EVRAZ PLC - Interim / Quarterly Report 2013

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RNS Number : 7180M

Evraz Plc

29 August 2013

EVRAZ ANNOUNCES UNAUDITED INTERIM FINANCIAL RESULTS FOR H1 2013

29 August 2013 - EVRAZ plc ("EVRAZ" or "the Company") (LSE: EVR) today announces its unaudited interim results for the six months ended 30 June 2013 ("the Period").

H1 2013 HIGHLIGHTS

Commenting on the interim results in respect of 2013, Alexander Frolov, Chief Executive of EVRAZ, stated:

"While our sales volumes were broadly flat at 7.8 million tonnes in H1 2013, the financial results inevitably reflect the weaker steel price environment, with revenues decreasing 3% vs. H1 2012 to US$7,362 million and EBITDA declining to US$939 million.

During the reporting period we successfully delivered on three key investment projects: the commissioning of the new coking coal mine Yerunakovskaya VIII, the launch of the modernised rail mill at EVRAZ ZSMK and the introduction of PCI technology at EVRAZ NTMK. Each of these undertakings represents an important milestone in our strategy to develop our raw material base, enhance our product portfolio and preserve our low cost position in the global steelmaking industry. At the same time, in the face of challenging conditions for the global steel sector, we have revised and further adjusted our expansion plans in order to significantly increase the flexibility of future capital expenditure".


Six months to 30 June
(US$ million)	2013	2012	Change
Consolidated revenue	7,362	7,619	(3.4)%
Consolidated EBITDA	939	1,184	(20.7)%
Net loss	(122)	(46)	165.2%
Loss per share, (US$)	(0.07)	(0.03)	133.3%
Net cash flows from operating activities	628	1,089	(42.3)%
CAPEX	492	565	(12.9)%
	30 June 2013	31 December 2012
Net debt	7,043	6,376	10.5%
Total assets	18,821	17,805	5.7%

Steel:

· Steel segment revenue of US$6,416 million (-9% vs. H1 2012)

· Crude steel production of 8.1 million tonnes (-3%)

· Full capacity utilisation in Russia for construction long products due to healthy domestic demand

· Total external sales of steel products of 7.8 million tonnes (+1%)

· Temporary growth in sales of semi-finished products to reverse once the production ramp up at EVRAZ ZSMK's rail mill is complete by Q2 2014

Mining:

· Mining segment revenue of US$1,622 million (vs. US$1,383 million in H1 2012) including US$228 million effect from the consolidation of Raspadskaya

· Raw coking coal production of 9.1 million tonnes (vs. 4.0 million tonnes in H1 2012) including 4.0 million tonnes from Raspadskaya

· Production of saleable iron ore products stable at 10.5 million tonnes

Vanadium:

· Vanadium segment revenue of US$268 million (+2% vs. H1 2012)

· Primary vanadium production (vanadium in slag) of 10,836 tonnes (-5%)

· External vanadium product sales volumes of 8,612 tonnes (-11%) reflected the timing of receipt of the Russian export license

Investments:

· Capital expenditure of US$492 million (vs. US$565 million in H1 2012) following delivery of several major investment projects in the period (rail mill modernisation, PCI project and commissioning of Yerunakovskaya VIII mine) and as a result of the capex optimisation programme

· Capital expenditure for 2013 revised down to US$0.9-1.0 billion compared with initial budget of US$1.3 billion

· Rail mill modernisation at EVRAZ ZSMK completed in January 2013 and currently being ramped-up

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

· Yerunakovskaya VIII coking coal mine launched in February 2013, while development of Mezhegey coking coal deposit continued

· Approaching the commissioning of Vostochny rolling mill in Kazakhstan

M&A developments:

· Acquisition of a controlling interest in Raspadskaya coal mining company in January 2013 for US$964 million, satisfied through the issue of equity, warrants and staged cash payments, bringing effective interest to 82%

· Acquired 51% stake in joint venture - Timir iron ore project from Alrosa in April 2013 in staged cash consideration of ca. US$160 million

Debt and liquidity:

· Net debt of US$7,043 million vs. US$6,376 million as at 31 December 2012 including additional US$453 million of net debt contributed in H1 2013 due to the consolidation of Raspadskaya

· Cash and short-term deposits of US$1,537 million

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

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

· In July 2013 Fitch affirmed long-term issuer default ratings of Evraz Group S.A. and EVRAZ plc at BB- with stable outlook

Dividends:

· The Board has not recommended the payment of an interim dividend in respect of H1 2013.

Chief Executive Officer's Report

While our sales volumes were broadly flat at 7.8 million tonnes in H1 2013, the financial results inevitably reflect the weaker steel price environment, with revenues decreasing 3% vs. H1 2012 to US$7,362 million and EBITDA declining to US$939 million.

Overview of Health, Safety and Environmental performance

The safety of our employees is of paramount importance. It is with the deepest regret that I have to report that, despite the consistent efforts being undertaken throughout the Company, 10 employees lost their lives as a result of work related accidents at EVRAZ's operations in H1 2013. All of these accidents have been thoroughly investigated and analysed in order to avoid reoccurrence and identify other workplace accident risks.

Some of the principal causes of injuries at our sites relate to slips, trips and falls on flat surfaces and, to combat this, we have developed a new safety standard for walkways that will be comprehensively implemented at the Company's production sites this year. Workplace lighting is also being upgraded.

H1 2013 market environment

H1 2013 was challenging for the steel industry. After modest signs of recovery at the start of the year steel prices continued on a downward path, ultimately decreasing to levels substantially below the 2012 average by the end of the period. Global iron ore and coking coal prices also declined during H1 2013, influenced by steel prices and concerns regarding the prospect of new supplies coming on stream at the end of 2013 and in 2014. Expectations of lower growth in Chinese steel production and consumption also adversely affected sentiment.

Russian steel demand expanded over the period and approached record levels during the summer months, with demand 4.3% higher compared to the first half of 2012. However, disappointing Russian macroeconomic lead indicators heightened concerns of deterioration in economic growth, while mounting imports of construction steel products from Ukraine and Belarus capped the positive domestic price trends and effectively prevented Russian steel mills from taking full advantage of a favourable domestic market.

North American steel market conditions remained difficult given a lack of consistent pricing power for key industry players, a softening of the outlook for demand growth and the consequent under-utilisation of capacity. While aggregate US industrial production remained strong in H1 2013, steel consumption was muted with a number of major steel consumers continuing to work down excess inventories.

European demand for flat products continued to deteriorate, putting the already thin spread between slab and plate prices under considerable pressure.

Steel segment

We benefit from an attractive product mix which is being further enhanced and developed in areas such as rails and construction long products in Russia, and tubular, long and rail products in North America. These businesses are well positioned to take advantage of ambitious infrastructure projects and the development of railways in Russia, as well as the domestic shale gas and oil activity in the USA.

One of the milestones of H1 2013 was the successful launch of the rail mill at EVRAZ ZSMK following a major modernisation programme. The EVRAZ ZSMK rail mill is capable of producing head hardened rails, including 100 metre rails suitable for high speed railways. Ramp-up to the full annualised capacity of 950,000 tonnes is expected by Q2 2014.

In order to strengthen our global leadership in rail production, we are also progressing with a rail mill project in EVRAZ North America which will allow us to improve rail quality, increase the mill's capacity and expand technical customer support and product development. The modernisation programme is proceeding as planned with project completion expected in mid-2014.

Another highlight of the reporting period is the introduction of pulverised coal injection (PCI) at EVRAZ NTMK that will mitigate the risks of rising energy and of raw material costs in order to preserve our low cost position in steelmaking. The positive impact of this project on our cost base is applicable to the majority of market scenarios due to the delivery of a sustained reduction in the consumption of natural gas and coking coal. As initially planned, in the first half of 2013 the PCI equipment reached the designed parameters reducing consumption of natural gas and coke by 42% and 22% respectively, while increasing pig iron production capacity by 100,000 tonnes per annum. The cost saving effect is approximately US$10 per tonne of crude steel. We have also made further progress with the introduction of PCI at EVRAZ ZSMK.

As part of the actions taken to streamline our business model, we decided to temporarily idle our Italian plate rolling mill EVRAZ Palini e Bertoli, which has been suffering from the overall weakness of the Eurozone economy. This releases valuable working capital.

In addition, we are progressing well with plans to sell our Czech subsidiary EVRAZ Vitkovice Steel and expect to update the market by the end of Q3 2013 on that process. We also continue to work with the potential buyer of EVRAZ Highveld Steel and Vanadium and the due diligence process is currently in progress. An update on the sale of EVRAZ Highveld Steel and Vanadium is expected in Q4 2013.

Mining segment

In coking coal mining, where the Company enjoys the long-term competitive advantage of being a large scale, low cost producer, we continued the integration of Raspadskaya and delivered on previously announced organic growth options. For example, the development of the Yerunakovskaya-VIII mine was launched in February ahead of schedule and below budget. This coking coal mine has a nameplate capacity of 2.5 million tonnes per annum with an estimated cash cost of raw coal production of US$40 per tonne, one of the lowest among CIS coal mines.

In addition, we continued work on the Mezhegey Phase I coking coal project which will ensure long-term access to hard coking coal reserves.

