EVRAZ plc Annual Report & Accounts 2020

MEET EVRAZ

EVRAZ IN FIGURES

STRATEGIC REPORT

Chairman’s Introduction
Chief Executive Officer’s Letter
EVRAZ’s Business Model
Operational Model
Report Boundaries
Sustainable Development
EVRAZ Business System
Market Review
Strategic Priorities
Key Performance Indicators
Impact of COVID-19
Financial Review
Business Review
Corporate Social Responsibility
Customer-centric
R&D
Digital Transformation
Principal Risks and Uncertainties
Viability Statement
Competition Statement

CORPORATE GOVERNANCE

Board of Directors
Management
Corporate Governance Report
Stakeholder Engagement
Audit Committee Report
Nominations Committee Report
Health, Safety and Environment Committee
Remuneration Report
Directors’ Report
Directors’ Responsibility Statement

FINANCIAL STATEMENTS

Independent Auditor’s Report to Members of EVRAZ plc
Consolidated Financial Statements
Separate Financial Statements

ADDITIONAL INFORMATION

Stock Performance Indicators and Shareholder Information
Definitions of Selected Alternative Performance Measures
Data on Mineral Reserves
Steel Segment
Steel, North America Segment
Coal Segment
Terms and Abbreviations
Contact Details

MEET EVRAZ

FOR A BETTER FUTURE

ANNUAL REPORT & ACCOUNTS 2020

MEET EVRAZ

EVRAZ IN FIGURES

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION | 2

FOR OUR
PARTNERS
PEOPLE
COMMUNITY

14
million tonnes
coking coal sales as of 31 December 2020
69,619
employees
US$ 31 million
steel products sales
Social and social infrastructure maintenance expenses

LEADER
* In construction and railway product markets in Russia.
* The largest coking coal producer in Russia.
* In production of rails and large diameter pipes in North America.

GLOBAL FOOTPRINT
* Moscow Office
* Russia
* Switzerland
* Czech Republic
* Kazakhstan
* Canada
* USA
* London Office

EVRAZ IN FIGURES

FINANCIAL HIGHLIGHTS

Segment	2018	2019	2020
Consolidated revenues by segment, US$ million
Coal	3,356	2,155	1,736
Steel	7,673	7,762	7,001
Steel, NA	2,395	2,526	2,153
Other operations	106	79	36
Eliminations	(23)	(22)	(20)
Total	13,507	12,500	10,806

Read more on page 32 →

Segment	2018	2019	2020
Consolidated EBITDA by segment, US$ million
Coal	1,457	871	488
Steel	2,701	2,555	2,003
Steel, NA	460	422	342
Other operations	6	4	1
Eliminations	(1)	(1)	(1)
Total	4,623	3,851	2,833

Read more on page 32 →

OPERATING HIGHLIGHTS

Metric	2018	2019	2020
Crude steel output, kt	13,814	13,019	12,768
Steel products output¹, kt	14,205	13,765	13,515
Iron ore products output, kt	13,230	12,376	12,154

¹ Net of re-rolled volumes.

CSR HIGHLIGHTS

Metric	2018	2019	2020
LTIFR (excluding fatalities), per million hours	1.91	2.04	1.58
Key air emissions, kt	128.24	127.69	121.30
EVRAZ GHG emissions, MtCO2e	38.79	43.57	43.35

Read more on page 58 →

Read more on page 60 →

Read more on page 64 →

SHAREHOLDER STRUCTURE

Geographic dispersion of institutional shareholders, % of voting rights

United Kingdom: 9.50%
Russia: 2.22%
Europe (excl. UK, Russia): 6.35%
North America: 10.87%
Other: 1.72%
Not Disclosed: 1.15%
Free-float: 68.19%

NET DEBT
US$ 3,356 million
3% year-on-year

CAPEX²
US$ 657 million
14% year-on-year

NET PROFIT
US$ 858 million
↓ 19% year-on-year

² Including payments on deferred terms recognised in financing activities.

Metric	2018	2019	2020
Raw coking coal production, kt	24,188	26,140	20,653
Coking coal concentrate production, kt	19,533	18,380	15,528
Gross vanadium slag production,³ mtV	1,947	2,057	1,930

³ Production by Coal segment. Production by Steel segment. In tonnes of pure vanadium.

Metric	2018	2019	2020
Fresh water consumption, million m³	226.49	205.32	206.20

EMPLOYEES BY REGION

Region	2018	2019	2020
Russia and CIS	50,266	18,951	104
North America	298	7	2
Europe	3	2	2
Total	50,567	18,960	108

Read more on page 62 →

DIVERSITY

Category	% (number of people)
Board	22%
Management	4%
Senior Employees	26%
Employees	27%

Read more on page 69 →

ULTIMATE BENEFICIAL OWNERS, % OF VOTING RIGHTS⁴

Roman Abramovich⁴: 33.80%
Alexander Abramov⁴: 28.68%
Alexander Frolov⁴: 19.35%
Free-float: 9.66%
Gennady Kozovoy⁵: 5.75%

⁴
⁵# Annual report & accounts 2020

STRATEGIC REPORT

Sustainable foundation for a Better Future

Meet EVRAZ

EVRAZ in ﬁgures

Strategic report

Corporate governance

Financial statements

Aꢀꢀitional inꢂormation | 4

CHAIRMAN’S INTRODUCTION

Despite the unpredictable challenges of the COVID-19 pandemic in 2020, EVRAZ's response was robust. The Group’s employees diligently implemented new workplace safety measures while also focusing on the health and wellbeing of the broader communities in which they and their families live and work. Thanks to the dedication and commitment of its people, EVRAZ maintained operational continuity and made further progress on its environmental agenda despite the unique challenges of 2020.

Alexander Abramov
Non-Executive Chairman

Health and safety

the work of the EVRAZ crisis management centre and senior executives to mitigate tꢁe operationalꢡ commercial anꢀ ﬁnancial impact on the Group. Thanks to the safety measures that EVRAZ enacted to protect its people and ensure operational continuity, the COVID-19 pandemic has had a relatively limited impact on the Group’s business.

climate risks, applying best environmental practices and working to meet stakeholder expectations. The EVRAZ Board of Directors remains committed to its long-term goal oꢂ acꢁieving ꢠero inꢝuries anꢀ ꢂatalities in the workplace. While the Group’s ꢁealtꢁ anꢀ saꢂetꢕ eꢢorts leꢀ to signiﬁcant improvements in this area, there were still ﬁve tragic emploꢕee ꢂatalities in ꢉꢚꢉꢚꢡ ꢇꢁicꢁ is ﬁve too manꢕꢘ

As part oꢂ its eꢢorts to improve tꢁe saꢂetꢕ cultureꢡ EVRAZ focused on a new approach to engage employees in the process of identifying and mitigating risks. This and other initiatives helped to bring tꢁe lostꢌtime inꢝurꢕ ꢂreꢣuencꢕ rate ꢤ a ꢥeꢕ ꢁealtꢁ anꢀ saꢂetꢕ metric ꢤ ꢀoꢇn to 1.58, which is a sign of considerable progress in the Group’s overriding priority of safeguarding its people. In addition, EVRAZ spareꢀ no eꢢort in its CꢦVꢎꢔꢌ 19 response to provide safe working conditions for employees while also supporting local hospitals and communities. For more about the Group’s environmental performance, see sections Environmental management and GHG emissions on pages 60-65

ꢧ Throughout the year, the Board strove to better understand the potential longer-term climate-related risks and opportunities ꢂacing EVRAZꢘ ꢙꢁe ﬁrst step ꢇas to conduct a qualitative analysis of three climate scenarios envisaging global average temperature increases of ~1.5°C, ~2.0°C and ~4.5°C by the year 2100. This analysis drew on insight into the global physical climate impacts under various climate scenarios developed by the UN’s Intergovernmental Panel on Climate Change, as well as Shared Socioeconomic Pathways, which provide outlooks for socioeconomic factors corresponding to tꢁe ꢀiꢢerent climate scenariosꢘ ꢙꢁe ꢨroup useꢀ tꢁis researcꢁ to prepare its ﬁrst Climate Change Report, which serves

The Board also understands that the unprecedented measures undertaken to prevent the spread of COVID-19 and the mental impact this may have on many people in these trying times requires careful attention to the possible health repercussions of the pandemic. For more about the support given to employees during this time, see section Impact of COVID-19 on pages 30-31

Environment

In 2020, the Board of Directors approved the Group’s new Environmental Strategy, which serves as a roadmap for improving environmental performance by assessing

From the outbreak of the pandemic, the Board of Directors closely monitored

as a foundation to continue improving climate risk management at EVRAZ. independent non-executive directors have been recruited in recent years to enhance the depth and breadth of the Board’s experience. In 2020, the Nominations Committee began searching for suitable candidates to replace those independent

EVRAZ uses an annual, organisation- wide employee survey as a guide for aligning the Group’s culture with its purpose and values, as described on pages ꢆꢉꢌꢆꢒ oꢂ tꢁe Strategic Reportꢘ The Board receives a summary of this

The Climate Change Report was prepared following the recommendations of the Task Force on Climate-related Financial Disclosures and outlines the principles underpinning the approach that EVRAZ takes to climate change while providing greater insight for stakeholders on the Group’s mitigation actions.

ꢙꢁe initial ﬁnꢀings are summariseꢀ in tꢁis report and the Group intends to update the Climate Change Report periodically.

non-executive directors who will have served survey for review and closely follows terms of nine years and will be required to stand down at the Annual General Meetings in 2021 and 2022.

tꢁe implementation oꢂ management eꢢorts undertaken as a result of the survey.

Dividends

Having both served nine years as non-executive directors, and in line with the UK Corporate Governance Code’s In 2020, the Board approved two interim dividend payments: US$0.40 per recommendations on director independence, ordinary share, totalling US$581 million, neither Sir Michael Peat nor Karl Gruber will seek re-election at the forthcoming Annual General Meeting. on ꢉꢆ ꢞarcꢁ ꢉꢚꢉꢚꢩ anꢀ ꢪSꢫꢚꢘꢉꢚ per sꢁareꢡ totalling US$291 million, on 2 October 2020. Prior to each distribution, the Board ensured that the level of distributable reserves ꢇitꢁin tꢁe ꢏalance sꢁeet ꢇas suꢄcient to enable the dividend to be paid, in line with the established EVRAZ dividend policy. The Board also considered the impact of COVID-19 on the Group's going concern anꢀ casꢁ ꢬoꢇ positionꢘ

Discover more in the Climate Change Report: https://www.evraz.com/en/sustainability/ data-center/climate-change-reports/

Governance

In 2020, the Board engaged in an externally facilitated annual evaluation of its conduct, after having undertaken internally evaluated reviews in 2018 and 2019. The Nominations Committee initiated and took part in the review, during which all Board directors received questionnaires for response and comment. The review found the Board’s performance in all key areas to be satisfactory.

The EVRAZ Board of Directors and management team are focused on ensuring that all aspects of the business are conducted in the best interests of the Group, its shareholders and other stakeholders, with particular attention being paid to generating long-term shareholder value. In recognition of the solid performance that EVRAZ delivered in 2020, the Group has announced an interim dividend. On 24 February 2021, the Board of Directors voteꢀ to ꢀisꢏurse a total oꢂ ꢪSꢫꢐꢒꢆꢘꢈ millionꢡ or US$0.30 per share, with a record date of 12 March 2021 and payment date oꢂ ꢆ April ꢉꢚꢉꢈꢘ

The Board held its meetings via video conferencing to minimise the disruptions to its business amid the pandemic. The Board received regular updates from management about the impact of COVID-19, as well as the mitigation measures implemented to safeguard people and operations.

Our people

EVRAZ recognises that its operations can only improve alongside the skills anꢀ ꢣualiﬁcations oꢂ an engageꢀ ꢇorꢥꢂorceꢘ To this end, the Group continued to improve existing professional development programmes and launched several new initiatives in 2020. While most directors have been serving on the Board since EVRAZ plc’s incorporation in October 2011, new

See pages 68-73 for more details

Alexander Abramov
Non-Executive Chairman

Meet EVRAZ
EVRAZ in ﬁgures
Strategic report
Corporate governance
Financial statements
Aꢀꢀitional inꢂormation | 6

CEO LETTER

Dear shareholder, 2020 was an unprecedented year, which changed the world and the way we do business. Intense global uncertainty caused by the outbreak of COVID-19 had a profound eﬀect on economies and pressured global markets. The restrictive measures imposed by the governments of various countries to ﬁght against the COVID-19 pandemic had a signiﬁcant impact on the level of consumption of steel products around the world, especially in the ﬁrst half of the year. However, thanks to the upswing seen on the global markets in the second half of the year, the Group delivered solid operating and ﬁnancial results while, most importantly, doing everything it could to protect its people during a pandemic.

Alexander Frolov
Cꢁieꢂ Eꢃecutive ꢦꢢcer

Sustainability

processes, the Group began training employees to use a new set of tools for identifying and managing risks. As a result of the COVID-19 pandemic, all training courses have been conducted online since the second quarter of 2020.

at improving its environmental impact. Among tꢁe most important proꢝects oꢂ ꢉꢚꢉꢚ were construction of a dust and gas cleaning unit for blast furnace no. 6 at EVRAZ NTMK, modernisation of gas cleaning units of the basic oxygen furnace shop at EVRAZ NTMK, modernisation of electrostatic precipitators of Heat and Power Station at EVRAZ ZSMK and the direction of coke oven gas to the coking chemicals collecting shop no. 3 at EVRAZ NTMK.

In 2020, Management’s primary focus was on ensuring safe working conditions and preventing the spread of COVID- 19. EVRAZ went beyond protecting its employees and worked to safeguard local communities.

ꢦtꢁer ꢥeꢕ aspects oꢂ tꢁe proꢝect incluꢀe the Risk Hunting initiative and a review of standard operating procedures. For more about the Group’s COVID-19 response, as ꢇell as tꢁe eꢢects oꢂ tꢁe panꢀemic on EVRAZꢡ see Impact of COVID-19 on pages 30-31.

ꢀ In 2020, EVRAZ worked hard to create a new tꢁe ꢨroupꢅs speciﬁc greenꢁouse gas environmental strategy with environmental impact mitigation goals to be achieved by 2030.# At the Group’s steelmaking assets, the goals include reducing greenhouse gas emissions (Scope 1 and 2) per tonne of steel produced by 20%, reducing atmospheric emissions from steel production by 33%, closing the water supply cycle, as well intensity ratio remained below 2.0 tonnes of carbon dioxide equivalent (tCO2e) per tonne of crude steel.

The overriding priority of EVRAZ is the health and safety of its people. Unfortunately, five people lost their lives at the Group’s enterprises during the reporting period. The lost time injury frequency rate (LTIFR) reached 0.85, the lowest level for EVRAZ historically and below the target of 1.61 that management set for 2020. For more about the Group’s new environmental strategy, see pages 14-15, 60.

In 2020, EVRAZ management team actively focused on developing the Group’s climate change approach at the request of the Board of Directors and its Health, Safety and Environmental Committee.

On March 2020, EVRAZ held several sessions with senior management, which included a detailed discussion on climate change. By the end of June, the Group had completed a climate change scenario analysis, as well as mapped the risks and opportunities together with impacts and mitigation measures.

In 2020, the primary focus in the area of health and safety was the roll-out of a project to enhance risk management across all divisions. After thoroughly reviewing and further developing existing principles, employee development, efficient management and process improvement. After having previously been implemented only at the Group’s Russian enterprises, in autumn 2020 the EBS roll-out began in North America at the EVRAZ Pueblo mill.

Given the volatile conditions on the Russian steel market, management decided to reprioritise the investment portfolio of EVRAZ, including several of the Group’s key development projects. A decision was made to postpone the integrated flat casting and rolling facility project at EVRAZ ZSMK and to go ahead with the rail and beam mill modernisation project at EVRAZ NTMK, which was moved to active implementation. In North America, EVRAZ Pueblo’s new long rail mill project continued according to the schedule with an active investment phase having commenced in the second half of the year.

Following this, in October 2020, EVRAZ published its first Climate Change Report, which was based on the recommendations of the Task Force on Climate-related Financial Disclosures. The report outlines the principles underpinning the Group’s approach to climate change and seeks to provide greater insight for stakeholders on the actions that EVRAZ is taking. Working closely with stakeholders is an integral part of the Group’s approach to climate change and the Climate Change Report is an effort to further enhance stakeholder engagement with respect to this important topic. For more about the results generated using the EVRAZ Business System, see pages 16-17.

Among other key investment projects in 2020, in the Steel segment, EVRAZ NTMK successfully completed the reconstruction of blast furnace no. 6, introducing state-of-the-art technology. In addition, EVRAZ NTMK continued installing a gas pressure-recovery turbine on blast furnace no. 6, which was part of an initiative to reduce electricity purchases by generating power in-house, and completed installing its sixth automated railway wheel processing line.

Among the achievements of the past year, the strong start of the Group’s digital transformation initiative stands out. In 2020, digital transformation projects generated an efficiency improvement effect of US$8.1 million, inspiring EVRAZ to set the ambitious goal of generating an effect of US$150 million in 2021-2023.

In 2020, the Group opened a digital transformation centre in Novosibirsk, close to its primary production sites. Embracing digital technology will help to improve employee safety and business efficiency, as well as process speed and customer convenience. Discover more in the Climate Change Report: https://www.evraz.com/en/sustainability/data-center/climate-change-reports/

EVRAZ believes that employee skill sets and engagement are the foundation for continuous improvement at its operations. In 2020, we continued existing programmes and started several new initiatives in this area. For more about the Group’s digital transformation, see pages 88-89.

Two large investment projects were implemented in the Coal segment. The transition of Esaulskaya mine to a new seam no. 10 in June and the transition of Uskovskaya mine to a new seam no. 48 in December. Implementation of both projects will allow to increase production volumes and improve quality of the GZh (semi-hard) coking coal mined by the Group.

The Group launched a comprehensive employee health management programme that incorporates new approaches, including identifying risk groups and offering preventative measures. It also introduced the “Health Management: Top 300” pilot project for “Top 300” programme participants. Moreover, in response to the COVID-19 outbreak, EVRAZ provided access to a telemedical service for personnel in Russia, enabling them to ask any questions they have about health.

Moreover, EVRAZ continued to implement its efficiency improvement programme, which is a performance monitoring system that aims to generate and implement initiatives with an annual EBITDA effect at least of 3% from cost of goods sold. During the reporting period, the efficiency improvement programme delivered an EBITDA effect of US$74.3 million from customer focus and cost-cutting initiatives.

Additionally, in the Steel, North America segment, capital investments to modernise equipment and expand production capacity continued at EVRAZ Regina in Saskatchewan and EVRAZ Red Deer in Alberta, which will help to reduce emissions and improve efficiency.

For more about the support given to employees during this time, see Impact of COVID-19 on pages 30-31.

In 2020, EVRAZ completed implementing a Target remuneration system at the Steel segment's EVRAZ NTMK, EVRAZ KGOK, EVRAZ ZSMK and EVRAZ Vanady Tula enterprises in Russia based on a grading system for employees at production facilities, below the level of head of shops and directors of mines. The main aim of the project is to develop and introduce unified, fair and transparent rules and principles for setting compensation across the Group.

In total, EVRAZ invested US$199 million in development projects and US$746 million in maintenance projects in 2020.

Operational efficiency

Retaining a low-cost position and maintaining market leadership positions remain very important for the Group. In 2020, EVRAZ continued its work to enhance customer service and develop new products as part of its strategic objective to remain the leading manufacturer of infrastructure steel. The Group launched an initiative to digitalise sales channels and continued to develop its programme aimed at promoting demand for beams and structural products in construction and improving the availability of products to clients. Moreover, in 2020, the Group launched a project to sell beam sets for constructing buildings such as car parks, logistical centres and industrial facilities.

The consolidation established the enlarged Raspadskaya as a leading Russian producer of high quality metallurgical coal with low cost asset footprint, reduced risks due to the diversification of coal type mix, expanded client base and assortment of final products. It will also streamline the corporate structure and management of EVRAZ' Coal segment.

bringing its net debt/EBITDA ratio to 1.5, which is in line with the medium-term target that EVRAZ has set to maintain net debt below US$4 billion. In 2020, the Group was able to generate robust free cash flow of US$1,020 million, which made it possible to pay dividends of US$306 million.

Outlook for 2021

In the Steel segment’s vanadium operations, EVRAZ further expanded its customer base in Asia, the Middle East and North Africa in 2020. The Group satisfied growing demand in steel and energy storage segments, particularly in China, by ensuring a stable supply of diversified products. In addition, in May 2020, EVRAZ established a new research and development centre at East Metals, a subsidiary of the Group in Switzerland. Its main objective is to support

Further to EVRAZ’ announcement on 26 January 2021, EVRAZ’ Board of Directors regularly reviews the Company’s strategic options to maximise long-term value for EVRAZ shareholders. The Board has given approval for management to consider the strategic merits of and possible structures for a potential demerger of its coal business. The discussion is ongoing and no decision has yet been made. EVRAZ will keep shareholders updated through further announcements in due course if and when appropriate.

In 2021, EVRAZ will continue to improve its safety culture, customer focus and operational efficiency, using digital tools where appropriate.

Meet EVRAZ

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8	9

The Steel segment remains the core of the Group’s business model, allowing it to maintain leadership positions in the railway product and infrastructure steel markets. In 2020, total pig iron production increased by 1.3% to 11,194 thousand tonnes after the launch of blast furnace no. 3. Efficiency improvement initiatives in the segment had a total effect of US$270 million.

The EBS, which marked its 10th anniversary in 2020, has evolved into a system which seeks to achieve ambitious targets. For more see Our people section on page 68-73.# EVRAZ BUSINESS MODEL

OUR BASIS

STRATEGIC PRIORITIES

BUSINESS SEGMENTS

Our vision

EVRAZ strategic priorities reflect current focus areas that are driven by market conditions and business fundamentals.

Steel

EVRAZ is a global steel and mining company, the leading producer of infrastructure steel products with low-cost production along the value chain.

EVRAZ Steel segment uses locally sourced raw materials to produce steel products in the CIS, which it sells for domestic infrastructure and construction projects while taking a flexible approach to exports. The Group’s vanadium business is based on processing vanadium slag from steelmaking operations.

Sustainable development management and stable dividends
Read more on pages 46-49. →

Global market trends

Prudent CAPEX
In 2020, global finished steel consumption declined by 1.1% primarily driven by the impact of COVID-19. China continues to be the main driver of global demand, with growth of 9.0%. Despite lockdowns in the early part of 2020, consumption of iron ore continued to grow, rising by 0.7% in 2020. In 2020, global metallurgical coal consumption declined by 1.8% year-on-year. Despite COVID-19 containment measures, global vanadium demand increased 5% year-on-year, with increased consumption from rebar producers in China offsetting a decline in demand in other regions.

Coal

EVRAZ Coal segment provides raw materials for the Group’s steel mills, supplies coking coal to major domestic coke and steel producers, and exports its products to foreign customers.

Retention of low-cost position
Read more on pages 50-51. →
EVRAZ Business System Development of product portfolio and customer base

Steel, NA

The Steel, North America segment focuses on the premium markets in the Western US and Canada, offering high value-added products including infrastructure steel, rails, large-diameter pipes and oil country tubular goods.

COMPETITIVE ADVANTAGES

THE VALUE WE CREATE FOR STAKEHOLDERS

EVRAZ uses the synergies derived from its competitive advantages to ensure that its overall operations are able to generate, sustain and capture value over the long-term.

Shareholders
EVRAZ strives to act in shareholders’ best interest by building an experienced management team and implementing corporate governance best practices.
Employees and investors
EVRAZ is among the most sought-after employers in its regions of operation partly due to its staff development programmes and best-in-class working conditions.
Customers
EVRAZ generates value for its global clientele by prioritising value-added products, offering better shipping terms and running a client oriented business model.
Suppliers and contractors
EVRAZ honours its position as a vital purchaser of auxiliary materials by fostering the advancement of its customers’ industries and running fair, transparent tenders.
Local communities
EVRAZ believes that conducting its business in a sustainable manner helps to promote regional prosperity where it operates and strives to create healthier, happier local communities by sponsoring social and economic development programmes.
Government and regulatory authorities
EVRAZ is one of Russia’s largest taxpayers and employers, and plays a valuable role for the state by providing construction and railway products for the development of infrastructure.
Media
EVRAZ proactive engagement with the media boosts the quality and transparency of information about the Group.
Industry organisations
EVRAZ cooperates and supports various industry organisations through joint initiatives and proactively participates in conferences and forums.
Leader in infrastructure steel products
A premium portfolio of railway, construction and tubular products with firm footprint in Russian, North American and global markets.
Strong position in coking coal market
The largest coking coal producer in Russia with an attractive portfolio of hard and semi-hard coking coal grades.
Vertically integrated low-cost operations
A sound base of steel and coal assets in the first quartile of the global cost curve.

The section 83-90 Statement, describing how the Directors have had regard to the matters set out in section 83(3)(a) to (f) when performing their duty under section 83(2), is on pages 96-97. →

Annual report & accounts 2020

OPERATIONAL MODEL

INPUT

STEEL SEGMENT

OPERATIONS

Proved Raw materials and probable reserves
* Iron ore products consumption
* Internal consumption: 18,341 kt
* 3rd parties’ iron ore products purchases: 4,884 kt
* 3rd parties scrap purchases: 1,770 kt
* Coking coal products consumption
* Coal segment coal products: 8,825 kt
* 3rd parties raw coal: 6,986 kt
* 3rd parties concentrate: 1,221 kt

9.9 bln t of iron ore
1.9 bln t of coking coal

Steelmaking
* Pig iron production: 12,050 kt
* Crude steel production: 11,157 kt
* Vanadium slag production: 19,533 mtV

Self-coverage
* 68% of iron ore
* 236% of coking coal

Rolling and processing
* Steel products production: 11,018 kt

Steel products
Iron ore products

SALES TO 3rd PARTIES
12,197 kt
1,732kt

Vanadium products (alloys and chemicals)
12,534mtV

Steel segment
15,578
US$ 1,930 million

Coal segment
3,278

Steel, NA segment

The Steel segment’s EBITDA rose amid lower expenses compared to revenue, as a result of a decline in prices for raw materials, including coal, scrap and other raw materials, as well as lower cost of goods for resale amid a drop in vanadium prices and exchange rate impact on rouble denominated costs.

7.5% year-on-year

Number of employees
46,007 in Steel segment
1,930 million in Coal segment

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Additional information | 12 13

COAL SEGMENT

STEEL, NORTH AMERICA SEGMENT

Read more on pages 52-55. →# MARKET REVIEW

GLOBAL PICTURE

Steel

In 2020, global finished steel consumption fell by 0.8% to 1,856 million tonnes, compared with 1,873 million tonnes in 2019. Global crude steel production in 2020 declined by 0.1% to 1,892 million tonnes, mainly driven by COVID-19 related lockdown measures, which forced steel producers to close. Chinese production totalled 1,053 million tonnes, up 5.2% year-on-year, compared with 952 million tonnes in 2019. India's production declined by 7.0% to 98 million tonnes, driven by lockdowns throughout the country.

Steel markets tightened rapidly at the end of 2020, as demand outpaced supply across the supply chain amid strong restocking activity. This led to a surge in steel prices in Q4 2020, as supply failed to keep up with a recovery in demand. Average steel prices, based on the CFR slab FE&SEA benchmark, increased from US$361 per tonne in Q1 2020 to US$443 per tonne in Q4 2020. As a result, the average price in 2020 amounted to US$424 per tonne, down 3.8% year-on-year from US$448 per tonne in 2019, with the decline primarily driven by the impact of the COVID-19 pandemic.

China continues to be the main driver of global demand, with growth of 9.0% and consumption of 1,011 million tonnes over the reporting period. Global demand, excluding China, contracted by 12.1% to 845 million tonnes, versus 961 million tonnes in 2019. Consumption in the EU dropped by 13.1% due to the impact of the COVID-19 pandemic. Crude steel production in the EU fell by a further 13.1% year-on-year, as a result of increasing environmental requirements and responses to pandemic.

EVRAZ BUSINESS SYSTEM: OF SUCCESSFUL DEVELOPMENT

The basic working principles are safety, respect, performance and responsibility, customer focus and effective teamwork. EVRAZ Business System (EBS) is a combined approach founded on a culture of continuous improvement which currently covers nearly all the Group’s main operations.

Process improvement

Each employee views finding and implementing improvements as part of their daily work.

Employee development

Employees have opportunities for training and development, as well as access to the tools and knowledge needed to achieve the target.

Efficent management

Managers support the continuous improvement process by acting in accordance with EVRAZ principles, as well as training and encouraging their employees.

Ambitious target setting

Each employee understands why they must improve their work.

EBS DEVELOPMENT TIMELINE: KEY EVENTS

Year	Key Events
2010	EBS development started. The company focused on maintaining and enhancing leadership positions in operational efficiency and cost reduction.
2011	Operational improvement directions created in all the divisions. Lean manufacturing and Six Sigma tools implemented along the manufacturing chain. Management Working Standard implemented at all the Group’s enterprises. Six Sigma office launched in Urals, Siberia and Coal divisions. Efficiency enhancement programmes launched at all the Group’s enterprises. Working groups created for waste elimination and identification of bottlenecks. First Lean sessions with top managers organised.
2012	The Group undergoes a shift from simple lean management tools to more complex ones: 2P, SMED, A3, VSA.
2013	Fast improvement tools implemented at all the Group’s enterprises. Lean training sessions for employees started.
2014
2015	The first EBS Summit organised in Kachkanar, with divisions sharing best practices of tools implementation. The EBS principles outlined.
2016	Idea Factory and Problem-Solving Board tools launched.
2017	EBS transformation programmes developed for all the divisions. The EBS transformation rolled out in the Vanadium division. The total effect of employees' initiatives surpassed USD 1 billion.
2018	The EBS transformation launched in the Urals and Coal divisions. Development managers’ recruiting programme started.
2019	The EBS transformation of the Steel, North America segment started. New projects launched in the Siberia division (supply marketplace, technical direction transformation, etc.).
2020

EVRAZ BUSINESS SYSTEM: RESULTS

Total EBS effect, US$ million

Division	2020	2019	2018
Overall effect of the initiatives funnel from all initiatives at all stages (L1-L5)	641	38,726	49,979
Siberia Division	358	5,156	10,110
Urals Division	241	1,098	2,868
Vanadium Division	25	17	17
Coal Division	100	1,398	905

Idea Factory results

Division	Ideas submitted	Ideas accepted	Ideas implemented
2020	80,624	49,979	38,726
Siberia Division	44,216	25,819	20,360
Urals Division	30,433	17,202	13,684
Vanadium Division	617	525	223
Coal Division	5,358	5,273	1,906
2019
Siberia Division	30,701	16,774	16,774
Urals Division	10,110	6,958	6,958
Vanadium Division	14,240	975	780
Coal Division	5,273	1,398	331
2018
Siberia Division	3,752	20,373	18,427
Urals Division	1,632	1,098	1,098
Vanadium Division	189	143	143
Coal Division	905	235	170

Problem-Solving Board results

Metric	2020	2019	2018
Problems submitted	29,956	18,427	11,962
Problems eliminated	21,222	16,909	10,607
Average problem elimination term, days	43	40	32
Plant shops involved	816	447	155
Number of people completed an internship at EBS teams	20,373	18,427	11,962
Transformation in transformation	30	33	28

Division	Problems submitted	Problems eliminated	Average problem elimination term, days	Plant shops involved	Number of people completed an internship at EBS teams
2020
Siberia Division	21,222	14,240	43	447	20,373
Urals Division	3,961	3,539	14	50	3,752
Vanadium Division	241	189	5	26	257
Coal Division	4,538	3,374	32	311	3,374
2019
Siberia Division	18,427	16,909	40	155	18,427
Urals Division	6,012	2,868	33	87	10,607
Vanadium Division	143	143	18	8	143
Coal Division	4,692	1,345	60	170	1,345
2018
Siberia Division	11,962	10,607	28	87	10,607
Urals Division	2,868	2,868	32	87	10,607
Vanadium Division	143	143	18	8	143
Coal Division	1,855	1,345	60	170	1,345

SUSTAINABLE DEVELOPMENT

EVRAZ environmental strategy until 2030 sets ambitious goals to reduce the negative impact on the environment, which meets the expectations of investors and the society.

ENVIRONMENTAL STRATEGY 2030 GOALS

Reduce specific Scope 1 and 2 GHG emissions from EVRAZ's Steel segments (the Steel and North America segments) by 20%, which complies with the Paris Agreement.
Utilise 75% of methane (CH4) emitted in the process of degassing carried out during coal mining.
Reduce total atmospheric emissions from steel production by 33%.
Reduce dust emissions from coal mining by 1.5 times.
Zero water discharge from steel production.

Goal	Target
GHG emissions (tCO2e/t steel)	↓20%
Utilise methane emitted in the process of degassing	75%
Atmosphere emissions (steel)	↓33%
Dust emissions (coal)	↓1.5х
Total water discharge	0 mln m3

ESG HIGHLIGHTS

Metric	2020	2019	2018
Lost time frequency rate	1.58x	1.91x	2.04x
EVRAZ GHG emissions, MtCO2e	43.57	43.38	38.79
Key air emissions, kt	121.30	127.67	128.24

Our approach

EVRAZ understands the responsibility inherent in its position as one of the world’s leading steelmakers and, as such, is committed to integrating sustainable development principles and values into its daily operations. The Group believes that sustainable development will help it to maintain the long-term stability of its business, retain a competitive market position and create value for its stakeholders.

EVRAZ sustainable development initiatives adhere to the OECD’s Guidelines for Multinational Enterprises to apply a consistent approach and adopt best practices across its global operations. The Group bases these commitments on the best international standards and practices, fully endorsing the United Nations Universal Declaration of Human Rights provisions and respecting people’s civil, political, economic, social and cultural rights.

CSR

Governance

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Health and safety

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Environmental matters

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Utilise 95% of waste from metal production and general waste.
Recycle 50% of mining waste.

Goal	Target
Utilise gen. and met. waste	95%
Recycle mining waste	50%

Our people

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Social and community matters

EVRAZ strives to adhere to international corporate social responsibility principles by making a meaningful contribution to local economies and supporting communities wherever it operates. Everywhere the Group operates, it seeks to build sustainable, positive partnerships with local governments and non-government organisations, as well as with business, media and other partners.

Read more on page 74 →

Metric	2020	2019	2018
Fresh water consumption, million m3	206.20	205.8	226.49
Diversity, % (number of people)
Board	95%	95%	95%
Men	78%	73%	74%
Senior Management	22%	27%	26%
Employees	4%	4%	4%
Women	22%	27%	26%

Employees by region	2020	2019	2018
Russia and CIS	18,951	7 298	50,266
North America
Europe

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Mining Raw materials

Item	2020	2019	2018
Total raw coking coal mined	20,653 kt
Sales to Steel segment	2,323 kt
3rd parties scrap purchases	1,010 kt
3rd parties slab purchases	279 kt

Coal washing

Item	2020	2019	2018
Total coking coal concentrate production	13,598 kt
Sales to Steel segment	4,663 kt

Steelmaking

Item	2020	2019	2018
Crude steel production	1,580 kt	1,668 kt

Rolling and processing

Item	2020	2019	2018
Steel products production	12,336kt	1,728kt

EBITDA

Segment	2020	2019	2018
Coking coal products	493	403	382
Steel products	262	144	44
Concentrate	10,103	2,233
Flat-rolled products	52.6% year-on-year
Non-concentrate	US$ 400 million
Other products	US$ (28) million

The Coal segment’s EBITDA was down year-on-year, amid lower coal product sales prices, while the cost of sales was largely unchanged. The Steel, North America segment’s EBITDA decreased due to lower revenues from sales of flat-rolled, tubular, railway, and construction products.

Metric	2020	2019	2018
Lost time frequency injury rate	1.58x	1.91x	2.04x
EVRAZ GHG emissions, MtCO2e	43.57	43.38	38.79
Key air emissions, kt	121.30	127.67	128.24

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Meet EVRAZ EVRAZ in figures Strategic report Corporate governance Financial statements Additional information | 14 15
Annual report & accounts 2020# Global ﬁnished steel consumption, million tonnes

Global crude steel production, million tonnes

Steel price (Slab, CFR, East & South East Asia), US$/tonne

2016	2017	2018	2019	2020
1200	1000	800	600	400
200	0

2016	2017	2018	2019	2020
2000	1800	1600	1400	1200
1000	800	600	400	200
0

2016	2017	2018	2019	2020
600	500	400	300

EU+UK
Asia, excl. China
Rest of the world
China
India
EU
Rest of the world

Source: CRU
Source: CRU
Source: CRU

Iron ore

Despite lockdowns in the early part of 2020, global consumption of iron ore continued to grow, rising 9.7% to 2,300 million tonnes in 2020. Growth in end-use demand in China and strong rebar margins provided steel producers with incentives to maintain high output. The recovery in demand from manufacturing and automotive and pushed HRC margins to their highest for two years. Iron ore demand rose 9.6% to 1,077 million tonnes in China. Other key markets showed reductions of 1.6% to 17.7 million tonnes in South Korea and by 6.1% to 144 million tonnes in India, driven by lower steel production. European and US markets also declined by 14.3% and 8.9% respectively.

Total iron ore production increased by 0.8% to 2,271 million tonnes in 2020 compared with 2,253 million tonnes in 2019. Production in Brazil decreased 9.3% during the year to 222 million tonnes, as Brazilian iron ore producers faced challenges with poor weather conditions, one of the worst COVID-19 outbreaks in the world and a legal and delayed mine restarts. China continued to ramp up domestic production of iron ore in order to attempt to meet domestic steelmaking demand, increasing production by 6.1% to 363 million tonnes in 2020.

Iron ore price (62% Fe fines, CFR China), US$/tonne

2016	2017	2018	2019	2020
120	100	80	60	40
20

Source: CRU

Fe fines increased to a nine-year high of US$186 per dry metric tonne CFR China in December. The outperformance throughout 2020 was driven by a combination of strong demand and supply fundamentals, with Chinese demand continuing to grow and supply constraints persisting.

Seaborne iron ore prices hit multi-year highs in the final quarter of 2020 with demand supported by strong steel margins and high output, driving the 62% Average iron ore prices climbed by 16.1% to US$108 per tonne in 2020, compared with US$93 per tonne in 2019.

Coal

In 2020, global metallurgical coal domestic metallurgical coal supplies, Australian FOB spot price was US$125 per tonne in 2020, down 18% from US$152 per tonne in 2019. consumption declined by 1.8% year-on-year to over 1,142 million tonnes. In China, consumption remained flat year-on-year and amounted to 966 million tonnes as crude steel production remained robust. Indian coking coal imports decreased 9.3% to 62 million tonnes, amid lower steel growth of 10.2% to 11.2 million tonnes, while Australia posted a 4.8% decline to 86.5 million tonnes, as a result of declining exports through its major Queensland ports.

Metallurgical coal prices experienced a dislocation in 2020 with CFR prices trading higher while FOB Australia benchmarks fell.

Coal price (HCC Spot price, FOB Australia), US$/tonne

2016	2017	2018	2019	2020
250	200	150	100
50

Source: CRU

Metallurgical coal consumption in Europe continued to fall, by 12.1% in 2020, also amid lower demand from steelmaking companies due to COVID-19 restrictions. The predominant reason for this trend was China’s decision in October 2020 to ban imports of Australian coal, thereby reducing demand for Australian imports, while pushing up domestic prices due to a reduction Total coking coal production declined by 2.3% in supply. The oversupply of Australian in supply. The oversupply of Australian year-on-year to 1,142 million tonnes during the period. China continued to increase material in the ex-China market put pressure on spot FOB prices. As a result, the average

Vanadium

Vanadium price (LMB FeV mid), US$/kg

2016	2017	2018	2019	2020
100	80	60	40	20
0

Source: Bloomberg

Despite COVID-19 containment measures, global vanadium demand reached an estimated 108 metric tonnes of vanadium, up 5% year-on-year, with increased kilogramme of vanadium, due to lower buying activity in most regions outside China. However, the market began to recover in Q4, which led to a price uptick, with an average 2020 price of US$25 per kilogramme of vanadium (down 40% year-on-year).

consumption from rebar producers in China offsetting a decline in demand from other regions. The ferrovanadium price was under pressure during mid 2020, reaching a low point in July at US$12 per

Steel: Russia

Russian steel consumption by product type, mt

2016	2017	2018	2019	2020
14000	12000	10000	8000	6000
4000	2000	0

Rebar
Beams
Rebar
Rails
Structurals
Structurals
Beams

Source: Metal Expert

Russian steel prices, US$/t

2016	2017	2018	2019	2020
1000	800	600	400
200

Source: Metal Expert

In 2020, Russian steel consumption totalled 54.9 million tonnes, down 5.6% year-on-year, amid lower economic activity and restrictions caused by the COVID-19 pandemic.

Demand for long products decreased by 3.3% year-on-year. The railway segment demonstrated mixed dynamics. While the rails market increased by 2.5%, mainly driven by demand from Russian Railways, demand for wheels fell by 15%, mainly amid lower consumption by railcar repair companies and producers. The construction sector was hit by the COVID-19 measures, and demand fell by 4.3% year-on-year for rebars, 2.8% for structural products, while demand for beams increased by 11.2%.

During the reporting period, crude steel production in Russia equalled 71.9 million tonnes, up 2.6% year-on-year. Despite softening in domestic consumption amid COVID-19 restrictions. Volumes were mostly redirected to export markets.

Russian steel prices moved in accordance with lower demand and a higher US dollar exchange rate. In 2020, based on the Moscow EXW benchmark, the rebar price averaged US$513 per tonne, down 12% year-on-year; channels and angles averaged US$580 per tonne, down 6%; and beams averaged US$628 per tonne, down 8%.

EVRAZ market shares in Russia by key products, %

	2019	2020
Rails	76	74
Beams	68	69
Grinding balls		63
Structural shapes	31
Railway wheels	28	25
Rebar	9	9

Source: Company estimates

Coal: Russia

Coal prices, US$/t

2016	2017	2018	2019	2020
200	150	100	50

GZh
Zh

Source: Metal Expert

Russian metallurgical coal consumption, mt

2016	2017	2018	2019	2020
40	35	30	25	20
15	10	5	0

Source: CRU

During the reporting period, Russian coking coal concentrate consumption totalled 32.8 million tonnes, up 8% year-on-year, as coke and pig iron production increased. Coking coal exports amounted to around 25 million tonnes, down 10% over the period, amid a decrease in demand across all regions, excluding China. Mining volumes fell to 84.4 million tonnes, down 10%, also as EVRAZ halted production at Razrez Raspadsky in Jan and Feb 2020 and at Yuzhnye.

The price of premium Zh-grade coking coal averaged US$80 per tonne, down 41% year-on-year, and semi-hard GZh-grade averaged US$63 per tonne, down 26%.

EVRAZ market share in Russia’s coking coal, %

	2019	2020
22	23

Source: Company estimates

Under pressure from cuts in steel output worldwide (apart from China), Russian prices of seaborne metallurgical coal shipments followed international benchmarks. In 2020, based on the FCA Puhla benchmark,

Steel: North America

In North America, the US steel market was significantly affected by the COVID-19 pandemic and was slow to recover from the resulting government-ordered lock-downs throughout 2020. In 2020, US steel product consumption totalled an estimated 84.4 million tonnes, down 18% from the 103.3 million tonnes in 2019.

Demand was down across the three major product segments served by EVRAZ. In 2020, we estimate that demand in the US fell 22% year-on-year for long products, 18% for flat products, and 44% for tubular products. Within the overall flat segment, demand for plate fell by an estimated 24% year-on-year amid lower consumption across all product groups with particularly acute consumption reductions in OEM manufacturing and construction. US demand for oil country tubular goods (OCTG) from mills shrank by 49%, as drilling activity dropped significantly due to substantial reductions in oil demand brought

US ﬁnished steel consumption, mt

2016	2017	2018	2019	2020
100	80	60	40	20
0

Flat
Long
Tubular

Through November 2020, US steel product imports amounted to 18 million tonnes, down 23.5% year-on-year. Compared with 2019, average US prices for steel products declined in 2020: plate averaged US$662 per tonne, down 24%; carbon OCTG averaged US$1,129 per tonne, down 20%; and rebar averaged US$706 per tonne, down 18%.

about by sharp decreases in COVID-related travel and movement. US demand for rebar fell approximately 18% while demand for rod fell approximately 30%.

North America prices, US$/t

2016	2017	2018	2019	2020
1500	1200	900	600	300

Source: Platts

EVRAZ market shares in North America by key products, %

	2019	2020
Rails	41
Large diameter pipe	48	26
Canadian OCTG	29	29

Source: Pipelogix, CRU, AMM

Rebar, domestic US

Plate, domestic US

OCTG Carbon

Source: Company estimates

STRATEGIC PRIORITIES DEBT MANAGEMENT AND STABLE DIVIDENDS

EVRAZ remains focused on medium-term debt management and maintaining a stable dividend payout:

Dividend payout according to stated dividend policy: a minimum of US$300 million to shareholders annually provided that the net leverage ratio remains below 3.0x.
Medium-term net debt level below US$4,000 million. The average net debt/EBITDA ratio was 1.5x.# Meet EVRAZ

EVRAZ in figures

Strategic report

Net debt (net debt/EBITDA), US$ million

Metric	2017	2018	2019	2020
Net debt/EBITDA	(1.5)	(0.9)	(1.3)	(1.5)
Net debt	4,200	3,571	3,445	3,356
Medium-term target				<4,000

Dividends, US$ million

Year	Dividends	Yield
2017	1,086	14%
2018	1,556	11%
2019	430	9%
2020	N/A	N/A

Even when facing market volatility, EVRAZ remains committed to maintaining its long-term average net debt/EBITDA at 2.0x. In 2020, the Group generated solid free cash flow of US$1,086 million. Couple with a net debt/EBITDA ratio below 2.0x, this enabled EVRAZ to return US$1,086 million to its shareholders in the form of dividends for a dividend yield of 14%.

In 2020, the Group’s net debt amounted to US$3,356 million, remaining below the medium-term target of US$4,000 million.

Target average net debt/EBITDA at 2.0x throughout the cycle.

PRUDENT CAPEX

In 2020, EVRAZ invested a total of US$745 million in CAPEX. US$458 million was spent on maintenance projects and US$287 million on development projects. Development investments grew by 9.9% year-on-year, mainly as a result of an increase in spending on EVRAZ Pueblo’s long rail mill project.

Annual CAPEX, US$ million

	2016	2017	2018	2019	2020
Maintenance	164	167	264	360	458
Development	236	181	199	581	287
Total	400	348	463	941	745

Key projects

Long rail mill at EVRAZ Pueblo
- Effect: CAPEX 2020 ~US$ 46 million
- Status: active
- 630 ktpa of rails with a maximum length of 100 metres
Rail and beam mill modernisation at EVRAZ NTMK
- Effect: CAPEX 2020 ~US$ 2 million
- Status: active
- 481 ktpa of high value-added products (H-beams, sheet piles and HH rails) instead of semi-finished products
Tashtagol iron ore mine upgrade
- Effect: CAPEX 2020 ~US$ 24 million
- Status: active
- increase the annual ore production of the Tashtagolsky deposit with a partial switch to sublevel caving using mobile equipment
Sobstvenno-Kachkanarsky deposit greenfield project
- Effect: CAPEX 2020 ~US$ 13 million
- Status: active
- maintain production of raw iron ore
Acquisition of equipment at Osinnikovskaya mine
- Effect: CAPEX 2020 ~US$ 14 million
- Status: completed
- Acquisition of equipment fully compliant with mining and geological conditions to provide the projected longwall load on a monthly basis.
Blast furnace No. 6 major overhaul at EVRAZ NTMK
- Effect: CAPEX 2020 ~US$ 80 million
- Status: completed
- reconstruction of blast furnace No. 6 with a planned capacity of 2.5 mtpa

RETENTION OF LOW-COST POSITION

Efficiency and cost-cutting remain a primary focus for the Group. EVRAZ is on pace to generate improvements with an annual EBITDA effect of 0.6% of the cost of goods sold. Various improvements at coal washing plants and mines. General and administrative costs and non-G&A headcount. Increasing productivity and cost effectiveness. Improving auxiliary materials and service costs of Urals and Siberia divisions. Improving auxiliary materials and service costs of EVRAZ North America and Vanadium divisions.

In 2020, the EBITDA effect from cost-cutting initiatives totalled US$192 million.

Breakdown of cost-cutting programme effect in 2020, US$ million

Initiative	EBITDA effect
Various improvements at coal washing plants and mines	60
General and administrative costs and non-G&A headcount	50
Increasing productivity and cost effectiveness	40
Improving auxiliary materials and service costs of Urals and Siberia divisions	28
Improving auxiliary materials and service costs of EVRAZ North America and Vanadium divisions	14

Steel segment

2020 key initiatives and results

EVRAZ NTMK successfully completed the reconstruction of blast furnace no. 6.
EVRAZ ZSMK increased its pig iron production to 6.2 million tonnes, its largest volume in 30 years.
Implementation of Repair function transformation projects in six pilot facilities.
EVRAZ KGOK continued to develop the Sobstvenno-Kachkanarskoe deposit, which is due to partly replace output from the Gusevogorskoe deposit.

2021 key initiatives

Implement initiatives aimed at costs reduction of manufactured products.
Improve energy efficiency of the main shops.
Re-equip EVRAZ NTMK’s ladle shop and improve the output of its blast furnaces.
Implement digital transformation projects for predictive analytics, digital BOF efficiency management and ferroalloy consumption optimisation.
Improve the efficiency of expert systems, developing predictive and advanced analytics.

Coal segment

2020 key initiatives and results

Acquired licence to develop the Zumgass open pit.
Launched 11 digital transformation initiatives.
Launched production at the Uskovskaya mine’s new seam No. 48 and the Esaulskaya mine’s seam No. 29a.
Procured replacement of mining equipment for the Osinnikovskaya and Alardinskaya mines.

2021 key initiatives

Continued to roll out EBS transformation projects on schedule.
Increase raw coal production volumes to around 25 million tonnes.
Develop K and Zh grades (HCC) production which are in high demand.

Steel, North America segment

2020 key initiatives and results

Continued the project to modernise equipment and expand production capacity at EVRAZ Regina in Saskatchewan and EVRAZ Red Deer in Alberta.
Launched EBS at EVRAZ Pueblo steelmaking operations.
Improved operating efficiency of EVRAZ Regina’s pipe mills and steelmaking operations.
Optimised conversion costs across all production facilities.
Reduced general and administrative expenses as well as fixed costs.
Completed the upgrade of EVRAZ Regina’s reheat furnace, after which the mill was certified as meeting the new nitrogen oxide emissions requirements.

2021 key initiatives

Continue EVRAZ Pueblo’s long rail mill project.
Complete the ongoing projects at EVRAZ Red Deer and EVRAZ Regina.
Continue the roll-out of EBS at the rest of the Pueblo site.

CUSTOMER FOCUS

Customer focus programme EBITDA effect in 2020, US$ million

Category	EBITDA effect
Procurement optimisation	84
Claims management	64
Logistics and marketing	27
Other	10
Total	185

EVRAZ remains focused on executing its development projects aimed at diversifying its product portfolio.

In 2020, the customer focus programme generated an EBITDA effect of US$234 million.

Steel segment

2020 key initiatives and results

Launched an initiative to digitalise sales channels, including the following key projects:
- Steel Radar: an online resource that shows beam inventories in traders’ warehouses and enables purchase orders to be placed.
- EDI/EDO: EDI is a platform for placing orders and handling administrative tasks like amending documents and invoices, while EDO is a platform for exchanging legal documents.
- EVRAZ Webshop: a single e-commerce platform for all types of customers.
Developed a new product, threaded rebar, which helps to reduce construction time.
Laid pilot batches of a unique new product, type DT400IK rails, for testing on the East Siberian and Trans-Baikal railways.
Continued to develop a programme aimed at promoting demand for beams and structural products in construction and improving the availability of products to clients.
A 10% year-on-year increase in beam sales despite the reduction in demand for other products amid the COVID-19 pandemic.
Launched a project to sell beam sets for constructing buildings such as car parks, logistical centres and industrial facilities.
Launched a solution in BIM design to improve availability of beams for customers.
In the vanadium business, EVRAZ further expanded its customer base in Asia and the Middle East and North Africa (MENA) region.
EVRAZ established a new research and development centre at East Metals, a Group subsidiary in Switzerland, the main objective of which is to support the sustainable and diversified use of vanadium as an alloying element in current and future steel products.

2021 key initiatives

Expand the range of steel solutions for construction industry.
Implement new phase of "Customer service" projects.
Continue digitalisation of sales channels.
Implement Digital transformation projects for clients.
Continue consumer properties assessment for DT400IK rails.
Launched a metal service centre in Noginsk.
Ensured consistently high production volumes at EVRAZ Caspian Steel amid solid demand in Kazakhstan and Central Asia despite the pandemic.
Certified the DPG200 rails.

Coal segment

2020 key initiatives and results

Increased the share of internal coal supplies to the Group’s assets in Russia to 75%.
Increased sales volumes under the long-term contracts despite the reduction in global demand amid the pandemic.

2021 key initiatives

Increase sales under long-term contracts to premium markets.

Steel, North America segment

2020 key initiatives and results

Continued commercialisation of APEX G2 rail and rubber reinforcement rod/bar products.
Expanded our leadership position in the North American rail market (achieved 48% share).
Energy and Lightsource BP, who have commenced construction of the new solar field adjacent to the mill and will provide about 90% of EVRAZ Pueblo’s electricity.

2021 key initiatives

Grow share of our rod product on the Aluminium Clad Steel Reinforced (ACSR) market.
Continue roll-out of enhanced quality and risk management practices and tools across North America.
Strengthened Quality organisation and management systems across North American sites.
Continue focusing on developing new products and applications across all product lines.
As part of the EVRAZ Pueblo new rail mill project, continued partnership with Excel.
Continue enhancing and expanding R&D capabilities to meet customer demand.

KEY PERFORMANCE INDICATORS

EVRAZ performance is assessed against several key performance indicators (KPIs), which are linked to our strategic priorities.# FINANCIAL KPI

FINANCIAL KPI
EBITDA, US$ million	2,212	2,601	1,020
Free cash ﬂow, US$ million	426	407	213
Eﬀect from eﬃciency improvement programme, US$ million	236	2019	1,456	3,777	1,940	340	225
Cash cost of slab, US$ per tonne	31	35	47
(cost cutting + customer focus)
DATA	2020	2019	2018	2020	2019	2018	2020	2019	2018

WHAT DOES IT MEAN?

Our financial performance

Our ability to generate free cash ﬂo from the current business and the eﬀect of our eﬀorts to generate and implement eﬃciency improvements initiatives.

Our integrated cash-cost per tonne of slab for Russian steel plants

HOW DID WE PERFORM IN 2020?

The decline in EBITDA was primarily attributable to lower steel, vanadium and coal products sales prices, as well as lower sales of tubular and ﬂat-rolled steel products resulting from weakening market demand in North America. The decline compared to 2019 is primarily attributable to lower EBITDA. The eﬃciency programme generated additional eﬀect mostly through productivity growth, yield improvements and numerous savings projects. Customer Focus initiatives generated additional eﬀect as result of sales eﬀorts in railway products as well as due to numerous improvements in logistics and procurement eﬃciency. Cash cost of slab decreased due to lower material prices, better raw materials' yields and mix as well as due to lower auxiliary, services and repairs costs.

RELEVANCE TO STRATEGIC PRIORITIES

Retention of low cost position
Development of product portfolio and customer base
Debt management and stable dividend
Prudent CAPEX
Retention of low cost position
Development of product portfolio and customer base
Retention of low-cost position
Development of product portfolio and customer base
Retention of low-cost position
Development of product portfolio and customer base
EVRAZ business system

FURTHER DETAILS
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Meet EVRAZ
EVRAZ in ﬁgures
Strategic report
Corporate governance
Financial statements
Additional inﬀormation | 28 29

NON-FINANCIAL

NON-FINANCIAL
Cash cost of coal concentrate, US$ per tonne	376	392	355
Labour productivity, steel, tonnes per person	1.58	1.97	1.97	2.04	1.91	2.01
LTIFR (excluding fatalities), per 1 million hours
GHG intensity ratio, tCO2e per tonne of crude steel
DATA	2020	2019	2018	2020	2019	2018	2020	2019	2018

Our cash-costs per tonne of washed coal products. Productivity of our workforce. Key indicator of the Group’s health and safety performance. The eﬀect of our eﬀorts to reduce the carbon footprint of our production.

Coking coal concentrate cash cost decreased mainly as a result of rouble depreciation. Labour productivity decreased as a result of lower production volumes coupled with a decline in number of employees. As part of its eﬀorts to improve the safety culture, EVRAZ focused on a new approach to engage employees in the process of identifying and mitigating risks. This and other initiatives helped to bring the lost-time injury frequency rate a key health and safety metric down to 1.58x. The Group surpassed its target level of 1.61x. Overall emissions in the steel sector (the Steel and North America segments) were 0.5% lower than the 2019 level, mostly due to a minor decrease in crude steel production and therefore the speciﬁc intensity of GHG emissions remains at the same level of 1.93 tCO2e/tcs compared to the previous year.

RELEVANCE TO STRATEGIC PRIORITIES

Retention of low cost position
Development of product
Retention of low-cost position
Sustainable development
Sustainable development
portfolio and customer base

Read more on page 255
Read more on page 255
Read more on page 255
Read more on page 255

Annual report & accounts 2020

IMPACT OF COVID-19

EVRAZ is closely monitoring the pandemic and its impact on employees, operations and the broader stakeholder base. The Group is committed to doing all reasonable steps to protect the lives and health of employees and minimise the eﬀect on its enterprises and the communities in which it operates.

Impact on key markets or supply of raw materials and other goods. Shipments continued and raw material deliveries to enterprises were stable.

Two-week isolation with salary for employees returning from trips abroad, either personal or work-related.
Remote work, as well as additional personal protection equipment for employees who must come to work, including eye protectors, respirators and gloves.
Installation of thermal imaging devices and pyrometers at facility entrances to monitor people’s temperatures.
Elimination of large gatherings where possible (with social distancing when they must take place) and cancellation of all major corporate, sporting and entertainment events.
Increase in supplies of antiseptic and disinfectant products in communal areas, as well as regular sanitation of facilities and transport.
Campaigns to raise awareness among employees and contractors about behavioural guidelines, social distancing and personal protection.
Access to a telemedical consultancy service.

Global steel prices continued to slide throughout spring 2020, primarily due to the initial outbreak of COVID-19 in China.

Impact on liquidity, solvency and access to ﬁnancing

In 2020, the pandemic had a limited impact on the Group’s liquidity. Despite the negative market trends seen mostly in the ﬁrst half of the year, operations and sales continued to generate suﬃcient operating cash ﬂow throughout the year, while EVRAZ proactively addressed its upcoming obligations and maintained a strong liquidity position. As of 31 December 2020, cash and cash equivalents stood at around US$1.6 billion, supported by operating cash ﬂow and ﬁnancing initiatives. To hedge against the risk of production disruptions, the Group extended the order book for semi-ﬁnished products with overseas customers where possible. In early April, the only accessible market was China, one of the ﬁrst countries to stabilise amid the pandemic and restore consumer activity. Facing such limited demand, the price decline on global markets accelerated. However, from early May, as countries started to ease lockdown restrictions and market conditions improved, the trend reversed and prices recovered, even gaining additional positive momentum, which helped to end the year with growth.

For more details, see Financial Review on pages 32-43

Measures taken to protect the wellbeing and safety of employees and local communities

For more details about the performance of key markets in 2020, see Market Review on pages 20-23

In addition to caring for the physical health of employees and their families, EVRAZ is carefully assessing the possible mental impact of the measures being undertaken to prevent the spread of COVID-19. More than 4,500 employees of the Group were switched to remote work during the peak of the pandemic. Since March 2020, in response to the COVID-19 pandemic, the Group has introduced numerous additional safety measures to protect its people and ensure operational continuity:

Signiﬁcant reduction of domestic business travel and cancellation of overseas trips.

The Group remains closely focused on its operations, including logistics, supply and technological processes. Despite the fact that more than 3,000 employees contracted COVID-19 in 2020, EVRAZ faced no signiﬁcant issues with the production.

Meet EVRAZ
EVRAZ in ﬁgures
Strategic report
Corporate governance
Financial statements
Additional inﬀormation | 30 31

Since March 2020, EVRAZ has undertaken additional measures aimed at supporting the wellbeing and mental health of its employees during the pandemic:

Outlook

The management of EVRAZ plc has in 2020 EVRAZ ﬁnanced the purchase of specialised equipment, transport and protective gear for hospitals in Russia’s Sverdlovsk and Kemerovo regions. In particular, Novokuznetsk municipal clinical infectious disease hospital No. 8 is being renovated to accommodate a polymerase chain reaction (PCR) laboratory. It will offer COVID-19 tests and same-day results, considering the Group’s cash ﬂow forecasts for the period to 30 June 2021 being its going concern assessment period and has evaluated various ﬁnancial performance scenarios, including a base, pessimistic and an additional stress downside test scenario. These scenarios considered the possible impacts of the COVID-19 crisis on the ﬁnancial results and liquidity position of the Group as well as the potential impact

The corporate website has been updated with a special page containing information about COVID-19 (https://www.evraz. com/en/covid-19/) and the actions that the Group is taking amid the pandemic. The page provides phone numbers for HSE corporate hotlines if employees have questions or encounter problems. EVRAZ North America has engaged external providers for this purpose.
Employees receive regular emails on topics such as how to deal with stress and anxiety; manage remote teams eﬀectively; handle conﬂicts at home; and organise children’s education and entertainment; as well as the importance of leisure time amid self- isolation and other restrictions.
Virtual meetings with senior management are being held, allowing employees to participate and ask questions.
Corporate challenges are regularly being set to promote positive change. As part of the “We Do Not Risk” social media challenge, for every post by participants, EVRAZ is providing antiseptic and masks to doctors at municipal hospitals in Nizhny Tagil, Yekaterinburg, Novokuznetsk and Chelyabinsk. The “What I Will Do After Self-Isolation” challenge allows employees to share their thoughts and improve their outlook by seeing what colleagues are planning.# FINANCIAL REVIEW

Nikolay Ivanov Chief Financial Officer

In its full-year financial results for 2020, EVRAZ reported a 18.1% year-on-year decrease in consolidated revenues, which totalled US$9,754 million, compared with US$11,905 million in 2019. The reduction was primarily the result of a drop in sales prices for steel, vanadium and coal products against a background of less favourable market trends.

The Group’s lower prices from sales of steel products were partly offset by higher sales volumes, which increased from 11.0 million tonnes in 2019 to 12.1 million tonnes in 2020, following an increase in production volumes at Russian mills amid higher demand.

EVRAZ’ consolidated EBITDA amounted to US$2,212 million in the period, compared with US$2,601 million in 2019, with the EBITDA margin rising to 22.7%, from 21.8%, and free cash flow amounting to US$1,877 million in 2020. The decline in EBITDA was primarily attributable to lower steel, vanadium and coal product sales prices, as well as lower sales of tubular and flat-rolled steel products resulting from weakening market demand in North America.

The Steel segment’s revenues (including inter-segment) dropped by 14.4% year-on-year to US$6,969 million, or 65.4% of the Group’s total before elimination. The decrease was mainly due to lower revenues from sales of vanadium and steel products, which fell by 46.0% and 8.4% year-on-year respectively. This was primarily due to a downturn as a result of a decline in prices for raw materials, including coal, scrap and other raw materials, and exchange rate impact on rouble denominated costs.

The Steel, North America segment’s EBITDA decreased due to lower revenues from sales of flat-rolled, tubular, rail-way, and construction products. The Steel, North America segment’s revenues decreased by 28.8% year-on-year. Steel product revenues fell by 29.2%, driven by declining sales volumes (down 18%) and lower prices (down 11%).

The Coal segment’s EBITDA was down, amid lower coal product sales prices, while the cost of sales was largely unchanged. The Coal segment’s revenues fell by 26.3% year-on-year, due to a 35.1% decline in coal product sales prices which was partly offset by a 9.6% increase in coal product sales volumes. Coal prices followed the downward trend set by global benchmarks during the period.

In 2020, the Steel segment’s EBITDA rose amid lower expenses compared to revenue, by 46.0% and 8.4% year-on-year respectively. This was primarily due to a downturn as a result of a decline in prices for raw materials, including coal, scrap and other raw materials, and exchange rate impact on rouble denominated costs. in average sales prices of 19.2% for vanadium and 9.4% for steel products, underpinned by unfavourable market conditions.

Eliminations mainly reflect unrealised profits or losses that relate to the inventories produced by the Steel segment on the Steel, North America segment’s balance sheet, and coal inventories produced by the Coal segment on the Steel segment’s balance sheet.

Revenues, US$ million

Segment	2020	2019	Change	Change, %
Steel	6,969	8,143	(1,174)	(14.4)
Steel, North America	1,490	2,500	(1,010)	(28.8)
Coal	2,021	410	1,611	(531)
Other operations	348	483	(135)	(28.0)
Eliminations	(894)	(1,242)	348	(15.1)
Total	9,754	11,905	(2,151)	(18.1)

Revenues by region, US$ million

Region	2020	2019	Change	Change, %
Russia	2,949	2,893	56	1.9
Asia	1,915	2,893	(978)	(33.8)
Americas	584	865	(281)	(32.5)
CIS (excl. Russia)	123	109	14	12.8
Europe	461	956	(495)	(51.8)
Africa and the rest of the world	266	569	(303)	(53.3)
Total	9,754	11,905	(2,151)	(18.1)

EBITDA, US$ million

Segment	2020	2019	Change	Change, %
Steel	1,930	1,917	13	0.7
Steel, North America	(28)	38	(66)	(52.6)
Coal	400	843	(443)	(56.3)
Other operations	15	18	(3)	(15.0)
Unallocated	(126)	(141)	15	10.6
Eliminations	21	48	(27)	(56.3)
Total	2,212	2,601	(389)	(15.0)

For the definition of EBITDA, please refer to page 253

The following table details the effect of the Group’s cost-cutting initiatives:

Effect of Group’s cost-cutting initiatives in 2020, US$ million

	2020	2019
Improving yields and raw material costs, including	102	60
Various improvements at coal washing plants and mines	28	14
Auxiliary materials and service costs of Urals and Siberia operations	40	50
Auxiliary materials and service costs of North American and Vanadium operations	49	49
Increasing productivity and cost effectiveness	192	173
Others, including
Reduction of general and administrative (G&A) costs and non-G&A headcount	70	68
Assets optimisation	122	105
Total	441	394

Annual report & accounts 2020

Revenues, cost of revenues and gross profit of segments, US$ million

	2020	2019	Change	Change, %
Steel segment
Revenues	6,969	8,143	(1,174)	(14.4)
Cost of revenues	(4,596)	(5,836)	1,240	21.2
Gross profit	2,373	2,307	66	2.9
Steel, North America segment
Revenues	1,490	2,500	(1,010)	(28.8)
Cost of revenues	(1,604)	(2,204)	600	27.2
Gross profit	(114)	296	(410)	(138.5)
Coal segment
Revenues	2,021	410	1,611	392.9
Cost of revenues	(1,490)	(531)	(959)	(180.6)
Gross profit	531	(121)	652	538.8
Other operations
Gross profit	115	116	(1)	(0.9)
Unallocated
Gross profit	(8)	(4)	(4)	100.0
Eliminations
Gross profit	4	18	(14)	(77.8)
Total	3,809	2,595	1,214	46.8

Gross profit, expenses and results, US$ million

	2020	2019	Change	Change, %
Gross profit	3,042	3,632	(590)	(16.2)
Selling and distribution costs	(840)	(966)	126	13.0
General and administrative expenses	(552)	(611)	59	9.7
Social and social infrastructure maintenance expenses	(31)	(26)	(5)	(19.2)
Gain/(loss) on disposal of property, plant and equipment, net	(3)	(6)	3	50.0
Impairment of assets	(310)	408	(718)	(176.0)
Foreign exchange gains/(losses), net	(43)	(341)	298	87.4
Other operating income and expenses, net	2	9	(7)	(77.8)
Profit from operations	1,305	1,797	(492)	(27.4)
Interest expense, net	(328)	(322)	(6)	(1.9)
Share of profits/losses of joint ventures and associates	454	493	(39)	(7.9)
Impairment of non-current financial assets	(1)	0	(1)	n/a
Gain(loss) on financial assets and liabilities, net	34	14	20	142.9
Gain(loss) on disposal groups classified as held for sale, net	0	0	0	n/a
Other non-operating losses, net	(28)	(56)	28	50.0
Profit before tax	1,433	1,826	(393)	(21.5)
Income tax expense	(440)	(531)	91	17.1
Net profit	993	1,295	(302)	(23.3)

In 2020, selling and distribution expenses fell by 13.0%, amid lower railroad transportation costs related to lower shipment volumes and tariffs. General and administrative expenses fell by 9.7%, mostly due to a furlough in the May-July period and staff reductions in North America caused by weak market conditions and idling.# EVRAZ in figures

Strategic report

In 2020, EVRAZ recognised a US$310 million impairment loss. As a result of impairment testing, in 2020, the Group recognised a US$234 million impairment loss with respect to the Large diameter pipes cash-generating unit, which was allocated to goodwill (US$65 million), intangible assets (US$16 million) and property, plant and equipment US$153 million. The impairment was caused by the reassessment of demand on the steel, oil and commodities markets in the USA and Canada.

Foreign exchange gains amounted to US$408 million, mainly related to intra-group loans denominated in roubles and payable by subsidiaries, whose functional currency is the US dollar, to the Russian subsidiaries, which have the rouble as their functional currency. The depreciation of the Russian rouble against the US dollar in 2020 led to exchange gains recognised in the income statements of non-Russian subsidiaries.

For the reporting period, the Group had an income tax expense of US$706 million, compared to US$853 million in 2019. The change reflects the decline in the operating results.

The loss on financial assets and liabilities amounted to US$68 million and consisted primarily of losses on foreign currency swap contracts.

Cash flow, US$ million

	2020	2019	Change	Change, %
Cash flows from operating activities before changes in working capital	1,593	2,057	(464)	(22.6)
Changes in working capital	335	4	331	8275.0
Net cash flows from operating activities	1,928	2,430	(502)	(20.7)
Short-term deposits at banks, including interest	(38)	(10.2)	-	-
Purchases of property, plant and equipment and intangible assets	(624)	(1,107)	(483)	(43.6)
Proceeds from sale of disposal groups classified as held for sale	11	44	(33)	(75.0)
Other investing activities	8	46	(38)	(82.6)
Net cash flows used in investing activities	(665)	(1,415)	(750)	(53.0)
Net cash flows used in financing activities including dividends paid	(1,086)	(6)	(1,080)	18000.0
Effect of foreign exchange rate changes on cash and cash equivalents	(38)	41	(79)	(192.7)
Net increase/(decrease) in cash and cash equivalents	204	356	(152)	(42.7)

Calculation of free cash flow, US$ million

	2020	2019	Change	Change, %
EBITDA	2,212	2,601	(389)	(15.0)
EBITDA excluding non-cash items	2,203	2,615	(412)	(15.8)
Changes in working capital	335	4	331	8275.0
Income tax accrued	(31)	(532)	501	94.2
Social and social infrastructure maintenance expenses	(26)	(38)	12	31.6
Net cash flows from operating activities	1,928	2,430	(502)	(20.7)
Interest and similar payments	(302)	(269)	(33)	(12.3)
Capital expenditures, including recorded in financing activities	(657)	(502)	(155)	(30.9)
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs	(33)	11	(44)	(400.0)
Other cash flows from investing activities	46	-	46	N/A
Free cash flow	1,020	1,456	(436)	(29.9)

For the definition of free cash flow, please refer to page 253.
In 2020, net cash flows from operating activities decreased by 21% (year-on-year). Free cash flow for the period was US$1,020 million.

CAPEX AND KEY PROJECTS

In 2020, EVRAZ’s capital expenditures fell to US$657 million, compared with US$502 million a year earlier. Capital expenditures (including those recognised in financing activities) for 2020 (in millions of US dollars) can be summarised as follows:

Capital expenditures in 2020

Development Projects

Steel segment

Tashtagol iron ore mine upgrade at EVRAZ ZSMK mining site
The project’s aim is to increase annual ore production at the Tashtagol deposit with a partial switch to sublevel caving using mobile equipment.
- 24
Sobstvenno-Kachkanarsky deposit greenfield project
The project’s aim is to maintain production of raw ore.
- 13
Rail and beam mill modernisation at EVRAZ NTMK
The project’s aim is to increase the production of beams and of sheet piles.
- 46

Steel, North America segment

Long rail mill at EVRAZ Pueblo
The project’s aim is to replace the existing rail facility and meet the needs of customers for long rail products.
- 14

Other

Electric arc furnace (EAF) repowering at EVRAZ Regina
The project’s aim is to increase prime coil and plate production at EVRAZ Regina and reduce electrode consumption.
- 4

Coal segment

Acquisition of equipment at Osinnikovskaya mine
Acquisition of equipment fully compliant with mining and geological conditions to provide the projected longwall load on a monthly basis.
- 14
Access and development of reserves in Uskovskaya mine’s seam no. 48
The project’s aim is to prepare the reserves in seam no. 48 for mining.
- 11
Acquisition of equipment at Alardinskaya mine
The project’s aim is to reduce the time required for transition from longwall to longwall and to increase annual production volumes to 3.2mt.
- 10
Access and development of reserves in the Esaulskaya mine’s seam no. 29a
The project’s aim is to relocate mining operations from seam no. 9 to seam no. 29a.
- 9

Other development projects
* 56

Maintenance projects

Steel segment

Major overhaul of blast furnace no. 6 at EVRAZ NTMK
- 80
Technical re-equipment of the air heaters of blast furnace no. 2 at EVRAZ ZSMK
- 657

Other maintenance projects
* 26

Total
* 657

FINANCING AND LIQUIDITY

EVRAZ began 2020 with a total debt of US$4,868 million. In November, the Group repurchased, in a series of open market purchases, and cancelled US$15 million of the outstanding principal of its US$500 million Notes due in 2022. exposure under the first credit facility of RUB5,000 million was hedged using cross-currency swaps.

Interest expense accrued on loans, bonds and notes amounted to US$291 million during the period, flat compared with the amount of 2019, despite a higher total debt load, reflecting lower US and RUR base rates since the second quarter 2020. Debt management has focused on capital markets maturities coming due in the first quarter of 2018.

Specifically, in March 2020, EVRAZ signed a US$315 million committed syndicated facility with a group of international banks with funds made available for one year after signing. Once utilised, this facility will be repayable in nine equal quarterly instalments, following a three-year grace period. As of 31 December 2020, the US$315 million committed syndicated facility remained unutilised.

As of 31 December 2020, various bilateral facilities with a total outstanding principal of around US$1,458 million contained financial maintenance covenants. Maintenance covenants under these facilities include two key ratios calculated using EVRAZ plc’s consolidated financials: a maximum of net leverage and a minimum of EBITDA interest cover. As of 31 December 2020, EVRAZ was in full compliance with its financial covenants.

The ratio of net debt to last twelve months (LTM) EBITDA was 1.5 times as of 31 December 2020, compared to 1.3 times as of 31 December 2019.

These actions, partially offset by scheduled repayments of bank loans and leases, led to an increase in total debt during 2020 by US$115 million to US$4,983 million, as of 31 December 2020.

During 2020, EVRAZ paid two interim dividends to its shareholders in the amount of US$581 million (US$0.40 per share) in March and US$291 million (US$0.20 per share) in October.

In the wake of uncertainties related to the COVID-19 pandemic, the Group decided to increase its cash safety cushion through additional borrowing. In March, EVRAZ utilised RUB5,000 million (c. US$68 million as of 31 December 2020), under its committed credit facility with VTB. Later, in April, it drew another RUB15,000 million (c. US$203 million as of 31 December 2020), under the uncommitted credit facility with this bank.

As of 31 December 2020, cash amounted to US$843 million and committed credit facilities to US$326 million, allowing the Group to comfortably cover upcoming maturities.

Short-term loans and the current portion of long-term loans amounted to US$1,526 million.

By the end of 2020 EVRAZ achieved a net debt reduction of US$89 million to US$3,356 million, compared with US$3,445 million as of 31 December 2019.

Currency risk

REVIEW OF OPERATIONS BY SEGMENT

Operations by Segment, US$ million

Segment	Revenues	EBITDA	EBITDA margin	CAPEX
	2020	2020	2020	2020
	2019	2019	2019	2019
Steel	8,143	1,930	22.0%	92
	6,969	401	1.5%	128
Steel, North America	394	2,500	26.8%	154
	410	1,490	15.4%	10
Coal	(28)	38	(1.6)%	13
	15	400	40.0%	13
Other	483	10	2.1%	-
	18	26	144.4%	-

Steel segment

Sales review

Steel segment revenues by product

	2020	% of total segment revenues	2019	% of total segment revenues	Change, %
	US$ million		US$ million
Steel products, external sales	6,079	87.2	6,637	81.5	(8.4)
Semi-finished products¹	2,013	35.6	2,528	31.0	(20.4)
Construction products²	1,099	28.9	2,166	26.6	(49.3)
Railway products³	146	15.8	1,181	14.5	(87.6)
Flat-rolled products⁴	35	2.1	386	4.7	(90.9)
Other steel products⁵	342	4.9	168	2.1	103.6
Steel products, intersegment sales	2,013	28.9	2,528	31.0	(20.4)
Including sales to Steel, North America	2,528	31.0	2,166	26.6	16.7
Iron ore products	1,099	15.8	1,181	14.5	(6.9)
Vanadium products	37	0.5	37	0.4	(0.0)
Other revenues	648	8.0	499	6.1	29.9
Total	6,969	100.0	8,143	100.0	(14.4)

Sales volumes of Steel segment (thousand tonnes)

	2020	2019	Change	Change, %
Steel products, external sales	12,075	12,197	(122)	(1.0)
Semi-finished products¹	5,636	6,039	(403)	(6.7)
Construction products²	3,800	3,944	(144)	(3.6)
Railway products³	1,393	1,299	94	7.2
Flat-rolled products⁴	622	1,393	(771)	(55.4)
Other steel products⁵	1,579	1,558	21	1.3
Steel products, intersegment sales	6,129	6,451	(322)	(5.0)
Total steel products	12,534	12,883	(349)	(2.7)
Iron ore products	1,895	1,732	163	9.4
Total	18,696	19,334	(638)	(3.3)
## EVRAZ in figures
## Strategic report
### Vanadium products (tonnes of pure vanadium)

	2020	2019	Change, %
Vanadium in slag	(3.3)	(5.0)
Vanadium in alloys and chemicals

Iron ore products

	Sinter	Pellets	Other iron ore products
	ꢭꢉꢘꢆꢯ (8.6)	ꢑꢉꢘꢆ	2
	(100.0)	1,134	(2) (100.0)

1. Includes billets, slabs, pig iron, pipe plants and other semi-finished products.
2. Includes rebar, wire rods, wire, beams, channels and angles.
3. Includes rails, wheels, tyres and other railway products.
4. Includes commodity plate and other flat rolled products.
5. Includes rounds, grinding balls, mine uprights and strips.

Geographic breakdown of external steel product sales, US$ million

	2020	2019	Change	Change, %
Russia	3,358	2,028	492	24.2
Asia	2,962	2,200	221	7.5
Europe	492	565	(73)	(13.4)
CIS	12	12
Africa, America and rest of the world	206	195	11	5.6
Total	6,638	5,000	1,638	32.8

In 2020, revenues from the Steel segment dropped by 14.4% to US$6,969 million, compared with US$8,143 million a year earlier. The segment’s revenues were impacted by a sharp reduction in sales prices for vanadium products, as well as a slight fall in construction sales prices and lower flat rolled sales volumes, along with lower sales volumes in the North America segment.

Steel segment revenues from sales of iron ore products dropped by 23.2%. This was due to a 14.6% decrease in sales prices, as well as 8.6% reduction in sales volumes, primarily as a result of the absence of sinter sales to third parties, due to disposal of Evraz Transsiberian and greater requirements for own operations. In 2020, around 63.2% of EVRAZ’ iron ore consumption in steelmaking came from the Group’s own operations, compared with 66.6% a year earlier.

Revenues from external sales of semi-finished products decreased by 18.7% amid a decline of 9.1% in average prices, which was partly offset by a 10.8% increase in sales volumes. The increase was driven primarily by E<0xC8><0x82>ternal revenues from flat rolled products fell by 20.9%. A 15.6% decrease was attributed Steel segment revenues from sales of vanadium products dropped by 46.0%, primarily due to a 24.1% downturn in sales prices in line with market trends. Ferrovanadium prices dropped in line with the London Metal Bulletin and Ryan’s Notes quotations, while vanadium slag prices fell along with vanadium pentoxide (V2O5) quotations. slab and billets sales to export destinations following a decrease in demand in Russia amid the COVID-19 pandemic. to a drop in sales volumes to Europe mainly due to disposal of EVRAZ Palini e Bertoli which took place in Q4 2019, and a 5.2% decrease due to lower sales prices.

Revenues from sales of construction products to third parties fell by 10.8%, a 17.1% decrease was attributed to a reduction in average prices, which was partly offset by a 10.8% increase in sales volumes.

The share of sales to the Russian market declined from 35.5% in 2019 to 34.6% in 2020, following increase of export sales to Asia.

Steel segment cost of revenues

	2020	2019	Change, %
	US$ million	% of segment revenue	US$ million
Cost of revenues	4,596	65.9	5,836
Raw materials	2,025	29.1	2,540
Iron ore	503	7.2	540
Coking coal	1,082	15.5	1,082
Scrap	542	7.8	413
Other raw materials	442	6.3	339
Auxiliary materials	311	4.5	366
Services	241	3.5	241
Transportation	366	5.3	339
Staff costs	501	7.2	501
Depreciation	233	3.4	398
Energy	439	6.3	442
Other¹	992	14.2	706

1. Includes goods for resale, changes in work in progress and finished goods, taxes in cost of revenues, semi-finished products, allowance for inventory and inter-segment unrealised profit.

