

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 Sergey Donskoy,  Societe Generale - Analyst   [5]
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 Thank you.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [6]
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 We're ready for the next question, please.

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Operator   [7]
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 Thank you. Our next question is coming come from the line of Anton Rumanse from Troika. Please go ahead, Anton.

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 Anton Rumanse,  Troika - Analyst   [8]
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 Good evening, gentlemen. Thank you for a very detailed presentation. I've got several questions. The first one is a follow-up question on Sergey's question on debt. So in the presentation, you are showing that your current debt is below $9 billion. And I just wanted to ask what was the reasons of this decrease? Was it solely the ruble depreciation, or you have been -- you have continued to repay your debt?

 And the second question is, what sales dynamics can we expect in mining division for -- in the second quarter? So do you plan to increase the sales of coking concentrate, the anthracite, and actually what dynamics, what price dynamics do you currently see for these products? Thank you.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [9]
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 The first question will be answered by Stanislav Ploschenko.

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 Stanislav Ploschenko,  Mechel OAO - CFO   [10]
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 Yes, indeed. Most of the reduction of net debt in the second quarter came as a result of the reverse dynamics of ruble and dollar exchange rate. But we continued to repay some of that out of the operating cash flow as well.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [11]
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 The second question will be answered by Oleg Korzhov.

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 Oleg Korzhov,  Mechel OAO - SVP - Economics & Management   [12]
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 (interpreted) The pricing policy very much depends on the consumer. So when you say consumers, irrespective of products separately, let's start with [kilo] nine grade coals, which come primarily from Yakutugol. In the second quarter, the sale price dynamics depended on the destination of all those products.

 Those coals are shipped to Ukraine, China, and Japan and Korea. For Ukraine, the sale price in the second quarter was $200. On the basis of DDUs, the DDU rate was $57. In the first quarter, the prices were about 30% high. So in the second quarter, the price was lower.

 As to China, we are shipping a slightly different grade of coal to China. And in the first quarter, the prices were $185, $190 on the basis of CIF. In the second quarter, the price was more or less the same, and the shipment rate to China is $55, $57.

 Japan and Korea, in the first quarter, the prices were $215, $220, on the basis of FOB, delivery to Port Posiet. In the second quarter, the prices went down somewhat to $185, $190 on the basis of FOB. And the same -- FOB Posiet is $41, $42.

 Now, if we take PCI coals and anthracite, PCI goes to Japan and Korea, and to China. In the second quarter, prices were more or less the same as in the first quarter, and amounted to $140, $150 on the basis of FOB. To China, the shipments are made on the CIF basis. In the first quarter, the price was $160 -- $165, and in the second quarter at $150, $160.

 Anthracite is shipped to Europe through Port Vysotsk. The delivery rate is $60, while the sale price is $145, $150. As to our expectations of the third quarter, the Company's pricing policy goes much in the same direction as the global trends. We are currently actively contracting. We know that, for instance, Anglo American has already agreed their prices with Posco, and as the coking coal concentrate, we expect that in the third quarter, the prices will add another $10 to $15. Thank you.

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 Vladislav Zlenko,  Mechel OAO - Director - IR   [13]
------------------------------
 Next question, please.

------------------------------
Operator   [14]
------------------------------
 Thank you. Our next question has come from the line of Andrey Lobazov from Alfa Bank. Please go ahead, Andrey.

------------------------------
 Andrey Lobazov,  Alfa Bank - Analyst   [15]
------------------------------
 First of all, thank you for the presentation. One of my questions about average realized prices has been answered already. So I have only one question left, about production costs. Given significant ruble devaluation, how do you see your mining cash cost in the second quarter, specifically 1,000 (inaudible) and equal to growth compared to the first quarter of this year? Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [16]
------------------------------
 Oleg Korzhov will answer the question.

------------------------------
 Oleg Korzhov,  Mechel OAO - SVP - Economics & Management   [17]
------------------------------
 (interpreted) We expect that in the second quarter the cash cost for the Company will be lower than in the first quarter. And our reasoning goes in the following way. There are three main factors. Basically factor number one is the seasonal factor. You know that mainly our production is (inaudible), it's in the northern regions. And traditionally, our costs in the second quarter have always been lower than in the first quarter.

 The second factor is that we plan to add another 10% steel production in the second quarter. You know that in the South Kuzbass, there was an accident in May. And now Sibirginskaya mine is the relaunched. And we expect that it will contribute, of course, to mining production.

