EVRAZ PLC — Earnings Release 2014

Jun 30, 2014

EVRAZ ANNOUNCES UNAUDITED INTERIM FINANCIAL RESULTS FOR H1 2014

27 August 2014 – EVRAZ plc ("EVRAZ" or "the Company") (LSE: EVR) today announces its unaudited interim results for the six months ended 30 June 2014 ("the Period").

H1 2014 HIGHLIGHTS

Commenting on the financial results in respect of H1 2014, Alexander Frolov, Chief Executive of EVRAZ, stated:

"EBITDA totalled US\$1,080 million in H1 2014 compared to US\$925 million for the corresponding period of 2013. This 17% increase largely reflects actions taken by the Company in terms of asset optimisation and the implementation of cost efficiencies. A strong free cash flow performance of US\$444 million for the first half of the year allowed us to decrease net debt to US\$6,095 million as at 30 June 2014. Our net leverage consequently declined from 3.6x at the year end to 3.1x, thereby strengthening the Company's financial position."

Six months to 30 June
(US\$ million)	2014	20131	Change
Consolidated revenue	6,805	7,319	(7)%
Profit from operations	297	145	105%
Consolidated EBITDA2	1,080	925	17%
Net profit/(loss)	1	(146)	n/a
Earnings/(loss) per share, basic (US\$)	0.03	(0.09)	n/a
Net cash flows from operating activities	844	628	34%
CAPEX3	365	492	(26)%
	30 June 2014	31 December 2013
Net debt	6,095	6,5344	(7)%
Total assets	16,333	17,689	(8)%

1 Figures for H1 2013 were restated due to reclassification of subsidiary that ceased to be held for sale and the completion of initial accounting for Raspadskaya acquisition

2 Please refer to Appendix 1 for reconciliation of profit/(loss) from operations to EBITDA

3 Including payments on deferred terms recognised in financing activities

⁴ Hereinafter debt and cash balances include the amounts held at operations that were classified as assets/liabilities held for sale, which were separately presented in the statement of financial position as of 31 December 2013 (cash – US\$7 million; net debt – US\$69 million). Please refer to Appendices 4 and 5

Steel:

• Steel segment revenue of US\$5,898 million (-8% vs. H1 2013)
• Crude steel production of 7.8 million tonnes (-4%)
• Total external sales of steel products of 7.7 million tonnes (-1%)

Coal:

• Coal segment revenue of US\$665 million (-7% vs. H1 2013)
• Raw coking coal production of 9.8 million tonnes (+7%) including 4.4 million tonnes from Raspadskaya
• Sergey Stepanov was appointed General Director of Raspadskaya Coal Company with effect from 1 July 2014.

Iron ore:

• Iron ore segment revenue of US\$659 million (-27% vs. H1 2013)
• Production of iron ore products was 11.3 million tonnes (-4%) on the back of lower output by the Russian operations largely driven by the disposal of high cost operation EVRAZ VGOK and three mines of Evrazruda

Vanadium:

• Vanadium segment revenue of US\$255 million (-5% vs. H1 2013)
• The vanadium division produced 10,404 tonnes (-4%) of vanadium slag and sold 9,393 tonnes (+5%) of final vanadium products

Investments:

• Capital expenditure of US\$365 million (vs. US\$492 million in H1 2013) following completion of some major projects and the thorough revision of investment plans
• PCI project at EVRAZ ZSMK continued in H1 2014 and hot tests started in July
• Yerunakovskaya VIII coking coal mine launched in February 2013 and fully ramped up by February 2014
• Development of Mezhegey coking coal deposit continued
• EVRAZ Caspian Steel rolling mill in Kazakhstan commenced production

M&A developments:

• Disposal of EVRAZ Vitkovice Steel based on the enterprise value of US\$287 million completed in April 2014
• Sale of 34% of issued share capital of EVRAZ Highveld Steel and Vanadium for approximately US\$27 million in August 2014

Debt and liquidity:

• Net debt of US\$6,095 million vs. US\$6,534 million as at 31 December 2013
• Net leverage at 3.1 times last twelve months EBITDA compared to 3.6 times as at 31 December 2013
• US\$425 million 5-year pre-export finance facility signed in August 2014

Dividends:

The US\$90.4 million dividend (6 cents per share) pay out in July 2014 represented the approximate cash portion of the proceeds from the sale of EVRAZ Vitkovice Steel, leaving US\$196.6 million for the reduction of debt

CHIEF EXECUTIVE OFFICER'S REPORT

EBITDA totalled US\$1,080 million in H1 2014 compared to US\$925 million for the corresponding period of 2013. This 17% increase largely reflects actions taken by the Company in terms of asset optimisation and the implementation of cost efficiencies. A strong free cash flow performance of US\$444 million for the first half of the year allowed us to decrease net debt to US\$6,095 million as at 30 June 2014. Our net leverage consequently declined from 3.6x at the year end to 3.1x, thereby strengthening the Company's financial position.

The volume of steel sales for H1 2014 amounted to 7.7 million tonnes (finished and semifinished). Revenue experienced a 7% decline to US\$6,805 million compared with H1 2013, a decrease which primarily reflects lower selling prices as a result of overcapacity in the global steel industry.

In response to a challenging environment, EVRAZ's Board and management have adjusted certain corporate priorities and, in line with the Company's long-term strategy, implemented changes designed to maintain competitiveness. We believe that we are beginning to see clear and positive results from our efforts. During the reporting period we delivered successfully against the targets, operational plans and cost reduction programmes, which we announced at the time of the 2013 results. We reported progress in this regard at our Investor Day held in London on 11 June 2014 (the presentation can be seen on http://www.evraz.com/investors/presentations/).

Overview of Health, Safety and Environmental performance

When we described the Company's strategy two years ago, we stated that the most important objective was to enhance health and safety conditions. This continues to be the case. Constant endeavour is required in this vital area involving the determination of rigorous safety standards, the training of employees and persistent diligence in order to ensure that our policies and procedures are properly followed. It is with deep regret that I have to report that seven employees and six contractors lost their lives in work-related incidents during the first six months of 2014. Any fatality is unacceptable to myself, my co-Directors and all of the management team and every effort is made to investigate the causes of such accidents and ensure that corrective measures are taken. Unsafe behaviour on the part of employees and contractors accounts for approximately 90% of accidents. Our priority is to change attitudes and behaviour, particularly within our CIS facilities.

H1 2014 market environment

The global steel industry has continued to struggle in the face of excess capacity. Lower raw material prices have helped although some of the benefit has been eroded as a result of lower selling prices. Put briefly, the situation in the steel sector remains challenging, with margins under pressure. We are adopting a cautious outlook towards raw material prices: negative on iron ore and neutral to positive in respect of coking coal.

We have immense faith in our core steel markets, Russia and North America. In Russia, construction and infrastructure are critical to economic growth and are supported by the government. Steel consumption enjoys the potential to be boosted by, for example, regional development projects and the 2018 FIFA World Cup. EVRAZ currently posesses an excellent portfolio of construction and infrastructure products for the Russian market. In the US, corporate earnings, employment growth and credit availability are improving, thereby positively affecting steel demand. EVRAZ also commands a strong exposure to the oil and gas sector in North America. In addition, we are the global leader in rails with a strong presence in both the Russian and North American markets, and the largest producer of coking coal in Russia.

Strategic priorities

Our operating strategy is aimed at building on our core value drivers: economically efficient low cost production of steel making raw materials (iron ore and coking coal), high quality steel assets in attractive markets, and a competitive product portfolio encompassing an increasing range of higher value products. We have set the following four strategic priorities in line with our strategy:

• Cost cutting initiatives;
• Selective investments in low-risk, high return projects;
• Customer focus to leverage our leading market positions;
• Deleveraging.

Cost efficiency remains a primary focus. In 2014, we targeted US\$400 million of cost savings. Some of the savings are derived from actions taken in 2013, such as the suspension, shutdown or disposal of inefficient iron ore and coal mines in Russia together with underutilised steel facilities in Russia, the US and Italy. Other cost optimisation initiatives have been implemented during the first half of this year, in particular the sale of our plant in the Czech Republic and headcount reductions. The full effect of these actions has yet to be realised. However, we have noted the positive effect on our cash costs; for example, the blended cash cost of iron ore concentrate decreased from US\$66/t in H1 2013 to US\$52/t in H1 2014, of which US\$6.7/t is due to the rouble devaluation, with the remainder being the result of management actions.

With a number of major capital intensive projects now successfully completed, we will focus on low capex and fast payback efficiency projects, which have a projected internal rate of return of at least 40%. We have already announced projected capex spending of a maximum of US\$900 million for each of the years 2014 and 2015. In H1 2014, capex amounted to US\$365 million, which is in line with plan.

During difficult market conditions good customer relations are particularly important. Customer focus underlines all our activities, be it working with existing partners, e.g. Russian Railways, or new partners. We have placed considerable emphasis on meeting customer product requirements, examples of which include the development of new types of rails, including headhardened rails for high-speed tracks, and new types of construction rebars.

Our financial strategy is currently focused on deleveraging. We have demonstrated a consistent record of debt reduction throughout the last four years and we are on course to achieve our target of a net debt to EBITDA (for the last 12 months) ratio of less than 3 times by the end of 2016.

Geopolitical situation

With key assets located in Russia and the Ukraine, EVRAZ is not immune to geopolitical risks. To date, neither our operations nor our assets in the Ukraine have been affected by the unrest in the country. In addition, EVRAZ has not been subject to sanctions introduced by a number of countries. We are watching the developments in the region closely and are consulting legal and other advisers, nationally and internationally, in order to analyse the risks and prepare, to the extent feasible, contingency plans.

Outlook

We remain confident in the strong long-term fundamentals of our business model and are undertaking all appropriate measures to ensure sustainable profitability in the current market environment. While we cannot control many of the challenges that the global economy and steel sector present, we believe that the benefits derived from asset portfolio optimisation, our efficiency improvement and cost reduction programme, lower capital expenditure and progressive product mix development will put us in a strong position to enhance shareholder value.

Alexander Frolov Chief Executive Officer EVRAZ plc

FINANCIAL REVIEW

Giacomo Baizini, Chief Financial Officer, commented:

"The Company showed a net profit of US\$1 million for the first half of 2014, compared to a net loss of US\$146 million in the first half of 2013. This is mainly the result of an improvement in business performance: the contribution of asset optimisation and cost efficiency actions can be estimated at US\$193 million in the first half of this year, excluding the effect of fluctuations of foreign exchange."

"Both the Russian rouble and the Ukrainian hryvnia devalued against the US dollar, 12.8% and 28.6% respectively in H1 2014 compared to the average rate in H1 2013. This had an additional positive effect on costs in Russia and Ukraine, but was counterbalanced by a delay in the readjustment of the local currency prices of domestic steel sales."

"Free cash flow for the period was positive at US\$444 million, due to improved business performance but also as a result of the disposal of EVRAZ Vitkovice Steel. US\$90.4 million of the disposal proceeds were paid out in dividends in July, but the rest has been retained to reduce debt. From the end of last year to 30 June 2014 net debt decreased by 7.2% to US\$6,095 million, meaning that net leverage decreased from 3.6x to 3.1x. This put the company in an increasingly secure financial position, further consolidated by the signing of a US\$425 million 5-year preexport finance facility in August. This now largely resolves the liquidity and refinancing needs of the company until Q4 2015."

Statement of operations

Revenues
(US\$ million)
Segment	H1 2014	H1 2013	Change	Relative change
Steel	5,898	6,393	(495)	(7.7%)
Coal	665	722	(57)	(7.9%)
Iron ore	659	900	(241)	(26.8%)
Vanadium	255	268	(13)	(4.9%)
Other operations	434	465	(31)	(6.7%)
Eliminations	(1,106)	(1,429)	323	(22.6%)
Total	6,805	7,319	(514)	(7.0%)

Group revenues for H1 2014 decreased by 7.0% to US\$6,805 million, with revenues from the Group's steel segment amounting to US\$5,898 million or 87% of total Group's revenue.

Steel sales volumes (including intersegment) slightly decreased to 7.7 million tonnes compared to 7.8 million tonnes in H1 2013. The decline in revenues was largely due to a decrease in prices, in line with the general negative trend in steel pricing, as well as the lag of domestic steel prices in Russia and Ukraine in adjusting to the depreciation of the local currencies versus the US dollar that occurred in H1 2014. The sale prices of steel products decreased by 4.6% in H1 2014 compared to H1 2013. This was accompanied by a decrease in sales of non-core products by the subsidiaries of the Steel segment, including coke, chemicals and scrap.

Steel revenues were also impacted by changes in the Group's product mix during 2013–2014 due to the suspension of operations of EVRAZ Claymont Steel and EVRAZ Palini e Bertoli, the EVRAZ Vitkovice Steel disposal and the closure of EVRAZ ZSMK plate rolling mill. While sales volumes of flat-rolled steel products declined, a part of semi-finished production was switched from internal consumption to external sales. Lower sales volumes of flat-rolled steel products were partially offset by higher sales of railway and tubular products. Changes in sales mix contributed to a 1.0% decrease in revenues.

Iron ore revenues decreased by 26.8% to US\$659 million in the period, compared to US\$900 million in H1 2013. The decrease in revenues was primarily due to disposal of a number Evrazruda's iron ore mining and processing facilities in December 2013 (Abakan iron ore mine, Teya iron ore mine, Mundybash beneficiation plant), closure of the Irba mine at Evrazruda from April 2013 and the EVRAZ VGOK disposal in September 2013. The decline in iron ore product prices by 9.7% in H1 2014 compared to H1 2013 also contributed to lower iron ore revenues.

Revenue by region (US\$ million)
Region	H1 2014	H1 2013	Change	Relative change
Russia	2,793	3,094	(301)	(9.7%)
Americas	1,751	1,616	135	8.4%
Asia	1,052	1,050	2	0.2%
Europe	508	766	(258)	(33.7%)
CIS	489	539	(50)	(9.3%)
Africa	207	250	(43)	(17.2%)
Rest of the world	5	4	1	25.0%
Total	6,805	7,319	(514)	(7.0%)

EBITDA

(US\$ million)
----------------	--	--

Segment	H1 2014	H1 2013	Change	Relative change
Steel	771	651	120	18%
Coal	132	109	23	21%
Iron ore	216	231	(15)	(6%)
Vanadium	20	34	(14)	(41%)
Other operations	52	61	(9)	(15%)
Unallocated	(115)	(100)	(15)	15%
Eliminations	4	(61)	65	n/m
Total	1,080	925	155	17%

Steel segment EBITDA in H1 2014 is higher than in H1 2013 as a result of asset optimisation and cost reduction activities, as well as the decrease in expenses in US dollar terms at Russian and Ukrainian subsidiaries due to the local currencies depreciation in H1 2014. Lower prices on coking coal and iron ore also impacted positively the segment results. The economy on the cost side was partially offset by decline in steel products sales prices due to both global weak market environment and lag in price adjustment in Russia and Ukraine after currency depreciation. In addition, the Steel segment EBITDA was influenced by the better performance of EVRAZ's North American assets.

Iron ore segment EBITDA was negatively impacted by falling prices for iron ore products which were partially compensated by decrease in costs.

Increased year on year Coal segment EBITDA was related to a decrease in costs associated with Russian rouble weakening, portfolio optimisation at Yuzhkuzbassugol (including the shutdown of Abashevskaya and Kusheyakovskaya mines as well as the sales of loss-making Tagaryshskaya, Gramoteinskaya and Yubileynaya mines) and operational improvements at operating mines. Another contributing factor with regard to improved EBITDA was the increase in sales volumes of coking and steam coal.

The decrease in Vanadium segment EBITDA largely reflected the fall in prices of vanadium in alloys and chemicals.

The decrease in the Other operations segment EBITDA is mainly attributable to weak results of Zabsib Heat and Power Plant.

Eliminations mostly reflect the unrealised profits or losses of the Iron ore and Coal segments in transactions with the subsidiaries relating to the Steel segment.

Cost of revenues, expenses and results

(US\$ million)
Item	H1 2014	H1 2013	Change	Relative change
Cost of revenue	(5,192)	(5,886)	694	(11.8%)
Gross profit	1,613	1,433	180	12.6%
Selling and distribution costs	(543)	(608)	65	(10.7%)
General and administrative expenses	(390)	(438)	48	(11.0%)
Impairment of assets	(147)	(7)	(140)	n/m
Foreign exchange gains/(losses), net	(180)	(179)	(1)	(0.6%)
Other operating income and expenses,
net	(56)	(56)	0	0.0%

6

Cost of revenues, expenses and results

(US\$ million)

Item	H1 2014	H1 2013	Change	Relative change
Profit from operations	297	145	152	104.8%
Interest expense, net	(287)	(357)	70	(19.6%)
Gain/(loss) on financial assets and liabilities, net	(43)	(71)	28	(39.4%)
Gain on disposal group classified as held for sale, net	113	54	59	109.3%
Other non-operating gains/(losses), net	5	90	(85)	(94.4%)
Profit before tax	85	(139)	224	n/m
Income tax benefit/(expense)	(84)	(7)	(77)	n/m
Net profit	1	(146)	147	n/m

The Group's cost of revenue decreased by 11.8% to US\$5,192 million in H1 2014 compared with US\$5,886 million in H1 2013. This was mostly due to a fall in staff costs, auxiliary materials, semifinished products, depreciation charges, transportation and raw materials costs.