In the iron ore mining division we continued to focus on cost savings and operational improvement programmes during the period. At our key iron ore mining asset, EVRAZ KGOK, we succeeded in maintaining cash costs of iron ore products at US$53 per tonne (before by-products), firmly securing the position of the asset as a low cost operation. Asset restructuring, primarily of underground iron ore mines, is also underway at Evrazruda following the closure of the Irba mine and further actions with regard to certain other Evrazruda mines are under review.

Looking longer term, EVRAZ has entered the Timir iron ore partnership to develop iron ore deposits in Southern Yakutia. Timir's large iron ore resources and proximity to existing infrastructure provide for the efficient development of the project as a low cost operation. The realisation of the Timir project is fully in line with the Company's strategy of securing attractively priced supplies of raw materials and is expected to replace the gradually depleting reserves of Evrazruda over the next 5-10 years.

Furthermore, we continue to explore options with regard to our non-core assets in both coal and iron ore with the objective of disposal or of minimizing their impact of on overall company performance.

Vanadium segment

The Vanadium segment managed to demonstrate positive performance due to strong global prices for ferrovanadium despite a decrease in sales volumes as a result of delays in obtaining the necessary export approvals.

Capital expenditure

We have managed to substantially increase the flexibility of our capital expenditure as a result of the completion of a series of important projects in our investment pipeline, such as the new coking coal mine Yerunakovskaya VIII, the launch of the modernised rail mill at EVRAZ ZSMK and the introduction of PCI technology at EVRAZ NTMK. In addition, in the face of challenging times for the global steelmaking industry, management has revised and adjusted further expansion plans.

Our capital expenditure for 2013 is reduced from the budgeted US$1.3 billion down to US$0.9-1.0 billion (including Raspadskaya). We have temporarily lowered our spending on non-essential maintenance, and as a result, maintenance capex is currently estimated at US$460-470 million for 2013 compared with initial estimates of US$600-650 million.

Outlook

We remain confident in the strong long-term fundamentals of our business model. While fully recognising the scale of challenges currently being faced by the global steelmaking industry we believe that the actions being implemented across all of our operations and which are focused on cost reduction, efficiency improvements, the lowering of capital expenditure and the streamlining of our business model will provide a safe passage through the current period of turbulence and economic uncertainty.

Alexander Frolov

Chief Executive Officer

EVRAZ plc

Financial Review

Giacomo Baizini, Chief Financial Officer, commented: "Whilst recognising that leverage is growing mainly due to falling EBITDA; as a result of prudent refinancing, proactive management of covenant compliance, operational improvements and the expected proceeds from disposals; we believe the company has sufficient liquidity to weather the current period of reduced profitability with confidence."

Overview

As a result of the challenging conditions in the market for steel and steelmaking raw materials, the Company recorded a net loss of US$122 million for H1 2013, compared to a net loss of US$46 million in H1 2012. Falling prices in H1 2013 caused revenue to decline by 3.4% to US$7,362 million; consequently gross profit fell by 7.1% to US$1,485 million and EBITDA decreased by 21% to US$939 million.

Free cash flow for the period was negative at US$(87) million. As a result of this and the effect of the consolidation of Raspadskaya's debt, net debt increased to $7,043 million. As of today we have no debt with maintenance covenants that require testing before H2 2014.

As of 30 June 2013, the Company's cash and short-term deposits amounted toUS$1,537 million, compared to short-term debt of US$1,574 million.

Corporate developments

As part of a strategic realignment of our asset base, the Group decided to dispose of EVRAZ Highveld Steel and Vanadium and the EVRAZ Vitkovice Steel operations. Accordingly these assets are accounted for as assets held for sale as at the end of the period.

In January 2013, we completed the acquisition of a controlling interest in the Raspadskaya coal company for US$964 million, a transaction which was primarily financed by equity accompanied bya US$202 million cash component payable in equal quarterly instalments ending on 15 January 2014.

In addition, in April 2013 we acquired a 51% stake in Timir, a joint-venture with Alrosa (shareholder agreement gives joint control), created for the development of major iron ore deposits in Yakutia, Russia, for RUB4,950 million (ca. US$160 million) payable in quarterly instalments until 15 July 2014.

Statement of Operations


Revenues
(US$ million)
Segment	H1 2013	H1 2012	Change	Relative change
Steel	6,416	7,019	(603)	(8.6)%
Mining	1,622	1,383	239	17.3%
Vanadium	268	263	5	1.9%
Other operations	465	541	(76)	(14.0)%
Eliminations	(1,409)	(1,587)	178	(11.2)%
Total	7,362	7,619	(257)	(3.4)%

Group revenues for H1 2013 decreased by 3.4% to US$7,362 million, with revenues from the Group's steel segment (excluding intersegment sales) amounting to US$5,732 million or 78% of total Group's revenue.

Steel sales volumes remained largely unchanged at 7.8 million tonnes compared to 7.7 million tonnes in H1 2012. The decline in revenues was largely due to a decrease in prices, in line with the general negative trend in steel pricing. Average Steel segment revenue per tonne decreased by 10% in H1 2013 compared to H1 2012 reflecting concerns regarding China's growth prospects and ongoing economic problems in the Eurozone. Prices of flat rolled products were hit particularly hard by the stagnation in the Eurozone and shrinking spreads between semi-finished and final products in the USA.

Steel revenues were also impacted by a temporary change in the Group's product mix during H1 2013 due to the ramp up of the new rail mill at EVRAZ ZSMK which resulted in an increase in the sales of lower margin semi-finished products. This trend is expected to reverse once the rail mill reaches full output by Q2 2014.

Mining revenues rose 17.3% to US$1,622 million in the period, compared to US$1,383 million in the first half of 2012. This growth in revenues was primarily the result of the consolidation of Raspadskaya.


Revenue by region (US$ million)

Region	H1 2013	H1 2012	Change	Relative change
Russia	3,137	3,157	(20)	(0.6)%
Americas	1,616	1,804	(188)	(10.4)%
Asia	1,050	1,151	(101)	(8.8)%
Europe	766	741	25	3.4%
CIS	539	526	13	2.5%
Africa	250	238	12	5.0%
Rest of the world	4	2	2	100.0%
Total	7,362	7,619	(257)	(3.4)%


EBITDA
(US$ million)
Segment	H1 2013	H1 2012	Change	Relative change
Steel	651	706	(55)	(7.8)%
Mining	354	419	(65)	(15.5)%
Vanadium	34	4	30	750.0%
Other operations	61	94	(33)	(35.1)%
Unallocated	(100)	(89)	(11)	12.4%
Eliminations	(61)	50	(111)	n/m
Total	939	1,184	(245)	(20.7)%

As a result of declining steel prices, particularly for flat rolled products in Europe and the USA, and the temporary change to the company's product mix, EBITDA for H1 2013 was US$939 million compared to US$1,184 million in H1 2012. The negative impact of the decline in revenues in the Steel segment was partially offset by lower raw material costs.

Mining EBITDA was negatively impacted by falling prices and slightly lower volumes of iron ore sales (while production was stable) and, in particular, coking coal.

The increase in Vanadium EBITDA from US$4 million in H1 2012 to US$34 million in H1 2013 largely reflected the recovery in prices of vanadium products.

The decrease in the other operations segment is attributable to the disposal of our transport subsidiary EvrazTrans at the end of 2012.


Cost of revenues, expenses and results
(US$ million)
Item	H1 2013	H1 2012	Change	Relative change
Cost of revenue	(5,877)	(6,020)	143	(2.4)%
Gross profit	1,485	1,599	(114)	(7.1)%
Selling and distribution costs	(618)	(621)	3	(0.5)%
General and administrative expenses	(448)	(428)	(20)	4.7%
Impairment of assets	(7)	(80)	73	(91.3)%
Foreign exchange gains/(losses), net	(177)	28	(205)	n/m
Other operating income and expenses	(52)	(59)	7	(11.9)%
Profit from operations	183	439	(256)	(58.3)%
Interest expense	(377)	(322)	(55)	17.1%
Gain/(loss) on derecognition of equity investments, net	89	0	89	n/m
Gain/(loss) on financial assets and liabilities, net	(71)	(26)	(45)	173.1%
Gain on disposal group classified as held for sale, net	54	(2)	56	n/m
Other non-operating gains/(losses), net	16	1	15	n/m
Profit/(loss) before tax	(106)	90	(196)	n/m
Income tax benefit/(expense)	(16)	(136)	120	(88.2)%
Net loss	(122)	(46)	(76)	165.2%

The Group's cost of revenue decreased by 2.4% to US$5,877 million in H1 2013 compared withUS$6,020 million in H1 2012. This was mostly due to a 20% fall in raw material costs and a 19% reduction in depreciation charges which, in turn, were partially offset by higher staff, transportation and other miscellaneous costs.