 And the third factor is related to the salaries and the taxes imposed on the salaries, the way the taxes are calculated and paid. Our company's subject to regressive accrual, scale of all the taxes. And that's why we expect, once again, our cash cost in the second quarter to be lower than that in the first quarter.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [18]
------------------------------
 Next question, please.

------------------------------
Operator   [19]
------------------------------
 Thank you. Next question has come from the line of Oleg Petropavlovsky from BCS. Please go ahead, Oleg.

------------------------------
 Oleg Petropavlovsky,  BCS - Analyst   [20]
------------------------------
 Good evening, gentlemen. Thank you for your presentation. A couple of questions for me. When are you going to finish the audit, announce your divestment plans? And the second question is, what are you expectations on Tokyo and 3Q steel prices environment?

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [21]
------------------------------
 The first question will be answered by Yevgeny Mikhel.

------------------------------
 Yevgeny Mikhel,  Mechel OAO - CEO   [22]
------------------------------
 (interpreted) Yes. We have already explained. Currently, we are undertaking a review of all our assets. And we plan to complete this process in the beginning of the first quarter. We already have an understanding regarding certain assets that can be subject to divestment. But anyway, it is too early to give any specific information and to name names, so to say.

 We will present our findings to the board of directors. And the board of directors will take a final decision.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [23]
------------------------------
 The second question will be answered by Oleg Korzhov.

------------------------------
 Oleg Korzhov,  Mechel OAO - SVP - Economics & Management   [24]
------------------------------
 (interpreted) You know that construction products are coal products for our company. And construction industry is extremely seasonal. In the second quarter, the dynamics, price dynamics, was more or less flat. The prices stayed more or less the same level as they were in the first quarter.

 However, towards the end of the second quarter, the prices started growing. And historically, the third quarter has always seen some peak prices on the construction products. Again, if we rely on the historical dynamics, then we expect the prices to grow by 5% to 7% in the third quarter.

 The situation in the external markets is less optimistic, especially the prices on square billets are extremely low level at the moment. And in the second quarter, there was some improvement on those prices, on square billet. But I think that right now, these prices have hit bottom. And we expect that in the short term, the prices will recover, and reach the level of $570, $580 FOB.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [25]
------------------------------
 Next question, please.

------------------------------
Operator   [26]
------------------------------
 Thank you. The next question has come from the line of Bernard Zonneveld from ING Bank. Please go ahead.

------------------------------
 Bernard Zonneveld,  ING Bank - Analyst   [27]
------------------------------
 Thank you very much. First of all, we live in very difficult times. And if you don't see the first quarter results of Mechel, I think there are very reasonable good results. And therefore, I think a big compliment to the senior management team of Mechel, that they did an excellent work in these difficult times.

 Having said that, I have two questions. My questions are the following with regard to -- I'm a typical bank, so forward-looking, I don't want to look so much backwards. So we see that last year you had an average adjusted EBITDA margin of 19%, 18%, 21%, and 18% per quarter. We are now at 16% the first quarter.

 Based on your figures of the second quarter, or let's say your estimate of the second quarter, can you tell us a little bit about your outlook for, let's say, the EBITDA margin for the full year, 2012? So will the end be higher than the 16% that's presented now?

 And the second question had to do with, let's say, your total debt position. Apparently now net around $9.2 billion. If I see in your presentation of June, on page 14, I see it mentioning the total debt reduced in quarter two to date, to under $9 billion. Can you please clarify that as well? Thank you very much.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [28]
------------------------------
 Stanislav Ploschenko will answer.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [29]
------------------------------
 Thanks, Bernard for the questions. With regard to the first one, unfortunately, it is the Company's policy not to give forward-looking statements with regard to its financial metrics. But the Company has a view on the development of its EBITDA. And with that view, which hasn't changed so far, we approach the syndicative banks to renegotiate the debt covenants a few months ago, as you know, and we are pretty certain that the room that we have agreed with the banks for the fluctuation in the net debt EBITDA metrics is still very comfortable for the Company through the end of this year.

 The second question, most of the reduction of -- most of the difference between the debt as of the end of the first quarter, and of last Friday, which is the date of which we put this number into the presentation, has happened due to a rather sharp dollar appreciation versus ruble in the second quarter.

 But on top of that, we are continuing to reduce excessive operating cash flow to repay debt.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [30]
------------------------------
 Thank you. Next question, please.

------------------------------
Operator   [31]
------------------------------
 Thank you. Our next question comes from the line of Dan Yakub. Please go ahead with your translation, please. Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [32]
------------------------------
 Now we're ready for the next question.