In 2020, the Steel segment’s cost of revenues decreased by 21.2% year-on-year. The main reasons for the increase were:
• The cost of raw materials declined by 21.4%, mainly due to lower costs of coking coal (down 28.9%), due to the trend on global markets, as well as reduced use of more expensive coal concentrate, which was replaced with a cheaper form from Esaulskaya mine. Scrap costs declined by 18.5%, due to lower scrap price and lower share of scrap in metal-charge amid increased pig iron consumption. The decrease in raw material costs was also accompanied by a weaker rouble and reduced consumption due to cost-cutting initiatives.
• Costs for auxiliary materials declined by 18.5%, amid lower consumption of auxiliary materials and auxiliary materials prices.
• Other costs were down by 52.0%, mainly due to the lower cost of goods for resale, amid a drop in vanadium purchase prices in 2020, compared to 2019. Other reasons were related to a reduction in the purchase price of goods, higher sales of own production scrap, and significant increases of semi- and vanadium stocks due to COVID-19.
• Service costs declined by 13.0%, primarily driven by the lower cost and volume of ferrovanadium processing, whose costs are linked to final product quotes.
• Transportation costs declined by 10.9%, primarily due to lower shipment volumes due to the COVID-19 pandemic, national lockdowns, the global economic shock and a sharp decline in economic growth rates.

Steel segment gross profit

The Steel segment’s gross profit increased by 18.5% year-on-year, as positive effects of lower cost outweighed the decrease in sales volumes and prices.
• Energy costs were lower due to the weaker rouble, as well as higher own electricity generation and change in fuel structure.

Steel, North America segment

Sales review

Steel, North America segment revenues by product

	2020	2019	Change, %
	US$ million	of total segment revenue	US$ million
Steel products	1,679	94.4	2,372
Semi-finished products	121	6.1	200
Construction products¹	109	5.6	183
Railway products²	183	10.3	326
Flat-rolled products³	405	18.3	405
Tubular products⁴	323	16.2	518
Other revenues⁵	95	5.1	128
Total	1,779	100.0	2,500

1. Includes beams, rebar and structural tubing.
2. Includes rails and wheels.
3. Includes commodity plates, specialty plate and other flat rolled products.
4. Includes large-diameter line pipes, ERW pipes and casing, seamless pipes, casing and tubing and other products.
5. Includes scrap and services.
6. Primarily includes transportation, goods for resale, certain taxes, changes in work in progress and finished goods, and allowances for inventories.

Sales volumes of steel products at Steel, North America segment (thousand tonnes)

	2020	2019	Change	Change, %
Semi-finished products	144	262	(118)	(45.0)
Construction products	256	404	(148)	(36.6)
Railway products	382	441	(59)	(13.4)
Flat-rolled products	523	476	47	9.9
Tubular and other steel products	424	624	(200)	(32.1)
Total	1,729	2,207	(478)	(21.7)

The segment’s revenues from the sale of steel products dropped, due to a decrease of 21.7% in volumes, as well as a decrease of 8.7% in prices. This was mainly attributable to lower demand on the tubular and flat rolled market.

Construction product revenues fell by 8.5%, due to a 10.8% reduction in prices, partly offset by a 2.6% increase in sales volumes as a result of improved market conditions.

Revenues from the sale of semi-finished products decreased by 9.9%, due to a decline in sales volumes of 25.0%, following the fulfilment of a contract with a key customer, albeit partly offset by an increase in prices of 15.1%.

Revenues from flat rolled products decreased due to declines of 10.6% in prices and of 9.5% in sales volumes, as a result of weakening market demand amid the COVID-19 pandemic.

Revenues from tubular product sales fell by 34.1% year-on-year, due to a drop of 32.5% in volumes. This was driven by turbulence on the oil and gas markets, which led to falling demand, resulting in the idling of the OCTG mills in Canada and the US.

Railway product revenues fell by 19.5%, driven by a decline in prices of 12.1%, along with lower sales volumes by 8.4%, due to reduced demand driven by the COVID-19 pandemic.

Steel, North America segment cost of revenues

	2020	2019	Change, %
	US$ million	% of segment revenue	US$ million
Cost of revenues	1,604	90.1	2,204
Raw materials	454	25.5	686
Semi-finished products	238	13.4	396
Auxiliary materials	145	8.2	190
Services	139	7.8	222
Staff costs	240	13.5	190
Depreciation	100	5.6	165
Energy	90	5.1	165
Other⁶	578	32.5	486

In 2020, the Steel, North America segment’s cost of revenues dropped significantly year-on-year driven by declined sales volumes. The main changes related to:
• Raw material costs fell by 33.8%, primarily because of lower production volumes and lower cost of scrap.
• The cost of semi-finished products was down 39.9%, due to the reduction of consumption at Portland Flat.
• Auxiliary material costs fell by 23.7%, driven by lower production levels at Pueblo and in Canada.
• Service costs went down by 37.4%, driven primarily by lower production volumes and mill idling.

Steel, North America segment gross profit

In 2020, the Steel, North America segment’s gross profit decreased by 21.9% year-on-year, driven by lower sales volumes and prices. The decrease in gross profit was partly offset by the significant reduction in the cost of revenues.## Coal segment

Sales review

Coal segment revenues by product

	2020		2019		Change, %
	US$ million	% of total segment revenue	US$ million	% of total segment revenue
External sales
Coal products
Coking coal	929	62.4	1,251	61.9	(25.7)
Coal concentrate	148	9.9	148	7.3	0.0
Steam coal	853	57.3	1,103	54.6	(22.7)
Intersegment sales
Coal products
Coking coal	536	35.9	730	36.1	(26.6)
Coal concentrate	101	6.8	124	6.1	(18.5)
Other revenues	29	1.9	25	1.2	16.0
Total	1,490	100.0	2,021	100.0	(26.3)

Sales volumes of Coal segment (thousand tonnes)

	2020	2019	Change, %

External sales
Coal products
Coking coal	12,336	11,053	11.6
Steam coal	2,233	1,928	15.8
Coal concentrate and other products	1,928	1,700	13.4
Intersegment sales
Coal products
Coking coal	10,066	9,124	9.8
Coal concentrate	4,663	4,525	3.1
Total, coal products	28,226	28,330	(0.4)

Revenues from external sales of coal products fell, amid a 22.0% reduction in prices, partly offset by an 11.0% increase in sales volumes. Coking coal revenues fell by 50.0% and coking coal concentrate revenues dropped by 37.5% amid lower pricing, but were offset in part by higher sales volumes. These were driven by strong demand for coal on the Russian market, as well as growth in demand for coal from China. Long-term partnerships with Japanese, Korean and European clients have minimised the impact of declining demand on these markets.

In 2020, the Coal segment’s sales to the Steel segment amounted to US$536 million (35.9% of total sales), compared with US$730 million (36.1% of total sales) in 2019.

Revenues from internal sales of coal products were down 26.8%, mainly due to a 33.1% reduction in sales prices, which was partly offset by a 9.6% uptick in volumes. Coking coal volumes rose by 22.4%, due to increased sales of K and KS grades. During the reporting period, roughly 68% of EVRAZ’ coking coal consumption in steelmaking came from the Group’s own operations, compared with 60% in 2019.

Coal segment cost of revenues

Cost of revenues	2020	% of segment revenue	2019	% of segment revenue	Change, %
Auxiliary materials	1,027	68.9	1,046	51.8	(1.8)
Services	110	7.4	159	7.9	(30.8)
Transportation	200	13.4	223	11.0	(10.3)
Staff costs	163	10.9	198	9.8	(17.7)
Depreciation	43	2.9	37	1.8	16.2
Energy	351	23.6	351	17.4	0.0
Other¹	51	3.4	26	1.3	96.2
Total	1,945	130.7	2,040	100.0	(4.7)

¹ Primarily includes goods for resale, certain taxes, changes in work in progress and finished goods, allowance for inventory, raw materials and inter-segment unrealised profit.

The main drivers of the year-on-year increase in the Coal segment’s cost of revenues were as follows:

The consumption of auxiliary materials decreased by 30.8% due mainly to lower volumes of preparation at third-party plants, the idling of production at the Raspadsky open pit in Q2-Q3 2020, and a decrease in the production volumes at Raspadskaya mine.
Costs for services dropped by 45.4%, due mainly to lower volumes of preparation at third-party plants, the idling of production at the Raspadsky open pit mine in Q2-Q3 2020, the use of in-house transportation equipment instead of third-party contractor equipment, lower volumes shipped.
Transportation costs fell by 16.2% during the reporting period, primarily due to the idling of production at the Raspadsky open pit mine in Q2-Q3 2020, lower volumes shipped.
Staff costs fell by 17.7% because of lower mining volumes as well as rouble depreciation.
Other costs increased during the reporting period, mainly due to higher sales, accumulated stock, partly offset by higher work-in-progress, and the lower cost of goods for resale and lower mineral extraction tax payments, due to reduced production levels.

Coal segment gross profit

In 2020, the Coal segment’s gross profit was US$250 million, down from US$331 million a year earlier, primarily due to lower sales prices.

Nikolay Ivanov
Chief Financial Officer

Annual report & accounts 2020

RUSSIA BUSINESS REVIEW

Kemerovo Airport ‒ Kemerovo region
Krasnodar Airport ‒ Krasnodar region
Udokan Metals and Mining Plant ‒ Zabaikal region
Taishet Aluminium Smelter ‒ Krasnoyarsk
Arctic LNG 2 project ‒ Yamalo-Nenets region, Murmansk region
Amur Gas Processing Plant ‒ Amur region
Skolkovo Technopark ‒ Moscow
Zolotoi transport hub ‒ Yekaterinburg
Kola Shipyard ‒ Murmansk region
Radioactive material processing facility at Leningrad Nuclear Plant ‒ Leningrad region
Large Circle Line and Lyublinsko-Dmitrovskaya line of the Moscow underground ‒ Moscow
Rubbish incineration facilities ‒ Moscow region
Launchpad 1A at Angara Cosmodrome ‒ Amur region
Yubileyny underground mine ‒ Bashkortostan
Nasedkino Mining and Processing Plant ‒ Irkutsk
Western quay with fuel terminal at Geoport in Novorossiisk ‒ Krasnodar
Russian Post logistics centre for Samara region ‒ Samara
New terminal at Novosibirsk Airport ‒ Novosibirsk region
Moscow City (15 plots) ‒ Moscow
Omsk Oil Refinery ‒ Omsk
Zvezda Shipyard ‒ Bolshoi Kamen, Primorye region
Surgutneftegaz ‒ Khanty-Mansiisk region
Reservoirs nos. 5 and 6 at Obsk LNG ‒ Yamal peninsula
Electricity pylons for Transneft ‒ Chelyabinsk region
Electricity connection for infrastructure at Rosneft's Erginsk deposits ‒ Khanty-Mansiisk region
Power of Siberia gas pipeline ‒ Siberia
Avangard Ice Arena ‒ Omsk
Water Sports Centre ‒ Yekaterinburg
UGMK Ice Arena ‒ Yekaterinburg
Severnaya Werf Shipyard ‒ St Petersburg
PhosAgro ‒ Murmansk region
NOVATEK ‒ Leningrad region
Lakta Centre ‒ St Petersburg
Blast furnace no.3 at Severstal ‒ Cherepovets
Salmanovskoye deposit ‒ Yamalo-Nenets region
Ethylene plant at Nizhnekamskneftekhim ‒ Tatarstan
GRINN shopping and entertainment centre ‒ Bryansk
Pipe section plant at NOVATEK's Heavy Sea Equipment Construction Centre ‒ Murmansk region
100,000 metanol unit at Shchigrovskaya Azot ‒ Tula region
Overhead steam pipe at Tatneft ‒ Tatarstan
Nitric acid and ammonia nitrate complex at Shchigrovskaya Azot ‒ Tula region
Field hockey stadium ‒ Kemerovo
Sulphuric acid neutralisation unit at Kolesnikov Metallurgy Plant ‒ Krasnoyarsk region
Noise reduction screens for the Central Ring Road ‒ Moscow
Udarnaya Thermal Power Plant in Taman ‒ Krasnoyarsk region
Facilities for Arctic LNG 2 project (onshore) ‒ Yamalo-Nenets region
Afipsky Oil Refinery ‒ Krasnoyarsk region
Belokamskoe gold deposit ‒ Yakutiya
Meat processing plant for Agroeco ‒ Voronezh region
Oil extraction plant ‒ Kurskaya region
School ‒ Magadan
Dufa Arena stadium ‒ Kemerovo
Chess centre ‒ Khanty-Mansiisk
Cardboard production plant ‒ Irkutsk region
Haier plant ‒ Tatarstan
Ust-Luga port terminal (Ultramar) ‒ Leningrad region
Sambo and boxing school ‒ Moscow
Associated gas processing facility ‒ Lipetsk region
Makfa logistics centre ‒ Chelyabinsk

ASIA

Kolkata Metro (RVNL) ‒ India
Kuala Lumpur Light Rail Transit line 3 ‒ Malaysia
Taipei Metro ‒ Taiwan
Tavan Tolgoi - Zuunbayan rail link (415 kilometres) ‒ Mongolia
Oil refinery in Altanshiree, Dornogovoi province ‒ Mongolia
Genghis Khan museum in Ulaanbaatar ‒ Mongolia
Namviet: Vietnam Railways Maintenance ‒ Vietnam
Sanying Line, New Taipei Metro ‒ Taiwan

CIS

200-unit in-patient treatment facility for the presidential administration medical centre ‒ Nur-Sultan, Kazakhstan
Rixos Turkestan hotel (by MunaiKurylysServis) ‒ Turkestan, Kazakhstan
Mosque ‒ Nur-Sultan, Kazakhstan
Hampton by Hilton hotel ‒ Turkestan, Kazakhstan

NORTH AMERICA

Mexico City Metro Line 12 extension (Sistema de Transporte Colectivo) ‒ Mexico City, Mexico
Metro Gold Line Foothill Extension ‒ Los Angeles, California, USA
Palo Alto II wind farm (MidAmerican Energy) ‒ Cylinder, Iowa, USA
Trans Mountain pipeline ‒ Alberta/British Columbia, Canada
Costal GasLink pipeline ‒ British Columbia, Canada
Alberta Carbon Trunk Line ‒ Alberta, Canada
Interoceanic Railway of Mexico (Ferrocarril Interoceanico de Mexico) ‒ Mexico
Sound Transit Federal Way Link Extension ‒ Seattle, Washington, USA
Central 9 ‒ Denver, Colorado, USA
Southern Hills wind farm (MidAmerican Energy) ‒ Creston, Iowa, USA
Sagamore Wind Project (Excel Energy) ‒ Rogers, Minnesota, USA
North Fork Ridge wind farm (Algonquin Power & Utilities Company) ‒ Liberal, Missouri, USA

SOUTH AMERICA

RUMO: track maintenance between the ports of Santos, Paranaguá, São Francisco do Sul and Rio Grande ‒ Brazil
Peru Copper Mine ‒ Ilo, Peru

AFRICA

Egyptian National Railways maintenance ‒ Egypt
Greater Cairo Metro Line 3 ‒ Egypt

Meet EVRAZ EVRAZ in figures Strategic report Corporate governance Financial statements Additional information | 44 45# Meet EVRAZ

EVRAZ in figures

Strategic report

Projects Completed in 2020

seat staꢀium ꢭꢏꢕ ꢪꢌCon ꢙꢁreeꢯ ꢛ Turkestan, Kazakhstan
Chipboard and hardboard plant ꢛ Mogilyov Region, Belarus
New airport (by Vlasta-Servis) ꢛ Shymkent, Kazakhstan
Tashkent City district (residential buildings, business centre, retail and entertainment centre) ꢛ Tashkent, Uzbekistan
Dramatics theatre ꢛ Turkestan, Kazakhstan
Glass factory (by KasAlPack) ꢛ Shymkent, Kazakhstan
Oil extraction plant ꢛ Tashkent, Uzbekistan
Almalyk Metals and Mining Plant ꢛ Almalyk, Uzbekistan
Constitutional Council building ꢛ Nur-Sultan, Kazakhstan
Airport ꢛ Kerki, Turkmenistan
Logistics centre ꢛ Fanipol, Belarus
Tyre centre ꢛ Kazakhstan
Hematology centre ꢛ Nur-Sultan, Kazakhstan
Specialist infection hospital (for COVID-19 cases) ꢛ Pavlodar, Kazakhstan
Thermal power plant reconstruction ꢛ Nur-Sultan, Kazakhstan
Uly-Dala Museum ꢛ Turkestan, Kazakhstan
Residential buildings in Saryarka and Dostyk districts ꢛ Pavlodar, Kazakhstan
Media centre (by U-Con Three) ꢛ Turkestan, Kazakhstan
National Centre for Oncology Research ꢛ Nur-Sultan, Kazakhstan
1. Chipboard and hardboard plant ꢛ Mogilyov Region, Belarus
1. Tashkent City district (residential buildings, business centre, retail and entertainment centre) ꢛ Tashkent, Uzbekistan
1. Dramatics theatre ꢛ Turkestan, Kazakhstan
1. Glass factory (by KasAlPack) ꢛ Shymkent, Kazakhstan
1. Oil extraction plant ꢛ Tashkent, Uzbekistan
1. Constitutional Council building ꢛ Nur-Sultan, Kazakhstan
1. Airport ꢛ Kerki, Turkmenistan
1. Logistics centre ꢛ Fanipol, Belarus
1. Tyre centre ꢛ Kazakhstan
1. Hematology centre ꢛ Nur-Sultan, Kazakhstan
1. Specialist infection hospital (for COVID-19 cases) ꢛ Pavlodar, Kazakhstan
1. Thermal power plant reconstruction ꢛ Nur-Sultan, Kazakhstan
1. Uly-Dala Museum ꢛ Turkestan, Kazakhstan
1. Residential buildings in Saryarka and Dostyk districts ꢛ Pavlodar, Kazakhstan
1. Media centre (by U-Con Three) ꢛ Turkestan, Kazakhstan

Annual report & accounts 2020

EVRAZ KGOK
EVRAZ NTMK
EVRAZ ZSMK
EVRAZ Vanady-Tula
EVRAZ Caspian Steel
EVRAZ Nikom
CZECH REPUBLIC
KAZAKHSTAN
SEGMENT
Iron ore

EVRAZ is No. 1 among rail suppliers and the leader in the construction steel market in Russia. The Steel segment’s primary focus is producing steel in the CIS from closely located raw materials to serve the domestic infrastructure and construction market while maintaining export ﬂexibility.

Our goals

Be a leader on the Russian construction steel market.
Secure a leadership position on the Russian rail market.
Be an eﬃcient producer of steel products for infrastructure projects.

Production highlights

Item	2020 (kt)
Crude steel	12,050
Iron ore products	14,205
Steel products	11,018
Vanadium slag	19,533

Sales highlights¹

Item	2020 (kt)
Finished products	6,158
Iron ore products	1,732
Semi-ﬁnished products	6,039
Vanadium ﬁnal products	12,534

¹ Sales to third parties only.

Financial highlights

Item	Value
Revenues	US$ 6,969 million
EBITDA	US$ 1,930 million
EBITDA margin	27.7%
CAPEX	US$ 401 million

KEY ASSETS

Mining operations

EVRAZ KGOK

EMPLOYEESꢁ
5,948 people

EVRAZ KGOK is one of the Group’s core mining companies in Russia. Located in Sverdlovsk region, 140 kilometres from EVRAZ NTMK, EVRAZ KGOK mines titanomagnetite iron ore with vanadium content at Gusevogorskoe deposit. The vanadium content makes it possible to produce high-strength grades of alloy steel. EVRAZ NTMK is a primary consumer of EVRAZ KGOK’s products. At the moment, EVRAZ KGOK uses three open pits to produce ore, which is then processed by its crushing, processing, sintering and pelletising plants. The ﬁnal products in the form of sinter and pellets are loaded into railways cars and shipped to consumers, including those abroad.

CAPACITY
9,734 million tonnes of ore per year

PROVEN AND PROBABLE RESERVESꢁ
60 million tonnes

EVRAZ ZSMK (mining operations)¹

EMPLOYEESꢁ
4,464 people

EVRAZ ZSMK’s mining operations include several mining and processing facilities in Kemerovo region. It uses an underground mining process and most of the iron ore that it produces is consumed internally by its steelmaking operations. The mining complex includes the Tashtagol mine, the Gorno-Sorskoe mine, the Izharskaya mine, the Yurievskiy open pit for limestone, as well as the Abagaturskaya Concentration and Sinter Plant.

CAPACITY
141 million tonnes of ore per year

PROVEN AND PROBABLE RESERVESꢁ
9 million tonnes

¹ Former Evraza.

Steelmaking operations

EVRAZ ZSMK (Russia)

EMPLOYEESꢁ
18,067 people

EVRAZ ZSMK has ﬁve coke oven batteries and three blast furnaces in operation. For steelmaking, it has two oxygen converter shops, which consist of ﬁve basic oxygen furnaces. It also has an electric arc furnace. EVRAZ ZSMK operates one eight-strand continuous casting machine, which produces square billets, a two-strand continuous slab casting machine, and one four-strand continuous casting machine, which makes semi-ﬁnished products for the rail mill. Rolling facilities include a blooming mill, one medium-section 450 mill, two small-section 250 mills, one rail and structural steel mill, one sectional mill and two ball-rolling mills. The EVRAZ ZSMK steel mill has its own coal washing plant for coking coal. It can also produce customised coking coal blends if necessary.

CAPACITY

Item	Value (million tonnes per year)
Pig iron	6.2
Crude steel	7.7

EVRAZ NTMK (Russia)

EMPLOYEESꢁ
13,359 people

EVRAZ NTMK has coke and chemical production facilities, two blast furnaces, steelmaking facilities (one oxygen converter shop consisting of four LD converters), four continuous casters, seven rolling mills, as well as a power and heat generation plant.

CAPACITY

Item	Value (million tonnes per year)
Pig iron	4.9
Crude steel	4.4

EVRAZ Caspian Steel (Kazakhstan)

EMPLOYEESꢁ
202 people

EVRAZ Caspian Steel has a light-section rolling mill.

CAPACITY
450 thousand tonnes of rebars per year

Vanadium operations

EVRAZ Vanady Tula (Russia)

EMPLOYEESꢁ
610 people

EVRAZ Vanady Tula is the largest European producer of vanadium pentoxide, ferrovanadium-50 and ferrovanadium-80, which are alloy additions used to manufacture extra high strength steel for various applications and titanium alloys. The site’s production and scientiﬁc resources make it possible to process any vanadium-containing materials and produce a wide range of products. Its production facilities are in Tula, in the Tula region of Russia. EVRAZ Vanady Tula uses low-cost, highly eﬃcient technology to process the vanadium slag produced by EVRAZ NTMK.

EVRAZ Nikom (Czech Republic)

EMPLOYEESꢁ
64 people

EVRAZ Nikom produces ferroalloys and corundum material. It converts the vanadium oxide produced by EVRAZ Vanady Tula into ferrovanadium, the major vanadium product used by the steel industry to increase strength and hardness.

Trading companies

Trading Company EvrazHolding

EMPLOYEESꢁ
138 people

Trading Company EvrazHolding is the largest Russian supplier of rolled steel and sells EVRAZ products in Russia and the CIS. It focuses on products for use in construction and engineering, rolled products for the transportation segment (rails, wheels and specialist products), as well as products for the mining and pipemaking sectors.

EVRAZ East Metals

EMPLOYEESꢁ
79 people

East Metals AG is a Swiss-based EVRAZ trading company, which is a sole distribution channel outside the CIS. Its main exports include semi-ﬁnished steel products (slabs and square billets), long ﬁnished products (rail, beam, wire rod and rebar), pig iron, coking coal, vanadium products and iron ore pellets. A wide network of agencies and representative oﬃces (including those in China, Hong Kong, Indonesia, Japan, the Philippines, South Korea, Taiwan, Thailand, Turkey, etc.) ensures proximity to clients in key markets.

EVRAZ Metall Inprom

EMPLOYEESꢁ
1,452 people

EVRAZ Metall Inprom is a leading Russian steel provider for infrastructure projects and trader supplying rebar, profile, flat, tubular and rolled section steel manufactured by major plants in the CIS. The company’s major presence in various regions of Russia is supported by a branch network that includes 48 subdivisions, and EVRAZ Metall Inprom’s branches are advantageously located in the industrial centres of the central, south and north-west of Russia, in Chernozemye, Povolzhye, Siberia, the Urals and Russia’s Far East, as well as in Kazakhstan. Each subdivision’s product range is shaped subject to local demand. Also, a part of HVA metal processing machines allows us to satisfy the needs of those customers who needs a HVA products.

RUSSIA Yuzhkuzbassugol COAL Raspadskaya Mezhegeyugol

SEGMENT

EVRAZ ranks ﬁrst among Russian coking coal producers. The Group oﬀers integrated solutions to optimise the coal blend to a global clientele and prides itself on being a reliable supplier. Coal and concentrate products are used by EVRAZ steelmaking divisions, as well as by third-party domestic customers and export clients in Asia and Europe. The product portfolio comprises a wide range of coking coal blends, including hard, semi-hard and semi-soft.

Raw coking coal
Coking coal concentrate

Our goals

Work safely and ensure growth by using innovative technology and methods.
Achieve 100% self-suﬃciency in all coal grades and expand the product portfolio in insuﬃcient grades.
Maintain cash costs in the ﬁrst quartile of the cost curve.

Production highlights

Item	2020 (kt)
Raw coking coal	20,653
Coking coal concentrate	13,598

Sales highlights¹

Item	2020 (kt)
Raw coking coal	2,271
Coking coal concentrate	10,065

¹ Sales to third parties only.

Financial highlights

Item	Value
Revenues	US$ 1,490 million
EBITDA	US$ 400 million
EBITDA margin	26.8 %
CAPEX	US$ 154 million

KEY ASSETS

Mining and coal washing operations

Raspadskaya

EVRAZ completed the consolidation of its coal businesses under Raspadskaya on 30 December 2020.

EMPLOYEESꢁ
15,578 people

Mezhdurechensk site (Russia)

Raspadskaya has two operational underground coking coal mines and two open-pits in Mezhdurechensk, the Kemerovo region. This complex includes the Raspadskaya mine, Russia’s largest. The operations produce hard coking coal (K and OS grades), semi-hard coking coal (GZh grade) and semi-soft coking coal (GZhO grade).

CAPACITY
26 million tonnes of raw coal per year

Corporate governance

Financial statements

Aꢀꢀitional inꢂormation | 46 47 48 49 50 51# Raspaꢀsꢥaꢕaꢕs coal ꢇasꢁing plant

Raspaꢀsꢥaꢕaꢕs coal ꢇasꢁing plant is one oꢂ tꢁe most moꢀern in Russiaꢘ ꢎt enꢝoꢕs loꢇ maintenance costs anꢀ is ꢀesigneꢀ to process ꢁigꢁ volumes ꢇitꢁ a small staꢢꢘ

PROVEN AND PROBABLE RESERVES

1,896 million tonnes

Novokuznetsk site (Russia)

Raspaꢀsꢥaꢕa ꢁas ﬁve coꢥing coal mines in ꢋovoꢥuꢠnetsꢥꢡ tꢁe ꢟemerovo regionꢘ ꢙꢁeꢕ produce hard and semi-hard coking coal (Zh, GZh and KS grades), which is processed into ꢁigꢁꢌꢣualitꢕ concentrate ꢭclassiﬁeꢀ as ꢶCC graꢀe internationallꢕꢯꢘ ꢞost oꢂ tꢁis is produced in the Yerunakovskaya-8 mine.

At ꢋovoꢥuꢠnetsꢥ site Raspaꢀsꢥaꢕa ꢁas tꢇo coal ꢇasꢁing plantsꢡ ꢇꢁicꢁ proꢀuce customiseꢀ coꢥing coal ꢏlenꢀs anꢀ pulveriseꢀ coal inꢝection ꢭꢴCꢎꢯ coalꢘ ꢙꢁe ꢟuꢠnetsꢥaꢕa ꢇasꢁing plant produces high-quality HCC concentrate for domestic market. The Abashevskaya washing plant proꢀuces a ꢇiꢀe varietꢕ oꢂ proꢀucts ꢇꢁose ꢣualitꢕ matcꢁes speciﬁc customersꢅ neeꢀsꢘ

Mezhegey

ꢎt ꢇas ꢀeciꢀeꢀ to stop proꢀuction at tꢁe ꢞeꢠꢁegeꢕ mine ꢂrom tꢁe ꢏeginning oꢂ ꢉꢚꢉꢚ with the conservation of the mine until demand and market prices recover.

STEEL, EVRAZ Red Deer EVRAZ Regina NORTH AMERICA SEGMENT

EVRAZ Portland USA EVRAZ Camrose

EVRAZ is a leading North American producer of high-quality, engineered steel for rail, energy and industrial end user markets, with a focus on manufacturing products with unmatched quality for the Group’s customers. The segment is the largest producer of rail and large-diameter pipe (LDP) in North America.

EVRAZ Pueblo

Construction products
Railway products
Tubular products
Flat-rolled products

The Steel, North America segment has three business units organised by geographic locations: Canada, Pueblo and Portland. Each of the new business units has product portfolios based on product mix at operating facilities. EVRAZ also holds leading positions in Western Canada’s oil country tubular goods (OCTG) and small-diameter line pipe (SDP) markets, as well as in the US West Coast plate market. Each of EVRAZ North America’s business units are structured to strengthen the focus on safety, quality and operational excellence across the Steel, North America segment.

Our goals

Grow leadership position in North American energy pipe market.
Maintain leading position in the Western region plate market.
Expand leading position in the rail market.

Production highlights

Crude steel	Steel products	Steel products
1,580kt	1,668kt	1,729kt

Sales highlights¹

¹ Sales to third parties only.

Revenues	EBITDA	EBITDA margin	CAPEX
US$ 1,779million	US$ (28) million	(1.6)%	US$ 92 million

KEY ASSETS

Canada - Steelmaking and rolling

EVRAZ Regina

EVRAZ Regina in Saskatchewan is the largest steelmaking operation in Western Canada. It comprises two electric arc furnaces (EAFs), a ladle furnace, a continuous variable-width slab caster, as well as a Steckel mill capable oꢂ rolling coil anꢀ plate ꢇitꢁ a ꢇiꢀtꢁ oꢂ up to 6 inchesꢘ EVRAZ Regina Steel proꢀuces carꢏon steel slaꢏsꢡ ꢬatꢌrolleꢀ ꢀiscrete plate anꢀ coileꢀ plateꢘ

EVRAZ Regina’s tubular operations are comprised of a 24-inch ERW line pipe mill, a 16-inch ERW pipe mill (ERW tubing welding), five Helical Submerged Arc Welded (HSAW) mills, and ID/OD coating facility, producing large-diameter pipe for oil, natural gas, and LNG transmission. EVRAZ Regina’s tubular mills are important suppliers to the North American energy markets, serving leading energy producers and midstream operators in both Canada and the US.

EMPLOYEES:	CAPACITY:
1,072 people	1.1 million tonnes of crude steel per year

EVRAZ Calgary

EVRAZ Calgary comprises an Electric Resistance Welded (ERW) pipe mill as well as heat treat AOD threading, and finishing lines ꢂor ERW casing ꢇitꢁ an outsiꢀe ꢀiameter oꢂ up to 20 inchesꢘ ꢙꢁe site also operates ERW tuꢏing ﬁnisꢁing ꢂacilities comprising pipe upsetting, threading, testing and inspection. EVRAZ Calgary’s products are primarily used in the exploration and production of oil and gas in Canada and the US.

EMPLOYEES:	CAPACITY:
243 people	186 thousand tonnes of tubular products

EVRAZ Camrose

EVRAZ Camrose operates an ERW pipe mill anꢀ ﬁnisꢁing lineꡡ capaꢏle oꢂ proꢀucing small-diameter line pipe and carbon OCTG casing with an outside diameter of up to 16 inches. Camrose products are primarily used in the drilling, transmission and distribution of oil and natural gas as well as in the transmission of other substances such as carbon dioxide.

EMPLOYEES:	CAPACITY:
91 people	118 thousand tonnes of tubular products

EVRAZ Edmonton Coupling Machining

EVRAZ Edmonton Coupling Machining specialises in manufacturing API couplings with an outside diameter of up to 9 5/8 inches. Couplings produced at ECM are supplied to EVRAZ’s Calgary and Red Deer OCTG casing and tubing operations.

EMPLOYEES:	CAPACITY:
16 people	1.5 million couplings per year

EVRAZ Red Deer

EVRAZ Red Deer comprises an ERW pipe mill producing OCTG casing and small-diameter line pipe with an outside diameter of up to 13 3/8 inches. The site includes a casing heat treat line, API and premium threading lines, as well as separate OCTG casing and SDP ﬁnisꢁing linesꢘ

EMPLOYEES:	CAPACITY:
178 people	167 thousand tonnes of tubular products

US - Steelmaking and rolling

EVRAZ Portland

EVRAZ Portland in Oregon comprises a Steckel rolling mill, a plate quench and tempering facility, and two HSAW pipe mills. The Portland rolling mill is tꢁe onlꢕ plate mill on tꢁe ꢻest Coast anꢀ ꢁas ꢀeepꢌꢇater access to tꢁe ꢴaciﬁc Ocean as well as access to Class I railways and trucking routes serving North America. Finished products include hot-rolled carbon and alloy steel plate, hot- rolled coil, heat-treated plate, shot-blasted and primed plate, temper-passed cut- to-length plate and plate coil. The Portland HSAW mills produce large-diameter API grade pipe for oil and gas transmission and structural applications.

EMPLOYEES:	CAPACITY:
302 people	204 thousand tonnes of tubular products per year

EVRAZ Pueblo

EVRAZ Pueblo in Colorado comprises three rolling mills: a rail mill; a seamless pipe mill that produces OCTG products for use in oil and gas exploration; and a wire rod and coiled reinforcing bar mill. EVRAZ also operates one EAF and a billet caster that supplies round billets to the hot rolling mills. In addition, EVRAZ Pueblo owns and operates the Colorado and Wyoming railway, a short-line route that serves the Group’s mills and connects the site to ꢏotꢁ tꢁe ꢱurlington ꢋortꢁern Santa Fe anꢀ tꢁe ꢪnion ꢴaciﬁc railꢇaꢕ linesꢡ ꢇꢁicꢁ results in minimal delivery costs to these customers.

EMPLOYEES:	CAPACITY:
1,022 people	1.0 million tonnes of crude steel per year

On ꢛune 2020, tꢁe EVRAZ ꢏoarꢀ oꢂ ꢀirectors approveꢀ eꢃecution oꢂ a capital proꢝect to construct a universal long rail mill at tꢁe ꢴueꢏlo siteꢘ ꢙꢁis proꢝect ꢇill moꢀernise ꢴueꢏloꢅs rail making capability and enable the manufacture and welding of 100m rails.

Recycling

EVRAZ Recycling

EVRAZ Recycling is the largest metal scrap recycler in Western Canada with 13 facilities across the prairies, as well as three facilities in the US, of which one is in North Dakota and two are in Colorado. EVRAZ Recycling buys, processes and sells a wide range of ferrous and non- ꢂerrous materialsꢡ ꢇꢁile also oꢢering a varietꢕ oꢂ metal recꢕcling anꢀ otꢁer servicesꢡ incluꢀing auto wrecking yards that provide a great selection of low-cost parts on a self-serve basis.

EMPLOYEES:
265 people

CORPORATE SOCIAL RESPONSIBILITY

HEALTH, SAFETY, AND ENVIRONMENT

2020 highlights
* The Group’s LTIFR was 1.58
* Employees received 40,000 Risk Management Project training

Approach to HSE management

While the HSE Committee deals with HSE issues at the executive level, each EVRAZ facility has its own HSE unit subordinated to a local management team, with the vice president supervising the overall workstream.

Environmental safety and protecting the health and safety of employees and contractors have always been priorities at EVRAZ. The Group is committed to enhancing its health, safety, and environment (HSE) management system and endeavours to provide its employees and contractors with safe working conditions at all its assets, while also protecting local environments.

Governance
The Group understands the importance of having strong leaders and strives to involve executives and managers in HSE management processes. In 2010, the HSE Committee at the Board of Directors level was created in order to improve the HSE strategy and to analyse the impact of HSE measures on the Group. In 2018, the EVRAZ HSE Management Committee was established to boost the level of engagement level of management and enhance the safety culture within the Group. This strategic body, which consists of the EVRAZ CEO and vice presidents, is authorised to set HSE goals, approve relevant annual KPIs and take other measures.

EVRAZ closely adheres to the guidance of the World Steel Association’s Environmental Policy (EPCO) and the Technology Policy (TPCO) and works actively with Safety and Health (SHCO) committees, as well as the HSE committees of Russian Steel (a Russia- based, non-commercial partnership) and the Russian Union of Industrialists and Entrepreneurs.

Health, occupational, and environmental safety considerations are at the core of EVRAZ’ operations. The Group has adopted a four-phase HSE management system that covers all levels of the business, from development strategies to daily operational issues.# EVRAZ HSE management structure

HSE Committee of the Board of Directors

EVRAZ plc
Board of Directors
HSE Management Committee
EVRAZ CEO
HSE Vice President
Health and Safety Directorate
Industrial Safety Directorate
Environmental Management Directorate
HSE FUNCTION AND SAFETY REPRESENTATIVES FOR ALL EVRAZ OPERATIONS

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HSE system

The fundamental purpose of the HSE management system is to ensure the safety and health of employees by identifying potential hazards in workplaces and facilities and to find and evaluate sources of potential environmental pollution and prepare mitigation measures. The primary HSE document is the EVRAZ HSE Policy, which was implemented in 2011 across the Group and amended in 2018. The policy sets out basic HSE principles, identifies the health and safety of employees as a priority, determines expectations for employees and sets out EVRAZ’ commitment to implementing leading environmental management practices as part of sustainability efforts.

The HSE management process operates in a continuous cycle, which consists of:

Forecast and assessment of the main HSE risks.
Development and implementation of HSE initiatives.
Monitoring, review and investigation of incidents via a root-cause analysis.
Analysis of performance, adjusting and setting new strategic HSE goals.

EVRAZ strives to adhere to all respective local HSE laws, the Group’s internal regulations and all HSE policy principles. In addition to technical regulations, the operational activities of the Group are governed by the following HSE documents:

The HSE Policy.
The Cardinal Safety Rules.
The Fundamental Environmental Requirements.
The Standard Incident Reporting Rules.

The HSE management system at EVRAZ’ metallurgical plants is certified under SAS 18001 and major steel entities are certified under the ISO 9001 standard. In 2019 Bureau Veritas Certification RUS carried out a recertification audit at the EVRAZ ZSMK facility as part of meeting the requirements of the ISO 45001 international standard.

EVRAZ requires that its employees do not conceal or misrepresent the circumstances surrounding an incident. Violations in this area can lead to dismissal. To help prevent any concealment of data and information, several HSE KPIs have been implemented for managers and executives. In addition, EVRAZ employees can use a hotline to report any operational hazards or HSE gaps.

HSE reporting system

Standard incident reporting rules, which form part of the Incident Management Standard, have been adopted across the Group, in line with the principle of making continuous improvements to the HSE management system. If an incident occurs, a rapid report, containing all of the details and circumstances of the incident, as well as response actions taken, is issued within 24 hours. The report is distributed immediately to all relevant managers. The local HSE department conducts an investigation and disseminates the key findings in order that all employees can learn from these incidents. Each fatality, serious injury, or significant environmental incident is reviewed by the HSE Management Committee, which also verifies the completeness and appropriateness of all remedial actions taken.

The Group requires all incidents to be investigated. In 2020, EVRAZ revised the internal regulation of incident investigations to strengthen the practice of root cause identification and to facilitate the integration of Risk Management tools into the investigation process. In addition, the A3 problem solving tool is used in all investigations of incidents to determine the key causes of incidents. This analysis helps users gain a deeper understanding of issues and allows them to present their ideas on preventive measures using a single sheet of A4-sized paper.

The Group is committed to conducting regular internal and external audits to verify whether the HSE management system is functioning properly and to monitor the effectiveness of remedial measures being taken. All audit results are used to develop corrective actions and eliminate violations. State supervisory bodies also perform external inspections and all recommendations made as a result of these are carefully analysed to ensure the necessary remedial measures are taken.

HSE functions also monitor subsidiaries using monthly, quarterly, and annual HSE performance reports based on data collected through the corporate HSE reporting system.

Annual report & accounts 2020
OCCUPATIONAL HEALTH AND SAFETY

Safeguarding human life and health from threats related to harmful
Lost time injury frequency rate (LTIFR)
Work-related employee fatalities and dangerous industrial factors is the Group’s highest priority. All EVRAZ employees are covered by the HSE management system. Despite consistent efforts on the part of the Group, many EVRAZ employees and contractors work in conditions that sometimes entail health and safety risks. Rock bursts, looks, gas explosions and incidents caused by blasting works are some of the typical risks

	2020	2019	2018	2017	2016
Lost time injury frequency rate (LTIFR)	1.58	2.04	1.91	1.90	2.36
EVRAZ employees		12	6	4	4
Contractors		6	4	4	4

encountered during mining operations. Employees at EVRAZ’ production assets work with moving machinery, molten metal, lifting equipment and in very hot conditions. Other risks to employees include working at heights, working with electrical power units, and operating cutting materials and equipment. Even employees working in offices are sometimes exposed to health and safety hazards.

Main types of high-consequence work-related injuries and fatalities, 2020 (incl. contractors), %

Moving and rotating equipment: 30
Rock burst: 17
Transport accidents: 14
Collapsing and falling materials: 13
Employee falling: 10
Other: 10
Falling from height: 3

EVRAZ has also analysed the entire industrial process to identify the main risk areas and the procedures in place across its operations to develop, alongside technical solutions, risk management methods and to mitigate hazardous and harmful impacts on employees.

Performance in 2020

LTIFR saddened by these losses and continues to work towards eliminating injuries and achieving the goal of zero fatalities in the near future. Another way in which the Group seeks to improve operational safety is by training staff in risk identification and analysis, HSE regulations and safe working methods, as prescribed by law. EVRAZ also equips employees with personal protective equipment (PPE) to lessen the impacts of potentially harmful operations.

The Group uses a number of occupational health and safety (OHS) performance measurement methods. One of the most important is the Lost Time Injury Frequency Rate (LTIFR). In 2020, the LTIFR at EVRAZ stood at 1.58, which was 22.5% lower than the 2019 figure of 2.04. The Group met its target level of 1.61. In-depth, internal investigations were conducted into each accident to determine the critical factors and root causes. EVRAZ is resolutely committed to avoiding such incidents in the future.

The OHS Management Committee reviews investigations and then creates a plan for corrective measures and implements respective health and safety initiatives across the Group and in individual business segments or facilities. The HSE Committee also approves these plans. The HSE Committee and other committees of the Board of Directors monitor the implementation of these measures, as well as their efficacy.

The Group strives constantly to enhance the safety culture, and all employees and contractors are required to understand that they are personally responsible for their health and safety. With this in mind, EVRAZ initiated the Risk Management Project to improve the level of safety culture and to actively engage staff in the HSE management process.

Fatalities

It is regrettable to report that, in 2020, five colleagues lost their lives during the performance of their duties. These incidents involved exposure to moving equipment, dynamic mine processes and falling loads. The Group is deeply

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Health protection

The Group carries out in-depth work to enhance working conditions and to improve industrial sanitary and hygiene conditions. In line with domestic legal requirements and international best practices, EVRAZ provides all employees with insurance for work-related injuries and disease. The Group also offers staff regular medical check-ups, which help to prevent occupational diseases and ensure prompt treatment.

Outlook for 2021 and the medium term

In 2021, in addition to continuing division-specific new risk programmes, EVRAZ plans to continue to implement key initiatives targeted at fostering and improving the safety culture. The strategic goal is to reach at least 60% compliance according to the Bradley scale of safety culture in 2020. Three key areas for improvement of the Safety culture were defined:

Dilemma of safety vs. production.
Promotion of safety behaviour: comply, communicate and improve.
The motivational system for safety actions.

EVRAZ plans to further develop these areas and has already conducted several pilot projects and developed the programme for these areas for implementation in 2021.

EVRAZ launched a new mobile app, Hunt for Risk, to identify and eliminate workplace risks. This app strengthens the safety culture level of staff through using gaming techniques. The new app is a key tool of the risk management system that EVRAZ began to implement in early 2020, with a view to preventing and eliminating threats to health and safety. With the app, the majority of employees can report and mitigate risks easily, simply and fast.# EVRAZ and Tactis risk management symposiums

If an occupational disease is diagnosed, the employee receives temporary disability compensation and their treatment costs are fully covered by the Group. EVRAZ also provides financial assistance to employees with occupational diseases, depending on their circumstances and medical condition. Those in need of long-term medical treatment and recovery can also receive compensation for any harm they have suffered.

In 2020, EVRAZ, together with Tactis Group conducted five symposiums for risk managers relating to the Risk Management Project launched in 2018. The online meeting was held in August 2020. The aim of such meetings is to exchange best practices and experience among risk managers across EVRAZ. Also, such conversations allow urgent issues to be openly discussed. As a result, cross-divisional symposiums have become a regular feature for EVRAZ risk managers.

During the next reporting period, another objective for EVRAZ will be to carry out HSE transformation initiatives that include the in-depth adaptation of the HSE Management System for risk management processes and the HSE team.

During the reporting period, 166 cases of occupational diseases were recorded at EVRAZ facilities, which was 29.9% lower than the figure for 2019. The Group takes a proactive approach to managing health risks, by elaborating and continuously enhancing occupational disease prevention programmes. EVRAZ has set the goal of reducing documentation in safety processes by 30% and using the additional time available for management to improve employee engagement. The Group also expects the HSE team will be reorganised along the following lines:

Incorporating the risk management project team into the HSE organisational structure.
Balancing the team and its competences with new processes and their requirements.

Video analysis implementation

The EVRAZ Coal segment has introduced artificial intelligence methods to prevent incidents that involve workers. This modern technology allows OHS violations and inappropriate or dangerous actions by employees to be detected on a real-time basis. The pilot project was launched in 2020 at Raspadskaya Coal Company. A digital network monitors whether an employee has the necessary PPE or whether they are in a safe area. A similar system will be rolled out for the corporate auto fleet. Video analysis will be used to ascertain whether drivers and passengers have fastened their belts or are using their phone while driving.

The most common occupational diseases were hearing disability and illnesses of musculoskeletal system owing to the nature of working conditions.

Key projects

EVRAZ believes that the safety initiatives implemented across the Group help to support the development of the safety culture and will hence have a long-lasting effect on safety performance. In 2019 the Group continued to implement new safety initiatives.

Annual report & accounts 2020

ENVIRONMENTAL MANAGEMENT

Management approach

A priority strategic goal for EVRAZ 2020 highlights is to ensure that its business operations are conducted in the most sustainable way possible. To comply with its environmental obligations and meet stakeholder expectations, the Group prioritises the mitigation of adverse environmental impacts caused by its day-to-day operations.

Non-mining waste recycling and reuse	Reduction in total air pollutant emissions
102.7 %	3.7%

The environmental management approach of EVRAZ is determined by its business strategy and HSE Policy (see the Health, safety, and environment section on page 56). All enterprises in the Group adopt an environmental management system (EMS) based on the plan-do-check-act (PDCA) model. The EMS provides a framework that contributes to mitigating environmental risks and supports the organisation of the Group’s environmental compliance processes. EVRAZ conducts internal audits to assess risks and evaluate its HSE management system. The Group strives to comply with all applicable environmental requirements. EVRAZ also strictly adheres to registration, evaluation, authorisation and restriction of chemicals (REACH) regulations governing products that it supplies to or manufactures in the European Economic Area. In 2020, the Group began to update its corporate regulations concerning REACH compliance, which it plans to complete in 2021.

Environmental strategy

To ensure environmental compliance and mitigate any potential adverse environmental impacts, EVRAZ has elaborated and is constantly improving its environmental strategy. It is based on sustainable business practices and environmental principles, which are incorporated into all stages of the Group’s value chain.

In 2018 EVRAZ set five-year environmental goals in three areas: water, waste and GHG emissions. In 2020, the Group accomplished its environmental strategy. It is based on sustainable business practices and environmental principles, which are incorporated into all stages of the Group’s value chain.

These water and waste goals (for GHG emissions, see the Climate and energy section on page 64-67).

Goal

To maintain an intensity ratio of less than two tonnes of carbon dioxide equivalent (tCO2e) per tonne of crude steel cast.

Reduce water consumption to 205 million cubic metres

Recycle 95% of non-mining waste and by-products

Result in 2020

Achieved level of 0.867 tonnes of carbon dioxide equivalent (tCO2e) per tonne of crude steel cast.

Reduced water consumption to 206 million cubic metres

Recycle 102.7% of non-mining waste and by-products

In 2020, EVRAZ updated the environmental strategy and developed two scenarios related to the level of impacts and capital investments: realistic and stressful. Using 2019 as the baseline year, they cover four aspects: water, waste, air emissions and GHG indicators (for more details, see the Climate and energy section on page 70-73). EVRAZ set the following new goals with the realistic scenario in mind. To meet the expectations of investors and society, the Group has also set new goals for the period up to 2030.

EVRAZ implements environmental and social impact assessments (ESIAs) for all new projects and operations. This is part of how it evaluates the potential direct and indirect impacts of its activities on local communities and the surrounding environment. It further prepares mitigation plans to limit and manage these impacts. While conducting ESIAs, the Group discusses any decisions and measures to be implemented with local and regional government, business and community stakeholders throughout the project’s life.

Area	Goal (2019–2030)	2020 status
Water	Zero water discharge from steel production	68.6 million cubic metres
Waste	Utilise 95% of waste from metal production and general waste	102.7%
	Recycle 50% of mining waste	28.5%
Air emissions	Reduce total atmospheric emissions from steel production by 33%	3.7% decrease
	Reduce dust emissions from coal mining by 1.5 times	10.0% decrease

When conducting day-to-day operations, all employees are required to adhere to the EVRAZ Fundamental Environmental Requirements. These comprise procedures related to environmental control systems. They also prohibit the discharge of any chemical products and waste disposal outside designated areas.

Within the new strategy the Group also aims to ensure full regulatory compliance and transparent data measurements by 2025. To enhance the disclosure of information regarding its environmental strategy, the Group also updated its environmental reporting procedures during the reporting period.

The figure exceeds 100% due to the recycling of previously accumulated waste.

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EVRAZ total air emissions (including key emissions), 2018–2020, kt

EVRAZ key air emissions, 2018–2020, kt

	381.57	396.22	409.20	121.30	127.69	128.24
	2020	2019	2018	2020	2019	2018

In 2020, EVRAZ spent US$56.95 million on projects to improve its environmental performance and US$26.4 million on measures to ensure environmental compliance. There were no significant environmental incidents or material environmental claims involving the Group’s assets during the reporting period. Non-compliance related environmental levies and penalties totaled US$3.1 million (US$5 million in 2019).

Clean Air project

EVRAZ has continued to implement the Clean Air Federal Project, which forms part of the Environment national project. As part of the Clean Air Project, the Group undertook significant measures in 2019 to improve gas purification systems at EVRAZ NTMK. These included overhauling blast furnace No. 6, a modern facility in Russia that has aspiration units containing 1,320 filters to collect and purify air. The new system more than doubled the efficiency of the facility’s gas cleaning system. The project required total investments of US$129.5 million, including US$45.4 million to modernise the aspiration units.

The Clean Air Project also involved modernising the electrostatic precipitators at EVRAZ ZSMK’s boilers 305 and 306, as well as commissioning boiler No. 10. The electrostatic precipitators purify flue gases from ash when burning coal in boilers. As a result, annual dust emissions into the atmosphere of Novokuznetsk will be reduced by 10 thousand tonnes.

The Group has committed to implement various environmental protection programmes over 2018–2023. As of 31 December 2020, the estimated cost to implement these programmes totaled US$226.2 million, compared with US$198.6 million as of 31 December 2019. The rising environmental commitments is mainly related to renewal of obligations under the Wastewater Management programs of steel production sites to implement “zero water discharge” goals.

To maintain a high level of environmental awareness and competence among EVRAZ employees, the Group provides training on waste management methods, HSE practices and other topics. In 2020, due to the COVID-19 pandemic, most of these trainings were held in an online format.# Lowering air emissions

EVRAZ understands that its growing business activities produce air emissions. The Group does its utmost to reduce them, as well as to mitigate any potential impacts on human health and the environment. This includes implementing best available technologies and regularly upgrading equipment. EVRAZ also continuously monitors all emissions to minimise the risk of breaching acceptable limits. Key emissions include sulphur oxide (SOx), nitrogen oxide (NOx), volatile organic compounds (VOCs) and particulate matter (dust). In 2020, total key air emissions fell by 5% year-on-year.

Zero discharge

In 2020, the Group continued its efforts to reduce adverse water related impacts on the environment. As part of this programme, EVRAZ ZSMK began to construct new wastewater treatment facilities. These measures will halt water discharges into Lake Shirokholodskoye, in line with the goal set forth in the environmental strategy. The project includes multi-stage wastewater treatment to ensure that no threshold limit for pollutants will be exceeded. The estimated capacity of the project’s treatment units is 600 cubic metres per hour. Treated wastewater will be used for production needs. The project is scheduled for completion at the end of 2022.

Balancing water supply

Mining and steelmaking operations use significant volumes of water. To ensure the rational use of water resources and prevent water-related adverse impacts, EVRAZ strives to implement efficient water management methods to handle both mine water and fresh water.

Most of the Group’s business operations do not take place in water-stressed regions. EVRAZ uses fresh water from surface water bodies, groundwater wells and public water networks for production processes, equipment cooling, fire safety, drinking and household purposes. Almost 95% of total fresh water intake for production needs occurs at major steel factories: EVRAZ NTMK, EVRAZ KGOK, and EVRAZ ZSMK (including EvrazRuA). Around 80% of these factories’ fresh water intake is covered by surface water, including from rivers, lakes and reservoirs. In 2020, the total water consumption at these sites was 278.5 million cubic metres, of which fresh water accounted for more than 95.2%. The total volume of fresh water consumed for production purposes was 206.2 million cubic metres, an increase of 0.9 million cubic metres year-on-year.

For safety reasons, the Group also pumps mine water (quarry water) out of mines and open pits at its coal and ore mining sites. Mine water is produced when groundwater of various horizons mixes and interacts with mine atmosphere and rocks uncovered by mining excavations. Unfortunately, it is not possible to fully control or forecast the volume of this water because it depends on natural processes. While EVRAZ strives to use mine water for production needs instead of fresh water, the volume of such water exceeds what the mining assets can consume. The majority of mines are also located in remote areas that exclude any possibility of delivering surplus water to other consumers. In 2020, the Group used 24.3 million cubic metres (or 34.6%) of mine water for production needs instead of fresh water. The remaining volume of 45.8 million cubic metres (65.4%) was discharged into water bodies. In line with the water- related goal established in the environmental strategy, EVRAZ treats mine water to remove pollutants introduced during mining.

The Group strictly adheres to legal requirements related to water discharges. In 2020, the total volume of water discharged was 125.3 million cubic metres, a reduction of 0.6 million cubic metres year-on-year.

Waste management strategy

EVRAZ recognises that its business activities generate large volumes of waste, including from metal production and general (non- mining) waste. They also produce mining waste, such as overburden, tailings and barren rock. The Group endeavours to apply effective management practices in this area to ensure the rational use of natural resources and reduce waste generation. The waste management strategy includes the following priorities, listed in order of importance:

Minimise at the source
- Improve technological processes to enhance product quality.
- Secure by-products without generating waste.
Reuse
- Reuse main types of waste from metal production: slag, clinker and tailings, including from old dumps.
- Develop new products that feature various types of waste.
- Use inert waste to reshape land plots and build dams or roads.
Recycle
Burn as fuel / generate heat
- Generate heat from hot slag.
- Use waste for heating (local boilers).
Store
- Store waste that cannot be used today safely, retaining the option of using the locations as industrial sites in the future.
Burn
- Under the EVRAZ Fundamental Environmental Requirements, it is forbidden to: “burn production and consumption waste without special facilities or dump it outside designated areas”.

EVRAZ mining and non-mining waste generated, 2018–2020, million tonnes

Waste type	2018	2019	2020
Non-mining waste	232.0	198.8	135.6
Mining waste	8.4	8.4	8.4

Non-mining waste recycling and reuse rate, 2018–2020, %

Year	2018	2019	2020	2030 goal: 95%
Rate	28.5	38.0	45.8*

* Exceeds 100% due to the recycling of previously accumulated waste.

Mining waste recycling and reuse rate1, 2018–2020, %

Year	2018	2019	2020	2030 goal: 50%
Rate	102.7	105.2	111.3

The recycling and reuse rate exceeds 100% due to the recycling of previously accumulated waste.

In 2020, the total volume of non-mining waste and by-products that EVRAZ enterprises generated was 135.6 million tonnes. In line with the environmental strategy, the Group seeks to increase the amounts of waste that it recycles and reuses. In 2020, it reused 48.9 million tonnes of waste (including mining waste). Where possible, EVRAZ uses non-hazardous mining waste for land rehabilitation purposes, as well as to build dams and roads. In 2020, 38.6 million tonnes of this waste were reused.

EVRAZ stores waste from metal production at tailings storage facilities (TSFs), in keeping with standard industry practices. The Group has three TSFs in operation at EVRAZ ZSMK and EVRAZ KGOK. The safety of TSFs is a top priority, as their operation entails significant environmental risks. EVRAZ has a dam safety management system that ensures compliance with applicable legislation covering all stages of their service life: design, construction, operation and closure. The Group also conducts continual safety monitoring, and its TSFs are regularly audited by internal and external specialists, as well as inspectors from regulatory bodies.

Protecting biodiversity

EVRAZ has a responsibility to protect biodiversity and local species, as well as their habitats. The Group assesses biodiversity related impacts during all stages of implementing mining and steelmaking projects. No EVRAZ assets are located in protected natural areas or territories with a high biodiversity value. In addition, the Group’s activities do not directly impact biodiversity. The Group’s approach to biodiversity includes striving to preserve the quality of water ecosystems and supporting existing biodiversity. EVRAZ regularly releases various species of fish into affected water bodies to offset any potential impacts on bioresources. In 2020, the Group’s assets released more than 200 thousand fingerlings in Kemerovo region.

Restoring aquatic biodiversity

In 2019, the Group completed a reclamation project for tailings storage facility No. 4 at EvrazRuA (EVRAZ ZSMK). EVRAZ strives to promote a rational and prudent attitude towards biodiversity and enhancing the living environments of its employees. The Group also actively engages with local communities on biodiversity related issues.

Rehabilitating disturbed land and landscaping

To restore land disturbed by mining and steelmaking operations, EVRAZ implements environmental projects aimed at rehabilitating affected areas. The Group’s environmental initiatives include planting trees in parks and public squares, along town/city streets and in the territory around kindergartens. The Group planted around 20,000 trees during the year.

Outlook for 2021

In 2021, EVRAZ will continue its efforts to mitigate any adverse impacts, as well as to preserve and enhance surrounding environments. Going forward, the Group plans to review its HSE Policy and REACH regulations. EVRAZ will remain committed to implementing measures under the Clean Air national project. The Group will also continue to implement the water management programmes launched in previous periods, including at EVRAZ ZSMK, EVRAZ NTMK, Raspadskaya and EVRAZ Vanady-Tula. In addition, Raspadskaya will continue to construct wastewater treatment facilities.

The Group also plans to continue to implement its air emission reduction programme, which includes the following new projects:

Project 2021 task

Project	2021 Task
EVRAZ ZSMK Coke gas cooling system upgrade	Complete the design stage
	SOx desulphurisation installation
EVRAZ NTMK Coke gas redirection to by-product recovery plant No. 3	Continue the project (to be completed by 2022)
	Efficiency upgrades of off-gas cleaning units
	Decommissioning of coke oven gas cooling tower
	Continue the project (to be completed by 2022)
	Off-gas system upgrade
	Complete the project
EVRAZ Vanady-Tula

In 2021, the Group will also continue to implement the water management programmes launched in previous periods, including at EVRAZ ZSMK, EVRAZ NTMK, Raspadskaya and EVRAZ Vanady-Tula. In addition, Raspadskaya will continue to construct wastewater treatment facilities.

EVRAZ fresh water intake for production needs, 2018–2020, million cubic metres

Year	2018	2019	2020
Intake	206.2	205.32	226.49

Total water discharge, million cubic metres

Year	2018	2019	2020
Steel	68.6	56.7	56.6
Mining	75.3	68.9	68.9

GHG EMISSIONS AND ENERGY EFFICIENCY

2020 highlights

Total GHG emissions: 43.57 Mt CO2e
GHG emission intensity: 1.97 t CO2e/tcs
Total energy consumption: 351.81 million GJ
Energy intensity: 23.30 GJ/tcs

Approach

EVRAZ recognises its commitment to climate goals up to 2030, using 2019 as a baseline year. These steps include: change mitigation and understands that businesses must play an active role in finding solutions. Adopting TCFD recommendations, the Group keeps stakeholders informed about the risks it faces due to climate change, as well as opportunities to manage these risks. EVRAZ recognises the importance of taking action to combat climate change in order to prevent negative and irreversible impacts resulting from further rises in global average temperatures. In 2020, the Group took its first steps in assessing climate-related risks in accordance with Task Force on Climate-related Financial Disclosures (TCFD)

Reducing specific Scope 1 and 2 emissions from EVRAZ’s Steel segments (the Steel and North America segments) by 20%, which complies with the Paris Agreement. Efforts to meet this goal will involve modernisation and energy efficiency measures. With energy efficiency projects representing a core focus for EVRAZ in lowering its level of GHG emissions. In addition to energy efficiency initiatives, during the development of the Group’s

The Group supports global initiatives to combat climate change, as well recommendations. These include conducting a qualitative evaluation and plans to improve as national climate-related strategies the analysis of these risks in the future. in the countries where it operates. As a member of organisations such as Russian Steel and the World Steel Association, EVRAZ resolutely supports efforts at climate mitigation and adaptation. EVRAZ’ approach to managing climate change risks is to systematically reduce greenhouse gas emissions by implementing best practices and technologies. Environmental strategy, EVRAZ considered several promising projects for switching to the best technologies available aimed at reducing GHG emissions, including the return of sinter gases to the sinter furnace and gas tank installation for the recovery of converter gas and heat at oxygen converter shop no. 2. It is planned to adopt these technologies in the future as part of the implementation of the Environmental strategy to 2030.

Utilising CH4 (methane) emitted in the process of degassing carried out during coal mining. In 2021, the Group plans to improve its approach to estimating greenhouse gas emissions, including the methodology for calculating them. A substantial part of these initiatives to lower

Another milestone for the Group total and specific GHG emissions relates to energy and fuel consumed at the Group’s facilities. These projects are aimed in 2020 gas joining the UN Global Compact initiative, which considers business as a force for good and will support the Group’s at enhancing energy efficiency and boosting efforts to promote the transition to a low the use of renewable and secondary energy sources. The Group is working to reduce the carbon intensity of its energy sources and to increase its own power generation and self-sufficiency by recycling 100% of secondary energy resources generated at its metallurgical plants. In addition, in order to enhance energy efficiency, EVRAZ is working to improve energy management at its assets and to engage all employees in energy efficiency issues. EVRAZ plans to implement several related projects in the next five years. These are expected to not only lower energy costs, but also the negative impacts of accelerating climate change. carbon future. As a participant in the UN Global Compact, EVRAZ promotes a preventive approach to environmental challenges and greater environmental responsibility, as well as work to develop and implement “green” technologies, such as those that lower its GHG emissions. EVRAZ’ commitment to reducing greenhouse gas emissions is reflected in its goals. The Group has set a target for the period 2019-2020 of maintaining specific Scope 1 and 2 emissions from steel production (the Steel and North America segments) below 2 tonnes of carbon dioxide equivalent per tonne of crude steel (tCO2e/tcs). This target was reached in 2019, with a level of 1.97 tCO2e/tcs. In 2020, EVRAZ was able to meet the target, with the same value of 1.97 tCO2e/tcs. As above, EVRAZ discloses data in tCO2e (tonnes of carbon dioxide equivalent), calculated using IPCC 2006 global warming potentials.

A comparative analysis of GHG GHG emissions emissions from the Group’s operations, for the period 2016 to 2020, demonstrates relatively stable growth in total GHG emissions. In 2020, nearly all of EVRAZ’s overall GHG emissions remained Mining and metallurgical operations are energy intensive and produce a high level of carbon dioxide (CO2) and other greenhouse gas emissions that contribute to climate change. During 2020, the Group developed an updated Environmental strategy that sets forth new and ambitious climate-related at the same level, rising by only 0.51% or 5.02 million tonnes or 5.02 MtCO2e.


EVRAZ GHG emissions, 2016–2020, million tCO2e	2016	2017	2018	2019
Direct (Scope 1)	35.81	39.06	39.41	36.68
Consisting of:
CO2	28.35	26.86	11.04	11.64
CH4	6.99	8.26	0.06	0.06
N2O	0.0001	0.00012	0.00012	0.00003
FC and FFC
SF6
HFC
Indirect (Scope 2)	5.02	4.97	4.23	4.28
Total GHG emissions	40.83	44.03	43.64	40.96

Note: Scope 1 data includes emissions in tonnes of carbon dioxide equivalent from the combustion of fuel and from other sources that are owned or controlled by the company. The Steel segment (incl. North America) continues to generate a significant portion of the Group’s gross GHG emissions, in 2020, almost all of which (94%) were methane emissions.

Operations in the Coal segment accounted for 30% of overall GHG emissions of 1.97 tCO2e/tcs.

Overall emissions in the steel sector (the Steel and North America segments) were 0.5% lower than the 2019 level, mostly due EVRAZ Scope 1 and 2 GHG emissions Specific Scope 1 and 2 GHG emissions GHG emissions per consolidated revenue in 2020, million tCO2e from steel production (the Steel and North in 2020 vs. 2019, kgCO2e/US$ America segments), tCO2e/tcs

	2020	2019	2018	2017	2016
EVRAZ total	39.4	40.96	43.64	44.03	40.83
Steel segment	4.16	4.28	4.23	4.97	5.02
EVRAZ total	1.97	1.97	2.01	2.02	2.11
Steel segment	0.62	0.59	0.7	0.6	0.62
Steel, NA segment	12.28	8.9	2.66	3.6	3.6
Steel, NA segment	0.91
Coal segment	6.2
Direct emissions (Scope 1)	2.11
Direct emissions (Scope 2)
	2020	2019
1. The numbers for 2019 were recalculated, which resulted in a downward correction of 0.03 million tCO2e for direct GHG emissions (Scope 1).

In 2020, EVRAZ reduced its Scope 2 emissions by 2.8%. This was due to lower steel production at the Group’s North American assets, which have no integrated power plants and have to purchase electricity from the market, and a decrease in electricity purchases by Russian steel mills.

to a minor decrease in crude steel production and therefore the specific intensity of GHG emissions remains at the same level and accounted for 50% of the total GHG level in 2020.

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Climate Change Report 2020

In October 2019, EVRAZ issued its first dedicated Climate Change Report compliant with TCFD recommendations and providing stakeholders with additional information about the Group’s approach to climate change. This includes the role played by top management in this area and the organisational structure of climate-related risk management. In 2019, EVRAZ conducted its first climate scenario review, determining and analysing relevant transition and physical climate-related risks, as well as identifying appropriate opportunities. Insights into how climate change under different scenarios will impact the Group’s operations, how significant this will be, and which actions will be taken are presented in the report. The report also provides information on EVRAZ’ vision for a low-carbon future for steel producers.

Discover more in the Climate Change Report: https://www.evraz.com/en/sustainability/data-center/climate-change-reports/

As methane is combustible, the Group carries out preliminary degassing to improve employee safety. To boost efficiency in this regard, it is important to increase the volume of gas captured. It generates higher methane emissions, and to reduce these, EVRAZ plans to conduct research and development projects on methane utilisation in 2021.

The increase was mainly attributable to an annual increase in methane emissions (by 5.4% vs. 2019), due to higher methane concentrations in the coal seams and more intense degassing at some mines.

Energy efficiency

Digital transformation in power supply

EVRAZ strives to improve the energy efficiency of all its facilities to minimise the Group’s environmental impact. This helps to reduce greenhouse gas emissions, as well as energy and process fuel costs. Energy intensity is an important aspect of the energy efficiency programmes at EVRAZ. In 2020, EVRAZ ZSMK’s thermal power plant launched a system for modelling operating conditions, as well as calculating technical and economic metrics. The system is capable of calculating the optimal composition and load of primary and auxiliary equipment. It can also monitor power plant KPIs and predict standard specific fuel equivalent consumption. The project helped to reduce specific fuel consumption by:

1.4 % for electricity energy supplies
0.9 % for thermal supplies

The energy management system is the primary driver of energy efficiency transformation processes.# Energy Efficiency

In 2019, the Group’s senior management decided to create a separate function to strengthen the energy management system at its production divisions in Russia. Based on the lessons learned from this initiative, the system will be rolled out at EVRAZ NTMK’s thermal power plant in 2021. These efforts focused partly on production processes and the transportation of energy resources to power plants at facilities. They also sought to expand the scale of the energy efficiency management approach to include energy consumption processes at steel production workshops.

Installation of gas top pressure recovery turbine at EVRAZ NTMK

EVRAZ NTMK is installing a gas top pressure recovery turbine to generate energy from secondary sources. This technology makes it possible to convert blast furnace gas pressure energy into electric power without the combustion of additional fuel. The facility is expected to be more advanced and powerful than its counterparts, of which there are only five in Russia. The new turbine is scheduled to be launched in the first quarter of 2023. It will help EVRAZ NTMK to enhance its resource and energy efficiency, increase its self-sufficiency in electricity and lower the cost of its final products.

In 2020, several changes were made to the energy efficiency management function. A group of energy management system experts was created at the two most energy-intensive facilities, EVRAZ ZSMK and EVRAZ NTMK. These two enterprises account for more than 85% of the Group’s energy consumption. Energy management teams were formed to monitor energy consumption, minimise energy intensity and reduce energy costs. As the technology does not consume additional fuel, it will help to reduce overall CO2 and other emissions, in proportion to the volume of electricity generated.

Results in 2020

Based on the positive lessons learned at EVRAZ ZSMK in September 2019, EVRAZ NTMK and EVRAZ KGOK held Idea Factory sessions in February 2020. Called “Growth Points: Energy Efficiency”, the sessions helped to shape the energy efficiency programmes at steel production workshops.

In 2020, EVRAZ developed a comprehensive programme aimed at creating a system to fully track the consumption of energy resources at the workshop and plant level. The process included an assessment of ways for production personnel to have an immediate impact on fuel and energy costs in the technological process. The initial phase of the programme’s implementation will help to reduce unaccounted energy losses.

The main aspects of the energy efficiency programmes include:

Optimising and minimising energy consumption and losses at production sites, including electricity, thermal energy, fuel, natural gas and air gases.
Using secondary and renewable energy sources.
Optimising the blend of furnace charge, coking coal and process fuel.
Automating energy-intensive equipment.
Implementing digital transformations of energy supply systems.

The Group also conducted an ambitious target setting cycle covering energy efficiency. It relied on industry benchmarking and a review of best production practices in each technological segment to evaluate the potential to reduce energy intensity. It resulted in short-term and long-term targets being set, as well as further steps for reducing energy consumption being identified. Interdepartmental energy days will be held in 2021.

In 2020, EVRAZ NTMK continued to install a gas top pressure recovery turbine at blast furnace No. 3. This project is part of an initiative to reduce electricity purchases by generating energy in-house. The Group’s energy efficiency programmes are helping to achieve the goal of reducing the energy intensity of its production processes. The programmes include initiatives covering a five-year period.

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Total energy consumption of EVRAZ’ steelmaking operations and its production, 2018 - 2020¹

	2018	2019	2020
Production, kt	13,036	13,832	13,650
Energy consumption, million GJ	39,905	37,703	34,858

Total energy consumption of EVRAZ’ mining operations (coal and iron ore) and its production, 2018 - 2020¹

	2018	2019	2020
Production, kt	319.9	339.0	322.6
Energy consumption, million GJ	31.9	32.7	32.5

¹ Note: Energy consumption in million kWh: 8,852 in 2020, 9,471 in 2019 and 10,068 in 2018.

As part of its energy efficiency efforts, the Group has begun to track energy intensity metrics at all of its production facilities. EVRAZ is using this new KPI to improve employee engagement and motivation. Success in improving energy efficiency also requires daily efforts to enhance the operational efficiency of equipment.

In 2020, the Group’s total energy consumption decreased by 5.3% year on year to 34,858 million GJ, including the energy consumption of metallurgical enterprises which decreased by 5.6% year on year to 30,980 million GJ, consumption of iron ore and coal assets - by 2.5% (to 3,878 million GJ). It should be noted that the specific energy intensity of EVRAZ NTMK and EVRAZ ZSMK also decreased, by 9% (compared to 2018 which is a base year) due to the development of the energy management system.

Note: EVRAZ does not have any production facilities in the USA, only the office. Data for USA office as well as data for offices located in Russia and North America were not included in the graphs, since the volumes of consumed power are not material in terms of overall energy consumption within the Group.

Energy intensity of EVRAZ’ steelmaking operations, 2018 - 2020, GJ/t²

	2018	2019	2020
EVRAZ	27.5	25.3	23.3
EVRAZ NTMK and EVRAZ ZSMK	28.5	25.6	24.5

² Note: EVRAZ energy intensity in GJ/t: 23.3 in 2020, 25.3 in 2019 and 27.5 in 2018.

The Group is working diligently to develop and improve its energy management system. On January 11, 2023, EVRAZ re-certified the compliance of its energy management system with the updated ISO 50001:2018 standard. Going forward, EVRAZ ZSMK and EVRAZ KGOK also plan to receive ISO 50001 certification.

Outlook for 2021

EVRAZ will also continue to integrate energy efficiency criteria in its procurement and investment processes. The Group is actively working to purchase energy-efficient electric motors and transformers.

In 2021, EVRAZ will develop a comprehensive methodology for assessing the development of the energy management systems throughout the Group’s facilities. This methodology will be applied during internal energy management audits at the segment and shop levels. In addition, EVRAZ will implement measures as part of its energy efficiency programme aimed at reducing energy intensity. These measures are part of the ambitious targets that the Group has set for each of its facilities.

This graph presents gross output as the sum of production volume metrics for key products (raw steel, iron ore products and unprocessed coking coal) and vanadium slag. To calculate the Group’s total energy consumption, this Report takes into account all energy used at EVRAZ facilities, including for the production of coke, coke products, energy and heat. The graphic shows data for EVRAZ ZSMK (including Evra-RU), EVRAZ NTMK, EVRAZ KGOK, EVRAZ Vanadievka, Raspadskaya, EVRAZ Caspian Steel, EVRAZ Nickel and the Group’s Steel, North America segment. To compute total energy consumption within the Group, the formula given in GRI 302-1 is used (the sum of fuel consumed, non-renewable and renewable, and electricity, heating, cooling, steam purchased for consumption and self-generated which are not consumed minus the volumes of electricity, heating, cooling, and steam sold).
The figure includes data on the Steel segment (EVRAZ ZSMK, EVRAZ NTMK, Steel, North America segment (EVRAZ Portland, EVRAZ Pueblo, EVRAZ Regina, EVRAZ Camrose, EVRAZ Calgary, and EVRAZ Red Deer). To calculate energy intensity ratio for the Group, the formula given in GRI 302-3 is used (the volumes of energy consumed per unit produced).

OUR PEOPLE

Average headcount

	2020
Employee turnover rate	9.8%

2020 highlights

69,916

Approach

EVRAZ is always seeking to improve the professional and personal skills of its employees, understanding that this represents an investment in the Group’s future achievements. That is why it is of great importance to create a working environment where all employees can fully realise their potential.

The Group endeavours to do its utmost to comply with international human rights legislation. In order to reduce the risk of legal violations, the treatment of workers is monitored by public organisations, including trade unions active in the Group’s operations, as well as regional and federal trade union associations and representatives from Russia’s Presidential Council for Civil Society and Human Rights.

Regularly collecting feedback via a variety of communications channels.

EVRAZ does not tolerate discrimination of any kind, whether based on gender, The Group holds its partners to equally high standards of human rights and business ethics. EVRAZ’ policies require that all contracts with partners contain sections governing the prevention of corruption and human trafficking.

Enhancing staff recruitment processes.
Continuously improving the KPIs system.

of social status or class, or any other factors not directly related to an employee’s professional qualities. It is crucial for the Group to comply with international human rights laws, hence it has internal documents ensuring such compliance, such as the Code of Ethics and the Code of Conduct. These documents guarantee equal employment opportunities for everyone. Child labour, forced labour, human trafficking, and other forms of slavery (known as modern slavery) are strictly prohibited at all EVRAZ subsidiaries and their suppliers. With this in mind, the Group continued to work actively in the following key areas of HR policy during the reporting period:• Enrolling employees in various professional courses and programmes.
• Implementing a targeted pay system.
• Developing Human Rights Policies.

Case study: Human rights

During the reporting period, EVRAZ prepared and published two documents: Human rights policy and Diversity and inclusion policy, both of which were adopted by the Board of Directors on 16 April 2020. EVRAZ understands the benefits of diversity and inclusion in the Group. The Diversity and Inclusion Policy sets out key principles in the following areas:
• Having a diverse Board of Directors.
• Recruitment and employment.
• The rights of disabled people.
• Empowering women.
• Development and training.
• Zero tolerance towards bullying and harassment.

The Human Rights Policy conforms with recommendations set forth in international documents and standards granting fundamental rights to all people, such as: The Universal Declaration of Human Rights and The International Covenant on Civil and Political Rights. The Diversity and Inclusion Policy was elaborated in accordance with international guidelines and standards, which address diversity and inclusion issues: The Universal Declaration on Cultural Diversity, The United Nations Global Compact and others. The Group requires that suppliers and contractors run their businesses in such a way that they respect the values and principles of these policies. EVRAZ’ employees can expect to be treated with respect, enjoy the safest working conditions possible, receive support to help develop their competencies and skills, have open and constructive discussions about the results of their work, receive recognition and respective performance-based financial rewards.

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Personnel profile

Breakdown of employees by region in 2020, %

All employees receive equal protection, irrespective of race, nationality, gender, age, sexual orientation, religion, political or other opinion, national or social origin, property, birth or other status.

Headcount

As at 31 December 2020, EVRAZ had a total of 69,619 employees. Compared to 2019, the Group saw an over 2% decrease in headcount.

Region	2020 (%)
Russia and CIS	95.1%
North America	4.7%
Europe	0.2%

Year	Number of employees, 31 December, people
2018	71,215
2019	69,712
2020	69,619

The Group believes that diversity fosters employee engagement and development, as it nurtures different ideas and approaches within the business.

Age	Diversity Senior management (%)	Diversity Employees (%)
<20	0.2	0.2
20-29	5.3	5.3
30-39	13.6	13.6
40-49	20.2	20.2
50-59	74.1%	72.6%
>60	25.9%	27.4%

Gender	Senior management (%)	Employees (%)
Men	30.5	402
Women	30.5	69,217

EVRAZ sees diversity as being beneficial in terms of business and cultural development. The goal is to ensure that

Staff recruitment and reduction

EVRAZ pays particular attention to identifying and addressing human rights risks, including those related to recruitment and working conditions. The Group embraces the principle of equal opportunity when hiring and prohibit all forms of discrimination. Staff recruitment is conducted in full compliance with the laws of the countries in which the Group operates, including respective regulations governing labour protection, minimum wage levels, annual paid and parental leave, collective bargaining agreements, health insurance, pensions and personal data protection.

EVRAZ adheres to the following recruitment principles:

Safety performance
Customer focus and responsibility
Respect for people
Effective teamwork

EVRAZ tries to recruit most employees on permanent employment contracts. However, on occasions, fixed-term employment contracts are necessary. Employees working under such contracts are in a favourable position when it comes to hiring for permanent positions that arise that suit their qualifications and educational backgrounds. Remuneration is the same for both fixed-term and permanent employees, with the exception of university students undergoing practical training and some others. Fixed-term contracts are used in certain cases such as: practical training of university students, internship etc.

Case study: EVRAZ redesigns the HuntFlow system

In 2020, the Group paid special attention to boosting the efficiency of HR processes. The HuntFlow system was redesigned, and EVRAZ automated a number of routine processes. In the HuntFlow system, recruiters can see that a candidate is already at the interview stage, which eliminates the possibility of different departments hiring the same professional. Also, recruiters from different departments are able to exchange useful information in cases when a candidate is more suitable for an open position that is not the same as the one for which they originally applied.

EVRAZ has a mentoring programme, as well as a Buddy programme, introduced in 2019, and updated in 2020 as it was transitioned to an online format. In addition, EVRAZ implemented the Buddy mobile app, which allows new hires to stay in touch with supervisors. It also helps keep track of tasks, useful information, requirements and Group rules. There is also a Buddy app available for mentors, which enables them to conveniently track their student’s activity.

In cases where temporary layoffs do happen, collective bargaining agreements contain clearly defined and specific measures to support workers and preserve jobs: changing work schedules, introducing shorter workdays or work weeks, creating temporary jobs, transferring employees to other jobs (with their consent) and elaborating a social adaptation programme for workers with the participation of a trade union.

for a child with a disability or for a child younger than three years, women who are pregnant, etc. In addition, the Group has sought to expand the range of people that are granted priority rights to retain employment beyond categories of employees specified under Russian law, including: single fathers, people with disabilities, people whose spouse is retired or unemployed, and others.

The Group occasionally has to implement staff reduction measures linked As a part of the Group’s work with trade unions, detailed employment-related EVRAZ endeavours to retain its production staff. When downsizing, the Group to continuous efficiency improvements. As a socially responsible company, EVRAZ deals with personnel dismissals in the most appropriate manner, as guided by an internal document adopted in 2012, the Socially Responsible Layoff Programme. sections are included in collective bargaining offers employees vacant positions and, if agreements and industry tariff agreements. All decisions regarding staff reductions are discussed with the trade union organisation. In addition, in compliance with Russian law, the following categories of employees have additional guarantees against being dismissed as a result necessary, also makes available training for new professions. If needed, EVRAZ organises employee relocations to other Group facilities, working with employment centres in the regions where it operates. EVRAZ also provides training and financial assistance to discharged employees.