A detailed breakdown of the cost of revenue can be seen in the following table:


(US$ million)
Item	H1 2013	% of revenue	H1 2012	% of revenue	Change	Relative change
Revenue	7,362		7,619		(257)	(3)%
Cost of revenue	5,877	80%	6,020	79%	(143)	(2)%
Raw materials, incl.	1,778	24%	2,222	29%	(444)	(20)%
Iron ore	336	4%	330	4%	6	2%
Coking coal	362	5%	620	8%	(258)	(42)%
Scrap	710	10%	925	12%	(215)	(23)%
Other raw materials	370	5%	347	5%	23	7%
Semi-finished products	216	3%	225	3%	(9)	(4)%
Auxiliary materials	505	7%	447	6%	58	13%
Services	401	6%	332	4%	69	21%
Goods for resale	301	4%	259	3%	42	16%
Transportation	454	6%	379	5%	75	20%
Staff costs	985	13%	847	11%	138	16%
Depreciation	486	7%	602	8%	(116)	(19)%
Electricity	295	4%	278	4%	17	6%
Natural gas	225	3%	216	3%	9	4%
Other costs	231	3%	213	3%	18	8%

In the reporting period, the foreign exchange effect did not have any material impact on costs compared to H1 2012.

The cost of raw materials, the largest single cost item, decreased by US$444 million in H1 2013 driven mostly by lower coking coal and scrap costs which fell by US$258 million and US$215 million respectively. The reduction in coking coal costs in H1 2013 was attributable to lower volumes of coking coal purchased from the market following the disposal of the Ukrainian coking plant DKHZ in 2012 (US$72 million), the consolidation of Raspadskaya (US$42 million), higher intragroup supplies of coal by Yuzhkuzbassugol (US$24 million) and a more than 20% reduction in the price of purchased coking coal (approximately US$120 million). A decrease in scrap costs in the period was primarily due to lower volumes of purchases from third parties, resulting in a saving of US$150 million in Russia and North America, in addition to lower prices which accounted for a further US$65 million reduction.

The costs for semi-finished products fell by 4% primarily due to lower prices, which were partially compensated by higher volumes purchased from third parties.

However, auxiliary material costs increased by 13%, or US$58 million, due to the consolidation of Raspadskaya, which accounted for US$53 million of additional costs.

Expenditure on services increased by 21%, or US$69 million, primarily as a result of higher volumes of coal processed at third party coal washing facilities which increased costs by US$24 million, the consolidation of Raspadskaya which added US$13 million, as well as repairs and maintenance costs and industrial services at North American, Russian and vanadium operations.

The costof goods for resale increased by 16%, or by US$42 million, to US$301 million in H1 2013. The increase of US$28 million is due to the purchase by EVRAZ Metal Inprom, the Company's retail trading arm, of more third party products to meet customer demand, while a further US$14 million was the result of a power supply company, MetalEnergo Finance, increasing the volumes of heat resold.

Transportation costs increased by 20%, or by US$75 million, due to the consolidation of Raspadskaya which added US$39 million in costs and a US$21 million charge due to a change in the delivery basis for the supply of iron ore between the Group's Russian operations from FCA ("free carrier") to CPT ("customer paid to"). In addition, transportation costs were further impacted by the disposal of the Group's rail transportation subsidiary EvrazTrans in December 2012, which accounted for US$28 million of costs in H1 2012.

Staff costs increased by 16%, or by US$138 million, due to the consolidation of Raspadskaya, which was responsible for 7% or US$61 million of the rise, and higher wages at the Group's other operations, which rose in accordance with collective bargaining agreements and accounted for 9% or US$77 million of the increase.

Total depreciation, depletion and amortisation in cost of goods sold amounted to US$486 million in H1

2013 compared to US$602 million in H1 2012. The decrease is mainly due to a lower depletion expense at Yuzhkuzbassugol driven by a revision of the accounting basis for mineral reserves in June 2012 and January 2013. Management excluded from the calculation of the depletion charge the future estimated development costs of deposits not expected to be developed earlier than 2040-2070. This is more in line with industry practice, and better reflects the costs to develop the deposits currently being exploited.

Electricity costs increased by 6%, or by US$17 million, primarily due to higher electricity prices across all regions with the exception of North America. Natural gas expenditure also increased by 4% due to higher average prices (+9%) which were partially offset by the reduced consumption of gas at EVRAZ NTMK following the implementation of the PCI technology.

An increase in other costs by 8% is mostly driven by the consolidation of Raspadskaya.

Selling and distribution expenses were 0.5% lower than in H1 2012, despite the consolidation of Raspadskaya, largely due to reduced long distance sales, the suspension of amortisation of intangibles for assets classified as held for sale, and a lower bad debt expense due to improved cash collection from those municipalities which use heat and electricity produced by the Group's subsidiaries.

General and administrative expenses increased by 4.7% in H1 2013 primarily reflecting the consolidation of Raspadskaya, which was partially offset by a decline in bonus accrual together with a reduction in expenses at Evrazruda and EVRAZ Highveld Steel and Vanadium as a result of significant cost saving initiatives.

Foreign exchange gains/(losses) moved from a US$28 million gain in H1 2012 to a US$(177) million loss in H1 2013. This, in large part, is due to currency fluctuations in respect of intra group debt where the entities involved have different functional currencies. There is no IFRS concept of a Group's functional currency, therefore the gains/(losses) of one subsidiary do not have offsetting entries in the Statement of Operations of another subsidiary with a different functional currency and thus cannot be eliminated on consolidation. This, for example, is the case between Russian subsidiaries which have the Rouble as the functional currency and our non-Russian entities with other respective functional currencies.

Interest expenses incurred by the Group have fallen steadily over the last two years as a result of the refinancing of debt at lower interest rates on a comparative basis. The increase in interest expenses from US$322 million in H1 2012 to US$377 million in H1 2013, as reported in the financial statements, is mostly caused by the consolidation of Raspadskaya (US$21 million) and the cost of the early repayment of a pre-export facility (US$18 million).

In accordance with IFRS 3 "Business Combinations" with regard to a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss in the income statement. In H1 2013 the Group recorded a US$94 million gain on derecognition of the equity interest in Raspadskya held before the business combination.

Losses on financial assets and liabilities for H1 2013 amounted to US$(71) million and were dominated by a loss of US$(88) million on the change in fair value of derivatives - currency and interest rate swaps for Rouble bonds.

In H1 2013, the Company accrued an income tax expense of US$16 million, notwithstanding a loss before tax of US$(106) million. This was mostly due to losses at certain subsidiaries that could not be offset against profits of other subsidiaries, as well as the fact that some expenses are not deductible for tax purposes.

In H1 2013, the Company reported a US$(122) million net loss, compared to a net loss of US$(46) million in H1 2012.

Cash flow


Cash Flow
(US$ million)
Item	H1 2013	H1 2012	Change	Relative change
Cash flows from operating activities before change in working capital	757	964	(207)	(21.5)%
Changes in working capital	(129)	125	(254)	n/m
Net cash flows from operating activities	628	1,089	(461)	(42.3)%
Short-term deposits at banks, including interest	680	6	674	n/m
Purchases of property, plant and equipment and intangible assets	(492)	(565)	73	(12.9)%
Other investing activities	50	89	(39)	(43.8%)
Net cash flows from / (used in) investing activities	238	(470)	708	n/m
Net cash flows from / (used in) financing activities	(670)	359	(1,029)	n/m
Effect of foreign exchange rate changes on cash and cash equivalents	(49)	(16)	(33)	206.3%
Net increase in cash and cash equivalents	147	962	(815)	(84.7)%

Cash flows from operating activities before changes in working capital fell by 21.5% in H1 2013 to US$757 million reflecting lower product prices in H1 2013 compared to H1 2012.

In H1 2013 US$129 million was tied up in working capital, reflecting the seasonality of our business while in H1 2012 US$125 million was released primarily due to inflow from taxes recoverable of US$186 million.


Calculation of Free Cash Flow (US$ million)
Item	H1 2013
EBITDA (excluding non-cash items)	904
Changes in working capital	(150)
Income tax paid	(126)
Net Cash flows from operating activities	628
Interest paid & covenant reset charges & conversion premiums & premiums on early repurchase of bonds & realised gain on swaps & interest income & debt issue costs	(273)
Capital expenditure	(492)
Short-term deposits of acquiree (at the date of business combination)	-
Purchases of subsidiaries, net of cash acquired	66
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs	(1)
Other cash flows from investing activities	(15)
Free Cash Flow	(87)

Free cash flow for the period was a negative US$(87) million as cash generated from operations was channelled into continuing investment to upgrade and maintain our asset base.

Capex and key projects

In H1 2013 we reduced our total capital expenditure to US$492 million compared to US$565 million in H1 2012 in order to preserve cash. In H1 2013 we finalised the modernisation of the rail mill at EVRAZ ZSMK, commissioned the Yerunakovskaya VIII coking coal mine and saw our PCI project at EVRAZ NTMK become fully operational. We also made good progress with the Mezhegey Phase I and the Vostochny rolling millprojects, while the Yuzhniy rolling mill project was put on hold in light of the current market environment.