------------------------------
Operator   [33]
------------------------------
 And our next question has come from the line of Dan Yakub from Citi. Please go ahead, Dan.

------------------------------
 Daniel Yakub,  Citibank - Analyst   [34]
------------------------------
 Guys, thanks a lot for the presentation. Couple of questions. The first question relates to the Elga coal deposits, production guidance. There was a published production guidance which suggested that you will be achieving 2 million tons of [one of the] mine coal already in 2012, and 1.3 million tons of clean washed, or concentrated coal in 2012.

 And that was growing to 6 million tons by 2014, which was an equivalent of 4.5 million tons of washed coal in 2014. Can you provide an understanding of whether this guidance is still in place, and what will be the washed or concentrated split between thermal and metallurgical coals in the first couple of years of production?

 Second question relates to the ruble denominated exchange-traded bonds. I understand the pretty significant portion of the $9 billion equivalent of the net debt is actually in ruble bonds, 25% of the total debt profile is in ruble bonds.

 Can you elaborate a little bit on the governance that pertains to these bonds? And maybe you can disclose who is the main holders? Who are the main holders of these bonds? Would be Russian financial institutions? Is there one financial institution? Is there many financial institutions who would actually hold these ruble bonds?

 And finally, just there's -- to finish off the debt questions, just to understand what kind of collateral Sberbank, who is among the major lenders, do you kind of collateral Sberbank is holding against the debt that it extended to you? These are the debt and Elga questions. And I might have one more market -- steel market related question, if I may, once we have dealt with these questions. Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [35]
------------------------------
 Oleg Korzhov will answer the first question.

------------------------------
 Oleg Korzhov,  Mechel OAO - SVP - Economics & Management   [36]
------------------------------
 (interpreted) As you know, in 2010, we had to adjust our plants for ELga, there's a certain constraining factor that exists there, which is our washing capacities. Indeed the plants to produce 2 million tons in 2012. But because of the commissioning of the seasonal washing factory, we had to adjust our plans of production to 1 million tons.

 This project, of a seasonal washing factory, is almost finished. We plan to commission this facility in July. But we have always insisted that we need to produce only as much as we can wash.

 So there are several factors that play here. First of all, our production very much depends, again, on the launch of this seasonal washing factory. Then we will need to build up the capacity, bring it to the design capacity. Then we are currently considering different options of turning that washing factory, rather to extend the time during which this washing factory can operate in the year.

 And there's another factor, which doesn't really depend on us, which is winter. You never can tell when winter will come this year. So again, we plan only to produce as much as we can wash. And as to our plans for subsequent years, in the next year, we plan to produce 2 million, 3 million tons of coal. Again, it will depend, the final figure will depend on the launch of additional washing, now, facilities according to our plans. And we have not made any adjustments yet to our plans beyond 2013.

 Now, to the split between the coking coals and the thermal steam coals, we -- in the current year, in the next year, we plan to produce 30%, 35% of coking coal with subsequent increase, is share in overall production. So when our Elga deposit production site reaches its design production of 9 million tons, we believe that the split between the coking coals and thermal coals will be 50-50.

 And when I said that there will be a split of 50-50, I meant the finished products, ready products, not the [run-of-mine] coal, but the ready-made products.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [37]
------------------------------
 The remaining questions will be answered by Stanislav Ploschenko.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [38]
------------------------------
 The first question was about ruble-denominated bonds, which constitutes 25% of our debt portfolio. And the attractiveness of this instrument is exactly the fact that it's covenant free, completely, and unsecured, and which is why we envisage further utilization of this instrument, it the future should be public debt, capital markets in Russia allow.

 This 25% consists of number of tranches, number of [issues] of different nominal value issued in the course of the last three years. So it's a widely distributed instrument across the investment community in Russia. Of course, include banks. But I would not say that a huge number of this instrument is concentrated by one particular investor.

 As far as the second question is concerned in particular, for the collateral and Sberbank loans, the usual collateral that -- with Sberbank, we have unsecured loans, largely working capital facilities. As far as long-term facilities are concerned, we have a five-year loan, which is already halfway through its maturity age. Chelyabinsk plant secured with a 25% plus one share in Beloretsk Metallurgical Plant. Now the significant security is attributed to Sberbank relationship.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [39]
------------------------------
 Next question, please.