A detailed breakdown of the cost of revenue is as follows:

		% of % of				Relative
(US\$ million)	H1 2014	revenue	H1 2013	revenue	Change	change
Revenue	6,805		7,319		(514)	(7)%
Cost of revenue	5,192	76%	5,886	80%	(694)	(12%)
Raw materials, incl.	1,731	25%	1,819	25%	(88)	(5%)
Iron ore	432	6%	371	5%	61	16%
Coking coal	272	4%	368	5%	(96)	(26%)
Scrap	636	9%	710	10%	(74)	(10%)
Other raw materials	391	6%	370	5%	21	6%
Semi-finished products	95	1%	217	3%	(122)	(56%)
Auxiliary materials	393	6%	516	7%	(123)	(24%)
Services	360	5%	351	5%	9	3%
Goods for resale	276	4%	298	4%	(22)	(7%)
Transportation	340	5%	437	6%	(97)	(22%)
Staff costs	851	13%	988	13%	(137)	(14%)
Depreciation	379	6%	487	7%	(108)	(22%)
Electricity	238	3%	258	4%	(20)	(8%)
Natural gas	175	3%	225	3%	(50)	(22%)
Other costs	354	5%	290	3%	64	22%

The cost of raw materials, the largest single cost item, decreased by US\$88 million in H1 2014 driven mostly by lower coking coal and scrap costs which fell by US\$96 million and US\$74 million respectively. This decline was related to lower coal and scrap prices as well as the shutdown of EVRAZ Claymont which consumed purchased scrap for steelmaking in H1 2013. This decrease was partially offset by an increase in iron ore costs of US\$61 million mainly due to lower intragroup sales resulting from the EVRAZ VGOK disposal in September 2013, closure of the Irba mine at Evrazruda and the disposal of Evrazruda's assets in Khakassia. EVRAZ has also implemented operational improvement plans that resulted in optimisation of yields at the Russian steel mills.

The costs for semi-finished products fell by 56% primarily due to lower consumption of slab purchased from third parties by EVRAZ North America's assets which were substituted by shipments from EVRAZ NTMK, as well as lack of pig iron consumption by EVRAZ Vitkovice Steel which was also substituted by EVRAZ NTMK and purchased slabs.

Auxiliary material costs decreased by 24%, or US\$123 million, which includes material decrease due to Russian rouble and Ukrainian hryvnia weakening, disposal and suspension of subsidiaries and cost optimisation programmes, primarily in the Coal segment.

The transportation services decrease of 22% related to the Russian rouble weakening and a slight decrease of production volumes, on one hand, and tariffs increase, on the other hand.

Staff costs decreased by 14%, or US\$137 million, which reflects the impact on costs in Russia and Ukraine of local currency weakening, the disposal and optimisations of assets, and personnel optimisation programmes.

Total depreciation, depletion and amortisation in cost of goods sold amounted to US\$379 million in H1 2014 compared to US\$487 million in H1 2013. The depletion charge was significantly reduced in the Coal segment driven by a lower depreciation and depletion expense at Yuzhkuzbassugol due to the revision and detailing of future mining plans and lower mineral deposits depletion. In addition, remaining useful lives of plant and equipment were reassessed and extended at EVRAZ NTMK, EVRAZ ZSMK and EVRAZ DMZ. This was also accompanied by a decrease of the US dollar amount of depreciation at our Russian and Ukrainian sites due to local currencies weakening.

Electricity costs decreased by 8%, or US\$20 million. The decrease was related to lower consumption volumes, predominantly because of assets optimisation and disposals (notably, EVRAZ Claymont operations in North America, Yuzhkuzbassugol mines, part of Evrazruda assets and VGOK), and was also positively impacted by operational improvements. Natural gas expenditure also decreased by 22%, or US\$50 million, due to a number of factors including the disposal of Central Heat and Power Plant in H2 2013 which consumed significant volumes of natural gas, operational improvements at EVRAZ DMZ, the disposal of EVRAZ Vitkovice Steel and the suspension of operations at Palini e Bertoli. Electricity and natural gas prices were generally stable in US dollar terms, while in Russia increased rouble prices were offset by Russian rouble weakening.

Other costs include taxes, change in WIP and finished goods, and certain energy costs. The increase in other costs in H1 2014 by 22% is mostly driven by a decrease in stock of WIP and finished goods.

Selling and distribution expenses decreased by 10.7% to US\$543 million in H1 2014 from US\$608 million in H1 2013. The key drivers were lower sales volumes to third parties and the Russian rouble weakening. This was accompanied by the impact of the EVRAZ Vitkovice Steel disposal and the suspension of operations at EVRAZ Claymont and EVRAZ Palini e Bertoli.

General and administrative expenses declined by 11.0% to US\$390 million in H1 2014 versus US\$438 million in H1 2013. This decrease was caused by the rouble and hryvnia weakening and the asset portfolio optimisation efforts. In H1 2014, EVRAZ also began a G&A expenses reduction programme the main results of which are expected within the following 12 months.

Impairment losses during the reporting period include US\$(77) million relating to several of the Yuzhkuzbassugol mines, which were idled (Kusheyakovskaya and Abashevskaya) and a US\$(55) million impairment for EVRAZ Highveld Steel and Vanadium resulting from a decrease in prices for steel and changes in forecast production volumes.

Foreign exchange losses arose, in particular, due to US dollar-denominated amounts payable by subsidiaries in Ukraine, where the national currency depreciated by 48%. In addition, there are some intra-group debts between subsidiaries with different functional currencies and, consequently, gains/(losses) of one subsidiary recognised in the Statement of Operations are not offset with the exchange differences of another subsidiary with a different functional currency.

Interest expenses incurred by the Group have fallen steadily over recent years as a result of the refinancing of debt at lower interest rates. Also the Company's debt has decreased during 2013 and in the first half of 2014. The interest expense for bank loans, bonds and notes amounted to US\$296 million in the first half of 2014 and US\$373 million in the comparative period of 2013. It was also impacted by a decrease in the interest expense of Russian rouble bonds due to the rouble weakening.

Losses on financial assets and liabilities amounted to US\$(43) million and included, inter alia, \$25 million realised gains and US\$(76) million unrealised losses on the change in the fair value of derivatives – currency and interest rate swaps for the rouble-denominated bonds.

In the reporting period the Group had an income tax expense of US\$(84) million in comparison with a US\$(7) million expense in the first half of 2013. The change reflects better operating results of the Group as well as a change in the recognition of deferred income tax assets due to the revision of profit forecasts for certain subsidiaries.

Cash flow

(US\$ million)
Item	H1 2014	H1 2013	Change	Relative change
Cash flows from operating activities before change in working capital	970	743	227	30.6%
Changes in working capital	(126)	(115)	(11)	9.6%
Net cash flows from operating activities	844	628	216	34.4%
Short-term deposits at banks, including interest	3	680	(677)	(99.6)%
Purchases of property, plant and equipment and intangible assets	(339)	(492)	153	(31.1)%
Purchase of subsidiaries, net of cash acquired	(102)	82	(184)	n/m
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs	296	(1)	297	n/m
Other investing activities	19	(31)	50	n/m
Net cash flows from / (used in) investing activities	(123)	238	(361)	n/m
Net cash flows from financing activities	(960)	(670)	(290)	43.3%
Effect of foreign exchange rate changes on cash and cash equivalents	(20)	(49)	29	(59.2)%
Net increase/(decrease) in cash and cash equivalents	(259)	147	(406)	n/m

Cash flows from operating activities before changes in working capital increased by 30.6% in H1 2014 to US\$970 million reflecting better operational results compared to H1 2013.

In H1 2014, the US\$126 million outlfow in working capital was mainly related to the repayment of a US\$312 million payable to Yuzhny GOK, a supplier of sinter to EVRAZ DMZ in Ukraine.

Free cash flow for the period was a positive US\$444 million.

Calculation of free cash flow

	(US\$ million)
--	----------------

Item	H1 2014
EBITDA	1,080
Changes in working capital, excluding income tax	(175)
Income tax paid	(94)
Other non-cash items	33
Net Cash flows from operating activities	844
Interest and similar payments	(235)
Capital expenditure, including recorded in financing activities	(365)
Purchases of subsidiaries (net of cash acquired) and interests in
associates/joint ventures	(102)
Proceeds from sale of disposal groups classified as held for sale, net of
transaction costs	296
Other cash flows from investing activities	19
Equity transactions	(13)
Free cash flow*	444

* Please refer to Appendix 3 for the definition of free cash flow

Capex and key projects

In the first half of 2014, we reduced our total capital expenditure (including payments on deferred terms recognised in financing activities) to US\$365 million compared to US\$492 million in the first half of 2013 as a result of a comprehensive review of the Company's investment programme. In the first half 2014, the Yerunakovskaya VIII mine reached planned mining volumes, we continued with the certification process of the EVRAZ ZSMK rail mill products and in May we sold the first shipment of 100 metre rails. Also EVRAZ Caspian Steel (former the Vostochny rolling mill) has started commercial operations and we made good progress with the Mezhegey and the EVRAZ ZSMK PCI projects.

A summary of our capital expenditure for 6 months ended 30 June 2014 in millions of USD is as follows:

Construction of Yerunakovskaya VIII mine	30	Ramp-up of long-wall 48-3. Production of 1.2 million tonnes of raw coking coal.
Mezhegey (Phase I)	22	First batches of coal mined. Ramp-up to be completed by 2016. Capacity of 1.5 mtpa
PCI at EVRAZ ZSMK	15	PCI started at EVRAZ ZSMK blast furnace #2. To be launched at all blast furnaces of EVRAZ ZSMK by the end of 2014
EVRAZ ZSMK rail mill modernisation	7	Ramp-up largely completed, technology of new equipment is being adjusted. Obtained certification for rails R50 N, R65 Т1, R65 NE, OR65CR. In May 2014 sales of 100 metre rails started.
EVRAZ Caspian Steel (Vostochny rolling mill, Kazakhstan)	6	Construction completed. Mill started shipment of products in H1 2014.
Other development projects	48
Maintenance	237
Total	365

Financing and liquidity

We started 2014 with total debt of US\$8,166 million.

During H1 2014 we repaid short-term lines totalling US\$1,060 million, part of which were subsequently redrawn. In January 2014, we borrowed US\$70 million under a US Ex-Im guaranteed facility to refinance part of the EVRAZ ZSMK rail mill capex. All the above, together with a number of minor scheduled repayments, resulted in a total debt of US\$7,479 million and net debt of US\$6,095 million as at 30 June 2014.

On 12 August 2014, we signed a US\$425 million 5-year syndicated pre-export financing facility, which covers most refinancing needs until Q4 2015.

Dividends

On 7 July 2014, EVRAZ paid out dividends in the amount of US\$90.4 million which represented the approximate cash portion of the proceeds from the sale of EVRAZ Vitkovice Steel.

The dividend policy has been revised to support the financial strategy of deleveraging and envisages that regular dividends will be paid only when the net leverage (net debt/EBITDA) target of below 3.0x is achieved.

Giacomo Baizini Chief Financial Officer EVRAZ plc

REVIEW OF OPERATIONS BY SEGMENT

STEEL

Market environment

While there are signs that the outlook for demand is slowly improving, excess steelmaking capacity remains the biggest concern for the sector. The majority of steelmakers in Europe and the US are experiencing low capacity utilisation rates, which, coupled with a high fixed cost base has a negative impact on profitability margins.

According to Worldsteel, global crude steel production grew 2.6% during the first half of this year compared to H1 2013 with China's 2.8% growth in output being the major driving force.

After a period of contraction in 2013, steel market conditions started to show signs of gradual improvement in major regions. Global crude steel production is expected to increase by 0.9% in H2 2014, according to CRU, and expected to be 4.6% higher than in H2 2013.

Russia's crude steel output increased by 0.4% in H1 2014 compared to H1 2013. Nevertheless, overall consumption of crude steel equivalent slipped by 2.5%. This was mainly caused by the reduced demand in flat products and rail. Long steel products witnessed a growth of just 0.9% yo-y. The demand for rebar increased by 7% in H1 2014 when compared to H1 2013, and was mainly driven by residential construction as a result of capital investments in this segment. However, demand for sections and beams dropped by 8% as compared to H1 2013. A rebound in infrastructure development is forecasted to compensate for this decline in H2 2014. Long-term consumption growth in Russia and CIS is expected to be driven by substantial investments in infrastructure modernisation and the upcoming 2018 FIFA World Cup preparation.

Prices in the local Russian market saw an upwards trend when analysed in Russian roubles, but due to the national currency depreciation, US dollar-denominated prices decreased by 8-10% y-oy, depending on the product segment. Billet prices decreased by 1.4%.

US crude steel production increased by 1.1% in H1 2014 compared to H1 2013, with apparent consumption of finished steel products¹ increasing by 5.5%. The pricing environment continues to

improve with rebar prices rising by 3.5% and hot rolled coil prices remaining stable with a slight 0.3% increase year-to-date.

European crude steel production increased by 4.2% in H1 2014 compared to H1 2013, with apparent consumption of finished steel products¹increasing by 4.0%. Overcapacity continues to exist in Europe but has stabilised at 85-90 mtpa level, according to CRU. "Metal margins" in the EU have stabilised and are recovering from trough levels.

South African crude steel production increased by 2.1% in the first half of 2014 compared to the first half of 2013 with apparent consumption of finished steel products declining by 10.6%. Various macro-economic issues, including extended labour disruptions and a slow pace of infrastructure spending within the economy, have led to stagnant demand. As a result, economic growth forecasts have been lowered to below 2% for 2014. Despite this outlook, pricing improved by 7% over the period as a result of the weak Rand placing pressure on imports.

__________________________________ 1 Including hot-rolled long and flat steel products only

Sales review

Steel segment revenues

(US\$ million)	Six months ended 30 June
	2014	2013	Change
To third parties	5,855	6,332	(7.5%)
To coal segment	8	11	(27.3%)
To iron ore segment	25	34	(26.5%)
To vanadium segment	2	1	100.0%
To other operations	8	15	(46.7%)
Total Steel segment	5,898	6,393	(7.7%)

Steel segment revenues by products

	Six months ended 30 June
	2014		2013		2014 v 2013
	US\$ million	% of total segment revenue	US\$ million	% of total segment revenue	% change
Steel products, external sales	5,431	92.1%	5,819	91.0%	(6.7%)
Semi-finished products1	1,178	20.0%	1,014	15.9%	16.2%
Construction products2	1,811	30.7%	2,058	32.2%	(12.0%)
Railway products3	910	15.4%	839	13.1%	8.5%
Flat-rolled products4	605	10.3%	1,057	16.5%	(42.8%)
Tubular products5	762	12.9%	623	9.7%	22.3%
Other steel products6	165	2.8%	228	3.6%	(27.6%)
Steel products, intersegment sales	20	0.3%	27	0.4%	(25.9%)
Other revenues7	447	7.6%	547	8.6%	(18.3%)
Total	5,898	100.0%	6,393	100.0%	(7.7%)

¹Includes billets, slabs, pig iron, pipe blanks and other semi-finished products

²Includes rebars, wire rods, wire, beams, channels and angles

3 Includes rail, wheels, tyres and other railway products

4 Includes commodity plate, specialty plate and other flat-rolled products

5 Includes large diameter line pipes, ERW pipes and casing, seamless pipes, casing and tubing, other tubular products

6 Includes rounds, grinding balls, mine uprights and strips

7 Includes coke and coking products, refractory products, ferroalloys, scrap, energy, services and Mapochs mine's iron ore fines

Sales volumes of Steel segment
('000 tonnes)	Six months to 30 June
	2014	2013	Change
Steel products, external sales	7,653	7,739	(1.1%)
Semi-finished products	2,316	1,945	19.1%
Construction products	2,716	2,776	(2.2%)
Railway products	1,046	887	17.9%
Flat-rolled products	771	1,391	(44.6%)
Tubular products	547	448	22.1%
Other steel products	257	292	(12.0%)
Intersegment sales	27	35	(22.9%)
Total	7,680	7,774	(1.2%)

Geographic breakdown of external steel products' sales
		US\$ million			000 t
	H1 2014	H1 2013	Change, %	H1 2014	H1 2013	Change, %
Russia	2,150	2,421	(11.2%)	3,231	3,227	0.1%
Americas	1,578	1,454	8.5%	1,476	1,349	9.4%
Asia	890	840	6.0%	1,715	1,555	10.3%
Europe	282	529	(46.7%)	477	838	(43.1%)
CIS	353	351	0.6%	487	466	4.5%
Africa & RoW	178	224	(20.5%)	267	304	(12.2%)
Total	5,431	5,819	(6.7%)	7,653	7,739	(1.1%)

The Steel segment's revenues decreased by 7.7% to US\$5,898 million in H1 2014 compared to US\$6,393 million in H1 2013, which was largely a result of lower steel product prices during the period.

Revenues from external sales of semi-finished products increased by 16.2% due to higher sales volumes, which reflected the changes in Group product mix. Sales of slabs to third parties in H1 2014 grew from H1 2013 increased as a result of suspension of operation at EVRAZ Palini e Bertoli and the EVRAZ Vitkovice Steel disposal.

Railway products' external revenues grew due to higher sales volumes after the modernisation of EVRAZ ZSMK's rail mill despite sales prices for railway products being lower in H1 2014 when compared to H1 2013. This is predominantly due to the fact that sales prices in US dollar terms in Russia have not been fully adjusted after the material Russian rouble devaluation.

Revenues from tubular product sales to third parties increased in H1 2014 primarily due to higher sales volumes, particularly of ERW pipe & casing and casing & tubing products as result of a strong order book.

Revenues from construction products to third parties sales decreased by 12.0% primarily as a result of reduced prices accompanied by lower sales volumes in H1 2014. The revenue was affected by a decline in prices of construction products in Russia, caused by lag in a local price adjustment after the Russian rouble depreciation, and in Asia.