Segment	Voluntary Turnover (%)	Overall Turnover (%)
Steel segment	4.8	8.5
Coal segment	5.6	12.2
Steel, North America segment	12.6	8.1
Other	12.5	8.1

Learning and development

The development of its people is a top priority for EVRAZ. The Group has a multi-level system of human resource management and a total of 28 people took part in place, geared towards improving the engineering and personal skills of employees, and fostering collaboration with educational institutions. In 2020, EVRAZ continued its “Top 300” corporate management programme, as an extension of the “Top 300” programme, which aimed at managing employees of lower positions. Its participants received instruction in such management practices as target-setting performance dialogues, feedback, delegation and the development of subordinates. More than 230 employees participated in the programme this year.
in the third wave (September). Each programme participant is mentored by one of the Group’s senior executives. In 2020, the “Top 1,000” corporate management programme was launched,

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Case study: EVRAZ receives awards for Personnel Development

EVRAZ NTMK and EVRAZ KGOK received awards and professional development programmes for its employees, compensates them for the cost of higher education for in-demand professions and encourages their participation in scientific conferences in the Personnel Development category at the Eighth Annual Metals and Mining Industry contest held by the Russian Metallurgists Association and the Central Council of the Russian Mining and Metallurgical Union. The Group hosts retraining Particular attention is paid to students and junior specialists. In 2020, over 240 students performed internships at EVRAZ and over half of these are already working for the Group. Junior specialists participate in scientific and technical conferences, professional skill competitions and in all-Russian competitions. An EVRAZ team took part in the national championship WorldSkills Hi-Tech 2020, which was held using a partially remote format. The team competed in multiple skillsets and won seven medals: four golds, one silver and two bronzes, including employees aged over 25 and junior categories.

Motivation

EVRAZ strives to provide the best possible working conditions and opportunities for professional development. It approaches each employee individually, continuously improving the motivation system.# Employee interaction

Employee engagement

EVRAZ acknowledges the value of receiving feedback and addressing employee concerns across the organisation. Management closely reviews engagement data from surveys to identify the main employee engagement trends. EVRAZ regularly interacts with employees via the corporate intranet and website, corporate publications, social networks and web conferences, as well as Q&A and townhall meetings with members of senior management. General meetings as well as satisfaction and engagement surveys are regularly held to identify key problems. In addition, townhall meetings with employees were held. Two non-executive directors were involved in the meetings dedicated to raising awareness surrounding prevalent trends and concerns. The "We Are Together" employee engagement satisfaction levels and records incidents survey was held annually until 2019, when it was decided that the survey would be held once every two years. The fourth "We Are Together" survey, carried out in 2019, outlined the need to increase employee awareness surrounding what is happening at the Group. In 2019, employee engagement survey response rate was 80%. Based on the survey results, companywide improvement plans were announced. Raising employee awareness surrounding Group short- and long-term goals, development plans and working conditions, is the main area for further development. Focus groups are held and after each meeting an enterprise develops a plan to eliminate problem areas. In addition, the Coal segment conducts an annual satisfaction pulse-survey on social and living conditions at the enterprise. A special mobile app has been developed, on which various questionnaires are posted.

EVRAZ Hotline

One of the main channels of communication at EVRAZ is an anonymous, 24-hour Hotline. The Hotline tracks employee satisfaction and engagement records and incidents. Queries are processed with the help of an IT system and the process is governed by EVRAZ Hotline Statutes. Enquiries are broken down by the responsible business unit (HSE, HR, Security, etc.), and then investigated and addressed. All employee grievances are investigated by the internal audit department, and difficult, contentious, or sensitive cases are reviewed by members of the Hotline Committee, which includes the vice president for corporate activities, the internal audit director, and the internal and external communications director. Random quality control reviews are carried out on a quarterly basis.

Breakdown of hotline enquiries, 2020, %

Category	Percentage
General	68.9
Labour relations	14.6
Security	11.1
Others	3.2
Health and safety	2.2

In 2020, the hotline received 1,096 requests. The most frequent issues related to labour relations, including the quality of labour relations (496), worker transportation (84), and labour compensation (69). In 2020, an extra hotline was set up due to the COVID-19 pandemic. The Steel and Coal segments have dedicated corporate hotlines, which employees can address with questions and problems. EVRAZ North America employs external providers for this purpose.

Labour relations

Work with trade unions

EVRAZ endeavours to establish long-term collective bargaining agreements with trade unions. The Group interacts with trade unions through the signing of collective bargaining agreements, which covered 100% of employees in 2020. The majority of the Group’s employees are members of trade unions and provided with unique benefits.

In 2020, the Group worked on implementing a target pay system. Since changes had to be made in working conditions, it negotiated respective changes in collective agreements with trade unions at all Group facilities. The year also saw extensions to the Coal Industry and Steel Industry Vari-Agreements with the active participation of the Group. In 2020, there were no conflicts or collective labour disputes at the Group’s Russian operating facilities. All changes and updates to collective agreements were constructive and in strict accordance with the law and the principles of social partnership. During the year, the Council of Social Work met twice; both meetings discussed the implementation of the target pay system.

Performance as an employer

EVRAZ takes the issue of social performance management very seriously and participates annually in contests that confirm its status as a socially responsible employer. In 2020, the Group won awards in the category of Personnel Development at the IIet Annual Metals and Mining Industry contest held by the Russian Metallurgists Association and the Central Council of the Russian Mining and Metallurgical Union.

In 2020, EVRAZ began planning its employer brand development strategy. The Group launched a communications campaign and detailed actions for 2021 in pursuit of becoming one of the best recruiters in the regions where the Group operates.

Financial motivation

The implementation of the target EVRAZ’ collective bargaining agreements also prescribe additional leave for childbirth, weddings and the funerals of close relatives. There is also a programme that provides financial assistance to employees in challenging circumstances. The remuneration system for production assets’ employees below the level of shop heads and mine directors is the main stage in the deployment of EVRAZ’ unified remuneration system, which intends to cover all of the Group’s employees in Russia.

EVRAZ endeavours to look beyond compliance with minimum wage requirements, with a view to ensuring that it fully compensates staff for their efforts. It also strives to ensure that the remuneration system at Group enterprises is transparent and easily understandable for employees. The non-financial compensation package offered by EVRAZ to employees exceeds minimum statutory requirements and contributes to their total remuneration. The package includes:
* Voluntary health insurance.
* Additional voluntary insurance against accidents at work.
* A state pension programme.
* A programme that offsets a portion of interest paid on mortgages.
* Free wellness leave vouchers for employees and their families.

Other categories of employees who fall under EVRAZ’ non-financial assistance include former employees who have worked for 10 or more years at the Group, employees who have been merged into public organisations and young professionals. The Group congratulates employees and their families on holiday occasions and organises cultural, entertainment and sporting events in the regions where it operates.

In 2020, EVRAZ completed the implementation of a target remuneration system based on a grading system for employees at all of the enterprises of the Steel segment in Russia: EVRAZ NTMK, EVRAZ KGOK, EVRAZ ZSMK and at EVRAZ Vanady Tula, covering 43,500 employees.

In 2021, EVRAZ plans to update the personnel assessment system so that each worker’s accomplishments are viewed individually, rather than as accomplishments within a certain position or group. This assessment will be held every year. The aim of the project is to elaborate and implement a uniform set of fair and transparent rules and principles for setting remuneration across the Group’s enterprises, and to harmonise fixed and variable pay so that amounts and growth dynamics depend on the performance of an employee, team, and department, ensuring a focus on constant improvements and achievement of ambitious goals.

As a part of the HR strategy, in 2021, EVRAZ implemented an HR-analytics project allowing the shop heads and mine directors to monitor the HR metrics of their departments and understand how their actions may impact certain indicators.

Non-ﬁnancial incentives

The staff motivation system at EVRAZ includes tools to assess staff productivity. The KPI system is continuously reviewed and refined. These tools are in line with the best industry practices and are monitored by the Group’s CEO. Corresponding KPI targets are included in management scorecards, down to the level of shop managers. The non-financial compensation package offered by EVRAZ to employees exceeds minimum statutory requirements and contributes to their total remuneration. The package includes:
* Voluntary health insurance.
* Additional voluntary insurance against accidents at work.
* A state pension programme.
* A programme that offsets a portion of interest paid on mortgages.
* Free wellness leave vouchers for employees and their families.

COVID-19

The absolute priority of the Group is the life and health of its employees. In 2020, measures were taken to protect personnel from COVID-19.

The working hours of office staff have been adjusted in order to reduce the number of mass gatherings. EVRAZ has moved most office employees to a remote working format. New laptops were purchased and additional equipment and software installed, which facilitate efficient and safe remote working conditions. All meetings are held remotely using modern conference and video call applications. All mass business, sporting and entertainment corporate events were postponed or cancelled. Canteen schedules were adjusted and the number and format of shift meetings at production facilities are currently being optimised. In addition, EVRAZ has been providing staff and their families with necessary psychological assistance during the COVID-19 pandemic. EVRAZ assesses the potential psychological impacts related to the preventative measures being undertaken as a result of the pandemic.

See more details in the Impact of COVID-19 section on pages 30-31

Case study: EVRAZ releases app to prevent the spread of COVID-19

EVRAZ is rolling out an app, called Antivirus, to promptly alert employees of their possible exposure to the COVID-19 virus. The app is based on the Stop Corona application, which was developed jointly by Accenture and the Austrian Red Cross to more effectively identify symptoms of the novel coronavirus infection. Antivirus will offer a checklist developed by EVRAZ in case of COVID-19 infection, as well as general recommendations based on Rospotrebnadzor requirements. The app will anonymously exchange data with employees’ devices located nearby (automatically via a Bluetooth connection).# Annual report & accounts 2020

COMMUNITY RELATIONS

Approach

Guided by the international principles of corporate social responsibility, EVRAZ strives to make a meaningful contribution to the regions where it operates. In 2020, the Group focused its community relations efforts on COVID-19 prevention and response. Throughout the year, EVRAZ continued its efforts to develop internal coaches as well as standard competency and skills development programmes. Other goals for 2021 include:
* Continuing to implement the grading system in the Coal segment.

In 2020, EVRAZ has conducted an analysis of its charitable activities and surveyed the residents of the cities where its operations are located. The residents believe that EVRAZ should provide better health care support, including support of children with disabilities, improvement of urban environment and leisure spaces. In this regard, EVRAZ plans to update its corporate social responsibility priorities and develop dedicated programs to implement its programmes supporting projects in education, sport, ecology, urban development and charity.

Despite the new restrictions and risks associated with the pandemic, the Group sought to foster a meaningful dialogue with all stakeholders. An important aspect of this work involved engaging with employees and the public about the actions that EVRAZ is taking to fight the pandemic. This information included safety precautions people can take, ways how to diagnose infection and where they can receive medical care. The Group also promoted a social media challenge to provide medical workers with protective equipment and disinfectants.

The Group’s charity funds in the Urals and Siberia select projects based on the EVRAZ Social Investments Guidelines. Priorities include supporting families in need, orphanages and veterans, financing educational, sport and cultural projects, as well as subsidising healthcare and environmental protection programmes.

Federal and regional events
EVRAZ organises events to support national championship of working professions. It was also a strategic partner of the INNOPROM International Industrial Fair. In addition, EVRAZ partnered with the “Ecology of Russia. Regional Aspect” online marathon, which Kommersant Publishing House held in Siberia.

EVRAZ supports the Novokuznetsk Drama Theatre and the “Science for Children” Endowment Fund, as well as Moscow’s Meshchersky Park and Documentary Film Centre. The Group also assists the “Connection” Deaf-Blind Support Foundation and other local charitable organisations.

In 2020, EVRAZ partnered with RUSAL to organise the third annual “Create. Empower. Evaluate.” project workshop. This educational event was part of the “EVRAZ: City of Friends – City of Ideas” grant competition for the next 5-10 years.

During the reporting period, the Group participated in the “Innosocium” nationwide competition of social projects and the WorldSkills# Case studies

• In Kemerovo, Sverdlovsk and Tula regions, EVRAZ acquired protective gear and equipment for regional medical, social and educational institutions. The Group outfitted a modern laboratory for the Centre for Hygiene and Epidemiology in Sverdlovsk region. It also purchased ventilators for hospitals in Chita and Vladivostok as well as medicine and medical equipment to supply oxygen to patients with pneumonia. An ambulance was provided for the doctors at the Nikomed medical facility. EVRAZ also provided funding for the construction of a municipal infectious disease hospital in Novokuznetsk. In addition, the Group joined the Far East and Arctic Development Fund’s initiative to help regions in Russia's Far East Federal District to fight COVID-19.

• For the 70th anniversary of Novokuznetsk’s Siberian State Industrial University, EVRAZ provided funding to create two research and educational centres. The first is focused on Environmental Geology and the second functions as a Digital Competence Centre.

• The Group helped to create the “History of Metallurgy” museum complex at the Mosolov Museum Estate in the Tula region village of Dubna. The museum was created and the estate was restored in preparation for the celebration of the 500th anniversary of the construction of Tula’s Kremlin.

For sport

EVRAZ strives to develop sport infrastructure among its employees and their family members. The Group supports amateur and professional sport competitions. EVRAZ also works to popularise sport and healthy lifestyles in the cities where it operates.

Case study

This year EVRAZ held the 6th High-Five! Race, in a combined format. Participants had one week to perform a run in an individual mode. They could choose the route they took, and the distance for adults was five kilometres and for children one kilometre. Each runner shared their route and time on the race website, could view their position in overall standings, and received an e-diploma for taking part. Those who began preparing in advance had an opportunity to take a course of 16 trainings conducted by guest trainers in running and general physical training and published weekly on the race website. High-five! brought together people from 23 cities, with the youngest participant aged younger than three, and the oldest being 87 years old.

EVRAZ volunteers

While EVRAZ does not have an official policy regarding volunteering, for many years the Group’s employees have been helping people in difficult situations. These efforts include supporting children's institutions, as well as organising various sport and social events.

In 2020, many events were held online. The Group’s employees volunteered to give New Year gifts from EVRAZ to children with health limitations. For example, employees of EVRAZ ZSMK have been sponsoring two orphanages for more than 20 years: Orphanage No. 95 and Island of Hope. In 2020, the plant’s management and primary labour union continued creative workshops for children with health limitations. They also assisted with equine therapy classes.

The children are taught independent housekeeping, cooking, cutting and sewing skills. They also attend vocational guidance classes, engage in sport and competitions, and visit cultural events. In addition, material aid is provided to orphanages.

Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 78

New projects

In 2020, the Group continued to develop a comprehensive communications strategy that focuses on digital channels as the most relevant format during the COVID-19 pandemic.

EVRAZ released a joint video project with Komsomolskaya Pravda Publishing House called “You Can’t Weld Metal Remotely”. The Group has also produced the “Thank You” video series, a separate series of social media publications with the online artist Gudim about safety during the pandemic, as well as the What If After project. Overall, these publications reached more than 1.2 million users. This effort was driven quantitative and qualitative improvements in the production of multiplatform content. The editorial team has created more than 3,000 minutes of video and more than 8,500 pieces of content, reaching 40 million users.

Crisis communications: EVRAZ Against COVID-19

In the past year, EVRAZ has more than doubled the size of its social media audience on VKontakte, Odnoklassniki, Facebook, Instagram and YouTube to 36,100 subscribers. In 2020, the Group updated its internal corporate portal with two new pages. The first, “EVRAZ Against COVID-19”, provides current information about the efforts that it is taking to fight the pandemic. The second, “Secure Office”, contains workplace policies and COVID-19 prevention services in the office of the management company.

In Russia, EVRAZ held a social media challenge called “We Don’t Risk” on VKontakte and Instagram. For each post or story made as part of the challenge, the Group sent masks and disinfectants to medical workers in the cities where it operates. In addition, the editorial team has streamed 42 broadcasts via corporate channels available only to the Group’s employees. This includes town hall meetings with senior executives, staff award ceremonies and other corporate events.

The Group’s Russian and North American enterprises organised regular mailing to the employees of EVRAZ against COVID-19 and Coronavirus information bulletins. They provide up-to-date information about how the pandemic is impacting the Group, country and world. They also contain recommendations for employees to follow, as well as information about helpful internal and external services.

In Russia, more than 40,000 EVRAZ employees received a phone call with a recording of the renowned sport announcer Nikolay Arustamyan. He offered them information about COVID-19 prevention and recommendations on how to stay healthy in their leisure time.

Throughout the pandemic, the management of EVRAZ has focused its business media communication strategy on the Group’s COVID-19 prevention measures and sustainability efforts.

Brand update “People’s Correspondent. To the factory? To the people!”

In 2020, EVRAZ refreshed its corporate brand to reflect its goals with the new tagline “For A Better Future”. The updated brand reflects the Group's commitment to continuous development together with its clients and partners. It also brings out the expertise and global outreach of its business, emphasises the synergies among its assets and highlights its social responsibility.

Inspired by the Russian travel show “Heads and Tails”, 12 young EVRAZ employees visited cities in Siberia and the Urals where the Group has facilities. Each city was featured in an episode that paired two presenters, one of whom explored local tourist sights while the other visited a production asset. The presenters explained complex technological processes to the audience in an easily understandable manner and shared interesting details about the production facilities. They also highlighted unusual tourist sights and interesting historical facts about each of the cities. The “People’s Correspondent” series was broadcast on the EVRAZ YouTube channel and social media accounts, as well as local television stations. Overall, they received more than 1.46 million views and around 6,000 reactions.

The new brand concept was developed together with international branding agency Siegel+Gale. All core components of the brand were modernised, including positioning, communication platform attributes and visuals. The update covered the EVRAZ brand and sub-brands.

Corporate media ecosystem

In 2020, the Group created an editorial office to coordinate its online and offline corporate media efforts. This includes the EVRAZ News corporate newspaper and EVRAZ TV, as well as the Group’s web portal and social media presence. EVRAZ strives to provide transparent information to employees and the broader public. As part of these efforts, the Group's corporate media has published 389 articles and 11 videos about pandemic safety measures.

ANTI-CORRUPTION AND ANTI-BRIBERY

Our approach and Charity Policy. These new and updated policies enable compliance managers to refer to clearer definitions and a wider range of recommended patterns to avoid risks of corruption. All relevant policies are available on the corporate intranet and employees bear personal responsibility for full compliance with them. The Group’s compliance manager regularly updates the Audit Committee on the status of ongoing anti-corruption efforts and prepares memos at the committee’s request.

EVRAZ has always striven for consistency in its strict compliance with the Law of the Russian Federation No. 273 “On Preventing Corruption”, the UK Bribery Act, the US Foreign Corrupt Practices Act and other relevant local legal equivalents. Battling bribery and unethical practices are core aspects of EVRAZ’ anti-corruption efforts. Employees have access to a brief summary of relevant anti-corruption policies as well as links to the full texts of top-level documents on the corporate intranet. Where necessary, the compliance managers discuss the essence of the adopted rules and procedures with all interested parties.# Key Group policies to regulate anti-corruption and anti-money laundering efforts

New employees are obliged to familiarise themselves with the Code of Conduct and the Anti-corruption Policy on their first day of work. They are also briefed about other relevant internal documents and procedures that pertain to the Group’s anti-corruption efforts. All internal policies and procedures related to anti-corruption compliance consistently encourage employees to seek guidance from compliance managers whenever they have questions about the expected course of action in difficult situations.

The Group has a developed system of well-documented procedures that define the day-to-day routines of managers appointed to monitor compliance with applicable anti-corruption laws. Today, compliance specialists scrutinise all tender procedures, check potential and existing business partners, vet prospective new candidates, and ensure that the principles set forth in the Anti-corruption Policy, Code of Conduct, and other relevant internal regulations are followed conscientiously and fully. The Group urges everyone to voice concerns about any known violations.

Today, managers responsible for monitoring compliance with applicable anti-corruption laws are present at every major asset and are responsible for controlling risks, risk analysis, and handling anti-bribery matters. They ensure that all possible non-compliance with policies receive proper attention immediately; monitor charity payments and hospitality spending; and act on whistle-blower allegations of possible bribery, corruption, fraud, and malfeasance. They then present their findings and recommendations to local managing directors, the Group’s compliance manager, and specialists reporting to the vice president for compliance and asset protection. The latter reviews investigation results to liaise with senior management as necessary. The Group investigates carefully and discreetly all signals suggesting potential violations of applicable law and internal anti-corruption policies.

At the end of each calendar year, compliance managers analyse potential anti-corruption risks across all assets. For this purpose, they consider every business process and redefine new risk areas if necessary. Each area is then evaluated to see if existing controls and procedures effectively mitigate the associated risks.

In its Anti-corruption Policy, EVRAZ declares zero tolerance for bribery and corruption.

Policies and regulations

In 2020, EVRAZ continued to review its key documents defining the norms of ethical and responsible behaviour for employees in particular circumstances. The Code of Conduct and Anti-corruption Policy, which were previously updated to reflect changes in processes that the Group has made, were joined by the Regulating Conflict of Interest Situations Policy and the Sponsorship and Charity policy.

Code of Conduct
Anti-corruption policy
Anti-corruption training policy
Sponsorship and charity policy
Gifts, business entertainment and travel expenses policy
Candidates’ Conﬂict of interest policy
Contractors/ suppliers due diligence check and background and criminal record check

Examples of anti-corruption risks tested in the Group’s business processes

In the process "sale of goods, works and services", compliance managers define risk indicators to look for and then test for:

Random transactions or past transactions are singled out and carefully considered for signs of said risks.
Goods sold at prices and on terms that are significantly different from the market average.
Goods, works and services sold via middlemen and agents when direct contracts are possible.
Discounts or mismatched conditions in supply contracts that contradict the Group’s trade policy requirements.

Should compliance managers reveal systemic or significant violations of anti-corruption procedures, this is drawn to the attention of the Group’s compliance manager and the top management, locally or at the Group level. Compliance managers then ensure that risks are properly addressed and mitigated.

Similarly, compliance managers further examine every major process for signs of corruption risks, unethical practices or bribery. So, in another example, they consider charity and sponsorship payments to make sure:

There were no violations of the approval procedure for charity and sponsorship projects.
All the required and correct documents were properly supplied for consideration to decide if the charity or sponsorship payment can be made.
Potential recipients of charity or sponsor support are allowable in accordance with the internal policy.

Other corruption risk indicators here include unexplained/unjustified bonuses to the buyer based on the amount of purchased products, lack of primary and shipping documentation, and granting a delay in payment that violates the current internal requirements.

As the Group’s business processes are stable and consistent from year to year, compliance managers typically examine the same following processes for signs of risk:

Purchase of goods or services.
Payments.
Sale of goods, works and services.
Business gifts, hospitality, entertainment and travel expenses.
Charity and sponsorship.
Interaction with government authorities.
Vetting contractors or customers.
Contract approval.
Group property management.

In January 2019, the compliance managers involved in the above-mentioned processes assessed the risks based on their own statistics from checking tenders, approving contracts, monitoring purchases, conducting inventory checks, etc. The compliance managers routinely meet with the managers responsible for each asset to inform them of known or newly revealed risks and threats, as well as to recommend further actions. The compliance managers then monitor any corrective measures undertaken to mitigate the risks discussed. In the event that the necessary follow-up is lacking or inadequate, the matter gets presented to the vice-president for compliance and asset protection for consideration.

In February 2020, the compliance officer presented to the Audit Committee the analysis for 2020, which revealed no significant violations of anti-corruption statutes or cases of non-compliance with Group policies.

Anti-corruption risk management cycle

Action	Timing	Input
Determine or update list of risks for all business processes	Oct	Input from legal, internal audit and security departments
Prepare comprehensive list of risks	Oct-Nov	Risk owners
Monitor how risks are being mitigated	Mar-Oct	Compliance team
Discuss results with risk owners and top managers	Nov-Dec	Input from internal audit
Analyse and draft risk reports	Dec-Jan	Top managers
Report to the Audit Committee	Jan	Top managers
Check events for signs of risk	Mar-Oct	Risk owners
Present findings and recommendations to the Audit Committee (interim report)	Ongoing (Mar-Oct)	Compliance managers

Key developments in 2020

In 2020, the Group’s compliance function did not initiate any investigations into signs of corrupt practices involving state or public officials. However, compliance managers’ own leads regarding potential fraudulent schemes between unscrupulous managers and suppliers/providers led to investigations. In the past year, there were four cases of fraudulent intent, namely lobbying for money and kickbacks. The employees involved were dismissed and vendors banned.

The compliance function considers ongoing preventive efforts, effective existing controls, the tone from the top, and employees’ adherence to the anti-corruption requirements as effective and adequate for the existing risks.

In 2020 alone, close to 2,200 managers throughout the Group completed online anti-corruption training developed by a leading international provider in the field. Also in 2020, the compliance officer developed several internal EVRAZ training modules to familiarise employees with or refresh their active knowledge of the Anti-corruption Policy and the Code of Conduct. In 2021, the new approach will be developed further to create a full-scale internal training programme in anti-corruption.

The new learning objectives of all internal courses is to:

Confirm the Group’s position and ensure full compliance with applicable anti-corruption laws.
Explain existing controls to manage the risk of bribery and corruption.
Raise awareness about the damaging effects of bribery and corruption.
Draw attention to red flags and warnings about possible illegal payments or other corrupt activities.

This will greatly improve the capacity to train new employees, as well as to help existing ones to refresh their knowledge of anti-corruption principles and best practices.

Another initiative launched in December 2020 and currently being tested is to invite vendors to learn the anti-corruption principles of EVRAZ. So far, close to 200 managers from contractor companies have passed this special course. This trend will also develop further in 2021.

Outlook for 2021

In 2021, more anti-corruption policies (for example, on vetting vendors, gifts and hospitality) will be updated to reflect existing and best practices, as well as the changes implemented within the compliance system since its launch. The Group plans to fully transfer to internal training modules and tests to make anti-corruption courses much more specific and relevant to life at EVRAZ.

For additional information, see the EVRAZ Sustainability Report for 2020, which is to be published in May 2021.# EVRAZ R&D CENTRES

Advances were made across the main product lines: rails, wheels, beams, long products, plates, tubular goods and vanadium. The products offer customers such benefits as better performance, longer product lifetimes and improved material properties to meet their growing requirements. The Group aims to continue to expand its work on basic research and new product development in 2021. EVRAZ’ R&D centres use the network and vast knowledge of the Group’s experts and metallurgists. They also set up partnerships with scientific institutions and universities to benefit from the state-of-the-art research and practical applications. "Customer first" will remain the hallmark of EVRAZ’ R&D work in 2021 and beyond.

EVRAZ’ R&D SYSTEM

In 2020, EVRAZ announced the creation of an integrated system of R&D in close connection with external partners, including laboratories, scientific institutions and universities to benefit from the latest breakthroughs in the field. The Group collaborates with its customers to accelerate the process of testing and certifying products, as well as to bring them to the market, from short-term improvements to new product launches.

US and Canadian plants have expertise in developing high-quality line pipes, OCTG and rail products capable of withstanding the harshest environmental conditions. R&D experts in Switzerland and Tula, Russia, focus on the use of vanadium in steels and the development of new recovery technologies respectively. At NTMK, the centre concentrates on expanding the product portfolio for wheels, beams and grinding balls and is expanding its expertise to the hardening of rail heads. At ZSMK, the centre focuses on premium rail products for the Russian and export market.

EVRAZ’ R&D system is designed to make full use of the product and geographical expertise of the centres. The Moscow office focuses on managing the product portfolio. The North American centre specialises in the portfolio from the Group’s to understand client needs and unlock new market opportunities. R&D requires significant time and resources. EVRAZ’ product development process takes centres to develop innovative products and solutions. It builds on existing R&D capacity and many projects were already in the pipeline. During the year, the R&D centres continued to work on key product areas and meeting customer requirements from the early stage of development to the final certification phase. The product development process is designed

EVRAZ NTMK

The NTMK plant has the most versatile product mix within the EVRAZ group, producing high-quality beams, rails, wheels, grinding balls, merchant bars and other long products for the Russian market and export destinations. Group experts have continuously expanded the product mix using the New Product Development process along with R&D work on rail head hardening technology and increasing the mechanical properties of larger sized beams and grinding balls. The requirements for wheels are steadily growing. As a result, a new R&D centre with the necessary research and testing equipment is being considered to meet future demand.

The new ECO wheel – evolution in steel performance. The new wheels are designed for European and Russian freight cars. They offer lower residual stresses and a high level of fatigue resistance compared to standard designs. It significantly lowers the dynamic impact of the wagon on the track. Operating costs are reduced, the lower wheel weight increases the railcar carrying capacity.

EVRAZ North America

R&D across EVRAZ North America has been reorganised into a single function. This newly formed structure allows for better resource and knowledge sharing and covers all product lines: line-pipe, OCTG, plates, rails and long products.

New! The APEX G2HH rail – A top seller in North America

EVRAZ Pueblo has developed, patented and put into production a new ultra premium rail alloy designed to withstand the most challenging conditions in North America. The rail grade was designed to achieve 430 HB average hardness at carbon levels that are universally acceptable for all of the NA (North American) Class I Railroad customers, a benchmark only achievable in the past by increasing carbon content beyond levels deemed acceptable by many of EVRAZ’ largest railroad customers. This unique approach to alloy design, combined with state of the art head hardening, achieves superior strength and hardness levels to resist wear and rolling contact fatigue damage. It simultaneously achieves enhanced ductility and fracture toughness compared to softer rail grades. The APEX G2HH rail has been fully qualified for running rail and special trackwork applications by five of the seven NA Class I railroads, and testing is continuing with the remaining two operators.

EVRAZ ZSMK

At EVRAZ’ ZSMK R&D centre, activities include the optimisation of the chemical composition, improvement of rail properties as well as the development of manufacturing processes and regulatory documentation for new railway products. The R&D team also carries out testing and monitoring of rail performance directly on the tracks of customers and works with leading research institutions.

DT400IK rails – increased wear resistance and contact fatigue strength for work in horseshoe curves under high loads.

The service conditions of the mountain pass sections of the East Siberian and Trans-Baikal Railways, part of the Trans-Siberian trunk line, are among the toughest in the world. Severe operational conditions come together, including high tonnages, low temperatures (as low as minus 60°C), a combination of track ascents and descents and small radius curves. Therefore, special rails are required for these conditions. These offer a combination of superior hardness and strength, while remaining ductile. Such a new generation rail was developed by EVRAZ ZSMK and is called the DT400IK.

Research and industrial trials, the Group has the capacity to redesign steels from the nanoscale up, facing the industry.

EVRAZ Vanadium R&D centre (East Metals AG, Zug, Switzerland)

New! Established in June 2020, the Vanadium R&D centre is promoting vanadium usage in the steel industry through cooperation with world-class research organisations, in order to promote sustainable and diversified demand for vanadium from the global steel industry. To bring these benefits to market, EVRAZ’ vanadium research is shaping steelmaking processes by coupling vanadium’s unique properties with appropriate metallurgical process designs. This results in microstructures that are precisely tailored to specific market needs and which can be produced efficiently and economically by modern steel mills. Steels that are microalloyed with vanadium exhibit remarkable properties that are able to address several current challenges.

EVRAZ Tula

EVRAZ’ Vanady Tula R&D centre was created to support technological improvements at the plant and to develop new technologies. Located at the hydrometallurgical plant, its primary focus is the improvement of vanadium recovery technology, along with production of value-added products, such as electrolytes for vanadium redox flow batteries. In addition, it is developing chemical and hydrometallurgical technologies for extraction of other valuable elements not currently produced by EVRAZ.

R&D PARTNERSHIPS

Beam Eco system and ASPPRC

EVRAZ, in partnership with leading Russian Scientific institutes (TsNIIM, VNIIMETMASH), and engineering companies (including Ferrostroy), are creating new ideas for using beams and other innovative solutions. In addition, it focuses on implementing completed R&D projects in design and engineering applications.

Vanadium projects with Swerim

A bilateral R&D programme has been founded at Sweden’s Swerim, the joint research centre of the Swedish steel and metals industry and academic metallurgical institutions. The programme covers the vital needs of steel producers and steel consumers in Europe.

The Advanced Steel Production and Processing Center of Colorado School of Mines (ASPPRC) is a platform where leading global steel producers, major steel consumers from the automotive and energy industries and the leading suppliers from the steel industry can meet with world-class research staff and faculty to collaborate on general steelmaking and steel and construction practices, through trials, development of codes and pilot projects.

DIGITAL TRANSFORMATION

EVRAZ DIGITAL TRANSFORMATION PATH

	2017-18	2019	2020	Plans for 2021	Plans 2021-2023
Approach/Strategy	Pilot projects and proof of concept	Broad discussion of digital transformation approach, objectives and outcomes	Decision to make digital transformation a strategic priority of EVRAZ	Implement a major programme with more than 60 projects	Generate an total effect of US$150 million
Implemented Projects		68 projects	implemented with an annual effect of US$ 17 million	Focus on production projects with direct economic impacts
Digital Tools Deployment		Decision to systematically employ digital tools on a large scale throughout enterprises and business units	Launch of major digital transformation projects	Outcome analysis
Impacts on Production/Business
Economic Effect	↓	↓	↓	↓	↓
Overall Progress					↓

ADVANCED ANALYTICS PROJECTS IN 2020

Advanced analytics is a trend in digitalisation based on solutions involving machine learning and other artificial intelligence elements. It is a digital transformation priority at EVRAZ. Advanced analytics systems are forward-looking, predictive and prescriptive.# Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 88 89

Key digital technologies

Advanced analytics based on machine learning and artificial intelligence.
Basic industrial analytics (modern BI tools).
Expert systems (from vendors).
Computer vision.
IoT (Internet of Things) sensors as data source for analytical and decision making systems.

Digital transformation goals

Improve client service.
Improve industrial safety.
Assist operators of complex technological processes in order to improve the efficiency of equipment, reduce costs and improve product quality.
Enhance efficiency and streamline business processes by eliminating internal barriers.

Digital transformation is closely linked to EVRAZ Business System

The EVRAZ Business System is an important partner in digital transformation project development, planning and implementation throughout the Group’s divisions:

Bottom-up digital innovation.
Effective interaction within digital product teams.
Change management.

CASE STUDIES

Risk Hunting: a unique mobile app

EVRAZ developed the Risk Hunting mobile app with the aim of helping to identify and eliminate production risks. By using the app, Group employees can upload information about unsafe areas or processes at their sites directly to a central database to get advice about how to eliminate the issues and ensure a prompt expert response. Risk reports are automatically sent to dozens of people at EVRAZ, including senior executives.

EVRAZ NTMK’s central control room

The concept and minimum viable product were developed for the unified dispatch centre at EVRAZ NTMK. The system contains a series of dashboards displaying the facility’s key working indicators: financial, production, performance, quality, energy consumption and HR. The system can be accessed via computers and mobile devices. In 2021, the development of the system’s functionality will continue.

Steel Radar online project

Working with leading Russian metal trading companies, EVRAZ launched an online project designed to develop the ecosystem for steel construction and improve client service. Steel Radar (www.steel-radar.ru) is a resource that aggregates data about the presence of I-beams in the Russian warehouses of traders taking part in the project. Transparent and up-to-date information allows a customer to find the closest warehouse. The site has functionality for searching for availability by region, profile sizes, steel grades and traders.

Annual report & accounts 2020

PRINCIPAL RISKS AND UNCERTAINTIES

RISK MANAGEMENT SYSTEM

As a major international mining and steelmaking group, EVRAZ faces inherent business risks that have the potential to negatively impact its operations. Identifying and mitigating risks is one of the most important aspects of the Group’s strategy and daily activities. The basic risk management processes that EVRAZ follows are outlined below.

TOP-DOWN APPROACH

Oversight, identification, assessment and management of risks at the corporate level.

BOTTOM-UP APPROACH

Identification, assessment and management of risks at regional and site levels and across functions.

	CEO	Board of Directors	Risk Management Group	Audit Committee
Has ultimate responsibility for risk management, ensuring that it is in place and effectively functioning	• Has an oversight role. • Ensures that risk management processes are in place, adequate, and effective. • Approves the risk appetite in accordance with the risk management methodology adopted by EVRAZ.	Identifies, assesses and monitors Group-wide risks and mitigation actions	• Supports the board in monitoring risk exposure against risk appetite. • Reviews the effectiveness of risk management and internal control systems.	Supports the Audit Committee in reviewing the effectiveness of risk management and internal control systems

	Site levels	Regional business unit management teams
	• Identification, assessment and mitigation of risks. • Promoting risk awareness and safety culture.	• Adopt regional risk appetite. • Support the Risk Management Group in reviewing and monitoring effectiveness of risk management. • Identify, assess and manage risks at the regional level. • Monitor risk management process and effectiveness of internal control.

EFFECTIVE RISK MANAGEMENT

The risk management process aims to identify, evaluate and manage potential and actual threats to the Group’s ability to achieve its objectives.

For more information, read risk management and internal control section of the corporate governance report on pages 112-115.

Risk assessment in 2020

Given the heightened market uncertainty, EVRAZ continued to actively manage the risks that the Group faces. The COVID-19 pandemic and heightened market volatility required EVRAZ to carefully monitor the risks that could negatively impact the business. The Group’s financial and operating results for the period show that management effectively coped with the challenges posed by this increased uncertainty.

In 2020, EVRAZ continued to roll out the health and safety risk management tools that it developed. The significant level of employee engagement in the process and heightened focus on safety were among the key aspects that contributed to a reduction in injury rates.

In summer 2020, EVRAZ updated its risk register to account for the current situation. While the composition of its principal risks did not change compared with the previous year, a detailed analysis of their impact and probability of negative consequences for the Group led to a recalibration in the assessment of some of the risks. The Audit Committee carefully reviewed this assessment on behalf of the Board.

The Group worked to accelerate and strengthen its IT security more quickly after a computer virus impacted its assets in North America in spring 2020. The EVRAZ Information Security Operations Centre also proved its ability to quickly process information about potential information security threats and act promptly to eliminate them.

To enhance its focus and control over the Environmental, Social and Governance risks, in 2020, EVRAZ developed an Environmental Strategy, as well as a Human Rights Policy and a Diversity and Inclusion Policy. Additionally, management began to develop a Climate Change Strategy, the initial results of which were presented in the Climate Change Report published in October 2020. This will provide more transparency on how the Group addresses the related risks.

The updated list includes risks associated with the possibility of a reduction in output due to increased rates of staff illness. To minimise the likelihood of such a negative turn of events, EVRAZ developed a system of measures aimed at both reducing the incidence of illness, as well as promptly identifying and isolating sick employees. The Group worked to quickly purchase all necessary equipment and materials, as well as to implement new rules and processes aimed at mitigating such risks throughout its operations. To reduce the risk of illness, a significant portion of the office staff now work remotely. In addition, EVRAZ changed many of its internal processes to improve its efficiency in this new environment.

As the UK formally left the EU on 31 January 2020, the Group continues to closely monitor the situation and believes that Brexit will not significantly affect its business.

Identifying and assessing risks, as well as developing measures to mitigate them and monitoring their implementation, are ongoing challenges for both management and internal audit function.

The assessment also included other risks that were not recognised as principal, e.g. HR and employee risks (including the risks of lack of skills, failure of succession planning, reduced productivity due to labour unrest or poor job satisfaction), taxation, compliance risks (including anti-corruption and anti-bribery matters), social and community risks, risks related to respect for human rights, and other risks. While the impact and probability analysis suggests that such risks could affect operations to some extent, management believes they are being adequately managed and does not consider them as being capable of seriously affecting the Group’s performance, future prospects or reputation.

In addition, as part of an ongoing programme to improve project management practices, the risk management approach was revised, the investment project risk register was regularly updated and appropriate employee training was conducted to ensure that its risk exposure did not exceed the established risk appetite.

Additional information | 90 91# SEVERITY Principal risks and uncertainties heat map in 2020

1. Global economic factors, industry conditions and cyclicality

5. Functional currency devaluation

6. HSE: environmental

2. Product competition

HSE: health, safety

3. Cost effectiveness

8. Business interruption

4. Potential regulatory actions by Governments, incl. trade, anti- monopoly, anti-dumping regulation, sanctions regimes, and other laws and regulations

9. Digital effectiveness, effective, efficient and continued service

10. Capital projects and expenditure

Risk appetite level

Risk migration, yoy

During the preparation of the Climate Change Strategy in 2020, EVRAZ performed scenario analysis, as well as identified and assessed climate risks and opportunities. The transitional Environmental risk has always been a topic of focus for management and is recognised as a principal risk for EVRAZ. The COVID-19 pandemic did not have a material impact on the risk management processes in use at EVRAZ in 2020. Overall, the Group's financial and operating results indicate that it implemented effective measures to overcome the uncertainty seen during the period.
and physical risks that were identified have not yet had any impacts on the Group’s operations and do not currently pose a critical risk to its business, as currently projected, by implementing air emission reduction programmes at all plants, participating in developing greenhouse gas emission regulations in Russia, implementing energy efficiency projects and, as a result, reducing greenhouse gas emissions.

Discover more in the Climate Change Report: https://www.evraz.com/en/sustainability/data-center/climate-change-reports/

Emerging risks

In addition to principal risks, management pays particular attention to threats that could become significant over a certain time, but have a lower likelihood of materialising in the next three to five years. These include:

Climate change.
Liabilities incurred due to environmental impairments.

The management works continuously to monitor and manage emerging risks and devise mitigation measures. The Group defines these as events that could meaningfully impact EVRAZ’ activities and results, known as emerging risks.

Principal risks and uncertainties

Basis	Strategic priorities	Direction of risk change
Debt management and stable dividends	Increased
Prudent CAPEX	No changes
Sustainable development	Increased
Retention of low-cost position
Development of product portfolio and customer base	Decreased
EVRAZ Business System

1. Global economic factors, industry environment, and cyclicality

Risk Description and impact
The operations of EVRAZ are dependent on the global macroeconomic factors, industry environment, as well as economic conditions and industry conditions, e.g. the global supply and demand balance for steel, iron ore and coking coal, which affect both product prices and volumes across all markets. The Group’s operations involve substantial fixed costs, and global economic and industry conditions can impact its operational performance. In 2020, the COVID-19 pandemic brought additional market uncertainties. At the same time, management’s actions reduced the impact of this risk on the Group’s business and operations. New capacities and lower demand amid the economic recession put significant pressure on prices.

Risk owner(s)
CEO, Strategy Committee, Management Committee, Budgeting Committee and other levels

Mitigating/risk management actions in 2020
This is an external risk that is mostly outside the control of EVRAZ; however, it is partly mitigated by exploring new market opportunities, focusing on expanding the share of value-added products, further downscaling inefficient assets, suspending production in low-growth regions, reducing and managing the cost base with the objective of being among the sector’s lowest-cost producers, and improving the balance sheet/gearing.

Direction/reason for change
N/A

2. Product competition

Risk Description and impact
EVRAZ faces excessive supply on the global market and greater competition, mostly in the steel products market, primarily due to competitors’ activity and the introduction of new facilities. Other risks include low demand for construction products and increasing competition in this segment. Competition is rising in the rail product segment. The Group also faces excessive supply of slabs on the global market and intensified competition.

Risk owner(s)
VP Sales, VPs of business units

Mitigating/risk management actions in 2020
EVRAZ mitigates this risk by expanding its product portfolio and penetrating new geographic and product markets. It continuously develops and improves its loyalty and customer focus programmes and initiatives. The Group also implements quality improvement initiatives and strives to increase the share of value-added products.

Direction/reason for change
N/A

3. Cost effectiveness

Risk Description and impact
Most of the Group’s steel production remains sensitive to costs and prices. Digitalisation is having a significant impact on the sector, as companies seek to use new technology to support efforts to improve productivity and margins across the value chain. Failure to find digital solutions for the most urgent business problems could reduce operational flexibility and cost advantage.

Risk owner(s)
VPs of business units, SVP Commerce and Business Development

Mitigating/risk management actions in 2020
For both the mining and steelmaking operations, EVRAZ is implementing cost-reduction projects to increase asset competitiveness. Given the substantial product share of commodity semi-finished, which requires less customer service and is more cost driven, maintaining a low-cost position is a key business objective for EVRAZ in steelmaking, as well as in the iron ore and coking coal mining businesses. The Group’s focused investment policy is aimed at reducing and managing the cost base. EVRAZ also seeks to mitigate this risk through the control of its Russian steel distribution network, the development of high value-added products, and the implementation of EVRAZ Business System transformation projects focused on increasing efficiency and effectiveness. On addition, the Group's digital projects help to reduce risks associated with primary equipment and to improve effectiveness. This includes the Advanced Analytics programme, which it launched in 2020 to drive operational efficiency.

Direction/reason for change
N/A

4. Potential regulatory actions by governments, incl. trade, anti-monopoly and anti-dumping regulations, sanctions regimes, as well as other laws and regulations

Risk Description and impact
New laws, regulations or other requirements and regimes could limit the Group’s ability to obtain financing on international markets, sell its products and purchase equipment. EVRAZ may also be adversely affected by government sanctions against Russian businesses or otherwise reducing its ability to conduct business with counterparties. There is a risk of adverse geopolitical situations in the countries where the Group operates. Other risks include the possibility that EVRAZ could fail to adapt to new market conditions, or could incur losses connected with existing contracts in case of additional sanctions implementation. While the Group’s internal compliance controls address the associated risks, the general uncertainty in the area increases management’s focus on this risk. EVRAZ also continuously monitors changes in temporary legislation related to the COVID-19 pandemic.

Risk owner(s)
VP Compliance and Security, VP Legal, VP Sales, VP Strategy

Mitigating/risk management actions in 2020
EVRAZ and its executive teams are members of various national industry bodies. As a result, they contribute to the development of such bodies and, when appropriate, participate in relevant discussions with political and regulatory authorities. The Group seeks to monitor potential legislative changes before their introduction, at the point when new laws are being drafted. EVRAZ has implemented and will further develop procedures to ensure that sanctions requirements are complied with across its operations.

Direction/reason for change
N/A

5. Functional currency devaluation

Risk Description and impact
Any significant fluctuation in subsidiaries’ functional currencies relative to the US dollar could have a significant effect on the Group’s financial accounts, which might impact its ability to borrow.

Risk owner(s)
CFO

Mitigating/risk management actions in 2020
While this external risk is mostly outside the Group’s ability to control, management works to mitigate its potential impact through proper disclosure and monitoring. EVRAZ also works to reduce the amount of intergroup loans denominated in Russian rubles to limit the possible devaluation effect on its consolidated net income.

Direction/reason for change
N/A

6. HSE: environmental

Risk Description and impact
Steel and mining production carry an inherent risk of environmental impact at the level of Directors, as well as at management level, relating to issues as diverse as water usage, quality of water discharged, waste recycling, tailing management, air emissions (including greenhouse gases) and community satisfaction.

Risk owner(s)
Board of Directors, HSE Committee

Mitigating/risk management actions in 2020
EVRAZ monitors its environmental risk matrix on a regular basis, and it develops and implements mitigation measures in response to these risks. The top management also devotes greater attention to monthly monitoring of environmental risk trends and factors. The Group implements programmes to reduce air emissions and water use at its plants, as well as to improve its waste management practices.

Direction/reason for change
Risk level was increased due to a noted increase in regulatory scrutiny and pressure resulting in a heightened risk impact in 2020.# Risk Description and impact

7. Inherent HSE risks

HSE: health and safety as well as at management level

Consequently, EVRAZ faces risks including regulator fines, penalties, adverse reputational impact and, in the extreme, the withdrawal of plant environmental licences, which would curtail operations indefinitely. EVRAZ has developed an environmental strategy and has updated its list of projects in accordance with it to achieve strategic goals regarding emissions and waste. The strategy is being implemented through dedicated programmes in each division. Globally, there is an increase in regulatory scrutiny and pressure, as well as investor and customer expectations. Most of the Group’s operations are certified under ISO 14001 and work is ongoing to bring the remaining plants in compliance with this international standard. EVRAZ is currently compliant with REACH requirements. The Group has begun to develop a Climate Change Strategy, including performing various scenario analyses and identifying appropriate risks. EVRAZ also participates in the development of GHG emissions regulation in Russia. In addition, the Group has achieved reductions in GHG emissions as a positive side-effect of its energy efficiency projects.

Inherent HSE risks include the potential danger of fire, explosions and electrocution, as well as risks specific of Directors level, to individual mines, where elevated methane levels, rock falls and other accidents could lead to loss of personnel, outage or production delays, loss of material, equipment or product, or extensive damage compensation.

To mitigate these risks, EVRAZ ensures that its management places significant emphasis on safety performance and the standardisation of critical safety programmes. The Group is implementing an energy isolation programme, further developing a programme of behaviour safety observations to drive a more proactive approach to preventing injuries and incidents, as well as launching a series of health and safety initiatives related to underground mining. In addition, the breach of any HSE laws, regulations and standards may result in fines, penalties and adverse reputational impacts and, in the extreme, the withdrawal of mining operational licences, thereby curtailing operations for an indefinite period. Other measures include implementing maintenance and repair modernisation programmes, launching a downtime management system, further developing the occupational safety risk assessment methodology, as well as analysing the effectiveness of corrective measures.

There is also the risk of infection with COVID-19, which may be associated with the need for a mass quarantine of workers. In addition, the Group conducts mass testing of personnel for COVID-19 and has introduced reliable barriers to prevent carriers of the virus from entering its facilities.

8. Prolonged outages or production delays

Business interruption especially in coal mining, could have a material adverse effect on the Group’s operating performance, production, financial condition and future prospects. In addition, any long-term business interruption may result in a loss of customers and competitive advantage, as well as damage to the Group’s reputation.

The Group has defined and established disaster recovery procedures that are subject to regular review. Business interruptions in mining mainly relate to production safety. Measures to mitigate these risks include methane monitoring and degassing systems, timely mining equipment maintenance, as well as employee safety training. EVRAZ performs detailed incident cause analyses to develop and implement preventative actions. Records of minor interruptions are reviewed to identify any more significant underlying issues.

9. Digital effectiveness

A failure to proactively use IT opportunities to increase the efficiency of business operations could result in a loss of competitive advantage and margins. Information technology and information security risks have the potential to cause prolonged production delays or shutdowns. At the same time, increased digital transformation and the convergence of IT and operational technology make companies more vulnerable.

Digital Transformation is a part of the Group’s IT strategy. EVRAZ continuously assesses and monitors information security risks, and it implements mitigation measures upon completion of external assessments by an independent advisor. The Group conducts regular continuity testing for the most critically important IT systems. Successful mitigation measures include launching the IT Security Operation Centre, conducting security awareness training for employees and effectively organising remote work for staff during the COVID-19 pandemic.

10. Capital projects

The Group’s development plans largely depend and expenditure on its economic viability, efficiency and effectiveness of execution, as well as the availability and cost of capital to finance capital expenditure. Economic issues outside those factored into the Group’s business plans, including regulatory approvals, also may negatively impact anticipated free cash flow and cause certain elements of the planned capital expenditure to be re-phased, deferred or abandoned with consequential impact on the Group’s planned future performance.

EVRAZ reviews all proposed capital projects on a risk return basis. The current list of projects has been reviewed and updated. Each project is presented for approval against the Group’s risk matrix to assess its potential downside and any possible mitigating actions. EVRAZ has created a list of typical project risks and a database of lessons learned. Project delivery is closely monitored against project plans resulting in high-level action to manage project investment for both timely delivery and planned project expenditure. New mine development and definition of feasibility plans are reviewed and signed off by independent mining engineers. Furthermore, the profitability of new projects could be impacted by higher than expected operating and life of mine costs due to variables such as lower than expected coal and iron ore quality, coal seam economics, as well as technical processing and engineering factors. The Group regularly revisits the key assumptions for its main investment projects and performs scenario analyses, which may result in the suspension and/or postponement of certain projects. EVRAZ also uses financial modelling to define the strategy of each individual asset and the enterprise in general for the purpose of long-term FCF forecasting, including investment projects. The project management systems transformation is ongoing.

VIABILITY STATEMENT

As a global steel and mining group, EVRAZ is exposed to a range of risks and inherent uncertainties that are explained more fully in this section. The Group’s principal risks and its approach to managing them, together with the latest financial forecasts and five-year strategic plan, have formed the basis of this long-term viability assessment. EVRAZ believes that a five-year period is optimal for the viability analysis, as it corresponds to the period used in the Group’s strategic planning and therefore reflects the information available to management regarding the future performance of the business. Visibility of performance and risks beyond the strategic planning cycle is limited, and scenarios beyond this five-year period have not been analysed for the purposes of the viability statement. The Group considered the emerging risk of climate change but determined that it did not have a significant impact on the viability assessment for the five-year period.

The assessment was underpinned by scenarios that encompass a wide spectrum of potential events. These scenarios are designed to explore the Group’s resilience to the significant risks set out on pages 92-95 and combinations of correlated risks. Some risks are outside the Group’s control and the potential implications are difficult to predict in the current environment and considered remote. The key scenarios tested can be summarised as:

Introduction of new tariffs and duties.
Business interruption, leading to lost production and restoration costs.
Combinations of correlated risks/scenarios.

The scenarios are designed to be severe but plausible. They take full account of the potential actions available to mitigate the occurrence and impact of the risk, and the likely effectiveness of such actions. The process makes certain assumptions about the normal level of capital recycling likely to occur and considers whether additional financing facilities will be required and available in each scenario. EVRAZ considers this assessment of its prospects based on stress-testing to be reasonable, given the risks and inherent uncertainties facing the business.

Base scenario:
- The key assumptions as disclosed in Note 3 to the financial statements under Impairment of assets on pages 186-189.
- Future pricing of steel and raw materials is within the range of the external analyst forecasts set out in Note 6.
- Annual steel volumes are assumed to vary from -2.5% to 10.5%, compared with the 2020 level over the five-year period to December 2025.

The Directors confirm that their assessment of the principal risks facing the Group is robust.

| Risk Description and impact | Risk owner(s) | Mitigating/risk management actions in 2020 Based on this robust assessment and the stress-testing of the Group’s prospects across several risk-related scenarios, including the possible impacts of the potential coal assets demerger, the directors have a reasonable expectation that EVRAZ will be able to continue in operation and meet its liabilities as they fall due over the five-year period to December 2025. not pose a material threat to the business over the period of the viability assessment. As a result, no specific climate change scenario was modelled.

• Global economic decline: In accordance with provision 31 of the UK Corporate Governance Code 2018, the Board has assessed the Group’s prospects – Steel and raw material prices and exchange rates during 2021 and future periods are at the lower end of the external analyst forecast set out in Note 6. – Sales volumes are assumed to decrease by 3.0% in comparison with the base scenario. over the period of the current strategic plan to December 2025 and considers it possible to form a reasonable expectation of the Group’s viability over this five-year period. The assessment included consideration of the stress-testing detailed below, with particular attention paid to the forecast cash position and compliance with financial maintenance covenants in each scenario, as well as the mitigation plan developed by management. In making this statement, the directors have made the following key assumptions:
• Funding or refinancing, by way of capital markets, bank debt and asset financing, continues to be available.
• Selling prices over the five-year viability period will not fall significantly below the lower end of the external analyst forecasts assumed in the severe
• Increased conversion costs in the CIS.
• Increased CAPEX.
• Potential changes in HSE requirements and standards.
• Appreciation of local operating currencies.
• Cybersecurity failure resulting in production delays or shutdowns at a major operation, but plausible scenarios.

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97

STATEMENT IN ACCORDANCE WITH S172 OF THE COMPANIES ACT

The Board has considered in detail the Company’s business model outlined on pages 10-11 of this report, which identifies the Company’s stakeholders as:
• Shareholders and investors.
• Employees.

All shareholders are normally welcome in person at the AGM, where all directors are available to discuss any issues that they might raise. This year, a closed meeting had to be held, but arrangements were made to allow private shareholders to submit questions.

actions that are necessary to reduce the Group’s impact on the environment, including the reduction of greenhouse gas emissions. During 2020, the HSE Committee reviewed presentations from management on a revised environmental strategy and recommended its adoption

• Customers.
• Suppliers and contractors.
• Local communities.
• Government and regulatory authorities.
• Media.
• Industry organisations.

The Board of EVRAZ recognises the benefit of clear and precise engagement with the Group’s stakeholders. Value is generated through the Group’s core activities as outlined in the discussion of its business model on pages 10-13.

to the Board. More details are available on pages 14-15.

The CEO, supported by the CFO, held conference calls and briefed analysts and institutional investors fully after the publication of the Group’s half-year and full-year results. Additionally, the CFO, supported by the director for investor relations, held a series of online meetings with institutional investors during the year.

The Board considers the interests of all stakeholders by taking a long-term view of how the business needs to develop within its economic market (please see principal decisions taken by the Board on pages 107-109). The Board has considered the technological developments in the market to ensure that its assets are improved to remain competitive, and that the necessary financing requirements to implement strategic projects will be available over the medium to long term. When development plans for projects are in their early stages, management engages key customers to ensure

Engagement with employees remains key, and the Board closely monitors the results of the annual engagement survey, which has seen satisfactory levels of improvement. Throughout the year, the Board has considered the impact of COVID-19 on all of its stakeholders. Full details of the actions taken are highlighted in the Corporate Governance Statement in the Impact of COVID-19 section on pages 30-31.

Two independent non-executive directors have taken responsibility for engaging with employees in our businesses in North America and Russia, respectively, and this is conducted through their attendance at key staff briefing events and town hall meetings.

Throughout the year, senior management attend the Group’s board meetings to present the annual budget for their respective business units and key investment projects that require the Board to approve significant capital expenditure. All presentations made to the board that the products manufactured meet their specific requirements.

The Group’s dividend policy anticipates dividend payments to shareholders of US$300 million per annum, provided that the Group’s net debt/EBITDA ratio remains below 3x. In addition, the Board may consider further distributions of free cash flow available after implementing its investment programme to support the business. The Board reviewed and considered that, despite the impact of the COVID-19 pandemic on the operational results of the business and the economy, the underlying strength of the business allowed the Board to continue to pay

All suppliers are treated in line with agreed contract terms, and when new opportunities come available the Group has transparent tendering procedures to ensure new contracts are awarded on a fair basis. The Board is introducing a stakeholder impact analysis for all proposals brought to its attention and will include an analysis in the annual strategy plan. The full range of EVRAZ Stakeholder engagement consider both the benefit to shareholders of the proposal and the impact on other key stakeholders.

The Remuneration Committee receives a detailed presentation from the Vice President of HR, which outlines remuneration and incentive plans across the whole business at each level. A whistleblowing arrangement is in place that allows staff to raise issues in confidence, and the responses to issues are routinely monitored by the Audit Committee, which escalates key issues to the Board.

dividends relating to the 2020 financial year. These actions assist the directors

in performing their duties under S172 of the Companies Act 2006, and the analysis will confirm to the Board that the impact of business plans on all stakeholders is being considered by management when developing initiatives for Board approval.

A capital markets day is normally held each year for the investment community, which covers both the current performance and future plans, as well as governance issues. Due to the COVID-19 pandemic, it was not possible to hold the event this year, but one is planned for 2021.

In 2011, the Board established a Health, Safety and Environment Committee to help it to monitor the Group’s Health, Safety and Environment performance, as well as the initiatives designed by management to improve the Group’s performance in that area. In addition, it considers the planned

Annual report & accounts 2020
NON-FINANCIAL REPORTING

EVRAZ aims to comply with the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006. The table below outlines to stakeholders the Group’s position, principal policies, main risks and KPIs on key non-financial areas:

Requirement	Group approach and policies	Documents Related	KPIs Related	Principal risks
Environment	Steel and mining production carry a high risk of environmental impact and incidents related to its production processes. EVRAZ pays the utmost attention to environmental matters to prevent or minimise any adverse impact.	Environmental strategy EVRAZ HSE Policy Environment, Code of Business Conduct see pages 60-65	EVRAZ has adopted new environmental targets: see pages 14-15	HSE: Environment, see page 94 Further information: Environment,
Employees	EVRAZ strictly complies with national labour laws and best practices of business ethics concerning employee management. Our People, Discrimination related to a person’s race, ethnic origin, gender, religion, see pages 68-73; political views, nationality, age, sexual orientation, etc, is totally unacceptable throughout the Group, as well as at its subcontractors and suppliers. Health and Safety, see pages 58-59	EVRAZ HSE Policy Diversity and inclusion policy Human rights policy Code of Business Conduct	LTIFR (per 1 million hours) Labour productivity, steel (tonnes per person)	Due to industry-specific issues, EVRAZ employees and contractors face safety and health risks. Providing a safe work environment is one of the Group’s main core values.
Social policy	EVRAZ strives to make a meaningful contribution to local economies and to support communities wherever it operates. The Group collective agreements.	Charitable Donation Sponsorship Policy Fulfilment of the Group’s social obligations towards its employees, factors, industry	Global economic	Further information:

The Group has an active IR programme to enable shareholders to engage with the Company and the Board, not only on businesses issues but also on any governance concerns that they might have.

Annual report & accounts 2020
NON-FINANCIAL REPORTING

Requirement	Group approach and policies	Documents Related	KPIs Related	Principal risks
Environment	Steel and mining production carry a high risk of environmental impact and incidents related to its production processes. EVRAZ pays the utmost attention to environmental matters to prevent or minimise any adverse impact.	Environmental strategy EVRAZ HSE Policy Environment, Code of Business Conduct see pages 60-65	EVRAZ has adopted new environmental targets: see pages 14-15	HSE: Environment, see page 94 Further information: Environment,
Employees	EVRAZ strictly complies with national labour laws and best practices of business ethics concerning employee management. Our People, Discrimination related to a person’s race, ethnic origin, gender, religion, see pages 68-73; political views, nationality, age, sexual orientation, etc, is totally unacceptable throughout the Group, as well as at its subcontractors and suppliers. Health and Safety, see pages 58-59	EVRAZ HSE Policy Diversity and inclusion policy Human rights policy Code of Business Conduct	LTIFR (per 1 million hours) Labour productivity, steel (tonnes per person)	Due to industry-specific issues, EVRAZ employees and contractors face safety and health risks. Providing a safe work environment is one of the Group’s main core values.
Social policy	EVRAZ strives to make a meaningful contribution to local economies and to support communities wherever it operates. The Group collective agreements.	Charitable Donation Sponsorship Policy Fulfilment of the Group’s social obligations towards its employees, factors, industry	Global economic	Further information:

CORPORATE GOVERNANCE

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BOARD OF DIRECTORS

Alexander Abramov

Non-Executive Chairman
Appointment
Alexander Abramov has been a Board member since April 2005. He was CEO and chairman of Evraz Group S.A. until January 2007 and continued to serve as chairman until 1 May 2006. Mr Abramov was a non-executive director from May 2006 until his re-appointment as chairman of the Board on 1 December 2008. He was appointed chairman of EVRAZ plc on 14 October 2011.

Committee membership
Mr Abramov is a member of the Nominations Committee.

Skills and experience
Mr Abramov graduated from the Moscow Institute of Physics and Technology with a first-class honours degree in 1982, and he holds a PhD in Physics and Mathematics. He founded EvrazMet in 1992.

Other appointments
Mr Abramov is a Bureau member of the Russian Union of Industrialists and Entrepreneurs (an independent non- governmental organisation), a member of the Board of Skolkovo Institute for Science and Technology, and a member of the Supervisory Board of the Moscow Institute of Physics and Technology.

Alexander Frolov

Chief Executive Officer
Appointment
Alexander Frolov has been a Board member since April 2005. He was chairman of the Board of Evraz Group S.A. from May 2006 until December 2008, and was appointed CEO with effect from January 2007. Mr Frolov was appointed CEO of EVRAZ plc on 14 October 2011.

Committee membership
Mr Frolov is a member of the Health, Safety and Environment Committee.

Skills and experience
Mr Frolov graduated from the Moscow Institute of Physics and Technology with a first-class honours degree in Physics and received a PhD in Physics and Mathematics in 1991. Prior to working at EVRAZ, he was a research fellow at the I. V. Kurchatov Institute of Atomic Energy. He joined EvrazNir in 1996 and served as its chief financial officer from 1999 to 2001, then as senior executive vice president of Evraz Group S.A. from 2001 to April 2006.

Other appointments
None.

Eugene Shvidler

Non-Executive Director
Appointment
Eugene Shvidler has been a Board member of Evraz Group S.A. since August 2003. He was appointed to the Board of EVRAZ plc on 14 October 2011.

Committee membership
Mr Shvidler is a member of the Nominations Committee.

Skills and experience
Mr Shvidler served as president of Sibneft from 1998 to 2005, having previously been senior vice president from 1995. He holds an MSc and an MBA.

Other appointments
Mr Shvidler currently serves as chairman of Millhouse LLC.

Key to committee membership
N Nominations Committee
H HSE Committee
Chairman
Member

Annual report & accounts 2020

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INDEPENDENT DIRECTORS

Eugene Tenenbaum

Independent Non-Executive Director
Appointment
Eugene Tenenbaum has been a Board member of Evraz Group S.A. since August 2006. He was appointed to the Board of EVRAZ plc on 14 October 2011.

Committee membership
None.

Skills and experience
Mr Tenenbaum served as head of corporate finance for Sibneft in Moscow from 1997 through 2001. He worked as director for corporate finance at Salomon Brothers from 1994 until 1998. Prior to that, he spent five years in corporate finance with KPMG in Toronto, Moscow and London, including three years (1990-93) as national director at KPMG International in Moscow. Mr Tenenbaum was an accountant in the business advisory group at Price Waterhouse in Toronto from 1986 until 1988. He is a chartered accountant.

Other appointments
Mr Tenenbaum is currently managing director of MHC (Services) Ltd and serves on the Board of Chelsea FC Plc.

Laurie Argo

Independent Non-Executive Director
Appointment
Laurie Argo has been a Board member of EVRAZ plc since August 2018.

Committee membership
Ms Argo is a member of the Audit Committee and the Remuneration Committee.

Skills and experience
Ms Argo has over 20 years of experience in the energy industry. From 2015 to 2016, she served as senior vice president of Enterprise Products Holdings LLC, the general partner of Enterprise Products Partners LP. From October 2014 to February 2015, Ms Argo was chief executive officer and president of Oiltanking GP LLC, the general partner of Oiltanking Partners L.P. From January 2010 to January 2014, she served as vice president, NGL fractionation, storage and unregulated pipelines, which included gas gathering and processing in the Rockies, San Juan and Permian areas. From 2005 to 2014, she held various positions in the NGL and natural gas processing businesses for Enterprise, where her responsibilities included the commercial and financial management of four joint venture companies. From 2001 to 2004, Ms Argo worked for San Diego Gas and Electric Company and from 1996 to 2001 H2E Gas Transmission in Houston, Texas.

Other appointments
Ms Argo is currently an independent non- executive director of the general partner of Rattler Midstream LP.

Deborah Gudgeon

Independent Non-Executive Director
Appointment
Deborah Gudgeon has been a Board member of EVRAZ plc since May 2015.

Committee membership
Ms Gudgeon serves as chairman of the Audit Committee and is a member of the Remuneration Committee.

Skills and experience
Ms Gudgeon is a qualified chartered accountant with 30 years’ experience. She started her career with Coopers and Lybrand, and in 1991 became a senior accountant for Salomon Brothers International. From 1993 to 2001, Ms Gudgeon served as a finance executive at Lonrho PLC and was appointed a member of the Finance Committee in March 1993. From 1995 to 1998, she served as a director for Halstead Services Limited, and from 1998 to 2003, she served as a director of Deloitte, specialising in corporate finance. From 2003 to 2009, Ms Gudgeon served as a founding director of the Special Situations Advisory team for BDO LLP, providing integrated advice on corporate finance, restructuring, debt and performance improvement. From 1998 to 2006, Ms Gudgeon served as managing director of LaSalle Corporate Finance Limited.

Other appointments
Ms Gudgeon is currently a Senior Adviser of Tenfifteen Limited.

Key to committee membership
A Audit Committee
R Remuneration Committee
N Nominations Committee
H HSE Committee
Chairman
Member

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103

Karl Gruber

Independent Non-Executive Director
Appointment
Karl Gruber has been a Board member of Evraz Group S.A. since May 2000. He was appointed to the Board of EVRAZ plc on 14 October 2011.

Committee membership
Mr Gruber is a member of the Audit Committee and the Remuneration Committee.

Skills and experience
Mr Gruber has extensive experience in international finance and mining. He was a partner at PwC from 1983 to 2000, leading its Russian practice from 1990 to 1998.

Other appointments
Mr Gruber is a Senior Independent Director.

Alexander Izosimov

Senior Independent Non-Executive Director
Appointment
Alexander Izosimov was appointed to the Board of EVRAZ plc on 28 February 2012. Having served nine years as non-executive director, and in line with the UK Corporate Governance Code’s recommendations on director independence, he will not seek re-election at the forthcoming Annual General Meeting.

Committee membership
Mr Izosimov is chairman of the Remuneration Committee. He is also a member of the Nominations Committee and the Audit Committee.

Skills and experience
Mr Izosimov has a strong track record in the retail and industrial sectors. He served as CEO of X5 Retail Group from 2006 to 2010 and as CEO of Inteco Management from 2003 to 2006. Earlier in his career, he was the head of finance and planning for Severstal’s steel division.

Other appointments
Mr Izosimov is currently Chairman of the Board of Directors of Mail.ru Group.

Sir Michael Peat

Independent Non-Executive Director
Appointment
Sir Michael Peat was appointed to the Board of EVRAZ plc on 14 October 2011. Having served nine years as non-executive director, and in line with the UK Corporate Governance Code’s recommendations on director independence, he will not seek re-election at the forthcoming Annual General Meeting.

Committee membership
Sir Michael is a member of the Audit Committee.

Skills and experience
Sir Michael is a chartered accountant with extensive experience in public service and corporate governance. He served as the UK’s First Treasury Officer of Accounts and Second Permanent Secretary at HM Treasury from 2008 to 2015. Prior to that, he was Secretary to the Lord Chancellor and Head of the Department for Constitutional Affairs from 2003 to 2007. He also served as a senior partner at KPMG, where he advised companies on financial and corporate governance matters.

Other appointments
Sir Michael is currently a Senior Independent Director and a member of the Board of Directors of Rolls-Royce Holdings plc.

Key to committee membership
N Nominations Committee
H HSE Committee
A Audit Committee
R Remuneration Committee
Chairman
Member

Requirement	Group approach and policies	Documents	Related KPIs	Related principal risks
Respect for human rights	EVRAZ’ commitments are based on internationally recognised standards and respect for all human rights. Child labour, bonded labour, human trafficking and other forms of slavery are strictly prohibited at all Group subsidiaries and their suppliers. EVRAZ rules also prohibit abusive, harassing, discriminatory, degrading or aggressive speech or conduct.	Code of Business Conduct, Transparency Statement, Human rights policy	None	None of EVRAZ’ current principal risks relates to aspects of human rights
Anti-corruption and anti-bribery	In accordance with the Group’s policies and procedures, compliance managers scrutinise tender procedures, check potential and existing business partners, vet prospective new candidates, and ensure that the principles set forth in the EVRAZ Anti-corruption Policy and Code of Business Conduct are adhered to throughout its operations.	Code of Business Conduct, EVRAZ Anti-Corruption Policy, Candidate background and criminal record checks, Conflict of interest policy, Contractor/supplier due diligence checks, EVRAZ Rules on Securities Dealings	None	None of EVRAZ’ current principal risks relate to aspects of anti-corruption and anti-bribery

Further information:
Our Approach, see pages 14-15
For a short summary of relevant anti-corruption policies, see page 257
Anti-corruption and Anti-bribery, see pages 80-83
For EVRAZ’ business model, relationships and products, see pages 4-97

EVRAZ’ Strategic Report, as set out By the order of the Board on pages 4-99 inclusive, has been reviewed and was approved by the Board of Directors on 24 February 2021.

Alexander Frolov
Chief Executive Officer
EVRAZ plc
24 February 2021

For the Group’s related risks and how they are managed, see the Principal Risks section on pages 90-95

Community Relations, see pages 74-79 Interaction with local communities in the regions of the Group’s presence during the implementation of various CSR related projects of improving the quality of life in local communities.

conditions and cyclicality, and business interruption; see pages 92, 95

EVRAZ plc
24 February 2021

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Requirement	Group approach and policies	Documents	Related KPIs	Related principal risks
Respect for human rights	EVRAZ’ commitments are based on internationally recognised standards and respect for all human rights. Child labour, bonded labour, human trafficking and other forms of slavery are strictly prohibited at all Group subsidiaries and their suppliers. EVRAZ rules also prohibit abusive, harassing, discriminatory, degrading or aggressive speech or conduct.	Code of Business Conduct, Transparency Statement, Human rights policy	None	None of EVRAZ’ current principal risks relates to aspects of human rights
Anti-corruption and anti-bribery	In accordance with the Group’s policies and procedures, compliance managers scrutinise tender procedures, check potential and existing business partners, vet prospective new candidates, and ensure that the principles set forth in the EVRAZ Anti-corruption Policy and Code of Business Conduct are adhered to throughout its operations.	Code of Business Conduct, EVRAZ Anti-Corruption Policy, Sponsorship and charity policy, Gifts and business entertainment policy, Candidate background and criminal record checks, Conflict of interest policy, Contractor/supplier due diligence checks, EVRAZ Rules on Securities Dealings	None	None of EVRAZ’ current principal risks relate to aspects of anti-corruption and anti-bribery

EVRAZ’ Strategic Report, as set out By the order of the Board on pages 4-99 inclusive, has been reviewed and was approved by the Board of Directors on 24 February 2021.

Alexander Frolov
Chief Executive Officer
EVRAZ plc
24 February 2021

For the Group’s related risks and how they are managed, see the Principal Risks section on pages 90-95

conditions and cyclicality, and business interruption; see pages 92, 95# EVRAZ plc

Annual Report & Accounts 2020

MANAGEMENT

Nikolay Ivanov
Chief Financial Officer

Alexander Frolov
Chief Executive Officer

Aleksey Ivanov
Senior Vice President, Commerce and Business Development

Alexander Kuznetsov
Vice President, Head of the Siberia Division and Performance Management

Ilya Shirokobrod
Vice President, Sales and Logistics

Alexey Soldatenkov
Vice President, Corporate Strategy

Denis Novozhenov
Vice President, Head of the Urals Division

Andrey Davydov
Vice President, Head of the Coal Division

Skip Herald
President and Chief Executive Officer, EVRAZ North America

Alexander Erenburg
Vice President, Vanadium Division

Sergey Vasiliev
Vice President, Compliance with Business Procedures and Asset Protection

Konstantin Rubin
Vice President, Health, Safety and Environment

Vsevolod Sementsov
Vice President, Human Resources

Natalia Ionova
Vice President, Information Technologies

Artem Natrusov
Vice President, Legal

Yanina Staniulenaite
Vice President, Corporate Communications

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CORPORATE GOVERNANCE REPORT

INTRODUCTION

EVRAZ is a public company limited by shares incorporated in the United Kingdom. It is a premium-listed company on the Main Market of the London Stock Exchange and is a member of the FTSE 100 Index. EVRAZ is committed to high standards of corporate governance and control.

COMPLIANCE WITH CORPORATE GOVERNANCE STANDARDS

The Group’s approach to corporate governance is based on the UK Corporate Governance Code published by the Financial Reporting Council (FRC) in July 2018 and the Listing Rules of the Financial Conduct Authority.

An explanation of how the Company has complied with the UK Corporate Governance Code, including how it has applied the principles contained therein, is set out within this Corporate Governance Report, the Strategic Report and the Directors’ Report. In particular, the following pages will be most relevant in enabling shareholders to evaluate how these principles have been applied:

Board Leadership and Company Purpose | please read at Corporate Governance Report on pages 106-112.
Division of Responsibilities | please read at Corporate Governance statement on pages 106-112.
Composition, Succession and Evaluation | please read at Nominations Committee Report on pages 124-125.
Audit, Risk and Internal Control | please read at Audit Committee Report on pages 118-123, Risk Management and Internal Control on pages 113-115 and Principal Risks and Uncertainties on pages 92-95.
Remuneration | please read at Remuneration Committee Report on pages 128-139.

During the year to 31 December 2020, EVRAZ complied with all the principles and provisions of the 2018 UK Corporate Governance Code (the Governance Code is available at www.frc.org.uk), with the following exceptions:

Provision 9: The chairman was non-independent on appointment, as he was and remains a significant shareholder, and had previously served as a CEO and chairman of the Group prior to listing in 2011. The Board considers that he brings independence of judgement to the Group’s activities, as well as extensive experience and expertise of the Group’s key markets. The Board also considers that the current Board structure provides a suitable level of protection for minority shareholders, as it operates in accordance with the Relationship Agreement currently in place (read page 143).
Provision 19: The Chairman has been in post since the IPO in October 2011 and has therefore served in excess of nine years. The Board has considered this situation and as explained in the previous comment, the Board considers that he has extensive experience and expertise of the Group’s key markets. The Board also considers that during a period of transition of Board members, his remaining in post also retains the necessary stability for the Group.
Provision 22: The Company does not operate clawback arrangements. An explanation for this non-compliance is set out in the Remuneration Report on page 130.

BOARD RESPONSIBILITIES AND ACTIVITIES

The Board and management of EVRAZ aim to pursue objectives in the best interests of the Group, its shareholders and other stakeholders, and particularly to create long-term value for shareholders.

Throughout the early stages of the pandemic, the Board was updated on a weekly basis by the management about the impact of COVID-19 on both the business and employees, as well as the steps that management was taking to ensure all necessary precautions were in place. In 2020, despite the significant operational impact of the COVID-19 pandemic, disruptions to the Board’s activity were minimal as meetings were moved to video format with little loss of efficiency.

The Board of EVRAZ is responsible for the following key aspects of governance and performance:

Financial and operational performance.
Strategic direction.
Major acquisitions and disposals.
Overall risk management.
Capital expenditure and operational budgeting.
Business planning.
Approval of internal regulations and policies.

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Generation and preservation of value

The business model and strategy of EVRAZ are presented on pages 10-13 of the Strategic Report, which describe the basis upon which the Company generates and preserves value over the long-term. The Board periodically reviews this model.

The Board and culture

The Board continues to ensure that the business’s culture is aligned with the purpose and values of the Group as detailed in pages 16-17 of the Strategic Report. The key feedback tool it uses to monitor progress in this area is the annual employee survey that EVRAZ carries out throughout the business, the details of which are described on page 72 of the Strategic Report. The Board reviews a summary of the annual survey and monitors the implementation of any necessary actions that the management undertakes.

The EVRAZ Code of Conduct establishes cultural expectations for the activities of all directors, executives, employees, contractors, suppliers and community members in relation to the Group’s business. It also encourages an environment of ethics and responsibility for the benefit of the Company’s stakeholders. The Group publishes a comprehensive Corporate Social Responsibility Report.

In early 2020, at the request of the Board, the management of EVRAZ actively focused on developing an Environmental Strategy for the Group, including a Climate Change Strategy. Following detailed discussions with senior management, EVRAZ published an updated Environmental Strategy and Climate Change Report.

The Board views corporate social responsibility as an integral part of the Group’s business and strives to address and monitor all relevant matters in this area.

The Board’s key pandemic-related discussions and decisions

The Board discussed numerous matters arising directly from the pandemic and its impact on the Company throughout 2020.

Skills and experience

Sir Michael Peat
Sir Michael Peat is a qualified chartered accountant with over 40 years’ experience. He served as Principal Private Secretary to HRH The Prince of Wales from 2002 until 2011. Prior to this, he spent nine years as the Royal Household’s Director of Finance and Property Services and then Treasurer to The Queen and Keeper of the Privy Purse. Sir Michael Peat was at KPMG from 1981 and became a partner in 1985. He left KPMG in 1993 to devote himself to his public roles. He holds an MA and MBA, and is a fellow of the Institute of Chartered Accountants in England and Wales. He was the 2018 recipient of the Institute of Chartered Accountants Outstanding Achievement Award.

Mr Gruber
Mr Gruber has extensive experience in the international metallurgical mill business and holds a diploma in mechanical engineering. He has held various management positions, including eight years as a member of the Managing Board of VOEST-Alpine Industrieanlagenbau (VAI), first as executive vice president of VAI and then as vice chairman of the Managing Board of Siemens VAI. He also chaired the boards of Metals Technologies (MT) Germany and MT Italy. Further, he has executed various consultancy projects for the steel industry and served as CEO and chairman of the Management Board of LISEC Group. He holds an MBA from INSEAD. Mr Gruber serves as chairman of the Health, Safety and Environment Committee. He is also a member of the Nominations Committee.

Mr Gerasimov
Mr Gerasimov has extensive managerial and board experience. From 2003 to 2011, he was president and CEO of VimpelCom, a leading emerging market telecommunications operator. From 1996 to 2003, he worked at Mars Inc, where he held various managerial positions, including regional president for CIS, Central Europe and Nordics, and was a member of the executive board. Prior to Mars Inc, Mr Gerasimov was a consultant with McKinsey and Co (Stockholm, London; 1991-96) and was involved in numerous projects in the transportation, mining, manufacturing and oil businesses. Until recently, Mr Gerasimov served on the boards of SKF AB, Dynasty Foundation, LM Ericsson AB and Transcom SA. He also previously served as director and chairman of the GSMA (global association of mobile operators) board of directors, and was a director of Baltika Breweries, confectionery company Sladko, and IT company Teleopti AB. Mr Gerasimov is an independent non-executive director of the Moscow Exchange and chief executive officer of DIY Video Eldorado Group. He will not seek re-election at the forthcoming Annual General Meeting.

Other appointments

Sir Michael Peat
Sir Michael Peat is chairman of CQS Management Limited and a partner in CQS (UK) LLP, chairman of GEMS MENASA Holdings Limited, a non-executive director of Arbuthnot Latham & Co Limited.

Mr Gruber
None.

Mr Gerasimov
None.

Annual report & accounts 2020

CORPORATE GOVERNANCE REPORT

INTRODUCTION

COMPLIANCE WITH CORPORATE GOVERNANCE STANDARDS

Board Leadership and Company Purpose | please read at Corporate Governance Report on pages 106-112.
Division of Responsibilities | please read at Corporate Governance statement on pages 106-112.
Composition, Succession and Evaluation | please read at Nominations Committee Report on pages 124-125.
Audit, Risk and Internal Control | please read at Audit Committee Report on pages 118-123, Risk Management and Internal Control on pages 113-115 and Principal Risks and Uncertainties on pages 92-95.
Remuneration | please read at Remuneration Committee Report on pages 128-139.

Provision 9: The chairman was non-independent on appointment, as he was and remains a significant shareholder, and had previously served as a CEO and chairman of the Group prior to listing in 2011. The Board considers that he brings independence of judgement to the Group’s activities, as well as extensive experience and expertise of the Group’s key markets. The Board also considers that the current Board structure provides a suitable level of protection for minority shareholders, as it operates in accordance with the Relationship Agreement currently in place (read page 143).
Provision 19: The Chairman has been in post since the IPO in October 2011 and has therefore served in excess of nine years. The Board has considered this situation and as explained in the previous comment, the Board considers that he has extensive experience and expertise of the Group’s key markets. The Board also considers that during a period of transition of Board members, his remaining in post also retains the necessary stability for the Group.
Provision 22: The Company does not operate clawback arrangements. An explanation for this non-compliance is set out in the Remuneration Report on page 130.

BOARD RESPONSIBILITIES AND ACTIVITIES

The Board and management of EVRAZ aim to pursue objectives in the best interests of the Group, its shareholders and other stakeholders, and particularly to create long-term value for shareholders.