------------------------------
 Daniel Yakub,  Citibank - Analyst   [40]
------------------------------
 One follow-up question, it's a very quick one on the different -- well, there is quite a significant premium opened up between rebar and billets. So the premium of real-life price of rebar relative to billets in the first quarter of this year was 27%, versus approximately 17% in the preceding two quarters, third quarter of 2011, fourth quarter of 2011.

 Can you comment on why the premium was so large, such a large increase in the premium in the first quarter? Is that the result of much lower billet prices? Or is all that particularly strong rebar market? Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [41]
------------------------------
 Please allow us some time for -- preparing the answer. Stanislav Ploschenko will answer the question.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [42]
------------------------------
 As a matter of fact, there's always a difference between the price on the rebar and the billets, because it's two different products, and two different markets. The fluctuation, or the change in the difference that happens from time to time, when one looks at that, one should take into account that we operate in different markets.

 So we use billet sales as a commodity, which is highly sensitive to the commodity markets changes. Whereas the rebar is a finished product market, is driven by slightly different factors. And we also should take into account that most of our rebar sales are domestic, where we fully utilize the selling capacity of Mechel service.

 And one of the illustration was that in the fourth quarter, and the first quarter, there -- while the billet prices were volatile, the rebar prices, as a matter of fact, did not change at all.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [43]
------------------------------
 Next question, please.

------------------------------
Operator   [44]
------------------------------
 Thank you. We currently have no further questions coming through. (Operator Instructions). And we have a question, comes from the line of Vasily Kuligin from Renaissance Capital. Please go ahead.

------------------------------
 Vasily Kuligin,  Renaissance Capital - Analyst   [45]
------------------------------
 Good evening. Thank you for your presentation. Two short questions from me. The first one's regarding Estar Group. What is the timing of consolidation of Estar Group on your balance? For example, if we assume that they really default on their loan closer to September, what will be the first quarter of your consolidated results, including Estar Group financials?

 And second question is regarding is SG&A. It's more general question. Usually your SG&A expenses account for about 20%, 22% of revenue, which is far above the average level of global peers, which is 4% or 5%, nothing more. Does this happen due to Mechel service separations or there is some other reason for this? Thanks.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [46]
------------------------------
 Stanislav Ploschenko will answer.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [47]
------------------------------
 First of all, it is too early to assume that Estar will default on the debt. And the group does not have an intention to consolidate Estar. This is the eventuality of the final default. And we count on Estar's management, or on its ability to repay debt.

 As far as the SG&A expenses are concerned, it is difficult for me to compare to the global peers as you mentioned. I would doubt that the average share of SG&A expenses in the revenue is 4% and 5%. It looks more like only administrative expenses, and certainly not in our industry, in our country.

 As you know, the group is selling -- or first of all, there is a big transportation lack from our operations to our core markets. And the group sells a lot of its goods not on the FCA basis, but on the final delivery basis. Sometimes FOB, sometimes CIF, and CFR.

 And those full delivery basis sales represent about all sales of Mechel Mining, which in that turn, represent the bulk of the consolidated group sales. So no surprise that commercial expenses take a significant part in our revenue. And the same goes for Mechel service. Yes, here your assumption is also right.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [48]
------------------------------
 Next question, please.

------------------------------
Operator   [49]
------------------------------
 Thank you. Our next question is coming from the line of Andrey Kulakov, Uralsib Capital. Please go ahead.

------------------------------
 Andrey Kulakov,  Uralsib Capital - Analyst   [50]
------------------------------
 Hi. Thank you for your presentation. I have a small follow-up question regarding your debt. So if I can find from your presentation, there is a graph showing your loans for payments schedule. And according to that, in 2012, have about $153 million of commercial papers, and ruble bonds that should be redeemed.

 But what looked strange to me, maybe I missed something, but as I can find information, public resources, you have free ruble bond issues. One of them should be redeemed, RUB5 billion, but as far as I know, RUB1.5 billion outstanding. And two bond issues of RUB10 billion totally that have put options. And you say that you include put options in this schedule.

 So as a whole, it should be approximately $470 million. Where are the rest? Maybe you bought back something from the market, from an open market, or can you just comment on that? Thanks.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [51]
------------------------------
 Stanislav Ploschenko can answer.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [52]
------------------------------
 We will double check that information. And if there is an error, it will be posted on the website.

------------------------------
 Andrey Kulakov,  Uralsib Capital - Analyst   [53]
------------------------------
 Okay. Thanks.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [54]
------------------------------
 Next question, please.

------------------------------
Operator   [55]
------------------------------
 Thank you. Next question has come from the line of George Buzhenitsa from Deutsche Bank. Please go ahead.