Flat rolled product external revenues in H1 2014 were significantly lower than in H1 2013 due to lower sales volumes. The main causes of this fall in revenues was the EVRAZ Vitkovice Steel disposal, the suspension of operations of EVRAZ Claymont Steel and EVRAZ Palini e Bertoli, and the shutdown of the EVRAZ ZSMK plate rolling mill.

Revenues from other steel products decreased by 27.6% in H1 2014 compared to H1 2013 as a result of significantly lower prices combined with a fall in sales volumes.

Lower revenues from sales in Russia, which accounted for 40% of external steel sales, were mainly attributable to lower prices, whereas sales volumes remained stable when compared to the previous year.

Steel segment cost of revenue

Steel segment cost of revenue Six months ended 30 June 2014 2013 2014 v 2013 US\$ million % of segment revenue US\$ million % of segment revenue % change Cost of revenue 4,649 78.8% 5,260 82.3% (11.6%) Raw materials 2,362 40.0% 2,741 42.9% (13.8%) Iron ore 850 14.4% 994 15.5% (14.5%) Coking coal 510 8.6% 674 10.5% (24.3%) Scrap 636 10.8% 710 11.1% (10.4%) Other raw materials 366 6.2% 363 5.7% 0.8% Semi-finished products 92 1.6% 214 3.3% (57.0%) Transportation 213 3.6% 251 3.9% (15.1%) Staff costs 499 8.5% 548 8.6% (8.9%) Depreciation 183 3.1% 233 3.6% (21.5%) Energy 425 7.2% 471 7.4% (9.8%) Other* 875 14.8% 802 12.5% 9.1%

*Includes repairs and maintenance, industrial services, auxiliary materials, goods for resale, taxes in cost of revenue, and effect of changes in work-in-progress and finished goods inventories.

EVRAZ's steel segment cost of revenue decreased to US\$4,649 million in H1 2014, compared to US\$5,260 million in H1 2013.

The principal factors affecting the change in the steel segment cost of revenue, in absolute terms, in H1 2014 compared to H1 2013 were:

• The cost of raw materials decreased by 13.8% due to a decline in prices for all main raw materials (particularly iron ore, coking coal, scrap) accompanied by a decrease in production volumes of crude steel by 4%. Meanwhile the decline in coke produced for sale at EVRAZ ZSMK (due to coke plant shutdown) and at EVRAZ's Ukrainian assets, the fall in scrap consumption due to EVRAZ Claymont's closure, the reduction of coke costs due to better coal mix at EVRAZ NTMK, and the improving coke yields at EVRAZ ZSMK all contributed to decreased production volumes.

• The costs of semi-finished products decreased by 57%, primarily due to lower consumption of slab purchased from third parties at Evraz North America assets which were substituted by shipments from EVRAZ NTMK, as well as lack of pig iron consumption by EVRAZ Vitkovice Steel, which was also substituted by EVRAZ NTMK and purchased slabs.

• Transportation costs decreased by 15.1%, for which the primary causes were the weakening of the Russian rouble, and the reduced exports from Russian mills.
• Staff costs decreased by 8.9%, which was mainly caused by the Russian rouble weakening. Additionally, the reduction in staff costs caused by the suspension of EVRAZ Claymont (-US\$14 million) and EVRAZ Palini e Bertoli (-US\$3 million) was offset by wage inflation at EVRAZ NTMK and EVRAZ ZSMK, and other changes.
• Depreciation and depletion costs were mostly reduced by the Russian rouble weakening, together with the reassessment of remaining useful lives of plant and equipment at EVRAZ NTMK, EVRAZ ZSMK and EVRAZ DMZ (-US\$26 million in total), and suspension of EVRAZ Claymont (-US\$9 million).
• Lower energy costs were driven by the Russian rouble weakening, the reduced consumption of natural gas by EVRAZ DMZ due to technology optimisation (-US\$9 million), the EVRAZ Palini e Bertoli suspension (-US\$7 million) and reduced production at EVRAZ Vitkovice Steel (-US\$2 million).
• Other costs increased primarily due to changes in work in progress and finished goods and auxiliary materials usage.

Steel segment gross profit

Steel segment gross profit increased by 10% to US\$1,249 million in the six months ended 30 June 2014 from US\$1,133 million in the six months ended 30 June 2013, as a result of lower costs that were partially offset by lower revenue.

Operational update – Steel segment

Steel products: Russia

In June 2014, the PCI unit was commissioned at EVRAZ ZSMK and is expected to reach its full capacity in November 2014. Pulverised coal injection will save costs on natural gas consumed for hot iron production, and reduce coke consumption by 15-20%. At the same time blast furnace productivity is expected to improve by approximately 5%.

In June 2014, following the scheduled launch of PCI at EVRAZ ZSMK and the resulting decline in internal coke consumption, accompanied by the weak demand for coke in the domestic and export markets, the EVRAZ ZSMK steel plant shut down its coke chemical plant EKS-2. The shutdown will reduce the plant's fixed costs.

In June 2014, the EVRAZ Caspian Steel rolling mill (former Vostochny rolling mill) in Kostanay, Kazakhstan started commercial production. The first lot of rebars has been delivered to customers, with sales in 2014 expected to amount to 150,000 tonnes. The main markets for the mill's products will be those of Kazakhstan and the Central Asia.

Activities related to enhance customer focus remained among the key priorities for EVRAZ in H1 2014. This can be seen through deliveries via a logistics hub in Siberia increasing by more than double compared to the same period of 2013. Furthermore, in order for clients to effectively carry out a number of tasks, including placing and tracking online orders, checking online payment statuses and file claims, EVRAZ launched a CRM system in June 2014. The new system has proven to be beneficial by additionally optimising the claim processing procedure.

EVRAZ Russia continued to develop new products to better meet customers' needs. These are niche steel products produced with new proprietary technologies. Production of rebar Aт1000 was launched by EVRAZ ZSMK, the only steel plant in Russia which can produce this type of rebars from steel grade 28C, the use of which reduces the rebar cash cost. EVRAZ ZSMK is now mastering rebar A600C, a premium niche product which is resistant to temperature changes and corrosion. Mass production of rebar A600C will begin in September 2014. Mastering of rebars under Hongkong's standard CS:2012 and US standard ASTM A615 is underway.

Railway products: Russia

A total of 529,000 tonnes of rails were sold to EVRAZ's customers in Russia and the CIS. More than half of this volume has been produced at EVRAZ ZSMK's modernised rail mill.

More than 120,000 tonnes of 25-metre head hardened rails, an innovative product aimed to substitute imported rails, was produced in H1 2014, and in May 2014, the first lot of 100-metre head-hardened rails was shipped to Russian Railways. Head-hardened DT350 rails for use in high-speed mixed-traffic railway operations and head-hardened DT370 rails, which have higher wear resistance and contact fatigue life were certified in August.

In H1 2014, despite a continued weakness in the Russian railcar industry, EVRAZ's wheel making demonstrated strong results. The continued sales under a long-term agreement with Russia's largest railcar producer, together with the strengthening of relationships with other clients in both Russia and CIS allowed the EVRAZ NTMK wheel mill to operate at near full capacity.

EVRAZ intends to grow its railway business by entering new markets and product segments. This process has already begun, with 60E1/E2 rail profiles for export markets having been developed at EVRAZ ZSMK rail mill and with EVRAZ having started the process of qualification with Deutsche Bahn that will allow EVRAZ to participate in the latter's tenders in 2015. Furthermore, the process to achieve certification under the European Raiway Agency's Technical Specification for Interoperability (TSI), in order to be able to supply rails to Europe and some other regions, has been initiated. In addition, in June 2014, the TSI certificate was issued by Výzkumný Ústav Železniční (VUZ), the Czech Republic, to the next type of wheel for European market produced at EVRAZ NTMK. The first lot of wheels for the European market was produced and shipped in June 2014.

EVRAZ continues to strengthen its presence in the North American and European railway wheel markets, in line with targets set out for the year. This is demonstrated by EVRAZ: having confirmed the Association of American Railroads (AAR) certificate; proceeding with wheel sales to the USA and European railway wheel markets.

Efforts to further develop the rail and wheel product portfolio will continue through 2014.

Steel: North America

In H1 2014 crude steel output at the North American operations declined by 13.8% compared to H1 2013 primarily due to the suspension of the EVRAZ Claymont facility. Excluding the impact of Claymont, crude steel output increased by 0.3%. Meanwhile, the output of finished steel products decreased by 9.8% in H1 2014, driven by discontinued operations at the Claymont facility. Excluding Claymont, finished production increased by 3.9% due to growth in ERW pipe, casing & tubing and rail production.

EVRAZ North America's Flat products group has focused on the following key objectives:

• 1) Price maximisation as the Company saw an upside in the plate market due to opportunities created by supply/demand imbalances in the first half of 2014;
• 2) Improvement of productivity rates at the EVRAZ Portland Mill tonnes per operating hour increased year over year, from 113 to 121 tonnes, resulting in additional production of 28,000 t ,
• 3) Identification and qualifying of alternative slab sources in the USA to increase our "Buy America" opportunity with respect to bridge grades on the West Coast in line with the target set out for the year, and
• 4) Supplement of the EVRAZ Regina melt shop volumes with slabs from Russia's EVRAZ NTMK to maximise rolling utilisation.

In Tubular products, the EVRAZ Pueblo seamless mill improved yields and conversion costs. Additionally, operating improvements at EVRAZ Calgary have been made through higher controls being set on steel input quality, the development of longer runs, process standardisation and increased employee training. New hydrotesting capabilities and other yield improvement projects are planned for H2 2014. The EVRAZ Calgary heat treat investment project has been initiated aiming to expand capacity by 59,000 tonnes per year by mid-2015. Our second premium threading line at EVRAZ Red Deer which has a 25,000 tonne capacity and was commissioned in 2013, is now fully operational.

As a result of successful completion of the rail mill modernisation and steel making upgrade projects at EVRAZ Pueblo, the EVRAZ Pueblo rail mill improved product quality and increased production capacity to 526,000 tonnes per year. This ensured that in H1 2014, projected production and yield rates were achieved. In addition, automated nondestructive test equipment will be installed later this year to ensure weld life and quality of the rails.

Steel: Ukraine

In H1 2014 crude steel output at EVRAZ DMZ Petrovskogo amounted to 0.5 million tonnes and was broadly unchanged compared to H1 2013. Sales of steel products increased by 1.4%, with domestic sales decreasing by 17%, to Russia and other CIS countries by 30%, while sales to far export destination rose by 23%.

The project for the modernisation of mill 800 at EVRAZ DMZ Petrovskogo, as set out in the targets for 2014, has made significant progress. Following the approval of the plans, and the completion of the design estimates, the necessary equipment has been ordered.

Installation of a pilot automated system for environmental monitoring at EVRAZ Bagliykoks is under way. The governmental approval has been received, and the provider of the equipment has been confirmed. Additionally, the modernised heat station demineraliser plant to reduce water discharges at EVRAZ Bagliykoks is expected to be commissioned in September 2014. Both of these developments suggest that the targets set out for this year will be achieved.

New product development included the launch of channel U220 and U260 production according to eurostandards DIN 1026-1, the production of two parts of KamAZ 533-310 wheel rim and relaunch of production of KamAZ 7,0-20 and GAZ-53 wheel rims, and the production of railcar uprights. Additionally, four types of angles (sizes 75, 80, 90 and 100) have been certified in accordance with eurostandard DIN. Subsequently the shipment of these products to the EU market has begun.

Steel: South Africa

In H1 2014, EVRAZ Highveld Steel and Vanadium increased production of saleable steel products by 10% compared to H1 2013. This was achieved through sustained availability at the two rolling mills and successful reduction of semi-finished product stocks, providing increased feedstock to the mills.

COAL

Market environment

Seaborne spot coking coal prices continued their gradual decline during Q1 2014, in the face of both cyclical and structural headwinds, with Australian Queensland FOB HCC spot price reaching US\$112/t by the end of March (–18%YTD). Following this, the price had stabilised at around US\$115/t level for the most of Q2 2014, partially supported by a supply side contraction and a number of mine closures announced in Australia and US. Queensland FOB HCC spot price stood at US\$114/t at the end of June.

In May 2014, Queensland Resources Council noted that approximately 25% of all coal operations in Queensland, Australia, are loss-making. Further, market analysts estimate that around 40% of global seaborne supply is uneconomic on a cash cost basis at current commodity prices, while about 75-80% of US export supply is loss-making. Supply-side pressure in the sector is expected to persist, potentially resulting in a number of additional closure announcements in the coming months, thereby gradually narrowing the seaborne supply/demand imbalance and providing some support for prices in the medium term.

Coking coal prices in the Russian market were more stable due to the fact that most coal producers are near or even below breakeven point and were not prepared for substantial discounts on their products. However, there has been a decline in demand for Russian coal concentrate in the Asian markets, due to the abundance of good quality brands supply from Australian producers which has led to a significant decrease in Russian export prices.

Sales review

Coal segment revenues
(US\$ million)		Six months ended 30 June
	2014	2013	Change
To third parties	398	381	4.5%
To steel segment	266	341	(22.0%)
To other operations	1	-	n/a
Total Coal segment	665	722	(7.9%)

Coal segment revenues by products

	Six months ended 30 June
	2014			2013
	US\$ million	% of total segment revenue	US\$ million	% of total segment revenue	% change
External sales
Coal products	390	58.6%	372	51.5%	4.8%
Raw coking coal	39	5.9%	23	3.2%	69.6%
Coking coal concentrate	296	44.5%	332	46.0%	(10.8%)
Raw steam coal	54	8.1%	13	1.8%	315.4%
Steam coal concentrate	1	0.1%	4	0.6%	(75.0%)
Intersegment sales
Coal products	266	40.0%	339	47.0%	(21.5%)
Raw coking coal	58	8.7%	85	11.8%	(31.8%)
Coking coal concentrate	208	31.3%	254	35.2%	(18.1%)
Other revenues	9	1.4%	11	1.5%	(18.2%)
Total	665	100.0%	722	100.0%	(7.9%)

Sales volumes of Coal segment

('000 tonnes)

	H1 2014	H1 2013	Change
External sales
Coal products	5,279	3,755	40.6%
Raw coking coal	792	375	111.2%
Coking coal concentrate	3,362	2,986	12.6%
Raw steam coal	1,112	353	215.0%
Steam coal concentrate	13	41	(68.3%)
Intersegment sales
Coal products	3,271	3,542	(7.7%)
Raw coking coal	1,094	1,363	(19.7%)
Coking coal concentrate	2,177	2,179	(0.1%)
Total, coal products	8,550	7,297	17.2%

Total coal segment revenues decreased by 7.9% to US\$665 million in H1 2014 compared to US\$722 million in H1 2013, primarily due to lower sales prices as well as the higher share of export sales, which offset the increase in coking coal and steam coal volumes.

External sales volumes of coal products increased in H1 2014 by 40.6% mainly due to higher sales of raw coking coal and coking concentrate as a result of the production ramp-up at the Yerunakovskaya VIII and the Raspadskaya mines as well as the increase of raw steam coal sales mainly due to the full operation of Yuzhkuzbassugol's Kusheyakovskaya mine until May 2014, while in Q1 2013 it was closed for longwall repositioning.

In H1 2014, Coal segment sales to the Steel segment amounted to US\$266 million and 40.0% of sales, compared to US\$339 million and 47.0% of sales in H1 2013.

During the period, approximately 73% of EVRAZ's steel-making coking coal consumption was satisfied by the Group's own operations, compared with 72% in H1 2013.

Coal segment cost of revenue

Coal segment cost of revenue
	Six months ended 30 June
	2014		2013		2014 v 2013
	US\$ million	% of segment revenue	US\$ million	% of segment revenue	% change
Cost of revenue	557	83.8%	640	88.6%	(13.0%)
Raw materials	1	0.2%	1	0.1%	0.0%
Transportation	84	12.6%	85	11.8%	(1.2%)
Staff costs	163	24.5%	185	25.6%	(11.9%)
Depreciation	134	20.2%	173	24.0%	(22.5%)
Energy	26	3.9%	30	4.2%	(13.3%)
Other*	149	22.4%	166	23.0%	(10.2%)

* Includes primarily contractor services and materials for maintenance and repairs and certain taxes

The coal segment cost of revenue decreased to US\$557 million or 83.8% of coal segment revenue in the six months ended 30 June 2014 compared with US\$640 million or 88.6% of coal segment revenue in the six months ended 30 June 2013.

The principal factors affecting the change in coal segment cost of revenue in the six months ended 30 June 2014 compared to the six months ended 30 June 2013 were:

• Transportation costs decreased by 1.2% due to Russian rouble weakening (-US\$11 million). This effect was offset by higher sales at Raspadskaya and Yuzhkuzbassugol, changes in sales destinations (higher exports) and an increase in Russian railway tariffs (+US\$10 million).
• Staff costs went down by 11.9%. The decrease was attributable to headcount optimisation, shutting down of the Yuzhkuzbassugol mines (Abashevskaya, Kusheyakovskaya) and Gramoteinskaya sale (-US\$23 million) as well as the impact of the Russian rouble weakening on Yuzhkuzbassugol and Raspadskaya (-US\$21 million). Lower level of unproductive time, on one hand, increased staff costs, but, on the other hand, decreased other operating expenses(+US\$22 million).
• Depreciation and depletion costs decreased by 22.5% mainly due to a lower depreciation and depletion expense at Yuzhkuzbassugol caused by the revision and detailing of future mining plans and lower mineral deposits depletion (-US\$34 million). This was also accompanied by a decrease in the US dollar amount of depreciation due to the rouble weakening (-US\$17

million). The decrease was partially offset by an increase in depreciation due to the revision and elaboration of mining future plans by IMC at Raspadskaya (+US\$13 million).