A summary of our capital expenditure for H1 2013 in millions of USD is as follows:


Construction of Yerunakovskaya VIII mine	43	Production of 2.5 million tonnes of raw coking coal per annum. Ramp-up to be completed by Q1 2014
EVRAZ ZSMK rail mill modernisation	35	Launched after modernisation programme in January 2013, ramp-up to be completed by Q2 2014
Mezhegey (Phase I)	21	Additional 1.3 million tonnes p.a. of coking coal
Vostochniy Rolling Mill (Kazakhstan)	18	Additional production capacity for long products used in the construction industry. Hot tests to start in Q4 2013
PCI at EVRAZ ZSMK	17	Reduction of coke and natural gas consumption in blast furnaces. To be completed by 2014 year end
Other investment projects	105
Maintenance	253
Total	492

Financing and liquidity

As at 30 June 2013, EVRAZ's total debt amounted to US$8,606 million compared with US$8,440 million as at 31 December 2012. The Company's net debt increased to US$7,043 million from US$6,376 million at the start of the year, largely due to the consolidation of Raspadskaya which added US$453 million to net debt.

In March 2013, we offered holders of 9.25% Rouble-denominated notes with put in 2013 the option to either put the notes back to the Company at a nominal value or accept a new coupon of 8.75% per annum until 20 March 2015. As a result of the offer, we placed RUB2,735 million (US$89 million) worth of bonds bearing the new coupon and put option date, and repurchased RUB12,265 million (US$399 million) of the notes, using cash accumulated for this purpose on bank deposits. In April-May 2013, we additionally placed RUB1,150 million of repurchased notesback in the market.

In April 2013, we issued US$1,000 million of 7-year Eurobonds due 2020 bearing an interest rate of 6.50% per annum, the lowest coupon EVRAZ has ever achieved. The issue proceeds were used to refinance US$534 million of the 2013 Eurobonds and to prepay the remaining US$759 million of the US$950 million structured credit facility due 2015. The prepayment of the facility allowed us to both extend the consolidated debt maturities profile and reduce the liquidity risk arising out of potential non-compliance with the maintenance covenants. We have also signed amendments to the remaining bilateral bank facilities totalling approximatelyUS$260 million that contained a number of financial covenants. The adjustment to the financial covenants removed some of the covenants and suspended testing of the remaining financial covenants until the end of H1 2014.

The interest expense accrued in respect of loans, bonds and notes was US$377 million for H1 2013, compared to US$322 million for H1 2012.

Our cash and short-term deposits as at 30 June 2013 of US$1,537 million and expected cash flow from potential disposals compared with a short-term debt of US$1,574 million gives us confidence in our financial position.

In July 2013 Fitch affirmed long-term issuer default ratings of EVRAZ plc and Evraz Group S.A. at BB- with stable outlook.

Restatement of 2012 Financial Statements

During the preparation of the H1 2013 results we identified a classification error in the 2012 annual financial statements which related to foreign exchange movements attributable to certain subsidiaries disposed of in 2012. These foreign exchange losses had not been recycled from the equity reserve back through the statement of operations, as required by the relevant accounting standard. The error represents a one-off non-cash item, does not affect 2012 EBITDA, CAPEX, free cash flow, or net assets of the Company, and does not have an impact on the measurement of any of the group's covenants. For more details, please refer to Note 2 of the Financial statements.

IAS 19 "Employee Benefits", which was revised in 2011 and became effective for annual periods beginning on or after 1 January 2013, introduced full recognition of defined benefit obligations in the statement of financial position whereas under the previous standard we accounted for a part of the obligation relating to unrealized actuarial gains/losses under the corridor approach. The revised standard also changed the accounting for certain components of defined benefit obligations. The comparatives for the half-year results have been restated to reflect this revision to the standard and for further details see Note 2 of the interim condensed consolidated financial statements.

Dividends

The Board has not recommended the payment of a dividend in respect of H1 2013.

Giacomo Baizini

Chief Financial Officer

EVRAZ plc

Review of operATIONS by SEGMENT

STEEL

Markets performance in H1 2013

Global crude steel production grew 2.7% during H1 2013 compared to H1 2012, led by an 8.5% increase in Chinese output. However, steel prices remained weak due to excessive capacity in both the Eurozone and China, the perception of softening economic growth in China and a longer term shift to a less resource intensive growth model as well as due to sluggish demand in the Eurozone.

The global steel market is expected to remain challenging during the second half of the year as structural problems continue to dominate the industry, with estimated global capacity utilisation to remain at 75%.

In H1 2013, crude steel output in Russia decreased by 2.9% compared to H1 2012, whereas apparent consumption of finished steel products grew by 4.3%. The construction industry remains the key driver of demand for steel products, demonstrating healthy growth of 13.1%. Long-term growth of steel product consumption in Russia and CIS is expected to be driven by substantial investments in infrastructure and railway modernisation. However, steel prices in Russia were not immune to the general weakness in global markets and followed the decreasing trend in H1 2013.

US crude steel production in the first half of the year decreased by 6.3% compared to H1 2012, with apparent consumption of finished steel products declining by 2.9%. Additionally, the pricing environment remained challenging with hot rolled coil prices falling by 7.3%, in spite of an increasingly positive US economic outlook, although rebar prices were relatively stable with only a 0.2% decrease over the period.

European crude steel production declined by 5.2% in H1 2013 compared to H1 2012 with apparent consumption of finished steel products declining by 4.4%. On-going macro-economic uncertainty resulted in average rebar and hot rolled coil price decreases of 9.7% and 6.6% respectively. Furthermore, capacity utilisation rates remained below 70%. In spite of this, there are early signs of an improving outlook for H2 2013 on the back of expected increases in public sector spending and the announcement of several significant new construction projects.

South Africa's apparent steel consumption in the first half of 2013 was in line with the corresponding period of 2012. Pricing in USD remained relatively flat when compared to Q4 2012, but that was mainly a reflection of the Rand weakening by over 9% in Q2 2013 compared to Q4 2012, rather than of underlying demand.

Sales review


Steel Segment Revenues
(US$ million)	Six months ended 30 June
	2013	2012	Change
To third parties	6,355	6,898	(7.9)%
To mining segment	45	79	(43.0)%
To vanadium segment	1	1	0.0%
To other operations	15	41	(63.4)%
Total Steel segment	6,416	7,019	(8.6)%


Steel Segment Revenues by Products
	Six months ended 30 June
	2013		2012		2013 v 2012
	US$ million	% of total segment revenue	US$ million	% of total segment revenue	% change
Steel products, external sales	5,732	89.4%	6,296	89.7%	(9.0)%
Semi-finished products1	1,014	15.8%	1,044	14.9%	(2.9)%
Construction products2	2,063	32.2%	2,170	30.9%	(4.9)%
Railway products3	828	12.9%	992	14.1%	(16.5)%
Flat-rolled products4	1,033	16.1%	1,255	17.9%	(17.7)%
Tubular products5	568	8.9%	595	8.5%	(4.5)%
Other steel products6	226	3.5%	240	3.4%	(5.8)%
Steel products, intersegment sales	27	0.4%	27	0.4%	0.0%
Other revenues7	657	10.2%	696	9.9%	(5.6)%
Total	6,416	100.0%	7,019	100.0%	(8.6)%

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

2 Includes 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
	2013	2012	Change
Steel products, external sales	7,753	7,714	0.5%
Semi-finished products	1,945	1,721	13.0%
Construction products	2,810	2,838	(1.0)%
Railway products	887	1,050	(15.5)%
Flat-rolled products	1,391	1,423	(2.2)%
Tubular products	427	389	9.8%
Other steel products	293	293	0.0%
Intersegment sales	34	33	3.0%
Total	7,787	7,747	0.5%


Geographic Breakdown of External Steel Products' Sales
	US$ million			000 t
	H1 2013	H1 2012	Change, %	H1 2013	H1 2012	Change, %
Russia	2,421	2,605	(7.1)%	3,240	3,324	(2.5)%
Americas	1,367	1,582	(13.6)%	1,349	1,345	0.3%
Asia	840	1,068	(21.3)%	1,555	1,732	(10.2)%
Europe	529	492	7.5%	838	632	32.6%
CIS	351	336	4.5%	466	406	14.8%
Africa & RoW	224	213	5.2%	305	275	10.9%
Total	5,732	6,296	(9.0)%	7,753	7,714	0.5%

The Steel segment's revenues decreased by 8.6% to US$6,416 million in H1 2013 compared to US$7,019 million in H1 2012, which was largely a result of lower steel product prices during the period.

Revenues attributable to sales of semi-finished products decreased due to a decline in export sale prices, despite an increase in sales volumes of Russian semi-finished products following EVRAZ ZSMK's rail mill modernisation and ramp up.

Railway products revenues also fell as a result of lower sales volumes during the ramp up of the modernised EVRAZ ZSMK's rail mill. In spite of lower sales volumes, prices for railway products remained resilient in H1 2013 compared to H1 2012.

Revenue from tubular product sales slightly decreased in H1 2013 as higher volumes, particularly of large diameter line pipes, were unable to offset the fall in prices of tubular products.

Lower prices for construction products, flat-rolled products and other steel products led to a fall in sales revenues, in spite of relatively stable production volumes. Prices of flat rolled products were particularly impacted by continuing economic stagnation in the Eurozone and shrinking spreads in the USA.

Russian sales accounted for 42% of external steel product sales revenues in H1 2013, compared with approximately 41% in H1 2012. The slightly higher share of revenues from steel sales in Russia was attributable to the relatively stable sales volumes to the construction industry and more resilient domestic prices.

