Update on the potential demerger of coal assets

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

15 April 2021

EVRAZ plc ("EVRAZ" or the "Company") - Update on the potential demerger of coal assets (the "Potential Demerger")

Further to the Company's announcement on 26 January 2021 that it is considering the strategic merits of and possible structures for a potential demerger of its coal business, the Board of EVRAZ (the "Board") has today given its approval for the Company to move forward in its preparations for the Potential Demerger. There can be no assurance that the Potential Demerger will be undertaken and the Board will keep shareholders updated through further announcements as appropriate.

Following completion of the previously announced consolidation, essentially all of the Company's coal assets sit under PJSC Raspadskaya ("Raspadskaya"). Raspadskaya is a subsidiary of EVRAZ listed on the Moscow Exchange, and is an integrated group of coal mining and enrichment facilities located in the Kemerovo region and Tyva Republic of Russia. It comprises eight underground mines, two open-pit operations and three processing facilities. Raspadskaya has a market capitalisation of c. RUB137bn (c.US$1.8bn) as of 15 April 2021. For the year ended 31 December 2020, coal segment contributed approximately US$400 million into EVRAZ's total EBITDA of US$2,212 million (~18%).

Potential Demerger rationale

EVRAZ is committed to maximising value for its shareholders and the Board believes the Potential Demerger of Raspadskaya could create significant long-term value by allowing each business to pursue dedicated strategic, capital allocation and ESG objectives. In particular, the rationale behind the Potential Demerger includes:

·    Differentiated value proposition: Establish a clear and focused equity story for each of EVRAZ as a leading global producer of steel, iron ore & vanadium and Raspadskaya as a leading regional producer of high quality metallurgical coal

·    Increased transparency over sustainability performance and goals: Allow each business to concentrate on its respective ESG priorities, enhancing accountability of ESG achievements and comparability of results against peer universe

·    Optionality for investors: Flexibility to customise the exposure to respective sectors, earnings volatility profiles and ESG performance in accordance with investors' risk and return appetite via publicly listed instruments

·    Tailored capital allocation:  Enable each business to adopt a capital allocation framework balancing its cash flow fluctuations, growth investment strategy and return of capital to shareholders

·    Independent growth strategy for Raspadskaya: Allow Raspadskaya to independently implement its strategy and pursue organic and inorganic growth opportunities avoiding possible competition for internal financial and human resources

Potential Demerger process overview and preparatory steps

The Company notes that the current intention is for the Potential Demerger, if undertaken, to be effected by EVRAZ making an interim in specie distribution of all of the shares which EVRAZ directly holds in Raspadskaya, being approximately 90.9% of the total shares[1], to all shareholders of EVRAZ pro rata to their existing shareholdings in EVRAZ (the "Demerger Dividend"). The Company intends for a mechanism to be made available to EVRAZ shareholders, providing them with the opportunity to sell, for cash, the shares in Raspadskaya which they would be entitled to receive pursuant to the Demerger Dividend. It is the Company's intention that such mechanism will not be dependent on funding from the post-demerger EVRAZ group or its major shareholders.

Certain financing arrangements are intended to be put in place and/or completed prior to the Potential Demerger being effected in order to rebalance the capital structure of EVRAZ and Raspadskaya. If the Potential Demerger is implemented, EVRAZ intends to remain committed to its existing financial policies, in particular to continue to target Net Debt/EBITDA below 2.0x through the cycle.

On completion of the Potential Demerger, EVRAZ plans to continue to satisfy part of its coal requirements for its production, through purchases of coal on arm's length terms from Raspadskaya. EVRAZ currently intends that its trading subsidiary, East Metals AG, will continue to re-sell coal purchased from Raspadskaya, applying arm's length margins.

In the event that the Board decides to proceed with the Potential Demerger, the precise mechanics and timing of the Potential Demerger will be communicated to shareholders in due course. Regardless of whether the Potential Demerger is undertaken, it is intended that Raspadskaya will continue to be listed on the Moscow Exchange and EVRAZ will continue to be listed on the Premium Segment of the London Stock Exchange.

EVRAZ has engaged J.P. Morgan Securities plc (which conducts its UK investment banking activities as J.P. Morgan Cazenove) and Citigroup Global Markets Limited as financial advisors, and Linklaters LLP as legal advisor to assist with the ongoing review of, and preparation for, the Potential Demerger.

About the Company

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, the USA, Canada, the Czech Republic and Kazakhstan. EVRAZ is among the top steel producers in the world. A significant portion of the Сompany's internal consumption of iron ore and coking coal is covered by its mining operations. EVRAZ is listed on the London Stock Exchange and is a constituent of the FTSE 100 index.

For further information:

EVRAZ plc IR Contacts                                                                                                                Tel: +44 207 290 1095  

Important information

Each of J.P. Morgan Securities plc (which conducts its UK investment banking activities as J.P. Morgan Cazenove) and Citigroup Global Markets Limited, is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by both the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the Potential Demerger. They will not regard any other person as a client in relation to the Potential Demerger and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for giving advice in relation to the Potential Demerger or the contents of this announcement or any transaction, arrangement or other matter referred to herein.