------------------------------
 George Buzhenitsa,  Deutsche Bank - Analyst   [56]
------------------------------
 Good evening, gentlemen. Thank you for the presentation. I have a question on your debt. Can you please tell us, how is the debt calculated? The net debt is calculated for the purpose of covenant testing. And could you also remind what the new governance --

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [57]
------------------------------
 Stanislav Ploschenko will answer.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [58]
------------------------------
 The net debt is calculated by adding debt -- by adding financial lease to debt, and subtracting cash and cash equivalence, including deposits up to six months. The net debt, EBITDA level set for this year is 5.5 times. And EBITDA interest expense is 3.3 -- excuse me -- 2.6 times.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [59]
------------------------------
 Next question, please.

------------------------------
Operator   [60]
------------------------------
 Thank you. Our next question is coming from the line of [Paul Carr] from [Amoris Management]. Please go ahead, Paul.

------------------------------
 Paul Carr,  Amoris Management - Analyst   [61]
------------------------------
 Thank you for taking my call. I don't know if you can actually comment on this, because I know your spokesperson said that you might not be able to comment until the time period expires. But what progress are you making in addressing the ministries concern at the (inaudible) subsidiary?

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [62]
------------------------------
 Yevgeny Mikhel will answer the question.

------------------------------
 Yevgeny Mikhel,  Mechel OAO - CEO   [63]
------------------------------
 (interpreted) As you probably already know, in the beginning of May 2012, there was a meeting of the special commission within the ministry, which considered our case, and made -- gave us certain instructions.

 We are complying with those instructions. They gave us six months to fix all the problems that they found at the site. And we believe that currently we are on schedule. We have a plan of action, and we are pursuing it. And when this time frame comes to the end, we will be able to give you all the details about that process. Thank you.

------------------------------
 Paul Carr,  Amoris Management - Analyst   [64]
------------------------------
 Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [65]
------------------------------
 Next question, please.

------------------------------
Operator   [66]
------------------------------
 Thank you. We have a follow-up question from the line of Dan Yakub from Citi. Please go ahead, Don.

------------------------------
 Daniel Yakub,  Citibank - Analyst   [67]
------------------------------
 Thanks so much for taking the follow-up question. As it relates to the 15% increase in the interest expenses, quarter-on-quarter, in the first quarter, what is your feeling for the US dollar interest expense dynamics in the third quarter? I know it would constitute a public financial guidance. But maybe you have an understanding of whether interest expenses are going to remain the same, or may change in the subsequent quarters. Thank you.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [68]
------------------------------
 Stanislav Ploschenko will answer.

------------------------------
 Stanislav Ploschenko,  Mechel OAO - CFO   [69]
------------------------------
 At the moment, we do not see any significant volatility in dollar interest rates in the markets. But of course, it will -- it's always easier to test the water when you step into it, since it's the Company's strategy for this year to continue in debt optimization.

 We aim to extend the maturity, which may probably entail certain refinancing, including in foreign currency, that may lead, if the market continues to be tight, to an increase in the interest rate. But obviously, we will not sacrifice the economics just to get a longer tenure, where we'll look at the -- all the factors at the same time.

 And I would also like to return to the question which was asked before about the ruble bonds. The figures that are in this schedule on the page number 14, represent the maturity of the bonds, but not the put options. The put options are assumed to be -- to roll over in today's markets, since we see the capacity of the market to do that.

 In case there is a shortage in the markets for rolling over the bonds, or even for any refinancing, we still feel very comfortable with the cash position of the Company, and the available credit lines, especially after the reduction of short-term debt, or repayment of short-term working capital facilities, which took place in the last two months following raising long-term debt with the Russian banks, amount to approximately $2 billion.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [70]
------------------------------
 Next question, please.

------------------------------
Operator   [71]
------------------------------
 Thank you. We currently have no further questions coming through. (Operator Instructions). We've got no further questions coming through. I'll hand it back to your host to wrap up today's call.

------------------------------
 Vladislav Zlenko,  Mechel OAO - Director - IR   [72]
------------------------------
 Ladies and gentlemen, thank you for taking the time to join Mechel's, our first quarter 2012 financial results conference call today. A replay of the call will be available on Mechel's website. If you have any further questions, please contact the IR office. Thank you again from all the team here.

------------------------------
Operator   [73]
------------------------------
 Ladies and gentlemen, thank you for joining. You may now disconnect your line.

------------------------------
Editor   [74]
------------------------------
 Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.




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