The Board of EVRAZ is responsible for the following key aspects of governance and performance:

Financial and operational performance.
Strategic direction.
Major acquisitions and disposals.
Overall risk management.
Capital expenditure and operational budgeting.
Business planning.
Approval of internal regulations and policies.

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Generation and preservation of value

The Board and culture

The Board views corporate social responsibility as an integral part of the Group’s business and strives to address and monitor all relevant matters in this area.

The Board’s key pandemic-related discussions and decisions

The Board discussed numerous matters arising directly from the pandemic and its impact on the Company throughout 2020.# Shareholders
• Changing the Annual General Meeting to a closed format meeting while providing opportunities for shareholders to submit questions to the Board by email.
• Moving investor roadshows to web-based meetings.

Employees

• Introduction of numerous additional safety measures to protect people and ensure operational continuity.
• Setting up a crisis management centre, with Board of Directors receiving regular updates of the impact on the Group’s operational, commercial and financial situation.

Communities

Customers

• Setting up a crisis management centre, with Board of Directors receiving regular updates of the impact on the Group’s operational, commercial and financial situation.
• Introduction of numerous additional safety measures to protect people and ensure operational continuity.
• Introduction of numerous additional safety measures to protect people and ensure operational continuity.

Suppliers and contractors

Financial

• Reviewing the appropriateness of the going concern basis of financial reporting.
• Revisiting the assumptions, stress-test scenarios and mitigating actions used in preparing the Company’s viability statement.
• Approving two interim dividends during the year.

Annual report & accounts 2020

In addition, the Board discussed proposals to pay: an interim dividend of US$0.40 per ordinary share, totalling US$581 million, on 11 March 2020 and an interim dividend of US$0.20 per share, totalling US$291 million, on 2 October 2020. The level of distributable reserves within the balance sheet was considered at each distribution and was found to be sufficient to enable the dividend to be paid. The dividends paid were in line with the dividend policy previously agreed by the Board, which also considered the impact of COVID-19 on the Group’s going concern and cash flow position. more details, see Strategic Report on page 14-15 ). To support of the relationship agreements are being fully observed by all parties. In accordance with B.R.D.C.R. 16.2 it is confirmed that the Company has complied with the independence provisions of the relationship agreements. the Board in adopting the strategy, the Audit Committee undertook a review of the parameters that were required to be met, and the HSE Committee undertook a full review with divisional business heads before the Board reviewed and approved the strategy. As far as the Company is aware, Greenleas International Holdings Plc, Abilgale Ltd and Crosland Global Limited (or any of their associates) have complied with the independence provisions of the relationship agreements; and so far as the Company is aware, Greenleas International Holdings Plc, Abilgale Ltd and Crosland Global Limited have complied with the procurement obligations in the relationship agreements. In keeping with the requirements of the relationship agreements in place between the Company and its major shareholders, the independent non- executive directors of the Company have conducted an annual review to consider the continued good During the year, the Board adopted a revised environmental strategy and governance process (for standing of the relationship agreements and are satisfied that the terms

Principal decisions

Decision Context 2021 Business Plan and Budget

The Business Plan and Budget sets the annual targets and the costs of the necessary resources to achieve these targets. It is developed considering the Group’s overall strategy, as well as any specific challenges faced by each division and its underlying business units, including any stakeholder-related considerations. The Chief Executive Officer, supported by key members of the management team, presents the Business Plan and Budget for the Board’s challenge and approval.

Stakeholder considerations

In reviewing the Business Plan and Budget, the Board considered the potential impact that each operation and project might have on its stakeholders (employees, local communities, government and regulators, contractors and suppliers, shareholders and customers) and the environment.

Strategic actions supported by the Board

The strategic actions of the Business Plan and Budget supported by the Board to generate value for stakeholders are:
• Further HSE initiatives, which will be monitored by the HSE Committee, to improve performance as detailed in the HSE Committee Report on pages 126-127.
• Approval of investment plans to further reduce greenhouse gas emissions, supporting government regulations.
• Continuing high standards of corporate governance and adherence to regulations.
• Approval of maintenance CAPEX to enhance business efficiency, increase value and improve working conditions for staff.
• Approval of investment plans, generating new projects that provide additional employment opportunities.

Impact

The Business Plan and Budget creates a balance between current operating performance and considerations that matter to all stakeholders in the short- and long-term, such as health and safety, environmental performance and community relations. of these actions on the long-term success of the Company

Outcome

In December 2020, the Board discussed and approved the 2021 Business Plan and Budget.

Decision Context Approval of construction of EVRAZ Pueblo’s new rail plant

As part of the Group’s ongoing programme of renovating existing facilities and developing new ones to expand its product range, the Board considered an investment project to construct a new long rail mill at EVRAZ Pueblo.

Stakeholder considerations

• Enhance shareholder value by improving production efficiency and unlocking markets for new products.
• Provide modern working conditions and a better overall working environment at a state-of-the-art plant.
• Reduce greenhouse gas emissions by developing a solar farm in partnership with a local energy provider.
• Improve wastewater control.
• Consult with key customers during decision process regarding their needs for long rails, as well as their commitment to contract for the product.

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Decision Approval of construction of EVRAZ Pueblo’s new rail plant

Impact

The decision to invest demonstrates confidence in the long-term outlook for long rail products in the US market served by this new production facility, as well as the Group’s commitment to sustainable growth for the benefit of all stakeholders. of these actions on the long-term success of the Company

Strategic actions supported by the Board

The Board supported the development of the new rail mill to generate value for stakeholders by:
• Improving health and safety conditions for staff.
• Reducing greenhouse gas emissions in line with government regulations.
• Improving operational efficiency.
• Providing a product that meets customers’ needs.

Outcome

The Board decided to proceed with an investment in the new rail mill at EVRAZ Pueblo.

Decision Context Approval of Environmental Strategy

EVRAZ is aware of the impact that some of its operations have on the environment and seeks to minimise it as far as practicable. The updated strategy takes into account the latest environmental regulations and best practice.

Stakeholder considerations

• Avoid fines and production delays due to breaches of environmental regulation.
• Ensure that operations are carried out on an ethical basis.
• Improve company ethos and provide safer working conditions.
• Reduce greenhouse gas emissions.
• Improve wastewater control.
• Increase energy efficiency.

Impact

A robust environmental strategy is a key component of the Group’s ongoing development in the modern world of these actions on the long-term success of the Company and supports its commitment to sustainable growth for the benefit of all stakeholders.

Strategic actions supported by the Board

The Board supported the investment projects to generate value for stakeholders by:
• Improving health and safety conditions for staff.
• Reducing greenhouse gas emissions in line with government regulations.
• Improving operational efficiency and increasing shareholder value.
• Providing transparent tendering opportunities for national and international contractors.# EVRAZ plc

Annual Report & Accounts 2020

Strategic Report

Chairman and Chief Executive

Board meetings and composition

The Board considers that five non-executive directors (Laurie Argo, Karl Gruber, Deborah Gudgeon, Alexander Izosimov and Sir Michael Peat) are independent in character and judgement, and free from any business or other relationship that could materially interfere with the exercise of their independent judgement.

The Board determines the division of responsibilities between the chairman and the chief executive officer (CEO). This division of duties is documented in a separate document approved by the Board.

EVRAZ plc held eight scheduled Board meetings during 2020. In 2021, up to the date of this report’s publication, two Board meetings were held. One unscheduled meeting was held to discuss a significant investment proposition. Due to travel restrictions put in place amid the COVID-19 pandemic, only one meeting was held in person; the remainder were held by video conference call, in compliance with the UK Corporate Governance Code.

The chairman’s principal responsibility is the effective running of the Board, ensuring that the Board as a whole plays a full and constructive part in the development and determination of the Group’s strategy and overall commercial objectives. The Board is chaired by Alexander Abramov.

The independent non-executive directors comprise the majority (excluding the Health, Safety and Environment Committee) on and chair all Board Committees. The chief financial officer and the senior vice president for commerce and business development attended all Board meetings, with other members of senior management attending meetings by invitation to deliver presentations on the status of projects and performance of business units.

Board composition

The CEO is responsible for leading the Group’s operating performance, as well as for the day-to-day management of the Company and its subsidiaries. The Group’s CEO is Alexander Frolov.

The table on the next page sets out the attendance of each current director at scheduled EVRAZ plc Board and Board committee meetings in 2020. The CEO is supported by the executive team.

As at 31 December 2020, the Board comprised the chairman, one executive director, and seven non-executive directors, including a senior independent director. Olga Pokrovskaya, a former non-executive director, is invited to attend Board meetings in an advisory capacity and to attend Audit Committee meetings as an observer.

	Scheduled Board meetings	Unscheduled Board meeting	Board Remco	HSE	Audit	Nomco	AGM	Total number of meetings
Alexander Abramov	8/8	1/1	8/8	8/8	8/8	8/8	8/8	9
Alexander Frolov	8/8	1/1	8/8	8/8	8/8	8/8	8/8	9
Laurie Argo	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Karl Gruber	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Deborah Gudgeon	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Alexander Izosimov	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Sir Michael Peat	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Eugene Shvidler	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11
Eugene Tenenbaum	8/9	1/1	3/3	2/2	4/4	9/9	9/9	11

Due to conflicting travel arrangements between the Audit Committee and the Board meetings, L. Argo was unable to attend one Board meeting.

Boardroom diversity

EVRAZ recognises the importance of diversity both at the Board level and organisation-wide. The Group remains committed to increasing diversity throughout its global operations and takes diversity into account during each recruitment and appointment process, working to attract outstanding candidates with diverse backgrounds, skills, ideas and cultures. As stated in the CSR Report, EVRAZ sees diversity as a crucial business driver and strives to ensure that all employees’ rights receive equal protection, regardless of race, nationality, religious belief, gender or sexual orientation. People with disabilities are given full consideration both during the recruitment process and once employed, to ensure that their unique aptitudes and abilities are taken into account.

While most of the directors have been in post since the incorporation of EVRAZ plc in October 2011, the recruitment of new independent non-executive directors in recent years has strengthened the Board’s technical expertise and widened the skills base.

The Nominations Committee has commenced a process to identify suitable candidates for the role of independent non-executive director to replace those directors who will be required to stand down at the 2021 and 2022 AGMs, having considered boardroom diversity, especially in view of the need to appoint up to two new independent non-executive directors to replace those standing down having served terms of nine years. The Board hopes to be able to appoint another female director and a director who will broaden the Board’s ethnic diversity. It will, of course, balance this with appointing directors who can best serve the Company’s and shareholders’ interests by providing excellent governance and appropriate challenge, with one new director also having knowledge of operating an integrated steel business substantially based in the Russian Federation.

Board expertise

The Board has determined that, as a whole, it has the appropriate skills and experience necessary to discharge its functions. Executive and non-executive directors have the experience required to contribute meaningfully to the Board’s deliberations and resolutions. Non-executive directors assist the Board by constructively challenging and helping to develop strategy proposals.

Board performance

Board performance was deemed to be satisfactory. The outcome of the 2020 board evaluation called for: further emphasis to be placed on strategic issues, especially the impact of new technology and digital development across the sector; sustained momentum on sustainability; reconsideration of the Group’s risk profile, along with further board training on key topics.

Arising from the previous years action plan, the Board noted that its members had spent more time considering the Group’s investment proposals and their impact on other stakeholders. It had also spent a significant amount of time monitoring the implementation of the HSE system across the Group.

The results were discussed at three levels: (i) among the members of the Nominations Committee; (ii) between Sir Michael Peat (as chairman of the Nominations Committee) and Alexander Abramov (as chairman of the Board); and (iii) among the members of the Board as a whole.

For more detailed information, see the Nominations Committee Report on pages 124-125 and the CSR Report on pages 68-69.

An externally facilitated annual Board evaluation was conducted in 2020, following an internally evaluated review undertaken in 2018 and 2019.

The Company

The Company undertakes regular performance evaluations of the Board in line with the requirements of the UK Corporate Governance Code.

Induction and professional development

The chairman is responsible for ensuring that there is a properly constructed Board committees and timely induction for new directors upon joining the Board. Directors have full access to a regular supply of financial, operational, strategic and regulatory information to help them to discharge their responsibilities.

Board committees

The following principal committees support the Board in its work: the Audit Committee, the Remuneration Committee, the Nominations Committee, and the Health, Safety and Environment Committee. Each committee has written terms of reference, approved by the Board, summarising its role and responsibilities. The committees review their respective terms of reference each year and submit any recommended changes to the Board for approval. All terms of reference for the committees are available on the Group’s website: www.evraz.com.

For more detailed information, read the Nominations Committee Report on pages 124-125.

Outcome

The Board approved the Environmental Strategy during the year, which was disseminated to management and employees. For more details, see Strategic Report on page 14-15.

Decision Context

Approval of various other investment projects. The business plan for each financial year contains numerous investment projects involving sizeable capital expenditure amounts. These can be for a variety of different types of projects, including the replacement of out-of-date equipment in existing facilities, or the construction of new plants to take advantage of new market opportunities.

Stakeholder considerations

Shareholders
- Enhance production efficiency and access markets for new products, thereby improving shareholder value.
Employees
- Provide safer working conditions with a better working environment.
Environment
- Reduce greenhouse gas emissions.
- Improve wastewater control.
- Increase energy efficiency.

Impact of these actions on the long-term success of the Company

The decision to invest demonstrates confidence in the long-term outlook for iron and steel products in the markets served by these production facilities, as well as the Group’s commitment to sustainable growth for the benefit of all stakeholders.

Strategic actions supported by the Board

The Board supported the investment projects to generate value for stakeholders by:

Reducing greenhouse gas emissions in line with government regulations.
Improving operational efficiency and increasing shareholder value.
Improving working conditions for employees.
Reassuring customers that the products they purchase have been made in line with environmental regulations.

Outcome

The Board approved a number of investment projects during the year.

EVRAZ in figures

Corporate governance

Financial statements

Additional information | 110 111# Lintstock was appointed as the external evaluator, having undertaken the review previously in 2016. Lintstock has no other connection with the Company. The Company believes that the Board’s composition provides an appropriate balance of skills, knowledge and experience. The Board members comprise a number of different nationalities with a wide range of skills, capabilities and experience from a variety of business backgrounds. Biographies of the Board members are provided in the Board of Directors section. The Audit Committee consists of three non-executive directors, all independent, which complies with the Code. The Board considers that, as a whole, the committee has competence relevant to the industry sector in which the Group operates. Specifically, theodora bugeon has relevant recent financial experience. The review was carried out at the initiative and with the participation of the Company’s Nominations Committee. Questionnaires were distributed to all Board directors for their response and comment.

Annual report & accounts 2020

Board composition as at 31 December 2020

Name	Position	Committee membership	Year of tenure
Alexander Frolov	CEO	HSEC — member	9
Alexander Abramov	Chairman	NC — member	9
Eugene Shvidler	Director	None	9
Eugene Tenenbaum	Director	NC — member	9
Laurie Argo	Director	AC — member, RC — member	2
Karl Gruber	Director	HSEC — chairman, NC — member	9
Deborah Gudgeon	Director	AC — chairman, RC — member	5
Alexander Gorshkov	Director	RC — chairman, NC — member, AC — member	8
Sir Michael Peat	Senior independent director	NC — chairman, RC — member	9

Role and composition of each committee

Committee name	Function	Composition	Read on pages
Audit Committee	Audit, financial reporting, risk management and controls	All three members are independent non-executive directors	118-123
Nominations Committee	Selection and nomination of Board members	All five members are non-executive directors, of which three are independent	124-125
Remuneration Committee	Remuneration of Board members and top management	All four members are independent non-executive directors	126-127
HSE Committee	HSE issues	Two of the three members are non-executive with an independent chairman who is also a non-executive director of the Company	128-139

The members of the Health, Safety and Environment Committee at 31 December 2020 were Karl Gruber (chairman), Alexander Frolov and Olga Pokrovskaya, who has continued as a non-executive member of the HSE Committee following her cessation as a Board member of the Company on 14 March 2016. With more than 50% of EVRAZ operations based in the Russian Federation, the committee continues to value the contribution she brings in terms of her technical and regional experience.

Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 112 113

RISK MANAGEMENT AND INTERNAL CONTROL

EVRAZ maintains a comprehensive financial reporting procedures (FRP) manual detailing the Group’s internal control and risk management systems and activity. The manual was last updated in November 2020 to reflect changes in internal processes.

The Board is responsible for assessing the optimum balance of risk (risk appetite) through the alignment of business strategy and risk tolerance on an enterprise-wide basis. In addition, the Board oversees and approves risks above the Group’s defined risk appetite and reviews any significant internal control weaknesses.
EVRAZ has established a reporting process involving business unit management teams and other relevant bodies at major enterprises. Its aim is to identify, evaluate and establish management actions for risk mitigation at a regional level, as well as at the Group’s major steel and mining operations. The Risk Management Group maintains a corporate risk register representing a summary of this information.

The document was prepared in accordance with the Financial Reporting Council (FRC) Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014. The aim of the risk management process is to identify, evaluate and manage potential and actual threats to the Group’s ability to achieve its objectives.

The business management team is primarily responsible for ERM and accountable for all risks assumed in the operations.

Internal audit

Internal audit is an independent appraisal function established by the Board to evaluate the adequacy and effectiveness of controls, systems and procedures at EVRAZ, which helps to reduce business risks to an acceptable level in a cost-effective manner. The Board approved the latest version of the internal audit charter on 19 January 2020.

The internal audit function’s role in the Group is to provide an independent, objective, innovative, responsive and effective value-added internal audit service. This is achieved through a systematic and disciplined approach based on assisting management in controlling risks and monitoring compliance, as well as improving the efficiency and effectiveness of internal control systems and governance processes. Once a year, the function provides an opinion of the overall effectiveness of the internal controls in place at EVRAZ.

The EVRAZ Enterprise Risk Management (ERM) process is designed to identify, quantify and respond to these threats, as well as to monitor the Group’s prevention and mitigation system. Management maintains a risk register that encompasses both internal and external threats. The level of risk appetite approved by the Board is used to identify particular risks and uncertainties that require specific Board oversight.

In 2020, the process in relation to principal risks and uncertainties was consistent with the UK Corporate Governance Code, the FRC Guidance on the Strategic Report issued in July 2018 and the abovementioned FRC guidance issued in September 2014.

Business unit management teams and other relevant bodies are accountable to the Risk Management Group, which consists of business unit and function vice presidents. During 2020, the Group’s head of internal audit and the secretary of the Audit Committee attended all the committee’s meetings and addressed any reported deficiencies in internal control as required by the committee.

The Board has delegated primary oversight of the internal control process at EVRAZ to the Audit Committee, which discusses any major internal control findings exceeding the Board’s risk appetite. Executive management is responsible for both internal controls in place and mitigating actions related to risk management throughout the Group’s business and operations. This serves to encourage a risk-conscious business culture. The internal audit planning process starts with the Group’s strategy; includes the formal risk assessment process, consideration of the results of management’s internal control self-assessment, and the identification of management concerns based on the results of previous audits; and ends with an internal audit plan, which the Audit Committee approves.

The EVRAZ Business Security department is led by a vice president and has specific responsibility for preventing and detecting business fraud and malpractice, including fraudulent behaviour by employees, customers and suppliers. Robust EVRAZ applies the following core principles internal controls help to minimise to identifying, monitoring and managing risk the risk, and the EVRAZ Business Security throughout the organisation: department ensures that appropriate processes are in place to protect the Group’s interests.

Risks are identified, documented, assessed and monitored, and their profile is communicated to the relevant levels

Audit resources are predominantly allocated to areas of higher risk and, to the extent considered necessary, to financial and business controls and processes, with appropriate resource reservation for ad hoc and follow-up assignments.

Annual report & accounts 2020

Cost effectiveness.
HSE: health and safety.
Capital projects and expenditure.
Human resources.
Business interruption, as well as equipment and infrastructure downtime management.
Transportation, sourcing, raw materials and energy supply.
Digital effectiveness, as well as effective, efficient and continuous IT service.

In 2020, EVRAZ engaged an independent party to ensure that the internal audit function’s activities are in compliance with the requirements of the Institute of Internal Auditors (IIA), as well as the IIA’s Code of Ethics and best international practices in internal audit. The Group’s internal audit function received the highest rating in the independent review.

In 2020, internal audit projects covered the following risks of the Group:

The internal audit function at EVRAZ is structured on a regional basis, reflecting its geographic spread of operations. The internal audit function aligns common internal audit practices throughout the Group via quality assurance and improvement programmes.

Potential regulatory actions by governments.

Components of the internal control system

Component	Basis for assurance	Action in 2020	Assurance framework — principal entity-level controls to prevent and detect error or material fraud, as well as to ensure the effectiveness of operations and compliance with principal external and internal regulations
Annual self-assessment by management at all major operations of the internal control system using the EVRAZ Assurance Framework.	Review of the self-assessment by the internal audit function.	In 2020, the internal audit function reviewed self-assessment and evaluated the overall effectiveness of the governance, risk management and internal control system.	the results of management’s internal control

Deborah Gudgeon
Independent Non-Executive Director, Chairman of Audit Committee

I am pleased to present the Audit Committee Report for the year ended 31 December 2020. The emergence of COVID-19 at the beginning of the financial year impacted the committee’s work in certain ways. From March 2020, all meetings were held virtually and it was not possible to hold a meeting at one of the operations, as originally scheduled. The impact of the pandemic on all aspects of the committee’s responsibilities and work was regularly evaluated throughout the year. I would like to extend the thanks of the committee to the executive and financial management of the Group, the internal audit department and our external auditor, EY, for their continuing diligence and valued contribution to the work of the committee during this challenging year.

ROLE AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

The work of the committee is determined by its terms of reference. These were reviewed and updated in August 2020 and can be accessed at: www.evraz.com. The Audit Committee reviews the Group’s governance, risk and control environment annually, together with the risk register and risk appetite proposed by the management, before they are considered by the board. and Markets Authority Order 2014 on mandatory tendering and audit committee responsibilities. The Audit Committee minutes are tabled at Board meetings for consideration and the chairman updates the Board orally on the committee proceedings, making recommendations on areas covered by its terms of reference, if appropriate.

I confirm, on behalf of the Group, its compliance during the financial year commencing 1 January 2020 with the provisions of the Competition.

COMMITTEE MEMBERS AND ATTENDANCE

The Audit Committee members are all independent non-executive directors and, between them, have a wide range of skills and experience. Deborah Gudgeon has recent and relevant financial experience and Alexander Igosimov provides key strategic expertise. Laurie Argo has extensive commercial and financial experience in the North American market. As disclosed in the Corporate Governance report on page 110, Olga Pokrovskaya attends Audit Committee meetings by invitation, providing additional technical expertise and valuable regional knowledge. The committee met nine times during 2020 and three times in early 2021 prior to the publication of this Annual Report. Due to the COVID-19 pandemic, only two meetings were in person. Eight of these meetings were held by video conference and two by a telephone conference. The CFO and senior members of the Group’s finance function, the head of internal audit and the external auditors attend all committee meetings. Other members of the management team and internal audit function are invited to attend committee meetings as appropriate.

STAKEHOLDER ENGAGEMENT

EVRAZ uses various communication channels to ensure that its stakeholder engagement approach covers all stakeholder groups and facilitates two-way communication and feedback.

Engagement by Board members

The Board, either directly or through its committees, engages or oversees engagement with the Company’s stakeholders through a number of governance activities (which are described in more detail, along with further information about the Company’s engagement with key stakeholders, on page 136).

Engagement by management

The executive team is responsible for the day-to-day stewardship of all stakeholder relationships and its members report to the Board on the key metrics and initiatives.

Shareholders and investors

Regular Capital Markets Days
Roadshows following financial reporting announcements
Russian and international investment conferences
Site visits

Customers

Regularly monitoring customer satisfaction levels
Discussions with potential suppliers
Meetings and feedback sessions with clients and EVRAZ management
Electronic platform for suppliers
Educational programmes for contractors to ensure high level of workplace safety
Electronic platform for clients
Site visits to production assets

Suppliers and contractors

Engagement with the following stakeholder groups is primarily undertaken by management through the engagement mechanisms set out below. Key issues are reported to the Board via management’s monthly Board Report.

Discussions with potential suppliers
Meetings and feedback sessions with clients and EVRAZ management
Electronic platform for suppliers
Educational programmes for contractors to ensure high level of workplace safety
Electronic platform for clients
Site visits to production assets

Employees

Direct engagement of dedicated Board members
Development of a safety culture
Regular educational programmes to develop employees’ professional skills
Regular interaction with trade unions
Internal portal for employees
Annual employee engagement survey
Corporate newspapers
Hotline

Local communities

Implementing various social, infrastructural and environmental projects based on local communities’ needs
Regular meetings with representatives of government and regulatory authorities at federal, regional and local levels
Initiating and supporting various social, economic, educational and environmental projects
Organising social events
Supporting regional TV channels and newspapers.
Disclosure of information
Holding direct dialogues with local communities concerning the Group’s social, economic and environmental performance
Organising site visits.
Day-to-day and ad-hoc Agreements on regional socio-economic development projects.

Government and regulatory authorities

Hosting regular press conferences
Organising and participating in conferences, as well as other industry events
Supporting and initiating for populations of regions where EVRAZ operates
Organising site visits.

Media

Hosting regular press conferences
Organising and participating in conferences, as well as other industry events
Supporting regional TV channels and newspapers.

Industry organisations

Hosting regular press conferences
Organising and participating in conferences, as well as other industry events
Supporting and initiating for populations of regions where EVRAZ operates
Organising site visits.

Our goal

To build honest and supportive relationships with all stakeholders on its path towards sustainable development.

Approach to risk appetite

Risk appetite is an important part of the risk management process that serves as a measure of the risks that management is willing to accept in pursuit of value. The Board has approved a risk appetite in accordance with the risk management methodology adopted by EVRAZ. Management reassesses the risk appetite at least annually via the Risk Management Group, which reports on the analysis performed to the Audit Committee. The committee then makes recommendations to the Board regarding the level of risk appetite. The Risk Management Group and the Audit Committee last reviewed the Group’s risk profile in November 2020.

In 2020, the Group was focused on enhancing its health and safety risk management methodology, including the risk of mass quarantine of workers due to COVID-19; this work will continue in 2021. Risk appetite is considered in evaluating strategies and setting objectives within the Group’s strategic and budgeting cycle, in decision making and in developing risk management actions and methods, as well as in identifying particular risks and uncertainties that require specific Board oversight. The strategic objectives set by EVRAZ are aligned with, and risk mitigation actions are reflective of, the risk appetite approved by the Board. The Group adopts a robust approach in relation to risk (fraud, security, bribery and corruption) is assessed, defined and evaluated separately from the rest of the processes.

Objectives for 2021

Further development of the risk management system and risk management practices is planned for 2021. In 2021, in addition to continuing to implement ongoing initiatives focused on improving risk management (in HSE, equipment maintenance and repairs, IT projects and other processes), the Group plans to focus more on addressing environmental risks, which have always been a topic of focus for management and are recognised as principal risks for the Group.

Based on the results of the most recent review, management concluded that the risk-acceptance approach employed by EVRAZ had not changed and that the risk appetite remained the same as in the prior year. An appropriate recommendation regarding the level of risk management was made to the Audit Committee and to the Board on 23 January 2021. Risk appetite for some specific business processes (e.g. health and safety, environmental) is assessed.

Corporate governance

Assessment of the overall effectiveness of the governance, risk and control framework.

All major production sites were certified as having effective overall governance, risk management and internal control.

Investment project management

Effectiveness of project management and management of project risks is monitored to further improve the efficiency by an established management committee and subcommittees.
Reviewed by the internal audit function.
Effectiveness of the project management process, for example by creating a project risk register and training more than 50 project managers and project team members.

In 2020, various activities were implemented and reviewed by the internal audit function.

Operating policies and procedures

Implemented, updated and monitored by management.
Reviewed by the internal audit function.

Operating policies and procedures are updated as per the internal initiatives by the operational management and in response to recommendations from the internal audit function. The process of improving the internal regulation framework began in 2019 and continued in 2020.

Operating budgets

Approved by the Board.
Monitored by the controlling unit.
Reviewed by the internal audit function.

Operating budgets are prepared by the executive management and approved by the Board.

Annual report & accounts 2020

Annual report & accounts 2020

---# ACTIVITIES AND WORK OF THE COMMITTEE DURING 2020

During the year, key members of the executive management and Risk Management Group are invited to attend Audit Committee meetings to present on specific matters. During these, these included the CEO and the vice presidents of strategy, commerce and business development, HSE, IT, legal, human relations and the Group’s compliance officer.

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119

The Audit Committee has continued to focus on the integrity of the Group’s financial reporting, the related internal control framework and risk management, including finance, operations, regulatory compliance and fraud. These areas were comprehensively reviewed and the committee received regular updates from the Group’s financial and operational management, internal audit, compliance officer and vice president of legal affairs, as well as the external auditor. This will remain an area of focus for the Audit Committee in 2021 and beyond.

The Group’s financial reporting procedures (FRP) manual was also reviewed and updated. The effectiveness and status of the anti-corruption policy and sanctions risk compliance controls were reviewed throughout the course of the year, together with progress to meet the recommendations of the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

Ahead of the implementation of ISA 315 revised, the Audit Committee requested the external auditor to perform certain agreed procedures on the 2019 reporting process and year-end position to undertake certain of the additionally required procedures of the new standard and so provide the Committee with some assurance as to the Group’s readiness for the new standard.

The management controls and processes underpinning the going concern assumption were reviewed, challenged and benchmarked against examples of best practice. The Group’s process for evaluating a severe but plausible downside scenario over the going concern period was also considered.

On 9 June 2020, the Audit Committee reviewed the EY report and accepted the limited recommendations made by the external auditor. At the request of the Board, the Audit Committee reviewed the pro forma Viability Statement and supporting analysis, which was produced by the management and reviewed by the Risk Management Group. The Audit Committee considered the scenarios being tested in the context of the updated risk register, current operating environment and the Group’s strategy. The assumptions and mitigating actions underpinning each scenario and the capital required for the effective operation of the business were also reviewed.

The scenario testing of the Group’s resilience to a cyberattack was updated to reflect the real-world experience gained in 2020. The committee also considered the emerging risks that EVRAZ faces, primarily climate change. These risks were extensively assessed during development of the Climate Change Strategy in 2020 and found not to currently pose a critical risk to the business over the period of the viability testing. The Audit Committee will review this annually.

The committee’s continuing focus on the IT security of the Group was strengthened following the cyberattack on the North American operations in March 2020. The committee reviewed a detailed report on the attack in June 2020, together with the recommendations from Accenture in respect of the IT security architecture and emerging risks, and considered the implications for the whole business. Progress against the updated North American mitigation plan was monitored throughout the year. The risk mitigation plan for the Russian business was updated and expanded to reflect the experience in North America, emerging risks and the results of the EY assessment in November 2019. The committee recommended that a common IT governance structure be implemented across the business and welcomed the establishment of the Information Security Committee headed by the CEO. Given the significance of IT security to the Group’s risk profile and resilience, and the level of digital transformation throughout the business, the committee updated its own terms of reference and undertook a self-assessment to consider the performance of the committee.

During 2020, the committee reviewed progress on a number of ongoing projects. These included the repair and maintenance transformation project, the standardisation of the procurement contract process, as well as the project to improve inventory and product shipment controls at one of the operations. The committee also reviewed the Group’s management of working capital.

SIGNIFICANT FINANCIAL REPORTING ISSUES CONSIDERED IN 2020

The Audit Committee’s primary objective is to support the Board in ensuring the integrity of the Group’s financial statements and Annual Report, including review of:

Compliance with financial reporting standards and governance requirements.
The material financial areas in which significant accounting judgements have been made.
The clarity of disclosures.
Whether the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s performance, business model, strategy, principal risks and uncertainties.

The Audit Committee considered several financial reporting issues in relation to the interim results for HY 2020 and the financial results for the year ended 31 December 2020. These included the appropriateness of the accounting policies adopted, disclosures and management’s estimates and judgements. The committee considered papers produced by the management on the key financial reporting judgements and reviewed reports by the external auditor on the audit process for the full-year and interim results.

The critical accounting policies and substance, consistency and fairness of management estimates.

The financial statements are impacted by fluctuations in the key functional currencies of the business (primarily the Russian rouble) against the US dollar, the presentation currency of the financial statements, as set out in Note 2. As a result, the analysis of balance movements in the financial statements between reporting periods can be difficult, although the management separately reports the forex impact for key movements.

has had a limited impact on the Group’s business to date and with the signs of recovery in key markets, the committee also considered the additional stressed downside scenario and the reverse stress testing undertaken by EY. The implications of the potential coal demerger was also considered. (goodwill US$65 million, intangibles US$16 million and PPE US$153 million) and the oil country tubular goods cash generating unit, where a goodwill impairment of US$11 million has been recorded. The committee considered the management’s reassessment of demand for steel, oil and commodities in the US and Canada, which it is assumed will only partially recover in 2022, together with the continuing implications of trade barriers and the long-term outlook for these businesses, and accepted the management’s proposed impairment charges.

Following these detailed considerations, the Audit Committee resolved to recommend the going concern basis of preparation for the Financial Statements as at 31 December 2020 to the Board.

Going concern (Note 2)

EVRAZ is exposed to a wide range of risks and inherent uncertainties as set out on pages 90-95, many of which are outside the control of the Group. While the onset of the COVID-19 pandemic in early 2020 resulted in a significant fall in the demand for steel products across the world, there was a material rebound in EVRAZ’s key markets during the second half of the year. The Audit Committee reviewed management’s going concern analysis which tested three scenarios: a base case, a severe downside scenario based upon pricing close to the bottom of the range of current investment analyst forecasts; and an additional stressed downside scenario based upon the 2009 reported results of the Group, the lowest since the Group listed in 2005, which assumed prices for steel, coal and iron ore significantly below management’s current forecasts. The Committee challenged management to validate the additional stressed downside scenario given the changes in the Group’s asset base and steel capacity since 2009 and accepted the analysis produced which demonstrated that some low performing assets in South Africa, Ukraine, North America and the Czech Republic had been disposed of and replaced by more profitable operations in the Russian Federation. In addition, management tested a potential scenario in which the coal assets are demerged in the going concern period.

Recovery of deferred tax assets

Significant accounting judgements and management estimates

Given the management’s reassessment of North American demand, the Audit Committee considered the recoverability of the net deferred tax assets, most of which relate to EVRAZ North America, together with tax planning strategies available to the Group. As a result, the committee is satisfied that the deferred tax assets are recoverable.

Impairment of goodwill and non-current assets (Note 7)

The committee considered the management’s impairment assessment for the financial year in the context of the current and future trading environment for the Group, including assumptions as to the continuation of tariffs and duties in North America and their impact on the recoverable amount of the affected assets. Impairment testing was undertaken at 30 September 2020 and reassessed at 31 December 2020, when no further impairment triggers were identified.

Other matters

The potential demerger of the Group’s coal assets

Further to the Company’s announcement on 23 January 2019, management is currently considering the strategic merits of.

Annual report & accounts 2020## AUDIT COMMITTEE REPORT

The Audit Committee’s primary function is to assist the Board in fulfilling its oversight responsibilities in relation to the Group’s financial reporting, risk management and internal control systems. The Committee is responsible for monitoring the integrity of the financial statements of the Group and any formal announcements relating to its financial performance, and for reviewing and approving the Group’s financial reporting procedures, internal controls and risk management systems.

The Committee comprises three independent Non-Executive Directors and has a written Audit Committee Terms of Reference, which is reviewed annually. The Committee met four times during 2020.

The Committee is satisfied that it has complied with its Terms of Reference throughout the year.

Activities of the Audit Committee

The Committee’s activities during 2020 included:

Financial Reporting

The Committee reviewed the Group’s financial reporting procedures, internal controls, risk management systems and activities. These are documented in a comprehensive FRP manual, which was updated and reviewed by the Audit Committee in December 2020.

The Committee receives quarterly updates on whistleblowing reports, together with a bi-annual security report on the progress of follow-up investigations and resulting actions in relation to fraud and theft. Any significant whistleblowing report is reported to the committee on an ad hoc basis when it arises.

The Committee considered the accounting treatment for the consolidated coal assets and concluded that, given the uncertainties, the Coal segment should not be treated as a discontinued operation in the financial statements.

The Committee carefully considered the projected use and sources of funds for the period to June 2021, which includes scheduled loan repayments, new committed funding, free cash flow after committed capital expenditure and the dividend policy. Given the volatility of the global supply and demand environment in which EVRAZ operates and the continuing pandemic, the committee focused on the worst downside scenario and the implications for free cash flow and financial covenants.

In 2020, certain suppliers sold their accounts receivable from the Group to a bank under non-recourse factoring contracts. Trade payables subject to these arrangements are payable in 60-180 days enhancing the Group’s management of working capital. Management analysed these reverse factoring arrangements and, as they do not contain a financing element, determined that they should continue to be presented as trade payables in the financial statements. At 31 December 2020, US$188 million was outstanding and included in trade payables. The Audit Committee reviewed and agreed with this treatment.

An impairment charge of US$310 million is recorded in the financial statements for 2020. This primarily relates to the large diameter pipe business in Canada, where a charge of US$234 million is recognised. The recoverable amount of all cash generating units tested in 2020 were determined by their value-in-use. In 2019, the recoverable amount for large diameter pipes was determined on the basis of fair value less cost of disposal, as the management considered that it provided a more reliable result and could be compared to a recent relevant open market transaction. The relative weakness of the rouble means that the carrying value of Russian cash-generating units remains low in US dollar terms; but they remain largely unchallenged by value-in-use comparisons, even if the pricing outlook is assumed to deteriorate.

The Committee discussed the Annual Report messages at an early stage to ensure a consistent message in both the narrative and financial reporting. Regular meetings were held to review the draft Annual Report and for the management and committee members to provide comments, and detailed reviews of the appropriate draft sections were undertaken by the relevant directors and external advisers. In particular, the committee considered whether the description of the business, principal risks and uncertainties, strategy and objectives were consistent with the understanding of the Board, and whether the controls over the consistency and accuracy of the information presented in the Annual Report are robust. Taking into account the disclosure implications of the issues discussed in this report, the committee recommended to the Board that, taken as a whole, it considers the Annual Report to be fair, balanced and understandable. The Audit Committee recommended approval of the Group’s 2020 Consolidated Financial Statements by the Board. Both recommendations were accepted by the Board.

Fair, balanced and understandable

In considering whether the Annual Report is fair, balanced and understandable, the committee reviewed the information it had received, discussions held with the management throughout the year and the preparation process adopted. The management agreed the key overall messages of the Annual Report at an early stage to ensure a consistent message in both the narrative and financial reporting.

Risk Management and Internal Control

This should be read in conjunction with the Risk Management and Internal Control section on pages 112-115. The risk profile was reviewed and updated in July 2020 to incorporate the effects of COVID-19 and the Group’s response. The Risk Management Group and the Audit Committee further reviewed the Group’s risk profile in November 2020 and finalised the assessment in January 2021. The assessment includes the Risk Management Group’s recommendation on the level of risk appetite of the Group and how that appetite is applied to strategic and operational business decisions. This was reviewed by the Audit Committee, along with the draft Statement of Principal Risks and Uncertainties to be included in the Annual Report, prior to the Board’s consideration.

Internal audit findings on control issues that exceed the Group’s risk appetite are reported to the Board by the Audit Committee and followed up by the Group’s Management Committee. Progress on the timely and effective resolution of issues is monitored regularly by the committee. EVRAZ has an integrated approach to risk management to ensure that the review and consideration of current and emerging risks inform the management of the business at all levels, the design of internal controls and the internal audit process.

The mitigation of health and safety risks across the business continued to be an area of focus during 2020. The committee reviewed reports from both internal audit and the industrial safety team, in addition to regular updates from the management. Following the cyberattack at EVRAZ North America in March 2020, the committee was regularly updated on the deficiencies exposed by the attack, the mitigation plan developed by the management and progress against this plan. The Audit Committee also continued to review information security risks across the business by way of updated annual assessments and consideration of initiatives to mitigate the evolving risk environment. Progress on projects to automate payment processes and to standardise procurement were also considered. Other areas reviewed were the repair and maintenance transformation project across the Russian assets, as well as the ongoing project to optimise product inventory and shipment control at one of the plants. The Audit Committee considered whether any of these matters had implications for the risk and control environment of the Group.

Internal audit evaluates the overall effectiveness of the Group’s governance, risk and control environment annually and this is considered by the Risk Management Group and the Audit Committee. The chairman of the Audit Committee tables the internal audit report assessment of the governance, risk and control environment with the Board.

The Audit Committee monitors the internal control environment throughout the year and engages with the executive management to ensure the resolution of any deficiencies identified by internal audit.

Internal Audit

The Audit Committee receives quarterly internal audit reports detailing significant findings, progress on the timely and effective resolution of outstanding findings, the status of ad hoc projects and any revisions to the current year audit plan. Overall, the committee considers the current internal audit resource to be adequate for the internal control and risk review and updated in January 2018. An annual assessment of the effectiveness, independence and quality of the internal audit function by committee members, the management and the external auditor was undertaken and was again found to be satisfactory. Deloitte undertook an external assessment of internal audit in Russia, the CIS and Europe in 2020 and found that the function fully complies with internal audit standards with no significant findings.

Other Matters

UKBA Anti-corruption training is online

During 2020, the Group extended its policies relating to anti-corruption through the addition of policies relating to conflict of interest situations and charity and sponsorship, as set out on page 80-83. Using the updated framework for monitoring compliance with EVRAZ’ anti-corruption policies and identifying risk, compliance during 2020 was tested and the results reported to the Audit Committee in February 2021. The testing indicated further progress in reducing risk. In 2020, a total of 2,200 managers completed the course developed by Thomson Reuters. In addition, several bespoke training modules were developed in-house by the EVRAZ compliance team. This approach will be developed further in 2021 to create a total internal programme covering anti-corruption, significantly extending the capacity to provide both initial and refresher training across the Group.

Sanctions compliance controls

The committee continued to monitor compliance with the current sanctions regime during 2020, including the control processes, procedures and reporting framework. The implications of the United Kingdom’s departure from the European Union upon the sanctions regime is currently under investigation and will be reviewed by the Audit Committee in 2021, along with any other changes.

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121# CORPORATE GOVERNANCE REPORT

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is responsible for monitoring the effectiveness and independence of the internal and external auditors and for overseeing the financial reporting process.

INTERNAL AUDIT

The internal audit plan for 2021 was reviewed by the Audit Committee and revisions proposed to reflect the updated risk profile of the business and the continuing pandemic, as well as to prioritise management assurance requirements. The Audit Committee reviewed the Internal Audit Charter in January 2021 and concluded that no changes were required. The key performance indicators for the internal audit function were also reviewed and accepted by the Audit Committee.

EXTERNAL AUDIT

The Audit Committee is responsible for monitoring the ongoing effectiveness and independence of the external auditor, as well as making recommendations to the Board on the re-appointment of the external auditor.

Effectiveness and Independence

The Audit Committee has an established framework through which it monitors the effectiveness, independence, objectivity and compliance of the external auditor with ethical, professional and regulatory requirements. These include:

Review and approval of the external audit plan for the interim review and year-end audit, including consideration of the audit scope, key audit risks, audit materiality and compliance with best practice.
Review and approval of the external auditor’s engagement letter.
Review of the FRC’s annual Quality Inspection Report of July 2020 and the EY response.
Consideration of EY’s reports on the interim review, annual report and representation letters.
Review of the EY management letter on the 2019 audit, consideration of the management’s response and proposed actions.

The committee chairman also had regular virtual meetings with the Senior Statutory Auditor outside of committee meetings. During 2020, the external auditor confirmed that these policies and processes were appropriate.

Engagement of the external auditor for non-audit services is managed in accordance with the Group’s policy, which can be found on the website www.evraz.com. This policy identifies a range of non-audit services, which are prohibited on the basis that they might compromise the independence of the external auditor. It also establishes threshold limits for the level of non-audit fees relative to audit fees and authorisation processes for the approval of fees.

During 2020, non-audit fees totalled US$521,000 and included US$465,000 in respect of the interim review (in 2019, the total was US$619,000, including US$543,000 in respect of the interim review). The balance in 2020 included US$39,000 in respect of the Group’s Sustainability Report and US$14,000 provided by EY to the management in respect of the provision of verification services for a financing facility. Non-audit fees were 19% of the 2020 audit fee of US$2.8 million, compared to 40% of the audit fee in 2019. Irrespective of the prior approval of the CFO and Audit Committee chairman, all fees are reported to the Audit Committee for noting and comment.

The committee is updated on the key risk areas throughout the audit process by both the external auditor and the management, providing transparency and allowing the committee to assess the assumptions underpinning each position, as well as the robustness and level of the challenge from both EY in 2016, the committee recommended the re-appointment of Ernst & Young LLP (EY) as external auditor for the years ended 31 December 2017 and 2018. After consideration of the UK Corporate Governance Code, EU legislation on audit regulation and the performance of EY, the committee recommended in 2019 that, subject to the agreement of appropriate terms, a further tender be deferred until the year ended 31 December 2021, with the process being undertaken in the summer of 2020 to allow for an orderly and effective rotation. Given the exigencies of the COVID-19 pandemic and travel restrictions, the committee determined that a fair and effective tender process could not be undertaken in 2020 and that the tender should be further deferred until these criteria could be met. The committee will monitor the situation during 2021 to determine the most appropriate time to reschedule the tender process. The latest regulatory guidance, the terms agreed with EY in respect of the year ended 31 December 2021 and the performance of EY were all considered by the committee in reaching this decision. Although the Audit Committee has not been able to meet with the external auditor in person since February 2020 due to COVID-19, there has been a regular virtual dialogue without the management to consider the appropriateness of the Group’s accounting policies and audit process. The committee continues to consider EY to be effective and independent in its role as auditor and has provided the Board with its recommendation to the shareholders that EY be re-appointed as external auditor for the year ended 31 December 2021.

Re-appointment of the external auditor

Following a tender process by EY’s digital approach, the involvement of forensic specialists in the identification and response to fraud risks, the high degree of continuity in the group audit team and coordinated efforts from both management and the external auditor. The Audit Committee and members of the Audit Committee completed a questionnaire to assess the effectiveness and independence of the 2019 external audit process during 2020, which was found to be satisfactory. The committee discussed the key audit matters identified by EY in their 2019 report, as well as certain other audit areas, the quality of communication with the Audit Committee and matters related to planning, completion, the report with the external audit team, reviewed the actions proposed by EY to remedy the matters raised by the AQR and was satisfied that the deficiencies identified were being addressed. The Financial Reporting Council intend to publish the inspection report in 2021, after the forthcoming Consultation Document on the government’s approach to reform of corporate reporting and audit. At the request of the committee, the external auditor provided a detailed assessment of the impact of COVID-19 on their audit approach in 2020, particularly with regard to significant risks and fraud risks. The assessment concluded that the requirement to undertake engagement with the external auditor to determine the implications of recommendations on the EVRAZ audit process both in current and future years. some work remotely was mitigated by EY’s ongoing commitment to quality and the provision of sufficient documentation in audit files to evidence certain assumptions and procedures relating to some key audit matters. The review scope included and shared with the chairman of the Audit Committee. The AQR found that only limited improvements in the audit were required, primarily relating to the provision of sufficient documentation in audit files to evidence certain assumptions and procedures relating to some key audit matters. The committee discussed the key audit matters identified by EY in their 2019 report, as well as certain other audit areas, the quality of communication with the Audit Committee and matters related to planning, completion, the report with the external audit team, reviewed the actions proposed by EY to remedy the matters raised by the AQR and was satisfied that the deficiencies identified were being addressed. The Financial Reporting Council intend to publish the inspection report in 2022, after the forthcoming Consultation ethics and quality control. The report was completed in November 2020 During 2020, the Financial Reporting Council Audit Quality Review (AQR) team undertook a review of EY’s audit of the financial statements of EVRAZ for the year ended 31 December 2019. As part of this review, the AQR team interviewed the chairman of the Audit Committee. The review scope included and shared with the chairman of the Audit Committee. The AQR found that only limited improvements in the audit were required, primarily relating to the provision of sufficient documentation in audit files to evidence certain assumptions and procedures relating to some key audit matters. The committee discussed Document on the government’s approach to reform of corporate reporting and audit. At the request of the committee, the external auditor provided a detailed assessment of the impact of COVID-19 on their audit approach in 2020, Meet EVRAZ EVRAZ in figures Strategic report Corporate governance Financial statements Additional information | 122 123 particularity with regard to significant risks and fraud risks. The assessment concluded that the requirement to undertake engagement with the external Re-appointment auditor to determine the implications of recommendations on the EVRAZ audit process both in current and future years. of the external auditor some work remotely was mitigated Following a tender process by EY’s digital approach, the involvement of forensic specialists in the identification and response to fraud risks, the high degree of continuity in the group audit team and coordinated efforts from both EY in 2016, the committee recommended the re-appointment of Ernst & Young LLP (EY) as external auditor for the years ended 31 December 2017 and 2018. After consideration of the UK Corporate The management and members of the Audit Committee completed a questionnaire to assess the effectiveness and independence of the 2019 external and the management. The Audit Committee audit process during 2020, which was found Governance Code, EU legislation reviewed and accepted the assessment of the external auditor. to be satisfactory. on audit regulation and the performance of EY, the committee recommended in 2019 that, subject to the agreement of appropriate terms, a further tender be deferred until the year ended 31 December 2021, with the process being undertaken in the summer of 2020 to allow for an orderly and effective rotation. Given the exigencies of the COVID-19 pandemic and travel restrictions, the committee determined that a fair and effective tender process could not be undertaken in 2020 and that the tender should be further deferred until these criteria could be met. The committee will monitor the situation during 2021 to determine the most appropriate time to reschedule the tender process. The latest regulatory guidance, the terms agreed with EY in respect of the year ended 31 December 2021 and the performance of EY were all considered by the committee in reaching this decision. Although the Audit Committee has not been able to meet with the external auditor in person since February 2020 due to COVID-19, there has been a regular virtual dialogue without the management to consider the appropriateness of the Group’s accounting policies and audit process. During 2020, the external auditor confirmed that these policies and processes were appropriate. The committee chairman also had regular virtual meetings with the Senior Statutory Auditor outside of committee meetings. Engagement of the external auditor for non-audit services is managed in accordance with the Group’s policy, which can be found on the website www.evraz.com. This policy identifies a range of non-audit services, which are prohibited on the basis that they might compromise the independence of the external auditor. It also establishes threshold limits for the level of non-audit fees relative to audit fees and authorisation processes for the approval of fees. EY was appointed as external auditor of EVRAZ plc in 2011. The current audit engagement partner, Steve Dobson, assumed the role for the year ended 31 December 2016 and will step down following the conclusion of the audit for the year ended 31 December 2020 and be replaced by Danny Trotman. The committee is updated on the key risk areas throughout the audit process by both the external auditor and the management, providing transparency and allowing the committee to assess the assumptions underpinning each position, as well The Audit Committee continues to consider EY to be effective and independent in its role as auditor and has provided the Board with its recommendation to the shareholders that EY be re-appointed as external auditor for the year ended 31 December 2021. as the robustness and level of the challenge Sustainability Report and US$14,000 provided by EY to the management in arriving at an agreed position. Non-audit fees were 19% of the 2020 audit fee of US$2.8 million, compared to 40% of the audit fee in 2019. Irrespective of the prior approval of the CFO and Audit Committee chairman, all fees are reported to the Audit Committee for noting and comment. The committee has continued to monitor the enquiries into the independence of audit firms, the effectiveness of the audit process during 2020 and the EY response. There continues to be a constructive Annual report & accounts 2020

NOMINATIONS COMMITTEE REPORT

Sir Michael Peat
Senior Independent Non-Executive Director, Chairman of Nominations Committee

The Nominations Committee has continued to review developments in corporate governance and to ensure that the Group adheres to best practice. It monitors the Board’s composition to ensure that it remains appropriate for the Company. With two of the five independent non-executive directors needing to retire at the 2021 annual general meeting having completed nine years on the Board, a search process has commenced. Currently, two of the Board’s nine members are female, which is below the Hampton-Alexander review recommended level. This will be taken into account when the next director appointment is made; however, all appointments will be made on the basis of merit.

The Board delegates the Nominations Committee’s role and responsibilities, which are set out in the written terms of reference: https://www.evraz.com/en-company/governance/policies/terms-of-reference

ROLE

The Nominations Committee is responsible for making recommendations to the Board on the structure, size and composition of the Board and its committees. It also oversees succession planning for directors and senior management.

COMMITTEE MEMBERS AND ATTENDANCE

The Nominations Committee members at 31 December 2020 were Sir Michael Peat, Alexander Iosifov, Earl Brummer, Alexander Abramov and Eugene Shvidler. Sir Michael Peat served as the chairman of the Nominations Committee throughout the year. Three of the five committee members were independent non-executive directors. The CEO attended all meetings and the company secretary acted as the Committee’s secretary. The Committee met on three occasions during 2020. As reported on page 110, all members were in attendance for all meetings.

ACTIVITY DURING 2020

During 2020, the Nomination Committee considered the following matters.

Board and committee composition

EVRAZ had benefited from having a stable board and a group of people who interact well.

Succession planning

The Committee also paid close attention to senior management succession. Two of the five independent non-executive directors are due to retire at the 2021 or 2022 AGMs. The search for their replacements commenced in 2020.# EVRAZ

Strategic report

Corporate governance

The Board’s Nominations Committee is responsible for leading the process for Board appointments and for managing succession planning. It also plays a key role in ensuring that the Board has the necessary mix of skills and experience to perform its duties.

The Nominations Committee agreed that its size and the committees were appropriate for the Group’s succession planning for the independent. The Committee was engaged with the Spencer Stuart Partnership as an external search consultancy to assist with the recruitment of two independent non-executive directors ongoing needs. The Committee determined that the Board represented a good mix of skills and experience. It also found that non-executive directors, in the context of length of service, three of the five independent non-executive directors to join the Board during 2020. The Spencer Stuart Partnership has no other contractual relationships with the Group. The Committee considered the outcome of the report and prepared an action plan for the Board to review and agree. The plan reflected continuing improvements to the Board processes, information flow and induction.

Independence of non-executive directors

The Nominations Committee reviewed the independent status of the non-executive directors based on the provisions in the UK Corporate Governance Code. It confirmed the appropriateness of the independent status of each of the independent non-executive directors.

Board performance evaluation

In 2020, as required by the UK Corporate Governance code, the Company undertook a Board performance evaluation using an external facilitator, Lintstock LLP. Following the review’s conclusion, the outcome of the review and the action plan are described in the Corporate Governance section on page 111.

PERFORMANCE OF CHAIRMAN AND INDIVIDUAL DIRECTORS

The senior independent non-executive director sought views from all directors about the performance and contribution of the chairman. The conclusions of this review were considered by the independent non-executive directors at a meeting on 19 February 2021.

The Committee believes his continuing as chairman is in the Company’s best interest. In addition, during a period of transition of board members having the same chairman helps with the Board’s continuity and stability. The Committee therefore, with the chairman recusing himself, recommended to the Board that he be put forward for re-appointment at the 2021 AGM.

The review concluded, as previously, that the chairman continues to make an important contribution to the Group, including through his industry knowledge, experience and contacts. It also noted that the chairman was not independent on appointment as required by Provision 9 of the UK Corporate Governance Code. However, it found that in view of his experience and knowledge, his independence of judgement was not considered to be impaired.

The Nominations Committee and the Board are committed to meeting best practice standards in gender and ethnic diversity. While the nature of the steel and mining industries makes this more challenging, it does not diminish the Committee’s and the Board’s commitment. In 2020, the Committee discussed Board diversity amid the search for two new independent non-executive directors to replace those retiring after having served their nine year terms. The Board hopes to be able to appoint another female director and a director who will broaden the Board’s ethnic diversity. It will, of course, balance this with appointing directors who can best serve the Company’s and shareholders’ interests by providing excellent governance and appropriate challenge. It is also important for one of the new directors to have knowledge of operating an integrated steel business substantially based in the Russian Federation.

The chairman of the Group and the chairman of the Nominations Committee discussed the performance of the individual directors, including time available to devote to the Group’s business. They noted no concerns and determined that no independent non-executive director had a significant number of roles.

Diversity policy

The Board’s diversity policy is to have Board membership that reflects the international nature of the Group’s operations and includes at least two women as board members. The Committee continues to review and monitor the Group’s performance against its diversity policy, including aspects such as age, gender and educational and professional backgrounds. More information about diversity is disclosed in the CSR report on page 69.

In addition, the review noted that the chairman has been in his post since the IPO in October 2011. He has therefore served in excess of nine years, longer than the limit suggested by Provision 19 of the Code. The Nominations Committee has considered this situation and, as described above, values his extensive experience and expertise of the Group’s key markets and of the steel sector. The Committee believes his continuing as chairman is in the Company’s best interest.

The Board currently meets these criteria.

2021 PRIORITIES

The Nominations Committee will continue to fulfil its general responsibilities with particular emphasis on compliance with the UK Corporate Governance Code, Board diversity and succession planning. The Committee will conclude a search to replace those independent non-executive directors who will stand down at the 2021 AGM after serving for nine years. In addition, the Committee will continue to consider development and succession planning for senior management.

HEALTH, SAFETY AND ENVIRONMENT COMMITTEE

In 2020, EVRAZ concentrated its health, safety and environment efforts on implementing a new approach to safety culture improvement by engaging employees in the risk identification and mitigation process. The Group also focused on responding to the COVID-19 pandemic by ensuring safe working conditions for employees, as well as supporting medical institutions and local communities. These efforts led to a considerable 22% improvement in the lost-time injury frequency rate and reduced the number of fatalities by more than two-fold. Despite these achievements, five tragic fatalities of our employees occurred during the past year.

During the reporting period, EVRAZ laid a solid foundation for improving its environmental performance over the next 10 years. This included assessing climate risks, applying best environmental practices, considering stakeholder expectations and developing an ambitious Environmental Strategy. The Group believes that this is the optimal approach to improve its safety and environmental performance in the future.

Role and responsibilities

The Health, Safety and Environment (HSE) Committee reports to the Board of Directors on matters concerning employee wellbeing and occupational safety, as well as protecting the environment and local communities where EVRAZ operates. It receives monthly HSE updates and provides a quarterly report to the Board, and its tasks include:

Assessing the effects of the Group’s HSE initiatives on key stakeholder groups, such as employees and local residents, as well as their reputational impact.
Liaising between management and the Board when there have been fatalities or serious incidents in the workplace, including to ensure that remedial action is implemented effectively.
Reviewing HSE strategy, industrial safety risk assessment.
Progress of health and safety initiatives.
Environmental risk assessment.

In 2020, the committee held three meetings: regular meetings on 4 February and 19 July, as well as one additional meeting on 22 October to review the Risk Management Project implementation and Environmental Strategy development process. All committee meetings had a necessary quorum and were convened as required. The meetings included reviews of current issues and HSE initiatives at the divisional level.

Activities during 2020

Throughout the year, the committee applied the following criteria to review the Group’s HSE performance:

Fatal incidents.
Lost-time injuries (LTIs), calculated as the number of injuries resulting in lost time per 1 million hours worked.
Lost-time injury frequency rate (LTIFR), calculated as the number of injuries resulting in lost time per 1 million hours worked.
Enforcement of cardinal safety rules.
Material environmental incidents and preventative measures.
Environmental risk assessment.

The committee applies the following criteria to evaluate the Group’s environmental performance:

Key air emissions, including nitrogen oxides (NOx), sulphur oxides (SOx), dust and volatile organic compounds.
Non-mining waste and by-product generation, recycling and re-use.
Fresh water intake and water management aspects.
Non-compliance related environmental levies (taxes) and penalties.
Environmental commitments and liabilities.
Major environmental litigation and claims.
Asset coverage with environmental permits/licenses.
Public complaints.

Below is a summary of the HSE Committee’s performance of its duties in 2020.

Committee members and attendance

As of 31 December 2020, the members of the HSE Committee included:

Member	Role
Karl Gruber	Independent Non-Executive Director
	Chairman of Health, Safety and Environment Committee
Alexander Frolov	Independent Non-Executive Director
Olga Pokrovskaya	Independent Non-Executive Director

In the aftermath of every fatality, severe injury and incident involving significant damage to property at EVRAZ, the HSE Committee conducts an investigation to determine the root cause, as well as to establish courses of remedial action. This involves recording a detailed description of the scene, the sequence of events, root cause analysis and corrective measures implemented.

monitoring pertinent parts of any independent operational audits and making recommendations for action or improvement as deemed necessary.

The report was published in November 2020 and demonstrates how the Group will manage the climate risks and presents the results of conducted climate risks analysis, presented in the first EVRAZ Climate Change Report, which was developed in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures.# REMUNERATION REPORT

Alexander Izosimov

Independent Non-Executive Director, Chairman of the Remuneration Committee

I am pleased to present EVRAZ’ annual report on directors’ remuneration and to confirm that the committee has taken its decisions fully in line with the shareholder-approved policy. This policy is designed to help deliver the Group’s sustainable business objectives and maximise long-term returns to shareholders. I am pleased to report our new remuneration policy was confirmed at the 2020 AGM with 95.9% approval.

INTRODUCTION

This report has been prepared in accordance with the relevant UK company laws and regulations (the “Regulations”). It also meets the relevant requirements of the Financial Conduct Authority’s Listing Rules and describes how the Board has applied the principles of good governance as set out in the 2018 UK Corporate Governance Code (the “Code”).

This policy is broadly the same as the previous version as, following a review of the CEO against predetermined KPIs and targets as well as the overall performance of the Group and concluded that the CEO’s annual bonus payout for 2020 should be 61% of the maximum. This assessment included a review of the performance of the business according to ESG parameters and positive developments achieved during the year that set the business up for future improvements. Despite global uncertainty and the negative impact on world economies caused by the COVID-19 pandemic, the performance of the Group has been strong from both operational and financial perspectives, meeting most established targets and showing good progress on strategic projects.

During the year, the Group continued to increase its focus on health and safety, placing paramount importance on measures aimed to improve the safety culture, which led to significant improvements in this area.

This report contains both auditable and non-auditable information. The information subject to audit by the Group’s auditors, Ernst & Young LLP, is set out in the Annual Remuneration Report and has been identified accordingly.

The second part of the report, the Annual Remuneration Report, sets out details of remuneration paid in 2020 and how the Group intends to apply its Remuneration Policy in 2021. This section will be put to an advisory shareholder vote at the forthcoming AGM.

Directors’ remuneration policy

Key decisions taken during the year

The current Remuneration Policy was approved by shareholders at the Annual General Meeting (AGM) in June 2020. The Regulations require that shareholders formally approve the policy every three years and therefore the next occasion will be at the AGM in 2023.

The committee operated under its terms of reference (as described on page 139) without conflicts of interest and having sought advice to determine the future policy.

Link with business strategy

EVRAZ’ strategic priorities define the selection of KPIs for the CEO. For 2020, the following five indicators, each with an equal weighting of 20%, were considered when determining the CEO’s annual bonus: LTIFR, EBITDA, Free Cash Flow (adjusted), Cash Cost Index and the committee’s assessment of overall performance against strategic objectives. These strategic priorities are reflected in the Group’s approach to executive remuneration. A large proportion of the CEO’s remuneration is linked to performance through the annual bonus.

The determination of the annual bonus is based on the Group’s key quantitative financial, operational and strategic measures to ensure focus is spread across the key aspects of Group’s performance and strategy. The exact KPIs are specific and focus on deliverables to support the Group’s strategy.

Through an ongoing dialogue with management, the committee maintained a thorough understanding of remuneration arrangements across the Group and, under its amended terms of reference, approved the remuneration of the senior executives operating immediately under the CEO.

In line with its commitment to good corporate governance, the committee will continue to monitor investors’ views, developments in best practices and market trends on executive remuneration. These will be considered when deciding on executive remuneration at EVRAZ, in order to ensure that its Remuneration Policy remains appropriate in the context of business performance and strategy.

Further details can be found on pages 134-135.

Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 128 129

HSE audit review

For more details on HSE issues, see the CSR Report on pages 56-67

During the reporting period, the Group’s operations underwent compliance inspections of state supervisory agencies and internal HSE auditors, and the committee reviewed:
* The HQ Industrial Safety Department’s audits of processes and structural units at EVRAZ facilities.
* The environmental risks identified via the HQ Environmental Management Directorate’s internal audit and risk assessment process.
* The Internal Audit Department’s audits of the HSE function.
* External environmental inspections carried out by environmental regulators, as well as the implementation of remedial action.

In 2020, the committee also reviewed new environmental metrics to measure the implementation of the Environmental Strategy. The committee’s members approved the EVRAZ Environmental Strategy and agreed that it sets ambitious environmental goals that meet the expectations of regulators, society and investors. To ensure the transparency of measurements, the Group will introduce online monitoring of sources of controlled emissions at metallurgical plants.

HSE strategy review

In 2020, the HSE Committee conducted three reviews of the Risk Management Project, a new corporate HSE initiative. The project methodology consists of a set of existing, known HSE tools and best practices, which were initially tested during 2019. Additionally, the project’s approach fosters more intensive interaction among workers and their supervisors by means of health and safety training, safety conversations and using the motivational tools applied within the EVRAZ Business System.

The committee’s members reviewed the implementation of the new risk management tools, training programme and facilitation based on risk hunting. The next stage of the project will be related to revision of the health and safety management system and auditing the processes. In addition, the committee supported the divisional management’s efforts in the following HSE initiatives, finding that the priorities are generally on track:
* Health and safety initiatives, such as the implementation of a lockout-tagout (LOTO) system, review of contractor management requirements and mine safety programmes.
* Promoting a responsible attitude towards safety at work and home.

During the year, the committee reviewed COVID-19 statistics and measures to ensure safe working conditions for employees, as well as to support medical and preschool institutions in local communities where the Group operates.

Community relations performance

In 2020, the HSE Committee reviewed the Group’s CSR events, as well as an update on social programmes aimed at:
* Improving the quality of life in local communities.
* Developing infrastructure, sport, educational and cultural programmes.
* Helping children with special needs.
* Caring for the environment.

HSE regulatory changes

In 2020, the HSE Committee evaluated the risks and opportunities related to the introduction of new regulation. Over the reporting period, EVRAZ reviewed drafts of HSE-related legislation for the Russian Steel Association’s HSE Committee, helping the steel industry to form positions in various areas, including:
* EU carbon border tax regulation.
* Regulation of greenhouse gases in Russia.
* Integrated environmental permits in Russia.
* On-line monitoring requirements for air emissions and water discharges.
* Air emission quotation systems in Novokuznetsk and Nizhny Tagil.
* A new state decree on tariff setting rules for municipal water treatment services in Russia.

In addition, the committee reviewed the results of the annual reputation audit, engaging businesses, clients, media, government representatives and local communities. The efforts that EVRAZ undertook to build sustainable partnerships with key stakeholders were rated as satisfactory. The Group’s reputation index shows sustainably high performance over the last three years. The HSE Committee acknowledges the risks involved and recommended a proactive approach in alliance with the business community and steel producers. The committee also recommended to incorporate those issues into:
* Environmental programmes, including air emission, water consumption and waste management initiatives.

During the year, the HSE Committee discussed the Group’s Environmental Strategy and Climate Change Strategy after reviewing the matter at the request of the Board of Directors. The committee reviewed scenario analysis results, identified climate risks and opportunities, as well as a map with climate change risks relevant for EVRAZ. The results of this process were the Environmental Strategy.

Annual report & accounts 2020# POLICY REPORT

Shareholder approval was received at the 2020 AGM for the updated policy (outlined on pages 130-133).

The Remuneration Policy’s primary objectives are to attract, retain and reward talented staff and management by offering compensation that is competitive within the industry, motivates management to achieve business strategic priorities align to overall reward at EVRAZ CEO KPIs Weighting Sustainable development EVRAZ Business System Debt management and stable Prudent CAPEX Retention of low- cost position Development of product portfolio dividends and customer base LTIFR 20% 20% 20% 20% 20% X X X X X X X EBITDA X X X X X X X X X X X X Aꢀꢝusteꢀ FCF Cash Cost Index Strategic ꢦꢏꢝectives X Annual report & accounts 2020 POLICY REPORT Shareholder approval was received at the 2020 AGM for the updated policy (outlined on pages 130-133). high level of performance and aligns the interests of management with those of shareholders. does not operate clawback arrangements on directors’ remuneration on the basis that such arrangements would not be enforceable under the Russian Labour Code. The ꣁommittee will keep this under review and should the Russian Labour Code change, it will revisit the inclusion of such provisions in the Group’s variable remuneration plans in order to comply with the 2018 UK Corporate Governance Code. ꢙꢁe Remuneration ꢴolicꢕꢅs primarꢕ oꢏꢝectives are to attractꢡ retain anꢀ reꢇarꢀ talenteꢀ staꢢ anꢀ management ꢏꢕ oꢢering compensation that is competitive within the industry, motivates management to achieve ꢙꢁe CEꢦꢅs incentive arrangements are suꢏꢝect to “malus”, under which the ꣁommittee maꢕ aꢀꢝust ꢏonus paꢕments ꢀoꢇnꢇarꢀs to reꢬect tꢁe ꢨroupꢅs overall perꢂormanceꢡ including the safety of underlying practices tꢁe ꢨroupꢅs ꢏusiness oꢏꢝectivesꢡ encourages a and resulting performance. The ꣁommittee Remuneration Policy Element Purpose and link to strategy Operation Maximum potential value Performance metrics Executive director Base salary Provides a level of base pay Normally reviewed annually, Generally, the maximum None to reꢬect inꢀiviꢀual eꢃperience considering individual increase per year and role to attract and retain high and market conditions, will be in line calibre talent. incluꢀingꢜ siꢠe anꢀ nature of the role; relevant market pay levels; individual with the overall level of increases within the Group. experience and pay However, there increases for employees across the Group. For the current CEO, base salary incorporates a director’s fee (paid to all directors of the Group is no overall maximum opportunity as increases may be made above this level at the ꣁommittee’s discretion, to take account of individual circumstances for participation in the work such as increases in scope of the Board committees anꢀ ꢱoarꢀ meetings ꢤ see the section on Non- executive Director and responsibility anꢀ to reꢬect the individual’s development and performance in the role. Remuneration Policy below). Where a salary is paid in a currency other than US dollars, the ꣁommittee may make additional payments to ensure that the total annual salary equals the level of annual salary in US dollars. ꢠeneﬁts To provide a market level oꢂ ꢏeneﬁtsꢡ as appropriate for individual circumstances, to recruit and retain executive talent. ꢠeneﬁts currentlꢕ incluꢀe private healthcare. Other ꢏeneﬁts ꢭincluꢀing pension ꢏeneﬁtsꢯ maꢕ ꢏe proviꢀeꢀ if the ꣁommittee considers it appropriate. The current CEO does not participate in any pension scheme at this time. ꢙꢁe cost oꢂ ꢏeneﬁts ꢇill generally be in line with that for the senior management team. However, the cost oꢂ insurance ꢏeneﬁts may vary from year to year depending on the individual’s circumstances. None In the event that ꢙꢁe overall ꢏeneﬁt an executive director is required by the Group to relocate, or do so following recruitment, ꢏeneﬁts maꢕ incluꢀeꢡ but are not limited to, a relocation, housing, travel and education allowance. value will be set at a level the ꣁommittee considers proportionate anꢀ appropriate to reꢬect individual circumstances, in line with market practices. There is no total maximum opportunity. Meet EVRAZ EVRAZ in ﬁgures Strategic report Corporate governance Financial statements Aꢀꢀitional inꢂormation | 130 131 Element Purpose and link to strategy Operation Maximum potential value Performance metrics Annual bonus To align executive remuneration to Group strategy by rewarding the achievement of annual ﬁnancial anꢀ strategic ꢏusiness targets. The Group operates an annual bonus arrangement under which awards are generally delivered in cash. Targets are reviewed annually and linked to corporate performance based on predetermined targets. Up to 200% of base salary in respect oꢂ anꢕ ﬁnancial year of the Group. The bonus is based on achievement of the Group’s key ꢣuantitative ﬁnancialꢡ operational and strategic measures in the year to ensure focus is spread across the key aspects of the Group’s performance and strategy. The exact measures and associated weighting will be determined on an annual basis, according to the Group’s strategic priorities, however at least 60% will be based on tꢁe ꢨroupꢅs ﬁnancial measures. For achievement of threshold performance, 0% of maximum will be paid, rising in a straight line to no more than 50% of the maximum for target performance and 100% of the maximum for outstanding performance. The ꣁommittee retains ꢀiscretion to aꢀꢝust ꢏonus paꢕments to reꢬect the Group’s overall performance. Element Purpose and link Operation Maximum potential value Performance metrics to strategy Non-executive directors Chairman and non- To provide remuneration that ꢔirector ꢂees are normallꢕ paiꢀ in tꢁe ꢂorm oꢂ casꢁꢡ ꢏut ꢇitꢁ tꢁe ꢬeꢃiꢏilitꢕ to ꢂorgo all or part of such fees (after deduction of applicable income tax and social taxes) to acquire shares in the Company should the non-executive director so wish. Non-executive director fees executive director is suꢄcient to attract remuneration and retain high calibre non- are reviewed from time to time. executive talent. Non-executive directors receive an annual fee for Board membership. Additional fees are payable by reference to other Board responsibilities taken on by the non- executive directors (for example, membership and chairmanship of the Board committees). The chairman of the Board receives an all-inclusive annual fee. Costs incurred in the performance of non-executive directors’ duties for the Company may be reimbursed or paid for directly by the Company, including any tax due on the costs. This may include travel expenses, professional fees incurred in the furtherance of duties as a director, and the provision of training and development. In addition, the Company contributes an annual amount towards secretarial and administrative expenses of non-executive directors. Non-executive directors may not participate in the Company’s share incentive schemes or pension arrangements. Total fees paid to non-executive directors will remain within the limit stated in the Articles of Association. Performance measures and targets Remuneration arrangements throughout the Group Annual bonus measures and targets reviews them annually to ensure that the measures and weightings are in line with the strategic priorities and needs of the business. This remuneration approach and philosophy is applied consistently at all levels, up to and including the executive director. This ensures that there is alignment with the business strategy throughout the Group. Remuneration arrangements are selected to ensure an appropriate balance between providing the director ꢇitꢁ incentives to meet ﬁnancial oꢏꢝectives for the year and achieving key operational oꢏꢝectivesꢘ ꢙꢁe Remuneration Committee Annual report & accounts 2020 ꢏeloꢇ tꢁe ꢱoarꢀ level reꢬect tꢁe senioritꢕ of the role and local market practices, and therefore the components anꢀ remuneration levels ꢂor ꢀiꢢerent emploꢕees maꢕ ꢀiꢢer in parts Regarꢀing anꢕ pension ꢏeneﬁtsꢡ tꢁese will not exceed the percentage of salary earneꢀ ꢏꢕ tꢁe maꢝoritꢕ oꢂ tꢁe ꢇorꢥꢂorce (either of the Group or the county in which the executive director works). conditions attached to the awards forfeited, the form in which they were granted (eg cash or shares) and the timeframe of the awards. The ꣁommittee will generally seek to structure the buyout on a comparable basis to awards forfeited. The overriding principle is that any buyout award would be at or below the commercial value of remuneration forfeited. from the policy set out above. Notwithstanding this, the ꣁommittee recognises that the Remuneration Policy set out above is tailored towards the only current executive director, the CEO, ꢇꢁo ꢁas a signiﬁcant sꢁareꢁolꢀing in the Company. Any new executive ꢀirector is liꢥelꢕ to ꢁave ꢀiꢢerent circumstances from the current CEO, and thus the ꣁommittee believes it is important to retain tꢁe ꢬeꢃiꢏilitꢕ to ꢏe aꢏle to oꢢer otꢁer elementsꢡ namely market-competitive, share-based incentive programmes, which are linked to the Group’s performance and designed to align the executive director’s interests to the delivery of growth in shareholder value. For instance, in addition to a base salary, a performance-related bonus (calculated by reference to KPIs aligned ꢇitꢁ tꢁe ꢨroupꢅs strategꢕꢯ anꢀ ꢏeneﬁtsꢡ senior managers are also entitled to participate in a long-term incentive programme. This is designed to align the interests of these individuals to the delivery of long-term growth in shareholder value. The ꣁommittee retains tꢁe ꢬeꢃiꢏilitꢕ to alter the performance measures of the annual ꢏonus ꢂor tꢁe ﬁrst ꢕear oꢂ appointmentꢡ if it determines that the circumstances of the recruitment merit such alteration. Where an executive director is appointed from within the organisation, the normal policy is that any legacy arrangements would be honoured in line with the original terms and conditions. Similarly, if an executive director is appointed following an acquisition of, or merger with another company, legacy terms and conditions will be honoured. The current CEO already holds a substantial shareholding in the Group and therefore does not participate in this plan.# ANNUAL REMUNERATION REPORT

This section summarises remuneration paid out to directors for the 2020 financial year and details of how the Remuneration Policy will be implemented in the 2021 financial year.

Executive director’s remuneration

Alexander Frolov’s current shareholding

The CEO, Alexander Frolov, has a significant shareholding in the Company (9.66% of issued share capital as at 31 December 2020), which provides alignment with the delivery of long-term growth in shareholder value. As such, the Committee does not consider it necessary for the CEO to participate in any long-term incentive plans or to impose formal shareholding guidelines. However, the Committee will continue to review this on an ongoing basis.

Executive director’s remuneration

In 2020, the CEO, Alexander Frolov, was entitled to a base salary, a performance-related bonus and provision of benefits. As a member of the Board, he is also entitled to a director’s fee (US$150,000) and any applicable fees for participation in the work of the Board committees as laid out in the section below on non-executive director remuneration. However, the Committee considers these fees to be incorporated in his base salary.

Single total ﬁgure of remuneration (audited)

Key elements of the CEO’s remuneration package received in relation to 2020 (compared with the prior year)

Alexander V. Frolov	2020 (US$)	2019 (US$)
Salary and director fees¹	2,625,000	2,625,000
Bonus	3,136,930	5,788,839
Benefits	26,909	26,909
Total Fixed Remuneration	2,651,909	2,651,909
Total Variable Remuneration	3,136,930	5,788,839
Total	5,788,839	8,440,748

¹ The Committee approved the CEO’s current salary on 8 January 2010 at the level of US$2,625,000 (which includes, for the avoidance of doubt, the director’s fee, fees paid for committee membership and any salary from subsidiaries of EVRAZ plc). This salary level will remain unchanged for 2021.

Annual bonus for 2020

The bonus is linked to achieving performance conditions based on predetermined targets set by the Board of Directors. The target bonus is 100% of base salary with a maximum potential of 200% of base salary. The Committee reviews the resulting bonus payout to ensure that it is appropriate considering the Group’s overall performance, as well as safety record and procedures.

In 2020, EVRAZ outperformed the threshold target for all of its operational and financial KPIs, resulting in an annual bonus payout of 100% of the maximum. Despite the negative impact on world economies caused by the COVID-19 pandemic, management has delivered a robust set of financial and operational results and continued to advance core strategic projects according to plan while, most importantly, doing everything it could to protect its people and support local communities during a pandemic.

Pension and beneﬁts (audited)

The CEO does not currently receive any pension benefit or allowance. Benefits consist principally of private healthcare.

Non-executive directors’ letters of appointment

Each non-executive director has a letter of appointment setting out the terms and conditions covering their appointment. Copies of the directors’ letters of appointment or, in the case of the CEO, the service contract, are available for inspection by shareholders at the Group’s registered office.

They are required to stand for election at the first AGM following their appointment or reappointment and will stand for re-election on the upcoming AGM on 8 June 2018 except Sir Michael Peat and Karl Gruber. The appointment is for a further one-year term. Over and above this arrangement, the appointment may be terminated by the director giving three months’ notice or in accordance with the Articles of Association. Letters of appointment do not provide for any payments in the event of loss of office.

Key terms of non-executive directors’ appointment letters

Non-executive directors	Date of contract	Notice period (months)
Alexander Abramov	14 October 2011	Three months
Karl Gruber	14 October 2011	Three months
Aleꢃanꢀer ꢎꢠosimov	28 February 2012	Three months
Sir Michael Peat	14 October 2011	Three months
Deborah Gudgeon	14 October 2011	Three months
Eugene Shvidler	14 October 2011	Three months
Eugene Tenenbaum	8 August 2018	Three months
Laurie Argo	31 March 2015	Three months

Executive director’s service contract and loss of office policy

The CEO has a service contract with a subsidiary of EVRAZ plc. The CEO’s service contract does not provide for any specific notice period and therefore, in the event of termination, the applicable notice period will be as provided for in the Russian Labour Code from time to time (where the termination is at the Company’s initiative, the entitlement to pay in lieu of notice is currently limited to three months’ base salary). The Committee may determine that a termination payment of up to 12 months’ base salary should be paid, taking into consideration the circumstances of departure.

Going forward, all new executive directors’ contracts will normally provide for a notice period of no more than 12 months and for any compensation provisions for termination without notice to be capped at 12 months’ base salary and contractual benefits.

There is no automatic entitlement to annual bonus and executive directors would not normally receive a bonus in respect to the financial year of their cessation.

However, where an executive director leaves by reason of death, disability, ill-health, or other reasons that the Committee may determine, a bonus may be awarded. Any such bonus would normally be subject to performance and time pro-rating, unless the Committee determines otherwise.

Policy on recruitment of executive directors

When setting salaries for new hires, the Committee will consider all relevant factors, including the skills and experience of the individual, the market from which they are recruited, and the market rate for the role. For interim positions, a cash supplement may be paid rather than salary (for example, a non-executive director taking on an executive function on a short-term basis).

This part of the Remuneration Policy has been developed to enable the Group to recruit the best possible candidate and one able to contribute to the Group’s performance and able to help it reach its goals.

When hiring a new executive director, remuneration is determined in line with the following Remuneration Policy. To facilitate recruitment, the Committee may need to compensate an executive director for the loss of remuneration arrangements forfeited on joining the Company. In granting any buyout award, the Committee will consider relevant factors, including any performance conditions.

So far as is practicable and appropriate, the Remuneration Committee will seek to structure the pay and benefits of any new executive directors in line with the current Remuneration Policy.

Illustration of the application of the Remuneration Policy

The maximum level of variable remuneration which may be granted in respect of recruitment (excluding any buyouts) will not exceed the ongoing policy of more than 200% of base salary, as described in the policy table above. This additional headroom has been capped at a level comparable with the maximum award levels seen in conventional long-term or non-executive directors will not include incentive plans used in the wider UK-listed market.