Operational update - Steel segment

Steel products: Russia

H1 2013 crude steel output in Russia was broadly flat, compared to H1 2012, at almost 6 million tonnes. However, results varied greatly across different product groups. Production of finished steel products decreased by 8%, although this was fully offset by the 14% output growth of semi-finished products. These changes to production levels were caused by the large scale modernisation of the rail mill at EVRAZ ZSMK in 2012, which led to a temporary decrease in production of railway products, and the shutdown of the plate rolling mill at EVRAZ ZSMK in H1 2013.

In general, our Russian steelmaking facilities continued to operate at utilisation rates which were close to full capacity during H1 2013.

The PCI project at EVRAZ NTMK reached full capacity in May 2013 and its implementation allows for coke and natural gas consumption rates per tonne of pig iron to be reduced from 405 kg to 315 kg and from 130 m3/t to 75 m3/t, or by 22% and 42%, respectively, based on the use of 133 kg PCI coal per tonne of pig iron. The savings effect is ca. US$10 per tonne of crude steel.

During H1 2013, the company also performed a week-long maintenance programme at one of EVRAZ NTMK's blast furnaces to configure it for a PCI technology upgrade in due course and boost the overall pig iron capacity from 5.1 up to 5.2 million tonnes per annum. During this time, EVRAZ NTMK additionally undertook a series of measures to enhance flexibility and improve productivity at a casting machine.

Works on the PCI project at EVRAZ ZSMK continued in H1 2013, however the project's development schedule was extended in order to decrease the capital expenditure requirements in the current year.

Additionally during the period, the Company decided to shut down the plate rolling mill at EVRAZ ZSMK, due to the marginal nature of its products in the current market environment.

Railway products: Russia

The key highlight of H1 2013 at EVRAZ's railway business was the re-commencement of the rail mill at EVRAZ ZSMK in January 2013, following completion of its large scale modernisation programme. Since January the rail mill has been ramping up steadily and is expected to reach its annualised full capacity of 950,000 tonnes by Q2 2014. Following successful lab tests, head hardened rails from the new rail mill were delivered to the Russian Railways for certification. The process of certification is expected to be completed by the end of 2013 and will pave the way for commercial sales of head hardened rails.

The rail mill at EVRAZ NTMK also operated at a high run rate during H1 2013, increasing its deliveries of rails to Russia and CIS region by 4% compared to H1 2012.

Russian Railways continues to be a major customer of rails produced by EVRAZ accounting for 80% of shipments from both rail mills.

In H1 2013, EVRAZ enjoyed solid results at our wheel making business, despite a certain weakness in the railcar industry, due to our long-term contract with Uralvagonzavod, the largest producer of railcars in Russia.

Additionally in March 2013, EVRAZ successfully completed the preliminary qualifications required to become a supplier of railway wheels to Deutsche Bahn. Although a schedule for final testing and approval of the wheels has yet to be determined, this represents an important step towards achieving a strategic goal of entering the European railway market. To this end, EVRAZ and GHH-Valdunes signed an agency agreement in June 2013 relating to the sale and marketing of EVRAZ's railway freight wheels in Europe through GHH-Valdunes.

Steel: North America

In H1 2013 crude steel output at the North American operations declined by 9.2% compared to H1 2012 due to maintenance works at EVRAZ Pueblo in Q2 2013, inventory optimisation and several unplanned production outages in Q1 2013. Meanwhile, output of finished steel products increased by 3.6% in H1 2013, driven by growth in flat-rolled and construction products.

The key focus of the flat product group, in the period, was enhancing capacity utilisation. To this end, EVRAZ North America is currently finalising works to increase the rolling speed at EVRAZ Claymont which should improve productivity and provide capacity for higher output levels when the order book is strong. In addition, the Company has been carrying out the scoping works on debottlenecking and capacity expansion projects at the Portland and Regina facilities; however, no final decision on the implementation of these projects has been made.

In tubular products, the company concentrated on productivity rates of the seamless mill at Pueblo, with the first pass yield currently running sustainably at improved levels and reducing conversion costs. The heat treating investment project at the Calgary mill of EVRAZ North America progressed well through H1 2013 and the company placed orders for several key pieces of equipment. The premium threading investment is on track to begin delivering additional volumes, at lower costs, during H2 2013.

The key investment project of the long product group in H1 2013 was the modernisation of the rail mill at Pueblo to improve product quality and increase production capacity to 526,000 tonnes per annum. The capacity of the rolling facility was increased by 10% as a result of the rolling automation and enhancements to the reheat furnace. In addition, the Company commenced installation works for new automated nondestructive test equipment, which are expected to be completed by mid-2014.

Steel: Ukraine

In H1 2013 crude steel output of EVRAZ DMZ Petrovskogo increased by 15% compared to H1 2012.

During the period, EVRAZ DMZ Petrovskogo increased its consumption of proprietary coal in its coke production from 49% to 66%, whilst also improving the quality of coke and increasing productivity of its blast furnaces. Additionally, several new product lines (profiles) were designed and produced to meet the requirements of European customers.

Following an optimisation programme and heightened focus on increasing in-house consumption of steelmaking materials, EVRAZ Bagliykoks reached its highest loading of coke oven batteries in the last 5 years, at 97%.

Steel: Europe

Crude steel output at EVRAZ Vitkovice Steel was affected by the planned on-and-off method of production at the facility and resulted in 35.7% decrease compared to H1 2012. The facility's rolling mill remained operational throughout the period. In July 2013 EVRAZ Vitkovice's steelmaking shop was idled for annual maintenance and the summer break.

EVRAZ Palini e Bertoli was operating as normal during H1 2013, but had to adjust its output level to reflect subdued market demand, with 192,000 tonnes of plates produced. In July 2013, the Company announced that operations of EVRAZ Palini e Bertoli would be temporarily suspended, until further notice, due to the weak European plate market.

Steel: South Africa

In H1 2013, EVRAZ Highveld Steel and Vanadium was still overcoming the effects of 2012's industrial action and transportation strike. Additionally, operating results were impacted by management of energy usage in response to growing electricity unit rates applicable during winter peak demand hours.

MINING

Markets performance in H1 2013

Iron ore

The Seaborne iron ore market began 2013 positively, with prices reaching ca.US$160/t China CFR (62% Fe) in late February, driven by short term inventory movements and Chinese steel mills restocking in Q4 2012 and Q1 2013. However, the positive price trend moderated from March 2013 onwards with spot prices falling to a US$130-140/t and continuing to gradually decline into the summer months. China CFR price stood at US$117/t at the end of June 2013, representing a 20% decline year-to-date, although with inventories again running low there is potential for restocking over the coming months.

Over the medium term the key catalysts for iron ore prices will be China's ability to sustain industrial commodity demand and the rate of capacity increases from major Australian and Brazilian iron ore producers.

Coking coal

Seaborne spot coking coal prices steadily declined during H1 2013, in the face of both cyclical and structural headwinds. Australia Queensland FOB HCC spot price reached US$138/t at the end of June, representing a year to date decline of 15%.

Coking coal price in the Russian domestic market remained flat in H1 2013, despite downward pressure from global steel markets. However, due to the continuing weak steel industry fundamentals domestic coal prices had declined 12% by the end of July 2013.

Sales review


Mining Segment Revenues
(US$ million)	Year ended 30 June
	2013	2012	Change
To third parties	605	341	77,4%
To steel segment	1,005	1,027	(2.1)%
To other operations	12	15	(20.0)%
Total Mining segment	1,622	1,383	17.3%


Mining Segment Revenues by Products
	Year ended 30 June
	2013				2012				2013 v 2012
	US$ million		% of total segment revenue		US$ million		% of total segment revenue			% change
External sales
Iron ore products*	195		12.0%		188		13.6%			3.7%
Iron ore concentrate	-		0.0%		1		0.1%			(100.0)%
Sinter		6		0.4%		7		0.5%			(14.3)%
Pellets		70		4.3%		70		5.0%			(0.0)%
Other**		119		7.3%		110		8.0%			8.2%
Coal products		371		22.9%		113		8.2%			228.3%
Raw coking coal		23		1.4%		-		0.0%			n/a
Coking coal concentrate		259		16.1%		81		5.9%			219.8%
Raw steam coal		12		0.7%		3		0.2%			300.0%
Steam coal concentrate		77		4.7%		29		2.1%			165.5%
Intersegment sales
Iron ore products		638		39.3%		740		53.5%			(13.8)%
Iron ore concentrate		244		15.0%		248		17.9%			(1.6)%
Sinter		156		9.6%		234		16.9%			(33.3)%
Pellets		238		14.7%		258		18.7%			(7.8)%
Coal products		344		21.2%		278		20.1%			23.7%
Raw coking coal		85		5.2%		36		2.6%			136.1%
Coking coal concentrate		255		15.8%		238		17.2%			7.1%
Raw steam coal		4		0.2%		4		0.3%			0.0%
Other revenues**		74		4.6%		64		4.6%			15.6%
Total		1,622		100.0%		1,383		100.0%			17.3%

* 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 Mining Segment
('000 tonnes)
---	---	---	---
	H1 2013	H1 2012	Change
External sales
Iron ore products	2,133	2,002	6.5%
Iron ore concentrate	1	10	(90.0)%
Sinter	55	63	(12.7)%
Pellets	607	583	4.1%
Other	1,470	1,346	9.2%
Coal products	3,755	834	350.2%
Raw coking coal	375	-	n/a
Coking coal concentrate	2,431	558	335.7%
Raw steam coal	351	53	562.3%
Steam coal concentrate	598	223	168.2%
Intersegment sales
Iron ore products*	6,892	7,334	(6.0)%
Iron ore concentrate	2,452	2,670	(8.2)%
Sinter	1,950	2,301	(15.3)%
Pellets	2,488	2,361	5.4%
Other	2	2	0.0%
Coal products	3,646	2,179	67.3%
Raw coking coal	1,363	434	214.1%
Coking coal concentrate	2,179	1,599	36.3%
Raw steam coal	104	146	(28.8)%
Total, iron ore products*	9,025	9,336	(3.3)%
Total, coal products	7,401	3,013	145.6%

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

Total mining segment revenues increased by 17.3% to US$1,622 million in H1 2013 compared to US$1,383 million in H1 2012, primarily as a result of additional volumes from the consolidation of Raspadskaya in January 2013, which offset the decrease in iron ore and coking coal prices.