• Energy costs were down by 13.3% due to mine shutdown at Yuzhkuzbassugol (-US\$5 million) as well as Russian rouble weakening (-US\$3 million) that was slightly offset by higher electricity costs related to higher production volumes at Raspadskaya (+US\$3 million).
• Other costs decreased by 10.2% primarily due to a reduction in auxiliary material costs at Yuzhkuzbassugol supported by cost cutting initiatives (-US\$6 million), revising mineral extraction tax payments for the previous year at Raspadskaya (-US\$9 million) and the influence of Russian rouble weakening (-US\$19 million). This was partly offset by increased environmental protection services expenses (sample control and prevention drilling, +US\$8 million) and changes in stock of WIP and finished goods (+US\$4 million).

Coal segment gross profit

The coal segment's gross profit increased to US\$108 million in the six months ended 30 June 2014 from US\$82 million in the six months ended 30 June 2013.

Operational update – Coal segment

In H1 2014, EVRAZ's raw coking coal output totalled 9.8 million tonnes, representing an increase of 0.7 million tonnes compared to H1 2013. The primary growth driver was the launch of longwalls at the Raspadskaya mine.

Yuzhkuzbassugol

In H1 2014, Yuzhkuzbassugol mined 5.3 million tonnes of raw coking coal, a 4% increase compared to 5.1 million tonnes in H1 2013, following the ramp-up of the Yerunakovskaya-VIII mine and a better performance from both the Alardinskaya and Uskovskaya mines. The Alardinskaya mine has operated at increased capacity since the beginning of the year and the Uskovskaya mine had demonstrated solid performance before it closed for longwall repositioning at the end of H1 2014. The growth of output in H1 2014 fully offset the loss of production from shutdown of the Abashevskaya mine in January 2014.

The Company remains on track to reduce operating costs, including capital expenditures. Executing the cost reduction programme at Yuzhkuzbassugol, including headcount optimisation, resulted in cost savings of over US\$11 million in H1 2014, with further benefits expected in the second half.

Ensuring safe working conditions for all of the company's facilities continues to be a management priority. In accordance with key initiatives for 2014, energy isolation programme LOTO (Lock out, Try out) has been successfully introduced at the Alardinskaya and Yerunakovskaya-VIII mines. During the period, further progress has continued with the programme to prevent spontaneous combustion.

Raspadskaya

In H1 2014, raw coking coal output from Raspadskaya amounted to 4.4 million tonnes, or 12% higher than in H1 2013, including 1.7 million tonnes of raw coal mined at the Raspadskaya mine. However, the increase was below the volumes expected due to delay in launch of longwall at the MUK-96 underground mine as a result of geological conditions, which offset the positive effects of the longwall launch. Raspadskaya is currently operating on three longwalls with a fourth expected to begin operations in September this year.

Project documentation relating to the 3rd stage of recovery at Raspadskaya has now been approved enabling production to expand by up to 6 million tonnes of raw coal per year. Development of a deposit of about 500,000 tonnes of "K" grade coking coal at the Raspadskaya-Koksovaya mine commenced in June. In addition, project documentation was approved to start mining in the Raspadsky IX-XI sections which will enable the extension of works at the Raspadsky open pit from 2.5 to 4.5 km and increase annual production from 4 to 6 million tonnes.

In line with its plan to develop new premium markets, EVRAZ signed a contract to supply material volumes of semi-hard (GZh) concentrate to POSCO (South Korea). Trial shipments of semi-soft coal (GZhO) monoconcentrate were made to Japanese steel and coke producers. Trial lots of semi-hard (KO) concentrate were shipped to a number of Russian customers.

Mezhegeyugol

Significant progress at Mezhegeyugol during the period included the completion of three development units. In addition, three inclines were developed, noteably at the same time: a transportation main, a conveyor main and a ventilation main.

Management changes

Sergey Stepanov was appointed General Director of Raspadskaya Coal Company with effect from 1 July 2014.

IRON ORE

Market environment

After almost six months of relative stability in H2 2013, with China CFR (62% Fe) prices trading in a narrow range of US\$130-140/t for most of the period, the seaborne iron ore market started 2014 on a downward trend. A general slowdown in Chinese demand growth in Q1 2014 along with the destocking by major steel mills and the surge in Australian shipments of iron ore collectively resulted in an approximate 22% year-to-date price drop by mid-March (down to US\$105/t). After a short rebound to US\$119/t levels in April on the back of brief iron ore inventory restocking and the Chinese authorities' announcement of efforts to stabilise the economy, the China CFR price continued its downward trend, reaching US\$89/t by mid-June (the lowest level since September 2012). At the end of June, the China CFR price stood at US\$94/t, representing an approximate.30% decline year-to-date.

This low price environment has displaced a fraction of Chinese domestic output in recent months, falling from an adjusted annualised rate of 339 mtpa in January to 315 mtpa in May 2014¹ . Most of the volume displacement comes from the marginal Chinese iron ore mines higher up the global cost curve who find production uneconomical at current prices, although the impact on seaborne trade and market conditions remains to be seen, with China likely compensating the marginal volume loss by increasing imports.

____________________________________________ 1 According to National Bureau of Statistics of China

Sales review

Iron ore segment revenues
(US\$ million)	Six months ended 30 June
	2014	2013	Change
To third parties	179	224	(20.1%)
To steel segment	473	665	(28.9%)
To other operations	7	11	(36.4%)
Total Iron ore segment	659	900	(26.8%)

Iron ore segment revenues by products

	Six months ended 30 June
	2014			2013
	US\$ million	% of total segment revenue	US\$ million	% of total segment revenue	% change
External sales
Iron ore products*	160	24.3%	195	21.7%	(17.9%)
Sinter	-	-	6	0.7%	(100.0%)
Pellets	61	9.3%	70	7.8%	(12.9%)
Other	99	15.0%	119	13.2%	(16.8%)
Intersegment sales
Iron ore products	460	69.8%	639	71.0%	(28.0%)
Iron ore concentrate	110	16.7%	244	27.1%	(54.9%)
Sinter	125	19.0%	156	17.3%	(19.9%)
Pellets	225	34.1%	239	26.6%	(5.9%)
Other revenues**	39	5.9%	66	7.3%	(40.9%)
Total	659	100.0%	900	100.0%	(26.8%)

* External sales of iron ore produced at the Mapochs mine, part of EVRAZ Highveld, are accounted for in the Steel segment

** Includes crushed stone

Sales volumes of Iron ore segment

('000 tonnes)

	H1 2014	H1 2013	Change
External sales
Iron ore products	2,064	2,133	(3.2%)
Sinter	-	55	(100.0%)
Pellets	610	607	0.5%
Other	1,454	1,471	(1.2%)
Intersegment sales
Iron ore products*	5,587	6,892	(18.9%)
Iron ore concentrate	1,342	2,454	(45.3%)
Sinter	1,745	1,950	(10.5%)
Pellets	2,500	2,488	0.5%
Total, iron ore products*	7,651	9,025	(15.2%)

* External sales of iron ore produced at the Mapochs mine, part of EVRAZ Highveld, are accounted for in the Steel segment

Total Iron ore segment revenues decreased by 26.8% to US\$659 million in H1 2014 compared to US\$900 million in H1 2013, primarily due to lower sales volumes for internal consumption as a result of the optimisation of Evrazruda's assets (disposal of Abakan iron ore mine, Teya iron ore mine, Mundybash beneficiation plant in December 2013), closure of the Irba mine at Evrazruda in the April 2013 and EVRAZ VGOK disposal in September 2013. The decrease in sales volumes were accompanied bу lower iron ore prices.

External sales volumes of iron ore products decreased by 3.2% in H1 2014 compared to H1 2013, driven by lower sales volumes primarily as a result of disposal of EVRAZ VGOK in October 2013. Intersegment sales volumes decreased by 18.9% as a result of the optimisation of Evrazruda's assets in December 2013 and the disposal of EVRAZ VGOK in September 2013. The closure of the Irba mine at Evrazruda also contributed to lower iron ore volumes being supplied to the Steel segment.

In H1 2014, Iron ore segment sales to the Steel segment amounted to US\$473 million and 71.8% of sales, compared to US\$665 million and 73.9% of sales in H1 2013.

During the period, approximately 77% of EVRAZ's iron ore consumption were satisfied by the Group's own operations compared with 95% in H1 2013, predominantly due to the disposal of assets in the Iron ore segment.

		Iron ore segment cost of revenue
--	--	----------------------------------	--	--	--

	Six months ended 30 June
	2014		2013		2014 v 2013
	US\$ million	% of segment revenue	US\$ million	% of segment revenue	% change
Cost of revenue	441	66.9%	669	74.3%	(34.1%)
Raw materials	66	10.0%	50	5.6%	32.0%
Transportation	43	6.5%	109	12.1%	(60.6%)
Staff costs	124	18.8%	185	20.6%	(33.0%)
Depreciation	42	6.4%	54	6.0%	(22.2%)
Energy	91	13.8%	126	14.0%	(27.8%)
Other*	75	11.4%	145	16.1%	(48.3%)

Iron ore segment cost of revenue

* Includes primarily contractor services and materials for maintenance and repairs and certain taxes

The iron ore segment cost of revenue decreased to US\$441 million or 66.9% of iron ore segment revenue, in the six months ended 30 June 2014 compared with US\$669 million, or 74.3% of iron ore segment revenue, in the six months ended 30 June 2013.

The principal factors affecting the change in iron ore segment cost of revenue in the six months ended 30 June 2014 compared to the six months ended 30 June 2013 were:

• Raw material costs increased by 32.0%, primarily due to iron ore purchases from sold Tey and Abakan subsidiaries, which were in the Group before (+US\$30 million). The effect was partially offset by VGOK disposal (-US\$3 million) and KGOK lower coal input prices and sinter production (-US\$8 million).
• Transportation costs decreased by 60.6% mostly due to Evrazruda subsidiaries disposals with large rail and car logistics (-US\$24 million), VGOK disposal (-US\$16 million) and the effect of the weakening of Russian rouble and Ukrainian hryvnia.
• Staff costs decreased by 33.0% driven by Evrazruda subsidiaries (-US\$23 million) and VGOK disposal (-US\$32 million), but were also influenced by an increase in wage inflation (+US\$6 million). The rouble and hryvnia weakening also contributed to costs decline.
• Depreciation and depletion costs decreased by 22.2% due to VGOK disposal, and were accompanied by a decreased depreciation in US dollar terms at Russian and Ukrainian sites due to local currencies weakening.
• Energy costs decreased by 27.8% primarily due to lower production volumes with Evrazruda subsidiaries (-US\$12 million) and VGOK disposal (-US\$15 million), and the weakening of the Russian rouble and Ukrainian hryvnia.
• Other costs decreased by 48.3% due to a reduction in auxiliary materials, taxes and services due to Evrazruda subsidiaries (-US\$31 million) and VGOK disposal (-US\$19 million), the KGOK cost optimisation programme which reduced diesel and lube consumption (-US\$9 million), as well as influence of the Russian rouble and Ukrainian hryvnia weakening.

Iron ore segment gross profit

The iron ore segment's gross profit decreased to US\$218 million in the six months ended 30 June 2014 from US\$231 million in the six months ended 30 June 2013. The disposal of Evrazruda subsidiaries and VGOK dropped the production volumes of iron ore segment and iron ore prices were lower in the six month ended 30 June 2014 than in the six month ended 30 June 2013.

Operational update – Iron ore segment

Iron ore – Russia

In the iron ore segment we continued to focus on operational improvement programmes and cost reductions during the period.

The restructuring of Evrazruda's operations is underway. The project to reconstruct the Sheregesh iron ore mine and expand its production has continued as planned. In H1 2014 a key stage of the project was completed with the commissioning of a new mine shaft and an underground crushing complex at the -115 metre level. The development programme for the Abagursky processing plant is being finalised.

In H1 2014, in line with its asset portfolio and cost optimisation programme, EVRAZ sold the noncore power generating company Sheregesh Energo and the Irba iron ore mine was shutdown as economically unprofitable in June 2013.

Operations at our core iron ore business, EVRAZ KGOK, were stable: in H1 2014 it mined 28.7 million tonnes of iron ore (+0.5 million tonnes compared to H1 2013) and produced 4.9 million tonnes (+218,000) of saleable iron ore products, including 1.8 million tonnes of sinter and 3.1 million tonnes of pellets.

EVRAZ KGOK continued to realise the project to adopt new, more environmentally friendly technologies for industrial waste storage and to build a new tailings dump. The survey results for the technical project have undergone a state expert review with the result expected in Q3 2014. However, after a thorough review of the project, EVRAZ has decided to put off the construction by two years, to 2017 at least, and carry out a new prefeasibility study to explore the possibility of prolonging waste storage by the current technology by 3 years and to decrease project CAPEX.

With regard to the project to develop of the Sobstvenno-Kachkanarskoye deposit, the necessary technical and ecological approvals have now been received. The next stage is approval by the state expert committee, expected in Q3 2014 .

At the Timir iron ore project, a tender to design the first stage of the iron ore mine has been held. As EVRAZ confirmed at its Investor Day in June 2014, execution of the project is subject to securing project finance and negotiations are continuing with potential lenders.

Iron ore – Ukraine

In H1 2014, EVRAZ Sukha Balka produced 1,450 thousand tonnes of lump ore compared to 1,461 thousand tonnes in H1 2013.

A new horizon of -1,340 metres was commissioned at the Yubileynaya mine. Mining will begin once iron ore at the existing horizon has been depleted, expected by Q3 2015. The new horizon will be developed for a minimum of five years, and the Company expects to be able to mine approximately 10.8 million tonnes of raw ore and produce 8 million tonnes of saleable iron ore with Fe content of 60%.

In line with its targets for 2014, the Company has been implementing the electrical safety programme aimed at removing 50% of electrical networks below the surface by year end. The first stage has been completed with 40% of electrical networks dismantled.

VANADIUM

Market environment

Vanadium is a key element in the steel making process, with the majority of globally produced vanadium used as an alloying agent to increase steel strength. As a result, demand for vanadium is closely linked to steel production levels, in particular high strength steels with application in the pipe industry, rebars, tool steel, automotive. Vanadium used in this process is ferrovanadium while vanadium pentoxide is used as a catalyst for the production of sulphuric acid.

Ferrovanadium (FeV) demand was robust in H1 2014, fuelled by pipeline projects in CIS, Europe, and healthy steel demand in North America. Prices increased steadily from the low levels of Q4 2013 approaching ca US\$27.3/kg in May, only to decrease to US\$25.5/kg in June 2014 due to stronger FeV exports from China. The FeV spot price stood at US\$25/kg at the end of June.

FeV prices are expected to further decline during Q3 to US\$24/kg to US\$25/kg as Chinese rebar producers are significantly decreasing their Vanadium consumption in response to poor domestic demand.

Sales review

Vanadium segment revenues
(US\$ million)		Six months ended 30 June
	2014	2013	Change
To third parties	244	256	(4.7%)
To steel segment	11	12	(8.3%)
Total Vanadium segment	255	268	(4.9%)

Vanadium segment revenues by products

	Six months ended 30 June
	2014		2013		2014 v 2013
	US\$ million	% of total segment	revenue US\$ million	% of total segment revenue	% change
External sales
Vanadium products	242	94.9%	253	94.4%	(4.3%)
Vanadium in slag	4	1.6%	1	0.4%	300.0%
Vanadium in alloys and chemicals	238	93.3%	252	94.0%	(5.6%)
Intersegment sales, vanadium products	9	3.5%	10	3.7%	(10.0%)
Other revenues	4	1.6%	5	1.9%	(20.0%)
Total	255	100.0%	268	100.0%	(4.9%)

Sales volumes of vanadium segment

(tonnes of pure Vanadium)

	H1 2014	H1 2013	Change
External sales
Vanadium products	8,992	8,612	4.4%
Vanadium in slag	204	192	6.3%
Vanadium in alloys and chemicals	8,788	8,420	4.4%
Intersegment sales	401	346	15.9%
Total	9,393	8,958	4.9%

Vanadium segment revenues decreased by 4.9% to US\$255 million in H1 2014 compared to US\$268 million in H1 2013 reflecting a decrease in sales prices of vanadium products partially compensated by higher sales volumes.

Vanadium segment cost of revenue

Vanadium segment cost of revenue

	Six months ended 30 June
	2014		2013	2014 v 2013
	US\$ million	% of segment revenue	US\$ million	% of segment revenue	% change
Cost of revenue	215	84.3%	210	78.4%	2.4%
Raw materials	53	20.8%	43	16.0%	23.3%
Transportation	2	0.8%	-	-	n/m
Staff costs	33	12.9%	32	11.9%	3.1%
Depreciation	9	3.5%	11	4.1%	(18.2%)
Energy	34	13.3%	33	12.3%	3.0%
Other	84	32.9%	91	34.0%	(7.7%)

The vanadium segment cost of revenue increased by 2.4% to US\$215 million, or 84.3% of vanadium segment revenue in H1 2014 from US\$210 million, or 78.4% of vanadium segment revenue in H1 2013. The decrease in EVRAZ's vanadium segment's cost of revenue in H1 2014 as compared to H1 2013, in absolute terms, was attributable to increase of production and sales volumes of vanadium products in alloys and chemicals.

Vanadium segment gross profit

In H1 2014, gross profit of EVRAZ's vanadium segment decreased to US\$40 million compared with US\$58 million in H1 2013, primarily due to lower prices for final vanadium products.