The following chart provides an indication of what could be received by an executive director under the Remuneration Policy. On the appointment of a new chairman or non-executive director, their remuneration will typically be in line with the Remuneration Policy as set out above. A specific case or share arrangements delivered to the chairman will not include incentive plans used in the wider UK-listed market.

Application of the remuneration policy, US$ thousand	Minimum	50%	In line with expectations	66%	Maximum
Base pay	2,652
Annual bonus		5,277	7,902

Policy on shareholdings of executive directors

The Company’s policy is that executive directors should hold shares in the Company and any new executive director will be required to build and retain a level of shareholding in the Company. The application of this policy will be contained from time to time in the Annual Remuneration Report and is currently set at 200% of salary. This level of shareholding (or the actual level on departure if it is lower) will normally have to be retained for two years following the departure of an executive director from their position. As the current executive director, the CEO, has a holding in excess of 9.66% of the Company and does not participate in share plans, this guideline does not apply to him.

Policy on share-based incentive awards

The Committee’s intention would be for any share-based incentive awards to be subject to performance conditions. Where the intention is to grant regular long-term incentive awards to a candidate, the Committee would seek appropriate shareholder approval for a new share plan in accordance with the Listing Rules.

Consideration of shareholder views

When determining the Remuneration Policy, the Committee considers investor body guidelines and shareholder views. The Committee takes this into account when setting the CEO’s remuneration. Copies of the directors’ letters of appointment or, in the case of the CEO, the service contract, are available for inspection by shareholders at the Group’s registered office.

Consideration of conditions elsewhere in the Group

Management prepares the details of all employee pay and conditions, Free Cash Flow adjusted, Cash Cost Index and the Committee’s assessment of overall performance against strategic objectives. The Group does not formally consult with employees on executive director remuneration. However, it does not consider any direct comparison measures between the executive director and wider employee pay.

The Committee considers them on an annual basis.

EVRAZ in ﬁgures

Strategic report

Corporate governance

Financial statements

Aꢀꢀitional inꢂormation | 132 133# EVRAZ

Strategic report

Corporate governance

Financial statements

Additional information | 134

The bonus is linked to the Group’s main quantitative financial, operational and strategic measures during the year to ensure alignment with the key aspects of Group performance and strategy.

Annual bonus

The CEO is eligible for a performance-related bonus that is paid in cash following the year-end subject to the Committee’s. For 2020 the following five indicators, each with an equal weighting of 20%, were considered when determining the CEO’s annual bonus: LTIFR, EBITDA,

The salary is paid in roubles and the amounts paid in the year are reconciled at the year-end so as to equal US$2,625,000.

KPI	Result measurement	Threshold	Planned level (% of target)	Outstanding	Actual 2020	Bonus payout (% of max)
LTIFR	1.93	US$1,913m	110%	1.61	US$2,391m	55%
EBITDA	US$868	100%	1.29	US$2,869m	31%
Adjusted FCF	US$1,303m	90%	1.58	US$2,212	50%
Cash cost index	US$1,245m
Discretion
Remuneration Committee assessment of overall performance against strategic objectives						59.75%
Total

Remuneration Committee assessment of overall performance

employees and ensure operational continuity.

Completion of late-stage investment projects on schedule.
Progress made on all key strategic priorities including environmental agenda, despite global uncertainty caused by the COVID-19 pandemic.
Net debt of US$3,356 million, bringing the net debt/EBITDA ratio to 1.5, in line with the medium-term target that EVRAZ has set to maintain net debt below US$4 billion.

in the subsequent year. In line with previous years, a malus arrangement will apply under which bonus payouts may be adjusted downwards to reflect the Group’s overall performance including underlying safety practices and resulting performance.

EVRAZ‘ Remuneration Policy stipulates that the discretionary portion of the bonus should reflect the CEO’s performance in relation to the Group’s key strategic priorities, as well as his efforts to ensure its long-term success.

During the year, the business continued to deliver in relation to key strategic priorities and create long-term returns for shareholders.

Non-executive directors’ remuneration

Non-executive directors’ fixed remuneration payable in respect of 2020 and 2019 is set out in the table below.

The efficiency improvement programme delivered savings of US$192 million from cost-cutting initiatives.
The customer focus programme generated an EBITDA effect of US$912 million.
A strong start of digital transformation projects which generated an efficiency improvement effect of US$76 million.

The Committee determined that in 2020 the Group maintained stable production and showed good progress on strategic projects despite the global outbreak of COVID-19. The Group’s primary focus was on ensuring safe working conditions for employees, safeguarding local communities and preventing the spread of COVID-19. In recognition of this, the CEO received 100% of Discretion KPI. The key reasons for this are:

A non-executive director’s remuneration consists of an annual fee of US$150,000 and a fee for committee membership (US$24,000) or chairmanship (US$100,000 for chairmanship of the Audit Committee and US$50,000 for other committees). The fee for employee engagement responsibilities is set at US$24,000.

Annual bonus for 2021

For 2021, the bonus framework will be in line with 2020. The Board considers forward-looking targets to be commercially sensitive; however, they will generally be disclosed.

Relatively limited impact of COVID-19 on the Group’s business due to proactive safety measures undertaken to protect

Single total figure of remuneration (audited)	2020 (US$ thousand)	2019 (US$ thousand)		2020 (US$ thousand)	2019 (US$ thousand)
	Total fees¹	Admin²	Total	Total fees¹	Admin²	Total
Alexander G. Abramov	302	30	332	254	30	284
Alexander Frolov	204	30	234	254	30	284
Eugene Shvidler	180	30	210	254	30	284
Eugene Tenenbaum	150	30	180	254	30	284
Karl Gruber	224	30	254	204	30	234
Sir Michael Peat	224	30	254	180	30	210
Deborah Gudgeon	254	30	284	150	30	180
Laurie Argo	254	30	284	224	30	254

Total fees include annual fees and fees for committee membership or chairmanship (pro rata working days).
The Group contributes an annual amount of US$30,000 towards secretarial and administrative expenses of non-executive directors. In addition to the amounts disclosed above, the Group reimburses directors’ travel and accommodation expenses incurred in the discharge of their duties.

Annual report & accounts 2020

For reference, the fees payable Aggregate directors’ current shareholding in EVRAZ. However, the proposed policy includes these in relation to any future appointments. for the chairmanship of a committee include remuneration the membership fee, and any director elected as chairman of more than one committee is generally entitled to receive fees in respect of one chairmanship only. The fee for the chairman of the Board amounts to US$260,000 from 1 March 2018 (this fee includes, for the avoidance of doubt, director’s fees and fees paid for committee membership). The aggregate amount of directors’ remuneration payable in respect of qualifying services for the year ended 31 December 2020 was US$8,319 thousand (2019: US$5,116 thousand). The directors’ interests in EVRAZ shares as of 31 December 2020 were as follows. There have been no changes in the directors’ interests from 31 December 2020 through 24 February 2021.

Share ownership by the Board of Directors (audited)

Fees will remain unchanged for 2021. There were no formal minimum shareholding requirements in place, reflecting the CEO’s

Directors	Number of shares	Total holding, ordinary shares, %
Alexander Abramov	40,488,242	19.35
Alexander Frolov	80,000	9.66
Eugene Shvidler	19,034,002	9.11
Alexander Frolov	8,000	0.01

The CEO holds shares to the value of 345 times his salary as at 31 December 2020.

and executing the Group’s vision and strategy. It also allows for informative decisions to be made throughout the business. Considering the views of the wider workforce has been in place at the Group for many years. Employees participate in an employee engagement survey aimed at gathering wider workforce views on various topics. During this meeting Alexander learned about employees’ priorities and concerns, noting the openness and transparency of communications. Laurie Argo participated in Evraz North America Executive Leadership Team virtual meeting. During this meeting the executive team shared their regular business update, Laurie was engaged in the conversation and shared her insights. This information was shared with the Committee and discussed.

The shares held by Alexander Frolov were acquired in 2012 when he was appointed as an independent non-executive director. All shares held by directors are held outright with no performance or other conditions attached to them, other than those applicable

The survey has historically been successful in driving numerous employee-focused initiatives and helps to set key priorities for the forthcoming year, aimed at improving the engagement of all employees. The Committee also considers executive remuneration in the context of the wider employee population and is kept regularly updated on pay and conditions across the Group. The proportion of variable pay increases with progression through management levels with the highest proportion of variable pay

Other directors do not currently hold EVRAZ shares.

Policy on external appointments

The Board reviews the engagement data and is therefore aware of any trends, comments or concerns in relation to executive pay. The Board also receives a

The Committee believes that the Group can benefit from executive directors holding approved non-executive directorships in other companies, offering executive directors the opportunity to broaden their experience and knowledge. EVRAZ’ policy is to allow executive directors to retain fees paid from any such appointment. The CEO does not currently hold a non-executive directorship of another company.

quarterly summary report of complaints made at executive director level, as defined on the EVRAZ employee telephone hotline.

by the Remuneration Policy. Variable pay cascades down through the next tiers of management with appropriate reductions in opportunity levels based on seniority. In addition, the Group operates pension arrangements in some of its businesses around the world, where this is relevant to the local conditions. The key element of remuneration for those below senior management grades is base salary and the Group’s policy is to ensure that base salaries are fair and competitive in the local markets. General pay increases take into account local salary norms, inflation and business conditions.

In 2020, EVRAZ has introduced additional tools aimed at engaging with employees during the pandemic. Virtual meetings with senior management were regularly held, allowing employees to participate and ask questions. The 007 corporate hotlines were opened for employees if they have questions or encounter problems.

Engagement with the workforce

EVRAZ is committed to regularly engaging with its workforce and realises the value of listening to and acting on employee views across the organisation. These insights are vital to attracting and retaining employees, which is key to delivering

In 2020, two non-executive directors, appointed in 2018 to be involved in town-hall meetings with employees, participated in virtual meetings. Alexander Frolov took part in an online town-hall meeting with employees of EVRAZ ZSMK.# Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information

Gender pay gap and CEO pay ratio

EVRAZ had less than 10 UK employees during the year and does not therefore have any gender pay or CEO pay ratio information to report under the Regulations.

The following table shows a comparison of the total cost of remuneration paid to all employees between the current and previous years and financial metrics in US$ millions:

US$ million	EBITDA	Share buybacks	Dividends	Total employee pay
2020	2,212	0	1,086	1,331
2019	2,601	0	1,464	1,331

For more information on the definition of EBITDA please read page 253.

Performance graph

plc’s admission to the premium listing on the London Stock Exchange on 7 November 2006. The FTSE 350 Basic Resources Index has been selected as an appropriate benchmark, as it is a broad-based index of which the Group is a constituent member. The following graph shows the Group’s performance as measured by total shareholder return compared with the performance of the FTSE 350 Basic Resources Index since EVRAZ Total Shareholder Return Performance, %

Year ends 31.12.2011	31.12.2012	31.12.2013	31.12.2014	31.12.2015	31.12.2016	31.12.2017	31.12.2018	31.12.2019	31.12.2020
FTSE 350 Basic Resources Index	100.00	105.55	93.98	96.80	84.39	72.41	69.49	113.62	109.41
Evraz	100.00	96.80	33.80	48.40	22.95	152.50	116.12	194.84	182.40

Total Shareholder Return Performance, %

250
200
150
100
50
0
07.11.2011
31.12.2011
31.12.2012
31.12.2013
31.12.2014
31.12.2015
31.12.2016
31.12.2017
31.12.2018
31.12.2019
31.12.2020

FTSE 350 Basic Resources Index
Evraz

Annual report & accounts 2020

CEO’s total remuneration paid in 2013–2020 (US$)

CEO single figure of total remuneration	Annual bonus payout (as a % of maximum opportunity)
Year	2020
Alexander Izosimov	5,393,884
	0%

Percentage change in remuneration

This group of employees has been selected as an appropriate comparator, as they are based in the same geographic market as the CEO, and so are subject to a similar external environment and pressures. administrative personnel in the Head Office and the Ural and Siberia management companies. This provides a representative calculation across the Russian businesses.

The following table sets out the percentage change in the elements of remuneration for the directors of Evraz plc, compared with average figures for Russia-based administrative personnel. The population of employees the calculation has been performed for includes:

Percentage change in the elements of remuneration for the directors compared with average figures for Russia-based administrative personnel	Salary¹	Benefits	Annual bonus
Role	3%	40%	(9%)
Alexander Frolov (CEO)	n/a	n/a	n/a
Alexander Abramov (NED)	2%	100%	n/a
Alexander Izosimov (NED)	0%	0%	9%
Eugene Shvidler (NED)	n/a	n/a	0%
Eugene Tenenbaum (NED)	n/a	n/a	0%
Karl Gruber (NED)	n/a	n/a	0%
Sir Michael Peat (NED)	0%	n/a	24%
Deborah Gudgeon (NED)	n/a	n/a	n/a
Laurie Argo (NED)	0%	n/a	n/a

Committee composition

All members of the Committee are independent non-Executive Directors. This is fundamental to ensuring Executive Directors and senior executives remuneration and necessary, in particular the CEO, is set by people who are independent and have no personal financial interest, other than as shareholders, in the matters discussed. There are no potential conflicts of interest arising from cross-directorships and there is no day-to-day involvement in running the business. No-one is allowed to participate in any matter directly concerning the details of their own remuneration or conditions of service.

The Committee may invite other individuals to attend all or part of any committee meeting, as and when appropriate, in particular the head of human resources and external advisers.

Committee members

The Committee’s composition remains the same as in 2019, its current members are:
* Alexander Izosimov
* Deborah Gudgeon
* Sir Michael Peat
* Laurie Argo.

1. Total fixed remuneration for NEDs or other share-based remuneration within the terms of the agreed policy.

Shareholder considerations

EVRAZ remains committed to ongoing shareholder dialogue and takes an active interest in feedback received from its shareholders and from voting outcomes. Where there are substantial votes against resolutions in relation to directors’ remuneration, the Group shall seek to understand the reasons for any such vote and will detail any actions in response to these.

Actual voting results from the AGM, which was held, in respect of the previous remuneration report and Remuneration Policy

Resolution	Number of votes For	Number of votes Against	Number of votes Withheld	Total votes as % of issued share capital
To approve the Directors Remuneration Policy as set out on pages 131-135 of the 2019 Annual Report and Accounts	5,966	916	1,106	85.20%
To approve the Annual Remuneration Report set out on pages 130-139 of the 2019 Annual Report and Accounts	5,650	276	1,280	85.42%

Percentage of votes cast.

Signed on behalf of the Board of Directors,

Alexander Izosimov
Chairman of the Remuneration Committee

24 February 2021

Annual report & accounts 2020

DIRECTORS’ REPORT

INTRODUCTION

In accordance with section 415 of the Companies Act 2006, the Directors of EVRAZ plc present their report to shareholders for the financial year ended 31 December 2020, which they are required to produce by applicable UK company law. The Directors’ Report comprises the Directors’ Report section of this report, together with the sections of the annual report incorporated by reference. As permitted by legislation, some of the matters normally included in the Directors’ Report have instead been included in other sections of the annual report, as indicated below.

The Company was incorporated under the name EVRAZ plc as a public company limited by shares on 23 September 2002 under registered number 4505517.

EVRAZ plc listed on the London Stock Exchange in November 2011 and is a member of the FTSE 100 Index.

Dividends

The underlying cash flow generation and continuing success with deleveraging have allowed the Company to continue to pay dividends in line with its dividend policy.

Advisers

The Committee has appointed Korn Ferry (UK) Limited (Korn Ferry) to provide independent remuneration consultancy services to the Group. Korn Ferry is a member of the Remuneration Consultants’ Group and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK. The code of conduct can be found at www.remunerationconsultantsgroup.com.

The Remuneration Committee is a formal committee of the Board and can operate with a quorum of two committee members. It is operated according to its Terms of Reference, which were reviewed and updated in the year to reflect changes made to the UK Corporate Governance Code. A copy can be found on the Group’s website.

Approve awards for participants where existing share incentive plans are in place.
Review and approve any compensation payable to executive directors and other senior executives in connection with any dismissal, loss of office or termination (whether for misconduct or otherwise) to ensure that such compensation is determined in accordance with the relevant contractual terms and the Remuneration Policy, and that such compensation is otherwise fair and not excessive for the Group

During the year, Korn Ferry principally advised the Committee on developments in the regulatory environment and market practice, and on the development of the Group’s pay arrangements. The total fee for advice provided to the Committee during the year was £20,824.

The Committee’s main responsibilities are to:

Set and implement the Remuneration Policy covering the chairman of the Board, the CEO, the company secretary and other senior executives.
Oversee any major changes in the structure of employee benefits throughout the Group and report on what engagement has taken place with the workforce on executive pay.
Take into account all factors that it deems necessary to determine, such as framework or policy, including all relevant legal and regulatory requirements, the provisions and recommendations of the 2018 UK Corporate Governance Code and associated guidance.
Review and consider remuneration trends across the Group and the alignment of incentives and rewards with culture when setting the Remuneration Policy.
Review regularly the Remuneration Policy’s appropriateness and relevance.

The Committee is satisfied that the advice it has received has been effective and independent.

During 2020, the Committee met four times. The main purpose of the meetings was to consider and make recommendations to the Board in relation to the remuneration packages of the executive director and key senior managers; to approve the annual bonus for the 2019 results; to approve the 2020 long-term incentive plan (LTIP) awards for key senior management and to be updated on pay across the workforce.

Determine the total individual remuneration package of the chairman of the Board, the company secretary and other senior executives, including pension rights, bonuses, benefits in kind, incentive payments and share options,

Meet EVRAZ

EVRAZ in figures

Strategic report

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Additional information | 138 139# Directors

Biographies of the directors who served on the Board during the year are provided in the Governance section on pages 102-103.

Directors’ appointment and re-election

The Board has the power at any time to elect any person to be a director, but the number of directors must not exceed the maximum number fixed by the Company’s Articles of Association. Any person so appointed by the directors will retire at the next AGM and then be eligible for election. In accordance with the UK Corporate Governance Code, the directors are subject to annual re-election by shareholders. For additional information about directors’ appointment and resignation, see the Remuneration Report on page 132. Sir Michael Peat and Karl Gruber will not be seeking re-election as directors at the AGM, having completed terms of nine years. All of the other directors intend to stand for re-election at the 2021 AGM to be held later this year.

Directors’ interests

Information on share ownership by directors can be found in this Report and in the Remuneration Report on page 136.

Directors’ indemnities and director and officer liability insurance

As at the date of this report, the Company has granted qualifying third-party indemnities to each of its directors against any liability that attaches to them in defending proceedings brought against them, to the extent permitted by the Companies Act. In addition, directors and officers of the Company and its subsidiaries have been and continue to be covered by director and officer liability insurance.

Powers of directors

Subject to the Company’s Articles of Association, UK legislation and to any directions given by special resolution, the business of the Company is managed by the Board, which may exercise all the powers of the Company. The Articles of Association contain specific provisions concerning the Company’s power to borrow money and provide the power to make purchases of any of its own shares. The directors have the authority to allot shares or grant rights to subscribe for or to convert any security into shares in the Company. Further details of the proposed authorities are set out in the Notice of the AGM.

Major interests in shares

Observable major share interests of which the Company has been made aware are set out in this Directors’ Report.

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 140 141

Research and development

EVRAZ is constantly engaged in process and product innovation. The research and development centres located at the Company’s production sites improve and develop high-quality steel products to better meet customers’ needs and to ensure that EVRAZ remains competitive in the global and local markets. For examples of the Company’s efforts in research and development in different operations, please refer to the Business R&D section on pages 84-87.

Sustainable development

The Corporate Social Responsibility section of this report focuses on the health and safety, environmental and employment performance of the Company’s operations, and outlines the Company’s core values and commitment to the principles of sustainable development and development of community relations programmes. Details of the Company’s policies and performance are provided in the Corporate Social Responsibility section on pages 56-83.

Payments to governments

EVRAZ published its 2019 report on payments to governments in June 2020. The report provides citizens, authorities and independent users with information on payments made to governments where the Company conducts its extractive activities. The report is prepared in accordance with the requirements of the Disclosure Guidance and Transparency Rules – Instrument 2014 “Report on payments to governments”, issued by the UK Financial Conduct Authority. The report is available on the Company’s website at www.evraz.com.

Political donations

No political contributions were made in 2020.

Greenhouse gas emissions

In 2020, in accordance with the requirements of the Companies Act 2006 (Strategic and Directors’ Report) Regulations 2013, and Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, EVRAZ undertook to assess full emissions of greenhouse gases (GHGs) from facilities under its control. Details can be found in the CSR section on page 65.

Employees

Information regarding the Company’s employees can be found in the Our People section on pages 68-73.

Overseas branches

EVRAZ does not have any branches. A full list of the Group’s controlled subsidiaries is disclosed in Note 34 of the Consolidated Financial Statements.

Financial risk management

Information regarding the financial risk management and internal control processes and policies, as well as details and financial instruments of hedging policy and exposure to the risks associated with financial instruments, can be found in Note 32 to the Consolidated Financial Statements, the Corporate Governance Report and Risk Management and Internal Control section on pages 112-115 and the Financial Review section on pages 32-43.

Going concern

The financial position and performance of the Group and its cash flows are set out in the Financial Review section of the report on pages 32-43. Based on the currently available facts and circumstances, the directors and management have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. More details are provided in Note 2 to the Consolidated Financial Statements on page 166.

Auditor

The Audit Committee conducted a tender for the external audit of the Group in July 2019. Ernst & Young LLP was selected to undertake the audits for the financial years ended December 2019 and 2020 (subject to shareholder approval at the respective AGMs). The Board has agreed that no re-tender will take place until the conclusion of the 2021 financial year. A decision on whether to re-tender will be taken in due course by the Audit Committee and presented to the Board for consideration. Ernst & Young LLP has indicated its willingness to continue in office and a resolution seeking to reappoint it will be proposed at the forthcoming AGM.

Future developments

Information on the Group and its subsidiaries’ future developments is provided in the Strategic Report on pages 4-99.

Events since the reporting date

The major events after 31 December 2020 are disclosed in Note 33 to the Consolidated Financial Statements on page 229.

Annual General Meeting (AGM)

The 2021 AGM will be held later this year in London. At the AGM, shareholders will have the opportunity to put questions to the Board, including the chairmen of the Board committees. Full details of the AGM, including explanatory notes, are contained in the Notice of the AGM, which will be distributed at least 20 working days before the meeting. The Notice sets out the resolutions to be proposed at the AGM and an explanation of each resolution. All documents relating to the AGM will be available on the Company’s website at www.evraz.com.

Electronic communications

A copy of the 2020 annual report, the Notice of the AGM and other corporate publications, reports and announcements will be available on the Company’s website at the following link: https://www.evraz.com/en/investors/ Shareholders may elect to receive notification by email of the availability of the annual report on the Company’s website instead of receiving paper copies.

Corporate governance statement

The Disclosure Guidance and Transparency Rules (DTR) require certain information to be included in a corporate governance statement set out in a company’s Directors’ Report.# In common with many companies, EVRAZ has an existing practice of issuing, within its annual report, a Corporate Governance Report that is separate from its Directors’ Report.

The information that fulfils the requirement of DTR 4.1.12R is located in the EVRAZ Corporate Governance Report (and is incorporated into this Directors’ Report by reference), with the exception of the information referred to in DTR 4.1.12R(e) which is located in this Directors’ Report.

Section 172 Statement

The Company’s Section 4.1 Statement can be found in the Strategic Report on page 97. Details of how the Company engages with its workforce can be found in the Strategic Report on page 72.

Stakeholder engagement on key decisions

Details of the key decisions and discussions of the Board during the year and the main stakeholder inputs into those decisions are set out in the Corporate Governance Report on page 107.

Annual report & accounts 2020

MAJOR SHAREHOLDINGS

The Company’s issued share capital as of 31 December 2020 was 8,140,923,471 ordinary shares, of which 0 shares are held in Treasury. Therefore, the total number of voting rights in the Company is 8,140,923,471.

As of 31 December 2020, the following significant holdings of voting rights in the Company’s share capital were disclosed to the Company under Disclosure and Transparency Rule 5.

Number of ordinary shares	% of voting rights
Greenleas International Holdings Ltd. 2,334,324,922	28.68
Abricate Ltd 1,577,211,176	19.35
Crosland Global Limited 787,747,821	9.66
Kadre Enterprises Ltd 660,339,552	8.11

The Company is aware of the following individuals who each have a beneficial interest in three percent or more of EVRAZ plc’s issued share capital (in each case, except for Gennady Bogolyubov, held indirectly): as of 31 December 2020.

Number of ordinary shares	% of voting rights
Roman Abramovich 2,334,324,922	28.68
Alexander Abramov 1,577,211,176	19.35
Alexander Frolov 787,747,821	9.66
Gennady Bogolyubov 660,339,552	8.11

There have been no changes in the Company’s issued share capital and the Company has not received any notifications under Disclosure and Transparency Rule 5, from 31 December 2020 through 24 February 2021.

LISTING RULE DISCLOSURES

For the purposes of LR 9.8.4CR, the information required to be disclosed by LR 9.8.4R can be found in the following locations:

Listing Rule Disclosure	Location
Interest capitalised	Note 9 to the Consolidated Financial Statements
Not applicable Publication of unaudited financial information
Detail of long-term incentive schemes	Note 21 to the Consolidated Financial Statements, Remuneration Report
Waiver of emoluments by a director	None
Waiver of future emoluments by a director	None
Non pre-emptive issues of equity for cash	None
Non pre-emptive issues of equity for cash in relation to major subsidiary undertakings	None
Parent participation in a placing by a listed subsidiary	None
Contract of significance in which a director is interested	Relationship Agreements section below
Contracts of significance with a controlling shareholder	None
Provision of services by a controlling shareholder	None
Shareholder waiver of dividends	None
Shareholder waiver of future dividends	Relationship Agreements section below
Agreements with controlling shareholder	Relationship Agreements section below

The Company understands that Roman Abramovich has an indirect economic interest in the 2,334,324,922 shares held by Greenleas International Holdings Ltd.
The Company understands that Alexander Abramov has an indirect economic interest in the 1,577,211,176 shares held by Abricate Ltd.
The Company understands that Alexander Frolov has an indirect economic interest in the 787,747,821 shares held by Crosland Global Limited.
Includes shares held by Gennady Bogolyubov. Shares shareholder, both indirectly through Yagre and directly. The number of shares is as per TR-1 Form. Notification of major interest in shares dated 24 February 2003.

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Additional information | 142

143 SIGNIFICANT CONTRACTUAL ARRANGEMENTS

Relationship agreements

its subsidiaries (on the one hand) or other rights and powers to procure and the Controlling Shareholders shall be entered into and conducted on arm’s length terms and on a normal commercial basis, unless otherwise agreed by a committee comprising the non-executive directors of the Company whom the Board considers to be independent in accordance with the UK Corporate Governance Code (the “Independent Committee”). Any amendment to the Memorandum and Articles that would be inconsistent with, undermine or breach any

The Company has entered into relationship agreements (the “Relationship Agreements”) with each of Greenleas International Holdings Ltd., Abricate Ltd and Crosland Global Limited (the “Controlling Shareholders”) that regulate the ongoing relationship between the Controlling Shareholders and the Company. This ensures that the Company is in compliance with the provisions of the Listing Rules and capable of carrying on its business independently of the Controlling Shareholders, and ensures that any transactions and relationships between the Company and the Controlling Shareholders are at arm’s length and on normal commercial terms. These Relationship Agreements were last amended and restated (for, in the case of Abricate Ltd, first entered into) in January 2018, reflecting changes in the Company’s shareholder structure that took place in December 2018. The Relationship Agreements terminate if the Controlling Shareholders cease to own or control (directly or indirectly) in aggregate at least 30% of the issued ordinary shares in the Company (or at least 30% of the aggregate voting rights in the Company).

Under the Relationship Agreements, the Controlling Shareholders and the Company agree that:

The Controlling Shareholders have the right to appoint the maximum number of non-executive directors that may be appointed while ensuring that the composition of the Board remains compliant with the UK Corporate Governance Code for so long as the Controlling Shareholders hold in aggregate an interest of 30% or more of the Company (or hold 30% or more of the aggregate voting rights in the Company) with each appointee being a “Shareholder Director”.
The Controlling Shareholders and their associates shall not take any action that would have the effect of preventing the Company from complying with its obligations under the Companies Act, the Listing Rules and the Disclosure Guidance and Transparency Rules.
The Controlling Shareholders shall, insofar as it is legally able to do so, exercise their powers, and shall procure that each member of the respective Controlling Shareholder group does the same, so that the Company is managed in accordance with the principles of good governance set out in the UK Corporate Governance Code, save as agreed in writing by a majority of the Independent Committee.
The Controlling Shareholders will, and will procure (as far as is reasonably possible) that each member of the respective Controlling Shareholder group will, treat as confidential all information (subject to certain exceptions) acquired relating to the Company and its subsidiaries.
The provision of, access to and use of information pursuant to the Relationship Agreements is governed by applicable laws relating to insider information, including, without limitation, the Disclosure Guidance and Transparency Rules.
The Controlling Shareholders shall not, and shall procure, insofar as they are legally able to do so, that each member of the respective Controlling Shareholder group shall not, take any action that precludes or inhibits the Company and/or any of its subsidiaries from carrying on its business independently of the Controlling Shareholders or any member of the respective Controlling Shareholder group.
The quorum for any Board meeting of the Company shall be three, of which at least one must be a Shareholder Director.
In any matter that, in the opinion of an independent director, gives rise to a potential conflict of interest between the Company and/or any of its subsidiaries (on the one hand) and the Shareholder Directors, the Controlling Shareholders or any member of the respective Controlling Shareholder group (on the other), such matter must be approved at a duly convened meeting of the Independent Committee or in writing by a majority of the Independent Committee.
For so long as Greenleas International Holdings Ltd. (and its affiliates) holds in aggregate an interest of 25% or more in the Company, Greenleas International Holdings Ltd. undertakes that it will not become, and will use its reasonable endeavours to procure that no other member of its group becomes, involved in any competing business (subject to certain exceptions) in Russia, Ukraine or the CIS without giving the Company the opportunity to participate in the relevant competing business.
For so long as Abricate Ltd and Crosland Global Limited (and their respective affiliates) hold in aggregate an interest of 15% or more in the Company, Abricate Ltd and Crosland Global Ltd undertake that they will not become, and will use their reasonable endeavours to procure that no other member of the respective Controlling Shareholder group becomes, involved in any competing business (subject to certain exceptions) in Russia, Ukraine or the CIS without giving the Company the opportunity to participate in the relevant competing business.
The Controlling Shareholders and their associates shall not take any action that would have the effect of preventing the Company from complying with its obligations under the Companies Act, the Listing Rules and the Disclosure Guidance and Transparency Rules, and will abstain from voting on, and will procure that the Controlling Shareholder Directors abstain from voting on, any resolution to approve a transaction with a related party (as defined in the Listing Rules) involving the Controlling Shareholders or any member of the respective Controlling Shareholder group.# ARTICLES OF ASSOCIATION

The Company’s Articles of Association were adopted with effect from June 1990 and contain, among others, provisions on the rights and obligations attaching to the Company’s shares, including the redeemable non-voting preference shares and the subscriber shares. The Articles of Association may only be amended by special resolution at a general meeting of the shareholders.

SHARE RIGHTS

Without prejudice to any rights attached to any existing shares, the Company may issue shares with rights or restrictions as determined by either the Company by ordinary resolution or, if the Company passes a resolution, the directors. The Company may also issue shares that are, or are liable to be, redeemed at the option of the Company or the holder and the directors may determine the terms, conditions and manner of redemption of any such shares.

VOTING RIGHTS

There are no other restrictions on voting rights or transfers of shares in the Articles other than those described in these paragraphs.

At a general meeting, subject to any special rights or restrictions attached to any class of shares on a poll, every member present in person or by proxy has one vote for every share that he or she holds.

Unless the directors decide otherwise, no member shall be entitled to vote either personally or by proxy to general meetings if any sum due from him or her to the Company in respect of that share remains unpaid.

Details of deadlines for exercising voting rights and proxy appointment will be set out in the Notice of the 2020 AGM. A proxy is not entitled to vote where the member appointing the proxy would not have been entitled to vote on the resolution had he or she been present in person.

The trustee of the Company’s Employee Share Trust is entitled, under the terms of the trust deed, to vote as it sees fit in respect of the shares held in trust.

TRANSFER OF SHARES

The Company’s Articles provide that transfers of certificated shares must be effected in writing, and duly signed by or on behalf of the transferor. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect of those shares.

Transfers of uncertificated shares may be effected by means of CREST unless the CREST Regulations provide otherwise.

The directors may refuse to register an allotment or transfer of shares in favour of more than four persons jointly and, except in the case of fully paid shares, by or on behalf of the transferee.

AUDIT INFORMATION

Each of the Directors who were members of the Board at the date of the approval of this report confirms that, as a Director, he or she has taken all the reasonable steps that he or she ought to have taken to make him or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of the information. So far as he or she is aware, there is no relevant audit information of which the Company’s auditors are unaware. The confirmation is given By the order of the Board and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

Alexander Frolov
Chief Executive Officer
EVRAZ plc

DIRECTORS’ RESPONSIBILITY STATEMENT

Responsibility Statement under the Disclosure Guidance and Transparency Rules

Under the Companies Act 2006, the directors must not approve the Group and parent company financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of the profit or loss of the Group and parent company for that period.

Under that law the directors have elected to prepare the group and parent company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the company for that period.

• Prepare the financial statements on the going concern basis unless it is appropriate to presume that the company and/or the group will not continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent company and enable them to ensure that the financial statements comply with the Companies Act 2006.

Under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules, group financial statements are required to be prepared in accordance with international financial reporting standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Statement Under the UK Corporate Governance Code

They are also responsible for safeguarding the assets of the Group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In preparing each of the Group and parent company financial statements, the directors are required to:

Present fairly the financial position, financial performance and cash flows of the Group and parent company.
Select suitable accounting policies in accordance with IAS8 (Accounting Policies, Changes in Accounting Estimates and Errors) and then apply them consistently.
Provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s and parent company’s financial position and financial performance.
On respect of the Group financial statements, state whether international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
On respect of the parent company financial statements, state whether international accounting standards in conformity with the requirements of the Companies Act 2003, have been followed, subject to any material departures disclosed and explained in the financial statements.

Each of the directors whose names and functions are listed on pages 102-103 confirm that to the best of their knowledge:

The consolidated financial statements of EVRAZ plc, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole (the “Group”).
The Annual report and Accounts, including the Strategic Report, include a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that they face.

The Board considers that the report and accounts taken as a whole, which incorporates the Strategic Report and Directors’ Report, is fair, balanced and understandable, and that it provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information.
Make judgements and estimates that are reasonable.

The directors are also responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the Corporate Governance Report in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules of the United Kingdom Listing Authority.

Other agreements

Amount of US$1,018 million outstanding as of 31 December 2020 specify that if a change of control occurs, each lender has a right to cancel their commitments and request repayment of their portion of the respective loans ahead of schedule. The change of control provisions contained in several loan agreements with a total principal under these agreements.# Legislation in the United Kingdom governing the preparation and dissemination of financial statements

Statement of Directors’ Responsibilities in Relation to the annual report and Financial Statements

The directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare Group and parent company financial statements for each financial year. Under that law the directors have elected to prepare the group and parent company financial statements in accordance with international accounting standards in conformity with the requirements By the order of the Board Alexander Frolov Chief Executive Officer EVRAZ plc 24 February 2021 of the Companies Act 2006.

Annual report & accounts 2020

FINANCIAL STATEMENTS

→ Independent auditor’s report to the members of EVRAZ PLC 147

Consolidated Financial Statements

Consolidated Statement of Operations 158
Consolidated Statement of Comprehensive Income 158
Consolidated Statement of Financial Position 159
Consolidated Statement of Cash Flows 160
Consolidated Statement of Changes in Equity 161
Notes to the Consolidated Financial Statements 163

Corporate Information 165

Signiﬁcant Accounting Policies 165
Segment Information 165
Changes in the Composition of the Group 166
Goodwill 185
Impairment of Non-Financial Assets 186
Income and Expenses 189
Income Taxes 191
Property, Plant and Equipment 193
Intangible Assets Other Than Goodwill 196
Investments in Joint Ventures and Associates 198
Disposal Groups Held for Sale 200
Other Non-Current Assets 201
Inventories 201
Trade and Other Receivables 201
Related Party Disclosures 203
Other Taxes Recoverable 203
Other Current Financial Assets 203
Cash and Cash Equivalents 204
Equity 205
Share-Based Payments 206
Loans and Borrowings 215
Employee Beneﬁts 216
Provisions 218
Lease and Other Long-Term Liabilities 218
Trade and Other Payables 225
Other Taxes Payable 225
Financial Risk Management Objectives and Policies 229
Non-Cash Transactions 229
Commitments and Contingencies 230
Auditor’s Remuneration 231
Material Partially-Owned Subsidiaries 231
Subsequent Events 231
List of Subsidiaries and Other Signiﬁcant Holdings 232

Separate Financial Statements

→ Separate Statement of Comprehensive Income 236
* Separate Statement of Financial Position 236
* Separate Statement of Cash Flows 238
* Separate Statement of Changes in Equity 239
* EVRAZ plc Notes to the separate ﬁnancial statements 239

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Additional in ormation | 146

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EVRAZ PLC

OUR OPINION ON THE FINANCIAL STATEMENTS

In our opinion:
* EVRAZ plc’s Group ﬁnancial statements and Parent Company ﬁnancial statements (the ‘Financial Statements’) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of the Group’s and the Parent Company’s proﬁt for the year then ended.
* The financial statements have been properly prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the Consolidated Financial Statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union; and
* The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the ﬁnancial statements of EVRAZ plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2020 which comprise:

Group	Parent Company
the Consolidated Statement of Operations;	the Separate Statement of Comprehensive Income;
the Consolidated Statement of Comprehensive	the Consolidated Statement of Financial Position;
Income;	the Separate Statement of Financial Position;
the Consolidated Statement of Cash Flows;	the Separate Statement of Cash Flows;
the Consolidated Statement of Changes in	the Separate Statement of Changes in Equity;
Equity; and	and the related notes 1 to 11.
the related notes 1 to 34.

The financial reporting framework that has been applied in their preparation is applicable law and International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the Consolidated Financial Statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included the assessment of the consistency of the cash flow forecasts, the key assumptions within the scenarios modelled and the available sources of liquidity, with the findings from other areas of the audit, testing of the historical accuracy of management’s forecasting and use of our valuation specialists to challenge the assumptions with reference to historical data and, where applicable, external benchmarks. actions on the going concern assessment. As in their pessimistic case scenario management sensitised commodity prices (the main non-controllable estimate of the going concern assessment) based on the lower end of the range derived from market analysts’ projections, we have also assessed pessimistic case commodity prices against external data. Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the Group and Parent Company’s ability to continue as a going concern for a 16-month period from the date the financial statements are authorised for issue, being management’s going concern assessment period. We considered, based on our own independent analysis, what reverse stress testing scenarios, including the possible coal assets demerger, could lead either to a loss of liquidity or a covenant breach and whether these scenarios were plausible. In our reverse stress testing we reﬂected controllable mitigating factors including reduced dividends distribution and capital expenditures to the extent we concluded these were controllable. In our demerger sensitivity analysis we considered the fact that the structure of the transaction is under management control and is subject to lenders’ consent which further mitigates the risk that the transaction proceeds in a manner which are detrimental In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. To reﬂect the economic downturn following the global pandemic, management Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern. has modelled two pessimistic scenarios which we believe give due consideration to potential operating scenarios that would place signiﬁcant stress on the Group. In addition, following the board decision to consider a demerger of the Group’s coal segment, management ran an additional scenario to model the potential eﬀect of the demerger. We analysed both to the financial position of the Group. We also conﬁrmed the availa ility of debt facilities to the signed debt agreements, and reviewed their underlying terms, including covenants. the impact of additional sensitivities and the availability of mitigating future

Overview of our audit approach

Audit scope

We performed an audit of the complete financial information of seven components, audit procedures on specific balances for a further two components, review procedures on one component and speciﬁed procedures on five components.
The nine reporting components where we performed full or specific audit procedures accounted for 73% of the Group’s EBITDA and 56% of the Group’s revenue (with 23% and 16% respectively representing seven full scope components and 2% and 2% respectively two speciﬁc scope components).
The six reporting components where we performed review or speciﬁed procedures accounted for 19% of the Group’s EBITDA and 10% of the Group’s revenue (with 18% and 1% respectively representing one review scope component and 1% and 1% respectively five speciﬁed procedures components).
For the remaining 32 reporting components of the Group representing 5% of the Group’s EBITDA and 3% of the Group’s revenue we have performed other procedures appropriate to# AN OVERVIEW OF THE SCOPE OF OUR AUDIT

We have obtained an understanding of the entity-level controls of the Group which assisted us in identifying and assessing risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.

Key audit matters

Goodwill and non-current asset impairment
Recoverability of deferred tax assets related to EVRAZ North America
Completeness of related party transactions
Parent company investment in subsidiaries impairment considerations and determination of distributable reserves

Materiality

Overall Group materiality of £3,250 million (2019: £2,770 million) represents approximately 3% (2019: 3%) of EBITDA.

Tailoring the scope of the Group audit

The EVRAZ Group has centralised processes and controls over the key areas of our audit focus with responsibility lying with Group management for the majority of estimation processes and significant risk areas. We have tailored our audit response accordingly and thus for the majority of our focus areas, audit procedures were undertaken directly by the Group audit team with testing undertaken by the component audit teams on the verification of operational data and other routine processes.

In assessing the risk of material misstatement to the Consolidated Financial Statements, and to ensure we had adequate quantitative coverage of significant accounts, we selected 15 components, covering entities within Russia, Switzerland, Canada, Luxembourg, the UK and the USA, which represent the principal business units within the Group where component teams carried out full, specific review or specified procedures. For the remaining five components ‘specified procedures’, the primary team performed procedures directly focussing on the specific accounts.

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the Consolidated Financial Statements. We take into account size, risk profile, changes in the business environment and other factors when assessing the level of work to be performed at each entity.

Full scope components

Of the 15 components selected, nine reporting components where we performed an audit of the complete financial information of seven components (full scope components), which accounted for 68% (2019: 53%) of the Group EBITDA, 86% (2019: 83%) of the Group’s revenue and 80% (2019: 80%) of the Group’s total assets. For the current year, the full scope components contributed 68% (2019: 53%) of the Group EBITDA, 86% (2019: 83%) of the Group’s revenue and 80% (2019: 80%) of the Group’s total assets.

Specific scope components

For the two selected components ‘specific scope components’ we performed audit procedures on specific accounts within the component that we considered had the potential for the greatest impact on the amounts in the Consolidated Financial Statements, either because of the size of these accounts or their risk profile. The extent of our audit work on the specific scope accounts was similar to that for a full scope audit. Of the two specific scope components selected, audit procedures were performed on one of these directly by the primary audit team.

The specific scope components contributed 8% (2019: 19%) of the Group EBITDA, 1% (2019: 1%) of the Group’s revenue and 6% (2019: 4%) of the Group’s total assets.

Review scope component

For the one review scope component, the primary team performed analytical review procedures to obtain an understanding of the business, the industry and the environment in which the component operates sufficient to identify the risks of material misstatement. This included considering the component’s accounts, its accounting systems and other matters relevant to the financial data presented in the reporting package.

Other components

For the remaining 32 components, we performed other procedures, including analytical review, review of internal audit reports, testing of consolidation journals, cross check of the related party list against journals, intercompany eliminations and foreign currency translation recalculations to respond to any potential significant risks of material misstatement to the Consolidated Financial Statements due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.

Scope allocation chart

Metric	Full Scope	Specific Scope	Review	Other	Total
Revenue	86%	1%	3%	11%	100%
EBITDA	68%	8%	3%	18%	100%
Total Assets	80%	6%	1%	9%	100%

Integrated team structure

The overall audit strategy is determined by the senior statutory auditor. The senior statutory auditor is based in the UK, but, since Group management and many operations reside in Russia, the Group audit team includes members from both the UK and Russia who work together as an integrated team throughout the audit process. The senior statutory auditor focused his time on the significant risks and judgmental areas of the audit. He attended management’s going concern, impairment and significant estimates and judgements presentations to the Audit Committee via video calls. During the current year’s audit he reviewed key working papers and held conference calls with representatives of the component audit team for all Russian and North American based full and specific scope components including internal valuation specialists used in the audit to discuss the audit approach and issues arising from their work.

We have refined our methods of interaction to ensure direction by the Partner in Charge throughout the audit, ensuring involvement in key calls throughout the audit both internally and with EVRAZ management. Additional calls were held with the Chair of the Audit Committee to consider audit progress, timetable and matters arising.

Involvement with component teams

In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team or by component auditors from other EGI globaL networK firms operating under our instruction. Of the seven full scope components, audit procedures were performed on all of these by the relevant component audit teams.

For the components where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole. Our scope allocation in the current year is broadly consistent with 2019 in terms of overall coverage of the Group and the number of full and specific scope entities except for the following changes:

EVRAZ Metall Inprom Group moved from other scope to specified procedures scope in the current year due to an increase in revenue from sales of goods; and
EMNA component that was assessed as review scope last year was moved to other scope this year (as it is no longer material for EVRAZ Consolidated Financial Statements).

This led to the increased revenue coverage for full and specific scope components as indicated above.

Impact of the COVID-19 pandemic

Early in the planning process, we worked with EVRAZ to agree a timetable to provide sufficient time for the judgements arising from COVID-19 to be considered fully, disclosures adequately assessed, and to reflect the incremental time impact on completing our year end external audit remotely.

The Group audit team performed the year-end audit fully remotely. We engaged with EVRAZ throughout the audit, using video calls, secure encrypted document exchanges and data downloads to avoid any limitation on the audit evidence required. The physical visits of the Group team to the component teams planned for 2020 and 2021 had to be replaced by virtual meetings due to the travel restrictions imposed by the COVID-19 outbreak. In instances where physical access to sites was restricted due to social distancing measures, we conducted inventory counts remotely using mobile video technology. All key meetings, such as closing and Audit Committee meetings, were performed via video conference calls. These virtual meetings involved discussing the audit approach with the component teams and any issues arising from their work, including any impacts of COVID-19 on the Group or our component audit procedures. The primary audit team participated in key discussions, via conference calls with all full and specific scope locations. The primary audit team interacted regularly with the component teams where appropriate during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. We maintained continuous and open dialogue with the component audit teams in addition to holding formal meetings to ensure that we were fully aware of their progress and results of their procedures. This, together with the additional procedures performed at Group level, gave us appropriate audit evidence for our opinion on the Consolidated Financial Statements.# KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included in our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Meet EVRAZ

EVRAZ in figures

Strategic report
Corporate governance
Financial statements
Additional information | 150
151
Risk
Our audit approach
What we reported to the Audit Committee

Goodwill and non-current asset impairment

Risk direction: ←

Refer to the Group Audit Committee report on page 120, the estimates and judgements on pages 167-169 and the disclosures of impairment in note 6 of the Consolidated Financial Statements

At 31 December 2020 the carrying value of goodwill was $7,361 million ($3,343 million). The carrying value of Property, Plant with the exception of certain location specific inputs and equipment was $4,315 million (2019: $4,925 million). The Group recognised a net impairment charge in respect of Goodwill of $148 million (2019: $300 million) and $162 million in respect of items of PP&E during the year (2019: $142 million). The continued unstable economic and geopolitical environment, wider impacts of Covid-19 and commodity price volatility led us to conclude that risk had remained at the same level as the prior year in respect of Group non-current assets.

Our audit procedures were performed mainly by the Group audit team with the assistance of our valuation specialists, component teams under instruction from the Group team. We confirmed our understanding of the impairment assessment process. Our audit procedures included the evaluation of management’s key assumptions used in their impairment models. The assumptions to which the models were most sensitive and most likely to lead to further impairments were:

decreases in commodity prices;
increases in production costs;
discount rates;
Capex;
sales volumes; and
terminal growth rate.

In accordance with IAS 36 management disclosed that, in addition to the impairment charge already recognised, a reasonably possible change in discount rates, sales prices and cost control measures, would lead to impairments in Flat, Seamless and Nikom CGUs where no impairment is currently recognised.

Management has reflected known changes in the circumstances of each CGU in its forecasts for forthcoming periods, including their best estimate of the North American tariffs impact. We challenged management’s assumptions with reference to historical data and, where applicable, external benchmarks. In instances where management’s assumptions fell outside an acceptable range, we considered the impact on headroom and disclosures ensuring adjustments were made where necessary.

Given the inherent uncertainty of management’s assumptions on anti-dumping duties (especially for Large Diameter Pipe CGU), we ensured that the importance of anti-dumping duties to the significance of the carrying value of the assets being assessed, the number and size of recent impairments, the recent economic environment in the Group’s operating jurisdictions and because the assessment of the recoverable amount of the Group’s Cash Generating Units (CGUs) involves significant judgement about the future results of the business and the discount rates applied to future cash flow forecasts. We performed an independent estimate of key assumptions and in some instances applied our own valuation methodology to determine our own range of potential recoverable values of the North American CGUs comparing to management’s assumptions and making adjustments when appropriate. We have discussed and tested, including consideration of potentially contradictory evidence, management’s assumptions that the North American anti-dumping duties will stay in place until 2024 and the resultant impact on other key assumptions in the model noted above. For external market information, we compared management’s assumptions to those of our local specialists. We have not identified evidence to suggest that management’s assumptions on anti-dumping duties are unreasonable.

We focused our effort on those CGUs with the largest carrying values and those with the lowest headroom (EVRAZ North America CGUs). We tested the integrity of management’s models, recalculated their sensitivity calculations and with the help of our specialists ran our own sensitivity calculations. We compared the historical accuracy of management’s budgets and forecasts to actual results, sought appropriate evidence for any anticipated improvements and considered the presence of any contrary evidence in major assumptions such as discount rates, sales volumes, EBITDA per ton, CAPEX assumptions. We corroborated previous forecasts with actual data. We tested the appropriateness of the related disclosures provided in the Consolidated Financial Statements. In particular we ensured the adequacy of the disclosures regarding those CGUs with material goodwill balances and where a reasonably possible change in certain variables could lead to impairment charges.

Annual report & accounts 2020

Risk
Our audit approach
What we reported to the Audit Committee

Recoverability of deferred tax assets related to EVRAZ North America

Risk direction: ↑

Refer to note 8 of the Consolidated Financial Statements

At 31 December 2020 the EVRAZ North America business unit has recognised a net deferred tax asset of $219 million (2019: $800 million) which management anticipates utilising in future periods.

Our audit procedures were performed mainly by the Group audit team with the assistance of our tax and valuation specialists. Based on the procedures performed we concluded that management’s assessment of recoverability is reasonable. We confirmed our understanding of the Group’s DTA recoverability assessment process as well as the control environment implemented by management. At the same time, we point out that management’s forecasts for the Canadian business unit indicates a 13 year period to fully recover the respective DTA balance. The recoverability of the deferred tax assets (DTAs) is subject to judgement regarding the future profitability of the Canadian and US subsidiaries. During the year their net DTA balances have increased from $25m and $92m to $113m and $106m respectively which, when considered along with the prolonged period of expected utilisation and 20 year limit on carrying non-capital tax losses in Canada, was considered as a reason to elevate the risk classification.

We ensured that the forecasts used by management for assessing the recoverability of DTAs were consistent with those used when testing for impairment and assessing going concern and viability. We challenged management’s assumptions with reference to historical data and, where applicable, external benchmarks. In instances where management’s assumptions fell outside an acceptable range, we considered the impact on headroom in the models and disclosures ensuring adjustments were made where necessary.

From our stress test we concluded that the existing headroom is sufficient to accommodate a further 30% reduction in the forecast taxable profits compared to the current projections before any of the available tax losses are at risk of expiry. When straightforward, available tax planning opportunities are reflected in the forecasts, this taxable profit decrease would need to be 54% before any of the available tax losses are at risk of expiry. We noted that any specific risks identified in the impairment assessment were reflected in the cash flows (as opposed to discount rates or other assumptions) which therefore appropriately reduce profit projections prepared for the purpose of DTA recoverability.

We reviewed management forecasts to assess whether the deferred tax asset is recoverable and meets the criteria per IAS 12 Income Tax for recognition in the financial statements. We concluded that the related significant judgement is appropriately disclosed in the Consolidated Financial Statements. To scrutinise the sufficiency of the available headroom we performed a stress test by further sensitising the projected taxable profits beyond the Group’s five-year forecast horizon and business cycle. We considered available tax planning opportunities none of which was incorporated in management’s DTA recoverability assessment. We also involved our tax specialists to ensure that the management recoverability analysis was consistent with the US and Canadian tax provisions including expiry periods for tax losses carried forward.# Completeness of related party transactions
Risk direction: ← ꢀ

Refer to note 16 of the Consolidated Financial Statements

During 2015, management discovered historic transactions with a company controlled by a key management person had been erroneously omitted from the prior year’s disclosures of related party transactions in the Consolidated Financial Statements, leading to us assessing the completeness of related party transactions as a significant risk. At both a component team and Group level, we have understood and tested management’s process for identifying related parties, and for recording and disclosure of related party transactions. Across the Russian components we obtained an understanding of unusual or high value transactions with new counterparties. We also performed analytical reviews of transactions and balances with customers and suppliers, including consideration of contradictory evidence, to assess whether there are any significant changes in trading activity indicating undisclosed related parties. We selected all directors together with a sample of key management personnel based on our risk assessment, and ran a search for any companies controlled by those individuals (the search was performed via an independent register of all companies based in the CIS and their directors or shareholders). We compared the results of the research made with the list of entities included in the related party listing provided to us by management, and investigated the differences between the listings. We assessed management’s evaluation that the transactions were on an arm’s length basis by reviewing a sample of agreements and comparing the related party transaction prices to those quoted by comparable unrelated companies. We concluded that the related disclosures provided in the Consolidated Financial Statements are appropriate. There have been no misstatements of related party transactions/disclosures since 2015, and therefore we have deemed completeness of related party transactions to no longer be an area of significant risk. It remains, however a key audit matter due to the sensitivity of this matter and we believe that it requires special audit consideration. We have not identified any related party transactions or balances omitted from disclosure. We considered the elevated risk to be limited to the Russian entities within the Group where external business interests, especially in relation to local product suppliers, are more common amongst members of key management.

Risk

Our audit approach

What we reported to the Audit Committee

Investment in subsidiaries impairment considerations and determination of distributable reserves

Refer to notes 3 and 4 of the Separate Financial Statements

Risk direction: ← ꢀ

This Key Audit Matter relates to the Parent Company only

Our audit procedures were performed mainly by the Group audit team with the assistance of our valuation specialists. As noted above, due to challenges raised through our audit process management recognised an additional goodwill and PP&E impairment. This additionally resulted in an impairment of the parent company investment in EGSA and subsequent impact on distributable reserves of $371 million.

Investment impairment considerations

At 31 December 2020 the carrying value of investments in subsidiaries was $15,802 million (2019: $15,095 million). We assessed the investments in NTMK and Raspadskaya for impairment indicators including reference to external data. For the investment in EGSA, we tested the integrity of management’s models and with the help of our specialists to move the ownership of Raspadskaya and NTMK from EVRAZ Group S.A (“EGSA”) to EVRAZ plc, resulting in a significant increase in the carrying value of investments and reduction in the headroom underlying subsidiaries’ estimated recoverable amounts had over the book value of investments. EGSA made a gain on this transaction which was passed onto EVRAZ plc in the form of a dividend. ran our own sensitivity calculations. We recalculated the recoverable amount of the investment in EGSA by using the results of our work on the North American CGUs from our Group impairment work and audited net assets of other EGSA subsidiaries. Following the recorded adjustments, we consider management’s estimate of the recoverable amount of its investments in subsidiaries to be reasonable and the impairment recognised in EGSA to be appropriate. We consider the impact of the various transactions during the year on distributable reserves to be appropriately considered and the reserves available to be satisfactorily disclosed.

Distributable reserves

We analysed transactions that impacted significantly the retained earnings of the parent company and subsidiary entities paying significant dividends and considered whether any of these transactions did not meet the criteria of distributable profits or losses. As a result management assessed the recoverable amount of EVRAZ plc’s investment in EGSA based on an aggregation of the fair values of the various business units owned by EGSA, including those within the Group’s North American Business. We compared the dividends distributed throughout the year with the available distributable reserves at the date of declaration and are satisfied the reserves were sufficient at the dates of distribution.

We reviewed management’s analysis of profits available for distribution in the parent company comparing this to the proposed year end dividend declaration and agree the dividend is permissible. At 31 December 2020, EVRAZ plc had $1,051 million of distributable profits (2019: $1,078 million). On 19 June 2020 EVRAZ distributed $369 million of dividends. We also reperformed the calculation of parent company distributable profits available for distribution and audited the roll forward of profits available for distribution from 1 January to 31 December 2020. We were satisfied that the impairment of the investment in EGSA was appropriately recognised within this calculation. The Group introduced its current dividend policy in 2018 and although annual profits have been made by the Group since 2012, the Company needs to ensure it has sufficient distributable reserves within the stand-alone parent to declare dividends in accordance with the policy. The legal framework applicable to UK companies for determining profits available for distribution is contained in both the Companies Act 2006 and complementary technical guidance. Under this framework, distributions are made by individual companies and not by groups. The EVRAZ consolidated financial statements are therefore not relevant for the purposes of determining EVRAZ’s profits available for distribution. Whether or not a distribution may be made should be determined by reference to EVRAZ’s ‘relevant accounts’, being the parent company financial statements. Given the judgements in respect of impairment considerations we have included this as a Key Audit Matter consistent with the prior year.

Annual report & accounts 2020

OUR APPLICATION OF MATERIALITY

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

	Materiality	Performance materiality	Reporting threshold
	$66 million	$33 million	$3.3 million

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate could reasonably be expected to influence the economic decisions of the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be $66.0 million (2019: $65.5 million), which we calculated as approximately 3.0% (2019: 3%) of EBITDA. EBITDA is a key performance indicator for the Group and is also a key metric used by the Group the most relevant performance measure to the stakeholders of the entity. which is set at approximately 3.0% (2019: 3%) in the assessment of the performance of management. We also noted that market analyst commentary on the performance of the Group uses EBITDA as a key metric. We therefore, considered EBITDA to be the most appropriate performance metric on which to base our materiality calculation as we considered that to be the most relevant performance measure to the stakeholders of the entity. We determined materiality for the Parent and Company to be $60.0 million (2019: $55.0 million), which we calculated as 1.5% (2019: 1.5%) of Equity adjusted to exclude non-distributable reserves which arose on a restructure in 2019. We have used an earnings-based measure as our basis of materiality. It was considered inappropriate to calculate materiality using Group profit before tax due to the historic volatility of this metric. EBITDA is a key performance indicator for the Group and is also a key metric used by the Group the most relevant performance measure to the stakeholders of the entity.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessment, together with our assessment of the Group’s overall control environment, our judgement was that given the number and monetary amounts of individual misstatements (corrected and uncorrected) identified in prior periods as well as the nature of the misstatements, overall performance materiality for the Group should be 50% (2019: 50%) of materiality, namely $33.0 million (2019: $32.5 million). Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year is undertaken based on a percentage of total the range of performance materiality performance materiality.# Meet EVRAZ EVRAZ in figures Strategic report Corporate governance Financial statements Additional information | 154 155

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $6.6 million (2019: $3.8 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

OTHER INFORMATION

The other information comprises the financial statements and our auditor’s report thereon. misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material the information included in the annual report set out on pages 1 to 145, including the Strategic report, Corporate Governance sections (including Corporate governance report, Remuneration report, Directors’ Report and Directors’ Responsibility statement) and Additional information sections other than the financial statements and our auditor’s report thereon.

The directors are responsible for the other information. We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

The information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

In the light of the knowledge to which the Companies Act 2006 requires us to report to you if, in our opinion:

Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
Certain disclosures of directors’ remuneration specified by law are not made; or
The Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or
We have not received all the information and explanations we require for our audit.

and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation

Annual report & accounts 2020

CORPORATE GOVERNANCE STATEMENT

The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 145.
Boards confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 91.
The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 121; and;
Directors’ explanation as to its assessment of the Parent Company’s prospects, the period this assessment covers and why the period is appropriate set out on page 96.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

The section describing the work of the Audit Committee set out on page 119.
Directors’ statement on fair, balanced and understandable set out on page 145.

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the directors’ responsibilities statement set out on page 145, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

On preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD

Irregularities, including fraud, deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. of fraud rests with both those charged with governance of the company and management. are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined below, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one Our approach was as follows:

We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting framework (IFRS, the Companies Act 2006 and UK Corporate Governance Code) and the relevant tax compliance regulations in Russia. operations and the external advice received by the Group. of fraud. We also considered performance targets and their propensity to influence on efforts made by management
We understood how EVRAZ plc is complying with those legal to manage earnings. We considered the programs and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and were designed to provide reasonable assurance that the financial statements were free of fraud or error. and regulatory frameworks by making enquiries to management, internal audit, those responsible for legal and compliance procedures and the company secretary. We corroborated our enquiries through our review of board minutes and papers provided to the Audit Committee. We assessed legal and regulatory frameworks by involvement of integrated team
We have considered the impact of the sanctions against Russia on the Group’s operations, customer base and credit risk as well as the possibility of further more restrictive sanctions being imposed and nothing has come to our attention to suggest that the operations or the liquidity of the group have been adversely affected directly by the current political and economic situation other than the negative impact on capital markets and the financing options available to management. We reviewed management’s assessment of the sanctions impact on the Group’s members based in Russia and the USA.

Meet EVRAZ EVRAZ in figures Strategic report Corporate governance Financial statements Additional information | 156 157# Independent Auditor's Report

To the members of EVRAZ plc

Opinion on the audit of the consolidated financial statements

• We have audited the consolidated financial statements of EVRAZ plc (the 'Group') for the year ended 31 December 2020, which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated statements of comprehensive income, profit or loss, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements:
• give a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of its consolidated financial performance and consolidated cash flows for the year then ended; and
• have been properly prepared in accordance with IFRS as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Ethical Standards for Auditors issued by the Financial Reporting Council ('FRC'), and we have fulfilled our other ethical responsibilities in accordance with those standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements, and include the most significant assessed risks of material misstatement of the financial statements and where, the greatest attention was paid.

These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Materiality and audit scope

• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting with management from various parts of the business to understand where it is considered there was a susceptibility. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters we are required to address

• We were appointed by the company in 2011 to audit the financial statements for the year ended 31 December 2011 and subsequent financial periods. Company and we remain independent of the Group and the Parent Company in conducting the audit. The period of total uninterrupted engagement including previous renewals and reappointments is ten years, covering periods from our initial appointment in 2011 through to the year ended 31 December 2020.

• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent.

• The audit opinion is consistent with the Audit Committee report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those responsibility to anyone other than matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Steven Dobson (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 February 2021

Notes:
1. The maintenance and integrity of the EVRAZ plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Annual report & accounts 2020
CONSOLIDATED FINANCIAL STATEMENTS WITH NOTES

Consolidated statement of operations

(in millions of US dollars, except for per share information)

Year ended 31 December	Notes	2020	2019	2018
Continuing operations
Revenue
Sale of goods	3	$ 9,514	$ 11,569	$ 12,525
Rendering of services	3	240	336	311
Total revenue		9,754	11,905	12,836
Cost of revenue	7	(6,712)	(8,273)	(8,011)
Gross profit		3,042	3,632	4,825
Selling and distribution costs	7	(840)	(966)	(1,013)
General and administrative expenses	7	(552)	(611)	(546)
Social and social infrastructure maintenance expenses		(31)	(26)	(27)
Gain/(loss) on disposal of property, plant and equipment, net		(1,013)	(546)	(27)
Impairment of non-financial assets		(310)	(442)	(341)
Foreign exchange gains/(losses), net		408	22	22
Other operating income	3	(341)	(30)	361
Other operating expenses		(65)	(54)	(55)
Profit from operations		1,671	1,217	3,528
Interest income	7	7	2	9
Interest expense	7	(328)	(336)	(359)
Share of profits/(losses) of joint ventures and associates	11	8	9	18
Impairment of non-current financial assets	13	–	(71)	(359)
Gain/(loss) on financial assets and liabilities, net	7	–	1	9
Gain/(loss) on disposal groups classified as held for sale, net	11	–	13	18
Other non-operating gains/(losses), net	13	(56)	14	14
Profit before tax		1,295	902	3,201
Income tax expense	8	(437)	(537)	(731)
Net profit		$ 858	$ 365	$ 2,470

Attributable to:
Equity holders of the parent entity		$ 848	$ 326	$ 2,406
Non-controlling interests		10	39	64
		$ 858	$ 365	$ 2,470

Earnings per share for profit attributable to equity holders of the parent entity, US dollars:
Basic	20	$0.58	$0.23	$1.67
Diluted	20	$0.58	$0.22	$1.65

The accompanying notes form an integral part of these consolidated financial statements.

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Consolidated statement of comprehensive income

(in millions of US dollars)

Year ended 31 December	Notes	2020	2019	2018
Net profit		$ 858	$ 365	$ 2,470

Other comprehensive income/(loss)
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Exchange differences on translation of foreign operations into presentation currency	4,12	(894)	757	(1,120)
Exchange differences recycled to profit or loss on disposal of foreign operations		25	–	–
Net gains/(losses) on cash flow hedges	7, 25	–	31	27
Net (gains)/losses on cash flow hedges recycled to profit or loss	7, 25	(33)	–	63
Effect of translation to presentation currency of the Group’s joint ventures and associates	11	(13)	8	(13)
		(915)	796	(1,034)
Items not to be reclassified to profit or loss in subsequent periods
Net gains/(losses) on equity instruments at fair value through other comprehensive income	13	–	–	59
Gains/(losses) on re-measurement of net defined benefit liability	23	(3)	2	(1)
Income tax effect	8	1	(1)	–
		(2)	1	58
Total other comprehensive income/(loss), net of tax		(917)	797	(976)
Total comprehensive income/(loss), net of tax		$ (59)	$ 1,162	$ 1,502

Attributable to:
Equity holders of the parent entity		$ (41)	$ 1,078	$ 1,441
Non-controlling interests		(18)	84	61
		$ (59)	$ 1,162	$ 1,502

The accompanying notes form an integral part of these consolidated financial statements.

Annual report & accounts 2020

Consolidated statement of financial position

(in millions of US dollars)

The financial statements of EVRAZ plc (registered number 7784342) on pages 100-190 were approved by the Board of Directors on 24 February 2021 and signed on its behalf by Alexander Frolov, Chief Executive Officer.

31 December	Notes	2020	2019	2018
ASSETS
Non-current assets
Property, plant and equipment	9	$ 4,314	$ 4,925	$ 4,202
Intangible assets other than goodwill	10	138	185	206
Goodwill	5	457	594	864
Investments in joint ventures and associates	11	79	92	74
Deferred income tax assets		245	92	13
Other non-current financial assets		26	13	45
Other non-current assets		152	44	55
		5,411	6,045	5,469
Current assets
Inventories	14	1,085	1,480	1,474
Trade and other receivables	15	378	534	835
Prepayments		80	93	113
Loans receivable		–	32	29
Receivables from related parties		16	17	18
Income tax receivable		10	10	17
Other taxes recoverable		46	53	35
Other current financial assets		35	2	4
Cash and cash equivalents	19	178	175	201
		1,728	2,396	2,732
Total assets		$ 7,139	$ 8,441	$ 8,201

EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent entity
Issued capital	20	$ 75	$ 75	$ 75
Treasury shares	20	(154)	(169)	(196)
Additional paid-in capital		2,510	2,492	2,480
Revaluation surplus	13,25	109	109	110
Unrealised gains and losses	13,25	(3,936)	(3,048)	(3,820)
Accumulated profits		791	1,676	252
Translation difference		129	257	1,928
		(1,385)	1,320	749
Non-controlling interests		920	1,938	1,938
Total equity		(465)	3,258	2,687

Non-current liabilities
Long-term loans	22, 8	3,759	4,599	4,186
Deferred income tax liabilities	23	253	352	258
Employee benefits	24	240	271	226
Provisions	25	57	321	222
Lease liabilities	25	38	83	38
Other long-term liabilities		102	40	33
		4,449	5,666	5,171
Current liabilities
Trade and other payables	26	1,264	1,378	1,216
Contract liabilities	31	314	348	320
Short-term loans and current portion of long-term loans	22, 8	140	140	377
Lease liabilities	25	34	34	104
Payables to related parties		1,078	122	122
Income tax payable		30	104	108
Other taxes payable		38	19	79
Provisions	41	169	27	24
Amounts payable under put options for shares in subsidiaries	65	69	65
		2,067	1,892	2,039
Total liabilities		6,516	7,558	7,210
Total equity and liabilities		$ 7,139	$ 8,441	$ 8,201

The accompanying notes form an integral part of these consolidated financial statements.

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Consolidated statement of cash flows

(in millions of US dollars)

Year ended 31 December	2020	2019	2018
Cash flows from operating activities
Net profit	$ 858	$ 365	$ 2,470
Adjustments to reconcile net profit to net cash flows from operating activities:
Deferred income tax (benefit)/expense (Note 8)	(142)	328	(336)
Depreciation, depletion and amortisation (Note 7)	605	578	542
(Gain)/loss on disposal of property, plant and equipment, net	3	(2)	11
Impairment of non-financial assets	310	442	341
Foreign exchange (gains)/losses, net	(408)	(341)	(8)
Interest income	(6)	(2)	(9)
Interest expense	336	359	361
Share of (profits)/losses of associates and joint ventures	(8)	(9)	(18)
Impairment of non-current financial assets	–	71	–
(Gain)/loss on financial assets and liabilities, net	–	(1)	(14)
(Gain)/loss on disposal groups classified as held for sale, net	–	(13)	(29)
Other non-operating (gains)/losses, net	56	14	14
Allowance for expected credit losses	(17)	(2)	(2)
Changes in provisions, employee benefits and other long-term assets and liabilities	(11)	(14)	(1)
Expense arising from equity-settled awards (Note 21)	1	3	5
Other	13	(2)	542
	1,593	2,057	3,063
Changes in working capital:
Inventories	250	61	(482)
Trade and other receivables	81	304	(128)
Prepayments	3	26	(48)
Receivables from/payables to related parties	5	(114)	(58)
Taxes recoverable	(30)	29	(24)
Other assets	–	(482)	–
Trade and other payables	(35)	(128)	(1)
Contract liabilities	(13)	(482)	(155)
Taxes payable	84	(58)	(9)
Other liabilities	219	(24)	108
	524	(609)	(804)
Net cash flows from operating activities	2,117	1,448	2,259

Cash flows from investing activities
Issuance of loans receivable to related parties	(1)	(1)	(1)
Issuance of loans receivable	–	–	1
Proceeds from repayment of loans receivable, including interest	1	1	4
Purchases of subsidiaries, net of cash acquired (Note 4)	–	(647)	6
Purchases of
(in millions of US dollars)


	2020	2019	2018
Cash flows from investing activities
Disposal groups held for sale (Note 12)	–	(665)	(8)
Investments in associates and joint ventures (Note 11)	92	(22)	(1,086)
Sale of associates (Note 16)	11	(378)	(5)
Proceeds from sale of other investments (Notes 18 and 13)	(521)	–	(1,556)
Short-term deposits at banks, including interest	4	–	(1)
Purchases of property, plant and equipment and intangible assets	52	–	1,412
Proceeds from disposal of property, plant and equipment	6	–	(2,459)
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs (Note 12)	–	–	–
Dividends received (Notes 11 and 16)	–	22	–
Other investing activities, net	2	19	22
Net cash flows used in investing activities	(624)	(624)	(2,606)

The accompanying notes form an integral part of these consolidated financial statements.

Annual report & accounts 2020
Consolidated statement of cash flows (continued)
(in millions of US dollars)


	2020	2019	2018
Cash flows from financing activities
Purchases of non-controlling interests (Note 4)	$ (66)	$ (71)	$ (24)
Payments for property, plant and equipment on deferred terms	(10)	–	–
Payments for investments on deferred terms (Note 11)	–	(8)	(11)
Dividends paid by the parent entity to its shareholders (Note 20)	(872)	(1,086)	(1,556)
Dividends paid by the Group’s subsidiaries to non-controlling shareholders	(5)	(5)	(1)
Proceeds from bank loans and notes (Note 22)	1,218	2,805	1,412
Repayment of bank loans and notes, including interest (Note 22)	(1,304)	(3,035)	(2,459)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest (Note 22)	(25)	22	–
Restricted deposits at banks in respect of financing activities	1	–	–
Realised gains/(losses) on derivatives not designated as hedging instruments (Note 25)	(11)	22	–
Realised gains/(losses) on hedging instruments (Note 25)	–	(23)	–
Payments under leases, including interest (Note 25)	(33)	(37)	(35)
Other financing activities, net	(1)	1	–
Net cash flows used in financing activities	(1,107)	(1,415)	(2,606)
Effect of foreign exchange rate changes on cash and cash equivalents	7	6	(48)
Net increase/(decrease) in cash and cash equivalents	204	(399)	1,466
Cash and cash equivalents at the beginning of the year	1,423	1,067	1,423
Cash and cash equivalents at the end of the year	1,627	1,423	1,067

Supplementary cash flow information:
| | | | |
| :--------------- | :---- | :---- | :---- |
| | 2020 | 2019 | 2018 |
| Interest paid | $ (284) | $ (283) | $ (320) |
| Interest received | $ 5 | $ 7 | $ 9 |
| Income taxes paid (included in operating activities) | (536) | (581) | (623) |

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

(in millions of US dollars)

	Issued capital	Treasury shares	Additional paid-in capital	Revaluation gains and surplus	Accumulated losses	Translation differences	Non-controlling interests	Total equity
Attributable to equity holders of the parent entity
At 31 December 2019	75	–	(169)	2,492	109	–	2,217	3,048
Net profit	–	–	–	–	848	–	–	848
Other comprehensive income/(loss)	–	–	–	10	(19)	–	–	(9)
Total comprehensive income/(loss) for the period	–	–	–	10	829	–	–	839
Acquisition of non-controlling interests in subsidiaries (Note 4)	–	–	–	–	–	–	(888)	(888)
Change in non-controlling interests due to reorganisation (Note 4)	–	–	–	–	–	–	7	7
Decrease in non-controlling interests due to put options (Note 4)	–	–	–	–	–	–	(41)	(41)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 and 21)	–	–	–	–	–	–	–	–
Share-based payments (Note 21)	–	–	–	–	11	–	–	11
Dividends declared by the parent entity to its shareholders (Note 20)	–	–	–	–	(872)	–	–	(872)
Dividends declared by the Group’s subsidiaries to non-controlling shareholders	–	–	–	–	–	–	(5)	(5)
At 31 December 2020	75	(154)	2,510	109	–	2,187	(3,936)	791

Attributable to equity holders of the parent entity
At 31 December 2018	75	–	(196)	2,480	110	6	(3,820)	1,681
Net profit	–	–	–	–	772	–	–	772
Other comprehensive income/(loss)	–	–	–	(14)	1	–	–	(13)
Reclassification of revaluation surplus to accumulated profits in respect of the disposed items of property, plant and equipment	–	–	–	–	1	–	–	1
Reclassification of additional paid-in capital in respect of the disposed subsidiaries	–	–	–	–	(1)	–	–	(1)
Total comprehensive income/(loss) for the period	–	–	–	(14)	772	–	–	772
Acquisition of non-controlling interests in subsidiaries (Note 4)	–	–	–	–	–	–	(888)	(888)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 and 21)	–	–	–	–	–	–	–	–
Share-based payments (Note 21)	–	–	–	–	13	–	–	13
Dividends declared by the parent entity to its shareholders (Note 20)	–	–	–	–	(1,086)	–	–	(1,086)
Dividends declared by the Group’s subsidiaries to non-controlling shareholders	–	–	–	–	–	–	(5)	(5)
At 31 December 2019	75	(169)	2,492	109	–	2,217	(3,048)	1,676

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity (continued)
(in millions of US dollars)

	Issued capital	Treasury shares	Additional paid-in capital	Revaluation gains and surplus	Accumulated losses	Translation differences	Non-controlling interests	Total equity
Attributable to equity holders of the parent entity
At 31 December 2017	1,507	(231)	2,500	111	39	–	2,406	635
Net profit	–	–	–	–	2,406	–	–	2,406
Other comprehensive income/(loss)	–	–	–	–	–	(1,043)	–	(1,043)
Transfer of realised gains on sold equity instruments to accumulated profits (Note 13)	–	–	–	(89)	89	–	–	–
Reclassification of revaluation surplus to accumulated profits in respect of the disposed items of property, plant and equipment	–	–	–	–	–	–	–	–
Reclassification of additional paid-in capital in respect of the disposed subsidiaries	–	–	–	–	–	–	–	–
Total comprehensive income/(loss) for the period	–	–	–	(89)	3,495	(1,043)	–	1,412
Reduction in par value of shares (Note 20)	(1,432)	–	–	–	–	–	–	(1,432)
Acquisition of non-controlling interests in subsidiaries (Note 4)	–	–	–	–	–	–	(21)	(21)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 and 21)	–	–	–	–	–	–	–	–
Share-based payments (Note 21)	–	–	–	–	15	–	–	15
Dividends declared by the parent entity to its shareholders (Note 20)	–	–	–	–	(1,556)	–	–	(1,556)
Dividends declared by the Group’s subsidiaries to non-controlling shareholders	–	–	–	–	–	–	(1)	(1)
At 31 December 2018	75	(196)	2,480	110	6	3,026	(3,820)	1,681

The accompanying notes form an integral part of these consolidated financial statements.

Notes to the consolidated financial statements

Year ended 31 December 2020

1. CORPORATE INFORMATION

These consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 24 February 2021. EVRAZ plc (“EVRAZ plc” or “the Company”) was incorporated on 23 September 2011 as a public company limited by shares under the laws of the United Kingdom. The Company was incorporated under the Companies Act 2006 with the registered number in England 7784342. The Company’s address is 2 Portman street, London, W1H 6DU, United Kingdom.

The Company is a holding company which owns steel, mining and trading companies. The Company, together with its subsidiaries (the “Group”), is involved in the production and distribution of steel and related products, vanadium products and coal and iron ore mining. The Group is one of the largest steel producers globally.

Until 3 September 2018 Lanebrook Limited (“Lanebrook”) registered in Cyprus was the ultimate controlling party of the Group. On that date Lanebrook distributed all its ownership interest in EVRAZ plc to its direct shareholders in proportion to their holdings in Lanebrook. At 31 December 2020, 2019 and 2018, EVRAZ plc was jointly controlled by a group of 3 shareholders: Greenleas International Holdings Limited (BVI), Abiglaze Limited (Cyprus) and Crosland Global Limited (Cyprus).

The major subsidiaries included in the consolidated financial statements of the Group were as follows at 31 December:

Subsidiary	Effective ownership interest, %	Business activity	Location	2020	2019	2018
EVRAZ Nizhny Tagil Metallurgical Plant	100.00	Steel production	Russia	100.00	100.00	100.00
EVRAZ Consolidated West-Siberian Metallurgical Plant	100.00	Steel production	Russia	100.00	100.00	100.00
EVRAZ Inc. NA	95.15*	Steel production	USA	95.15*	95.15*	88.17
EVRAZ Inc. NA	100.00	Steel production	Canada	100.00	100.00	100.00
Raspadskaya	100.00	Coal mining	Russia	100.00	100.00	100.00
Yuzhkuzbassugol	100.00	Coal mining	Russia	100.00	100.00	100.00
EVRAZ Kachkanarsky Mining-and-Processing Integrated Works	100.00	Ore mining & processing	Russia	100.00	100.00	100.00

The ownership interest in Raspadskaya and Yuzhkuzbassugol reflects the potential purchase of 4.25% in Raspadskaya under the share buyback offer disclosed in Note 4 Put Option for the Shares of Raspadskaya.

The full list of the Group’s subsidiaries and other significant holdings as of 31 December 2020 is presented in Note 34.

2.# SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

These consolidated financial statements of the Group have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (“IFRS”) adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union. The consolidated financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. Exceptions include, but are not limited to, property, plant and equipment at the date of transition to IFRS accounted for at deemed cost, equity instruments measured at fair value, assets classified as held for sale measured at the lower of their carrying amount or fair value less costs to sell and post-employment benefits measured at present value.

Annual report & accounts 2020

Basis of Preparation (continued)

Going Concern

These consolidated financial statements have been prepared on a going concern basis. The Group’s financial position at 31 December 2020 including its cash flows, liquidity position and borrowing facilities are set out in the Financial Review section. The Group’s net debt as at 31 December 2020 was $3,356 million (31 December 2019: $3,445 million) and its cash plus committed undrawn facilities were $2,564 million (31 December 2019: $1,870 million).

As disclosed in Note 30, macroeconomic uncertainty and instability have arisen due to the COVID-19 pandemic. However, the majority of the Group’s businesses were relatively unaffected with no significant issues for production, supply or shipments. Over the going concern period, we will continue to focus on operations amid signs of a recovery in demand and, therefore, prices in key markets. Furthermore, management has already taken actions to increase its liquidity with a new (undrawn) syndicated facility of $750 million having been secured with a view to the scheduled repayment of the 8.25% notes with the outstanding principal of $735 million as of 31 December 2020 (Note 28).

The management of EVRAZ plc has considered the Group’s cash flow forecasts for the period to 30 June 2022 being its going concern assessment period and has evaluated various financial performance scenarios, including a base, pessimistic and an additional stress downside test scenario. These scenarios considered the possible impacts of the COVID-19 crisis on the financial results and liquidity position of the Group as well as the potential impact of the possible coal assets demerger (Note 2, Accounting Judgements). The most pessimistic stress scenario is based upon results at the level experienced in 2009, the lowest reported results since the Group listed in 2005, and assumes prices for steel, iron ore and coal all significantly below management’s current forecasts. In this scenario, the Group maintained sufficient liquidity for the period to 30 June 2022 and would be able to operate within its debt covenants. Furthermore, since 2009 the Group disposed of some of its low-performing assets in South Africa, Ukraine, North America and the Czech Republic and acquired additional assets in the Russian Federation, which have improved the Group’s profitability despite an overall decrease in steel production capacity. The conclusions below are not changed by any currently expected potential impacts of the possible coal assets demerger, a transaction within the Group’s control and which it would not proceed with if it were to have a detrimental impact on going concern or shareholder value. The Group does not reasonably anticipate that the most pessimistic stress scenario will occur, given the relatively limited impacts on the Group’s businesses to date and the signs of a recovery in key markets. Based on this analysis and other currently available facts and circumstances directors and management have a reasonable expectation that the Company and the Group have adequate resources to continue as a going concern.