External sales volumes of iron ore products increased by 6.5% in H1 2013 compared to H1 2012 driven by higher volumes from EVRAZ Sukha Balka, while intersegment sales volumes decreased by 6.0% primarily as a result of changes to intersegment product handling and processing procedures. The preparations for closure of the Irba mine at Evrazruda also contributed to lower iron ore volumes being supplied to the Steel segment.

External sales volumes of coal products increased in H1 2013 by 350% due to an additional 2 million tonnes of coking coal concentrate from Raspadskaya and higher sales of steam coal products following the repositioning of longwalls at Kusheyakovskaya and Gramoteinskaya steam coal mines in H1 2012.

In H1 2013, Mining segment sales to the Steel segment amounted to US$1,005 million and 62.0% of sales, compared to US$1,027 million and 74.3% of sales, in H1 2012. The lower share of sales to the Steel segment reflects the additional coal volumes sold to market from Raspadskaya.

During the period, approximately 69% and 68% of EVRAZ's respective iron ore and coking consumption was satisfied by the Group's own operations compared with 71% and 48% (including coal from Raspadskaya) in H1 2012.

Third party sales by the Mining segment to customers in Russia in H1 2013 increased to approximately 40% compared to 38% in the corresponding period last year. The increase is primarily attributable to the consolidation of Raspadskaya in H1 2013. Approximately 60% of sales of Raspadskaya in H1 2013 were to customers in Russia.

Operational update - Mining segment

Mining: Iron Ore

In H1 2013, the output of iron ore products totalled 10.5 million tonnes with the 2.5% decline in Russian output being more than offset by the 10% increase in production at Ukrainian and South African assets.

Cost savings and operational improvement programmes remained the focus of the iron ore division. These included actions aimed at the optimisation of land tax payments and the enhancement of railway transportation terms, which along with other measures contributed US$23 million of savings in the reporting period.

In February 2013, the Company finalised the project documentation and received the relevant state approvals for the development of the Sobstvenno-Kachkanarskoye deposit. Following a thorough review of the options for the deposit, management redesigned the development plans in order to mitigate short term pressures while preserving its long term investment case. As a result, the project's development timeline has been extended, with commencement of production postponed from 2015 to 2017 and the estimated total investment budget to bring the mine to production reduced from US$240 million to US$150 million.

On 1 July 2013 the Company permanently shut down the high cost Irba mine at Evrazruda. This initiative is part of a wider strategic plan targeting the closure and/or disposal of less efficient operations while focussing on the development of more efficient mines at Evrazruda to improve productivity and sustainably achieve economies of scale at a reasonably low cost. EVRAZ expects that the loss of production from closed mines will be largely offset by additional volumes from modernised operations such as the Sheregesh mine, where output is expected to increase by 2.5 times by 2018 to 4.8 million tonnes per annum. These measures should result in lowering the Company's cash cost position and support long run economically efficient vertical integration.

In April 2013, EVRAZ acquired a 51% stake in the joint venture, Timir, which holds licences to four iron ore deposits in Southern Yakutia with total reserves under the Russian geological categories of A+B+C1 of 3.5 billion tonnes of iron ore. Among these deposits, the Tayozhnoye deposit is considered to be the most attractive with 341 million tonnes of fully explored reserves for open pit mining, ore grades of 38-40% Fe and close proximity to existing rail and power infrastructure. In H1 2013, the scoping study for the project was finalised, with current estimates indicating a mining capacity at the Tayozhnoye open pit of 15 million tonnes of iron ore per annum. The Company expects that active construction works at the deposit will not commence until, at the earliest, 2015.

Mining: Coal

In H1 2013, EVRAZ's raw coking coal output totalled 9.1 million tonnes which was 5.1 million tonnes higher than in H1 2012. The primary non-organic driver of the growth of raw coking coal output was the consolidation of Raspadskaya coal mining company in January 2013.

Yuzhkuzbassugol mined 5.1 million tonnes of coking coal in H1 2013, a 28% increase compared to 4.0 million tonnes in H1 2012, following the launch and ramp-up of the Yerunakovskaya VIII mine, which was commissioned ahead of schedule and below budget. Additionally, the Alardinskaya mine has operated at an increased capacity since the beginning of the year and the Uskovskaya mine demonstrated solid performance while it was closed for longwall repositioning during part of H1 2012. The growth of output in H1 2013 fully offset the loss of production from the Ossinikovskaya mine where a flood in March 2013 tragically killed 4 people and led to a month long suspension. The Alardinsklaya mine also briefly halted production for a period in March and April as a result of a fire.

The Company remains on track to meet its target of mining 1 million tonnes of raw coal at the Yerunakovkaya VIII mine in 2013 and fully ramping-up the mine by the beginning of 2014. In H1 2013, Yuzhkuzbassugol received a new set of longwall equipment and its installation is scheduled to be completed in Q4 2013.

In July 2013 a trial of a SAP ERP management system started at Yuzhkuzbassugol. The system allows for the automation of most of the basic functions of the mine relating to finance and accounting, logistics, supply and material requirements planning and the cost of repairs. The project is planned to be completed in Q4 2013 and if successful, may allow a single SAP template be applied to all EVRAZ mining operations, providing the Company with more accurate information and enhancing existing systems.

In H1 2013, raw coking coal output from Raspadskaya amounted to 4 million tonnes, 15% higher than in H1 2012, including 1.1 million tonnes of raw coal mined at the Raspadskaya mine. However, these increases were below targets, due to weak seaborne market demand and the suspension of operations at the Raspadskaya underground mine in May-June 2013 due to excessive carbon monoxide levels in certain areas of the mine. Having completed the necessary actions to rectify the situation, Raspadskaya resumed the mining operations at the underground mine on 5 July 2013.

In the reporting period EVRAZ continued to focus on efficiency improvement programmes at all of its mines. These include a shortened longwall repositioning schedule at the Uskovskaya mine, more efficient gas draining drilling and cutting down operating and capital expenses at Yuzhkuzbassugol.

EVRAZ continued the development of the Mezhegey Phase I project during the period. In H1 2013, the Company finalised design and engineering project plans, which have been submitted for approval to the relevant state agencies. The construction works of key industrial facilities and power infrastructure, which started in 2012, are scheduled to be completed by the end of Q3 2013. First coal is expected to be mined in October 2013. The bulk of production from the mine will be consumed by EVRAZ ZSMK.

The Company reiterates its forecast over 10 million tonnes of raw coking coal production at the Yuzhkuzbassugol mines, while reducing guidance for Raspadskaya to 8 million tonnes of raw coal from 9.3 million tonnes.

In H1 2013, production from our steam coal mines were heavily affected by the suspension of the Gramoteinskaya mine in Q4 2012 and longwall repositioning at the Kusheyakovskaya mine in Q1 2013.

VANADIUM

Markets performance in H1 2013

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.

Ferrovanadium (FeV) prices demonstrated a strong performance in Q1 2013, fuelled in part by a rally in China, and approached ca. US$33/kg, only to decrease to US$27/kg in May 2013 and then stabilise at this level leading into the summer months. FeV spot price stood at US$27.2/t at the end of June, representing a 3% decline year to date.

FeV prices are expected to show moderate growth in H2 2013 as producers' inventories are reduced and traders lack the required quantities of material.

