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Mechel Announces the Acquisition of a Controlling Stake in Moscow Coke and Gas Plant OAO

Posted on: Wednesday, 4 October 2006, 09:00 CDT

MOSCOW, Oct. 4 /PRNewswire-FirstCall/ -- Mechel OAO announces the acquisition of a controlling stake in Moscow Coke and Gas Plant OAO (Moskoks).

The acquisition is in line with Mechel's strategy of further developing its mining segment, expanding company's presence in coal and coke-chemical markets and strengthening synergistic effects.

Moscow Coke and Gas Plant OAO, located in the central region of Russia, boasts economically advantageous geographical location and stable sales markets. The Plant's annual production capacity is about 1.5 million tonnes of coke. Products are successfully sold domestically, mainly to Russia's central region manufacturers, as well as shipped abroad, in particular to Ukraine and European Union countries.

Mechel acquired a controlling stake in Moskoks from its management and other shareholders. Effective ownership rate is about 77%. The amount of transaction is approximately $300 million. Based on Russian Accounting Standards (RAS), in 2005 Moskoks' revenue was approximately $111 million, net income - approximately $25 million. Moskoks' net assets (RAS) as of July 30, 2006 were approximately $190.5 million.

Inclusion of Moskoks into Mechel Group's structure will enable Moskoks to fully satisfy its needs in coking coal. Annual shipments of coking coal from the Southern Kuzbass Coal Company will be around 1.5-2 million tonnes. Moskoks' competitive advantage is self-sufficiency in electricity, which is produced by its own power plant with a capacity of 30 MW.

Alexey Ivanushkin, Mechel's Chief Operating Officer, commented: "We continue to implement our strategy of further developing our mining segment. The acquisition of Moscow Coke and Gas Plant OAO allows for an increase of Mechel's competitiveness as we enter new sales markets for coal and its byproducts.

Mechel is one of the leading Russian mining and metals companies. Mechel unites producers of coal, iron ore, nickel, steel, rolled products, and hardware. 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: Irina Ostryakova, Director of Communications, Mechel OAO,+7-495-221-88-88, fax, +7-495-221-88-00, irina.ostryakova@mechel.com

Source: PRNewswire-FirstCall

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