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Mechel Announces Contract for Its Chelyabinsk Metallurgical Plant OAO Subsidiary to Supply Rails to Russian Railways OAO

Posted on: Thursday, 13 November 2008, 12:00 CST

MOSCOW, Nov. 13 /PRNewswire-FirstCall/ -- Mechel OAO , one of the leading Russian mining and metals companies, announces that a contract has been signed between its Chelyabinsk Metallurgical Plant OAO (CMP OAO) subsidiary and Russian Railways OAO (RZhD OAO) for the supply of rail products. The agreement is in line with the long-term partnership agreement signed between Mechel OAO and RZhD OAO early this year.

Today, November 13, 2008, Russian Railways OAO President Vladimir Yakunin and Mechel OAO Chief Executive Officer Igor Zyuzin signed the contract for Chelyabinsk Metallurgical Plant OAO to supply rail products to RZhD OAO from 2010 to 2030.

Pursuant to the agreement between RZhD OAO and Mechel OAO signed on February 26, 2008, the total annual supply volume of rail products will be a minimum of 400,000 tonnes following achievement of the rail and structural steel mill's full production capacity.

The new products will include high quality railroad rails up to 100 meters in length manufactured with the use of state of the art technologies for steel melting, rolling, tempering, straightening, finishing, and rail quality control. Technical solutions will enable manufacturing rails that surpass their world equivalents in a number of key parameters, which are determined by the climate conditions of the rail service in Russia.

As was announced earlier, Mechel will ensure obtaining the necessary certificates for safe use of the rails in the railway system and performing proving-ground tests. In addition, Mechel will work systematically under programs to enhance rail production technology.

To ensure a smooth production process at Mechel's subsidiaries, RZhD OAO plans to continuously deliver the rolling stock, including its own rail carrying cars, to be used for shipping finished products.

"Signing the contract to supply rail product to RZhD OAO is the next step in implementing our long-term partnership program. To ensure its successful implementation of the program, Mechel collaborates with one of the world leaders - Danieli, Italian manufacturer of equipment, and Minmetals, China's state-owned industrial corporation. In collaboration with these companies, Mechel is constructing a rail and structural steel mill at its Chelyabinsk Metallurgical Plant subsidiary and implementing unique technology, unparalleled in Russia, to produce high quality rails that conform to the most stringent requirements set by RZhD OAO. Mechel plans to invest more than US$500 million in the new production development," Mechel OAO Chief Executive Officer Igor Zyuzin commented.

Mechel is one of the leading Russian companies. Its business includes three segments: mining, steel, and power. Mechel unites producers of coal, iron ore concentrate, nickel, steel, rolled products, hardware, heat and electric power. Mechel products are marketed domestically and internationally.

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, 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 files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. 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 20-F, 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.

Mechel OAO

CONTACT: Ilya Zhitomirsky, Mechel OAO, +7-495-221-88-88,ilya.zhitomirsky@mechel.com

Source: PRNewswire-FirstCall

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