Operational update – Vanadium segment

The project to expand throughput of vanadium pentoxide at EVRAZ Vanady Tula is underway with engineering and technical solutions to implement the project being developed. Evaluation of the technical solutions and implementation alternatives is expected to be completed by the end of the year.

The equipment for the pulp filtration project at EVRAZ Vanady Tula was installed in March 2014 and pilot production commenced. The optimal operations mode is being assessed.

EVRAZ Stratcor completed the OVP (oxide vanadium products) project aimed at reaching 100% capacity utilisation and eliminating more expensive third-party feedstock. Now EVRAZ Stratcor is converting oxide vanadium products produced by EVRAZ Vanady Tula. As a result, output of specialty high value added vanadium chemicals has increased by ~5% compared to H1 2013 and the plant is close to operating at full capacity.

OTHER BUSINESSES

EVRAZ's other operations include trading, logistics, port services, electricity and heat generation and other auxiliary activities.

Sales review

Other operations segment revenues
(US\$ million)	Six months ended 30 June
	2014	2013	Change
To third parties	129	126	2.4%
To steel segment	200	224	(10.7%)
To coal segment	32	22	45.5%
To iron ore segment	73	93	(21.5%)
Total Other operations segment	434	465	(6.7%)

Revenues from other operations decreased by 6.7% to US\$434 million in H1 2014 as compared to US\$465 million in H1 2013, principally due to the disposal of Central Heat and Power Plant and decrease in revenues of Zabsib Heat and Power Plant. Revenue of other operations segment includes the following (sales figures shown below include sales within the same segment):

• Nakhodka Trade Sea Port provides various sea port services to EVRAZ. The company's revenue totaled US\$57 million in H1 2014 and US\$45 million in H1 2013.
• Metallenergofinance ("MEF") supplies electricity to EVRAZ's steel, iron ore and coal segments as well as third parties. MEF's sales amounted to US\$228 million in H1 2014 compared to US\$219 million in H1 2013. Intersegment sales accounted for 69% and 76% of MEF's revenue in H1 2014 and H1 2013 respectively.
• Zapsib Heat and Power Plant generates electricity and heating. Most sales are classified as intersegment as they relate to the supply of internal energy to EVRAZ ZSMK. Sales were US\$57 million in H1 2014, compared to US\$65 million in H1 2013. The decrease of revenue is primarily attributable to the accident at Zabsib Heat and Power Plant in March 2014.
• Sinano Ship Management and East Metals Shipping provide sea freight services to EVRAZ's steel segment. These companies' sales totaled US\$58 million in H1 2014 and US\$61 million in H1 2013, with intersegment sales accounting for almost 98% in H1 2014 and 94% in H1 2013 of its revenue. Lower revenues in H1 2014 compared to H1 2013 were attributable to the sale of ships and as a result of a decline in sea freight services to third parties.

Other operations segment cost of revenue and gross profit

The other operations segment's cost of revenue in H1 2014 amounted to 78.8% of other operations revenue, or US\$342 million compared to 81.7%, or US\$380 million in H1 2013.

The major components of cost of revenue at EVRAZ Nakhodka Trade Sea Port are staff and inventory costs. The major component of MEF's cost of revenue is the purchase of electricity from power generating companies. The major components of the Zapsib Heat and Power Plant's cost of revenue are steam coal for power generation, depreciation and staff costs, while the major component of Sinano's cost of revenue is ship hire fees.

In H1 2014, gross profit of EVRAZ's other operation segment increased to US\$92 million compared with US\$85 million in H1 2013.

Operational update – Other businesses

In H1 2014 EVRAZ Metall Inprom (EMI)'s market share remained stable at 11%. During the period EMI sold over 950,000 tonnes of steel products, 2% less than in H1 2013, while the trading margin per tonne increased from 4.6% to 5.8%.

EMI is implementing measures to increase its portfolio in the segment of tubular products and expand sales of flat products in line with its Customer focus strategy. Company standards of customer service have been defined. Tools to increase sales efficiency are being implemented and include system surcharges for services and industry pricing differentiated by each sector.

In order to reduce costs and improve business efficiency, in line with its 2014 targets, EMI has focused on the shutdown of low-margin units, storage areas and branches, and on increasing staff productivity.

Cargo turnover at the EVRAZ Nakhodka Trade Sea Port (EVRAZ NMTP) increased by 24% in H1 2014 compared to H1 2013. EVRAZ Nakhodka Trade Sea Port continues to pursue the realisation of two projects, which will enable an increase in the volume of cargo turnover of coal to 7.3 million tonnes by 2016.

Sales of EVRAZ Nakhodka Trade Sea Port increased by 27%. On 20 January 2014, EVRAZ NTMP concluded an agreement with East Metals AG for the handling of ferrous metals and coal, whereas in H1 2013 all port services related to handling of EVRAZ's export products were rendered under a contract with Russian Railways.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties affecting EVRAZ were set out in detail under the heading Principal Risks and Uncertainties on pages 24 to 27 of the Annual Report 2013 http://www.evraz.com/investors/annual\_reports/ . We provide below an update on those risks which impacted the Company during the Period and which we expect to be the most significant for the rest of the year: The remaining principal risks identified in the Annual Report are unchanged.

Risk and risk description	Mitigations
Global economic factors, industry conditions and cost effectiveness EVRAZ operations are highly dependent and sensitive to the global macroeconomic environment, economic and industry conditions, e.g. global supply / demand balance for steel and particularly for iron ore and coking coal which has the potential to significantly affect both product prices and volumes across all markets. As EVRAZ operations have a high level of fixed costs, global economic and industry conditions can impact the Company's operational performance and liquidity. Liquidity risk with a related reduction in the availability of finance brings a risk of insufficient capital investment to ensure the	EVRAZ has a focused investment policy aimed at reducing and managing the cost base with the objective of being among the sector's lowest cost producers. In respect of its mining operations the Company has a focus on divestiture or downscaling of high cost and lower coal quality mining assets and development of efficient low cost mining operations. The Company's strategic focus is on improvement of operations through optimising that part of the Group's coal product portfolio of assets producing lower quality semi-hard coal. For steelmaking operations EVRAZ aims to idle rolling operations in low growth markets. For both mining and steelmaking operations the Company executes cost reduction projects to reinforce competitiveness of assets. Particularly,
long-term sustainability of the Company	conversion and logistics cost optimisation programmes were initiated during the Period. Capital and operational initiatives aligned with the overall EVRAZ strategy are specified within the section "CEO's report" on pages 2 to 5 of this report.
Health, safety and environmental (HSE) issues Safety and environmental risks are inherent to the Company's principal business activities of steelmaking and mining. Further, EVRAZ operations are subject to a wide range of HSE laws, regulations and standards, the breach of any of which may result in fines, penalties, suspension of production, or other sanctions. Such actions could have a material adverse effect on the Company's business, financial	HSE issues have direct oversight at Board level and HSE procedures and material issues are given top priority at all internal management level meetings. Management KPIs include a material factor for safety performance. EVRAZ has instigated a programme to improve the management of safety risks across all business units with the objective of embedding a new safety, harm-free culture at all management and operational levels. The Company continues to focus on
condition and business prospects. The key material environmental issues are primarily concerned with air emissions and water quality.	standardisation of critical safety programmes with a main focus in 2014 on implementing an energy isolation programme, or Lockout Tryout (LOTO). Further, EVRAZ has introduced a programme of Behavior Safety Observations to drive a more proactive approach to preventing injuries and incidents. Safety training has been reviewed and strengthened and an operational safety assessment is undertaken for all new projects.

	Environmental commitments are detailed in Note 13 to the EVRAZ plc unaudited interim condensed consolidated financial statements for six-month period ended 30 June 2014.
Dependency on certain key markets The Company's profitability is highly dependent on limited geographical markets, i.e. 41% of EVRAZ revenues are derived from Russia, and 24% from North America.	The strategic risks and opportunities within EVRAZ's key regions are regularly reviewed, including consideration of the quality and nature of the Company's product portfolio, relative cost effectiveness and the sustainability of industry sector market positioning together with effective in house and external distribution networks. The Company's product portfolio development and its production and distribution strategies are focused on leveraging leading market positions within the steel construction and logistic segments and within the coking coal and vanadium markets.
	The medium term risk of declining demand for rail products in the Russian market and a risk of new rail production capacity introduced by competitors is partly addressed by exploring rail market opportunities outside Russia and North America.
	Risks related to the tubular product market are addressed by long-term contracts with customers in North America combined with the new opportunities provided by the US policy of decreasing dependency on oil & gas supplies from other countries.
	For the long steel product market EVRAZ benefits from its wide proprietary distribution network in Russia (EVRAZ Metall Inprom).
Human Resources The principal HR risk is the quality and availability of critical operational and business skills of EVRAZ management and employees, particularly in certain regions and for particular business units, e.g.	Succession planning is a key feature of EVRAZ's human resources management. EVRAZ has invested substantial resource in training, internal mentoring, and development of its pool of successors.
engineers, mining experts and project managers. Associated risks involve selection, recruitment, training and retention of employees and qualified executives.	EVRAZ seeks to meet its leadership and skill needs through retention of its employees, internal promotion, structured professional internal mentoring and external development programs, including internal training, schools of engineers, technical forums, and expertise certification programmes. Additionally, training programmes of the Moscow Skolkovo business school provide further contribution to the development and training for the key strategic management pool.
Potential Actions by Governments EVRAZ operates in a number of countries and there is a risk that governments or government agencies could adopt new laws and regulations, or otherwise impact the Company's operations. New laws, regulations or other requirements could	Although these risks are mostly not within the Company's control, EVRAZ and its executive teams are members of various national industry bodies and, as a result, contribute to the thinking of such bodies and, when appropriate, participate in relevant discussions with political and regulatory authorities.
have the effect of limiting the Company's ability to obtain financing in international markets, or selling its products.	The Company has diligently taken international legal advice in order to assess the risk of consequences from sanctions against Russian

To date the Company has not been significantly impacted by recent geopolitical developments relating to Ukraine. There is a risk, however, that, if these events were to escalate, there could be an impact on EVRAZ's operations in the country (EVRAZ generates approximately 6% of consolidated revenue from its Ukrainian business) and revenues from the sale of coking coal to third party Ukrainian customers.	businesses and develop mitigating measures.
In addition, EVRAZ may be affected by government sanctions against Russian business if they are broadened from the current level causing capital market risk and operating risk.
Treasury EVRAZ, as with many other large and multi-national corporates, faces various treasury risks including liquidity, credit access, currency fluctuations, interest rate, and tax compliance risks. In addition, and as mentioned above, potential actions by Governments, including economic	EVRAZ employs skilled specialists to manage and mitigate such risks and the management of such risks is embedded in internal controls. Oversight of the key risks is reported within the monthly Board reports and compliance with the internal controls is reviewed by the management independent internal audit function, which reports to the Audit Committee on a monthly basis.
sanctions impacting Russian entities, may increase the Company's capital market risk in respect of new funding issues.	EVRAZ continues to undertake certain actions in order to extend the debt maturity profile and lower short-term external funding needs, as well as proactively managing the remaining portion of debt subject to maintenance covenants. Liquidity risk is managed through revisiting capital expenditure plans, cost optimisation programmes, continued asset portfolio rationalisation, and revision of the Company's dividend policy. The EVRAZ treasury management team and the directors regularly and pro-actively review all funding requirements and exposures.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that to the best of our knowledge this consolidated interim financial information has been prepared in accordance with lAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

An indication of important events that have occurred during the first six months and their impact on the consolidated interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and material related party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

By order of the Board

Alexander Frolov Chief Executive Officer 26 August 2014

Giacomo Baizini Chief Financial Officer 26 August 2014

Appendix 1

EBITDA

EBITDA represents profit from operations plus depreciation, depletion and amortisation, impairment of assets, loss (gain) on disposal of property, plant and equipment, and foreign exchange loss (gain). EVRAZ presents an EBITDA because it considers EBITDA to be an important supplemental measure of its operating performance and believes that EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the same industry. EBITDA is not a measure of financial performance under IFRS and it should not be considered as an alternative to net profit as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. EVRAZ's calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. EBITDA has limitations as an analytical tool and potential investors should not consider it in isolation, or as a substitute for an analysis of our operating results as reported under IFRS. Some of these limitations include:

• EBITDA does not reflect the impact of financing or financing costs on EVRAZ's operating performance, which can be significant and could further increase if EVRAZ were to incur more debt.
• EBITDA does not reflect the impact of income taxes on EVRAZ's operating performance.
• EBITDA does not reflect the impact of depreciation and amortisation on EVRAZ's operating performance. The assets of EVRAZ's businesses which are being depreciated and/or amortised will have to be replaced in the future and such depreciation and amortisation expense may approximate the cost of replacement of these assets in the future. EBITDA, due to the exclusion of these costs, does not reflect EVRAZ's future cash requirements for these replacements. EBITDA also does not reflect the impact of a loss on disposal of property, plant and equipment.

	Six months ended 30 June
	2014	2013
	(US\$ million)
Consolidated EBITDA reconciliation
Profit from operations	297	145
Add:
Depreciation, depletion and amortisation	435	580
Impairment of assets	147	7
Loss on disposal of property, plant & equipment	21	14
Foreign exchange loss/(gain)	180	179
Consolidated EBITDA	1,080	925
Steel segment EBITDA reconciliation
Profit from operations	344	339
Add:
Depreciation and amortisation	228	294
Impairment of assets	40	(32)
Loss on disposal of property, plant & equipment	7	8
Foreign exchange loss/(gain)	152	42
Steel segment EBITDA	771	651
Coal segment EBITDA reconciliation
Profit from operations	(108)	(187)
Add:
Depreciation, depletion and amortisation	136	187

Reconciliation of profit (loss) from operations to EBITDA is as follows:

	Six months ended 30 June
	2014	2013
	(US\$ million)
Impairment of assets	77	63
Loss on disposal of property, plant & equipment	13	6
Foreign exchange loss/(gain)	14	40
Coal segment EBITDA	132	109
Iron ore segment EBITDA reconciliation
Profit from operations	220	254
Add:
Depreciation, depletion and amortisation	43	55
Impairment of assets	3	(24)
Foreign exchange loss/(gain)	(50)	(54)
Iron ore segment EBITDA	216	231
Vanadium segment EBITDA reconciliation
(Loss)/profit from operations	(20)	11
Add:
Depreciation and amortisation	15	23
Impairment of assets	25	-
Vanadium segment EBITDA	20	34
Other operations EBITDA reconciliation
Profit from operations	38	45
Add:
Depreciation and amortisation	11	17
Impairment of assets	2	-
Gain on disposal of property, plant & equipment	1	(1)
Other operations EBITDA	52	61
Unallocated EBITDA reconciliation
Loss from operations	(181)	(256)
Add:
+ depreciation	2	4
+ (gain)/loss from disposal of PPE	-	1
+ forex gain/losses	64	151
Other unallocated operations EBITDA	(115)	(100)
Intersegment eliminations
Eliminations EBITDA	4	(61)

Appendix 2

Cash and short-term bank deposits

Cash and short-term bank deposits is not a measure under IFRS and it should not be considered as an alternative to other measures of financial position. EVRAZ's calculation of cash and shortterm bank deposits may be different from the calculation used by other companies and therefore comparability may be limited.

	30 June 2014	31 December 2013
	(US\$ million)
Cash and short-term bank deposits Calculation
Cash and cash equivalents	1,353	1,604
Cash of disposal groups classified as held for sale	-	7
Short-term bank deposits	-	-
Cash and short-term bank deposits	1,353	1,611

Appendix 3

Definition of Free Cash Flow

Free Cash Flow represents EBITDA, net of non-cash 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 on swaps, 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 disposal groups 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. Free Cash Flow is not a measure under IFRS and it should not be considered as an alternative to other measures of financial position. EVRAZ's calculation of Free Cash Flow may be different from the calculation used by other companies and therefore comparability may be limited.

Appendix 4

Total debt

Total debt represents the nominal value of loans and borrowings plus unpaid interest, finance lease liabilities, loans of assets classified as held for sale, the nominal effect of cross-currency swaps on principal of rouble-denominated notes. Total debt is not a measure under IFRS and it should not be considered as an alternative to other measures of financial position. EVRAZ's calculation of total debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation shall not be considered for covenant compliance reasons.

Total debt has been calculated as follows:

Total debt calculation	30 June 2014	31 December 2013
	(US\$ million)
Long-term loans, net of current portion	5,960	6,041
Short-term loans and current portion of long-term loans	1,244	1,816
Add back: Unamortised debt issue costs and fair value adjustment to liabilities assumed in business combination	40	41
Nominal effect of cross-currency swaps on principal of rouble-denominated notes	230	186
Loans of assets classified as held for sale	-	76
Finance lease liabilities, including current portion	5	6
Total debt	7,479	8,166

Appendix 5

Net debt

Net debt represents total debt less cash and liquid short-term financial assets, including those related to disposal groups classified as held for sale. Net debt is not a measure under IFRS and it should not be considered as an alternative to other measures of financial position. EVRAZ's calculation of net debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation shall not be considered for covenant compliance reasons.