Changes in Accounting Policies

New/Revised Standards and Interpretations Adopted in 2020:

Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 “Business Combinations” clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group, but may impact future periods should the Group enter into any business combinations.
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 “Financial Instruments: Recognition and Measurement” provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no material impact on the consolidated financial statements of the Group.
Amendment to IFRS 16: COVID-19-related Rent Concessions
The amendment provides relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19-related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19-related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification.
Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of the Group.
Amendments to References to the Conceptual Framework in IFRS Standards
The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group.

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Changes in Accounting Policies (continued)

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Standards Issued But Not Yet Effective

Standards not yet effective for the financial statements for the year ended 31 December 2020	Effective for annual periods beginning on or after
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16: Interest Rate Benchmark Reform, phase 2	1 January 2021
Amendments to IFRS 4: Extension of the Temporary Exemption from Applying IFRS 9	1 January 2022*
Amendments to IFRS 3: Reference to the Conceptual Framework	1 January 2022*
Amendments to IAS 16: Proceeds before intended use	1 January 2022*
Amendments to IAS 37: Onerous Contracts — Cost of Fulfilling a Contract	1 January 2023*
Amendments to Annual improvements 2018-2020	1 January 2023*
IFRS 17 “Insurance Contracts”, including amendments	1 January 2023*
Amendments to IAS 1: Classification of Liabilities as Current or Non-current	1 January 2023*
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies	1 January 2023*
Amendments to IAS 8: Definition of Accounting Estimates	1 January 2023*

*Subject to UK endorsement

The Group expects that the adoption of the pronouncements listed above will not have a significant impact on the Group’s results of operations and financial position in the period of initial application.

Interest Rate Benchmark Reform, phase 2

Over the past few years global financial regulators developed a reform aimed at replacement of benchmark interbank offered rates (“IBORs”), such as LIBOR and EURIBOR, with new “official” benchmark rates, known as alternative risk-free rates. This reform caused changes to financial reporting requirements under IFRS. The International Accounting Standards Board tackled the changes in two phases.

Phase 1 amended specific hedge accounting requirements where uncertainty could arise in the run-up to transition;
Phase 2 addressed potential financial reporting issues that may arise when IBORs are either reformed or replaced.

In 2017 it was announced that LIBOR, one of the most widely used benchmarks, will be discontinued after December 2021, as panel banks will no longer be required to submit the quotes used to construct it. The Group has a number of short-term and long-term borrowings with variable interest rates. Currently the Group is assessing its floating-rate debt maturing after 2021 and discussing with banks the possible changes to the contract terms. It is expected that IBORs will be replaced by Secured Overnight Financing Rate (“SOFR”). All new loan agreements contain appropriate fallback language.# 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Significant Accounting Judgements and Estimates

Accounting Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimates, which have the most significant effect on the amounts recognised in the consolidated financial statements:

The Group determined based on the criteria in IFRIC 4 “Determining whether an Arrangement Contains a Lease” (before 2019) and IFRS 16 “Leases” (from 2019) that the supply contracts with PraxAir and Air Liquide do not contain a lease. These contracts include the construction of air separation plants by PraxAir and Air Liquide to be owned and operated by them and the supply of oxygen and other industrial gases produced by the entities to the Group’s steel plants for a long-term period on a take or pay basis. Management believes that these arrangements do not convey a right to the Group to use the assets as the Group does not have an ability to operate the assets or to direct other parties to operate the assets; it does not control physical access to the assets; and it is expected that more than an insignificant amount of the assets’ output will be sold to the parties unrelated to the Group. The commitments under the contracts are disclosed in Note 30.

Annual report & accounts 2020

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Significant Accounting Judgements and Estimates (continued)

Accounting Judgements (continued)

In 2019, the Group concluded a contract with Xcel Energy Inc. for the construction of a solar power plant to be owned and operated by a third party and for the supply of electricity to the Group’s steel plant for a long-term period on a take-or-pay basis. The Group determined based on the criteria in IFRS 16 “Leases” that the supply contract with Xcel Energy Inc. does not contain a lease. Management believes that this arrangement does not convey a right to the Group to use the assets as the Group does not have an ability to operate the assets or to direct other parties to operate the assets; it does not control physical access to the assets; and it is expected that more than an insignificant amount of the assets’ output will be sold to the parties unrelated to the Group. The commitments under the contract are disclosed in Note 30.
In 2019, an independent trader concluded contracts with two Group’s subsidiaries: for the purchase of semi-finished steel products with one subsidiary of the Steel segment and for the sale of semi-finished steel products with another subsidiary of the Steel North America segment. The Group analysed the nature of the contracts and determined that they require a separate recognition of the sales and purchase transactions as there is neither a tripartite agreement, nor a call or put option, which would require to treat these contracts as a single arrangement. Specifically, the trader bears full inventory and market risks, it has a full discretion in establishing prices for each contract separately based on prevailing market conditions.
In 2020, the Group sold to the independent trader 322 thousand metric tonnes of slabs for $145 million (2019: 330 thousand metric tonnes of slabs for $161 million) and purchased from it 276 thousand metric tonnes for $141 million (2019: 192 thousand metric tonnes for $108 million).
In June 2020 and January 2021, the Board of directors discussed the possible de-merger of a group of coal companies headed by Raspadskaya, which constitutes a major part of the coal segment. However, at 31 December 2020 and at the date of authorisation of these consolidated financial statements for issue, it remained uncertain whether this transaction would be finally approved by the directors and executed as there were a number of additional significant uncertainties and potential conditions pending, such as approval of the transaction by shareholders and bondholders, by the regulatory authorities of the UK and the Russian Federation. Accordingly, the classification, measurement and presentation requirements of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” have not been applied to the coal segment in the consolidated financial statements for the year ended 31 December 2020. If the transaction is approved by all respective individuals and authorities, the coal segment will meet the criteria of a major business line, consequently, its disposal shall be treated as discontinued operations.
In 2020, certain Group’s suppliers sold their accounts receivable from the Group under factoring contracts to banks with no recourse. The Group analysed these reverse factoring arrangements and determined that they do not significantly change the terms and conditions of payments, i.e. they do not contain a financing component and, consequently, should continue to be presented as trade payables in the consolidated statement of financial position and in cash flows from operating activities in the consolidated statement of cash flows. At 31 December 2020, $188 million were unpaid under the reverse factoring liabilities.

Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below.

Impairment of Property, Plant and Equipment

The Group assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the assets.

In 2020, 2019 and 2018, the Group recognised a net impairment reversal/(loss) of $(162) million, $(142) million and $(30) million, respectively (Notes 6 and 9).

The determination of impairments of property, plant and equipment involves the use of estimates that include, but are not limited to, the cause, timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current competitive conditions, expectations of growth in the industry, increased cost of capital, changes in the future availability of financing, technological obsolescence, discontinuance of service, current replacement costs and other changes in circumstances that indicate that impairment exists. The determination of the recoverable amount of a cash-generating unit involves the use of estimates by management. Methods used to determine the value in use include discounted cash flow-based methods, which require the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. These estimates, including the methodologies used, may have a material impact on the value in use and, ultimately, the amount of any impairment.

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SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Significant Accounting Judgements and Estimates (continued)

Estimation Uncertainty (continued)

Impairment of Goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

The carrying amount of goodwill at 31 December 2020, 2019 and 2018 was $457 million, $594 million and $864 million, respectively. In 2020, 2019 and 2018, the Group recognised an impairment loss in respect of goodwill in the amount of $132 million, $300 million and $Nil, respectively. More details of the assumptions used in estimating the value in use of the cash-generating units to which goodwill is allocated are provided in Note 6.

Deferred Income Tax Assets

At 31 December 2020, 2019 and 2018, the Group had recognised net deferred tax assets of $245 million, $152 million and $92 million, respectively (Note 8). These assets mostly related to the US and Canadian subsidiaries and mainly consisted of the unused tax losses and tax credits. Such assets are recognised only to the extent that there are sufficient taxable temporary differences or there is convincing evidence that sufficient taxable profits will be available against which the deductible temporary differences can be utilised. The assumptions about generation of future taxable profits depend on management’s estimates of future cash flows and are contained in yearly budgets and long-term forecasts. Judgements and assumptions are also required about the application of income tax legislation, expiration of tax losses carried forward and tax planning strategies.# 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

All these judgements and assumptions are subject to risks and uncertainties, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the consolidated statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances some or all of the carrying amounts of the recognised deferred tax assets may require a material adjustment within the next year, resulting in a corresponding credit or charge to the consolidated statement of operations.

Post-Employment Benefits

The Group uses an actuarial valuation method for the measurement of the present value of post-employment benefit obligations and related current service cost. This involves the use of demographic assumptions about the future characteristics of the current and former employees who are eligible for benefits (mortality, both during and after employment, rates of employee turnover, disability and early retirement, etc.) as well as financial assumptions (discount rate, future salary and benefit levels, expected rate of return on plan assets, etc.). More details are provided in Note 23.

Foreign Currency Transactions

The presentation currency of the Group is the US dollar because presentation in US dollars is most relevant for the major current and potential users of the consolidated financial statements. The functional currencies of the Group’s subsidiaries are the Russian rouble, US dollar, euro, Czech koruna, Canadian dollar and Ukrainian hryvnia. At the reporting date, the assets and liabilities of the subsidiaries with functional currencies other than the US dollar are translated into the presentation currency at the rate of exchange ruling at the end of the reporting period, and their statements of operations are translated at the exchange rates that approximate the exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to a separate component of equity. On disposal of a subsidiary with functional currency other than the US dollar, the deferred cumulative amount recognised in equity relating to that particular subsidiary is recognised in the statement of operations.

The following exchange rates were used in the consolidated financial statements:

	31 December 2020	31 December 2019	31 December 2018
USD/RUB Average	73.8757	72.1464	61.9057
EUR/USD Average	1.1271	1.1422	1.1234
USD/CAD Average	1.2740	1.3413	1.2968
USD/UAH Average	n/a	n/a	n/a
	2020	2019	2018
USD/RUB Average	64.7362	69.4706	62.7078
EUR/USD Average	1.1195	1.1450	1.1810
USD/CAD Average	1.3269	1.3658	1.2962
USD/UAH Average	26.1337	27.6883	27.2029

Transactions in foreign currencies in each subsidiary of the Group are initially recorded in the functional currency at the rate ruling at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the end of the reporting period. All resulting differences are taken to the statement of operations. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Annual report & accounts 2020

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of Consolidation

Subsidiaries

Subsidiaries, which are those entities in which the Group has an interest of more than 50% of the voting rights and over which the Group has control, or otherwise has power to exercise control over their operations, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from the parent’s shareholders’ equity. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Acquisition of Subsidiaries

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

The initial accounting for a business combination involves identifying and determining the fair values to be assigned to the acquiree’s identifiable assets, liabilities and contingent liabilities and the cost of the combination. If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is effected because either the fair values to be assigned to the acquiree’s identifiable assets, liabilities or contingent liabilities or the cost of the combination can be determined only provisionally, the Group accounts for the combination using those provisional values. The Group recognises any adjustments to those provisional values as a result of completing the initial accounting within twelve months of the acquisition date. Comparative information presented for the periods before the completion of initial accounting for the acquisition is presented as if the initial accounting had been completed from the acquisition date.

Increases in Ownership Interests in Subsidiaries

The differences between the carrying values of net assets attributable to interests in subsidiaries acquired and the consideration given for such increases is either added to additional paid-in capital, if positive, or charged to accumulated profits, if negative, in the consolidated financial statements.

Purchases of Controlling Interests in Subsidiaries from Entities under Common Control

Purchases of controlling interests in subsidiaries from entities under common control are accounted for using the pooling of interests method. The assets and liabilities of the subsidiary transferred under common control are recorded in these financial statements at the historical cost of the controlling entity (the “Predecessor”). Related goodwill inherent in the Predecessor's original acquisition is also recorded in the financial statements. Any difference between the total book value of net assets, including the Predecessor's goodwill, and the consideration paid is accounted for in the consolidated financial statements as an adjustment to the shareholders' equity. These financial statements, including corresponding figures, are presented as if a subsidiary had been acquired by the Group on the date it was originally acquired by the Predecessor.

Put Options over Non-controlling Interests

The Group derecognises non-controlling interests if non-controlling shareholders have a put option over their holdings. The difference between the amount of the liability recognised in the statement of financial position and the carrying value of the derecognised non-controlling interests is charged to accumulated profits.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments in Associates

Associates are entities in which the Group generally has between 20% and 50% of the voting rights, or is otherwise able to exercise significant influence, but which it does not control or jointly control. Investments in associates are accounted for under the equity method of accounting and are initially recognised at cost including goodwill. Subsequent changes in the carrying value reflect the post-acquisition changes in the Group’s share of net assets of the associate and goodwill impairment charges, if any. The Group’s share of its associates’ profits or losses is recognised in the statement of operations and its share of movements in reserves is recognised in equity. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has legal or constructive obligations to make payments to, or on behalf of, the associate.# 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interests in Associates and Joint Ventures

If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Interests in Joint Ventures

The Group’s interest in its joint ventures is accounted for under the equity method of accounting whereby an interest in jointly ventures is initially recorded at cost and adjusted thereafter for post-acquisition changes in the Group's share of net assets of joint ventures. The statement of operations reflects the Group's share of the results of operations of joint ventures.

Property, Plant and Equipment

The Group’s property, plant and equipment is stated at purchase or construction cost, excluding the costs of day-to-day servicing, less accumulated depreciation and any impairment in value. Such cost includes the cost of replacing part of plant and equipment when that cost is incurred and recognition criteria are met. The Group’s property, plant and equipment include mining assets, which consist of mineral reserves, mine development and construction costs and capitalised site restoration costs. Mineral reserves represent tangible assets acquired in business combinations. Mine development and construction costs represent expenditures incurred in developing access to mineral reserves and preparations for commercial production, including sinking shafts and underground drifts, roads, infrastructure, buildings, machinery and equipment.

At each end of the reporting period management makes an assessment to determine whether there is any indication of impairment of property, plant and equipment. If any such indication exists, management estimates the recoverable amount, which is the higher of an asset’s fair value less cost to sell and its value in use. The carrying amount is reduced to the recoverable amount, and the difference is recognised as impairment loss in the statement of operations or other comprehensive income. An impairment loss recognised for an asset in previous years is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount. Land is not depreciated.

Depreciation of property, plant and equipment, except for mining assets, is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives of items of property, plant and equipment and methods of their depreciation are reviewed, and adjusted as appropriate, at each fiscal year end. The table below presents the useful lives of items of property, plant and equipment.

Useful lives (years)	Weighted average remaining useful life (years)
Buildings and constructions	15–60
Machinery and equipment	4–45
Transport and motor vehicles	7–20
Other assets	3–15

The Group determines the depreciation charge separately for each significant part of an item of property, plant and equipment.

Depletion of mining assets including capitalised site restoration costs is calculated using the units-of-production method based upon proved and probable mineral reserves. The depletion calculation takes into account future development costs for reserves which are in the production phase. Maintenance costs relating to items of property, plant and equipment are expensed as incurred. Major renewals and improvements are capitalised, and the replaced assets are derecognised. The Group has the title to certain non-production and social assets, primarily buildings and facilities of social infrastructure, which are carried at their recoverable amount of zero. The costs to maintain such assets are expensed as incurred.

Mineral Reserves

The Group estimates its mineral reserves in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”). Estimation of reserves in accordance with the JORC Code involves some degree of uncertainty. The uncertainty depends mainly on the amount of reliable geological and engineering data available at the time of the estimate and the interpretation of this data, which also requires use of subjective judgement and development of assumptions. The changes in the pricing environment and geology-related risk factors may lead to a revision of mining plans, decisions to abandon or to mothball certain parts of a mine, to a reassessment of the capital expenditures required for the extraction of the proved and probable reserves, as well as to the changes in the resources classified as proved and probable reserves. These changes may have an impact on the depletion charge and impairment, which may arise as a result of a decline in the recoverable amounts of the affected mines.

Exploration and Evaluation Expenditures

Exploration and evaluation expenditures represent costs incurred by the Group in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. The expenditures include acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling, activities in relation to evaluating the technical feasibility and commercial viability of extracting mineral resources. These costs are expensed as incurred. When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the Group commences recognition of expenditures related to the development of mineral resources as assets. These assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

Leases

Group as a Lessee

The determination of whether an arrangement is, or contains, a lease is done at contract inception and includes the assessment of whether the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term or exercise a purchase option, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Otherwise, the lessee depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Right-of-use assets are subject to impairment. The right-of-use assets are included in the Property, plant and equipment caption of the statement of financial position (Note 9).

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The incremental borrowing rate is determined based on the Group’s borrowing rates for similar terms and currencies in an economic environment, in which the lessee operates. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment of plans to purchase the underlying asset.

The lease term is a non-cancellable period for which a lessee has the right to use an underlying asset, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain to not be exercised. The lease term of cancellable or renewable leases is dependent of the enforceability of the contract beyond the date on which it can be terminated. The contract is enforceable if only one party of the lease contract has the right to terminate the lease without permission from the other party with no more than an insignificant penalty. In this case the Group, as a lessee, assesses whether it is reasonably certain to exercise an extension option, or not to exercise a termination option.# Lease accounting

Lease payments for contracts with a duration of 12 months or less or leases for which the underlying assets are of low value are not recognised as lease liabilities. They are expensed to the statement of operations on a straight-line basis over the lease term and included in cost of revenues, selling, general and administrative expenses. Information about lease arrangements is disclosed in Note 25.

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Group as a Lessor

Finance leases, in which the Group acts as a lessor, when substantially all the risks and benefits incidental to ownership of the leased item are transferred to the lessee, are recognised as net investments in finance lease from the commencement of the lease term at the present value of the minimum lease payments. Lease payments are apportioned between the finance income and reduction of the lease receivable so as to achieve a constant rate of interest on the remaining balance of receivables. Finance income is included in the interest income caption. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases (Note 9). Operating lease income is recognised within the rendering of services caption on a straight-line basis over the lease term.

Accounting for Leases before 2019

Before 1 January 2019 the Group recognised as liabilities only finance lease arrangements. Finance leases, which involved the transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, were capitalised from the commencement of the lease term at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges were charged to interest expense. Leases where the lessor retained substantially all the risks and benefits of ownership of the asset were classified as operating leases. Operating lease payments were recognised as an expense in the statement of operations on a straight-line basis over the lease term.

Goodwill

Goodwill represents the excess of the aggregate of the consideration transferred for an acquisition of a subsidiary or an associate and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the acquiree, the difference is recognised in the consolidated statement of operations. Goodwill on acquisition of a subsidiary is included in intangible assets. Goodwill on acquisition of an associate is included in the carrying amount of the investments in associates.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently, if events or changes in circumstances indicate that the carrying amount may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Impairment is determined by assessing the recoverable amount of the cash-generating unit, or the group of cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets Other Than Goodwill

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditures on internally generated intangible assets, excluding capitalised development costs, are expensed as incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite life are reviewed at least at each year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are treated as changes in accounting estimates. Intangible assets with indefinite useful lives are not amortised, they are tested for impairment annually either individually or at the cash-generating unit level. The table below presents the useful lives of intangible assets.

Useful lives (years)	Weighted average remaining useful life (years)
Customer relationships	1–15
Contract terms	3
Other	3
	4
	5–19

Certain water rights and environmental permits are considered to have indefinite lives as management believes that these rights will continue indefinitely. The most part of the Group’s intangible assets represents customer relationships arising on business combinations (Note 10).

Financial Assets

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them, i.e. how the Group manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. With the exception of trade and other receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. The Group measures financial assets at amortised cost if both of the following conditions are met:
* The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows and
* The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Trade and Other Accounts Receivable

Trade and other receivables are recognised at their transaction price as defined in IFRS 15 “Revenue” if they do not contain a significant financing component or if the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. For trade and other receivables, the Group applies a simplified approach for calculating the expected credit losses. Therefore, the Group does not track changes in credit risk, but, instead, it recognises a loss allowance based on the lifetime expected credit losses at each reporting date. The Group separately determines the expected credit losses for individually significant balances or collectively for trade and other receivables that are not individually significant. The expected credit losses for individually significant balances are estimated using debtors’ historical credit loss experience adjusted for forward- looking factors specific to the debtors and economic environment.

Inventories

Inventories are recorded at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average basis and includes expenditure incurred in acquiring or producing inventories and bringing them to their existing location and condition. The cost of finished goods and work in progress includes an appropriate share of production overheads based on normal operating capacity, but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Value Added Tax

The tax authorities permit the settlement of sales and purchases value added tax (“VAT”) on a net basis. The Group’s subsidiaries apply the accrual method for VAT recognition, under which VAT becomes payable upon invoicing and delivery of goods or rendering services as well upon receipt of prepayments from customers. VAT on purchases, even if not settled at the end of the reporting period, is deducted from the amount of VAT payable.# 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Equity

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction in equity from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital.

Treasury Shares

Own equity instruments which are acquired by the Group (treasury shares) are deducted from equity. No gain or loss is recognised in statement of operations on the purchase, sale, issue or cancellation of the treasury shares. Any difference between the carrying amount and the consideration, if reissued, is recognised in additional paid-in capital.

Dividends

Dividends are recognised as a liability and deducted from equity only if they are declared before the end of the reporting period. Dividends are disclosed when they are proposed before the end of the reporting period or proposed or declared after the end of the reporting period but before the financial statements are authorised for issue.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

Site Restoration Provisions

The Group reviews site restoration provisions at each reporting date and adjusts them to reflect the current best estimate in accordance with IFRIC 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities”. Provisions for site restoration costs are capitalised within property, plant and equipment.

Employee Benefits

Social and Pension Contributions

Defined contributions are made by the Group to the Russian and Ukrainian state pension, social insurance and medical insurance funds at the statutory rates in force based on gross salary payments. The Group has no legal or constructive obligation to pay further contributions in respect of those benefits. Its only obligation is to pay contributions as they fall due. These contributions are expensed as incurred.

Defined Benefit Plans

The Group companies provide pensions and other benefits to their employees (Note 23). The entitlement to these benefits is usually conditional on the completion of a minimum service period. Certain benefit plans require the employee to remain in service up to retirement age. Other employee benefits consist of various compensations and non-monetary benefits. The amounts of benefits are stipulated in the collective bargaining agreements and/or in the plan documents. The Group involves independent qualified actuaries in the measurement of employee benefit obligations. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses on post-employment benefit obligations, the effect of the asset ceiling, and the return on plan assets (excluding amounts included in interest income), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in profit or loss on the earlier of the date of the plan amendment or curtailment, and the date that the Group recognises restructuring-related costs. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. It is recorded within interest expense in the consolidated statement of operations. The Group recognises current service costs, past-service costs, gains and losses on curtailments and non-routine settlements in the consolidated statement of operations within “cost of sales”, “general and administrative expenses” and “selling and distribution expenses”.

Other Costs

The Group incurs employee costs related to the provision of benefits such as health services, kindergartens and other services. These amounts principally represent an implicit cost of employment and, accordingly, have been charged to cost of sales.

Share-based Payments

The Group has management compensation schemes (Note 21), under which certain senior executives and employees of the Group receive remuneration in the form of share-based payment transactions, whereby they render services as consideration for equity instruments (“equity-settled transactions”). The cost of equity-settled transactions with grantees is measured by reference to the fair value of the Company’s shares at the date on which they are granted. The fair value is determined using the Black-Scholes-Merton model. In valuing equity-settled transactions, no account is taken of any conditions, other than market conditions. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity (additional paid-in capital), over the period in which service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (“the vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit in the statement of operations for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards if EBITDA-related conditions are not satisfied or participants lose the entitlement for the shares due to the termination of their employment. Accumulated share-based expense is adjusted to reflect the number of share options that eventually vest. For market-related performance conditions, such as TSR (Note 21), if the conditions are not met and the share options do not vest, then no reversal is made for the share-based expense previously recognised. The TSR-related vesting condition of Incentive Plans adopted in 2017, 2018, 2019 and 2020 was considered by the Group as a market condition. As such, it was included in the estimation of the fair value of the granted shares and will not be subsequently revised. Vesting condition related to EBITDA was not taken into account when estimating the fair value of the share options at the grant date. Instead, this will be taken into account by adjusting the share-based expense based on the number of share options that eventually vest. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. The dilutive effect of outstanding share-based awards is reflected as additional share dilution in the computation of earnings per share (Note 20).

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of Goods

The Group recognises revenues from sales of goods at the point in time when control of the asset is transferred to the customer and it is probable that the amount of consideration is collectible. The moment of transfer of control is determined by the contract terms and usually occurs at the date of shipment. Some contracts with customers provide a right of return, trade discounts or volume rebates. The Group recognises revenue from the sale of goods measured at the fair value of the consideration received or receivable, net of the estimated returns and price concessions, trade discounts and volume rebates.# 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue (continued)

Rendering of Services

The Group’s revenues from rendering of services include electricity, transportation and other services. The pattern of revenue recognition reflects the transfer of services to customers and may occur at a point in time or over time.

Advances from Customers

The Group receives only short-term advances from its customers. The Group uses the practical expedient provided in IFRS 15, which allows not to adjust the promised amount of consideration for the effects of a significant financing component in the contracts where the Group expects, at contract inception, that the period between the Group’s transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Therefore, for short-term advances, the Group does not account for a financing component even if it is significant.

Interest

Interest is recognised using the effective interest method.

Dividends

Dividend income is recognised when the shareholders’ right to receive the payment is established.

Rental Income

Rental income is accounted for on a straight-line basis over the lease term on ongoing leases.

Government Grants

Government grants are recognised at their fair value, when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Grants related to non-monetary assets are presented in the statement of financial position by deducting the grant in arriving at the carrying amount of the asset and are recognised as a deduction from depreciation expense over the life of the asset. Government grants related to costs are deducted from the relevant expenses to be compensated in the same period.

Current Income Tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognised outside profit or loss is recognised in other comprehensive income or equity and not in the statement of operations.

Deferred Income Tax

Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred income taxes are provided for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes, except where the deferred income tax arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Various factors are considered to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plans, expiration of tax losses carried forward, tax legislation and tax planning strategies. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

3. SEGMENT INFORMATION

For management purposes the Group has four reportable operating segments:

Steel segment includes production of steel and related products at all mills except for those located in North America. Extraction of vanadium ore and production of vanadium products, iron ore mining and enrichment and certain energy-generating companies are also included in this segment as they are closely related to the main process of steel production.
Steel, North America is a segment, which includes production of steel and related products in the USA and Canada.
Coal segment includes coal mining and enrichment.
Other operations include energy-generating companies, shipping and railway transportation companies.

Management and investment companies are not allocated to any of the segments.

Operating segments have been aggregated into reportable segments if they show a similar long-term economic performance, have comparable production processes, customer industries and distribution channels, operate in the same regulatory environment, and are generally managed and monitored together.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

Management monitors the results of the operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on EBITDA. This performance indicator is calculated based on management accounts and differs from the IFRS consolidated financial statements for the following reasons:

1) for the last month of the reporting period management accounts are prepared using a forecast for that month;
2) certain unallocated costs are treated as segment expenses in management accounts.

Before 2020 there were additional differences between the IFRS indicators and the figures of management accounts, such as non-consolidation of certain subsidiaries in management accounts, use of the adjusted local GAAP figures and simplified methods of translation into presentation currency.

Segment revenue is revenue reported in the Group's statement of operations that is directly attributable to a segment and the relevant portion of the Group’s revenue that can be allocated to it on a reasonable basis, whether from sales to external customers or from transactions with other segments.

Segment expense is expense resulting from the operating activities of a segment that is directly attributable to the segment and the relevant portion of an expense that can be allocated to it on a reasonable basis, including expenses relating to external counterparties and expenses relating to transactions with other segments. Segment expense does not include social and social infrastructure maintenance expenses.

Segment result is segment revenue less segment expense that is equal to earnings before interest, tax, depreciation and amortisation (“EBITDA”) for that segment.

Segment EBITDA is determined as a segment’s profit/(loss) from operations adjusted for social and social infrastructure maintenance expenses, impairment of assets, profit/(loss) on disposal of property, plant and equipment and intangible assets, foreign exchange gains/(losses) and depreciation, depletion and amortisation expense. Management believes that this measure is useful and relevant for the users and gives a better comparison with the Russian steel peers.

SEGMENT INFORMATION (CONTINUED)

The following tables present measures of segment profit or loss based on management accounts.# 3. SEGMENT INFORMATION (CONTINUED)

Year ended 31 December 2020

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Revenue
Sales to external customers	$6,902	$1,779	$952	$121	$9,754
Inter-segment sales	67	–	538	289	(894)
Total revenue	6,969	1,779	1,490	410	9,754
Segment result – EBITDA	$1,888	$(22)	$396	$17	$2,299

Year ended 31 December 2019

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Revenue
Sales to external customers	$7,903	$2,517	$1,273	$186	$11,879
Inter-segment sales	175	–	735	303	(1,213)
Total revenue	8,078	2,517	2,008	489	11,879
Segment result – EBITDA	$1,668	$38	$883	$19	$2,640

Year ended 31 December 2018

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Revenue
Sales to external customers	$8,373	$2,593	$1,533	$214	$12,713
Inter-segment sales	343	–	1,322	279	(1,944)
Total revenue	8,716	2,593	2,855	493	12,713
Segment result – EBITDA	$2,701	$18	$1,180	$17	$3,902

In 2020, chief operating decision makers ceased to review the amounts of revenue reported by management accounts. Instead of them, the revenue based on IFRS is used for performance analysis. The comparative information has not been restated since it contains currently used IFRS measures.

Annual report & accounts 2020

3. SEGMENT INFORMATION (CONTINUED)

The following table shows a reconciliation of revenue and EBITDA used by management for decision making and revenue and profit or loss before tax per the consolidated financial statements prepared under IFRS.

Year ended 31 December 2020

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Total Revenue per IFRS financial statements	$6,969	$1,779	$1,490	$410	$9,754
EBITDA	$1,888	$(22)	$396	$17	$2,299
Unrealised profits adjustment	(48)	–	(4)	1	(51)
Reclassifications and other adjustments	–	(126)	3	90	38
EBITDA based on IFRS financial statements	$1,838	$(148)	$395	$108	$2,286
Unallocated subsidiaries	1,930	(28)	400	15	2,317
Social and social infrastructure maintenance expenses	(24)	–	(2)	–	(26)
Depreciation, depletion and amortisation expense	(261)	(5)	(147)	(189)	(600)
Impairment of assets	(310)	3	(3)	–	(310)
Gain on disposal of property, plant and equipment and intangible assets	–	(3)	–	–	(3)
Foreign exchange gains/(losses), net	(55)	2	122	–	69
Unallocated income/(expenses), net	$1,308	$(181)$	$260$	$(74)$	$1,254$
Profit/(loss) from operations	$1,342	329	1,585	(484)	2,212
Interest income/(expense), net	(322)	1,671	(3)	12	1,358
Share of profits/(losses) of joint ventures and associates	3	–	–	21	24
Gain/(loss) on financial assets and liabilities	(71)	–	–	–	(71)
Gain/(loss) on disposal groups classified as held for sale	14	–	–	–	14
Other non-operating gains/(losses), net	–	–	–	334	334
Profit/(loss) before tax	$1,295	1,900$	1,582$	(117)$	3,857$

Meet EVRAZ EVRAZ in ﬁgures Strategic report Corporate governance Financial statements Additional information | 180 181

3. SEGMENT INFORMATION (CONTINUED)

Year ended 31 December 2019

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Total Revenue	$8,078	$2,517	$2,008	$489	$11,879
Reclassifications and other adjustments	65	(17)	13	(6)	(29)
Revenue per IFRS financial statements	$8,143	$2,500	$2,021	$483	$11,905
EBITDA	$1,668	$38	$883	$19	$2,640
Unrealised profits adjustment	81	–	41	–	139
Reclassifications and other adjustments	46	–	(81)	(1)	(37)
EBITDA based on IFRS financial statements	$1,795	$38	$843	$18	2,601
Unallocated subsidiaries	1,795	38	843	18	2,601
Social and social infrastructure maintenance expenses	(17)	–	(3)	–	(20)
Depreciation, depletion and amortisation expense	(254)	(26)	(147)	(168)	(573)
Impairment of assets	(107)	(4)	–	–	(111)
Gain on disposal of property, plant and equipment and intangible assets	1	4	(3)	–	2
Foreign exchange gains/(losses), net	(10)	46	(30)	10	16
Unallocated income/(expenses), net	$1,406$	$61$	$665$	$(140)$	$1,935$
Profit/(loss) from operations	$1,584	367$	1,489$	(368)$	3,069$
Interest income/(expense), net	(328)	1,217	9	24	922
Share of profits/(losses) of joint ventures and associates	(56)	–	–	48	(8)
Impairment of non-current financial assets	29	–	–	–	29
Gain/(loss) on financial assets and liabilities	2	–	–	–	2
Gain/(loss) on disposal groups classified as held for sale	14	–	–	–	14
Other non-operating gains/(losses), net	–	–	–	532	532
Profit/(loss) before tax	$902$	1,584$	1,498$	(164)$	4,500$

Annual report & accounts 2020

3. SEGMENT INFORMATION (CONTINUED)

Year ended 31 December 2018

US$ million

	Steel, Other	Steel North America	Coal operations	Eliminations	Total
Total Revenue	$8,716	$2,593	$2,855	$493	$12,713
Reclassifications and other adjustments	163	(10)	(518)	(21)	509
Revenue per IFRS financial statements	$8,879	$2,583	$2,337	$472	$12,836
EBITDA	$2,701	$18	$1,180	$17	$3,902
Unrealised profits adjustment	(46)	–	(25)	–	(71)
Reclassifications and other adjustments	4	1	17	(4)	77
EBITDA based on IFRS financial statements	$2,672	14	1,218	17	3,777
Unallocated subsidiaries	2,672	14	1,218	17	3,777
Social and social infrastructure maintenance expenses	(25)	–	(2)	–	(27)
Depreciation, depletion and amortisation expense	(239)	(18)	(137)	(158)	(551)
Impairment of assets	(10)	(3)	–	–	(13)
Loss on disposal of property, plant and equipment and intangible assets	(3)	(2)	(6)	–	(11)
Foreign exchange gains/(losses), net	31	(72)	30	(2)	(13)
Unallocated income/(expenses), net	$2,374$	(78)$	1,103$	(143)$	3,210$
Profit/(loss) from operations	3,159	369	2,418	(199)	5,737
Interest income/(expense), net	(341)	3,201	9	12	2,881
Share of profits/(losses) of joint ventures and associates	(10)	–	–	13	3
Gain/(loss) on financial assets and liabilities	–	–	–	–	–
Gain/(loss) on disposal groups classified as held for sale	–	–	–	–	–
Other non-operating gains/(losses), net	–	–	–	2	2
Profit/(loss) before tax	$3,201$	3,570$	2,427$	(172)$	8,620$

Meet EVRAZ EVRAZ in ﬁgures Strategic report Corporate governance Financial statements Additional information | 182 183

3. SEGMENT INFORMATION (CONTINUED)

The revenues from contracts with external customers for each group of similar products and services and rental income are presented in the following table:

US$ million

	2020	2019	2018
Steel, North America
Construction products	$2,013	$2,166	$2,280
Flat-rolled products	146	386	415
Railway products	2,166	2,280	2,528
Semi-finished products	1,099	1,181	1,167
Other steel products	2,479	2,528	2,521
Other products	342	377	399
Iron ore	965	965	965
Vanadium in slag	2,521	2,521	2,521
Vanadium in alloys and chemicals	377	377	377
Rendering of services	64	71	71
Steel, North America Total	6,902	7,944	8,504
Construction products	183	170	170
Flat-rolled products	323	200	247
Railway products	743	518	597
Tubular products	1,128	1,167	1,167
Other products	211	168	168
Rendering of services	38	24	25
Steel, North America Total	1,779	2,500	2,583
Coal
Coal	929	1,251	1,506
Other products	9	15	21
Rendering of services	14	25	25
Coal Total	952	1,291	1,552
Other operations
Rendering of services	121	121	174
Other operations Total	121	121	174
Total	9,754	11,879	12,836

Revenue from rendering of services included rental income, which was mainly attributable to the subsidiaries of the steel segment.

US$ million

	2020	2019	2018
Revenues from contracts to customers	$9,729	$11,873	$12,822
Rental income	25	32	14
Total	9,754	11,905	12,836

Annual report & accounts 2020

3. SEGMENT INFORMATION (CONTINUED)

Distribution of the Group’s revenues by geographical area based on the location of customers for the years ended 31 December was as follows:

US$ million

CIS	2020	2019	2018
Russia	$3,722	$4,373	$4,564
Kazakhstan	279	297	237
Ukraine	80	291	480
Uzbekistan	63	71	76
Belarus	58	46	50
Kyrgyzstan	72	58	58
Others	46	49	49
CIS Total	4,306	5,238	5,500

America	2020	2019	2018
USA	$1,060	$735	$61
Canada	1,701	847	119
Mexico	59	42	92
Others	59	537	154
America Total	2,879	2,213	426

Asia	2020	2019	2018
China	$1,052	$525	$338
Taiwan	271	255	244
Philippines	106	61	61
Indonesia	95	478	433
Republic of Korea	478	680	631
Japan	680	387	346
United Arab Emirates	244	243	409
Mongolia	282	124	186
Thailand	243	61	5
Vietnam	77	58	133
India	57	225	81
Singapore	69	35	45
Others	247	225	43
Asia Total	2,949	2,893	2,716

Europe	2020	2019	2018
European Union	$314	$135	$12
Turkey	767	166	23
Others	461	956	1,426
Europe Total	1,542	1,257	1,461

Africa	2020	2019	2018
Kenya	$87	$63	$77
Egypt	5	27	17
Others	30	122	107
Africa Total	122	212	201

Other countries	2020	2019	2018
Total	$9,754	$11,905	$12,836

None of the Group’s customers amounts to 10% or more of the consolidated revenues.

Meet EVRAZ EVRAZ in ﬁgures Strategic report Corporate governance Financial statements Additional information | 184 185

3. SEGMENT INFORMATION (CONTINUED)

Non-current assets other than financial instruments, deferred tax assets and post-employment benefit assets were located in the following countries at 31 December:

US$ million

	2020	2019	2018
Russia	$3,500	$643	$818
Canada	643	981	1,221
USA	818	827	791
Kazakhstan	32	38	41
Czech Republic	37	–	–
Italy	–	35	35
Other countries	3	3	3
Total	5,033	2,527	2,909

4. CHANGES IN THE COMPOSITION OF THE GROUP

Purchase of Non-controlling Interests

Raspadskaya

In 2020, the Group acquired an additional 2.73% ownership interest in Raspadskaya, a subsidiary of the Group, for cash consideration of $27 million. The excess of the carrying values of non-controlling interests acquired over consideration amounting to $7 million was credited to additional paid-in capital.

In 2019, the Group acquired an additional 1.8% ownership interest in Raspadskaya for cash consideration of $25 million. The excess of consideration over the carrying values of non-controlling interests acquired amounting to $3 million was charged to accumulated profits.

In addition, in June 2019 Raspadskaya purchased its own shares in course of the tender offer for cash consideration of $46 million. The Group derecognised 2.53% of non-controlling interests and charged to accumulated profits $7 million representing the excess of consideration over the carrying values of non-controlling interests acquired.

In the course of the closed subscription in September 2019 Raspadskaya issued 80,285 new shares, and Evraz Group S.A. acquired 80,284 shares, thus increasing the Group’s stake in the subsidiary by 0.0014%.In 2018, the Group acquired an additional 1.89% ownership interest in Raspadskaya for cash consideration of $24 million. The excess of consideration over the carrying values of non-controlling interests acquired amounting to $3 million was charged to accumulated profits.

Mezhegeyugol
On 14 March 2017, the Group signed an option agreement with a non-controlling shareholder in respect of shares of Mezhegeyugol, a coal mining subsidiary of the Group. Under the agreement, the non-controlling shareholder had the right to sell to the Group (the put option) all its shares in Mezhegeyugol (39.9841%) for $39 million and to settle the loan payable to the Group for $25 million. As a result, the Group would hold 100% ownership interest in the subsidiary. The option could be exercised from 1 December 2019 to 1 December 2020. In 2017, the Group determined that the terms of the option agreement give the Group the rights to the beneficial interests in Mezhegeyugol and derecognised the non-controlling interests in full and recognised a liability under the put option in the amount of $60 million. From March 2017 and until the put option exercise the Group accrued $9 million interest on this liability ($1 million, $3 million and $4 million in 2020, 2019 and 2018, respectively). In June 2020, the non-controlling shareholder sold its interest to the Group. The consideration for the purchased non-controlling interest comprised of a non-cash settlement of a loan owed to the Group with a carrying value of $30 million, which approximated the fair value, and $39 million of cash consideration.

Change in Non-controlling Interests due to Reorganisation
In 2020, EVRAZ plc decided to reorganise its business structure combining all coal operations in one group headed by Raspadskaya. On 30 December 2020, Nizhny Tagil Metallurgical Plant, a wholly-owned subsidiary of the Group, sold its 100% ownership interest in Yuzhkuzbassugol (which is in turn the parent entity of Mezhegeyugol) to Raspadskaya for cash consideration of RUB 67,741 million ($920 million at the date of the transaction). As a result, the Group’s interest in Yuzhkuzbassugol was diluted from 100% to 90.90%. The carrying value of non-controlling interests decreased by $45 million, being the share of non-controlling shareholders in the excess of cost of acquisition of Yuzhkuzbassugol over its consolidated net assets, with a corresponding increase in the Group’s accumulated profits through the consolidated statement of changes in equity.

Annual report & accounts 2020
4. CHANGES IN THE COMPOSITION OF THE GROUP (CONTINUED)

Put Option for the Shares of Raspadskaya
In the course of the Group’s business and ownership structure reorganisation, as described above in Change in Non-controlling Interests due to Reorganisation, Raspadskaya followed the Russian legislation, which, in particular, required the approval of the potential acquisition of Yuzhkuzbassugol by the majority of the voted non-controlling shareholders of Raspadskaya. The non-controlling shareholders who voted against or did not vote have the right to sell their stakes to Raspadskaya at a price being the fair value determined by an independent appraiser (RUB 164 per share). At the same time the liability for the share repurchase is limited to 10% of net assets of JSC Raspadskaya, thus, the number of shares to be repurchased is proportionately reduced if all potential shareholders cannot be satisfied. Consequently, the Group derecognised the non-controlling interests relating to the shareholders, which have a put option over their holding (4.25% of the total shares of Raspadskaya), with the carrying value of $30 million, and recognised a $65 million liability to these shareholders at fair value. The difference between the amount of the recognised liability and the carrying value of the derecognised non-controlling interests was charged to accumulated profits. On 1 February 2021, Raspadskaya completed the collection of the share repurchase requests from eligible non-controlling shareholders. The actual number of shares to be repurchased amounted to 2.51% of Raspadskaya’s share capital, which is equal to a $38 million liability. On expiry of the put option the difference with the liability originally recognised was reversed through equity with a corresponding increase of the non-controlling interests of $27 million in relation to those shareholders who did not exercise the option.

Sale of Subsidiaries
In 2019, the Group sold EVRAZ Stratcor Inc, EVRAZ Palini e Bertoli, and Evraztrans-Ukraine. In 2018, the Group sold Dneprovsk Metallurgical Plant. Further details of these transactions are disclosed in Note 12.

GOODWILL

Goodwill relates to the assembled workforce and synergy from integration of the acquired subsidiaries into the Group. The table below presents movements in the carrying amount of goodwill.

Gross Impairment losses	Carrying amount
US$ million	US$ million
At 31 December 2017	$ 2,403
Sale of subsidiaries (Note 12)	(112)ꢀ
Translation difference	(70)ꢀ
At 31 December 2018	$ 917
Sale of subsidiaries (Note 12)	–ꢀ
Impairment of Large diameter pipes	17
Translation difference	(53)
At 31 December 2019	$ 864
Impairment	–
Large diameter pipes	–
Oil Country Tubular Goods	30
Translation difference	34
At 31 December 2020	$ 457

amount	$	$
$	2,221ꢀ	$ (1,357)ꢀ
	(63)	63
	–	–
	(300)	(300)
	30	30
	34	34
	(4)	(4)
$	2,192	$ (1,598)

	(65)	(65)
	(67)	(67)
	(12)	(12)
	(65)	(65)
	(67)	(67)
	(5)	(5)
$	2,199	$ (1,742)

The carrying amount of goodwill was allocated among cash-generating units as follows at 31 December:

US$ million	2020	2019	2018
EVRAZ Inc. NA/EVRAZ Inc. NA Canada	$ 392	$ 525	$ 799ꢀ
Large diameter pipes	–	68	76
Oil Country Tubular Goods	349	316	316
Long products	27	35	33
EVRAZ Vanady-Tula	3	4	3
EVRAZ Nikom, a.s.	141	316	316
Others	32	33	29ꢀ
	$ 457	$ 594	$ 864ꢀ

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IMPAIRMENT OF NON-FINANCIAL ASSETS

A summary of impairment losses recognition and reversals relating to non-financial assets is presented below.

	Year ended 31 December 2020	Year ended 31 December 2020
	Goodwill and intangible assets	Property, plant and equipment
US$ million	Total	EVRAZ Inc. NA Canada
	$ (301)	$ (148)
EVRAZ Inc. NA	(7)	(153)
Others, net	(2)	(7)
Recognised in profit or loss	$ (310)	$ (162)

	Year ended 31 December 2019	Year ended 31 December 2019
	Goodwill and intangible assets	Property, plant and equipment
US$ million	Total	EVRAZ Inc. NA Canada
	$ (300)	$ (300)
Raspadskaya	(92)	(142)
EVRAZ Consolidated	(18)	(142)
West-Siberian Metallurgical Plant	(15)	–
Yuzhkuzbassugol	(11)	–
EVRAZ Nizhny Tagil Metallurgical Plant	(8)	–
EVRAZ Inc. NA	3	–
Others, net	$ (442)	$ (442)
Recognised in profit or loss
	Year ended 31 December 2018	Year ended 31 December 2018
	Goodwill and intangible assets	Property, plant and equipment
US$ million	Total	EVRAZ Stratcor Inc.
	$ –	$ (12)
Yuzhkuzbassugol	$ (6)	$ (6)
Evrazruda	$ (4)	$ (4)
Others, net	$ (8)	$ (8)
Recognised in profit or loss	$ (30)	$ (30)

In 2018-2020, the Group made a write-off of certain functionally obsolete items of property, plant and equipment. In 2019, the Group decided to postpone reopening of a coal mine MUK-96, a subsidiary of Raspadskaya. In connection with this decision the recoverable amount of mining assets relating to this mine ($84 million) was reassessed and fully impaired. In addition, the Group recognised impairment losses as a result of impairment testing at the level of cash-generating units. For the purpose of the impairment testing the Group assessed the recoverable amount of each cash-generating unit to which goodwill was allocated or where indicators of impairment were identified. In 2018-2020, the impairment tests were performed as of 30 September, the conclusions were reassessed at 31 December and no further impairment triggers were identified. The recoverable amounts for all cash-generating units, except for Large diameter pipes in 2019, have been determined based on the calculation of value-in-use. This valuation technique uses cash flow projections based on the actual operating results and business plans approved by management and appropriate discount rates reflecting the time value of money and risks associated with respective cash-generating units. For the periods not covered by management business plans, terminal value is used. The terminal value is calculated based on the cash flow projections by extrapolating the results of the respective business plans using a zero real growth rate. In 2019, the recoverable amount of Large diameter pipes was determined based on the calculation of fair value less costs of disposal as it was deemed to produce a more reliable result. This valuation method was based on unobservable inputs (discounted cash flows), which represent Level 3 of the fair value hierarchy.

Annual report & accounts 2020
6. IMPAIRMENT OF NON-FINANCIAL ASSETS (CONTINUED)

The key assumptions used by management in the impairment tests with respect to the cash-generating units to which the goodwill was allocated or units containing intangible assets with indefinite useful lives are presented in the table below.

Carrying amount of CGU at 30 September*, US$ million	Recoverable amount of CGU before impairment at 30 September, US$ million	Period of forecast, years	Pre-tax discount rate, %	Average price of commodity per tonne in the next reporting year
2020	2019	2020	2019	2020
Steel	North America	Large diameter pipes	steel products	steel products

Sales Volumes

Management assumed that the sales volumes of steel products in 2021 will change by (12)%–3% and future dynamics will be driven by a gradual market recovery and removal of anti-dumping duties allowing the Group to utilise assets’ capacities to a greater extent. Reasonably possible changes in sales volumes could lead to an additional impairment at Large diameter pipes and Oil Country Tubular Goods. If the sales volumes were 10% lower than those assumed for 2021 and 2022 in the impairment test, this would lead to an additional impairment of $18 million.

Cost Control Measures

The recoverable amounts of cash-generating units are based on the business plans approved by management. A reasonably possible deviation in cost from these plans could lead to an additional impairment at Large diameter pipes, Oil Country Tubular Goods, Seamless pipes, Flat-rolled products and Nikom. If the actual costs were 10% higher than those assumed for 2021 and 2022 in the impairment test, this would lead to an additional impairment of $134 million.

The impact of reasonably possible changes in assumptions is summarised in the table below.

US$ million	Large diameter pipes	Oil Country Tubular Goods	Flat-rolled products	Seamless pipes	Nikom	Steel North America
Discount rates	$ (81)	$ (100)	$ (18)	$ (134)	$ (39)	$ (2)
Sales prices	$ (66)	$ (75)	$ (28)	$ (34)	$ (4)	$ (2)
Sales volumes	$ (16)	$ (29)	$ (11)	$ (6)	–	–
Cost control measures	$ (2)	$ (3)	$ (1)	$ (2)	–	–

Sensitivity Analysis

For the cash-generating units, which were not impaired in the reporting period and for which the reasonably possible changes could lead to impairment, the recoverable amounts would become equal to their carrying amounts if the assumptions used to measure the recoverable amounts changed by the following percentages:

	Nikom	Steel North America	Flat-rolled products	Seamless pipes	Large diameter pipes	Oil Country Tubular Goods
Discount rates	6.7%	–	9.5%	1.5%	(2.0)%	–
Sales prices	–	–	1.2%	–	–	–
Sales volumes	–	–	–	–	–	–
Cost control measures	3.0%	–	–	–	–	–

7. INCOME AND EXPENSES

Cost of revenues, selling and distribution costs, general and administrative expenses include the following for the years ended 31 December:

US$ million	2020	2019	2018
Cost of inventories recognised as expense	$ (3,495)	$ (4,595)	$ (4,580)
Staff costs, including social security taxes	(1,331)	(1,464)	(1,326)
Depreciation, depletion and amortisation	(605)	(578)	(542)

In 2020, 2019 and 2018, the Group recognised expense on allowance for net realisable value in the amount of $(2) million, $(4) million and $Nil, respectively.

Staff costs include the following:

US$ million	2020	2019	2018
Wages and salaries	$ 958	$ 1,047	$ 968
Social security costs	257	274	245
Net benefit expense	37	41	38
Share-based awards	11	13	15
Other compensations	68	89	60
Total	$ 1,331	$ 1,464	$ 1,326

The average number of staff employed under contracts of service was as follows:

	2020	2019	2018
Steel	45,332	44,512	45,282
Steel, North America	3,199	4,295	3,877
Coal	15,440	14,655	13,505
Other operations	837	927	882
Unallocated	2,531	2,345	2,344
Total	67,339	66,734	65,890

The major components of other operating expenses were as follows:

US$ million	2020	2019	2018
Stoppage of production, including termination benefits	$ (37)	$ (20)	$ (17)
Restoration works and casualty compensations in connection with accidents	(2)	(3)	(3)
Other	(26)	(31)	(35)
Total	$ (65)	$ (54)	$ (55)

Interest expense consisted of the following for the years ended 31 December:

US$ million	2020	2019	2018
Bank interest	$ (63)	$ (60)	$ (74)
Interest on bonds and notes	(228)	(231)	(248)
Interest on lease liabilities (Note 25)	(6)	(8)	–
Net interest expense on employee benefits obligations (Note 23)	(11)	(17)	(13)
Discount adjustment on provisions (Note 24)	(13)	(18)	(16)
Other	(3)	(6)	(8)
Total Net interest expense	$ (328)	$ (336)	$ (359)

Interest income consisted of the following for the years ended 31 December:

US$ million	2020	2019	2018
Interest on bank accounts and deposits	$ 5	$ 7	$ 9
Interest on loans and accounts receivable	1	1	7
Other	–	1	2
Total Interest Income	$ 6	$ 8	$ 18

Gain/(loss) on financial assets and liabilities included the following for the years ended 31 December:

US$ million	2020	2019	2018
Gain/(loss) on extinguishment of debts (Notes 22, 25)	$ 2	$ (27)	$ (1)
Gain/(loss) on derivatives not designated as hedging instruments (Note 25)	(69)	38	3
Realised gain/(loss) on hedging instruments (Note 25)	–	(23)	11
Net gains/(losses) on cash flow hedges recycled to profit or loss	–	33	–
Other	(4)	(4)	(4)
Total	$ (71)	$ 17	$ 13

In 2020, the Group’s costs relating to the COVID-19 pandemic included contributions to funds and hospitals, payments to employees during sick leave, laboratory testing, purchase of medical supplies and equipment. These costs in the total amount of $25 million were recorded in Cost of revenue, General and administrative expenses, Social expenses, Other operating expenses. Also in 2020 the Canadian subsidiaries received $19 million of the Canada Emergency Wage Subsidy. This income-related government grant reduced the amounts of staff costs and the related expense captions of the consolidated statement of operations. Operating costs incurred during production stoppages for an extended period of time, such as preparatory works for stoppage of workshops, maintenance expenses relating to the idle assets, termination benefits for the dismissed employees or compensations to those who were on temporary leave, have been classified as “stoppage of production” costs within other operating expenses.

8. INCOME TAXES

The Group’s income was subject to tax at the following tax rates:

	2020	2019	2018
Russia	20.00% and 16.50%	25.09%	26.08%
Canada	12.50%	19.00%	19.00%
Cyprus	–	–	–
Italy	18.00%	18.00%	18.00%
Switzerland	19.00%	19.00%	19.00%
Ukraine	24.87%	24.69%	27.90%
United Kingdom	19.00%	19.00%	19.00%
USA	24.57%	27.90%	9.62%

In 2018, EVRAZ Nizhny Tagil Metallurgical Plant completed capital construction works, which make it eligible for investment tax credit from the regional government. Income tax rate was reduced from 20% to 16.5% for a period from 2018 to 2022.# 8. INCOME TAXES (CONTINUED)

The Group determined that the investment tax credit is in the scope of IAS 12 “Income taxes”. As a result, in 2020, 2019 and 2018, EVRAZ Nizhny Tagil Metallurgical Plant and other subsidiaries included in the group of consolidated taxpayers received a current income tax benefit amounting to $28 million, $33 million and $37 million, respectively.

Major components of income tax expense for the years ended 31 December were as follows:

US$ million	2020	2019	2018
Current income tax expense	$(575)	$(540)	$(679)
Adjustment in respect of income tax of previous years	$8	$4	$4
Deferred income tax benefit/(expense) relating to origination and reversal of temporary differences	144	(2)	(6)
Deferred income tax recognised directly in other comprehensive income	1	(54)	6
Income tax (expense)/benefit reported in the consolidated statement of operations	$(437)	$(537)	$(731)

The major part of income taxes is paid in the Russian Federation. A reconciliation of income tax expense applicable to profit before income tax using the Russian statutory tax rate to income tax expense as reported in the Group’s consolidated financial statements for the years ended 31 December is as follows:

US$ million	2020	2019	2018
Profit/(loss) before income tax	$1,295	$902	$3,201
At the Russian statutory income tax rate of 20%	$(259)	$(180)	$(640)
Adjustment in respect of income tax of previous years	$(4)	$8	$33
Current income tax benefit from investment tax credit	$28	$37	–
Other tax credits recognised/(utilised)	$16	–	–
Current tax on dividends distributed by the Group’s subsidiaries	–	–	$(53)
Change in deferred tax on undistributed earnings of the Group’s subsidiaries	$(213)	$(178)	$(130)
Effect of non-deductible expenses and other non-temporary differences	$(19)	$(58)	$(95)
Unrecognised temporary differences recognition/reversal	$(96)	$(35)	$(37)
Effect of the difference in tax rates in countries other than the Russian Federation	$70	$23	$57
Share of profits in joint ventures and associates	$12	$2	$2
Income tax (expense)/benefit reported in the consolidated statement of operations	$(437)	$(537)	$(731)

As of 31 December 2020, the Group accrued deferred income taxes in respect of undistributed earnings of the Group’s subsidiaries in the amount of $46 million (2019: $54 million, 2018: $35 million). The current tax rate on intra-group dividend income varies from 0% to 15%. The temporary differences associated with investments in subsidiaries were not recognised as the Group is able to control the timing of the reversal of these temporary differences and does not intend to reverse them in the foreseeable future. At 31 December 2020, the aggregate amount of such temporary differences, for which deferred tax liabilities have not been recognised, amounted to $63 million (2019: $59 million, 2018: $101 million).

Annual report & accounts 2020

8. INCOME TAXES (CONTINUED)

In the context of the Group’s current structure, tax losses and current tax assets of the different companies may not be set off against current tax liabilities and taxable profits of other companies in the same jurisdiction, except for the companies registered in Cyprus, Russia, the USA and the United Kingdom where group relief and tax consolidation can be applied.

As of 31 December 2020, the unused tax losses carried forward approximated $10,503 million (2019: $8,620 million, 2018: $9,321 million). The Group recognised deferred tax assets of $275 million (2019: $234 million, 2018: $199 million) in respect of unused tax losses. This includes $172 million (2019: 141 million, 2018: $124 million) in respect of unused tax losses in Canada which expire after 20 years if not utilised. Deferred tax assets in the amount of $2,244 million (2019: $1,878 million, 2018: $2,287 million) have not been recorded as it is not probable that sufficient taxable profits will be available in the foreseeable future to offset these losses. Tax losses of $9,071 million (2019: $7,592 million, 2018: $8,492 million) for which deferred tax assets were not recognised arose in companies registered in Canada, Cyprus, Italy, Kazakhstan, Luxembourg, Russia, Ukraine, the United Kingdom and the USA. Losses in the amount of $8,975 million (2019: $7,499 million, 2018: $8,399 million) are available indefinitely for offset against future taxable profits of the companies in which the losses arose and $96 million will expire within 10 years (2019: $93 million, 2018: $93 million).

Deferred income tax assets and liabilities and their movements for the years ended 31 December were as follows:

Year ended 31 December 2020

US$ million	Change recognised in statement of operations	Change recognised in other comprehensive income	Change due to disposal of subsidiaries	Translation difference	Other movements	2019
Deferred income tax liabilities:
Valuation and depreciation of property, plant and equipment	$ 402	30	(57)	(12)	–	–
Valuation and amortisation of intangible assets	96	(41)	–	–	(9)	–
Other	708	528	(110)	(70)	–	–
Deferred income tax assets:
Tax losses available for offset	275	4	(3)	(8)	2	–
Accrued liabilities	115	45	(2)	32	–	–
Impairment of accounts receivable	126	520	(22)	–	–	–
Other	508	–	–	–	–	–
Net deferred income tax asset	245	91	2	–	–	–
Net deferred income tax liability	–	–	–	–	–	–
Total	$ 253	$(51)	$(48)	$ 352	–	–

Year ended 31 December 2019

US$ million	Change recognised in statement of operations	Change recognised in other comprehensive income	Change due to disposal of subsidiaries	Translation difference	Other movements	2018
Deferred income tax liabilities:
Valuation and depreciation of property, plant and equipment	$ 519	43	(3)	(9)	43	–
Valuation and amortisation of intangible assets	146	–	–	7	13	–
Other	708	31	(6)	55	615	–
Deferred income tax assets:
Tax losses available for offset	234	15	29	(1)	(7)	(1)
Accrued liabilities	129	14	–	(1)	13	9
Impairment of accounts receivable	130	508	26	–	15	5
Other	508	152	–	(7)	28	7
Net deferred income tax asset	55	60	–	–	34	–
Net deferred income tax liability	–	–	–	–	–	–
Total	$ 352	$ 60	–	$ 34	–	–

Other movements in deferred tax assets and liabilities represent adjustments in connection with the adoption of IFRS 16 “Leases” (Note 2).

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193

8. INCOME TAXES (CONTINUED)

Year ended 31 December 2018

US$ million	Change recognised in statement of operations	Change recognised in other comprehensive income	Change due to disposal of subsidiaries	Translation difference	Other movements	2017
Deferred income tax liabilities:
Valuation and depreciation of property, plant and equipment	$ 469	50	(4)	–	–	(73)
Valuation and amortisation of intangible assets	96	(8)	–	–	(4)	–
Other	615	27	15	–	(11)	(88)
Deferred income tax assets:
Tax losses available for offset	199	95	3	(42)	(15)	(7)
Accrued liabilities	152	152	(42)	(25)	(10)	(2)
Impairment of accounts receivable	128	449	(33)	(65)	(4)	(1)
Other	92	173	(6)	(44)	(11)	(1)
Net deferred income tax asset	–	–	–	–	–	–
Net deferred income tax liability	–	–	–	–	–	–
Total	$ 258	$(17)	$ 2	–	$(55)	–

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, including right-of-use assets, consisted of the following as of 31 December:

US$ million	2020	2019	2018
Cost
Land	$ 97	$ 102	$ 100
Buildings and constructions	1,786	1,899	1,752
Machinery and equipment	4,595	4,758	4,302
Transport and motor vehicles	333	369	226
Mining assets	2,126	2,468	2,084
Other assets	36	34	35
Assets under construction	707	681	378
Total	9,680	10,311	8,877
Accumulated depreciation, depletion and impairment losses
Buildings and constructions	(903)	(943)	(857)
Machinery and equipment	(3,051)	(2,904)	(2,647)
Transport and motor vehicles	(207)	(200)	(145)
Mining assets	(943)	(998)	(1,152)
Other assets	(25)	(28)	(26)
Total	(5,339)	(5,380)	(4,675)
Government grants	4,314	4,925	4,202

Annual report & accounts 2020

9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The movement in property, plant and equipment, including right-of-use assets, was as follows:

Year ended 31 December 2020

US$ million	Land	Buildings and constructions	Machinery and equipment	Transport and motor vehicles	Mining assets	Other assets	Assets under construction	Total
At 31 December 2019, cost, net of accumulated depreciation	$ 102	$ 956	$ 1,854	$ 169	$ 1,160	$ 9	$ 675	$ 4,925
Additions	–	–	–	–	–	–	128	128
Assets put into operation	–	7	401	2	3	–	725	1,139
Disposals	–	(78)	(356)	(64)	(2)	–	(544)	(1,044)
Depreciation and depletion charge	–	(624)	(734)	(78)	(78)	(2)	–	(1,516)
Impairment losses recognised in statement of operations	–	–	–	–	–	–	(163)	(163)
Impairment losses reversed through statement of operations	–	3	–	–	–	–	5	8
Change in site restoration and decommissioning provision	–	1	–	–	–	–	(3)	(2)
Government grants	–	(169)	(7)	(1)	(3)	–	–	(180)
Translation difference	(122)	(193)	(189)	(20)	(608)	–	(20)	(1,152)
At 31 December 2020, cost, net of accumulated depreciation	$ 97	$ 883	$ 1,544	$ 126	$ 974	$ 10	$ 680	$ 4,314

Year ended 31 December 2019

US$ million	Land	Buildings and constructions	Machinery and equipment	Transport and motor vehicles	Mining assets	Other assets	Assets under construction	Total
At 31 December 2018, cost, net of accumulated depreciation	$ 100	$ 895	$ 1,655	$ 12	$ 1,086	$ 7	$ 378	$ 4,202
IFRS 16 adoption: recognition of right-of-use assets (Note 2)	–	–	–	–	–	–	68	68
At 1 January 2019, cost, net of accumulated depreciation	$ 100	$ 895	$ 1,655	$ 12	$ 1,086	$ 7	$ 446	$ 4,270
Additions	–	1	50	–	4	–	387	442
Assets put into operation	–	4	46	–	–	–	828	878
Assets acquired in business combinations	–	(3)	(82)	(3)	(4)	–	(46)	(138)
Disposals	–	(331)	(555)	(4)	(13)	–	(101)	(1,004)
Depreciation and depletion charge	–	(550)	(828)	(14)	(608)	(26)	–	(2,026)
Impairment losses recognised in statement of operations	–	(4)	(4)	–	(4)	–	–	(12)
Impairment losses reversed through statement of operations	–	6	–	–	–	–	–	6
Change in site restoration and decommissioning provision	–	7	–	–	–	–	–	7
Government grants	–	(6)	–	–	–	–	–	(6)
Translation difference	–	13	55	–	55	–	7	130
At 31 December 2019, cost, net of accumulated depreciation	$ 100	$ 102	$ 956	$ 956	$ 169	$ 1,160	$ 9	$ 675

Assets under construction include prepayments to constructors and suppliers of property, plant and equipment in the amount of $22 million, $77 million and $36 million as of 31 December 2020, 2019 and 2018, respectively. Impairment losses were identified in respect of certain items of property, plant and equipment that were recognised as functionally obsolete or as a result of the testing at the level of cash-generating units (Note 6). The amount of borrowing costs capitalised during the year ended 31 December 2020 was $Nil (2019: $Nil, 2018: $1 million).

Right-of-Use Assets

In 2020 and 2019, the movement in right-of-use assets were as follows:

US$ million	Land	Buildings and constructions	Machinery and equipment	Transport and motor vehicles	Total
At 1 January 2019, assets under finance leases, cost, net of accumulated depreciation	$ 3	$ 1	$ 3	$ –	$ 7
Newly recognised right-of-use assets	–	–	–	–	–
Total right-of-use assets at 1 January 2019	$ 3	$ 1	$ 3	$ –	$ 7
Additions	–	–	–	–	–
Purchase of right-of-use assets	–	40	11	48	107
Depreciation charge	(3)	(7)	(19)	(30)	(59)
Transfer to assets held for sale	–	–	(2)	(2)	(4)
Translation difference	–	12	(2)	9	19
At 31 December 2019, cost, net of accumulated depreciation	$ –	$ 48	$ 56	$ 115	$ 219
Additions	–	–	–	–	–
Disposals	–	–	–	–	–
Depreciation charge	–	(2)	(8)	(2)	(12)
Impairment	–	(1)	(1)	–	(2)
Translation difference	–	(8)	(9)	–	(17)
At 31 December 2020, cost, net of accumulated depreciation	$ –	$ 37	$ 38	$ 113	$ 188

The liabilities related to the right-of-use assets are disclosed in Note 25.

Assets in Operating Lease

The Group acts as a lessor in some operating lease contracts. The carrying value of assets in operating lease at 31 December 2020 and 2019 was $31 million and $66 million, respectively, the main part of which relates to railroad cars representing the right-of-use assets in sublease.

US$ million	Buildings and constructions	Machinery and equipment	Transport and motor vehicles	Total
At 31 December 2020, cost, net of accumulated depreciation	$ 1	$ 3	$ 27	$ 31
At 31 December 2019, cost, net of accumulated depreciation	$ 8	$ 22	$ 36	$ 66

In 2020 and 2019, rental income amounted to $25 million and $32 million, respectively, including $19 million and $25 million, respectively, of income from subleasing of right-of-use assets.

At 31 December 2020, the undiscounted lease payments to be received under operating leases were as follows:

US$ million	2021	2022	2023	2024	2025	In more than 5 years	Total
Lease payments under operating leases	$ 22	$ 12	$ 2	$ 2	$ 2	$ 11	$ 51

At 31 December 2019, the undiscounted lease payments to be received under operating leases were as follows:

US$ million	2020	2021	2022	2023	2024	In more than 5 years	Total
Lease payments under operating leases	$ 25	$ 26	$ 15	$ 3	$ 3	$ 20	$ 92

10. INTANGIBLE ASSETS OTHER THAN GOODWILL

Intangible assets consisted of the following as of 31 December:

US$ million	2020	2019	2018
Cost:
Customer relationships	$ 686	$ 678	$ 656
Water rights and environmental permits	57	57	57
Contract terms	20	24	21
Other	64	67	64
Total cost	$ 827	$ 826	$ 798
Accumulated amortisation and impairment:
Customer relationships	$ (617)	$ (567)	$ (525)
Water rights and environmental permits	(13)	(13)	(13)
Contract terms	(14)	(15)	(11)
Other	(45)	(46)	(43)
Total accumulated amortisation and impairment	$ (689)	$ (641)	$ (592)
Net carrying amount	$ 138	$ 185	$ 206

As of 31 December 2020, 2019 and 2018, water rights and environmental permits with a carrying value of $44 million had an indefinite useful life.

The movement in intangible assets was as follows:

Year ended 31 December 2020

US$ million	Customer relationships	Water rights and environmental permits	Contract terms	Other	Total
At 31 December 2019, cost, net of accumulated amortisation	$ 111	$ 44	$ 9	$ 21	$ 185
Additions	–	–	–	–	–
Amortisation charge	(27)	–	(2)	(6)	(35)
Impairment	(16)	–	(1)	(3)	(20)
Translation difference	(1)	–	(3)	–	(4)
At 31 December 2020, cost, net of accumulated amortisation	$ 69	$ 44	$ 6	$ 19	$ 138

Year ended 31 December 2019

US$ million	Customer relationships	Water rights and environmental permits	Contract terms	Other	Total
At 31 December 2018, cost, net of accumulated amortisation	$ 131	$ 44	$ 10	$ 21	$ 206
Additions	–	–	–	–	–
Amortisation charge	(26)	–	(2)	(6)	(34)
Translation difference	6	–	7	–	13
At 31 December 2019, cost, net of accumulated amortisation	$ 111	$ 44	$ 9	$ 21	$ 185

Year ended 31 December 2018

US$ million	Customer relationships	Water rights and environmental permits	Contract terms	Other	Total
At 31 December 2017, cost, net of accumulated amortisation	$ 180	$ 44	$ 15	$ 20	$ 259
Additions	–	–	–	10	10
Amortisation charge	(36)	–	(2)	(6)	(44)
Translation difference	–	–	(3)	(3)	(6)
At 31 December 2018, cost, net of accumulated amortisation	$ 144	$ 44	$ 10	$ 21	$ 219

11. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The Group accounted for investments in joint ventures and associates under the equity method. The movement in investments in joint ventures and associates was as follows:

US$ million	Timir	Streamcore	Other associates	Total
Investment at 31 December 2017	$ 21	$ 47	$ 11	$ 79
Share of profit/(loss)	9	–	(1)	8
Dividends paid	–	–	(1)	(1)
Translation difference	(1)	(1)	(13)	(15)
Investment at 31 December 2018	$ 17	$ 47	$ (3)	$ 61
Additional investments	–	–	3	3
Share of profit/(loss)	7	3	9	19
Dividends paid	–	(2)	(1)	(3)
Translation difference	1	6	8	15
Investment at 31 December 2019	$ 25	$ 54	$ 16	$ 95
Disposal of investments	–	–	(1)	(1)
Share of profit/(loss)	–	(1)	1	–
Dividends paid	–	–	(1)	(1)
Translation difference	(3)	(10)	(13)	(26)
Investment at 31 December 2020	$ 22	$ 43	$ 3	$ 68

Timir Iron Ore Project

In April 2013, the Group acquired a 51% ownership interest in the joint venture with Alrosa for the development of 4 iron ore deposits in the southern part of the Yakutia region in Russia. Under the joint venture agreement major operating and financial decisions are made by unanimous consent of the Group and Alrosa, and no single venturer is in a position to control the activity unilaterally. Consequently, the Group accounts for its interest in Timir under the equity method. The Group’s consideration for this stake amounted to 4,950 million roubles ($159 million at the exchange rate as of the date of the transaction) payable in instalments to 15 July 2014. The consideration was measured as the present value of the expected cash outflows. Later the payment schedule was changed by extending the payment period until 2019. From the dates of the amendments the Group incurred interest charges on the unpaid liability. In 2019 and 2018, the Group paid 480 million roubles ($8 million) and 500 million roubles ($9 million), respectively, of purchase consideration and $1 million and $2 million, respectively, of interest charges. Previously, the Group paid the principal of 3,970 million roubles ($104 million) in total. In addition, the Group paid interest charges on the liability. At 31 December 2018, trade and other accounts payable included liabilities relating to this acquisition in the amount of $8 million. In January 2019, the liability was fully settled.

The table below sets out Timir’s assets and liabilities as of 31 December:

US$ million	2020	2019	2018
Mineral reserves and property, plant and equipment	$ 46	$ 54	$ 48
Other non-current assets	6	7	6
Total assets	52	61	54
Current liabilities	24	27	21
Total liabilities	24	27	21
Net assets	28	34	33
Net assets attributable to 51% ownership interest	$ 14	$ 17	$ 17

In 2020, 2019 and 2018, Timir’s statement of operations included only other income and expenses amounting to $Nil, $(1) million and $(2) million, respectively. At 31 December 2020, 2019 and 2018 Timir owed to the Group $9 million, $9 million and $7 million, respectively, which were included in the receivables from related parties caption. The amounts represent a loan bearing interest of 6.45% per annum.

Streamcore

The Group owns a 50% interest in Streamcore (Cyprus), a joint venture established for the purpose of exercising joint control over facilities for scrap procurement and processing in Siberia, Russia.# 12. DISPOSAL GROUPS HELD FOR SALE

The table below sets out Streamcore’s assets and liabilities as of 31 December:

US$ million	2020	2019	2018
Property, plant and equipment	$ 23	$ 25	$ 21
Other non-current assets	95	96	94
Inventories	9	10	9
Accounts receivable	151	129	181
Total assets	217	260	305
Deferred income tax liabilities	3	4	4
Current liabilities	108	109	86
Total liabilities	111	113	90
Net assets	106	147	215
Net assets attributable to 50% ownership interest	$ 54	$ 63	$ 94

The table below sets out Streamcore’s income and expenses:

US$ million	2020	2019	2018
Revenue	$ 385	$ 502	$ 579
Cost of revenue	(367)	(478)	(553)
Other expenses, including income taxes	(16)	(10)	(8)
Net profit	2	14	18
Group’s share of profit of the joint venture	7	1	1

The table below demonstrates the carrying values of assets and liabilities, at the dates of disposal, of the subsidiaries and other business units disposed of during 2018–2020.

US$ million	2020	2019	2018
Property, plant and equipment	$ –	$ 39	$ 65
Goodwill	–	–	–
Other non-current assets	–	26	2
Inventories	–	34	38
Accounts receivable	–	46	46
Cash and cash equivalents	–	22	168
Total assets	–	167	219
Employee benefits	–	–	7
Other non-current liabilities	–	13	21
Current liabilities	110	130	147
Total liabilities	110	143	175
Non-controlling interests	–	(15)	(12)
Net assets	$ –	$ 8	$ 32

The net assets of disposal groups sold in 2018–2020 related to the following reportable segments:

US$ million	2020	2019	2018
Assets classified as held for sale	$ –	$ 168	$ 153
Steel	–	155	153
Coal	–	13	–
Other operations	–	–	–
Liabilities directly associated with assets classified as held for sale	–	130	168
Steel	–	124	168
Coal	–	6	–
Other operations	–	–	–
Non-controlling interests	–	–	(15)
Net assets	$ –	$ 38	$ (32)

Cash flows on disposal of subsidiaries and other business units were as follows:

US$ million	2020	2019	2018
Net cash disposed of with subsidiaries	$ –	$ 11	$ (2)
Cash received	99	(47)	54
Tax and transaction costs paid	–	(8)	44
Net cash inflow	11	52	96

The disposal groups sold during 2018–2020 are described below.

Stratcor Inc.
On 11 October 2019, the Group sold its wholly-owned subsidiary EVRAZ Stratcor Inc. to a third party for cash consideration of 1 US dollar. EVRAZ Stratcor Inc. is a vanadium producer located in the USA, it was included in the steel segment of the Group’s operations. The Group recognised a $19 million gain on sale of the subsidiary within the Gain/(loss) on disposal groups classified as held for sale caption of the consolidated statement of operations. Cash disposed with the subsidiary amounted to $Nil.

Evraztrans Ukraine
On 15 November 2019, the Group sold its wholly-owned subsidiary Evraztrans Ukraine to a third party for cash consideration of $8 million. Evraztrans Ukraine is a railway forwarder located in Ukraine, it was included in 2 segments of the Group’s operations – other operations and steel. The Group recognised a $(36) million loss on sale of the subsidiary, including $(37) million of cumulative exchange losses reclassified from other comprehensive income to the consolidated statement of operations. The result was included in the Gain/(loss) on disposal groups classified as held for sale caption of the consolidated statement of operations. Cash disposed with the subsidiary amounted to $Nil. At 31 December 2019, the sale consideration was unsettled. In 2020, it was fully received in cash.

Yartsevo Rolling Mill
Historically, the Group was one of major creditors of a steel-rolling mill in Yartsevo located in the Smolensk region of Russia. The mill went into the bankruptcy proceedings and in the 1st half of 2019 the Group impaired the non-current financial asset relating to the mill, recognising a $56 million loss, which was recorded in the Impairment of non-current financial assets caption of the consolidated statement of operations. At 30 June 2019, the resulting carrying value of the non-current financial asset was $21 million. In November 2019, the Group acquired property, plant and equipment and inventory of this rolling mill from the auction undertaken in the course of the bankruptcy proceedings for $22 million with the purpose of subsequent sale to a third party. The proceeds from the sale were used by the bankruptcy administrator to partially repay the debts of the mill, the majority of which were the debts to the Group. Upon acquisition the acquired non-current asset was classified as a disposal group held for sale. Shortly after the acquisition the Group sold the mill for cash consideration of $66 million to a third-party acquirer. The gain on sale before tax amounting to $44 million was included in the Gain/(loss) on disposal groups classified as held for sale caption of the consolidated statement of operations. Income tax paid on a resale margin amounted to $8 million. At the moment of the acquisition the Group did not have any arrangement for the sale of the mill to a new purchaser, therefore, the purchase and sale transactions were not treated as linked.

Palini e Bertoli
On 2 December 2019, the Group sold its wholly-owned subsidiary EVRAZ Palini e Bertoli to a third party for cash consideration of $36 million. EVRAZ Palini e Bertoli, an Italian rolling mill, was included in the steel segment of the Group’s operations. The Group recognised a $2 million gain on sale of the subsidiary, including $(5) million of cumulative exchange losses reclassified from other comprehensive income to the consolidated statement of operations and $(1) of transaction costs. The result was included in the Gain/(loss) on disposal groups classified as held for sale caption of the consolidated statement of operations. Cash disposed with the subsidiary amounted to $47 million. At 31 December 2019, $3 million of the sale consideration was unsettled. In 2020, it was fully received in cash.

Dneprovsk Metallurgical Plant
On 6 March 2018, the Group sold Dneprovsk Metallurgical Plant (Ukraine), in which it had a 97.73% ownership interest, to a third party for cash consideration of $35 million. The consideration was payable in 2 instalments: $25 million was received upon signing of the transaction documents and the rest was settled in December 2018. The Group received interest income on deferred consideration in the amount of $1 million. Prior to disposal the subsidiary was included in the steel segment. The Group recognised a $(10) million loss on sale of the subsidiary, including $(60) million of cumulative exchange losses reclassified from other comprehensive income to the consolidated statement of operations. The result was included in the Gain/(loss) on disposal groups classified as held for sale caption of the consolidated statement of operations. Cash disposed with the subsidiary amounted to $2 million.

13. OTHER NON-CURRENT ASSETS

Other non-current assets consisted of the following as of 31 December:

Non-current Financial Assets

US$ million	2020	2019	2018
Derivatives not designated as hedging instruments (Note 25)	$ 2	$ 17	$ –
Trade and other receivables	18	16	17
Loans receivable	–	1	1
Receivables from related parties	6	6	6
Restricted deposits	–	–	1
Other	–	–	66
Total	$ 26	$ 40	$ 91

Other Non-current Assets

US$ million	2020	2019	2018
Safety stock inventories	$ 28	$ 24	$ 8
Defined benefit asset (Note 23)	12	–	9
Income tax receivable	6	8	8
Other	9	3	8
Total	$ 55	$ 35	$ 33

Other Non-current Financial Assets

In 2018, the Group’s other non-current financial assets mainly related to a steel-rolling mill located in the Smolensk region of Russia. In 2019, these assets were partially impaired and the remaining balance was settled by cash (Note 12).

Financial Assets Measured at Fair Value Through Other Comprehensive Income

At 31 December 2017, the Group held approximately 15% in Delong Holdings Limited (“Delong”), a flat steel producer headquartered in Beijing (China). At that date the investments in Delong were classified as available-for-sale and measured at fair value based on market quotations of the Singapore Exchange. At 31 December 2017, the carrying value of these investments amounted to $33 million, including a $30 million increase in the fair value recognised in other comprehensive income in 2017. At 1 January 2018, the Group irrevocably designated these investments as measured at fair value through other comprehensive income. For such financial instruments all subsequent changes in fair value are reported in other comprehensive income, no impairment losses are recognised in profit or loss and no gains or losses are recycled to profit or loss upon derecognition. In June 2018, the Group sold its ownership interest in Delong to the major shareholder of the entity for cash consideration of $92 million. Market value of the equity instruments at the date of sale was $71 million. Total gain, comprising the change in market value until the sale and the excess of the sale price over the market value of the investments at the sale date, amounting to $59 million was recognised in other comprehensive income. Upon sale the Group transferred the realised gains accumulated in other comprehensive income ($89 million) to accumulated profits.

14. INVENTORIES

Inventories consisted of the following as of 31 December:

US$ million	2020	2019	2018
Raw materials and spare parts	$ 542	$ 811	$ 737
Work-in-progress	136	185	292
Finished goods	407	484	445
Total	$ 1,085	$ 1,480	$ 1,474

All respective inventory lines presented above are shown at lower of cost and net realisable value. As of 31 December 2020, 2019 and 2018, the net realisable value allowance was $29 million, $39 million and $34 million, respectively.# 15. TRADE AND OTHER RECEIVABLES

Trade and other receivables consisted of the following as of 31 December:

US$ million	2020	2019	2018
Trade accounts receivable	$ 345	$ 481	$ 806
Other receivables	70	99	71
	415	580	877
Allowance for expected credit losses	(37)	(46)	(42)
	$ 378	$ 534	$ 835

Ageing analysis and movement in allowance for expected credit losses are provided in Note 28.