Sales review


Vanadium Segment Revenues (US$ million)
	Six months ended 30 June
	2013	2012	Change
To third parties	256	253	1.2%
To steel segment	12	10	20.0%
Total Vanadium segment	268	263	1.9%


Vanadium Segment Revenues by Products
	Six months ended 30 June
	2013		2012		2013 v 2012
	US$ million	% of total segment revenue	US$ million	% of total segment revenue	% change
External sales
Vanadium products	253	94.4%	252	95.8%	0.4%
Vanadium in slag	1	0.4%	1	0.4%	0.0%
Vanadium in alloys and chemicals	252	94%	251	95.4%	0.4%
Intersegment sales, vanadium products	10	3.7%	7	2.7%	42.9%
Other revenues	5	1.9%	4	1.5%	25.0%
Total	268	100.0%	263	100.0%	1.9%


Sales volumes of vanadium segment
(tonnes of pure Vanadium)
	H1 2013	H1 2012	Change
External sales
Vanadium products	8,612	9,665	(10.9)%
Vanadium in slag	192	66	190.9%
Vanadium in alloys and chemicals	8,420	9,599	(12.3)%
Intersegment sales	346	288	20.1%
Total	8,958	9,953	(10.0)%

Vanadium segment revenues increased by 1.9% to US$268 million in H1 2013 compared to US$263 million in H1 2012 reflecting increase in sales prices of vanadium products, which more than offset the decrease in sales volumes. Sales volumes of the Vanadium segment decreased by 10% as a result of lower sales of vanadium slag by EVRAZ NTMK to China, while waiting for an export license, and proportionally lower purchases of vanadium pentoxide for further processing into FeV at third party facilities in China and the USA.

Operational update - Vanadium segment

In H1 2013, the vanadium facilities of the Company demonstrated strong operational results, producing 10,836 tonnes of vanadium in slag and 8,730 tonnes of final vanadium products.

The key highlights of the reporting period include the implementation of the project at EVRAZ Vanady Tula's pulp filtration plant to improve working conditions, increase mechanisation, cut operational losses and increase pentoxide production volumes, which nears completion.

The project to enable the processing of vanadium slag supplied from EVRAZ NTMK at EVRAZ Stratcor, to alleviate feed shortages, is progressing on schedule with construction works expected to be completed by the end of 2013.

OTHER BUSINESSES

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

Sales review


(US$ million)	Six months ended 30 June
	2013	2012	Change
To third parties	147	127	15.7%
To steel segment	203	308	(34.1)%
To mining segment	115	106	8.5%
Total Other operations segment	465	541	(14.0)%

Revenues from other operations decreased by 14.0% to US$465 million in H1 2013 as compared to US$541 million in H1 2012, principally driven by the disposal of the Evraztrans business in 2012. Revenue of other operations segment includes the following (sales figures shown below include sales within the same segment):

· Evraztrans (until its disposal by EVRAZ on 12 December 2012) acted as a railway transport provider for EVRAZ's Steel segment. Sales of EvrazTrans (including Russian and Ukrainian operations) amounted to US$85 million in H1 2012. EvrazTrans derived the majority of its revenue from inter‑segment sales, which accounted for 88% of its revenue in H1 2012. Following the sale, EVRAZ retained a smaller part of the business related to the transportation of pellets from EVRAZ KGOK to EVRAZ NTMK. In H1 2013 EVRAZ mostly used third party providers for transportation of its goods.

· Sales of EVRAZ Nakhodka Trade Sea Port, which provides various sea port services to the Company, totaled US$45 million both in H1 2013 and in H1 2012. Intersegment sales accounted for 44% of the revenue in H1 2012, while in H1 2013 all port services related to handling of EVRAZ's export products were rendered under the contract with the Russian Railways, which resulted in the higher third party sales of other operations in H1 2013.

· Metallenergofinance ("MEF") supplies electricity to EVRAZ's steel and mining segments as well as third parties. MEF's sales amounted to US$219 million in H1 2013 compared to US$204 million in H1 2012. Intersegment sales accounted for 78% and 79% of MEF's revenue in H1 2013 and H1 2012 respectively.

· Sinano Ship Management ("Sinano") provides sea freight services to EVRAZ's steel segment. Sinano's sales totaled US$61 million in H1 2013 and US$64 million in H1 2012, with intersegment sales accounting for almost 93% in H1 2013 and 98% in H1 2012 of its revenue.

· ZapSib Power Plant (including Central Power Plant) is an energy-generating branch of EVRAZ ZSMK which supplies electricity and heat to EVRAZ ZSMK and third party customers. Its revenue amounted to US$96 million in H1 2013 compared with US$94 million in H1 2012. Intersegment sales accounted for 84% and 76% of ZapSib Power Plant revenue in H1 2013 and H1 2012 respectively.

Operational update - Other businesses

In H1 2013, EVRAZ Metall Inprom, a retail trading arm of EVRAZ, retained one of the leading positions in the warehousing and distribution of ferrous metals in Russia with a share of 11.5%. The company sold about ca. 970,000 tonnes of rolled products in the reporting period, which is by 6.2% higher compared to the same period of the last year.

In the reporting period, EVRAZ continued to expand the number of rolled steel product deliveries which used trucks, helping our clients to save on transportation costs, shortening delivery times and increasing flexibility in terms of volumes ordered. The customer focused strategy of the company led to growth of the total number of active clients by 3% in H1 2013 compared to H1 2012.

In H1 2013 EVRAZ continued with operational improvements at key power generating facilities. The ZapSib Power Plant, at EVRAZ ZSMK, upgrade is on track to be completed by 2016 and will increase power generation by 48% to 3.6 billion kw/h per annum from the current capacity of 2.4 billion kw/h. The 2013 design for power generation amounts to 3.2 billion kw/h.

Cargo turnover at the EVRAZ Nakhodka Trade Sea Port (NMTP) increased by 85,000 tonnes (+2%) in H1 2013 The Group remains on track to increase the annual coal loading capacity of the port to 5 million tonnes by 2015.

COST OF REVENUE AND GROSS PROFIT


Cost of Revenue and Gross Profit by Segments
	Six months ended 30 June
	2013		2012			2013 v 2012
	US$ million	% of segment revenues		US$ million	% of segment revenues	% change
Steel segment
Cost of revenue	(5,245)	81.7%		(5,742)	81.8%	(8.7)%
Gross profit	1,171	18.3%		1,277	18.2%	(8.3)%
Mining segment
Cost of revenue	(1,321)	81.4%		(1,175)	85.0%	12.4%
Gross profit	301	18.6%		208	15.0%	44.7%
Vanadium segment
Cost of revenue	(205)	76.5%		(242)	92.0%	(15.3)%
Gross profit	63	23.5%		21	8.0%	200.0%
Other operations segment
Cost of revenue	(380)	81.7%		(401)	74.1%	(5.2)%
Gross profit	85	18.3%		140	25.9%	(39.3)%
Unallocated
Cost of revenue	(6)			2		n/m
Gross profit	(6)			2		n/m
Eliminations - cost of revenue	1,280			1,538		(16.8)%
Eliminations - gross profit	(129)			(49)		163.3%
Consolidated cost of revenue	(5,877)	79.8%		(6,020)	79.0%	(2.4)%
Consolidated gross profit	1,485	20.2%		1,599	21.0%	(7.1)%

EVRAZ's consolidated cost of revenue amounted to US$5,877 million, representing 79.8% of the Company's consolidated revenues, in the first six months of 2013 compared to US$6,020 million, or 79.0% of consolidated revenues, in the first six months of 2012. The decrease in the gross profit margin in the six months ended 30 June 2013 compared to the six months ended 30 June 2013 was primarily due to lower average prices of steel products.

Steel Segment Cost of Revenue
	Six months ended 30 June
---	---	---	---	---	---	---
	2013		2012		2013 v 2012
---	---	---	---	---	---	---
	US$ million	% of segment revenue	US$ million	% of segment revenue	% change
---	---	---	---	---	---	---
Cost of revenue	5,245	81.7%	5,742	81.8%	(8.7)%
Raw materials	2,708	42.3%	3,192	45.5%	(15.2)%
Iron ore	961	15.0%	1,074	15.3%	(10.5)%
Coking coal	674	10.5%	847	12.1%	(20.4)%
Scrap	710	11.1%	925	13.2%	(23.2)%
Other raw materials	363	5.7%	346	4.9%	4.9%
Semi-finished products	214	3.3%	222	3.2%	(3.6)%
Transportation	258	4.0%	269	3.8%	(4.1)%
Staff costs	548	8.5%	515	7.3%	6.4%
Depreciation	221	3.4%	217	3.1%	1.8%
Energy	471	7.3%	492	7.0%	(4.3)%
Other*	825	12.9%	835	11.9%	(1.2)%

*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$5,245 million or 81.7% of steel segment revenue in the first six months of 2013, compared to US$5,742 million or 81.8% of steel segment revenue in the first six months of 2012.

The principal factors affecting the change in the steel segment cost of revenue, in absolute terms, in the six months ended 30 June 2013 compared to the six months ended 30 June 2012 were as follows:

• Raw material costs decreased by 15.2% due to a decline in prices for all main raw materials (particularly iron ore, coking coal, scrap) accompanied by decrease in production volumes of crude steel by 3%. Other factors influencing this decrease included a higher proportion of own coking coal consumption, as a result of higher production volumes at YuKU, and additional volumes from the consolidation of Raspadskaya and disposal of DKHZ (consumption of coal in H1 2012 of US$72 million).

• Costs of semi-finished products decreased by 3.6% due to lower average prices, which was partially compensated for by higher volumes purchased from third parties.

• Transportation costs decreased by 4.1% due to a change in contract terms between TC Evrazholding and the Russian Railways resulting in all transportation costs relating to sales of rails reported as selling expenses in H1 2013, while in H1 2012 some costs related to rent of third party wagons were reported in cost of revenues (US$7 million). This decrease was accompanied by lower intercompany sales and related transportation costs between Russian steel operations (US$4 million).

