Mechel Announced its Winning of Auctions to Develop New Coking Coal Mine Areas

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Mechel Announced its Winning of Auctions to Develop New Coking Coal Mine Areas

Kemerovo, Russia – December 2, 2004 – Southern Kuzbass Coal Company, a subsidiary of Mechel , has won two auctions for the right to use subsoil plots for coking coal exploration and mining at the Raspadsky Open Pit Mine and Berezovsky-2 areas, with total reserves of 55.5 million tons according to Russian reserve valuation standards . In total, Mechel has increased its reserves of coking coal by over 120 million tons in the last month.

According to the decisions of the auction committees, Mechel will receive licenses through its subsidiary, Southern Kuzbass OAO, for the use of reserves of the Raspadsky Open Pit Mine area of the Raspadsky Coal Deposit and Berezovsky-2 area of the Berezovsky and Olzherassky Coal Deposits for 20 years. The acquisition of the new mining areas has been done in pursuance of the Mechel's strategy targeted at further developing its coking coal mining operations.

The coal reserves of the Raspadsky Open Pit Mine license area amount to 25 million tons based on Russian reserve valuation standards. The auction conditions require a minimum of 0.75 million tons of extraction annually during the first stage of development, and 1.0 million tons of extraction annually during the second stage of development.

The coal reserves of the Berezovsky-2 license area amount to 30.5 million tons based on Russian reserve valuation standards. The auction conditions require a minimum of 0.45 million tons of extraction annually during the first stage of development, and 0.5 million tons of extraction annually during the second stage of development.

Mechel currently operates at a number of coal areas located at the Raspadsky, Olzherassky, and Berezovsky Deposits.

Earlier in November of this year, Southern Kuzbass Coal Company also won an auction to develop a coking coal mine in the Sibirginskaya Mine area in the Kuzbass region of Russia with reserves amounting to 65 million tons. Combined with the two new license areas won today, Mechel has increased its balance of reserves of coking coal by over 120 million tons in the last month.

“Coking coal mining is the important constituent part of the Mechel’s activities, and we follow our strategy providing for priority development of this segment,” Mechel’s CEO, Vladimir Iorich, said on completion of the auction.

Russian reserve valuation standards differ from other international standards. Mechel intends to finalize an independent reserve valuation of these license areas with U.S. experts during 2005.


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Mechel Steel Group OAO
Irina Ostryakova
Phone: 7-095-258-18-28
e-mail: Irina.Ostryakova@mechel.com


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Mechel Steel Group is a Russian metals and mining company, uniting producers of steel, rolled products, hardware, coal, iron ore concentrate, and nickel. Mechel Steel Group products are marketed domestically and internationally.


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Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel Steel Group, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel Steel Group files from time to time with the U.S. Securities and Exchange Commission, including our Form F-1. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Form F-1, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions.

02.12.2