16. RELATED PARTY DISCLOSURES

Related parties of the Group include associates and joint venture partners, key management personnel and other entities that are under the control or significant influence of the key management personnel, the Group’s ultimate parent or its shareholders. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Amounts owed by/to related parties at 31 December were as follows:

Amounts due from related parties

US$ million	2020	2019	2018
Loans	$ 9	$ 9	$ 7

Amounts due to related parties

US$ million	2020	2019	2018
Loans Timir (Note 11)	$ –	$ –	$ –
Dividends receivable Yuzhny GOK	–	–	4
Sale of investments Streamcore	–	5	–
Trade balances Nakhodka Trade Sea Port	–	1	1
Vtorresource-Pererabotka	10	28	15
Yuzhny GOK	7	5	1
Other entities	5	1	1
	22	35	17
Less: allowance for expected credit losses	(12)	(16)	(6)
	$ 10	$ 19	$ 11

In 2018–2020, the Group did not recognise any expense or income in relation to the expected credit losses of related parties.

Annual report & accounts 2020

16. RELATED PARTY DISCLOSURES (CONTINUED)

Transactions with related parties were as follows for the years ended 31 December:

Purchases from related parties

US$ million	2020	2019	2018
Genalta Recycling Inc.	$ –	$ –	$ –
Nakhodka Trade Sea Port	–	–	–
Vtorresource-Pererabotka	344	424	494
Yuzhny GOK	1	1	1
Other entities	1	2	1
	$ 346	$ 427	$ 496

Sales to related parties

US$ million	2020	2019	2018
Genalta Recycling Inc.	$ 8	$ 10	$ 15
Nakhodka Trade Sea Port	77	72	73
Vtorresource-Pererabotka	376	15	7
Yuzhny GOK	6	6	5
Other entities	1	1	28
	$ 468	$ 104	$ 128

In addition to the disclosures presented in this note, some of the balances and transactions with related parties are disclosed in Notes 11, 12, 13 and 25.

Genalta Recycling Inc. is a joint venture of a Canadian subsidiary of the Group. It sells scrap metal to the Group.

Lanebrook Limited (“Lanebrook”) was a controlling shareholder of the Company. After the transfer of ownership interests in EVRAZ plc to the shareholders of Lanebrook (Note 1), it represents an entity under common control by the shareholder. At 31 December 2018, the Group had other receivables from Lanebrook, amounting to $32 million, in connection with the acquisition of a 1% ownership interest in Yuzhny GOK in 2008 (Note 18). In 2019, these receivables were settled by cash.

Nakhodka Trade Sea Port (“NTSP”) is an entity under common control with the Group. NTSP renders handling services to the Group.

Streamcore is a joint venture of the Group. In 2019, the Group received from Streamcore an advance payment for the sale of another associate of the Group, RVK Limited, to Streamcore for $5 million. At the end of 2019 this transaction was not completed. In 2020, the share in RVK Limited was transferred to Streamcore and the Group recognised a $5 million gain on sale, which was recorded within the Other non-operating expense caption of the consolidated statement of operations.

Vtorresource-Pererabotka is a subsidiary of Streamcore, the Group’s joint venture. It sells scrap metal to the Group and provides scrap processing and other services. In 2020, 2019 and 2018, the purchases of scrap metal from Vtorresource-Pererabotka amounted to $344 million (1,378,211 tonnes), $424 million (1,640,750 tonnes) and $494 million (1,821,380 tonnes), respectively. At 31 December 2020 and 2019, $131 million and $156 million payable by the Group to Vtorresource-Pererabotka were classified as trade payables to third parties as Vtorresource-Pererabotka sold its receivables under factoring contracts to several banks with no recourse (Note 26). In addition, at 31 December 2020, $10 million receivable by the Group from Vtorresource-Pererabotka was classified as trade receivables from third parties due to factoring arrangements.

Yuzhny GOK, an ore mining and processing plant, is an associate of an entity, which is under common control with EVRAZ plc. The Group sold steel products to Yuzhny GOK and purchased sinter from the entity. In 2019 and 2018, the volume of purchases was 755,085 tonnes and 1,344,277 tonnes, respectively. In 2019 and 2018, the Group recognised dividend income from Yuzhny GOK in the amount of $3 million and $4 million, respectively, within the other non-operating gains/(losses) caption in the consolidated statement of operations. The dividends declared in 2018 were received by the Group in 2019.

The transactions with related parties were based on prevailing market terms.

Compensation to Key Management Personnel

Key management personnel include the following positions within the Group:
* directors of the Company, vice presidents, senior management of major subsidiaries.

In 2020, 2019 and 2018, key management personnel totalled 28, 30 and 32 people, respectively. Total compensation to key management personnel were included in general and administrative expenses in the consolidated statement of operations and consisted of the following:

US$ million	2020	2019	2018
Salary	$ 13	$ 14	$ 12
Performance bonuses	14	13	4
Social security taxes	7	7	7
Share-based payments (Note 21)	1	1	1
Termination benefits	–	–	–
	$ 31	$ 38	$ 39

Other disclosures on directors' remuneration required by Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts & Reports) regulations 2008 are included in the Directors' Remuneration Report.

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17. OTHER TAXES RECOVERABLE

Taxes recoverable consisted of the following as of 31 December:

US$ million	2020	2019	2018
Input VAT	$ 45	$ 73	$ 78
Other taxes	133	102	123
	$ 178	$ 175	$ 201

Input VAT, representing amounts payable or paid to suppliers, is recoverable from the tax authorities via offset against VAT payable to the tax authorities on the Group’s revenue or direct cash receipts from the tax authorities. Management periodically reviews the recoverability of the balance of input value added tax and believes it is fully recoverable within one year.

18. OTHER CURRENT FINANCIAL ASSETS

Other current assets included the following as of 31 December:

US$ million	2020	2019	2018
Other receivables from Lanebrook (Note 16)	$ –	$ –	$ 32
Restricted deposits at banks	2	4	3
	$ 2	$ 4	$ 35

19. CASH AND CASH EQUIVALENTS

Cash and cash equivalents, mainly consisting of cash at banks, were denominated in the following currencies as of 31 December:

US$ million	2020	2019	2018
US dollar	$ 1,461	$ 774	$ 273
Euro	34	484	540
Russian rouble	134	131	215
Other	8	124	39
	$ 1,637	$ 1,423	$ 1,067

Annual report & accounts 2020

20. EQUITY

Share Capital

31 December	2020	2019	2018
Ordinary shares, issued and fully paid	1,506,527,294	1,506,527,294	1,506,527,294

On 10 July 2018, EVRAZ plc reduced the nominal value of its shares from $1 to $0.05 each. The amount of the cancelled share capital ($1,432 million) became distributable reserves.

Treasury Shares

31 December	2020	2019	2018
Treasury shares	49,654,691	54,620,233	63,177,187

In 2015, EVRAZ plc repurchased 108,458,508 of its own shares ($336 million). In 2020, 2019 and 2018, 4,965,542 shares, 8,556,954 shares and 11,297,476 shares, respectively, were transferred to the participants of Incentive Plans (Note 21). The cost of treasury shares transferred to the participants of Incentive Plans, amounted to $15 million, $27 million and $35 million in 2020, 2019 and 2018, respectively.

Earnings per Share

Earnings per share are calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the potential dilutive ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	2020	2019	2018
Weighted average number of ordinary shares outstanding during the period	1,455,054,617	1,448,789,048	1,439,326,349
Effect of dilution: share options	7,949,696	11,996,310	19,462,750
Weighted average number of ordinary shares adjusted for the effect of dilution	1,463,004,313	1,460,785,358	1,458,789,099
Profit for the year attributable to equity holders of the parent, US$ million	$ 848	$ 326	$ 2,406
Basic earnings per share	$ 0.58	$ 0.23	$ 1.67
Diluted earnings per share	$ 0.58	$ 0.22	$ 1.65

Dividends

Dividends declared by EVRAZ plc during 2018–2020 were as follows:

Date of declaration	registered at	Dividends declared, US$ million	US$ per share
28/02/2018	09/03/2018	429.6	0.30
24/05/2018	08/06/2018	187.6	0.13
08/08/2018	17/08/2018	577.3	0.40
15/11/2018	23/11/2018	361	0.25
27/02/2019	08/03/2019	577.3	0.40
07/08/2019	16/08/2019	508.2	0.35
26/02/2020	06/03/2020	581	0.40
05/08/2020	21/08/2020	291	0.20

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21. SHARE-BASED PAYMENTS

In 2018-2020, the Group had several Incentive Plans under which certain senior executives and employees (“participants”) could be awarded shares of the parent company upon vesting.# Share-based payments
These plans were adopted on 8 August 2014, 26 October 2015, 15 September 2016, 25 September 2017, 26 September 2018, 25 September 2019 and 28 September 2020. The vesting under Incentive Plans adopted before 2017 does not depend on the achievement of any performance conditions. The new Plans adopted in 2017 and later provide that the number of shares transferred to participants upon vesting is dependent on the Group’s performance versus the selected group of peers. EBITDA and total shareholder return (“TSR”) are used as the key performance indicators. If the Group’s EBITDA achieves a specific ranking in the peer group (not lower than the 7th place in terms of EBITDA dynamics), then 50% of the shares of a particular tranche become vested, otherwise they are forfeited. If the Group’s TSR achieves a specific ranking in the peer group, then the other 50% of the shares of a particular tranche become vested, otherwise they are forfeited. Subject to the resolution of the Remuneration Committee, EBITDA can become the only metric in the performance evaluation (in case if the net debt to EBITDA ratio is equal to 3 or higher). The TSR-related vesting condition was considered by the Group as a market condition. As such, it was included in the estimation of the fair value of the granted shares and will not be subsequently revised. Vesting condition related to EBITDA was not taken into account when estimating the fair value of the share options at the grant date. Instead, this will be taken into account by adjusting the share-based expense based on the number of share options that eventually vest. The vesting date for each tranche occurs within the 90-day period after announcement of the annual results. The expected vesting dates of the awards outstanding at 31 December 2020 are presented below:

Number of Shares of EVRAZ plc	Total Incentive Plan 2020	Incentive Plan 2019	Incentive Plan 2018	Incentive Plan 2017
March 2021	3,725,939	2,436,585	2,229,714	1,530,247
March 2022	1,020,164	1,020,164	1,530,247	1,530,247
March 2023	466,291	699,443	699,467	–
March 2024	716,893	1,522,591	716,978	–
Total	9,922,485	5,100,822	1,865,201	1,433,871

The plans are administered by the Board of Directors of EVRAZ plc. The Board of Directors has the right to accelerate vesting of the grant. In the event of a participant’s employment termination, unless otherwise determined by the Board or by a decision of the authorised person, a participant loses the entitlement for the shares that were not awarded up to the date of termination. There have been no modifications or cancellations to the plans during 2018–2020.

The Group accounted for share-based compensation at fair value pursuant to the requirements of IFRS 2 “Share-based Payment”. The weighted average fair value of share-based awards granted in 2020, 2019 and 2018 was $3.23, $4.25 and $5.27 per share, respectively. The fair value of these awards was estimated at the date of grant and measured at the market price of the shares of the parent company reduced by the present value of dividends expected to be paid during the vesting period.

The following inputs, including assumptions, were used in the valuation of Incentive plans, which were effective during 2018-2020:

	Incentive Plan 2020	Incentive Plan 2019	Incentive Plan 2018	Incentive Plan 2017	Incentive Plan 2016	Incentive Plan 2015	Incentive Plan 2014
Dividend yield (%)	3.2	– 4.1	0.5 – 3.5	2.3 – 3.0	0.5 – 3.5	1.8 – 2.3	0.5 – 3.5
Expected life (years)	2.1 – 2.9	0.5 – 3.5	7.3 – 9.1	0.6 – 3.6	3.6 – 4.8	0.6 – 3.6	n/a
Market prices of the shares of EVRAZ plc at the grant dates	$4.31	$5.75	$7.36	$3.86	$1.73	$1.36	$1.68

The following table illustrates the number of, and movements in, share-based awards during the years.

Number of shares	2020	2019	2018
Outstanding at 1 January	10,771,774	17,755,977	27,912,610
Granted during the year	2,578,803	3,143,865	–
Forfeited during the year	(2,003,022)	(11,297,476)	(8,556,954)
Vested and exercised during the year	(4,965,542)	(984,569)	(1,006,052)
Outstanding at 31 December	9,922,485	10,771,774	17,755,977

The weighted average share price at the dates of exercise was $2.97, $7.21 and $6.82 in 2020, 2019 and 2018, respectively. The weighted average remaining contractual life of the share-based awards outstanding as of 31 December 2020, 2019 and 2018 was 1.4, 1.1 and 1 years, respectively.

In the years ended 31 December 2020, 2019 and 2018, the expense arising from the equity-settled share-based compensations was as follows:

US$ million	2020	2019	2018
Expense arising from equity-settled share-based payment transactions	$ 11	$ 13	$ 15

22. LOANS AND BORROWINGS

Short-term and long-term loans and borrowings were as follows as of 31 December:

US$ million	Non-current	Current	Non-current	Current	Non-current	Current
2020	$ 1,608	$ 1,554	2019	$ 1,404	$ 1,352	2018
Bank loans	$ 1,290	$ 80	$ 1,370	$ –	$ 1,290	$ 80
US dollar-denominated
6.50% notes due 2020	–	735	–	500	–	750
8.25% notes due 2021	500	750	500	750	500	750
6.75% notes due 2022	700	–	750	–	700	–
5.375% notes due 2023	750	–	700	–	750	–
5.25% notes due 2024	700	–	700	–	700	–
Rouble-denominated
12.95% rouble bonds due 2019	–	203	–	242	–	216
12.60% rouble bonds due 2021	–	271	–	323	–	216
7.95% rouble bonds due 2024	203	–	242	–	323	–
Unamortised debt issue costs	(16)	–	(18)	–	(20)	–
Interest payable	86	–	88	–	81	–
Total	$ 4,837	$ 3,759	$ 4,739	$ 4,599	$ 4,563	$ 4,186

The average effective annual interest rates were as follows at 31 December:

US dollar			Russian rouble		Euro	Canadian dollar
2020	2019	2018	2020	2019	2018	2020
4.76%	7.22%	2.23%	2.56%	5.74%	9.94%	0.70%
2.39%	4.08%	6.13%	12.84%	3.47%	8.00%	0.74%
12.59%	1.03%	–	3.31%	–	–	–
7.83%	–	–	–	–	–	–

The liabilities are denominated in the following currencies at 31 December:

US$ million	2020	2019	2018
US dollar	$ 3,993	$ 4,027	$ 3,758
Russian rouble	761	586	440
Canadian dollar	75	120	144
Euro	24	238	238
Other	–	–	–
Unamortised debt issue costs	(16)	(18)	(20)
Total	$ 4,837	$ 4,739	$ 4,563

The movement in loans and borrowings were as follows:

US$ million	2020	2019	2018
1 January	$ 4,739	$ 4,563	$ 5,391
Cash changes:
Cash proceeds from bank loans and notes, net of debt issues costs	1,218	2,805	1,412
Repayment of bank loans and notes, including interest	(1,304)	(3,035)	(2,459)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest	(25)	22	–
Non-cash changes:
Change in the balance of debt issues costs paid in subsequent reporting period	–	–	–
Non-cash proceeds (Note 29)	–	–	6
Interest and other charges expensed (Note 7)	291	322	291
Interest capitalised (Note 9)	–	–	–
Accrual of premiums and other charges on early repayment of borrowings (Note 7)	27	1	–
Transfer to disposal groups held for sale	–	–	–
Effect of exchange rate changes	(82)	66	(111)
31 December	$ 4,837	$ 4,739	$ 4,563

22. LOANS AND BORROWINGS (CONTINUED)

Pledged Assets

The Group’s pledged assets at carrying value included the following at 31 December:

US$ million	2020	2019	2018
Property, plant and equipment	$ 47	$ 72	$ 67
Inventory	414	512	629

Issuer Substitution

On 13 March 2019, EVRAZ plc assumed the liabilities of Evraz Group S.A. as the issuer of all outstanding US dollar-denominated notes with the total nominal value of $2,700 million.

Issue of Notes and Bonds

In April 2019, EVRAZ plc issued 5.25% US dollar-denominated notes due 2024 in the amount of $700 million. The proceeds from the issue of the notes were used to finance the purchase of 6.50% notes due 2020 at the tender offer in April 2019 and make whole call in May 2019. In August 2019, EvrazHolding Finance, the Group’s subsidiary, issued 7.95% rouble-denominated bonds due 2024 in the amount of 20,000 million roubles ($317 million at the exchange rate at the date of the transaction).

Repurchase of Notes and Bonds

In November 2020, the Group partially repurchased its 8.25% notes due 2021 ($15 million). There was no gain or loss on the transaction. In April and May 2019, the Group fully settled its 6.50% notes due 2020 ($700 million). The premium over the carrying value on the repurchase and other costs relating to the transaction in the total amount of $26 million were charged to the Gain/(loss) on financial assets and liabilities caption of the consolidated statement of operations. In June 2019, the Group fully settled its 12.95% rouble bonds due 2019, there was no gain or loss on this transaction. Upon repayment of these bonds, the related swap contracts matured and the Group recycled $33 million of the accumulated unrecognised gains on cash flow hedges from other comprehensive income to the statement of operations.

Compliance with Financial Covenants

Some of the loan agreements and terms and conditions of notes provide for certain covenants in respect of EVRAZ plc and its subsidiaries. The covenants impose restrictions in respect of certain transactions and financial ratios, including restrictions in respect of indebtedness and profitability. EBITDA used for covenants compliance calculations is determined based on the definitions of the respective loan agreements and may differ from that used by management for evaluation of performance. Several bank credit facilities totalling $1,458 million contain certain financial maintenance covenants. These covenants require EVRAZ plc to maintain two key ratios, consolidated net indebtedness to 12-month consolidated EBITDA and 12-month consolidated EBITDA to adjusted 12-month consolidated interest expense, within certain limits.## 22. LOANS AND BORROWINGS (CONTINUED)

Unamortised Debt Issue Costs

Unamortised debt issue costs represent bank fees and transaction costs paid by the Group in relation to the arrangement and reset of loans and notes.

Unutilised Borrowing Facilities

The Group had the following unutilised borrowing facilities as of 31 December:

US$ million	2020	2019	2018
Committed	937	424	447
Uncommitted	377	1,434	1,165
Total unutilised borrowing facilities	1,361	1,811	1,612

23. EMPLOYEE BENEFITS

Russian Plans

Certain Russian subsidiaries of the Group provide regular lifetime pension payments and lump-sum amounts payable at retirement date. These benefits generally depend on years of service, level of remuneration and amount of pension payment under the collective bargaining agreements. Other post-employment benefits consist of various compensations and certain non-cash benefits. The Group funds the benefits when the amounts of benefits fall due for payment. In addition, some subsidiaries have defined benefit plans under which contributions are made to a separately administered non-state pension fund. The Group matches 100% of the employees’ contributions to the fund up to 4% of their monthly salary. The Group’s contributions become payable at the participants’ retirement dates. At the end of the reporting year the benefit obligation was valued based on the terms of the pension plan assuming that all defined benefit plan participants will continue to participate in the plan.

Defined contribution plans represent payments made by the Group to the Russian state pension, social insurance and medical insurance funds at the statutory rates in force, based on gross salary payments. The Group has no legal or constructive obligation to pay further contributions in respect of those benefits.

In October 2018, the Russian pension law was amended introducing a higher retirement age from 1 January 2019. During 2019 – 2023 the retirement age will be gradually increased for women from 55 to 60 and for men from 60 to 65. The Group accounted for these amendments, when measuring the post-employment benefit obligations as of 31 December 2018 and recorded the resulting decrease in the obligations in the amount of $2 million as a part of past service costs.

US and Canadian Plans

The Group’s subsidiaries in the USA and Canada have defined benefit pension plans that cover specified eligible employees. Benefits are based on pensionable years of service, pensionable compensation, or a combination of both depending on the individual plan. The subsidiaries also have U.S. and Canadian supplemental retirement plans (“SERP’s”), which are non-qualified plans designed to maintain benefits for eligible employees at the plan formula level. The subsidiaries provide other unfunded post-retirement medical and life insurance plans (“OPEB’s”) for certain of their eligible employees upon retirement after completion of a specified number of years of service. For the pension plans, SERP’s and OPEB’s, the subsidiaries use a measurement date for plan assets and obligations of 31 December.

Certain employees that were hired after specified dates are no longer eligible to participate in the defined benefit pension plans. Those employees are instead enrolled in defined contribution plans and receive a contribution funded by the Group’s subsidiaries equal to 3–7% of annual wages, including applicable bonuses. The defined contribution plans are funded throughout the year and, depending on their work location, participants’ benefits vesting dates range from immediate to after three years of service.

In two Canadian locations, employees hired after a specific date participate in hybrid defined benefit/defined contribution pension plans. The benefits in the hybrid pension plans are at a reduced benefit for the defined benefit, and the defined contribution portion is funded at 1.5-1.6% of annual wages. In addition, the subsidiaries have defined contribution plans available for eligible U.S. and Canadian-based employees in which the subsidiaries generally match a percentage of the participants’ contributions. Some Canadian employees participate in a retirement savings plan. For these employees, the participation may be voluntary, employee contributions are matched by the employer at 1-1.5% of annual wages, including applicable bonuses, and depending on the group of employees, are funded either annually or throughout the year.

Other Plans

Defined benefit pension plans and defined contribution plans are maintained by the subsidiaries located in Europe.

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23. EMPLOYEE BENEFITS (CONTINUED)

Defined Contribution Plans

The Group’s expenses under defined contribution plans were as follows:

US$ million	2020	2019	2018
Expense under defined contribution plans	$ 257	$ 274	$ 245

Defined Benefit Plans

The Russian and other defined benefit plans were mostly unfunded and the US and Canadian plans were partially funded. Except as disclosed above, in 2020 there were no significant plan amendments, curtailments or settlements. The Group’s defined benefit plans are exposed to the risks of unexpected growth in benefit payments as a result of increases in life expectancy, inflation, and salaries. As the plan assets include significant investments in quoted and unquoted equity shares, corporate and government bonds and notes, the Group is also exposed to equity market risk.

The components of net benefit expense recognised in the consolidated statement of operations for the years ended 31 December 2020, 2019 and 2018 and amounts recognised in the consolidated statement of financial position as of 31 December 2020, 2019 and 2018 for the defined benefit plans were as follows:

Net benefit expense (recognised in the statement of operations within cost of sales and selling, general and administrative expenses and interest expense)

Year ended 31 December 2020

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Current service cost	$ (3)	$ (18)	$ –	$ (21)
Net interest expense	(11)	(2)	(7)	(2)
Past service cost	–	(4)	–	(3)
Other	–	(3)	–	(3)
Net benefit expense	$ (12)	$ (25)	$ –	$ (37)

Year ended 31 December 2019

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Current service cost	$ (2)	$ (17)	$ (5)	$ (20)
Net interest expense	(13)	(8)	–	(21)
Net actuarial gains/(losses) on other long-term employee benefits obligation	(4)	–	–	(4)
Past service cost	(1)	–	–	(1)
Other	(3)	–	–	(3)
Net benefit expense	$ (15)	$ (25)	$ (1)	$ (41)

Year ended 31 December 2018

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Current service cost	$ (2)	$ (8)	$ (19)	$ (21)
Net interest expense	(5)	(13)	–	(13)
Net actuarial gains/(losses) on other long-term employee benefits obligation	(1)	–	–	(1)
Past service cost	–	–	–	–
Curtailment/settlement gain	–	1	–	1
Other	(1)	(3)	–	(3)
Net benefit expense	$ (10)	$ (28)	$–	$ (38)

Annual report & accounts 2020
23. EMPLOYEE BENEFITS (CONTINUED)

Gains/(losses) recognised in other comprehensive income

Year ended 31 December 2020

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Return on plan assets, excluding amounts included in net interest expense	$ 63	$ –	$ 63
Net actuarial gains/(losses) on post-employment benefit obligation	6	(74)	2	(68)
Effect of asset ceiling	2	–	–	2
	$ 6	$ (9)	$ (3)	$ –

Year ended 31 December 2019

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Return on plan assets, excluding amounts included in net interest expense	$ –	$ 84	$ (3)	$ 84
Net actuarial gains/(losses) on post-employment benefit obligation	(15)	(81)	(15)	(99)
	$ (15)	$ (84)	$ (3)	$ (15)

Year ended 31 December 2018

US$ million	US & Canadian plans	Russian plans	Other plans	Total
Return on plan assets, excluding amounts included in net interest expense	$ –	$ 56	$ 2	$ 58
Net actuarial gains/(losses) on post-employment benefit obligation	2	(30)	–	(28)
	$ 2	$ (26)	$ –	$ 26

Actual return on plan assets was as follows:

US$ million	2020	2019	2018
Actual return on plan assets including:	$ 82	$ 105	$ (10)
US & Canadian plans	82	105	(10)
Russian plans	–	–	–

Net defined benefit liability

Year ended 31 December 2020

| US & Canadian plans | Russian plans | Other plans | US$ million |
| :------------------ | :------------ | :---------- | :---------- |## 23. EMPLOYEE BENEFITS (CONTINUED)

Net defined benefit liability (continued)

Year ended 31 December 2020

US$ million	Russian plans	Canadian plans	Other plans	Total
Benefit obligation	$ 102	–	$ 858	$ (724)
Plan assets	$ 10	(6)	$ 970	$ (730)
Net defined benefit asset	–	–	–	–
Net defined benefit liability	$ 102	$ 134	$ 4	$ 240

Year ended 31 December 2019

US$ million	Russian plans	Canadian plans	Other plans	Total
Benefit obligation	$ 123	–	$ 785	$ (653)
Plan assets	$ 11	(7)	$ 919	$ (660)
Net defined benefit asset	–	12	12	–
Net defined benefit liability	$ 123	$ 144	$ 4	$ 271

Year ended 31 December 2018

US$ million	Russian plans	Canadian plans	Other plans	Total
Benefit obligation	$ 91	–	$ 687	$ (555)
Plan assets	$ –	–	$ –	$ –
Net defined benefit asset	$ –	3	3	–
Net defined benefit liability	$ 91	$ 135	$ –	$ 226

Movements in net defined benefit liability/(asset)

US$ million	Russian plans	Canadian plans	Other plans	Total
At 31 December 2017	$ 111	$ 154	$ 19	$ 284
Net benefit expense recognised in the statement of operations	10	28	–	38
Contributions by employer	(8)	(2)	(24)	(26)
(Gains)/losses recognised in other comprehensive income	–	–	(32)	(28)
Reclassification to liabilities directly associated with disposal groups classified as held for sale	–	–	(20)	(20)
Translation difference	(20)	–	1	(19)
At 31 December 2018	$ 91	$ 132	$ –	$ 223
Net benefit expense recognised in the statement of operations	15	25	1	41
Contributions by employer	(10)	15	(15)	(3)
(Gains)/losses recognised in other comprehensive income	–	3	(25)	15
Reclassification to liabilities directly associated with disposal groups classified as held for sale	–	(7)	–	(7)
Translation difference	12	–	–	12
At 31 December 2019	$ 123	$ 132	$ 4	$ 259
Net benefit expense recognised in the statement of operations	12	25	–	37
Contributions by employer	(7)	(6)	(33)	9
(Gains)/losses recognised in other comprehensive income	(1)	–	(41)	3
Translation difference	(20)	1	1	(18)
At 31 December 2020	$ 102	$ 134	$ 4	$ 240

Movements in benefit obligation

US$ million	US & Canadian plans	Russian plans	Other plans	Total
At 31 December 2017	$ 111	$ 765	$ 19	$ 895
Interest cost on benefit obligation	8	2	25	33
Current service cost	19	1	–	21
Past service cost	–	–	–	–
Benefits paid	(8)	(36)	(44)	(88)
Actuarial (gains)/losses on benefit obligation related to changes in demographic assumptions	(7)	–	–	(7)
Actuarial (gains)/losses on benefit obligation related to changes in financial assumptions	(6)	(49)	(55)	(110)
Actuarial (gains)/losses on benefit obligation related to experience adjustments	5	–	–	5
Curtailment/settlement gain	(1)	–	–	(1)
Reclassification to liabilities directly associated with disposal groups classified as held for sale*	–	(20)	–	(20)
Translation difference	(31)	–	(20)	(51)
At 31 December 2018	$ 91	$ 687	$ –	$ 778
Interest cost on benefit obligation	8	2	26	34
Current service cost	17	–	1	20
Past service cost	1	–	–	1
Benefits paid	(10)	(36)	(1)	(47)
Actuarial (gains)/losses on benefit obligation related to changes in demographic assumptions	3	15	–	18
Actuarial (gains)/losses on benefit obligation related to changes in financial assumptions	(2)	83	–	81
Actuarial (gains)/losses on benefit obligation related to experience adjustments	1	–	1	2
Reclassification to liabilities directly associated with disposal groups classified as held for sale	–	(8)	–	(8)
Other	12	8	30	50
Translation difference	8	–	–	8
At 31 December 2019	$ 123	$ 785	$ 11	$ 919
Interest cost on benefit obligation	7	3	23	30
Current service cost	18	–	–	18
Past service cost	2	–	–	2
Benefits paid	(7)	(51)	(4)	(62)
Actuarial (gains)/losses on benefit obligation related to changes in demographic assumptions	1	(6)	–	(5)
Actuarial (gains)/losses on benefit obligation related to changes in financial assumptions	84	(4)	–	80
Actuarial (gains)/losses on benefit obligation related to experience adjustments	(1)	(6)	(10)	(17)
Effect of asset ceiling	–	–	1	1
Other	–	2	–	2
Translation difference	(20)	10	(9)	(19)
At 31 December 2020	$ 102	$ 858	$ 10	$ 970

This movement reflects the sale of Dneprovsk Metallurgical plant (Ukraine) in March 2018.

The weighted average duration of the defined benefit obligation was as follows:

Years	2020	2019	2018
Russian plans	10.97	10.85	9.82
Ukrainian plans	–	–	8.00
US & Canadian plans	14.96	14.34	13.48
Other plans	20.4	20.3	7.46

Changes in the fair value of plan assets

US$ million	Russian plans	Canadian plans	Other plans	Total
At 31 December 2017	$ –	$ 611	$ –	$ 611
Interest income on plan assets	–	20	–	20
Return on plan assets (excluding amounts included in net interest expense)	(30)	–	–	(30)
Contributions of employer	8	(8)	24	24
Benefits paid	(36)	–	–	(36)
Other	(3)	–	–	(3)
Translation difference	(31)	–	–	(31)
At 31 December 2018	$ –	$ 555	$ –	$ 555
Interest income on plan assets	–	21	–	21
Return on plan assets (excluding amounts included in net interest expense)	84	–	–	84
Contributions of employer	10	15	25	50
Benefits paid	(10)	(36)	(1)	(47)
Reclassification to liabilities directly associated with disposal groups classified as held for sale	–	(1)	–	(1)
Other	18	8	18	44
Translation difference	5	–	–	5
At 31 December 2019	$ –	$ 653	$ 7	$ 660
Interest income on plan assets	–	19	–	19
Return on plan assets (excluding amounts included in net interest expense)	63	–	–	63
Contributions of employer	7	(7)	33	33
Benefits paid	(51)	(2)	9	(44)
Other	(4)	1	2	(1)
Translation difference	41	(62)	–	(21)
At 31 December 2020	$ –	$ 724	$ 6	$ 730

The amount of contributions expected to be paid to the defined benefit plans during 2021 approximates $42 million.

The major categories of plan assets as a percentage of total plan assets were as follows at 31 December:

US & Canadian plans:	2020 Quoted	2020 Unquoted	2019 Quoted	2019 Unquoted	2018 Quoted	2018 Unquoted
Equity funds and investment trusts	45%	17%	24%	3%	–	–
Governmental bonds	48%	–	34%	–	51%	–
Corporate bonds and notes	–	14%	3%	2%	–	12%
Cash	–	3%	–	–	3%	2%
Other	92%	8%	65%	35%	65%	35%

The principal assumptions used in determining pension obligations for the Group’s plans are shown below:

Assumption	2020 Russian plans	2020 US & Canadian plans	2020 Other plans	2019 Russian plans	2019 US & Canadian plans	2019 Other plans	2018 Russian plans	2018 US & Canadian plans	2018 Other plans
Discount rate	6.2%	4-7%	71 plans	2-2.6%	–	70 plans	3.3-3.4%	–	69 plans
Future benefits increases	0.2%	1%	1%	0.2%	–	3%	3.3-4.3%	–	–
Future salary increase	3%	3%	1%	3%	–	3%	3%	–	–
Average life expectation, male, years	88	91	–	88	–	91	86	81	87
Average life expectation, female, years	86.5	88.5	6.5%	86	86	80	80	88.5	5-6.8%
Healthcare costs increase rate	–	–	–	–	–	79	88.5	5-7%	–

The following table demonstrates the sensitivity analysis of reasonable changes in the significant assumptions used for the measurement of the defined benefit obligations, with all other variables held constant.

Impact on the defined benefit obligation at 31 December 2020, US$ million

Assumption	Russian plans	US & Canadian plans	Other plans
10% Discount rate	$ (32)	33	$ (1)
(10%) Discount rate	9	(1)	9
10% Future benefits increases	7	–	–
(10%) Future benefits increases	(6)	(9)	(4)
10% Future salary increase	1	1	–
(10%) Future salary increase	(1)	(1)	(1)
1 year Average life expectation, male, years	1	14	–
(1 year) Average life expectation, male, years	(1)	(14)	–
1 year Average life expectation, female, years	1	9	–
(1 year) Average life expectation, female, years	(1)	(9)	–
10% Healthcare costs increase rate	–	(1)	(1)
(10%) Healthcare costs increase rate	–	1	1

Impact on the defined benefit obligation at 31 December 2019, US$ million

Assumption	Russian plans	US & Canadian plans	Other plans
10% Discount rate	$ (34)	36	$ (1)
(10%) Discount rate	9	(1)	8
10% Future benefits increases	–	–	6
(10%) Future benefits increases	–	–	(9)
10% Future salary increase	1	1	–
(10%) Future salary increase	(1)	(1)	(1)
1 year Average life expectation, male, years	1	12	–
(1 year) Average life expectation, male, years	(1)	(12)	–
1 year Average life expectation, female, years	1	7	–
(1 year) Average life expectation, female, years	(1)	(7)	–
10% Healthcare costs increase rate	–	–	1
(10%) Healthcare costs increase rate	–	–	(1)

Impact on the defined benefit obligation at 31 December 2018, US$ million

Assumption	Russian plans	US & Canadian plans	Other plans
10% Discount rate	$ (38)	40	$ –
(10%) Discount rate	8	–	1
10% Future benefits increases	–	–	–
(10%) Future benefits increases	–	–	–
10% Future salary increase	1	1	–
(10%) Future salary increase	(1)	(1)	(1)
1 year Average life expectation, male, years	–	11	–
(1 year) Average life expectation, male, years	–	(11)	–
1 year Average life expectation, female, years	–	6	–
(1 year) Average life expectation, female, years	–	(6)	–
10% Healthcare costs increase rate	–	1	–
(10%) Healthcare costs increase rate	–	(1)	–

24. PROVISIONS

At 31 December the provisions were as follows:

US$ million	2020 Non-current	2020 Current	2019 Non-current	2019 Current	2018 Non-current	2018 Current
Site restoration and decommissioning costs	$ 272	$ 24	$ 321	$ 21	$ 221	$ 1
Other provisions	–	17	–	12	–	12
Total	$ 272	$ 41	$ 321	$ 33	$ 221	$ 13

In the years ended 31 December 2020, 2019 and 2018, the movement in provisions was as follows:

US$ million	Site restoration and decommissioning costs	Other provisions	Total
At 31 December 2017	$ 289	$ 12	$ 301
Additional provisions	4	14	18
Increase from passage of time	16	–	16
Effect of change in the discount rate	(38)	–	(38)
Effect of changes in estimated costs and timing	29	–	29
Utilised in the year	(13)	(12)	(25)
Reclassification to liabilities directly associated with disposal groups classified as held for sale	(1)	–	(1)
Translation difference	(42)	(1)	(43)
At 31 December 2018	$ 244	$ 13	$ 257
Additional provisions	18	–	18
Increase from passage of time	73	–	73
Effect of change in the discount rate	(20)	(4)	(24)
Effect of changes in estimated costs and timing	(31)	(10)	(41)
Utilised in the year	–	(4)	(4)
Unused amounts reversed	(9)	(8)	(17)
Reclassification to liabilities directly associated with disposal groups classified as held for sale	26	–	26
Translation difference	5	12	17
At 31 December 2019	$ 342	$ 23	$ 365
Additional provisions	17	–	17
Increase from passage of time	1	–	1
Effect of changes in estimated costs and timing	(10)	(4)	(14)
Utilised in the year	(49)	(8)	(57)
Unused amounts reversed	(1)	(1)	(2)
Translation difference	(18)	–	(18)
At 31 December 2020	$ 296	$ 17	$ 313

Site Restoration Costs

Under the legislation, mining companies and steel mills have obligations to restore mining sites and contaminated land.# 25. LEASE AND OTHER LONG-TERM LIABILITIES

The majority of costs are expected to be paid after 2061. At 31 December the respective liabilities were measured based on estimates of restoration costs, which are expected to be incurred in the future discounted at the following annual rates:

	2020	2019	2018
Russia	7%	2%	n/a
USA	3%	4.7%
Others

Annual report & accounts 2020

Lease Liabilities

The Group has a number of lease contracts, under which it leases railroad cars, coating equipment, warehouses, offices and other machinery and equipment (Note 9). Before the adoption of IFRS 16 (Note 2) the Group classified its leases (as lessee) at the inception date as either a finance lease within the Other long-term liabilities caption or an operating lease. The movement in lease liabilities is disclosed in the table below:

	1 January	Recognition of liabilities under new contracts	Sale of subsidiaries	Interest accrued	Payment of principal	Payment of interest	Termination of lease arrangements	Reclassification into short-term portion	Translation difference	31 December
US$ million
Current portion of lease liabilities	$ 117	9	$ 83	8	$ 34	1	$ 124	15	(2)	$ 8
Non-current lease liabilities	$ 90	14	–	$ 34	1	–	$ 34	–	–	$ 34
Total lease liabilities	$ 207	23	$ 83	42	$ 68	1	$ 158	15	(2)	$ 42

1 January
Current portion of lease liabilities	$ 117
Non-current lease liabilities	$ 90
Total lease liabilities	$ 207

2020	2019
Current portion of lease liabilities	$ 117	9	$ 83	8	$ 34	1	$ 124	15	(2)	$ 87
Non-current lease liabilities	$ 90	14	–	$ 34	1	–	$ 34	–	–	$ 57
Total lease liabilities	$ 207	23	$ 83	42	$ 68	1	$ 158	15	(2)	$ 144

As at 1 January 2019
Current portion of lease liabilities	$ 117
Non-current lease liabilities	$ 90
Total lease liabilities	$ 207

As at 31 December 2020
Current portion of lease liabilities										$ 87
Non-current lease liabilities										$ 57
Total lease liabilities										$ 144

As at 31 December 2019
Current portion of lease liabilities										$ 83
Non-current lease liabilities										$ 34
Total lease liabilities										$ 117

As at 31 December 2018
Current portion of lease liabilities										$ 34
Non-current lease liabilities										$ 1
Total lease liabilities										$ 35

	2020	2019
US$ million
Current portion of lease liabilities	$ 87	$ 83
Non-current lease liabilities	$ 57	$ 34
Total lease liabilities	$ 144	$ 117

	2020	2019
US$ million
Recognition of liabilities under new contracts	9	8
Sale of subsidiaries	–	–
Interest accrued	6	7
Payment of principal	(31)	(2)
Payment of interest	(2)	(1)
Termination of lease arrangements	–	–
Reclassification into short-term portion	(35)	(31)
Translation difference	(6)	33
Net movement	(59)	14
Opening balance	117	83
Closing balance	87	117

	2020	2019
US$ million
Current portion of lease liabilities	$ 87	$ 83
Non-current lease liabilities	$ 57	$ 34
Total lease liabilities	$ 144	$ 117

The movement in lease liabilities is disclosed in the table below:

	1 January	Recognition of liabilities under new contracts	Sale of subsidiaries	Interest accrued	Payment of principal	Payment of interest	Termination of lease arrangements	Reclassification into short-term portion	Translation difference	31 December
US$ million	$ 117	9	$ 83	8	$ 34	1	$ 124	15	(2)	$ 8
Current portion of lease liabilities	$ 90	14	–	$ 34	1	–	$ 34	–	–	$ 34
Non-current lease liabilities	$ 207	23	$ 83	42	$ 68	1	$ 158	15	(2)	$ 42
Total lease liabilities
2020	2019
Current portion of lease liabilities	$ 117	9	$ 83	8	$ 34	1	$ 124	15	(2)	$ 87
Non-current lease liabilities	$ 90	14	–	$ 34	1	–	$ 34	–	–	$ 57
Total lease liabilities	$ 207	23	$ 83	42	$ 68	1	$ 158	15	(2)	$ 144

As at 1 January 2019
Current portion of lease liabilities	$ 117
Non-current lease liabilities	$ 90
Total lease liabilities	$ 207

As at 31 December 2020
Current portion of lease liabilities										$ 87
Non-current lease liabilities										$ 57
Total lease liabilities										$ 144

As at 31 December 2019
Current portion of lease liabilities										$ 83
Non-current lease liabilities										$ 34
Total lease liabilities										$ 117

As at 31 December 2018
Current portion of lease liabilities										$ 34
Non-current lease liabilities										$ 1
Total lease liabilities										$ 35

	2020	2019
US$ million
Current portion of lease liabilities	$ 87	$ 83
Non-current lease liabilities	$ 57	$ 34
Total lease liabilities	$ 144	$ 117

	2020	2019
US$ million
Recognition of liabilities under new contracts	9	8
Sale of subsidiaries	–	–
Interest accrued	6	7
Payment of principal	(31)	(2)
Payment of interest	(2)	(1)
Termination of lease arrangements	–	–
Reclassification into short-term portion	(35)	(31)
Translation difference	(6)	33
Net movement	(59)	14
Opening balance	117	83
Closing balance	87	117

	2020	2019
US$ million
Current portion of lease liabilities	$ 87	$ 83
Non-current lease liabilities	$ 57	$ 34
Total lease liabilities	$ 144	$ 117

Total expenses under lease contracts are summarised in the table below.

	2020	2019
US$ million
Interest accrued under lease liabilities	$ 6	$ 7
Expense relating to variable lease payments not included in the measurement of opening lease liabilities	$ 8	$ 7
Expense relating to leases, which were not recognised as lease liabilities (leases of low-value assets and short-term leases)	$ 11	$ 12
Total lease expense	$ 24	$ 27

The maturity of contractual undiscounted and discounted cash flows under lease payments at 31 December was as follows:

	2020	2019
US$ million
Present value of lease payments
Not later than 1 year from the reporting date	$ 31	$ 30
Later than 1 year and not later than 2 years	$ 29	$ 15
Later than 2 years and not later than 5 years	$ 35	$ 38
Later than 5 years and not later than 10 years	$ 34	$ 34
Later than 10 years	$ 10	$ 5
Total lease payments	$ 139	$ 122
Less: amounts representing finance charges	(52)	(5)
31 December	$ 87	$ 117

Undiscounted lease payments
Not later than 1 year from the reporting date	$ 34	$ 34
Later than 1 year and not later than 2 years	$ 34	$ 18
Later than 2 years and not later than 5 years	$ 40	$ 12
Later than 5 years and not later than 10 years	$ 14	$ 6
Later than 10 years	$ 8
Total lease payments	$ 130	$ 70
Less: amounts representing finance charges	(43)
31 December	$ 87	$ 70

	2020	2019
US$ million
Present value of lease payments
Not later than 1 year from the reporting date	$ 31	$ 30
Later than 1 year and not later than 2 years	$ 29	$ 15
Later than 2 years and not later than 5 years	$ 35	$ 38
Later than 5 years and not later than 10 years	$ 34	$ 34
Later than 10 years	$ 10	$ 5
Total lease payments	$ 139	$ 122
Less: amounts representing finance charges	(52)	(5)
31 December	$ 87	$ 117

	2020	2019
US$ million
Not later than 1 year from the reporting date	$ 34	$ 34
Later than 1 year and not later than 2 years	$ 34	$ 18
Later than 2 years and not later than 5 years	$ 40	$ 12
Later than 5 years and not later than 10 years	$ 14	$ 6
Later than 10 years	$ 8
Total lease payments	$ 130	$ 70
Less: amounts representing finance charges	(43)
31 December	$ 87	$ 70

The maturity of contractual undiscounted and discounted cash flows under lease payments at 31 December was as follows:

	2020	2019
US$ million
Lease payments
Not later than 1 year from the reporting date	$ 31	$ 30
Later than 1 year and not later than 2 years	$ 29	$ 15
Later than 2 years and not later than 5 years	$ 35	$ 38
Later than 5 years and not later than 10 years	$ 34	$ 34
Later than 10 years	$ 10	$ 5
Total lease payments	$ 139	$ 122
Less: amounts representing finance charges	(52)	(5)
Present value of lease payments	$ 87	$ 117

	2020	2019
US$ million
Lease payments
Not later than 1 year from the reporting date	$ 34	$ 34
Later than 1 year and not later than 2 years	$ 34	$ 18
Later than 2 years and not later than 5 years	$ 40	$ 12
Later than 5 years and not later than 10 years	$ 14	$ 6
Later than 10 years	$ 8
Total lease payments	$ 130	$ 70
Less: amounts representing finance charges	(43)
Present value of lease payments	$ 87	$ 70

Other Long-Term Liabilities

Other liabilities consisted of the following as of 31 December:

	2020	2019	2018
US$ million
Financial liabilities
Finance lease liabilities	$ –	$ 49	$ –
Derivatives not designated as hedging instruments	$ –	$ 6	$ 6
Hedging instruments	$ –	$ 46	$ 30
Long-term trade and other payables	$ 34	$ 44	$ 83
Long-term accounts payable to related parties	$ –	$ 83	$ 73
Subtotal financial liabilities	$ 34	$ 228	$ 192
Less: current portion (Note 26)	(10)	(73)	(68)
Net financial liabilities	$ 24	$ 155	$ 124

Non-financial liabilities
Employee income participation plans and compensations	$ 16	$ 16	$ 32
Tax liabilities	$ –	$ 4	$ 6
Other non-financial liabilities	$ 13	$ 17	$ 14
Subtotal non-financial liabilities	$ 29	$ 37	$ 52
Less: current portion (Note 26)	(3)	(3)	(3)
Net non-financial liabilities	$ 26	$ 34	$ 49

Total Other Long-Term Liabilities	$ 50	$ 189	$ 173

Hedging Instruments

In July 2015, the Group issued bonds in the total amount of 15,000 million Russian roubles ($216 million at 31 December 2018), which bore interest of 12.95% per annum and had a put date in June 2019. The Group used an intercompany loan to transfer the proceeds from the bonds within the Group. To manage the currency exposure, the Group entered into a series of cross currency swap contracts with several banks under which it agreed to deliver US-dollar denominated interest payments at rates ranging from 5.90% to 6.55% per annum plus the notional amount, totaling approximately $265 million, in exchange for rouble-denominated interest payments at the rate of 12.95% per annum plus notional, totaling 14,948 million roubles ($215 million at 31 December 2018).

Year of issue	Borrowings principal, millions of roubles	Hedged amount, millions of roubles	Swap amount, US$ million	Interest rates on the swap amount
2015	15,000	13,310	239	5.90% - 6.55%
2019
Bonds due 2019

The Group accounted for these swap contracts as cash flow hedges. In 2017, one of these swap contracts with the notional amount of $26 million did not meet the criteria for efficiency and ceased to be classified as hedging instruments. In 2019 and 2018, the change in fair value of these derivatives amounted to $46 million and $(44) million, respectively. The realised gain/(loss) on the swap transactions amounting to $(23) million and $11 million, respectively, was related to the interest portion of the change in fair value of the swap. Under IFRS the lesser of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge is recognised in other comprehensive income and the remaining loss on the hedging instrument is recorded through the statement of operations. In 2020, 2019 and 2018, the Group recognised a gain/(loss) in other comprehensive income amounting to $Nil, $27 million and $(3) million, respectively. Most of the swaps were assessed as effective. Those swaps, which ceased to be effective, were reclassified into Derivatives Not Designated as Hedging Instruments. In 2020, 2019 and 2018, $Nil, $19 million and $(41) million, respectively, were recorded in the Foreign exchange gains/(losses) caption in the consolidated statement of operations. In June 2019, upon repayment of the 12.95% rouble bonds, the related swap contracts matured and the Group recycled $33 million of the accumulated unrecognised gains on cash flow hedges from other comprehensive income to the statement of operations.

Derivatives Not Designated as Hedging Instruments

In 2018-2020 derivatives not designated as hedging instruments comprised of those swap contracts, which either were not designated as cash flow or fair value hedges or ceased to be effective, and forward contracts. The aggregate amounts under swap contracts translated at the year end exchange rates are summarised in the table below.

	2020	2019	2018
US$ million
Bonds and loans, principal	$ 338	$ 323	$ 24
Hedged amount	$ 338	$ 323	$ 24
Swap amount	$ 381	$ 317	$ 26

Annual report & accounts 2020

LEASE AND OTHER LONG-TERM LIABILITIES (CONTINUED)

Derivatives Not Designated as Hedging Instruments (continued)

To manage the currency exposure on the rouble-denominated bonds, the Group partially economically hedged these transactions. In 2020, the Group concluded a currency and interest rate swap contract under which it agreed to deliver US dollar-denominated interest payments at a fixed rate of 3.335% rate per annum plus the US dollar notional amount, in exchange for variable rouble-denominated CBR key rate-based interest payments plus the rouble notional amount. The exchange is exercised on approximately the same dates as the payments under the bank loan. In 2019, the Group concluded a currency and interest rate swap contract under which it agreed to deliver US dollar-denominated interest payments at a fixed rate of 3.75% per annum plus the US dollar notional amount, in exchange for fixed rouble-denominated interest payments plus the rouble notional amount. The exchange is exercised on approximately the same dates as the payments under the bonds.

The swap contracts, which were effective at 31 December 2020 and 2019, are summarised in the table below.

Year of issue	Borrowings principal, millions of roubles	Hedged amount, millions of roubles	Swap amount, US$ million	Interest rates on the swap amount
2019	20,000	20,000	317	3.75%
2020	5,000	5,000	64	3.335%
EVRAZ ZSMK bank loan agreement due 2023

The discount rates used in the valuation were the non-deliverable forward rate curve and the interest rate swap curve for US dollar at the reporting dates. In 2020, 2019 and 2018, a change in fair value of these derivatives of ($64) million, $20 million and $(6) million, respectively, together with a realised gain/(loss) on the swap transactions, amounting to $13 million, $8 million and $2 million, respectively, was recognised within gain/(loss) on financial assets and liabilities in the consolidated statement of operations (Note 7).

In 2018-2020, the Group concluded EUR/USD forward contracts, which were accounted for at fair value. In 2020, 2019 and 2018, the change in fair value of the derivatives $6 million, $(4) million and $(2) million, respectively, together with a realised gain/(loss) on the currency forward transactions, amounting to $(24) million, $14 million and $9 million, respectively, was recognised within gain/(loss) on financial assets and liabilities in the consolidated statement of operations (Note 7).

26. TRADE AND OTHER PAYABLES

Trade and other payables consisted of the following as of 31 December:

	2020	2019	2018
US$ million
Trade accounts payable	$ 844	$ 982	$ 877
Liabilities for purchases of property, plant and equipment, including VAT	$ 200	$ 132	$ 98
Accrued payroll	$ 157	$ 162	$ 75
Other payables	$ 50	$ 75	$ 50
Other long-term obligations with current maturities (Note 25)	$ 13	$ 27	$ 26
Total Trade and Other Payables	$ 1,264	$ 1,378	$ 1,126

The maturity profile of the accounts payable is shown in Note 28. At 31 December 2020 and 2019, trade accounts payable included $131 million and $156 million, respectively, owed by the Group for purchases of scrap from Vtorresource-Pererabotka, a related party (Note 16). These amounts were classified as trade payables to third parties as Vtorresource-Pererabotka sold its receivables from the Group under factoring contracts to several banks with no recourse.

27.# OTHER TAXES PAYABLE

Other taxes payable were mainly denominated in roubles and consisted of the following as of 31 December:

US$ million	2020	2019	2018
VAT	$ 89	$ 67	$ 124
Social insurance taxes	47	48	40
Property tax	7	10	10
Land tax	6	6	7
Personal income tax	7	7	12
Import/export tariffs	8	12	10
Other taxes, fines and penalties	–	–	–
Total	$ 169	$ 153	$ 266

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and trade accounts receivable. To manage credit risk related to cash, the Group maintains its available cash, mainly in US dollars and euros, in reputable international banks and major Russian banks. Management periodically reviews the creditworthiness of the banks in which it deposits cash.

The Group’s trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. There are no significant concentrations of credit risk within the Group. The Group defines counterparties as having similar characteristics if they are related entities. In 2020, the major customers were Russian Railways (6% of total sales) and TC Energy Corporation (4%).

Part of the Group’s sales is made on terms of letter of credit. In addition, the Group requires prepayments from certain customers. The Group does not require collateral in respect of trade and other receivables, except when a customer applies for credit terms which are longer than normal. In this case, the Group requires bank guarantees or other collateral. The Group has developed standard credit terms and constantly monitors the status of accounts receivable collection and the creditworthiness of the customers.

Certain of the Group’s long-standing Russian customers for auxiliary products, such as heat and electricity, represent municipal enterprises and governmental organisations that experience financial difficulties. The significant part of allowance for expected credit losses consists of receivables from such customers. The Group has no practical ability to terminate the supply to these customers and negotiates with regional and municipal authorities the terms of recovery of these receivables.

At 31 December the maximum exposure to credit risk is equal to the carrying amount of financial assets, which is disclosed below.

US$ million	2020	2019	2018
Restricted deposits at banks (Notes 13 and 18)	$ 8	$ 10	$ 9
Financial instruments included in other non-current and current assets (Notes 13 and 18)	2	17	66
Long-term and short-term investments (Notes 13 and 18)	32	33	396
Trade and other receivables (Notes 13 and 15)	852	550	10
Loans receivable	30	–	–
Receivables from related parties (Notes 13 and 16)	10	12	1,627
Cash and cash equivalents (Note 19)	1,423	1,067	–
Total	$ 2,043	$ 2,043	$ 2,068

The ageing analysis of trade and other receivables, loans receivable and receivables from related parties at 31 December is presented in the table below.

US$ million	2020 Gross amount	2020 Impairment	2019 Gross amount	2019 Impairment	2018 Gross amount	2018 Impairment
Not past due	$ 343	$ (1)	$ 446	$ (1)	$ 770	$ (1)
Past due less than 6 months	100	(36)	193	(45)	166	(41)
between 6 months and 1 year	46	–	107	(1)	109	–
over 1 year	5	(2)	31	–	9	–
Total	$ 494	$ (39)	$ 777	$ (47)	$ 1,054	$ (42)

In the years ended 31 December 2020, 2019 and 2018, the movement in allowance for expected credit losses was as follows:

US$ million	2020	2019	2018
At 1 January	$ (46)	$ (42)	$ (54)
Charge for the year	2	2	5
Utilised	1	3	8
Translation difference	(3)	–	2
At 31 December	$ (37)	$ (46)	$ (42)

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages liquidity risk by maintaining adequate cash reserves and borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The Group prepares a rolling 12-month financial plan which ensures that the Group has sufficient cash on demand to meet expected operational expenses, financial obligations and investing activities as they arise. The Group exercises a daily monitoring of cash proceeds and payments. The Group maintains credit lines and overdraft facilities that can be drawn down to meet short-term financing needs. If necessary, the Group refinances its short-term debt by long-term borrowings. The Group also uses forecasts to monitor potential and actual financial covenants compliance status (Note 22). Where compliance is at risk, the Group considers options including debt repayment, refinancing or covenant reset. The Group has developed standard payment periods in respect of trade accounts payable and monitors the timeliness of payments to its suppliers and contractors.

The following tables summarise the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, including interest payments.

31 December 2020

US$ million	Less than 3 months	3 to 12 months	1 to 2 years	2 to 5 years	5 years	After On demand	Total
Fixed-rate debt
Loans and borrowings Principal	$ 510	$ 1,748	$ 18	$ 3,206	–	–	$ 5,482
Interest	116	120	–	413	–	–	649
Lease liabilities	34	18	–	101	–	–	153
Other long-term financial liabilities	3	11	67	1,953	18	3,808	5,860
Total fixed-rate debt	763	1,897	85	5,678	18	3,808	12,144
Variable-rate debt
Loans and borrowings Principal	3	12	41	350	54	1,157	1,617
Interest	15	88	403	1,211	–	–	1,717
Total variable-rate debt	18	100	444	1,561	54	1,157	3,334
Non-interest bearing debt
Loans and borrowings	195	890	33	–	–	9	1,127
Trade and other payables	1	1	9	–	–	65	76
Payables to related parties	–	–	–	–	–	9	9
Amounts payable under put options for shares in subsidiaries	–	–	1	9	–	–	10
Total non-interest bearing debt	196	988	43	9	–	83	1,222
Total	$ 977	$ 2,985	$ 572	$ 7,248	$ 72	5,048	$ 16,699

31 December 2019

US$ million	Less than 3 months	3 to 12 months	1 to 2 years	2 to 5 years	5 years	After On demand	Total
Fixed-rate debt
Loans and borrowings Principal	$ 5	$ 97	$ 134	$ 1,002	$ 2,304	$ 3,326	$ 6,868
Interest	9	9	26	184	249	664	1,141
Lease liabilities	–	–	38	22	–	40	100
Other long-term financial liabilities	16	8	11	51	16	135	237
Amounts payable under put options for shares in subsidiaries	–	–	8	11	–	69	88
Total fixed-rate debt	30	114	217	1,270	2,569	4,234	8,434
Variable-rate debt
Loans and borrowings Principal	26	14	16	30	53	885	1,024
Interest	40	61	89	511	–	1,343	2,044
Total variable-rate debt	66	75	105	541	53	2,228	3,068
Non-interest bearing debt
Trade and other payables	228	883	78	–	–	1,189	2,378
Payables to related parties	1	13	–	–	–	14	28
Total non-interest bearing debt	229	896	78	–	–	1,203	2,406
Total	$ 325	$ 1,085	$ 400	$ 1,811	$ 2,622	$ 7,665	$ 13,908

31 December 2018

US$ million	Less than 3 months	3 to 12 months	1 to 2 years	2 to 5 years	5 years	After On demand	Total
Fixed-rate debt
Loans and borrowings Principal	$ 226	$ 84	$ 710	$ 2,452	$ 17	$ 3,405	$ 6,894
Interest	148	3	194	637	–	637	982
Finance lease liabilities	3	–	–	9	–	9	21
Other long-term financial liabilities	53	9	8	211	5	86	372
Amounts payable under put options for shares in subsidiaries
Principal	60	9	–	–	–	–	69
Interest	9	–	–	–	–	–	9
Total fixed-rate debt	499	105	912	3,309	22	4,137	9,350
Variable-rate debt
Loans and borrowings Principal	3	2	15	65	45	1,014	1,144
Interest	17	110	72	1,121	–	–	1,320
Total variable-rate debt	20	112	87	1,186	45	1,014	2,464
Non-interest bearing debt
Trade and other payables	129	864	12	–	–	1,005	2,010
Payables to related parties	94	26	–	–	–	120	240
Total non-interest bearing debt	223	890	12	–	–	1,125	2,250
Total	$ 742	$ 1,107	$ 1,011	$ 4,495	$ 67	$ 6,276	$ 14,064

Payables to related parties in the tables above do not include contract liabilities in the amount of $4 million, $5 million and $2 million as of 31 December 2020, 2019 and 2018, respectively.

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures, while optimising the return on risk.

Interest Rate Risk

The Group borrows on both a fixed and variable rate basis and has other interest-bearing liabilities, such as finance lease liabilities and other obligations. The Group incurs interest rate risk on liabilities with variable interest rates. The Group’s treasury function performs analysis of current interest rates. In case of changes in market fixed or variable interest rates management may consider the refinancing of a particular debt on more favourable terms. The Group does not have any financial assets with variable interest rates.

Fair Value Sensitivity Analysis for Fixed Rate Instruments

The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect the Group’s profits. The Group does not account for any fixed rate financial assets as assets available for sale. Therefore, a change in interest rates at the reporting date would not affect the Group’s equity.# 28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)

Market Risk (continued)

Interest Rate Risk (continued)

Cash Flow Sensitivity Analysis for Variable Rate Instruments

Based on the analysis of exposure during the years presented, reasonably possible changes in floating interest rates at the reporting date would affect profit before tax (“PBT”) by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. In estimating reasonably possible changes the Group assessed the volatility of interest rates during the reporting periods.

	2020 Basis points	2019 Basis points	2018 Basis points
Effect on PBT	US$ millions	US$ millions	US$ millions
Liabilities denominated in US dollars
Decrease in LIBOR	2	2	(17)
Increase in LIBOR	(2)	(2)	17
	$ 2	$ (2)	$ (17)
Liabilities denominated in euro
Decrease in EURIBOR	–	–	(6)
Increase in EURIBOR	–	–	6
	$ –	$ –	$ (1)
Liabilities denominated in roubles
Decrease in Bank of Russia key rate	(75)	(75)	(75)
Increase in Bank of Russia key rate	75	50	50
	$ –	$ –	$ –

Currency Risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in currencies other than the functional currencies of the respective Group’s subsidiaries. The currencies in which these transactions are denominated are primarily US dollars, Canadian dollars and euro. The Group does not have formal arrangements to mitigate currency risks of the Group’s operations. However, management believes that the Group is partly secured from currency risks as foreign currency denominated sales are used to cover repayment of foreign currency denominated borrowings. The Group’s exposure to currency risk determined as the net monetary position in the respective currencies was as follows at 31 December:

US$ million	2020	2019	2018
USD/RUB	$2,230	$2,750	$2,886
EUR/RUB	(71)	467	265
EUR/USD	16	(77)	7
USD/CAD	–	(907)	(614)
EUR/CZK	–	(11)	(14)
USD/CZK	–	17	24
USD/UAH	–	–	(723)
USD/KZT	–	–	(12)
RUB/KZT	–	1	(20)

Sensitivity Analysis

The following table demonstrates the sensitivity to reasonably possible changes in the respective currencies, with all other variables held constant, of the Group’s profit before tax. In estimating reasonably possible changes the Group assessed the volatility of foreign exchange rates during the reporting periods.

	2020 Change in exchange rate %	Effect on PBT US$ millions	2019 Change in exchange rate %	Effect on PBT US$ millions	2018 Change in exchange rate %	Effect on PBT US$ millions
USD/RUB	16.88	(478)	17.10	(12)	18.91	(723)
	(16.88)	304	(17.10)	12	(18.91)	119
EUR/RUB	7.79	(1)	7.78	–	8.84	(170)
	(7.79)	1	(7.78)	–	(8.84)	170
CAD/RUB	5.02	50	4.58	(1)	2.23	–
	(5.02)	(50)	(4.58)	1	(2.23)	–
EUR/USD	5.98	(230)	7.68	4	4.20	(1)
	(5.98)	200	(7.68)	(4)	(4.20)	1
USD/CAD	13.87	(468)	13.54	(1)	16.08	(7)
	(13.87)	350	(13.54)	1	(16.08)	7
EUR/CZK	7.35	–	6.76	49	2.96	–
	(7.35)	–	(6.76)	(49)	(2.96)	–
USD/CZK	8.54	2	4.20	2	–	14
	(8.54)	(2)	(4.20)	(2)	–	(14)
USD/UAH	14	7	–	7	–	–
	(14)	(7)	–	(7)	–	–
USD/KZT	–	–	–	–	–	–
	–	–	–	–	–	–
RUB/KZT	8.13	25	7.56	–	11.48	–
	(8.13)	(25)	(7.56)	–	(11.48)	–

In addition to the effects of changes in the exchange rates disclosed above, the Group is exposed to currency risk on derivatives (Note 25). The impact of currency risk on the fair value of these derivatives is disclosed below.

	2020 Change in exchange rate %	Effect on PBT US$ millions	2019 Change in exchange rate %	Effect on PBT US$ millions	2018 Change in exchange rate %	Effect on PBT US$ millions
USD/RUB	16.88	74	7.78	30	13.87	36
	(16.88)	(52)	(7.78)	(25)	(13.87)	(27)

Fair Value of Financial Instruments

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data (unobservable inputs).

The carrying amounts of financial instruments, such as cash, short-term and long-term investments, short-term accounts receivable and payable, short-term loans receivable and payable and promissory notes, approximate their fair value.

At 31 December the Group held the following financial instruments measured at fair value:

US$ million	2020			2019			2018
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Assets measured at fair value
Derivatives not designated as hedging instruments (Notes 13, 25)	–	–	2	–	–	–	–	–	17
Hedging instruments (Note 25)	–	–	–	–	–	–	–	–	–
Liabilities measured at fair value
Derivatives not designated as hedging instruments (Note 25)	–	–	47	–	–	–	–	–	6
Hedging instruments (Note 25)	–	–	–	–	–	5	–	–	46

During the reporting period, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

The following table shows financial instruments for which carrying amounts differ from fair values at 31 December.

US$ million	2020 Carrying amount	2019 Carrying amount	2018 Carrying amount	2020 Fair value	2019 Fair value	2018 Fair value
Long-term fixed-rate bank loans	$ 38	$ 47	$ 56	$ 57	$ 269	$ 266
Long-term variable-rate bank loans	1,542	1,531	1,309	1,330	1,084	1,092
Long-term zero-rate bank loans	9	7	–	9	–	–
USD-denominated
6.50% notes due 2020	762	767	776	762	825	825
8.25% notes due 2021	514	543	513	514	555	535
6.75% notes due 2022	761	818	759	761	819	754
5.375% notes due 2023	707	778	705	707	770	–
5.25% notes due 2024	–	–	–	723	826	826
Rouble-denominated
12.95% rouble bonds due 2019	210	213	250	210	216	222
12.60% rouble bonds due 2021	279	297	333	279	223	241
7.95% rouble bonds due 2024	–	–	–	–	–	–
	$ 4,822	$ 5,001	$ 4,701	$ 4,970	$ 4,549	$ 4,659

The fair value of the non-convertible bonds and notes was determined based on market quotations (Level 1). The fair value of long-term bank loans was calculated based on the present value of future principal and interest cash flows, discounted at the Group’s market rates of interest at the reporting dates (Level 3).

The discount rates used for valuation of financial instruments were as follows:

Currency in which financial instruments are denominated	2020	2019	2018
USD	1.6 – 2.6%	1.7 – 3.4%	4.9 – 7.2%
EUR	2.2%	4.9 – 5.7%	8.13%
RUB	–	–	–

Capital Management

Capital includes equity attributable to the equity holders of the parent entity. Revaluation surplus which is included in capital is not subject to capital management because of its nature. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise the return to shareholders. The Board of Directors reviews the Group’s performance and establishes key performance indicators. There were no changes in the objectives, policies and processes during 2020. The Group manages its capital structure and makes adjustments to it by the issue of new shares, dividend payments to shareholders, and the purchase of treasury shares. In addition, the Group monitors distributable profits on a regular basis and determines the amounts and timing of dividend payments taking into account cashflow and other constraints.

29. NON-CASH TRANSACTIONS

Transactions that did not require the use of cash or cash equivalents, not disclosed in the notes above, were as follows in the years ended 31 December:

US$ million	2020	2019	2018
Liabilities for purchases of property, plant and equipment, excluding VAT	$ 194	$ 142	$ 92
Loans provided in the form of payments by banks for property, plant and equipment	6	–	30

30. COMMITMENTS AND CONTINGENCIES

Operating Environment of the Group

The Group is one of the largest vertically integrated steel producers globally and the largest steel producer in Russia. The Group’s major subsidiaries are located in Russia, the USA and Canada. Russia is considered to be a developing market with higher economic and political risks. The unrest in the Southeastern region of Ukraine and the economic sanctions imposed by the USA and the European Union on Russia in 2014 and later on caused economic slowdown in Russia and reduced access to international capital markets. Further sanctions imposed on Russia could have an adverse impact on the Group’s business. Steel consumption is affected by the cyclical nature of demand for steel products and the sensitivity of that demand to worldwide general economic conditions. In March 2018 the United States placed 25% tariffs on imports of most steel products from several countries, including Russia, while granting temporary exemptions for others, including Canada, Mexico, and the European Union. In May 2018, the U.S. announced the end of temporary exemptions for Canada, Mexico, and the European Union, putting 25% tariffs on imports from those jurisdictions effective 1 June 2018. In response, the government of Canada introduced 25% tariffs effective 1 July 2018 on selected steel products from the U.S.# 30. COMMITMENTS AND CONTINGENCIES

In addition, effective 25 October 2018, the Canadian government imposed provisional safeguard measures on imports from most countries (excluding the United States) of certain categories of steel products by adding a 25% surtax in cases, where the volume of imports from trading partners exceeded historical norms. Most of those provisional safeguards expired on 29 April 2019 following an inquiry by the Canadian International Trade Tribunal. In May 2019, the United States lifted the 25% tariffs on imports of steel products from Canada and Mexico. The Canadian government lifted its retaliatory tariffs on steel the same day. Therefore, the Group’s cross-border transactions between U.S. and Canadian subsidiaries no longer face the 25% Section 232 tariffs and Canadian retaliatory tariffs. The entities of the Steel North America segment import steel for further processing and final products for selling to domestic customers. U.S. Section 232 tariffs remain in place against other countries, including Russia, and U.S. subsidiaries still face those 25% tariffs on any imported steel from those countries. In August 2018, the U.S. imposed a preliminary 24.38% antidumping duty on welded line pipe greater than 16-inch outside diameter exported from Canada into the United States. In April 2019, the U.S. imposed a final antidumping duty of 12.32% that remains in place. The first administrative review of the duty rate at the U.S. Department of Commerce was initiated in July 2020, which may lead to a revised antidumping duty rate in January 2022.

The coronavirus (COVID-19) pandemic outbreak has significantly affected the world economy, including steel production, oil and gas, and construction industry. However, the majority of the Group’s businesses were relatively unaffected with no significant issues for production, supply or shipments. The increased market volatility may have an impact on the Group’s financial position, earnings and cash flows in 2021 and beyond. Management closely monitors the development of the economic situation and undertakes all necessary measures to maintain the sustainability of the Group’s business in the current circumstances. The global economic climate continues to be unstable and this may negatively affect the Group’s results and financial position in a manner not currently determinable.

Taxation

Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Further, the interpretation of tax legislation by tax authorities as applied to the transactions and activity of the Group’s entities may not coincide with that of management. As a result, tax authorities may challenge transactions and the Group’s entities may be assessed for additional taxes, penalties and interest. In Russia the periods remain open to review by the tax and customs authorities with respect to tax liabilities for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has accrued tax liabilities based on its best estimate of the probable outflow of resources embodying economic benefits, which will be required to settle these liabilities. Possible liabilities which were identified by management at the end of the reporting period as those that can be subject to different interpretations of the tax laws and other regulations and are not accrued in these financial statements could be up to approximately $72 million.

Contractual Commitments

At 31 December 2020, 2019 and 2018, the Group had contractual commitments for the purchase of production equipment and construction works for an approximate amount of $462 million, $379 million and $250 million (including VAT), respectively.

In 2010, the Group concluded a contract with PraxAir (Note 2, Accounting Judgements) for the construction of an air separation plant and for the supply of oxygen and other gases produced by PraxAir at this plant for a period of 20 years (extended to 25 years in 2015, when the construction was completed). This supply contract does not fall within the scope of IFRS 16 “Leases”. At 31 December 2020, the Group has committed expenditure of $517 million over the life of the contract.

In 2018, the Group concluded a contract with Air Liquide for the construction of an air separation plant and for the supply of oxygen and other gases produced by Air Liquide at this plant for a period of 20 years. The contractual price comprises a fixed component and a variable component. The total amount of the fixed component approximates $422 million, which is payable within 20 years starting upon commencement of production in 2021 in proportion to the amounts of the variable component. The variable component is determined based on the actual purchase of gases and is estimated at $374 million during the life of the contract. Based on management’s assessment this supply contract does not fall within the scope of IFRS 16 “Leases” as the Group has no access to the equipment and has no rights either to operate the assets, or to design them in order to predetermine the way of their usage. Also it is expected that more than an insignificant amount of the assets’ output will be sold to the parties unrelated to the Group.

In addition, Air Liquide will construct the system of trunk and auxiliary pipelines, distribution stations and other equipment for products delivery, which will be leased by the Group for a period of 20 years and accounted for under IFRS 16. The cost of construction of the products delivery system is estimated at $98 million.

In 2019, the Group concluded a contract with Xcel Energy Inc. for the supply of electricity for a period of 22 years. The Group is committed to purchase from 1 January 2022 at least 500,000 MWh annually on a take-or-pay basis at rates ranging from 3.90 to 4.90 cents/kWh. The rates can be adjusted for gas prices. The total amount of this commitment at the unadjusted rates approximates $440 million.

Social Commitments

The Group is involved in a number of social programmes aimed to support education, healthcare and social infrastructure development in towns where the Group’s assets are located. The Group budgeted to spend approximately $20 million under these programmes in 2021.

Environmental Protection

In the course of its operations, the Group may be subject to environmental claims and legal proceedings. The quantification of environmental exposures requires an assessment of many factors, including changing laws and regulations, improvements in environmental technologies, the quality of information available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved in remediation or settlement. The Group has a number of environmental claims and proceedings which are at a stage of investigation. Environmental provisions in relation to these proceedings that were recognised at 31 December 2020 amounted to $21 million. Preliminary estimates available of the incremental costs indicate that such costs could be up to $186 million. The Group has insurance agreements, which will provide reimbursement of the costs to be actually incurred up to $228 million, of which $21 million relate to the accrued environmental provisions and have been recognised in receivables at 31 December 2020. Management believes that an economic outflow of the additional costs is not probable and any pending environmental claims or proceedings will not have a material adverse effect on its financial position and results of operations.

In addition, the Group has committed to various environmental protection programmes covering periods from 2021 to 2026, under which the Group will perform works aimed at reductions in environmental pollution and contamination. As of 31 December 2020, the costs of implementing these programmes are estimated at $226 million.

[Page 226 / 227]

Legal Proceedings

The Group has been and continues to be the subject of legal proceedings, none of which has had, individually or in aggregate, a significant effect on its operations or financial position. The Group exercises judgement in measuring and recognising provisions and the exposure to contingent liabilities related to pending litigations or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the final settlement. Because of the inherent uncertainties in this evaluation process, actual losses may be different from the originally estimated provision. These estimates are subject to change as new information becomes available, primarily with the support of internal specialists or with the support of outside consultants. As of 31 December 2020, possible legal risks approximate $35 million.

Issued Guarantees

In June 2018, EVRAZ plc and EVRAZ West-Siberian Metallurgical Plant issued a joint guarantee in the amount of up to 30 billion roubles ($478 million at the exchange rate at the transaction date) to nine companies owned by Sibuglemet in respect of management services provided by one the Group’s subsidiaries to these entities. Sibuglemet is a producer of coking coal and operator of coal refineries in the Kemerovo region of Russia.31. AUDITOR’S REMUNERATION

The remuneration of the Group’s auditor in respect of the services provided to the Group was as follows.

US$ million	2020	2019	2018
Audit of the parent company of the Group	$ 1	$ 1	$ 1
Audit of the subsidiaries	2	2	2
Total audit fees	3	3	3
Other services	–	1	1
	$ 3	$ 4	$ 4

MATERIAL PARTLY-OWNED SUBSIDIARIES

Financial information of subsidiaries that have material non-controlling interests is provided below.

Non-controlling interests at 31 December	Country of incorporation	2020	2019	2018
Raspadskaya	Russia	4.85%	11.83%	10.00%
New CF&I (subsidiary of EVRAZ Inc NA)	USA	10.00%	16.16%	10.00%

US$ million	2020	2019	2018
Accumulated balances of material non-controlling interests
Raspadskaya	$ 44	$ 105	$ (20)
New CF&I (subsidiary of EVRAZ Inc NA)	129	162	105
Others	(15)	(16)	252
Total	158	251	337
Profit allocated to material non-controlling interests
Raspadskaya	17	–	35
New CF&I (subsidiary of EVRAZ Inc NA)	2	74	4
Others	(7)	2	(14)
Total	12	76	25

Annual report & accounts 2020

MATERIAL PARTLY-OWNED SUBSIDIARIES (CONTINUED)

The summarised financial information regarding these subsidiaries is provided below. This information is based on amounts before inter-company eliminations. As described in Note 4, at the end of 2020 Raspadskaya acquired Yuzhkuzbassugol. Consequently, the consolidated statement of financial position of Raspadskaya includes, among others, Yuzhkuzbassugol and its subsidiaries, and the statement of operations and cash flow information do not include the acquired entities. In addition, at 31 December 2020, the share of non-controlling shareholders takes into account the potential buyback of 4.25% of Raspadskaya’s shares (Note 4).

Summarised statements of operations

Raspadskaya

US$ million	2020	2019	2018
Revenue	$ 627	$ (441)	$ 186
Cost of revenue	(77)	–	(96)
Gross profit/(loss)	550	(441)	90
Operating costs	(493)	(509)	(76)
Impairment of assets	487	487	(92)
Foreign exchange gains/(losses), net	5	23	(24)
Profit/(loss) from operations	540	(489)	(26)
Non-operating gains/(losses)	203	275	23
Profit/(loss) before tax	743	(214)	(3)
Income tax benefit/(expense)	(43)	(64)	(4)
Net profit/(loss)	700	(278)	(7)
Other comprehensive income/(loss)	(242)	(78)	(8)
Total comprehensive income/(loss)	458	(356)	(15)
attributable to:
equity holders of parent	216	(278)	(12)
non-controlling interests	242	(78)	(3)
dividends paid to non-controlling interests	(150)	(384)	(56)

New CF&I

US$ million	2020	2019	2018
Revenue	$ 561	$ (496)	$ 65
Cost of revenue	(82)	(654)	(88)
Gross profit/(loss)	479	(1,150)	(23)
Operating costs	(17)	103	(1)
Impairment of assets	22	(93)	–
Profit/(loss) from operations	484	(1,050)	(24)
Non-operating gains/(losses)	10	–	–
Profit/(loss) before tax	494	(1,050)	(24)
Income tax benefit/(expense)	29	48	19
Net profit/(loss)	523	(1,002)	(5)
Other comprehensive income/(loss)	(1)	3	(6)
Total comprehensive income/(loss)	522	(999)	(11)
attributable to:
equity holders of parent	481	(996)	(11)
non-controlling interests	41	(3)	–
dividends paid to non-controlling interests	(7)	17	44

Annual report & accounts 2020

MATERIAL PARTLY-OWNED SUBSIDIARIES (CONTINUED)

Summarised statements of financial position as at 31 December

Raspadskaya

US$ million	2020	2019	2018
Property, plant and equipment	$ 1,452	$ 870	$ 831
Other non-current assets	24	9	113
Current assets	906	1,082	1,961
Total assets	2,382	1,961	2,905
Deferred income tax liabilities	96	196	82
Non-current liabilities	76	71	23
Current liabilities	1,230	1,522	327
Total liabilities	1,302	1,789	432
Total equity	1,080	172	2,473
attributable to:
equity holders of parent	816	1,314	993
non-controlling interests	44	162	170

New CF&I

US$ million	2020	2019	2018
Property, plant and equipment	$ 228	$ 205	$ 173
Other non-current assets	1,022	1,038	982
Current assets	149	152	199
Total assets	1,399	1,395	1,354
Deferred income tax liabilities	17	16	12
Non-current liabilities	110	128	81
Current liabilities	222	204	231
Total liabilities	349	348	324
Total equity	1,050	1,047	1,030
attributable to:
equity holders of parent	945	942	927
non-controlling interests	105	105	103

Summarised cash flow information

Raspadskaya

US$ million	2020	2019	2018
Operating activities	$ 89	$ 386	$ 345
Investing activities	(47)	194	(285)
Financing activities	(56)	(37)	(72)
Net cash generated/(used)	(14)	543	(12)

New CF&I

US$ million	2020	2019	2018
Operating activities	$ 22	$ 76	$ 80
Investing activities	(2)	(70)	(80)
Financing activities	–	(6)	(19)
Net cash generated/(used)	20	0	(19)

SUBSEQUENT EVENTS

On 24 February 2021, the Board of directors of EVRAZ plc declared dividends in the amount of $437 million, which represents $0.30 per share. In January 2021, the Group fully settled its 8.25% notes due 2021.