Net debt has been calculated as follows:

Net debt calculation	30 June 2014	31 December 2013
	(US\$ million)
Total debt	7,479	8,166
Short-term bank deposits	-	-
Cash and cash equivalents	(1,353)	(1,604)
Cash of assets classified as held for sale	-	(7)
Collateral under swaps	(31)	(21)
Net debt	6,095	6,534

For further information:

Media Relations: Vsevolod Sementsov VP, Corporate Communications London: +44 207 832 8998 Moscow: +7 495 937 6871 media@evraz.com

Investor Relations: London: +44 207 832 8990 Moscow: +7 495 232 1370 ir@evraz.com

Unaudited Interim Condensed Consolidated Financial Statements

Six-month period ended 30 June 2014

Unaudited Interim Condensed Consolidated Financial Statements

Six-month period ended 30 June 2014

Contents

Report on Review of Interim Condensed Consolidated Financial Statements

Unaudited Interim Condensed Consolidated Financial Statements

Unaudited Interim Condensed Consolidated Statement of Operations	41
Unaudited Interim Condensed Consolidated Statement of Comprehensive Income 42
Unaudited Interim Condensed Consolidated Statement of Financial Position 43
Unaudited Interim Condensed Consolidated Statement of Cash Flows 44
Unaudited Interim Condensed Consolidated Statement of Changes in Equity 46
Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements 48

Independent Review Report to EVRAZ plc

Introduction

We have been engaged by EVRAZ plc (the Company) to review the condensed set of financial statements in the interim report for the six months ended 30 June 2014 which comprises the Interim Condensed Consolidated Statement of Operations, Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Statement of Financial Position, Interim Condensed Consolidated Statement of Cash Flows, Interim Condensed Consolidated Statement of Changes in Equity and related notes 1 to 15. We have read the other information contained in the Interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland), 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP London 26 August 2014

Unaudited Interim Condensed Consolidated Statement of Operations

(In millions of US dollars, except for per share information)

		Six-month period ended 30 June
	Notes	2014		2013 restated*
Revenue Sale of goods		\$ 6,628	\$	7,142
Rendering of services Cost of revenue		177 6,805 (5,192)		177 7,319 (5,886)
Gross profit		1,613		1,433
Selling and distribution costs General and administrative expenses Social and social infrastructure maintenance expenses Loss on disposal of property, plant and equipment Impairment of assets Foreign exchange gains/(losses), net Other operating income Other operating expenses Profit from operations	5	(543) (390) (13) (21) (147) (180) 18 (40) 297		(608) (438) (22) (14) (7) (179) 48 (68) 145
Interest income Interest expense Share of profits/(losses) of joint ventures and		9 (296)		16 (373)
associates Gain/(loss) on derecognition of equity investments, net Gain/(loss) on financial assets and liabilities, net	8	5 – (43)		3 89 (71)
Gain/(loss) on disposal groups classified as held for sale, net Other non-operating gains/(losses), net	4	113 –		54 (2)
Profit/(loss) before tax		85		(139)
Income tax expense	6	(84)		(7)
Net profit/(loss)		\$ 1	\$	(146)
Attributable to:
Equity holders of the parent entity Non-controlling interests		\$ 38 (37)	\$	(131) (15)
		\$ 1	\$	(146)
Earnings/(losses) per share: basic, for profit/(loss) attributable to equity holders of the parent entity, US dollars	11	\$ 0.03	\$	(0.09)
diluted, for profit/(loss) attributable to equity holders of the parent entity, US dollars	11	\$ 0.02	\$	(0.09)

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the completion of initial accounting (Note 2).

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income (In millions of US dollars)

	Notes 2014		Six-month period ended 30 June 2013 restated*
Net profit/(loss)		\$	1	\$	(146)
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Exchange differences on translation of foreign operations into presentation currency			(197)		(409)
Recycling of exchange difference to profit or loss (Note 4)			(65)		68
Net gains/(losses) on available-for-sale financial assets			(9)		4
			(271)		(337)
Effect of translation to presentation currency of the Group's joint ventures and associates Share of other comprehensive income of joint	8		(5)		(10)
ventures and associates accounted for using the equity method			(5)		(10)
Items not to be reclassified to profit or loss in subsequent periods
Gains/(losses) on re-measurement of net defined benefit liability Income tax effect			(29) 9		– –
			(20)		–
Decrease in revaluation surplus in connection with the impairment of property, plant and equipment Income tax effect			– –		(5) 1
			–		(4)
Total other comprehensive loss			(296)		(351)
Total comprehensive loss, net of tax		\$	(295)	\$	(497)
Attributable to:
Equity holders of the parent entity Non-controlling interests		\$	(248) (47)	\$	(449) (48)
		\$	(295)	\$	(497)

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the completion of initial accounting (Note 2).

Unaudited Interim Condensed Consolidated Statement of Financial Position

(In millions of US dollars)

		30 June		31 December
	Notes		2014		2013
ASSETS					restated*
Non-current assets
Property, plant and equipment	7	\$	8,772	\$	9,387
Intangible assets other than goodwill			530		588
Goodwill			1,980		1,988
Investments in joint ventures and associates Deferred income tax assets	8		191 80		191 86
Other non-current financial assets			119		144
Other non-current assets			57		62
			11,729		12,446
Current assets
Inventories Trade and other receivables			1,694 943		1,744 915
Prepayments			87		124
Loans receivable			42		21
Receivables from related parties	9		22		13
Income tax receivable			46		59
Other taxes recoverable			260 65		283
Other current financial assets Cash and cash equivalents	10		1,353		71 1,604
			4,512		4,834
Assets of disposal groups classified as held for sale			92		409
			4,604		5,243
Total assets		\$	16,333	\$	17,689
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent entity
Issued capital	11	\$	1,507	\$	1,473
Treasury shares			(1)		(1)
Additional paid-in capital	11		2,469		2,326
Revaluation surplus			159		162
Other reserves Unrealised gains and losses	11		– 3		156 12
Accumulated profits			2,508		2,589
Translation difference			(1,943)		(1,685)
			4,702		5,032
Non-controlling interests			378 5,080		431 5,463
Non-current liabilities
Long-term loans	12		5,960		6,041
Deferred income tax liabilities			751		841
Employee benefits			491		492
Provisions			261		254
Other long-term liabilities			266 7,729		230 7,858
Current liabilities
Trade and other payables			1,497		1,488
Advances from customers			129		180
Short-term loans and current portion of long-term loans	12		1,244		1,816
Payables to related parties	9		149		458
Income tax payable Other taxes payable			94 227		57 202
Provisions			78		45
Dividends payable by the parent entity to its shareholders	11		90		–
Dividends payable by the Group's subsidiaries to non-controlling
shareholders			–		5
Liabilities directly associated with disposal groups classified as held for			3,508		4,251
sale			16		117
			3,524		4,368
Total equity and liabilities		\$	16,333	\$	17,689

* The amounts shown here do not correspond to the financial statements for the year ended 31 December 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale (Note 2).

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(In millions of US dollars)

	Six-month period ended 30 June
	2014	2013 restated*
Cash flows from operating activities
Net profit/(loss)	\$ 1	\$ (146)
Adjustments to reconcile net profit/(loss) to net cash flows from
operating activities:
Deferred income tax (benefit)/expense Depreciation, depletion and amortisation	(59) 435	(140) 580
Loss on disposal of property, plant and equipment	21	14
Impairment of assets	147	7
Foreign exchange (gains)/losses, net	180	179
Interest income	(9)	(16)
Interest expense	296	373
Share of (profits)/losses of associates and joint ventures	(5)	(3)
(Gain)/loss on derecognition of equity investments, net	–	(89)
(Gain)/loss on financial assets and liabilities, net	43	71
(Gain)/loss on disposal groups classified as held for sale, net	(113)	(54)
Other non-operating (gains)/losses, net	–	2
Bad debt expense	21	(1)
Changes in provisions, employee benefits and other long-term
assets and liabilities	(2)	(43)
Expense arising from the equity-settled awards	15	11
Other	(1)	(2)
	970	743
Changes in working capital: Inventories	(35)	101
Trade and other receivables	(74)	(176)
Prepayments	29	15
Receivables from/payables to related parties	(186)	94
Taxes recoverable	(1)	68
Other assets	10	(3)
Trade and other payables	118	(225)
Advances from customers	(46)	(32)
Taxes payable	66	42
Other liabilities	(7)	1
Net cash flows from operating activities	844	628
Cash flows from investing activities
Issuance of loans receivable to related parties	(1)	(1)
Issuance of loans receivable	–	(1)
Proceeds from repayment of loans receivable, including interest	1	1
Purchases of subsidiaries, net of cash acquired	(102)	82
Purchase of interest in a joint venture	–	(16)
Restricted deposits at banks in respect of investing activities	2	(1)
Short-term deposits at banks, including interest Purchases of property, plant and equipment and intangible assets	3 (339)	680 (492)
Proceeds from disposal of property, plant and equipment	4	3
Proceeds from sale of disposal groups classified as held for sale, net of
transaction costs (Note 4)	296	(1)
Dividends received	–	1
Other investing activities, net	13	(17)
Net cash flows from/(used in) investing activities	(123)	238

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the completion of initial accounting (Note 2).

Unaudited Interim Condensed Consolidated Statement of Cash Flows (continued)

(In millions of US dollars)

	Six-month period ended 30 June
	2014	2013 restated*
Cash flows from financing activities
Purchase of treasury shares	\$ (13)	\$ –
Proceeds from loans provided by related parties (Note 9)	267	–
Repayment of loans provided by related parties (Note 9)	(251)	–
Proceeds from bank loans and notes	1,052	1,776
Repayment of bank loans and notes, including interest Net proceeds from/(repayment of) bank overdrafts and credit lines,	(1,286)	(2,849)
including interest	(712)	412
Payments for purchase of property, plant and equipment on
deferred terms	(26)	–
Gain on derivatives not designated as hedging instruments	25	19
Collateral under swap contracts	(10)	(26)
Payments under finance leases, including interest	(1)	(2)
Other financing activities	(5)	–
Net cash flows used in financing activities	(960)	(670)
Effect of foreign exchange rate changes on cash and cash equivalents	(20)	(49)
Net increase/(decrease) in cash and cash equivalents	(259)	147
Cash and cash equivalents at beginning of year	1,604	1,382
Add back: decrease in cash of disposal groups classified as assets
held for sale	8	5
Cash and cash equivalents at end of period	\$ 1,353	\$ 1,534
Supplementary cash flow information: Cash flows during the period:
Interest paid	\$ (264)	\$ (302)
Interest received	10	17
Income taxes paid	(94)	(126)

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the completion of initial accounting (Note 2).

Unaudited Interim Condensed Consolidated Statement of Changes in Equity

(In millions of US dollars)

	Attributable to equity holders of the parent entity
		Issued capital		Treasury shares		Additional paid-in capital		Revaluation surplus	reserves	Other		Unrealised gains and losses	Accumulated profits		Translation difference	Total	Non controlling interests	Total Equity
At 31 December 2013 (as reported)	\$	1,473	\$	(1)	\$	2,326	\$	162	\$	156	\$	12	\$	2,566	\$ (1,687)	\$ 5,007	\$ 427	\$ 5,434
Subsidiary that ceased to be classified as held for sale (Note 2)		–		–		–		–		–		–		23	2	25	4	29
At 31 December 2013 (as restated)		1,473		(1)		2,326		162		156		12		2,589	(1,685)	5,032	431	5,463
Net profit/(loss)		–		–		–		–		–		–		38	–	38	(37)	1
Other comprehensive income/(loss)		–		–		–		(3)		–		(9)		(16)	(258)	(286)	(10)	(296)
Total comprehensive income/(loss) for the period		–		–		–		(3)		–		(9)		22	(258)	(248)	(47)	(295)
Issue of shares (Note 11)		34		–		122		–		(156)		–		–	–	–	–	–
Acquisition of non-controlling interests in existing subsidiaries		–		–		6		–		–		–		–	–	6	(6)	–
Purchase of treasury shares (Note 11)		–		(13)		–		–		–		–		–	–	(13)	–	(13)
Transfer of treasury shares to participants of the Incentive Plans (Note 11)		–		13		–		–		–		–		(13)	–	–	–	–
Share-based payments		–		–		15		–		–		–		–	–	15	–	15
Dividends declared by the parent entity to its shareholders (Note 11)		–		–		–		–		–		–		(90)	–	(90)	–	(90)
At 30 June 2014	\$	1,507	\$	(1)	\$	2,469	\$	159	\$	–	\$	3	\$	2,508	\$ (1,943)	\$ 4,702	\$ 378	\$ 5,080

Unaudited Interim Condensed Consolidated Statement of Changes in Equity (continued)

(In millions of US dollars)

	Attributable to equity holders of the parent entity
		Issued capital		Treasury shares	Additional paid-in capital		Revaluation surplus		Other reserves		Unrealised gains and losses	Accumulated profits		Translation difference		Total	Non controlling interests		Total Equity
At 31 December 2012 (as reported) Subsidiary that ceased to be classified as	\$	1,340	\$	(1)	\$	1,820	\$	173	\$ –	\$	5	\$ 3,004	\$	(1,424)	\$	4,917	\$	200	\$ 5,117
held for sale (Note 2) At 31 December 2012 (as restated)		– 1,340		– (1)		– 1,820		– 173	– –		– 5	3,009	5	– (1,424)		5 4,922		– 200	5 5,122
Net loss Other comprehensive income/(loss) Total comprehensive income/(loss) for		– –		– –		– –		– (4)	– –		– 4	(131)	–	– (318)		(131) (318)		(15) (33)	(146) (351)
the period* Issue of shares		– 133		– –		– 478		(4) –	– 156		4 –	(131)	–	(318) –		(449) 767		(48) –	(497) 767
Acquisition of non-controlling interests in existing subsidiaries		–		–		1		–	–		–		–	–		1		(3)	(2)
Non-controlling interests arising on acquisition of subsidiaries Share-based payments		– –		– –		– 11		– –	– –		– –		– –	– –		– 11		314 –	314 11
At 30 June 2013 (restated)	\$	1,473	\$	(1)	\$	2,310	\$	169	\$ 156	\$	9	\$ 2,878	\$	(1,742)	\$	5,252	\$	463	\$ 5,715

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013 and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the completion of initial accounting (Note 2).

Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements

Six-month period ended 30 June 2014

1. Corporate Information

These interim condensed consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 26 August 2014.

EVRAZ plc ("EVRAZ plc" or "the Company") was incorporated on 23 September 2011 as a public company under the laws of the United Kingdom with the registered number 7784342. The Company's registered office is at 5th Floor, 6 St. Andrew Street, London, EC4A 3AE, United Kingdom.

The Company, together with its subsidiaries (the "Group"), is involved in the production and distribution of steel and related products and coal and iron ore mining. In addition, the Group produces vanadium products. The Group is one of the largest steel producers globally.

Lanebrook Limited (Cyprus) is the ultimate controlling party of the Company.

Going Concern

These interim condensed consolidated financial statements have been prepared on a going concern basis.

The Group's activities in all of its operating segments continue to be affected by the uncertainty and instability of the current economic environment (Note 13). In response the Group implemented a number of cost cutting initiatives, reduced capital expenditures and continues to reduce the level of debt.

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.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies

Basis of Preparation

These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting", as adopted by the European Union. Accordingly, these interim condensed consolidated financial statements do not include all the information and disclosures required for a complete set of financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2013, which were prepared in accordance with International Financial Reporting Standards, as adopted by the European Union.

The comparative figures as of 31 December 2013 are not the Company's statutory accounts for the year ended 31 December 2013 in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 have been filed with the Registrar of Companies. The auditor's report under section 495 of the Companies Act 2006 in relation to these accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Operating results for the six-month period ended 30 June 2014 are not necessarily indicative of the results that may be expected for the year ending 31 December 2014.

Restatement of Financial Statements

Subsidiary that Ceased to Be Classified as Held for Sale

On 12 August 2014, the Group signed an agreement to sell 34% in EVRAZ Highveld Steel and Vanadium Limited and decided to retain control over the remaining 51.1% ownership interest. The subsidiary was classified as a disposal group held for sale starting from 31 December 2012 and the carrying value of its net assets was based on management's best estimate of the net proceeds from the sale.

As a result of this decision the subsidiary ceased to meet the definition of a disposal group held for sale. In accordance with IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" the Group restated its consolidated financial statements for the periods in which the assets were classified as held for sale as if the subsidiary had not been classified as an asset held for sale in the past and all assets and liabilities and the results of operations had been accounted for in accordance with the applicable International Financial Reporting Standards as adopted by the European Union.

Completion of Initial Accounting

The purchase price allocation for Raspadskaya acquired in January 2013 has been completed during the preparation of the annual consolidated financial statements for 2013. As a result, the Group recognised adjustments to the provisional values of identifiable assets, liabilities and contingent liabilities of the entity and restated the interim consolidated financial statements as of 30 June 2013 and for the six-month period then ended.

Reclassifications

In the second half of 2013, the Group started to apply new accounting policies with respect to certain operating costs previously included in general and administrative expenses and selling costs. Consequently, the statement of operations for the six-month period ended 30 June 2013 has been adjusted for comparability purposes.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies (continued)

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

The effects of the restatements on the previously reported amounts are set out below.

