Evraz pays 2013 special dividend of 6 cents and revises dividend policy

DividendMax Ltd.

Evraz pays 2013 special dividend of 6 cents and revises dividend policy

Mining:

 

·    Mining segment revenue of US$3,120 million (+18% vs. 2012)

 

·    Raw coking coal production of 18.9 million tonnes (+22%) including 7.8 million tonnes from Raspadskaya

 

·    Production of saleable iron ore products was 20.4 million tonnes (-1%) on the back of lower output by the Russian operations largely driven by the disposal of high cost operation EVRAZ VGOK

 

·    Decline in prices for mining products led to a US$182 million decrease in consolidated revenue

 

 

 

Vanadium:

 

·    Vanadium segment revenue of US$550 million (+6% vs. 2012)

 

·    The vanadium division produced 21,077 tonnes (+0.1%) of vanadium slag and sold 23,287 tonnes (+10%) of vanadium products

 

 

 

Investments:

 

·    Capital expenditure of US$902 million (vs. US$1,261 million in 2012) following the thorough revision of investment plans

 

·    Rail mill modernisation at EVRAZ ZSMK completed in January 2013 with ramp-up mostly finished

 

·    PCI project at EVRAZ NTMK fully reached design parameters in May 2013, while construction work on PCI at EVRAZ ZSMK continued

 

·    Yerunakovskaya VIII coking coal mine launched in February 2013 and fully ramped up by February 2014

 

·    Development of Mezhegey coking coal deposit continued

 

·    Hot tests at Vostochny rolling mill in Kazakhstan commenced

 

 

 

M&A developments:

 

·    Completion of acquisition of an indirect controlling interest in OJSC Raspadskaya bringing effective interest to 81.95% for US$964 million in  equity and cash

 

·    Acquisition of the 51% stake in Timir iron ore project for a US$159 million cash consideration

 

·    Disposal of structurally high costs assets in iron ore and coal mining - EVRAZ VGOK, Abakan and Teya mines of Evrazruda and the Gramoteinskaya steam coal mine for cash consideration of ca.US$20 million

 

·    Disposal of EVRAZ Vitkovice Steel based on the enterprise value of US$287 million

 

 

 

Debt and liquidity:

 

·    Net debt of US$6,534 million vs. US$6,376 million as at 31 December 2012 including additional US$400 million of net debt contributed in 2013 from the consolidation of Raspadskaya

 

·    Cash and short-term deposits of US$1,611 million (see Appendix 2 for calculation)

 

·    Placed US$1,000 million Eurobonds due in 2020 with the lowest ever coupon rate achieved by EVRAZ of 6.50% p.a.

 

·    Prepaid US$950 million structured credit facility due 2015 with certain covenants on net leverage

 

 

·    Revised dividend policy set out (see below)

 

 

Dividends and dividend policy

 

The directors recommend a dividend of 6 cents per share to be consistent with their intention of distributing, where appropriate, a proportion of the margin on disposals as dividends, and as an indication of confidence in the Company's position. The US$90.4 million represents the approximate cash portion of the proceeds from the sale of EVRAZ Vitkovice Steel, leaving US$196.6 million for the reduction of debt.

 

Going forward, the dividend policy has been revised to support the financial strategy of deleveraging and envisages that the regular dividends will be paid only when the net leverage (net debt/EBITDA) target of below 3.0x is achieved. The Board reserves the right to propose special dividends in the event of asset disposals.

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