Annual report & accounts 2020

LIST OF SUBSIDIARIES AND OTHER SIGNIFICANT HOLDINGS

Name	Relationship	Registered address	Country of incorporation	Ownership interest in 2020	Notes
Camrose Pipe Corporation	indirect subsidiary	9040 N.Burgard Way, Portland, OR 97203	USA	100.00%	merged
Evraz Canada Holding Company Ltd	indirect subsidiary	3300 TD Canada Trust Tower, 421-7 Avenue SW, Calgary Alberta T2P 4K9	Canada	100.00%	merged
Canadian National Steel Corporation	indirect subsidiary	160 Elgin Street, Suite 2600, Ottawa Ontario K1P 1C3	Canada	100.00%
EVRAZ Inc. NA	indirect subsidiary	160 Elgin Street, Suite 2600, Ottawa, Ontario K1P 1C3	Canada	100.00%
EVRAZ Materials Recycling Inc.	indirect subsidiary	387 Broadway, Winnipeg, Manitoba R3C 0V5	Canada	51.00%
EVRAZ Recycling ( previously General Scrap Partnership)	indirect subsidiary	181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3	Canada	50.00%
EVRAZ Wasco Pipe Protection Corporation	indirect subsidiary	2400, 525 8th Avenue SW Calgary AB T2P 1G1	Canada	100.00%
Genalta Recycling Inc.	joint venture	387 Broadway, Winnipeg, Manitoba R3C 0V5	Canada	50.00%	merged
Genlandco Inc.	indirect subsidiary	3300 TD Canada Trust Tower, 421-7 Avenue SW, Calgary, Alberta T2P 4K9	Canada	100.00%
Kar-basher Manitoba Ltd	joint venture	3300 TD Canada Trust Tower, 421-7 Avenue SW, Calgary, Alberta T2P 4K9	Canada	50.00%	merged
Kar-basher of Alberta Ltd	indirect subsidiary	387 Broadway, Winnipeg, Manitoba R3C 0V5	Canada	100.00%
King Crusher Inc.	joint venture	160 Elgin Street, Suite 2600, Ottawa, Ontario K1P 1C3	Canada	100.00%
New Gensubco Inc.	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	96.36%	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Sametco Auto Inc.	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Actionfield Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
East Metals Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%	100% controlled through put option for the purchase of shares
Malvero Holdings Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Mastercroft Finance Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Nafkratos Limited	associate	Themistokli Dervi, 3, Julia House, P.C. 1066, Nicosia, Cyprus	Cyprus	21.31%
RVK Invest Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Sinano Shipmanagement Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Steeltrade Limited	joint venture	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	50.00%
Streamcore Limited	indirect subsidiary	Leoforos Archiepiskopou Makariou lll, 135, EMELLE Building, flat/office 22, 3021, Limassol	Cyprus	100.00%
Unicroft Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%
Velcast Limited	indirect subsidiary	3 Themistokli Dervi, Julia House, 1066, Nicosia	Cyprus	100.00%	liquidated
EVRAZ Nikom, a.s.	indirect subsidiary	Mnisek pod Brdy, c. 900, 25210	Czech Republic	100.00%
Evraz Caspian Steel	indirect subsidiary	41, ul. Promyshlennaya, Kostanai, 110000	Kazakhstan	65.00%
EvrazMetall Kazakhstan	indirect subsidiary	office 411; 29, prospekt Jenis, Saryarka district, Nur-Sultan	Kazakhstan	100.00%
Evraz Group S.A.	direct subsidiary	13, avenue Monterey, L-2163, Luxembourg	Luxembourg	100.00%
EVRAZ NA Mexico	indirect subsidiary	Frida Kahlo 195-709, Valle Оrientе, San Pedro Garza Garcia, Nuevo Leon, 66269	Mexico	100.00%
ECS Holdings Europe B.V.	indirect subsidiary	Hoogoorddreef 15, 1101 BA Amsterdam	Netherlands	65.00%
EVRAZ Highveld Steel and Vanadium Limited	indirect subsidiary	Old Pretoria Road, Portion 93 of the Farm Schoongezicht 308 JS eMalahleni (Witbank)	Republic of S.Africa	85.11%	deconsolidated in 2015
Mapochs Mine (Proprietary) Limited	indirect subsidiary	Old Pretoria Road, Portion 93 of the farm Schoongezicht No.308 JS, eMalahleni	Republic of S.Africa	62.98%	deconsolidated in 2015
Mapochs Mine Community Trust	indirect subsidiary	Portion 93 of the farm Schoongezicht No.308 JS, eMalahleni	Republic of S.Africa	-	deconsolidated in 2015
Aktiv-Media	indirect subsidiary	office 6; 35, ul. Ordzhonikidze, Novokuznetsk, Kemerovskaya obl., 654007	Russia	100.00%
Allegro	associate	office 2/2, bld.2, ul.	Russia	50.00%	90.90%

LIST OF SUBSIDIARIES AND OTHER SIGNIFICANT HOLDINGS (CONTINUED)

Annual report & accounts 2020# 34. LIST OF SUBSIDIARIES AND OTHER SIGNIFICANT HOLDINGS (CONTINUED)

Name	Relationship	Registered address	Notes
Vladislava Tetyukhina		Verhnyaya Salda, Sverdlovskaya obl., 624760
ATP Yuzhkuzbassugol	indirect subsidiary	20, Silikatnaya, Novokuznetsk, Kemerovskaya obl., 654086 Russia
AVT-Ural	indirect subsidiary	51.00% 2, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624351
Blagotvoritelniy fond Evraza - Sibir	indirect subsidiary	- non-commercial - - 1, ul. Ploshad Pobedy, Novokuznetsk, Kemerovskaya obl., 654006
Blagotvoritelniy fond Evraza - Ural	indirect subsidiary	- non-commercial office 4, 39, ul. Karl Marks, Nizhny Tagil, Sverdlovskaya obl., 622001 Russia
Brianskmetallresursy	indirect subsidiary	99.95% - 14, ul. Staleliteinaya, Bryansk, 241035
Centr kultury i iskusstva NTMK	indirect subsidiary	- non-commercial 1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025 Russia
Centr podgotovki personala Evraz- Ural	indirect subsidiary	- non-commercial - 1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025
Centr Servisnykh Resheniy	indirect subsidiary	100.00% 83.72% 1, ul. Rudokoprovaya, Novokuznetsk, Kemerovskaya obl., 654063
Centralnaya Obogatitelnaya Fabrika Abashevskaya	indirect subsidiary	12, Tupik Strelochny, Novokuznetsk, Kemerovskaya obl., 654086	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Centralnaya Obogatitelnaya Fabrika Kuznetskaya	indirect subsidiary	90.90% 16, Shosse Severnoe, Novokuznetsk, Kemerovskaya obl., 654043	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Elektrosvyaz YKU	indirect subsidiary	79.27%
EVRAZ Consolidated West-Siberian metallurgical Plant	direct subsidiary	16, ul. Shosse Kosmicheskoe, Novokuznetsk, Kemerovskaya obl., 654043
EVRAZ Kachkanarsky Ore Mining and Processing Plant	direct subsidiary	2, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624351
EVRAZ Metall Inprom	direct subsidiary	2-a, ul. Marshala Zhukova, Taganrog, Rostovskaya obl., 347942
EVRAZ Nizhny Tagil Metallurgical Plant	direct subsidiary	1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025
EVRAZ Uzlovaya	indirect subsidiary	100.00% 4, ul.Entuziastov, kvartal 5 Pyatiletka, Uzlovaya, Tulskaya obl., 301600
EVRAZ Vanady	indirect subsidiary	100.00% 1, ul. Przhevalskogo, Tula, 300016
EVRAZ Yuzhny Stan	indirect subsidiary	100.00% 1, ul. Zarechnaya, rabochy poselok Ust- Donetsky, Ust-Donetsky raion, Rostovskaya obl., 346550	controlled through put option for the purchase of shares of Malvero Holdings Limited
Evrazenergotrans	indirect subsidiary	50.00% 4, ul. Rudokoprovaya, Novokuznetsk, Kemerovskaya obl., 654006
EvrazHolding Finance	indirect subsidiary	100.00% office 14; 62, ul. Internationalnaya, Kyzyl, Tyva Republic, 667000
EvrazHolding LLC	indirect subsidiary	100.00% 4, ul. Belovezhskaya, Moscow, 121353
EvrazService	indirect subsidiary	100.00% 4, ul. Belovezhskaya, Moscow, 121353
Evraztekhnika	indirect subsidiary	80.00% 4, ul. Belovezhskaya, Moscow, 121353
Ferro-Building	office	402A, 6, bld. 1, 1st Nagatinsky proezd, Moscow, 117105
Gurievsky rudnik	indirect subsidiary	100.00% 1, ul. Zhdanova, Gurievsk, Kemerovskaya obl., 652780
Industrialnaya Vostochno- Evropeiskaya company	indirect subsidiary	50.00% floor 5, office 1, 9, ul. Khimicheskaya, Taganrog, Rostovskaya obl., 347913	controlled through put option for the purchase of shares of Malvero Holdings Limited
KachkanarEnergoTrans	office	115; 2, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624351
Kachkanarskaya teplosnabzhauschaya company	indirect subsidiary	100.00% - 17, 8 microraion, Kachkanar, Sverdlovskaya obl., 624350
Kulturno-sportivniy centr metallurgov	indirect subsidiary	- non-commercial 20, Prospect Metallurgov, Novokuznetsk, Kemerovskaya obl., 654006	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Kuznetskpogruztrans	indirect subsidiary	85.90% 18, ul. Promyshlennaya, Novokuznetsk, Kemerovskaya obl., 654029
Kuznetskteplosbyt	indirect subsidiary	100.00% 4, ul. Rudokoprovaya, Novokuznetsk, Kemerovskaya obl., 654006
Magnit	indirect subsidiary	- 4, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624351
Managing Company EVRAZ Mezhdurechensk	indirect subsidiary	100.00% 69, ul. Kirova, Novokuznetsk, Kemerovskaya obl., 654080
Medsanchast Vanady	indirect subsidiary	100.00% 1, Zeleny Mys district, Kachkanar, Sverdlovskaya obl., 624350
Metallenergofinance	indirect subsidiary	100.00% 4, ul. Rudokoprovaya, Novokuznetsk, Kemerovskaya obl., 654006
Metservice	indirect subsidiary	100.00% 90, ul. Industrialnaya, Nizhny Tagil, Sverdlovskaya obl., 622000	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mezhegeyugol Coal Company	indirect subsidiary	90.90% 62, ul. Internationalnaya, Kyzyl, Tyva Republic, 667000	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mine Abashevskaya	indirect subsidiary	90.90% 5, ul. Kavkazskaya, Novokuznetsk, Kemerovskaya obl., 654013	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mine Alardinskaya	indirect subsidiary	90.90% 56, ul. Ugolnaya, Malinovka, Kaltan, Kemerovskaya obl., 652831	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mine Esaulskaya	indirect subsidiary	90.90% 33, Prospect Kurako, Novokuznetsk, Kemerovskaya obl., 654006	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mine Osinnikovskaya	indirect subsidiary	90.90% 3, ul. Shakhtovaya, Osinniki, Kemerovskaya obl., 652804	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mine Uskovskaya	indirect subsidiary	90.90% 33, Prospect Kurako, Novokuznetsk, Kemerovskaya obl., 654006	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mining Metallurgical Company “Timir”	joint venture	51.00% 90.90% 4, Prospect Geologov, Neryungri, Republic of Saha (Yakutia), 678960	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Montazhnik Raspadskoy	indirect subsidiary	office 408; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Mordovmetallotorg	indirect subsidiary	99.90% 39, Aleksandrovskoe Shosse, Saransk, Respublica Mordovia, 430006
MU-Invest	indirect subsidiary	90.90% office 79, 4, ul. Belovezhskaya, Moscow, 121353	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Nizhny Tagil Telecompany	indirect subsidiary	- 74, ul. Industrialnaya, Nizhny Tagil, Sverdlovskaya obl., 622034
Telecon	associate	48.51%
Novokuznetskmetallopttorg	indirect subsidiary	- 16, ul. Chaikinoi, Novokuznetsk, Kemerovskaya obl., 654005
Ohothichie hozyaistvo	indirect subsidiary	- non-commercial 1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Olzherasskoye shakhtoprokhodcheskoye upravlenie	indirect subsidiary	90.90% office 331; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Osinnikovsky remontno- mekhanichesky zavod	indirect subsidiary	76.75% 90.90% 1/2, ul. Pervogornaya, Osinniki, Kemerovskaya obl., 652804	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Promuglepoject	indirect subsidiary	4, ul. Nevskogo, Novokuznetsk, Kemerovskaya obl., 654006	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Publishing House IKaR	indirect subsidiary	- 4, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624350	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Raspadskaya	direct subsidiary	90.90% 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Raspadskaya Coal Company	indirect subsidiary	90.90% office 201; 33, Prospect Kurako, Novokuznetsk, Kemerovskaya obl., 654006	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Raspadskaya Preparation Plant	indirect subsidiary	90.90% office 203; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Raspadskaya-Koksovaya	indirect subsidiary	90.90% office 424; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Razrez Raspadskiy	indirect subsidiary	90.90% office 213; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Regional Media Company	indirect subsidiary	- - 4, ul. Belovezhskaya, Moscow, 121353
Regionalniy Centr podgotovki personala Evraz-Sibir	indirect subsidiary	- non-commercial 4, ul. Nevskogo, Novokuznetsk, Kemerovskaya obl., 654006
Rembytcomplex	indirect subsidiary	100.00% - 8, 8 microraion, Kachkanar, Sverdlovskaya obl., 624351
Sanatoriy-porfilactory Lenevka	indirect subsidiary	- non-commercial Nikolopoltavskoye post-office, Lenevka, Prigorodny district, Sverdlovskaya obl., 622911
Sfera	indirect subsidiary	100.00% 50.00% office 315; 205, ul.

Name	Relationship	Registered address	Country of incorporation	Ownership interest in 2020	Notes
Sibmetinvest	indirect subsidiary	Sibmetinvest office 10; 1, 1st km of Rublevo-Uspenskoye shosse, der. Razdory, Odintsovo area, Moscow region, 143082	Russia	100.00%
Specializirovanniy registrator KOMPAS		57, Prospect Stroiteley, Novokuznetsk, Kemerovskaya obl., 654005	Russia	11.16% 45.12%
Specializirovannoye Shakhtomontazhno-naladochnoye upravlenie	indirect subsidiary	28, proezd Zaschitny, Novokuznetsk, Kemerovskaya obl., 654034	Russia		sold controlled through put option for the purchase of shares of Malvero Holdings Limited
Sportivniy complex Uralets	indirect subsidiary	36, Gvardeisky bulvar, Nizhny Tagil, Sverdlovskaya obl., 622005	Russia	- non-commercial -
Sportivno-Ozdorovitelny complex Metallurg-Forum	indirect subsidiary	office 26; 61, ul. Krasnogvardeiskaya, Nizhny Tagil, Sverdlovskaya obl., 622013	Russia	- non-commercial -
Tagilteplosbyt	indirect subsidiary	78A, ul. Industrialnaya, Nizhny Tagil, Sverdlovskaya obl., 622059	Russia	100.00% 53.26%	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Tomusinskoye pogruzochno- transportnoye upravlenie	indirect subsidiary	office 209; 106, ul. Mira, Mezhdurechensk, Kemerovskaya obl.,652870	Russia
Trade Company EvrazHolding	indirect subsidiary	4, ul. Belovezhskaya, Moscow, 121353	Russia	100.00%
TV-Most	indirect subsidiary	office 164, 31, Moscovsky prospect, Kemerovo, 650065	Russia	-
TVN	indirect subsidiary	office 16; 35, ul. Ordzhonikidze, Novokuznetsk, Kemerovskaya obl., 654007	Russia
Uliyanovskmetall	indirect subsidiary	20, 11 proezd Inzhenerny, Ulyanovsk, 432072	Russia	99.37%
United accounting systems	indirect subsidiary	office 205; 1, ul. Rudokoprovaya, Novokuznetsk, Kemerovskaya obl., 654063	Russia	100.00% 90.90%	liquidated excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
United Coal Company Yuzhkuzbassugol	indirect subsidiary	33, Prospect Kurako, Novokuznetsk, Kemerovskaya obl., 654006	Russia		excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
Upravlenie po montazhu, demontazhu i remontu gornoshakhtnogo oborudovaniya	indirect subsidiary	3, ul. Shakhtovaya, Osinniki, Kemerovskaya obl., 652804	Russia	90.90%
Vanady-transport	indirect subsidiary	2, ul. Sverdlova, Kachkanar, Sverdlovskaya obl., 624351	Russia	100.00%
Vladimirmetallopttorg	indirect subsidiary	57, ul. P. Osipenko, Vladimir, 600009	Russia	95.64%
Vtorresurs-Pererabotka	joint venture	37A, ul. Kutuzova, Novokuznetsk, Kemerovskaya obl., 654041	Russia	50.00%
Yuzhno-Kuzbasskoye geologorazvedochnoye upravlenie	indirect subsidiary	33, Prospect Kurako, Novokuznetsk, Kemerovskaya obl., 654006	Russia	90.90%	excluding the effect of derecognition of 4.25% in Raspadskaya (Note 4)
ZAO Irkutskvtorchermet	associate	office 212, bld. ZAO Vtorchermet, ul. Severny Promuzel, Irkutsk, 664053	Russia	21.31%
ZAO Vtorchermet	associate	office 211, bld. ZAO Vtorchermet, ul. Severny promuzel, Irkutsk, 664053	Russia	21.31%
Zapadnye Vorota	indirect subsidiary	4, ul. Belovezhskaya, Moscow, 121353	Russia	100.00%
Zavod metallurgicheskih reagentov	associate	1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025	Russia	50.00%
East Metals A.G.	indirect subsidiary	Baarerstrasse 131, 6300 Zug	Switzerland	100.00% 100.00% 100.00%
East Metals Shipping A.G.	indirect subsidiary	Baarerstrasse 131, 6300 Zug	Switzerland
EVRAZ North America plc	indirect subsidiary	Suite 1, 3rd Floor, 11-12 St James’s Square London SW1 4LB	United Kingdom
CF&I Steel LP	indirect subsidiary	1612 E Abriendo Pueblo, CO 81004	USA	90.00% 90.00%
Colorado and Wyoming Railway Company	indirect subsidiary	2100 S. Freeway Pueblo, CO 81004	USA
East Metals North America, LLC	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00%
East Metals Services Inc.	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00%
EVRAZ Claymont Steel, Inc.	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00%	liquidated
EVRAZ Inc. NA	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00%
EVRAZ Trade NA LLC	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00%
Fremont County Irrigating Ditch Co.	investment	113 W. 5th Street Florence, CO 81226	USA	13.50%
General Scrap Inc.	indirect subsidiary	3101 Valley Street Minot, ND 58702	USA	100.00% 90.00%
New CF&I Inc.	indirect subsidiary	1612 E Abriendo Pueblo, CO 81004	USA	60.00%
Oregon Ferroalloy Partners	indirect subsidiary	14400 Rivergate Blvd. Portland, OR 97203	USA	100.00%
Oregon Steel Mills Processing Inc.	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA
OSM Distribution Inc.	indirect subsidiary	71 S.Wacker, Suite 1700, Chicago, IL 60606	USA	100.00% 90.00%	liquidated
Palmer North America LLC	indirect subsidiary	251 Little Falls Drive, Wilmington, Delaware 19808	USA	57.59%
Union Ditch and Water Co.	indirect subsidiary	113 W. 5th Street Florence, CO 81226	USA

Separate statement of comprehensive income

(In millions of US dollars)

	Notes	31 December 2020	31 December 2019
General and administrative expenses		$ (12)	$ (11)
Operating income		10	9
Impairment of investments	3	6	6
Foreign exchange gains/(losses)	3,6,7,8	(76)	(49)
Interest expense	3,6,7,8	(239)	(318)
Gain/(loss) on financial assets or liabilities	7	(199)	(211)
Dividend income	2,12	6	6
Other non-operating gains/(losses)	9,732	2	2
Profit before tax		1,765	(213)
Current income tax expense	9	1,552	8,890
Net profit
Total comprehensive income	$ 1,552	$ 8,890

The accompanying notes form an integral part of these separate financial statements.

Separate statement of financial position

(In millions of US dollars)

	Notes	31 December 2020	31 December 2019
ASSETS
Non–current assets
Investments in subsidiaries	3	$ 15,057	$ 15,095
Investments in joint ventures	3	23	12
Receivables from related parties	6	15,092	15,136
Current assets
Receivables from related parties	6	704	629
Dividends receivable from related parties	6	16	16
Income tax receivable	9	732	654
TOTAL ASSETS		15,824	15,790
EQUITY AND LIABILITIES
Capital and reserves
Issued capital	4,5	75	75
Treasury shares		(154)	(169)
Reorganisation reserve		(584)	(584)
Merger reserve		127	127
Share-based payments		173	162
Accumulated profits		9,835	9,472
		9,170	8,781
LIABILITIES
Non-current liabilities
Trade and other payables	8,6,7	1,961	2,747
Long-term loans	7	3,201	522
Loans payable to related parties	19	5,178
Financial guarantee liabilities		3,295
Current liabilities
Trade and other payables	3,8,6,7	3,151
Payables to related parties		63
Short-term loans and current portion of long-term loans	7	800	1,174
Loans payable to related parties	8	285	3,714
Financial guarantee liabilities	9	6
Income tax payable	6	424
		70
TOTAL LIABILITIES		6,352	7,009
TOTAL EQUITY AND LIABILITIES		15,824	15,790

The Financial Statements on pages 236 to 249 were approved by the Board of Directors on 24 February 2021 and signed on its behalf by Alexander Frolov, Chief Executive Officer. The accompanying notes form an integral part of these separate financial statements.

Separate statement of cash flows

(In millions of US dollars)

	Notes	2020	2019
Cash flows from operating activities
Net profit		$ 1,552	$ 8,890
Adjustments to reconcile net loss to net cash flows from operating activities:
Impairment of investments	3	76	49
Foreign exchange (gains)/losses	3,6,7	318	199
Interest expense	6	239	211
(Gain)/loss on financial assets or liabilities	7	6	6
Dividend income	6	(2,129)	(9,732)
Other non-operating (gains)/losses		(2)	(33)
Changes in working capital:		(215)	(141)
Payables/receivables from related parties	6	(64)	(1)
Income tax receivable	9	–	(16)
Trade and other payables	6	(7)	(7)
Taxes payable	7	213	140
Net cash flow used in operating activities		(73)	(25)
Cash flows from investing activities
Dividends received	6	1,777	784
Payment for acquisition of investments in subsidiaries		–	–
Net cash flow from investing activities		1,730	784
Cash flows from financing activities
Proceeds from bank loans and notes	7	6	3,201
Repayment of bank loans and notes, including interest	7	6	(188)
Proceeds from loans provided by related parties		1,345	(1,947)
Repayment of loans provided by related parties, including interest	7	(854)	(1,086)
Payments for investments on deferred terms, including interest		1,736	(1,241)
Dividends paid to shareholders		(872)	(1,662)
Net cash flow used in/(from) financing activities		(758)
Effect of foreign exchange rate changes on cash and cash equivalents	5	–	(1)
Net decrease in cash and cash equivalents		–	–
Cash and cash equivalents at the beginning of the year		–	–
Cash and cash equivalents at the end of the year		–	–
Supplementary cash flow information:
Interest paid to third parties	7	(173)	(102)
Interest paid to related parties	6	(129)	(71)
Income taxes paid	9	(16)

The accompanying notes form an integral part of these separate financial statements.# Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information

Issued capital	Treasury shares	Reorganisation reserve	Merger reserve	Share-based payments	Accumulated profits	Notes	Total
At 31 December 2018
$ 75	$ (196)	$ (584)	$ 127	$ 149	$ 1,393	8,890	$ 964
Total comprehensive loss for the year	–	–	–	–	–	8,890	–
Share-based payments	–	–	–	–	–	13	13
Dividends declared	–	–	–	–	–	(1,086)	(1,086)
Transfer of treasury shares to participants of the Incentive Plans	–	27	–	–	–	(27)	–
At 31 December 2019	$ 75	$ (169)	$ (584)	$ 127	$ 162	$ 9,170	$ 8,781
Total comprehensive income for the year	–	–	–	–	–	1,552	1,552
Share-based payments	–	–	–	–	–	11	11
Dividends declared	–	–	–	–	–	(872)	(872)
Transfer of treasury shares to participants of the Incentive Plans	–	15	–	–	–	(15)	–
At 31 December 2020	$ 75	$ (154)	$ (584)	$ 127	$173	$ 9,835	$ 9,472

The accompanying notes form an integral part of these separate financial statements.

Annual report & accounts 2020

EVRAZ plc

Notes to the separate financial statements

Year ended 31 December 2020

1. CORPORATE INFORMATION

These separate financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 24 February 2021. EVRAZ plc (“EVRAZ plc” or “the Company”) was incorporated on 23 September 2011 as a public company limited by shares under the laws of the United Kingdom. The Company was incorporated under the Companies Act 2006 with the registered number in England 7784342. The Company’s registered address is 2 Portman street, London, W1H 6DU, United Kingdom. The Company, together with its subsidiaries (the “Group”), is involved in the production and distribution of steel and related products, vanadium products and coal and iron ore mining. The Group is one of the largest steel producers globally. At 31 December 2020 and 2019, EVRAZ plc was jointly controlled by a group of 3 shareholders: Greenleas International Holdings Limited (BVI), Abiglaze Limited (Cyprus) and Crosland Global Limited (Cyprus).

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

These separate financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. International financial reporting standards are issued by the International Accounting Standard Board (“IASB”). These financial statements have been prepared on a going concern basis as the directors believe that there are no material uncertainties which could create a significant doubt as to the Company’s ability to continue as a going concern in the foreseeable future.

Foreign Currency Transactions

The presentation and functional currency of the Company is the US dollar. Transactions in foreign currencies are initially recorded in US dollars at the rate on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the balance sheet date. Exchange gains and losses are recognised in profit or loss.

Investments

Investments in subsidiaries, associates or joint ventures are initially recorded at acquisition cost. Impairment in value is recorded if the carrying value of an investment exceeds its recoverable amount. The initial cost of the investment in Evraz Group S.A. was measured at the carrying amount of the equity items of Evraz Group S.A. as a separate legal entity at the date of the reorganisation (Note 3). Dividend income is recognised as revenue when the Company’s right to receive the payment is established. All purchases and sales of investments are recognised on the settlement date, which is the date when the investment is delivered to or by the Company.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

Borrowings

Borrowings are initially recognised at fair value, net of directly attributable transaction costs. After initial recognition, borrowings are measured at amortised cost using the effective interest rate method; any difference between the amount initially recognised and the redemption amount is recognised as interest expense over the period of the borrowings.

Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, and when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

Meet EVRAZ EVRAZ in ﬁgures Strategic report Corporate governance Financial statements Aꢀꢀitional inꢂormation | 240 241

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial Guarantee Liabilities

Financial guarantee liabilities issued by the Company are those contracts that require a payment to be made to reimburse the incurred losses because the specified debtor or counterparty to a contract fails to make payments or to perform the agreed terms of a contract. Financial guarantees issued by the Company are recognised initially as a liability at fair value, being equal to the estimated future cash inflows receivable from the subsidiaries under the guarantee agreements, with a corresponding recognition of the same amount as receivables from related parties. Subsequently, the liability is amortised over the lives of the guarantees through the statement of comprehensive income, unless it is considered probable that a guarantee will be called, in which case it is measured at the value of the guaranteed amount payable, if higher.

3. INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES

Investments in subsidiaries and joint ventures consisted of the following as of 31 December:

	Ownership interest	2020	Cost, net of impairment	US$ million
Subsidiaries
Evraz Group S.A.	100%	100%	2,808	2,884
EVRAZ NTMK	100%	100%	10,781	10,771
Raspadskaya	90.90%	88.16%	1,468	1,440
Joint Ventures
Timir	51.00001%	51.00001%	23	22
			15,057	15,095

The movement in investments was as follows:

	Evraz Group S.A.	NTMK	Raspadskaya	Timir	Total
31 December 2018	$ 3,197	$ –	$ 10,761	$ –	$ 3,221
					12,201
Additional investments	–	–	–	–	–
Impairment loss (recognition)/reversal	(318)	–	–	(318)	(316)
Share-based compensations	–	–	–	13	13
31 December 2019	$ 2,884	$ 10,771	$ 1,440	$ 22	$ 15,117
Additional investments	–	–	–	–	–
Impairment loss (recognition)/reversal	–	–	–	1	1
Share-based compensations	–	–	–	28	28
	(77)	–	–	–	(76)
	11
31 December 2020	$2,808	$ 10,781	$1,468	$ 23	$15,080

The Company recognises share-based payments made to employees of subsidiaries under control of Evraz Group S.A., EVRAZ NTMK and Raspadskaya as an addition to the cost of its investments in these subsidiaries (Note 5).

The accumulated impairment of the investments was as follows:

	Evraz Group S.A.	EVRAZ NTMK	Raspadskaya	Timir	Total
31 December 2018	$ –	$ –	$ –	$ (125)	$ (125)
Impairment loss (recognition)/reversal	(318)	–	–	(2)	(318)
31 December 2019	$ (316)	$ –	$ –	$ (127)	$ (443)
Impairment loss (recognition)/reversal	(77)	–	–	1	(76)
31 December 2020	$ (393)	$ –	$ –	$ (126)	$(519)

Evraz Group S.A.

In 2011, the Company acquired Evraz Group S.A. by means of the share exchange offer made by the Company to the shareholders of Evraz Group S.A. At that date the cost of investments in Evraz Group S.A. was measured at the carrying amount of the equity items shown in the separate accounts of Evraz Group S.A. at the dates of the share exchange. In 2020 and 2019, the Company impaired its investment in Evraz Group S.A. largely as a consequence of the decline in value of cash-generating units of EVRAZ Inc. NA Canada. More details are provided in Note 6 of the consolidated financial statements.

EVRAZ NTMK

On 18 April 2019, the Company acquired 100% ownership interest in EVRAZ NTMK from Evraz Group S.A. for consideration of $10,761 million, which was partially settled by non-cash consideration (Note 6). At 31 December 2019, the Company owed $2,899 million to Evraz Group S.A. in respect of this acquisition. In 2020, the Company paid $25 million under these liabilities and the remaining balance was converted into a loan (Note 6).

Annual report & accounts 2020

3. INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES (CONTINUED)

Raspadskaya

On 18 April 2019, the Company acquired 84.33% ownership interest in Raspadskaya from Evraz Group S.A. for consideration of $1,423 million, which was settled wholly by non-cash consideration (Note 6). Later in 2019, the Company acquired 1.33% in Raspadskaya from Evraz Group S.A. for cash consideration of $17 million, which in 2020 was converted into a loan payable to Evraz Group S.A. in the amount of $15 million (Note 6). In 2020, the Company acquired an additional 2.74% interest in Raspadskaya from Evraz Group S.A. for cash consideration of $28 million of which $22 million was paid in cash (Note 6).

OJSC Mining and Metallurgical Company Timir

Since 2013 the Company has owned a 51% ownership interest in the joint venture with Alrosa for the development of iron ore deposits in the Yakutia region in Russia. The Company’s consideration for this stake of 4,950 million roubles was recognised in the amount of $149 million being the present value of the expected cash outflows at the exchange rate as of the date of the transaction. During 2013-2019 the Company paid deferred installments for this acquisition. In 2019, the Company paid the final tranche of 480 million roubles ($7 million of purchase consideration and $1 million of interest charges). In 2016 and before, due to the postponement of the major project activities, the Company impaired its investment in Timir.# 4. EQUITY

In 2019, the Company additionally impaired $2 million and in 2020 a $1 million impairment loss was reversed. Additional information regarding Timir is provided in Note 11 of the consolidated financial statements. Indirect Subsidiaries and Other Significant Holdings The full list of indirect subsidiaries and other significant holdings of EVRAZ plc is presented in Note 34 of the consolidated financial statements.

Share Capital	Number of shares
	2020	2019
Ordinary shares of $0.05 each, issued and fully paid	1,506,527,294	1,506,527,294

EVRAZ plc does not have an authorised limit on its share capital.

Treasury Shares	Number of shares
	2020	2019
Treasury shares	49,654,691	54,620,233

In 2015, EVRAZ plc purchased 108,458,508 of its own shares. These shares are used for the Company’s Incentive Plans (Note 21 of the consolidated financial statements). Under these plans, in 2020 and 2019, the Company transferred to the participants of Incentive Plans 4,965,542 and 8,556,954 shares, respectively.

Reorganisation Reserve

Reorganisation reserve represents the difference between the net assets of Evraz Group S.A. at the date of the Group’s reorganisation (7 November 2011) and the par value of the issued shares of EVRAZ plc. This charge to equity reduced the amount of distributable reserves.

Merger Reserve

The merger reserve arose in 2013 in connection with the purchase of 50% in Corber Enterprises S.à r.l. (“Corber”) in accordance with section 612 of the Companies Act 2006. Impairments of the carrying value of this investment were transferred to the merger reserve. In 2015, the disposal of the investment in Corber to Evraz Group S.A. (Note 3) was made for non-cash consideration, which does not meet the criteria for qualifying consideration. The balance of the merger reserve will be presented as a separate component of equity in the Company’s statement of financial position until such time as Evraz Group S.A. is sold for qualifying consideration, and the merger reserve will be re-allocated to accumulated profits and become distributable.

Dividends

In 2020 and 2019, the Company declared dividends in the amount of $872 million and $1,086 million, respectively (Note 20 of the consolidated financial statements).

Distributable Reserves

$US million
	2020	2019
Accumulated profits	9,835	9,170
Reorganisation reserve	(584)	(584)
Unrealised profits	(8,200)	(8,200)
Dividend income from Evraz Group S.A. (Note 6)	1,051	386

Dividend income from Evraz Group S.A. (Note 6) did not constitute a qualifying consideration and was distributed out of the profit resulting from sale of assets (EVRAZ NTMK and Raspadskaya) to parent and, therefore, this income is excluded from the Company’s distributable reserves at 31 December 2020 and 2019. Although distributable reserves are currently calculated at $1,051 million (2019: $386 million), the Company has also considered the impact of further restrictions on distributions for public companies within Section 831 of the Companies Act. Under these restrictions the amount of reserves available for distribution at 31 December 2020 would be $1,051 million (2019: $379 million).

In February 2020 the directors became aware that certain dividends paid in 2018 and 2019 totaling $1,447 million had been made otherwise than in accordance with the Companies Act 2006. The directors duly checked the sufficiency of distributable reserves before each distribution, but due to an administrative error the interim accounts were not filed at Companies House prior to payment. To rectify these breaches, in February 2020 the Company filed the interim accounts in respect of each dividend payment. In addition, a special resolution was planned to be proposed at the Annual General Meeting of the Company’s shareholders in June 2020 to authorise the appropriation of distributable profits for the payment of the relevant dividends and remove any right for the Company to pursue shareholders or directors (the ‘Director Release’) for repayment. Due to the uncertainty caused by the effect of COVID-19 on the Company’s ability to conduct in-person meeting of shareholders this resolution was postponed to a more convenient time. It is expected that the special resolution will be proposed at the Annual General Meeting of the Company’s shareholders in June 2021. The Director Release will constitute a related party transaction under the Listing Rules of the UK Listing Authority and under IFRS. The overall effect of the special resolution will be to return all parties to the position they would have been in had the relevant dividends been made in full compliance with the Companies Act 2006.

5. SHARE-BASED PAYMENTS

As disclosed in Note 21 of the consolidated financial statements, the Group has incentive plans under which certain employees (“participants”) can be gifted shares of the Company. In 2020 and 2019, the Company recognised share-based compensation expense amounting to $11 million and $13 million, respectively, as a cost of investments in subsidiaries with a corresponding increase in equity.

6. RELATED PARTY TRANSACTIONS

Related parties of the Company include its direct and indirect subsidiaries, associates and joint venture partners, key management personnel and other entities that are under the control or significant influence of the key management personnel, the Company’s parent or its shareholders.

Loans Received from Related Parties

The following movements in loans payable to related parties were in 2019-2020.

Loans	Balance at 31 December 2019	Loans received from related parties	Interest expense	Repayment of loans	Non-cash transactions	Forex (gain)/loss	Balance at 31 December 2020
US$ million		2020
Currency		$	$	$	$	$	$
Maturity
Direct subsidiary
Evraz Group S.A.	USD	1.93-4.95%	2021-2023	528	815	89	(596)
Evraz Group S.A.	RUB	6.4%	2020	474	−	−	(17)
Indirect subsidiaries
East Metals A.G.	USD	3.00-5.06%	2020	418	466	8	(892)
EVRAZ ZSMK	RUB	4.56%	2021	−	64	−	(66)
ENA plc	USD	1.93%	2023	−	750	−	−
				946	1,345	99	(1,947)

Loans	Balance at 31 December 2018	Loans received from related parties	Interest expense	Repayment of loans	Non-cash transactions	Forex (gain)/loss	Balance at 31 December 2019
US$ million		2019
Currency		$	$	$	$	$	$
Maturity
Direct subsidiary
Evraz Group S.A.	USD	3.50%	2022	543	6	(21)	−
Indirect subsidiaries
East Metals A.G.	USD	2.73-5.06%	2018-2020	62	466	2	(121)
EVRAZ KGOK	RUB	5.89%	2019-2020	648	65	11	(126)
Sibmetinvest	RUB	5.51%	2020	244	100	7	(101)
EVRAZ Vanady Tula	RUB	5.51-5.89%	2019	1,263	194	7	(872)
EVRAZ ZSMK	RUB	5.51-5.89%	2019-2021	44	−	−	(719)
				2,217	1,736	97	(1,241)

In 2020, non-cash transactions included the following:
* In January 2020, a US dollar-denominated loan, which was received from Evraz Group S.A. in 2019, amounting to $474 million was converted into a loan denominated in roubles.
* In March 2020, EVRAZ plc and Evraz Group S.A. signed an assignment agreement and the outstanding balances payable to Evraz Group S.A. for the purchase of EVRAZ NTMK and Raspadskaya (Note 3) and for the transfer of loans in 2019 were converted into a loan in the amount of $3,124 million.
* In April 2020, EVRAZ plc transferred to Evraz Group S.A. its obligations under loans payable to EVRAZ ZSMK amounting to $66 million for consideration of $64 million. An amount of $2 million was recognised as non-operating gain in the separate statement of comprehensive income.
* In December 2020, Evraz Group S.A. reassigned $750 million under a loan receivable from EVRAZ plc to ENA plc.

In 2019, non-cash transactions included the transfer of the Company’s obligations under loans payable with a carrying value of $2,032 million to Evraz Group S.A. for consideration of $1,999 million. The excess of the carrying value of the liabilities transferred over the newly recognised liability to Evraz Group S.A. amounting to $33 million was recognised as a gain in the income statement within the Other non-operating gains/(losses) caption.

Dividend Income

	Evraz Group S.A.	EVRAZ NTMK	Raspadskaya	Total
Dividends receivable at 31 December 2018	$ –	$ 1,509	$ 23	$ 1,509
Dividend income accrued in 2019		(763)	(85)
Dividends received by cash			(21)
Tax withheld			(2)
Non-cash offset	(8,200)			(8,200)
Foreign exchange gain/(loss)		(32)		(32)
Dividends receivable at 31 December 2019	$ –	$ 629	$ –	$ 629
Dividend income accrued in 2020		2,083	46
Dividends received by cash		(1,735)	(42)
Tax withheld		(193)	(4)
Non-cash offset
Foreign exchange gain/(loss)		(80)		(80)
Dividends receivable at 31 December 2020	$ –	$ 704	$ –	$ 704

In 2019, the Company’s dividend income consisted of dividends from Evraz Group S.A. ($8,200 million declared in August 2019 and settled by a non- cash offset), EVRAZ NTMK ($886 million declared in July 2019 and fully paid by cash and $623 million declared in December 2019 and not paid as of 31 December 2019) and from Raspadkaya ($23 million declared in September 2019 and fully paid by cash).

In February, June, August and December 2020, EVRAZ NTMK, the Company’s wholly-owned subsidiary, declared dividends in the amount of 31.9 billion roubles ($499 million), 38.4 billion roubles ($556 million), 23.6 billion roubles ($324 milion) and 52.4 billion roubles ($704 million), respectively. As of 31 December 2020, dividends declared in December 2020 amounted to $704 million were not paid to EVRAZ plc.# 6. RELATED PARTY TRANSACTIONS (CONTINUED)

Offset of Liabilities with Evraz Group S.A.

During 2020 there were a number of transactions between EVRAZ plc and its direct subsidiary Evraz Group S.A.:

In February 2020, EVRAZ plc repaid $25 million to Evraz Group S.A. in respect of the liabilities for the purchase of EVRAZ NTMK (Note 3).
In March 2020, EVRAZ plc and Evraz Group S.A. signed an assignment agreement and the remaining balances payable to Evraz Group S.A. for the purchase of EVRAZ NTMK and Raspadskaya (Note 3) and for the transfer of loans were converted into a loan amounting to $3,124 million. An amount of $2 million was recognised as foreign exchange gain in the separate statement of comprehensive income (Note 6, Loans Received from Related Parties);
In April 2020, EVRAZ plc transferred to Evraz Group S.A. its obligations under loans payable to EVRAZ ZSMK amounting to $66 million for consideration of $64 (Note 6, Loans Received from Related Parties);

During 2020 EVRAZ plc purchased Raspadskaya shares from Evraz Group S.A. for total consideration of $28 million of which $6 million were not settled at 31 December 2020. During 2020 EVRAZ plc and Evraz Group S.A. concluded agreements, under which the above mentioned mutual payment obligations were offset resulting in a net liability payable to Evraz Group S.A. in the amount of $6 million.

During 2019 the following transactions were executed by EVRAZ plc and Evraz Group S.A.:

EVRAZ plc purchased EVRAZ NTMK and Raspadskaya from Evraz Group S.A. for total consideration of $12,201 million (Note 3);
EVRAZ plc transferred its obligations under loans payable to EVRAZ KGOK, EVRAZ Vanady Tula, EVRAZ ZSMK, Sibmetinvest for consideration of $1,999 million (Note 6, Loans Received from Related Parties);
Evraz Group S.A. transferred to EVRAZ plc notes payable for consideration of $2,850 million (Note 7);
Evraz Group S.A. declared dividends to EVRAZ plc in the amount of $8,200 million (Note 6, Dividend Income).

During 2019 EVRAZ plc and Evraz Group S.A. concluded agreements, under which the above mentioned mutual payment obligations were offset resulting in a net liability payable to Evraz Group S.A. in the amount of $3,151 million, which comprised of $2,916 million allocated to payables for the purchase of EVRAZ NTMK and Raspadskaya and $235 million allocated to payables for the transfer of loans payable to related parties.

Guarantees

The guarantees issued by Company to related parties were as follows at 31 December:

		US$ million		US$ million
	2020		2019
	Financial guarantee liability		Financial guarantee liability
	Guaranteed amount (principal)		Guaranteed amount (principal)
	Maturity at 31 December 2020
	Guarantee fees earned		Guarantee fees earned
Debtor	Subject of guarantee	$ 193	$ −
East Metals A.G.	Bank loans	1,458	10
		280	3
		$ 1	$ 141
		3	1,191
		$ 3	323
		$ −	$ −
		4	1
EVRAZ NTMK/ EVRAZ ZSMK	Loan to East Metals A.G.	2	5
Evrazholding Finance	Rouble bonds	486	169
Evraz Group S.A.	not determined	1	1
	2021	486	169
	2021-2028	−	1
	2021-2024	2	−
Management Company Mezhdurechensk	Performance of services	5	17
	Bank loans	203	486
		8	17
		3	4
EVRAZ Nikom a.s.	not determined	14	−
		−	−
		$ 2,634	$ 21	$ 10
		$ 2,327	$ 26	$ 9

The above guarantees are recognised at fair value in the statement of financial position of the Company. The guarantee fees are recorded within the Operating income caption of the Company’s income statement.

In 2018, the Company issued a guarantee to nine companies owned by Sibuglemet to compensate any direct losses caused by the failure to perform the agreed management services provided by Management Company Mezhdurechensk, an indirect subsidiary of the Company, to these entities (Note 30 of the consolidated financial statements). In 2018, the Company recognised financial guarantee liability of $18 million. In 2020 and 2019, the Company accrued $3 million and $4 million income, respectively, under this guarantee. In May 2020, the Group issued a notification about termination of the management services contract from 15 November 2020. The guarantee will continue to be effective 3 years after the date of termination.

Other Transactions

In 2020, Evrazholding, an indirect subsidiary of the Company, rendered consulting services to the Company in the amount of $Nil (2019: $1 million).

Other disclosures on directors' remuneration required by Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts & Reports) regulations 2008 and those specified for audit by the Directors' Remuneration Report Regulations 2002 are included in the Directors' Remuneration Report.

7. LOANS AND BORROWINGS

The Company had the following loans and borrowings during 2019-2020.

	6.50% notes due 2020	8.25% notes due 2021	6.75% notes due 2022	5.375% notes due 2023	5.25% notes due 2024	Total $
31 December 2018	$ –	$ –	$ –	$ –	$ –	$ –
Non-cash changes:
Recognition of notes at fair value						2,850
Interest and other charges expensed	738	808	528	776	–	2,850
Accrual of premiums and other charges on early repayment of borrowings	4	29	20	32	28	113
Cash changes:
Cash proceeds from bank loans and notes, net of debt issues costs	–	–	–	–	695	695
Repayment of interest and premiums on early repayment	–	–	–	–	(18)	(18)
Repayment of principal	(700)	–	–	–	–	(700)
31 December 2019	$ 806	$ 531	$ 768	$ 705	$ 2,810	5,620
Non-cash changes:
Interest and other charges expensed	36	26	39	38	139	278
Cash changes:
Repayment of interest and premiums on early repayment	–	–	–	–	(31)	(31)
Repayment of principal	(700)	–	(40)	(37)	(173)	(950)
31 December 2020	$ –	$ 765	$523	$ 767	$706	2,761

On 13 March 2019, Evraz Group S.A. transferred all its rights and obligations under the notes with a nominal amount of $2,700 million to EVRAZ plc for consideration of $2,850 million being the market value of the notes at that date. The Company recognised the liabilities at fair value and classified them as subsequently measured at amortised cost.

In April 2019, EVRAZ plc issued 5.25% US dollar-denominated notes due 2024 in the amount of $700 million. The proceeds from the issue of the notes were used to finance the purchase of 6.50% notes due 2020 at the tender offer in April 2019 and make whole call in May 2019. In April and May 2019, the Group fully settled its 6.50% notes due 2020 ($700 million). The premium over the carrying value on the repurchase amounting to $(6) million was included in the Gain/(loss) on financial assets and liabilities caption of the separate statement of comprehensive income.

In November 2020, EVRAZ plc early repaid $15 million under 8.25% notes due 2021. At 31 December 2020, the current portion of the borrowings included a principal payable under 8.25% notes due 2021 and interest payable under all issued notes. At 31 December 2019, the current portion of the borrowings included only interest payable under the notes.

8. TRADE AND OTHER PAYABLES

Trade and other accounts payable included the following at 31 December:

	2020	2019
	Current $	Non-current $
US$ million
Liability relating to a settlement of guarantee	4	7
	4	7
	$ 4	$ 7

At 31 December 2020 and 2019, trade and other accounts payable included liabilities relating to the settlement of the Company’s guarantee under a long-term take-or-pay supply contract of a former indirect subsidiary of the Company. In 2020, the Company paid $7 million (2019: $7 million) in respect of this liability and recognised interest expense of $1 million (2019: $1 million).

9. INCOME TAXES

A reconciliation of income tax expense applicable to profit before income tax using the statutory tax rate to income tax expense as reported in the Company’s financial statements for the years ended 31 December is as follows:

	2020	2019
US$ million	$ 1,766	$ 9,029
Profit/(loss) before income tax
At the statutory income tax rate of 19%	(336)	(1,716)
Adjustment in respect of income tax of previous years	–	(2)
Non-deductible expenses	(56)	(13)
Effect of lower tax rate for dividend income	192	(94)
Allowance for deferred tax asset	1,696	(23)
Current income tax expense	$ (213)	$ (139)

The movement in the net balance of current income tax receivable/(payable) was as follows:

	2020	2019
US$ million	$ (46)	$ (14)
1 January	(153)	16
Current income tax on dividend income	–	197
Benefit from a tax loss carryback	–	87
Adjustment in respect of income tax of previous years	(2)	16
Income tax withheld (Note 6)	197	4
Paid for the period	8	3
Foreign exchange gain/(loss)	4
31 December	$ (54)	$ (46)

The tax rate on dividends is equal to 10% for income from the Russian subsidiaries and zero rate for dividend income from Luxembourg.

At 31 December 2020 the Company had an amount payable of $70 million (2019: $62 million) in relation to income tax on dividends receivable from EVRAZ NTMK. In 2019, the Company recognised current income tax benefit of $16 million relating to the current year tax losses of $87 million that can be carried back to recover current tax paid in 2018.

At 31 December 2020, the unused tax losses carried forward amounted to $188 million (2019: $121 million). Deferred tax assets in respect of these losses have not been recorded as it is not probable that sufficient taxable profits will be available in the foreseeable future to offset the losses. They are available for offset against future taxable profits indefinitely.

At 31 December 2020, the Company had $49 million of unutilised foreign tax credits (2019: $76 million).# 10. FINANCIAL INSTRUMENTS

Liquidity Risk
The following tables summarise the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments, including interest payments.

	31 December 2020
US$ million	Less than 3 months	3 to 12 months	On demand	1 to 2 years	2 to 5 years	After 5 years	Total
Fixed-rate debt
Loans and borrowings
Principal	$ –	$ –	$ 735	$ 48	$ –	$ 78	$ 500
Interest	$ 97	$ 1,450	$ 94	$ –	$ –	$ –	$ 2,685
Loans payable to related parties
Principal	$ –	$ –	$ 280	$ 4	$ –	$ 3,201	$ 60
Interest	$ –	$ 3,481	$ 192	$ 65	$ 63	$ –	$ –
Trade and other payables
Principal	$ –	$ –	$ 2	$ 2	$ 9	$ 4	$ 7
Financial guarantees	$ –	$ –	$ –	$ –	$ 5	$ –	$ –
Total fixed-rate debt	$ –	$ 1,069	$ 154	$ 671	$ 4,810	$ 6,704	$ 6,704
Non-interest bearing debt
Payables to related parties	$ 6	$ 6	$ –	$ –	$ –	$ –	$ –
Total non-interest bearing debt	$ 6	$ 1,069	$ 154	$ 671	$ 4,810	$ –	$ 6,710

	31 December 2019
US$ million	Less than 3 months	3 to 12 months	On demand	1 to 2 years	2 to 5 years	After 5 years	Total
Fixed-rate debt
Loans and borrowings
Principal	$ –	$ –	$ –	$ 68	$ 750	$ 142	$ 1,950
Interest	$ 169	$ –	$ –	$ 105	$ –	$ –	$ 2,700
Loans payable to related parties
Principal	$ –	$ –	$ 198	$ 4	$ 218	$ 28	$ –
Interest	$ 522	$ 5	$ –	$ –	$ 938	$ 55	$ 18
Trade and other payables
Principal	$ –	$ –	$ 3	$ –	$ 3	$ 1	$ 7
Interest	$ 4	$ –	$ –	–	–	–	14
Financial guarantees	$ –	$ –	$ 12	$ 26	$ –	$ –	$ –
Total fixed-rate debt	$ –	273	362	921	2,662	4,218	4,218
Non-interest bearing debt
Payables to related parties	$ 3,151	$ 3,151	$ –	$ –	$ –	$ –	$ –
Total non-interest bearing debt	$ 3,151	273	362	921	2,662	–	7,369

10. FINANCIAL INSTRUMENTS (CONTINUED)

Market Risk
Currency Risk
The Company’s exposure to currency risk determined as the net monetary position in the respective currencies was as follows at 31 December:

US$ million	2020	2019
USD/RUB	$ 613	$ 6

Sensitivity Analysis
The following table demonstrates the sensitivity to reasonably possible changes in the respective currencies, with all other variables held constant, of the Company’s profit before tax. In estimating reasonably possible changes the Company assessed the volatility of foreign exchange rates during the reporting periods.

	2020		2019
	Change in	Effect on PBT	Change in	Effect on PBT
	exchange rate		exchange rate
	%	US$ millions	%	US$ millions
USD/RUB	(16.88)	16.88	1	(7.78)
	1	(44)	52	(44)

Fair Value of Financial Instruments
The carrying amounts of financial instruments, such as cash, accounts receivable and payable, loans payable to related parties, approximate their fair value. The fair value of the notes is disclosed in Note 28 of the consolidated financial statements.

11. SUBSEQUENT EVENTS

Material events after the reporting year are disclosed in Note 33 of the consolidated financial statements.

STOCK PERFORMANCE INDICATORS AND SHAREHOLDER INFORMATION

INFORMATION ABOUT SHARES OF EVRAZ PLC
The Company’s issued share capital as of 31 December 2020 and 24 shares are held in Treasury. Therefore, the total number of voting ordinary shares of which rights in the Company is February 15 2021 was 756,788,395.

The shares of EVRAZ plc trades on the Main market of London Stock Exchange

Trading service	Market	Listing category	FTSE index	FTSE sector	FTSE sub-sector	Segment	MiFID Status
SETS	MAIN MARKET	Premium	FTSE 100	Industrial Metals & Mining	Iron & Steel GB	STMM	Regulated Market
Ticker (Bloomberg)
EVR LN

SEDOL	ISIN number
B03RXG3	GB00B03RXG35

Share price Relative share price dynamics, 52w
140
120
100
80
60
40
20
0
01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020 01.01.2020
EVRAZ FTSE 100 INDEX

Shareholder structure
Ultimate beneficial owners, % of voting rights¹

33.80 Alexander Abramov¹
19.35 Roman Abramovich¹
28.68 Alexander Frolov¹
9.66 Free-float
5.75 Gennady Kozovoy²
The number of shares as dealing notification dated June 15 2018.
The number of shares is as per UKRFI Form C Notification of major interest in shares dated 26 February 2012. For Frolov includes shares held directly.

Unsolicited telephone calls and correspondence
If you receive any unsolicited investment advice:
* Make sure you get the correct name of the person and organisation.
* Check that they are properly authorised by the FSA before getting involved by visiting www.fsa.gov.uk/fsaregister and contacting the firm using the details on the register.
* Report the matter to the FCA either by calling 0845,606 1234 or visiting www. fsa.gov.uk/scams.
* If the calls persist, hang up. Details of any share dealing facilities that the company endorses will be included in Company mailings.

These operations are commonly known as ‘boiler rooms’ and the ‘brokers’ can be very persistent and extremely persuasive.
These are typically from overseas-based ‘brokers’ who target US or UK shareholders, offering to sell them what often turns out to be worthless or high risk shares.
Shareholders are advised to be wary of any unsolicited advice; offers to buy shares at a discount; or offers of free reports about the Company.

Electronic shareholder communications
EVRAZ uses its website www.evraz.com as its primary means of communication with its shareholders provided that the shareholder has agreed or is deemed to have agreed that communications may be sent or supplied in that manner in accordance with the Companies Act 2006. Electronic communications allow shareholders to access information instantly as well as helping EVRAZ reduce its costs and its impact on the environment. Shareholders can sign up for electronic communications via Computershare’s Investor Centre website at www.investorcentre.co.uk. Shareholders that have consented or are deemed to have consented to electronic communications can revoke their consent at any time by contacting the Company’s registrar, Computershare.

DEFINITIONS OF SELECTED ALTERNATIVE PERFORMANCE MEASURES

The Group uses alternative performance measures (APMs) to improve comparability of information between reporting periods and business units, either by adjusting for uncontrollable or one-off factors, or by aggregating measures, to aid the user of this report in understanding the activity taking place across the Group’s portfolio.

EBITDA
EBITDA is determined as a segment’s profit/loss from operations adjusted for social and social infrastructure maintenance expenses, impairment of assets, profit/loss on disposal of property, plant and equipment and intangible assets, foreign exchange gains/(losses) and depreciation, depletion and amortisation expense.

Free Cash Flow
Free Cash Flow represents EBITDA, net of noncash items, less changes in working capital, income tax paid, interest paid and covenant reset charges, conversion premiums, premiums on early repurchase of bonds and realised gain/ (losses) on interest payments under swap contracts, interest income and debt issue costs, less capital expenditure, including recorded in financing activities, purchases of subsidiaries, net of cash acquired, proceeds from sale of disposals classified as held for sale, net of transaction costs, less purchases of treasury shares for participants of the incentive plans, plus other cash flows from investing activities. EVRAZ’ calculation of Free Cash Flow may be different from the calculation used by other companies and therefore comparability may be limited. Free Cash Flow is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. See note 9 of the consolidated financial statements for additional information and reconciliation with IFRS financial statements.

Cash and short-term bank deposits
Cash and short-term bank deposits is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ calculation of cash and short-term bank deposits may be different from the calculation used by other companies and therefore comparability may be limited.

Cash and short-term bank deposits calculation	31 December 2020	31 December 2019	Change	Change, %
US$ million
Cash and cash equivalents	1,423	1,627	(204)	(14.3)
Cash and short-term bank deposits	1,423	1,627	(204)	(14.3)

Total debt
Total debt represents the nominal value of loans and borrowings plus unpaid interest, finance lease liabilities, loans on assets classified as held for sale, and the nominal effect of cross-currency swaps on principal of roubledenominated notes. Total debt is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ’ calculation of total debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation is different from that used for covenant compliance calculations.# Total debt

Total debt has been calculated as follows:
US$ million | 31 December 2020 | 31 December 2019 | Change | Change, %
---|---|---|---|---
Long-term loans, net of current portion | 4,599 | 4,676 | (77) | (1.6)
Short-term loans and current portion of long- term loans | 140 | 16 | 124 | n/a
Add back: Unamortised debt issue costs and fair value adjustment to liabilities assumed in business combination | 16 | 18 | (2) | (11.1)
Nominal effect of cross-currency swaps on principal of rouble-denominated notes | 43 | 49 | (6) | (12.2)
Finance lease liabilities, non-current portion | 30 | 34 | (4) | (11.8)
Finance lease liabilities, current portion | 83 | 31 | 52 | 167.7
Total debt | 4,911 | 4,824 | 87 | 1.8

Net debt

Net debt represents total debt less cash and liquid short-term financial assets, including those related to disposals classified as held for sale. Net debt is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ's calculation of net debt may be different from that used by other companies and therefore comparability may be limited. The current calculation is different from that used for covenant compliance calculations.

Net debt has been calculated as follows:
US$ million | 31 December 2020 | 31 December 2019 | Change | Change, %
---|---|---|---|---
Total debt | 4,911 | 4,824 | 87 | 1.8
Cash and cash equivalents | (3,356) | (3,371) | 15 | (0.4)
Net debt | 1,555 | 1,453 | 102 | 7.0

CAPEX

Capital expenditure (CAPEX) is cash expenditure on property, plant and equipment. For internal reporting and analysis, CAPEX includes non-cash transactions related to CAPEX. CAPEX has been calculated as follows:

US$ million	31 December 2020	31 December 2019	Change	Change, %
Purchases of property, plant and equipment and intangible assets	762	647	115	17.8
Purchases of purchase of property, plant and equipment on deferred terms	10	-	10	n/a
CAPEX	772	647	125	19.3

Meet EVRAZ

GHG intensity ratio

GHG intensity ratio is the total number of occupational injuries resulted in lost time among the company employees in the reporting period. Fatalities are not included. Tonnes of CO2 equivalent (Scope 1 and 2 GHG emissions) divided by tonnes of crude steel. Only steelmaking enterprises are included into the calculation, which are located in Russia and North America.

Cash cost of iron ore products

Cash cost of iron ore products is defined as cost of revenues less depreciation and SG&A, the result is divided by sales volumes.

Labor productivity, US$/t

Number of EBS transformations implemented at the key assets during the reporting year.

Number of EBS transformations

Slab cash costs, US$/t

Cash cost of slab is defined as production cost less depreciation, the result is divided by production volumes of slab. Raw materials from EVRAZ coal and iron ore producers are accounted for on at-cost-basis. Costs of slab of EVRAZ NTMK, EVRAZ ZSMK are then weighted averaged by the total saleable slab production volume.

P = S / V

Where:
S = Major Costs (asset and allocated subsidiary costs), exclusive of tax, local currency and division consolidation sites with different currencies, $)
V = production volume, tnd (for steel assets)

Effect from efficiency improvement programme (customer focus and cost cutting effects)

Each project effect is calculated as an absolute deviation of targeted metrics year to year multiplied by relevant price or volume depending on project's focus.

Coking coal concentrate cash cost, US$/t

Cash cost of coking coal concentrate is defined as cost of revenues less depreciation and SG&A, the result is divided by sales volumes.

LTIFR

LTIFR = X * 1000000 / Y
Where:
X = total number of occupational injuries resulted in lost time among the company employees in the reporting period. Fatalities are not included.
Y = the actual total number of man-hours worked by all company employees in the reporting period.

DATA ON MINERAL RESERVES

COAL

Raspadskaya (Novokuznetsk site)

JORC equivalent coal proved and probable reserves, kt
Mine | As of 31 December 2020
---|---
Alardinskaya | 21,443
Erunakovskaya-8 | 182,015
Total | 203,458

Raspadskaya (Mezhegeyugol site)

JORC equivalent coal proved and probable reserves, kt
Mine | As of 31 December 2020
---|---
Mezhegeyugol | 59,564
Total | 59,564

IRON ORE

EVRAZ ZSMK mining operations

JORC equivalent coal proved and probable reserves, kt
Mine | As of 31 December 2020
---|---
Tashtagol | 80,001
Sheregesh | 61,967
Total | 141,968

Kachkanarsky GOK (EVRAZ KGOK)

JORC equivalent coal proved and probable reserves, kt
Mine | As of 31 December 2020
---|---
Gusevogorskoe | 2,990,494
Kachkanar Proper (Sobstvenno-Kachkanarskoye) | 203,556
Total | 3,194,050

Fe, %	S, %	V2O5 %
31.90	1.39	0.13

SHORT SUMMARY OF RELEVANT ANTI-CORRUPTION POLICIES

Code of Conduct

The Code of Conduct is the key document that all employees must adhere to and act in full accordance with. Every new employee is instructed to read the Code of Conduct carefully on his or her first day of work. The document is available on the corporate intranet and stresses the ultimate importance of ethical behaviour in all circumstances.

Anti-corruption training

EVRAZ consistently performs thorough background and criminal record checks on all potential employees. Among other requirements and norms, the policy specifies that all necessary effort is invested only after the candidate gives written permission to work with his/her personal data. The Group is committed to protecting each individual’s privacy and works in full compliance with relevant laws on personal data.

Anti-corruption policy

The EVRAZ Anti-corruption Policy establishes and explains key principles that all assets have adopted to prevent corruption. The policy is easily accessible on the corporate intranet for employees, interested parties and partners, who are all expected to be compliant with relevant anti-corruption legislation and the principles upheld by the Group. Every new employee reads the policy on his or her first day of work.

Conflict of interest policy

A conflict of interest is a set of circumstances in which employees have financial or other personal considerations that may compromise or influence their professional judgment or integrity in carrying out their work responsibilities. The policy specifies how to identify, consider and duly take care of situations with signs of such conflicts. HR together with compliance managers routinely check whether there are conflicts of interests in the Group, whereas employees and particularly their managers are expected to provide information about any potentially risky situations. Special commissions consider cases that are reported and found to come up with the best possible solution to each individual situation.

Gift and business entertainment policy

EVRAZ believes that business gifts and hospitality are accepted ways to demonstrate and further develop good relationships. At the same time, adequate and consistent control over such expenses is highly important and is one of the key areas for anti-corruption compliance to watch. The policy defines rules and strict approval procedures to be followed when extending or receiving gifts and hospitality. In particular, all amounts above US$100 for a personal gift (received or given) and US$500 for hospitality (received or extended to a person) must be approved by the responsible compliance manager. Corresponding amounts in the US and Canada are US$50 and US$250, respectively. To this end, an electronic notification system has been developed.

Anti-corruption training policy

Consistent anti-corruption education efforts are an integral element of a well-thought-out compliance system. The policy adopted in December 2018 defines what positions and levels of authority are to undergo training in anti-corruption awareness. Specifically, all managers and specialists from compliance, legal, controlling, asset protection, investor and government relations, and HR are to receive training and pass a corresponding test. The same refers to all decision makers and/or client managers from procurement and sales. Compliance managers are assigned discreet authority to analyse risk areas and decide who else needs to be trained.

Contractor/supplier due diligence checks

To guard against unscrupulous, unreliable, or suspicious would-be agents and partners, EVRAZ runs comprehensive due diligence checks on a business or person prior to signing a contract. The internal audit function conducts regular checks of the completeness and accuracy of records, either planned or requested by a compliance manager, and compliance specialists act on any recommendations promptly.

Code of Conduct

from conflicts or natural disasters. EVRAZ may choose to support certain projects in education, sport, healthcare, culture and environmental protection. or contractors feel unable to do so via other means and procedures, a confidential hotline is available.# TERMS AND ABBREVIATIONS

B

By-product: A secondary product which results from a manufacturing process or chemical reaction.
Bessemer converter: A furnace used in a method of primary steelmaking in which carbon-rich molten pig iron is made into steel. Blowing oxygen through molten pig iron lowers the carbon content of the alloy and changes it into low-carbon steel. The process is known as bessemer because basic oxides of burnt lime or dolomite, which are chemical bases, are added to promote the removal of impurities and protect the lining of the converter.
Basic oxygen furnace: A furnace used in a method of primary steelmaking in which carbon-rich molten pig iron is made into steel. Blowing oxygen through molten pig iron lowers the carbon content of the alloy and changes it into low-carbon steel. The process is known as basic because basic oxides of burnt lime or dolomite, which are chemical bases, are added to promote the removal of impurities and protect the lining of the converter.
Blast furnace: The blast furnace is the classic production unit to reduce iron ore to molten iron, known as hot metal. It operates as a counter-current shaft system, where iron ore and coke is charged at the top. While this charge descends towards the bottom, ascending carbon containing gases and coke reduces the iron ore to liquid iron. To increase efficiency and productivity, hot air (often enriched with oxygen) is blown into the bottom of the blast furnace. In order to save coke, coal or other carbon containing materials are sometimes injected with this hot air.
Beam: A structural element. Beams are characterised by their profile (the shape of their cross-section). One of the most common types of steel beam is the I-beam, also known as H-beam, or W-beam (wide-flange beam) or a universal beam/column. Beams are widely used in the construction industry and are available in various standard sizes, e.g. HEB beam, IPE beam, IPN beam as mentioned in this report.
Billet: A usually square, semi-finished steel product obtained by continuous casting or rolling of blooms. Sections, rails, wire rod and other rolled products are made from billets.
Coking coal: Highly volatile coal used to manufacture coke.
Coke: A product made by baking coal without oxygen at high temperatures. Unwanted gases are driven out of the coal. The unwanted gases can be used as fuels or processed further to recover valuable chemicals. The resulting material (coke) has a strong porous structure which makes it ideal for use in a blast furnace.
Concentrate: A product resulting from iron ore / coal enrichment, with a high grade of extracted mineral.
Construction products: Include beams, channels, angles, rebars, wire rods, wire and other goods.
Converter: A type of furnace that uses pure oxygen in the process of producing steel from cast iron or dry mix.
Conversion costs: Conversion costs is defined as production costs without raw materials and depreciation, incl. SG&A and Maintenance CAPEX. This measure is used to monitor segment competitiveness improvement.
Crude steel: Steel in its solidified state direct after casting. This is then further processed by rolling or other treatments, which can change its properties.
Coal washing: The process of removing mineral matter from coal usually through density separation, for subsequent rolling in the finishing mills. for coarser coal and using surface chemistry for finer particles.
Continuous casting machine: Process where molten metal is solidified into a semi-finished billet, bloom, or slab.
CAPEX: Capital expenditure.
CFR: Cost and freight, the seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is not included.
Channel: U-shaped section for construction.

D

Debottlenecking: Increasing capacity of a supply or production chain through the modification of existing equipment or infrastructure to improve efficiency.
Deposit: An area of coal resources or reserves identified by surface mapping, drilling or development.
ISO 9001:2008: The International Standardisation Organisation’s standard for a quality management system.

E

Electric arc furnace: A furnace used in the steelmaking process which heats charged material via an electric arc.
EVRAZ in figures:
| Strategic report | Corporate governance | Financial statements | Additional information |
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| 258 | 259 | | |

F

Finished products: Products that have completed the manufacturing process but have not yet been sold or distributed to the end user.
Flat products: Include commodity plate, specialty plate and other products in flat shape such as sheet, strip and tin plate.
Feasibility study: A comprehensive engineering estimate of all costs, revenues, equipment requirements and production levels likely to be achieved if a mine is developed. The study is used to define the technical and economic viability of a project and to support the search for project financing.

G

Greenfield: The development or exploration of a new project not previously examined.
Grinding balls: Balls used to grind material by impact and pressure.

H

Hot metal: Molten iron produced from a blast furnace.
Hot-rolled steel products: Products finished in a rolling mill, these include bars, rods, plate, beams etc.
Head-hardened rails: High strength rails with head hardened by heat treatment.
Heat-treatment: A group of industrial and metalworking processes used to alter the physical, and sometimes chemical, properties of a material.
HiPo: High potential employee.

I

Iron ore: Chemical compounds of iron with other elements, mainly oxygen, silicon, Sulphur or carbon. Only extremely pure (rich) iron-oxygen compounds are used for steelmaking.
ISO 14001: The International Standardisation Organisation’s standard for environmental management systems.
Include: Bars, rods and structural products that are long rather than flat and are produced from blooms or billets.

J

JORC Code: The Australasian Joint Ore Reserves Committee, which is widely accepted as a standard for professional reporting of Mineral Resources and Ore Reserves.

K

Kt: Thousand tonnes.

L

Labour productivity: Labour productivity is defined as labour costs exclusive of tax divided by production volumes of steel products. The measurement of performance enables the Company to monitor labour efficiency.
Ladle furnace: The secondary metallurgy vessel used between steelmaking and casting operations to allow the composition of molten steel to be brought to the required customer specification.
Lean: Lean is philosophy of managing the business that is based on a set of principles that define the way of work.
Long products: Include bars, rods and structural products that are long rather than flat and are produced from blooms or billets.
Longwall: An underground mining process in which the coal face is dug out by a shearer and transported above ground by conveyors.
LTIFR: Lost time injury frequency rate, which represents the number of lost time injuries (1 day or more of absence) divided by the total number of hours worked expressed in millions of hours.

M

Mt: Million tonnes.
Mtpa: Million tonnes per annum.
Model line: Model line is as a value stream within a single facility or operation, provides a focused and controlled playground for implementing lean. Serve as internal benchmark for the Company. The measurement of performance enables the Company to monitor lean implementation.
Meet EVRAZ:

O

Open pit mine: A mine working or excavation open to the surface where material is not replaced into the mined out areas.
OCTG pipe: Oilfield Casing and Tubing (OCTG) pipes used in the oil industry.

P

Pulverised coal injection (PCI): A cost-reducing technique in iron-making, where cheaper coal is prepared to replace normal coking coal in the blast furnace. The coal is pulverised into very small particles.
Pellet: An enriched form of iron ore shaped into small balls or pellets. Pellets are used as raw material in the steel making process.
Pig iron: The solidified iron produced from a blast furnace used for steel production. In liquid form, pig iron is known as hot metal.
Pipe blank: A flat sheet of metal, a semi-finished product, sold to pipemakers to manufacture pipes.
Plate: A long thin square shaped construction element made from slabs.
Products finished in a rolling mill: These include bars, rods, plate, beams etc.

R

Rebar: Reinforcing bar, a commodity grade steel used to strengthen concrete in highway and building construction. Rebar A500SP is a type of reinforcing bar that allows for a reduction in the metallic component of reinforced concrete, thereby significantly lowering construction costs.
Railway products: Include rails, rail fasteners, wheels, tyres and other goods for the railway sector.
Rolled steel products: Products finished in a rolling mill, these include bars, rods, plate, beams etc.

S

Saleable products: Products produced by EVRAZ mines or steel mills which are suitable for sale to third parties.
SG&A: Selling, General and Administrative Expenses.
Self-coverage: The raw material requirement of EVRAZ steelmaking facilities compared with coal product sales or production of iron ore products from own raw materials.

T

The Group strictly enforces a know-your-partner/client policy and in doing so is fully compliant with the applicable anti-corruption laws. The investigation includes but is not limited to checking the company’s business reputation and solvency, as well as its top management’s profile and reputation.
Sponsorship and charity policy: This policy regulates all aspects of sponsorship and charity efforts at EVRAZ as necessary. According to it, the Group may consider supporting low-income or physically challenged individuals, and those suffering.
Hot-rolled steel products: Products finished in a rolling mill, these include bars, rods, plate, beams etc.
Bessemer converter: A furnace used in a method of primary steelmaking in which carbon-rich molten pig iron is made into steel. Blowing oxygen through molten pig iron lowers the carbon content of the alloy and changes it into low-carbon steel. The process is known as bessemer because basic oxides of burnt lime or dolomite, which are chemical bases, are added to promote the removal of impurities and protect the lining of the converter.
Basic oxygen furnace: A furnace used in a method of primary steelmaking in which carbon-rich molten pig iron is made into steel. Blowing oxygen through molten pig iron lowers the carbon content of the alloy and changes it into low-carbon steel. The process is known as basic because basic oxides of burnt lime or dolomite, which are chemical bases, are added to promote the removal of impurities and protect the lining of the converter.
Coking coal: Highly volatile coal used to manufacture coke.
Cash cost of coking coal concentrate: Cash cost of coking coal concentrate is defined as the production cost less depreciation, incl. SG&A and Maintenance CAPEX, the result is divided by production volumes. This measure is used to monitor segment competitiveness improvement.
Concentrate: A product resulting from iron ore / coal enrichment, with a high grade of extracted mineral.
Construction products: Include beams, channels, angles, rebars, wire rods, wire and other goods.
Beam: A structural element. Beams are characterised by their profile (the shape of their cross-section). One of the most common types of steel beam is the I-beam, also known as H-beam, or W-beam (wide-flange beam) or a universal beam/column. Beams are widely used in the construction industry and are available in various standard sizes, e.g. HEB beam, IPE beam, IPN beam as mentioned in this report.
CAPEX: Capital expenditure.
CFR: Cost and freight, the seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is not included.
Converter: A type of furnace that uses pure oxygen in the process of producing steel from cast iron or dry mix.
Conversion costs: Conversion costs is defined as production costs without raw materials and depreciation, incl. SG&A and Maintenance CAPEX. This measure is used to monitor segment competitiveness improvement.
Billet: A usually square, semi-finished steel product obtained by continuous casting or rolling of blooms. Sections, rails, wire rod and other rolled products are made from billets.
Channel: U-shaped section for construction.
Coal washing: The process of removing mineral matter from coal usually through density separation, for subsequent rolling in the finishing mills. for coarser coal and using surface chemistry for finer particles.
Continuous casting machine: Process where molten metal is solidified into a semi-finished billet, bloom, or slab.
Blast furnace: The blast furnace is the classic production unit to reduce iron ore to molten iron, known as hot metal. It operates as a counter-current shaft system, where iron ore and coke is charged at the top. While this charge descends towards the bottom, ascending carbon containing gases and coke reduces the iron ore to liquid iron. To increase efficiency and productivity, hot air (often enriched with oxygen) is blown into the bottom of the blast furnace. In order to save coke, coal or other carbon containing materials are sometimes injected with this hot air.
Crude steel: Steel in its solidified state direct after casting. This is then further processed by rolling or other treatments, which can change its properties.
Coke: A product made by baking coal without oxygen at high temperatures. Unwanted gases are driven out of the coal. The unwanted gases can be used as fuels or processed further to recover valuable chemicals. The resulting material (coke) has a strong porous structure which makes it ideal for use in a blast furnace.

Whistle-blowing procedures

EVRAZ encourages employees to raise concerns to their line managers if they believe the Group’s policies or cardinal principles are somehow violated. If employees, clients,

Wire rod

Products made from billets.

Tonnages

Measured in tonnes.

Terms and abbreviations

This section defines various terms and abbreviations used within the document.

Thickness

Refers to the thickness of a material.

Tin plate

A type of flat-rolled steel product.

Trade receivables

Amounts owed to a company by its customers.

Transactions

Business dealings or exchanges.

Transfer pricing

The price at which affiliated entities conduct transactions.

Treasury shares

Company's own stock that it has repurchased.

Truck components

Parts used in the manufacturing of trucks.

Turnaround

A scheduled period when a plant or facility is shut down for maintenance and repairs.

Two-piece cans

A type of can made from two pieces of metal.

Typographical errors

Mistakes made in the typing or printing of a document.

Underwriter

A financial institution that facilitates the issuance and distribution of securities.

Unsecured debt

Debt that is not backed by collateral.

Upstream operations

Activities at the beginning of the value chain, such as exploration and extraction.

Used and useful

Assets that are currently being utilized in business operations.

Utilities

Services such as electricity, water, and gas.

Valuation

The process of determining the economic worth of an asset or company.

Value-added tax (VAT)

A consumption tax placed on a product or service.

Variable costs

Costs that change in proportion to production output.

Various

Different types of items or categories.

Vendor financing

Financing provided by a supplier to a buyer.

Venture capital

Financing provided by investors to startups and small businesses.

Vertical integration

A strategy where a company owns or controls its suppliers, distributors, or retail locations.

Vesting

The process of acquiring a right to something, such as stock options.

Via

By way of.

Viscosity

A measure of a fluid's resistance to flow.

Volatility

The degree of variation of a trading price series over time.

Volume

The amount of something.

Voluntary liquidation

The dissolution of a company by its shareholders or creditors.

Voting rights

The rights of shareholders to vote on company matters.

V-shaped section

A type of structural steel profile.

Wage

Payment for labor.

Warranty

A guarantee or promise made by a seller to a buyer regarding the quality of a product.

Waste

Unwanted or unusable material.

Water pollution

The contamination of water bodies.

Water treatment

The process of purifying water.

Wear and tear

The deterioration of an asset due to normal use.

Weighted average

An average in which each observation or data point is assigned a particular weight.

Weighted average cost of capital (WACC)

The average rate of return a company expects to pay to its security holders to finance its assets.

Welfare

The health, happiness, and fortunes of a person or group.

Wellhead

The point at which a wellbore reaches the surface of the earth.

Wharfage

A fee charged for the use of a wharf.

Whistle-blowing

The act of reporting misconduct within an organization.

Wide-flange beam

A type of steel beam with a wide flange.

Wildcat drilling

Exploratory drilling in an area where oil or gas has not previously been found.

Will

A legal document that specifies how a person's assets will be distributed after their death.

Wind-down

The process of closing down a business gradually.

Windfall profit

An unexpectedly large profit.

Window dressing

The practice of manipulating financial statements to make a company appear more profitable.

Wire rod

A product made from billets.

Withholding tax

A tax deducted at source.

Working capital

The difference between current assets and current liabilities.

Working interest

The interest of a party in an oil and gas lease that is obligated to pay or bear a share of the costs.

Workover

Operations performed on an existing well to maintain or improve production.

W-beam

A type of steel beam (wide-flange beam).

Yield

The amount of product obtained from a process.

Yield strength

The stress at which a material begins to deform plastically.

Z-section

A type of structural steel profile.

Zero-based budgeting

A budgeting method in which all expenses must be justified for each new period.

Zinc coating

A protective layer of zinc applied to steel.

Zone

An area or region.

Zonal

Relating to a specific zone.# Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information | 260 261

Scrap
Steam coal
Iron containing recyclable materials (mainly industrial or household waste) that is generally remelted and processed into new steel.
All other types of hard coal not classified as coking coal. Coal of this type is also commonly referred to as thermal coal.
Vanadium
A grey metal that is normally used as an alloying agent for iron and steel. It is also used to strengthen titanium based alloys.
Semi-finished products
The initial product forms in the steel making process including slabs, blooms, billets and pipe blanks that are further processed into more finished products such as beams, bars, sheets, tubing etc.
Tailings
Vanadium pentoxide
Also called mine dumps, are the materials left over after the process of separating the valuable content from the uneconomic remainder (gangue) of an ore. These materials can be reprocessed using new methods to recover additional minerals.
The chemical compound with the formula V2O5: this orange solid is the most important compound of vanadium. Upon heating, it reversibly loses oxygen.
Sinter
An iron rich clinker formed by heating iron ore fines and coke in a sinter line. The materials, in pellet form, combine efficiently in the blast furnace and allow for more consistent and controllable iron manufacture.
Vanadium slag
Vanadium slag produced from pig iron in the converter shop and used as a raw material by producers of ferroalloys and vanadium products.
Tubular products
Include large diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products.
Slab
A common type of semi-finished steel product which can be further rolled into sheet and plate products.
U
Unrealised profit (URP)
Slag
Inter-segment unrealised profit or loss (URP) is a change in the sales margin included in balances of inventories purchased from segments other than the reportable segment between the end and the beginning of the reporting period.
Slag is a by product generated when nonferrous substances in iron ore, limestone and coke are separated from the hot metal in metallurgical production. Slag is used in cement and fertiliser production as well as for base course material in road construction.

Annual report & accounts 2020

CONTACT DETAILS

Registered Name and Number	Registered Office
EVRAZ plc 9069002R	2 Portman street, London, W1H 6DU, England, UK.

Directors	Secretary
Alexander Abramov	Prism Cosec
Alexander Frolov
Laurie Argo
Karl Gruber
Deborah Gudgeon
Alexander Asimov
Sir Michael Peat
Eugene Shvidler
Eugene Tenenbaum

Investor Relations
Tel: London: +44 (0)20 7830 3117	Tel: Moscow: +7 495 258 4100
Email: [email protected]

Auditors	Solicitors	Registrars
Ernst & Young LLP	Linklaters LLP	Linklaters LLP

For information about proxy voting, dividends and to report changes in personal details, shareholders should contact the Company’s registrar Computershare Investor Services PLC

The Pavilions
Bridgwater Road
Bristol BS13 8AE
United Kingdom

Tel: +44 (0)20 7799 0021
Fax: +44 (0)20 7799 0022
E-mail: [email protected]

AI assistant

EVRAZ PLC — Annual Report (ESEF) 2020

EVRAZ plc Annual Report & Accounts 2020

TABLE OF CONTENTS

MEET EVRAZ

EVRAZ IN FIGURES

STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

MEET EVRAZ

EVRAZ IN FIGURES

FINANCIAL HIGHLIGHTS

OPERATING HIGHLIGHTS

CSR HIGHLIGHTS

SHAREHOLDER STRUCTURE

EMPLOYEES BY REGION

DIVERSITY

STRATEGIC REPORT

Sustainable foundation for a Better Future

Meet EVRAZ

EVRAZ in ﬁgures

Strategic report

Corporate governance

Financial statements

Aꢀꢀitional inꢂormation | 4

CHAIRMAN’S INTRODUCTION

Health and safety

Environment

Dividends

Governance

Our people

CEO LETTER

Sustainability

Operational efficiency

Outlook for 2021

Meet EVRAZ

OUR BASIS

STRATEGIC PRIORITIES

BUSINESS SEGMENTS

Our vision

Steel

Global market trends

Coal

Steel, NA

COMPETITIVE ADVANTAGES

THE VALUE WE CREATE FOR STAKEHOLDERS

OPERATIONAL MODEL

INPUT

STEEL SEGMENT

OPERATIONS

COAL SEGMENT

STEEL, NORTH AMERICA SEGMENT

GLOBAL PICTURE

Steel

EVRAZ BUSINESS SYSTEM: OF SUCCESSFUL DEVELOPMENT

Process improvement

Employee development

Efficent management

Ambitious target setting

EBS DEVELOPMENT TIMELINE: KEY EVENTS

EVRAZ BUSINESS SYSTEM: RESULTS

Total EBS effect, US$ million

Idea Factory results

Problem-Solving Board results

SUSTAINABLE DEVELOPMENT

ENVIRONMENTAL STRATEGY 2030 GOALS

ESG HIGHLIGHTS

Our approach

CSR

Governance

Health and safety

Environmental matters

Our people

Social and community matters

Mining Raw materials

Coal washing

Steelmaking

Rolling and processing

EBITDA

EVRAZ PLC Annual Report (ESEF) 2020