Statement of Operations	Year ended 31 December 2013 Subsidiary that
		As previously reported		ceased to be held for sale		Restated
Revenue Sale of goods	\$	14,071	\$	–	\$	14,071
Rendering of services		340		–		340
Cost of revenue		14,411 (11,468)		– (33)		14,411 (11,501)
Gross profit		2,943		(33)		2,910
Selling and distribution costs		(1,183)		(30)		(1,213)
General and administrative expenses		(877)		–		(877)
Social and social infrastructure maintenance expenses Loss on disposal of property, plant and equipment		(50) (47)		– –		(50) (47)
Impairment of assets		(446)		(117)		(563)
Foreign exchange gains/(losses), net		(258)		–		(258)
Other operating income		53		–		53
Other operating expenses		(116)		–		(116)
Profit/(loss) from operations		19		(180)		(161)
Interest income		23		–		23
Interest expense		(699)		–		(699)
Share of profits/(losses) of joint ventures and associates Gain/(loss) on derecognition of equity investments, net		8 89		– –		8 89
Gain/(loss) on financial assets and liabilities, net		(43)		–		(43)
Gain/(loss) on disposal groups classified as held for sale, net		(25)		156		131
Other non-operating gains/(losses), net		15		–		15
Loss before tax		(613)		(24)		(637)
Income tax benefit/(expense)		41		45		86
Net profit/(loss)	\$	(572)	\$	21	\$	(551)
Attributable to:
Equity holders of the parent entity Non-controlling interests	\$	(522) (50)	\$	18 3	\$	(504) (47)
		\$(572)	\$	21	\$	(551)
Earnings/(losses) per share: for profit/(loss) attributable to equity holders of the parent
entity, US dollars, basic and diluted	\$	(0.35)	\$	0.01	\$	(0.34)

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

Statement of Comprehensive Income	Year ended 31 December 2013 Subsidiary that
		As previously reported		ceased to be held for sale		Restated
Net profit/(loss)	\$	(572)	\$	21	\$	(551)
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		(378)		3		(375)
Exchange differences recycled to profit or loss Net gains/(losses) on available-for-sale financial		90		–		90
assets		7		–		7
		(281)		3		(278)
Effect of translation to presentation currency of the Group's joint ventures and associates		(11)		–		(11)
		(11)		–		(11)
Items not to be reclassified to profit or loss in subsequent periods
Gains/(losses) on re-measurement of net defined benefit liability Income tax effect		119 (30)		– –		119 (30)
		89		–		89
Decrease in revaluation surplus in connection with the impairment of property, plant and equipment		(9)		–		(9)
Income tax effect		2		–		2
		(7)		–		(7)
Total other comprehensive income/(loss)		(210)		3		(207)
Total comprehensive income/(loss), net of tax	\$	(782)	\$	24	\$	(758)
Attributable to: Equity holders of the parent entity Non-controlling interests		(697) (85)	\$	20 4	\$	(677) (81)
	\$	(782)	\$	24	\$	(758)

Statement of Changes in Equity Year ended 31 December 2013

		Subsidiary that
		As previously reported		ceased to be held for sale		Restated
Accumulated profits	\$	2,566	\$	23	\$	2,589
Translation difference		(1,687)		2		(1,685)
Non-controlling interests		427		4		431

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

Statement of Financial Position		31 December 2013
		Subsidiary that
	As previously reported	ceased to be held for sale	Restated
ASSETS
Non-current assets
Property, plant and equipment	\$ 9,251	\$ 136	\$ 9,387
Intangible assets other than goodwill	525	63	588
Goodwill	1,988	–	1,988
Investments in joint ventures and associates	191	–	191
Deferred income tax assets	86	–	86
Other non-current financial assets	140	4	144
Other non-current assets	62	–	62
Current assets	12,243	203	12,446
Inventories	1,641	103	1,744
Trade and other receivables	873	42	915
Prepayments	122	2	124
Loans receivable	21	–	21
Receivables from related parties	13	–	13
Income tax receivable	59	–	59
Other taxes recoverable	281	2	283
Other current financial assets	71	–	71
Cash and cash equivalents	1,576	28	1,604
	4,657	177	4,834
Assets of disposal groups classified as held for sale	804 5,461	(395) (218)	409 5,243
Total assets	\$ 17,704	\$ (15)	\$ 17,689
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent entity
Issued capital	\$ 1,473	\$ –	\$ 1,473
Treasury shares	(1)	–	(1)
Additional paid-in capital	2,326	–	2,326
Revaluation surplus	162	–	162
Other reserves	156	–	156
Unrealised gains and losses	12	–	12
Accumulated profits	2,566	23	2,589
Translation difference	(1,687)	2	(1,685)
	5,007	25	5,032
Non-controlling interests	427	4	431
	5,434	29	5,463
Non-current liabilities
Long-term loans	\$ 6,039	\$ 2	\$ 6,041
Deferred income tax liabilities	827	14	841
Employee benefits	481	11	492
Provisions	194	60	254
Other long-term liabilities	230	–	230
	7,771	87	7,858
Current liabilities
Trade and other payables	1,395	93	1,488
Advances from customers	179	1	180
Short-term loans and current portion of long-term loans	1,816	–	1,816
Payables to related parties	458	–	458
Income tax payable	57	–	57
Other taxes payable	202	–	202
Provisions	39	6	45
Dividends payable by the Group's subsidiaries to non
controlling shareholders	5	–	5
Liabilities directly associated with disposal groups	4,151	100	4,251
classified as held for sale	348	(231)	117
	4,499	(131)	4,368
Total equity and liabilities	\$ 17,704	\$ (15)	\$ 17,689

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Changes in Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

Statement of Operations	Six-month period ended 30 June 2013
				Subsidiary that		Completion of
		As previously reported		ceased to be held for sale		initial accounting	Reclassifications		Restated
Revenue
Sale of goods	\$	7,142	\$	–		–	–	\$	7,142
Rendering of services		220		–		–	(43)		177
		7,362		–		–	(43)		7,319
Cost of revenue Gross profit		(5,877) 1,485		(16) (16)		12 12	(5) (48)		(5,886) 1,433
Selling and distribution costs		(618)		(17)		(11)	38		(608)
General and administrative expenses Social and social infrastructure		(448)		–		–	10		(438)
maintenance expenses		(22)		–		–	–		(22)
Loss on disposal of property, plant and
equipment		(10)		–		(4)	–		(14)
Impairment of assets		(7)		–		–	–		(7)
Foreign exchange gains/(losses), net Other operating income		(177) 48		– –		(2) –	– –		(179) 48
Other operating expenses		(68)		–		–	–		(68)
Profit/(loss) from operations		183		(33)		(5)	–		145
Interest income		16		–		–	–		16
Interest expense		(377)		–		4	–		(373)
Share of profits/(losses) of joint
ventures and associates		3		–		–	–		3
Gain/(loss) on derecognition of equity
investments, net		89		–		–	–		89
Gain/(loss) on financial assets and liabilities, net		(71)		–		–	–		(71)
Gain/(loss) on disposal groups
classified as held for sale, net		54		–		–	–		54
Other non-operating gains/(losses), net		(3)		–		1	–		(2)
Loss before tax		(106)		(33)		–	–		(139)
Income tax benefit/(expense)		(16)		9		–	–		(7)
Net loss	\$	(122)	\$	(24)	\$	–	–	\$	(146)
Attributable to: Equity holders of the parent entity	\$	(111)	\$	(20)	\$	–	\$ –	\$	(131)
Non-controlling interests		(11)		(4)		–	–		(15)
	\$	(122)	\$	(24)	\$	–	\$ –	\$	(146)
Earnings/(losses) per share: for profit/(loss) attributable to equity holders of the parent entity, US dollars, basic and diluted	\$	(0.07)	\$	(0.02)		–	–	\$	(0.09)

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Changes in Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

Statement of Comprehensive Income Six-month period ended 30 June 2013

	As previously reported	Subsidiary that ceased to be held for sale	Completion of initial accounting	Restated
Net loss	\$ (122)	\$ (24)	\$ –	\$ (146)
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	(414)	2	3	(409)
Exchange differences recycled to profit or loss Net gains/(losses) on available-for-sale financial	68	–	–	68
assets	4	–	–	4
	(342)	2	3	(337)
Effect of translation to presentation currency of the Group's joint ventures and associates	(10)	–	–	(10)
Share of other comprehensive income/(loss) of joint ventures and associates accounted for using the equity method	(10)	–	–	(10)
Items not to be reclassified to profit or loss in subsequent periods Decrease in revaluation surplus in connection with the impairment of property, plant and equipment	(5)	–	–	(5)
Income tax effect	1	–	–	1
	(4)	–	–	(4)
Total other comprehensive income/(loss)	(356)	2	3	(351)
Total comprehensive income/(loss), net of tax	\$ (478)	\$ (22)	\$ 3	\$ (497)
Attributable to:
Equity holders of the parent entity Non-controlling interests	\$ (430) (48)	\$ (19) (3)	\$ – 3	\$ (449) (48)
	\$ (478)	\$ (22)	\$ 3	\$ (497)

Statement of Changes in Equity	Six-month period ended 30 June 2013

	As previously reported	Subsidiary that ceased to be held for sale			Completion of initial accounting	Restated
Accumulated profits	\$ 2,893	\$	(15)	\$	–	\$ 2,878
Translation difference	(1,743)		1		–	(1,742)
Non-controlling interests	509		(3)		(43)	463

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies

Changes in Accounting Policies

In the preparation of the interim condensed consolidated financial statements, the Group followed the same accounting policies and methods of computation as compared with those applied in the complete consolidated financial statements for year ended 31 December 2013, except for the adoption of new standards and interpretations and revision of the existing IAS as of 1 January 2014.

New/Revised Standards and Interpretations Adopted in 2014:

IFRS 10 "Consolidated Financial Statements", IAS 27 "Separate Financial Statements"

IFRS 10 replaced the portion of IAS 27 "Consolidated and Separate Financial Statements" that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 "Consolidation — Special Purpose Entities". IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27.

IFRS 12 "Disclosure of Interests in Other Entities"

IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group's financial position or performance.

Amendments to IFRS 10, IFRS 12 and IAS 27

These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss.

IFRS 11 "Joint Arrangements", IAS 28 "Investments in Associates and Joint Ventures"

IFRS 11 replaced IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly-controlled Entities" — Nonmonetary Contributions by Venturers". IFRS 11 removed the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. As a consequence of the new IFRS 11 and IFRS 12, IAS 28 "Investments in Associates", has been renamed IAS 28 "Investments in Associates and Joint Ventures", and describes the application of the equity method to investments in joint ventures in addition to associates.

Amendments to IAS 32 "Financial Instruments: Presentation" – Offsetting Financial Assets and Financial Liabilities

These amendments clarify the meaning of "currently has a legally enforceable right to set-off" and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting.

Amendments to IAS 36 – Recoverable Amount Disclosures for Non-financial Assets"

These amendments remove the unintended consequences of IFRS 13 "Fair Value Measurement" on the disclosures required under IAS 36 "Impairment of Assets". In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

2. Significant Accounting Policies (continued)

Changes in Accounting Policies (continued)

Amendments to IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting"

These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.

IFRIC 21 "Levies"

IFRIC 21 is applicable to all levies imposed by governments under legislation, other than outflows that are within the scope of other standards (e.g., IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognises a liability for a levy no earlier than when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold is reached.

The new standards, interpretations and amendments described above did not have a significant impact on the financial position or performance of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

3. Segment Information

The management reporting that is used by the chief operating decision maker for making decisions about resource allocation has changed to put more emphasis on analysis of the operating results of the mining segment separately for coal and iron ore operations. As such, the mining segment has been split into two separate reportable segments. The comparative segment information has been restated accordingly.

The following tables present measures of segment profit or loss based on management accounts.

US\$ million Steel Coal Iron Ore Vanadium Other Eliminations Total Revenue Sales to external customers \$ 6,216 \$ 307 \$ 86 \$ 123 \$ 98 \$ – \$ 6,830 Inter-segment sales 362 311 760 151 254 (1,838) – Total revenue 6,578 618 846 274 352 (1,838) 6,830 Segment result – EBITDA \$ 759 \$ 110 \$ 210 \$ 15 \$ 43 \$ (62) \$ 1,075

Six-month period ended 30 June 2014

Six-month period ended 30 June 2013

US\$ million	Steel		Coal		Iron Ore		Vanadium		Other		Eliminations	Total
Revenue
Sales to external customers	\$	6,641	\$	317	\$	55	\$	148	\$	100	\$ –	\$ 7,261
Inter-segment sales		179		386		799		140		235	(1,739)	–
Total revenue		6,820		703		854		288		335	(1,739)	7,261
Segment result – EBITDA	\$	530	\$	67	\$	181	\$	27	\$	36	\$ (34)	\$ 807

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

3. Segment Information (continued)

The following table shows a reconciliation of revenue and EBITDA used by the management for decision making and revenue and profit or loss before tax per the consolidated financial statements prepared under IFRS.

Six-month period ended 30 June 2014

US\$ million	Steel		Coal		Iron Ore		Vanadium		Other		Eliminations	Total
Revenue	\$	6,578	\$	618	\$	846	\$	274	\$	352	\$ (1,838)	\$ 6,830
Reclassifications and other adjustments		(680)		47		(187)		(19)		82	732	(25)
Revenue per IFRS financial statements	\$	5,898	\$	665	\$	659	\$	255	\$	434	\$ (1,106)	\$ 6,805
EBITDA	\$	759	\$	110	\$	210	\$	15	\$	43	\$ (62)	\$ 1,075
Exclusion of management services from
segment result		57		4		12		2		1	–	76
Unrealised profits adjustment		(41)		1		–		–		–	38	(2)
Reclassifications and other adjustments		(4)		17		(6)		3		8	28	46
		12		22		6		5		9	66	120
EBITDA based on IFRS financial
statements	\$	771	\$	132	\$	216	\$	20	\$	52	\$ 4	\$ 1,195
Unallocated subsidiaries												(115)
												\$ 1,080
Depreciation, depletion and amortisation expense		(228)		(136)		(43)		(15)		(11)	–	(433)
Impairment of assets		(40)		(77)		(3)		(25)		(2)	–	(147)
Gain/(loss) on disposal of property, plant
and equipment and intangible assets		(7)		(13)		–		–		(1)	–	(21)
Foreign exchange gains/(losses), net		(152)		(14)		50		–		–	–	(116)
		344		(108)		220		(20)		38	4	363
Unallocated income/(expenses), net												(66)
Profit/(loss) from operations												\$ 297
Interest income/(expense), net												(287)
Share of profits/(losses) of joint ventures
and associates												5
Gain/(loss) on derecognition of equity investments, net												–
Gain/(loss) on financial assets and liabilities												(43)
Gain/(loss) on disposal groups classified as
held for sale												113
Other non-operating gains/(losses), net												–
Profit/(loss) before tax												\$ 85

Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

3. Segment Information (continued)

Six-month period ended 30 June 2013

US\$ million	Steel	Coal	Iron Ore	Vanadium	Other	Eliminations	Total
Revenue Reclassifications and other adjustments	\$ 6,820 (427)	\$ 703 19	\$ 854 46	\$ 288 (20)	\$ 335 130	\$ (1,739) 310	\$ 7,261 58
Revenue per IFRS financial statements	\$ 6,393	\$ 722	\$ 900	\$ 268	\$ 465	\$ (1,429)	\$ 7,319
EBITDA Exclusion of management services from	\$ 530	\$ 67	\$ 181	\$ 27	\$ 36	\$ (34)	\$ 807
segment result	75	4	19	2	2	–	102
Unrealised profits adjustment	8	–	–	(1)	–	(27)	(20)
Reclassifications and other adjustments	38	38	31	6	23	–	136
	121	42	50	7	25	(27)	218
EBITDA based on IFRS financial statements	\$ 651	\$ 109	\$ 231	\$ 34	\$ 61	\$ (61)	\$ 1,025
Unallocated subsidiaries							(100)
							\$ 925
Depreciation, depletion and amortisation expense	(294)	(187)	(55)	(23)	(17)	–	(576)
Impairment of assets Gain/(loss) on disposal of property, plant	32	(63)	24	–	–	–	(7)
and equipment and intangible assets	(8)	(6)	–	–	1	–	(13)
Foreign exchange gains/(losses), net	(42)	(40)	54	–	–	–	(28)
Unallocated income/(expenses), net	339	(187)	254	11	45	(61)	301 (156)
Profit/(loss) from operations							\$ 145
Interest income/(expense), net Share of profits/(losses) of joint ventures							(357)
and associates Gain/(loss) on derecognition of equity							3
investments, net Gain/(loss) on financial assets and liabilities							89 (71)
Gain/(loss) on disposal groups classified as held for sale							54
Other non-operating gains/(losses), net							(2)
Profit/(loss) before tax							\$ (139)

In the six-month period ended 30 June 2014, the Group made a reversal of the allowance for net realisable value in the amount of \$13 million.

The material changes in property, plant and equipment during the six-month period ended 30 June 2014 other than those disclosed above are presented below:

US\$ million	Steel		Coal		Iron ore		Vanadium		Other		Total
Additions	\$	136	\$	106	\$	46	\$	4	\$	4	\$	296

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

4. Sales of Ownership Interests in Subsidiaries

Sale of EVRAZ Vitkovice Steel

On 3 April 2014, the Group sold its wholly-owned subsidiary EVRAZ Vitkovice Steel to a third party for a cash consideration of \$287 million on a debt free and normalised working capital basis. As of June 30 2014, \$19 million of working capital deficit to be paid by the Group to the purchaser were unpaid. Transaction costs in the amount of \$3 million were unpaid as of 30 June 2014.

The Group recognised a \$96 million gain on the sale of the subsidiary, including \$61 million of cumulative exchange gains reclassified from other comprehensive income to the consolidated statement of operations. Cash disposed with the subsidiary amounted to \$20 million.

Sale of Business Units of Evrazruda

On 21 April 2014, the Group sold to third parties an iron ore mine Irbinsky Rudnik and a service entity Sheregesh-Energo located in Western Siberia. The cash consideration amounted to 20 million roubles (approximately \$0.6 million).

The Group recognised a \$24 million gain on the sale, including \$4 million of cumulative exchange gains reclassified from other comprehensive income to the consolidated statement of operations.

5. Impairment of Non-current Assets

The summary of impairment losses recognition and reversals is presented below.

US\$ million	Goodwill and intangible assets	Property, plant and equipment	Taxes receivable	Total
EVRAZ Highveld Steel	\$ (15)	\$ (40)	\$ –	\$ (55)
Yuzhkuzbassugol	–	(77)	–	(77)
EVRAZ Nizhny Tagil Metallurgical			–	(13)
Plant	–	(13)
Others, net	–	(9)	7	(2)
	\$ (15)	\$ (139)	\$ 7	\$ (147)

The Group recognised impairment losses as a result of the impairment testing at the level of cashgenerating units. In addition, the Group made a write-off of certain functionally obsolete items of property, plant and equipment and recorded an impairment relating to capitalised site restoration costs and taxes with a long-term recovery.

For the purpose of the impairment testing as of 30 June 2014 the Group assessed the recoverable amount of each cash-generating unit ("CGU") where indicators of impairment were identified.

The recoverable amount has been determined based on a value-in-use calculation using cash flow projections based on the actual operating results and business plans approved by management and appropriate discount rates reflecting time value of money and risks associated with respective cashgenerating units. For the periods not covered by management business plans, cash flow projections have been estimated by extrapolating the respective business plans results using a zero real growth rate.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

5. Impairment of Non-current Assets (continued)

The key assumptions used by management in the value-in-use calculations with respect to the cashgenerating units to which the goodwill was allocated and where indicators of impairment existed are presented in the table below.

	Period of forecast, years	Pre-tax discount rate, %	Commodity	Average price of commodity per tonne in 2014	Average price of commodity per tonne in 2015	Recoverable amount of CGU, US\$ million	Carrying amount of CGU, US\$ million
EVRAZ Palini e Bertoli EVRAZ Inc. NA cash generating units:	5	14.52	steel plates	\$624	\$655	233	192
Rocky Mountain Steel Mills - Seamless	5	13.78	seamless pipes	\$1,373	\$1,449	280	129

In addition, the Group determined that there were indicators of impairment in other cash generating units and tested them for impairment using the following assumptions.

	Period of forecast, years	Pre-tax discount rate, %	Commodity	Average price of commodity per tonne in 2014	Average price of commodity per tonne in 2015
EVRAZ Dnepropetrovsk Iron and Steel Works	5	14.83	steel products	\$539	\$570
EVRAZ United West-Siberian Iron & Steel Plant	5	15.04	steel products	\$488	\$507
EVRAZ Caspian Steel	5	15.00	rebars	\$510	\$539
EVRAZ Yuzhny Stan	5	14.07	steel mill under construction	\$572	\$604
EVRAZ Bagleykoks	5	14.35	coke	\$190	\$209
Yuzhkuzbassugol	17	13.03	coal	\$73	\$80
Raspadskaya	22	13.53	coal	\$55	\$63
EVRAZ Highveld Steel	5	13.26	steel products	\$711	\$748

Discount Rates

Discount rates reflect the current market assessment of the risks specific to each cash-generating unit. The discount rates have been determined using the Capital Asset Pricing Model and analysis of industry peers. Reasonably possible changes in discount rates could lead to an impairment at EVRAZ United West-Siberian Iron & Steel Plant, EVRAZ Yuzhny Stan and EVRAZ Highveld Steel cashgenerating units. If the discount rates were 10% higher, this would lead to an additional impairment of \$139 million.

Sales Prices

The prices of the products sold by the Group were estimated using industry research. The Group expects that the nominal prices will grow with a compound annual growth rate of 0%-10% in 2014 – 2018 and 3.0% in 2019 and thereafter. Reasonably possible changes in sales prices could lead to an additional impairment at EVRAZ United West-Siberian Iron & Steel Plant and EVRAZ Highveld Steel cash-generating units. If the prices assumed for the 2nd half of 2014 and 2015 were 10% lower, this would lead to an impairment of \$261 million.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

5. Impairment of Non-current Assets (continued)

Sales Volumes

Management assumed that the sales volumes of steel products would increase by 2.6% in 2015 and would grow evenly during the following four years to reach normal asset capacity utilisation thereafter. Reasonably possible changes in sales volumes could lead to an additional impairment at EVRAZ United West-Siberian Iron & Steel Plant and EVRAZ Highveld Steel. If the sales volumes were 10% lower than those assumed for the 2nd half of 2014 and 2015, this would lead to an impairment of \$72 million.

Cost Control Measures

The recoverable amounts of cash-generating units are based on the business plans approved by management. A reasonably possible deviation of cost from these plans could lead to an additional impairment at EVRAZ United West-Siberian Iron & Steel Plant and EVRAZ Highveld Steel cashgenerating units. If the actual costs were 10% higher than those assumed for the 2nd half of 2014 and 2015, this would lead to an impairment of \$566 million.

The unit's recoverable amount would become equal to its carrying amount if the assumptions used to measure the recoverable amount changed as follows:

	Discount rates	Sales prices	Sales volumes	Cost control measures
EVRAZ United West-Siberian Iron & Steel Plant	1.9%	(0.8)%	(3.7)%	0.6%
EVRAZ Yuzhny Stan	6.0%	–	–	–

6. Income Taxes

Major components of income tax expense were as follows:

	Six-month period ended 30 June
US\$ million		2014		2013
Current income tax expense Adjustment in respect of income tax of previous years Deferred income tax benefit relating to changes in tax rates Deferred income tax benefit relating to origination and reversal	\$	(128) (15) 6	\$	(149) 2 –
of temporary differences		53		140
Income tax expense reported in the consolidated statement of operations	\$	(84)	\$	(7)

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

7. Property, Plant and Equipment

The movement in property, plant and equipment for the six-month period ended 30 June 2014 was as follows:

US\$ million	Land	Buildings and constructions	Machinery and equipment	Transport and motor vehicles	Mining assets	Other assets	Assets under construction	Total
At 31 December 2013, cost, net of accumulated depreciation (as reported)	\$ 156	\$ 1,554	\$ 3,667	\$ 187	\$ 2,679	\$ 22	\$ 986	\$ 9,251
Cessation of classification of a subsidiary as held for sale	1	6	100	2	17	4	6	136
At 31 December 2013, cost, net of accumulated depreciation
(as restated)	157	1,560	3,767	189	2,696	26	992	9,387
Additions	–	–	1	–	28	–	267	296
Assets put into operation	–	31	112	14	77	2	(236)	–
Disposals	(1)	(2)	(14)	(2)	(3)	–	(3)	(25)
Depreciation and depletion charge Impairment losses recognised in	–	(58)	(251)	(22)	(72)	(3)	–	(406)
statement of operations Impairment losses reversed	–	(7)	(52)	–	(79)	–	(4)	(142)
through statement of operations	–	1	1	–	–	–	1	3
Transfer to assets held for sale	–	(3)	(3)	–	–	–	–	(6)
Change in site restoration and decommissioning provision	–	1	–	–	74	–	5	80
Translation difference	(2)	(67)	(136)	(10)	(150)	(2)	(48)	(415)
At 30 June 2014, cost, net of accumulated depreciation	\$ 154	\$ 1,456	\$ 3,425	\$ 169	\$ 2,571	\$ 23	\$ 974	\$ 8,772

On 1 January 2014, the Group changed its estimation of useful lives of property, plant and equipment, which resulted in a \$31 million decrease in depreciation expense as compared to the amounts that would have been charged had no change in estimate occurred.

8. Investments in Joint Ventures and Associates

The movement in investments in joint ventures and associates during the six-month period ended 30 June 2014 was as follows:

US\$ million	Timir	Streamcore	Other associates	Total
At 31 December 2013 Share of profit/(loss)	\$ 141 (1)	\$ 40 5	\$ 10 1	\$ 191 5
Translation difference	(4)	(1)	–	(5)
At 30 June 2014	\$ 136	\$ 44	\$ 11	\$ 191

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

9. Related Party Disclosures

For the Group related parties 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 were as follows:

	Amounts due from related parties		Amounts due to	related parties
US\$ million	30 June 2014	31 December 2013	30 June 2014		31 December 2013
Vtorresource-Pererabotka	\$ 6	\$ 4	\$ 14	\$	13
Yuzhny GOK	5	5	127		336
Liability to management of Raspadskaya for the acquisition of
Corber	–	–	–		102
Other entities	14	7	8		7
	25	16	149		458
Less: allowance for doubtful accounts	(3)	(3)	–		–
	\$ 22	\$ 13	\$ 149	\$	458

In the first half of 2014, Ukrainian hryvnia has depreciated against US dollar by 48%. As a result, the Group recognised a \$85 million foreign exchange loss on the balances and transactions with Yuzhny GOK.

Transactions with related parties were as follows for the six-month periods ended 30 June:

		Sales to related parties	Purchases from related parties
US\$ million	2014	2013		2014			2013
Genalta Recycling Inc.	\$ –	\$	–	\$	11	\$	11
Interlock Security Services	–		–		22		27
Raspadsky Ugol	–		–		–		5
Vtorresource-Pererabotka	10		7		229		205
Yuzhny GOK	25		34		142		71
Other entities	2		5		16		20
	\$ 37	\$	46	\$	420	\$	339

On 1 April 2014, the Group received a non-interest bearing loan of 2,935 million Ukrainian hryvnias (\$267 million at the exchange rate as of the date of disbursement) from Standart IP, an entity under control of one of the major shareholders. The proceeds were used for the purposes of short-term liquidity management for a Ukrainian subsidiary. The loan was fully repaid in several installments by 10 April 2014.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

9. Related Party Disclosures (continued)

Compensation to Key Management Personnel

In the six-month periods ended 30 June 2014 and 2013, key management personnel totalled 51 and 57 persons, respectively. Total compensation to key management personnel was included in general and administrative expenses and consisted of the following in the six-month periods ended 30 June:

US\$ million	2014	2013
Salary	\$ 12	\$ 13
Performance bonuses	14	–
Social security taxes	3	2
Share-based payments	7	5
Termination benefits	1	–
	\$ 37	\$ 20

10. Cash and Cash Equivalents

Cash and cash equivalents were denominated in the following currencies:

US\$ million	30 June	31 December 2013
US dollar Russian rouble Ukrainian hryvnia Euro South African rand Canadian dollar Other	\$	937 269 79 7 36 24 1	\$	1,300 195 17 9 32 50 1
	\$	1,353	\$	1,604

The above cash and cash equivalents mainly consist of cash at banks.

At 30 June 2014 and 31 December 2013, the assets of disposal groups classified as held for sale included cash amounting to \$Nil and \$7 million, respectively.

11. Equity

Share Capital

Number of shares	30 June 2014	31 December 2013
Issued and fully paid Ordinary shares of \$1 each	1,506,527,294	1,472,582,366

Share Issue

On 27 January 2014, EVRAZ plc issued 33,944,928 shares in connection with the exercise of the warrants included in the purchase consideration for Raspadskaya.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

11. Equity (continued)

Share Capital (continued)

Treasury Shares

Number of shares	30 June 2014	31 December 2013
Number of treasury shares	303,370	302,717

In 2014, the Group purchased 7,252,575 shares of EVRAZ plc for \$13 million and transferred 7,251,922 shares to participants of Incentive Plans. The cost of treasury shares transferred to the participants of Incentive Plans, amounting to \$13 million, was charged to accumulated profits.

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 profit/(loss) and share data used in the basic and diluted earnings per share computations:

	Six-month period ended 30 June
		2014		2013
Weighted average number of ordinary shares outstanding during
the period	1,505,402,864			1,492,577,321
Effect of dilution: share options	25,615,845			–
Weighted average number of ordinary shares adjusted for the
effect of dilution	1,531,018,709		1,492,577,321
Profit/(loss) for the period attributable to equity holders of the
parent entity, US\$ million	\$	38	\$	(131)
Basic earnings/(losses) per share	\$	0.03	\$	(0.09)
Diluted earnings/(losses) per share	\$	0.02	\$	(0.09)

The warrants issued in connection with the acquisition of a controlling interest in Corber are included in the calculation of basic earnings per share starting from the date of their issue.

As the Group reported net losses in the six-month period ended 30 June 2013, the share-based awards were antidilutive.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these consolidated financial statements.

Dividends

On 8 April 2014, the Board of directors of EVRAZ plc proposed to declare special dividends in the amount of \$90.4 million, which represent \$0.06 per share. On 12 June 2014, the Annual Shareholders Meeting approved the payment of these dividends out of the sale proceeds for EVRAZ Vitkovice Steel (Note 4). The dividends were paid in July 2014.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

12. Loans and Borrowings

Short-term and long-term loans and borrowings were as follows:

US\$ million	30 June 2014		31 December 2013
Bank loans	\$	1,530	\$	2,065
8.25 per cent notes due 2015		577		577
7.40 per cent notes due 2017		600		600
9.5 per cent notes due 2018		509		509
6.75 per cent notes due 2018		850		850
6.50 per cent notes due 2020		1,000		1,000
13.5 per cent bonds due 2014		528		611
8.75 per cent bonds due 2015		116		119
9.95 per cent bonds due 2015		446		458
8.40 per cent bonds due 2016		595		611
Liabilities under 7.75 per cent bonds due 2017 assumed in
business combination		400		400
Fair value adjustment to liabilities assumed in business
combination		24		27
Other liabilities		4		8
Unamortised debt issue costs		(64)		(68)
Interest payable		89		90
	\$	7,204	\$	7,857

At 30 June 2014 and 31 December 2013, the liabilities of disposal groups classified as held for sale included bank loans amounting to \$Nil and \$76 million, respectively.

Some of the loan agreements and terms and conditions of notes provide for certain covenants in respect of Evraz Group S.A. and its subsidiaries. The covenants impose restrictions in respect of certain transactions and financial ratios, including restrictions in respect of indebtedness and profitability.

Pledged Assets

The Group pledged its rights under some export contracts as collateral under the loan agreements. All proceeds from sales of steel pursuant to these contracts can be used to satisfy the obligations under the loan agreements in the event of a default.

At 30 June 2014 and 31 December 2013, the Group had inventory with a carrying value of \$51 million and \$63 million, respectively, pledged as collateral under the loan agreements.

At 30 June 2014, 100% shares of Mezhegeyugol and EVRAZ Caspian Steel were pledged as collateral under bank loans with a carrying value of \$174 million. These subsidiaries represented 1.7% of the consolidated assets at 30 June 2014 and did not generate revenues in the reporting period.

Partial Repurchase of the 13.5% Bonds Due 16 October 2014

In April 2014, the Group re-purchased bonds for a nominal amount totalling 2,258 million roubles (\$64 million at the exchange rates as of the dates of the transactions). There was no gain or loss on the transaction.

Unutilised Borrowing Facilities

As of 30 June 2014, the Group had unutilised bank loans in the amount of \$1,987 million, including \$395 million of committed facilities.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

13. 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, Ukraine, the European Union, the USA, Canada and the Republic of South Africa. Russia, Ukraine and the Republic of South Africa are considered to be developing markets with higher economic and political risks. Steel consumption is affected by the cyclical nature of demand for steel products and the sensitivity of that demand to worldwide general economic conditions.

The global economic recession resulted in a significantly lower demand for steel products and decreased profitability. In addition, the political crisis over Ukraine led to an additional uncertainty in the global economy. The unrest in the Southeastern region of Ukraine and the economic sanctions imposed on Russia caused the depreciation of national currencies, economic slowdown, deterioration of liquidity in the banking sector, and tighter credit conditions within Russia and Ukraine. If the Ukrainian crisis broadens and further sanctions are imposed on Russia, this could have an adverse impact on the Group's business.

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 and Ukrainian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities.

Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has accrued tax liabilities based on management's 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 \$39 million.

Contractual Commitments

At 30 June 2014, the Group had contractual commitments for the purchase of production equipment and construction works for an approximate amount of \$269 million.

In 2010, the Group concluded an agreement for the supply of oxygen, nitrogen and argon by a third party 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 256 million euro. The agreement is within the scope of IFRIC 4 "Determining whether an Arrangement Contains a Lease". At 30 June 2014, the lease had not commenced.

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 \$70 million under these programmes in the second half of 2014.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

13. Commitments and Contingencies (continued)

Environmental Protection

In the course of the Group's 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. Management believes that 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 2014 to 2022, under which the Group will perform works aimed at reductions in environmental pollution and contamination. As of 30 June 2014, the costs of implementing these programmes are estimated at \$225 million.

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 the Group's operations or financial position.

14. 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.

The Group held the following financial instruments measured at fair value:

		30 June 2014		31 December 2013
US\$ million	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Assets measured at fair value Available-for-sale financial assets	21	–	–	30	–	–
Liabilities measured at fair value Derivatives not designated as hedging instruments Contingent consideration payable for the acquisition of	–	294	–	–	219	–
Stratcor	–	–	8	–	–	8

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements (continued)

14. Fair Value of Financial Instruments (continued)

The following table shows fair values of the Group's bonds and notes.

30 June 2014		31 December 2013
	Carrying Fair amount value		Carrying amount			Fair value
\$	573 605 506 856 1,007 542 118 453 597	\$	611 629 559 851 947 546 115 438 549	\$	569 605 505 855 1,007 627 122 466 614	\$	621 634 568 858 951 645 121 464 592
							417 5,871
	\$	428 5,685	\$	405 5,650	\$	431 5,801	\$

The fair value of the non-convertible bonds and notes was determined based on market quotations (Level 1).

15. Subsequent Events

Borrowings

In August 2014, the Group received a \$425 million 5-year loan from a syndicate of international banks. The interest is set at a rate of LIBOR plus a margin ranging from 2.75% to 4% per annum depending on the net leverage ratio. The loan is payable in equal quarterly instalments starting from August 2016 with a final instalment on 12 August 2019.

Sale of a Non-controlling Interest

On 12 August 2014, the Group signed an agreement to sell 34% in EVRAZ Highveld Steel and Vanadium Limited for approximately \$27 million. It is expected that the transaction will be completed in September 2014.