• Staff costs increased by 6.4% largely due to higher wages and salaries of production staff which rose, in accordance with the trade union agreements.

• Depreciation and depletion costs increased by 1.8% primarily due to capitalisation of expenses following the completion of major investment projects at EVRAZ ZSMK and EVRAZ NTMK.

• Energy costs decreased by 4.3%, which was primarily attributable to reduced consumption volume of natural gas at ZSMK (-US$23 million) due to classification of the results of Central Heat and Power Plant in Other operations segment in H1 2013 and NTMK (-US$11 million) as a result of PCI implementation. This decrease was partially offset by higher electricity and natural gas prices.

• Other costs decreased by 1.2% due to an increase in stock of goods in ports in H1 2013, while there was a destocking in H1 2012.

Steel segment gross profit decreased by 8.3% to US$1,171 million in the first six months of 2013 from US$1,277 million in the first six months of 2012. Gross profit margin amounted to 18.3% of steel segment revenue in the six months ended 30 June 2013 compared with 18.2% in the corresponding period last year, reflecting the decline in steel segment revenues by 8.6%, while cost of revenues decrease by 8.7%.


Mining Segment Cost of Revenue and Gross Profit
	Six months ended 30 June
	2013		2012		2013 v 2012
	US$ million	% of segment revenue	US$ million	% of segment revenue	% change
Cost of revenue	1,321	81.4%	1,175	85.0%	12.4%
Raw materials	47	2.9%	87	6.3%	(46.0)%
Transportation	203	12.5%	117	8.5%	73.5%
Staff costs	366	22.6%	267	19.3%	37.1%
Depreciation	243	15.0%	356	25.7%	(31.7)%
Energy	156	9.6%	130	9.4%	20.0%
Other*	306	18.8%	218	15.8%	40.4%

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

The mining segment cost of revenue increased to US$1,321 million or 81.4% of mining segment revenue in the six months ended 30 June 2013 compared with US$1,175 million or 85.0% of mining segment revenue in the six months ended 30 June 2012.

The principal factors affecting the change in mining segment cost of revenue, in absolute terms, in the six months ended 30 June 2013 compared to the six months ended 30 June 2012 were:

· Raw material costs decreased by 46.0% primarily due to switch to a tolling scheme of sinter production by EVRAZ VGOK instead of purchasing the raw material from EVRAZ NTMK (-US$24 million), and decrease of third party coal purchases for production of concentrate by Yuzhkuzbassugol (-US$9 million).

· Transportation costs increased by 73.5% due to the consolidation of Raspadskaya (+US$39 million), increased export sales of iron ore and coal (+US$17 million), change in contract terms from FCA to CPT for supply of iron ore between EVRAZ ZSMK and Evrazruda (+US$11 million) and EVRAZ VGOK (+US$10 million) and an increase in Russian railway tariffs.

· Staff costs increased by 37.1%. The increase was largely attributable to consolidation of Raspadskaya (US$61 million) and the increase in wages and salaries in accordance with trade union agreements.

· Depreciation and depletion costs decreased by 31.7% mainly due to a lower depreciation and depletion expense at Yuzhkuzbassugol caused by a revaluation of reserves in June 2012 and January 2013 (net effect of US$154 million) and a significant reduction in depreciaton at Evrazruda due to impairment of assets (net effect of US$23 million) This decrease was partially offset by an increase of depreciation due to consolidation of Raspadskaya (US$66 million).

· Energy costs increased by 20% primarily due to higher electricity and natural gas prices, the consolidation of Raspadskaya (+US$7 million) and higher production volumes at Yuzhkuzbassugol and EVRAZ KGOK.

· Other costs increased by 40.4%, primarily due to the consolidation of Raspadskaya (+US$79 million) and higher processed volumes of concentrate at third party facilities by Yuzhkuzbassugol (+US$24 million).

The Mining segment's gross profit increased to US$301 million in the six months ended 30 June 2013 from US$208 million in the six months ended 30 June 2012. The increase in the gross profit margin in the first six months of 2013compared to the first six months of 2012 was primarily attributable to lower depreciation and depletion at Yuzhkuzbassugol and additional profit from consolidation of Raspadskaya (US$24 million).


Vanadium Segment Cost of Revenue and Gross Profit
	Six months ended 30 June
	2013		2012		2013 v 2012
	US$ million	% of segment revenue	US$ million	% of segment revenue	% change
Cost of revenue	205	76.5%	242	92.0%	(15.3)%
Raw materials	38	14.2%	64	24.3%	(40.6)%
Staff costs	33	12.3%	31	11.8%	6.5%
Depreciation	7	2.6%	11	4.2%	(36.4)%
Energy	33	12.3%	31	11.8%	6.5%
Other	94	35.1%	105	39.9%	(10.5)%

The vanadium segment cost of revenue decreased by 15.3% to US$205 million, or 76.5% of vanadium segment revenue, in the six months ended 30 June 2013 from US$242 million, or 92.0% of vanadium segment revenue, in the six months ended 30 June 2012. The decrease in EVRAZ's vanadium segment's cost of revenue in the first six months of 2013 as compared to the first six months of 2012, in absolute terms, was attributable to a decrease in sales volumes as discussed in the Vanadium segment revenues above.

In H1 2013, gross profit of EVRAZ's vanadium segment increased to US$63 million compared with US$21 million in H1 2012 primarily due to higher prices for vanadium products.

Other operations segment cost of revenue and gross profit

The other operations segment's cost of revenue amounted to 81.7% of other operations revenue, or US$380 million, in the first six months of 2013 compared to 74.1%, or US$401 million, in the first six months of 2012.

The major components of cost of revenue at EVRAZ Nakhodka Trade Sea Port are staff and inventory costs. The major components of EvrazTrans' cost of revenue in H1 2012 were rental and maintenance of railway cars. The major component of MEF's cost of revenue is the purchase of electricity from power generating companies. The major components of ZapSib 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.

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 28 to 31 of the Annual Report 2012. The majority of principal risks of the Company are unchanged from those identified in the Annual Report but we provide the following update on those risks which impacted the Company during the Period and which we expect to be most significant for the rest of the year:

· Global economic factors, industry conditions and cost effectiveness

EVRAZ Steel, Mining and Vanadium operations are highly dependent and sensitive to the global macroeconomic environment, with economic conditions in China and Europe being of particular importance. The risk to EVRAZ's operations can be different dependent on the regions of activity and on EVRAZ's products; finished, semi-finished or commodities. The global supply and demand balance for steel and particularly for iron ore and metallurgical coal has the potential to significantly affect both product prices and volumes across all markets. Fluctuations in RUR/USD exchange rates and other foreign currencies can negatively impact performance and liquidity. As EVRAZ's operations have a high level of fixed costs, global economic and industry conditions have significant impact on the Company's operational performance and liquidity. EVRAZ has a focused investment policy aimed at

reducing and managing fixed costs and reducing direct costs by expanding the Company's self-coverage of key raw material inputs with the objective of being among the sector's lowest cost producers.

· Health, safety and environmental (HSE) issues

Safety 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 or other sanctions. Such actions could have a material adverse effect on the Company's business, financial condition and business prospects. HSE is a functional area where new laws, regulations and sanctions are continuously introduced. Regulatory activity could result in elements of EVRAZ's operations becoming uneconomic. Given that HSE risks can be critical, HSE issues have direct oversight at Board level and HSE procedures and material issues are given top priority at all internal management level meetings. 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. Management KPIs include a material factor for safety performance. Safety training has been reviewed with the aim of providing strong and professional safety leadership. For all new projects an operational safety assessment is undertaken as a first step to the engineering design and project approval.

· Dependency on certain key markets

EVRAZ revenues are substantially derived from customers in Russia, around 43% and North America, around 22%, and as a result, EVRAZ commercial success is closely aligned to the operating and economic environment in these two regions. The strategic risks and opportunities within these regions are regularly reviewed. The review includes 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 (EVRAZ Metal Inprom) and external distribution networks.

· Capital projects and expenditure

Steel production and mining are both capital intensive operational activities requiring both continuing maintenance and development capital expenditure, in addition to capital expenditure focused on improving the Company's cost effectiveness and increasing self-coverage of the Company's primary raw material inputs. These intended and planned investments are aligned to the Company's and external market expectations for each particular project and to maximise levels of investment returns. The risks that events or economic issues outside those factored into the Company's forward business plans, may negatively impact the Company's anticipated Free Cash Flow could cause certain elements of the planned capital expenditure to be re-phased, deferred or abandoned with consequential impact on the Company's planned future performance. The Company has developed various stressed business scenarios to assess the Company's ability to meet or flex capital expenditure requirements both for maintaining current operations as well as for commissioning key projects. Project delivery is closely monitored against project plans resulting in high level action to manage project investment both for timely delivery and for planned project expenditure.

· Human Resources

EVRAZ management and employees represent a key resource and are critical to the delivery of the Company's objectives. The principal related risk is the quality and availability of critical operational and business skills. Associated risks involve selection, recruitment, training and retention of employees and qualified executives. Succession planning is a key feature of EVRAZ's human resources management. However, in certain regions and for particular business units where there is a general skill scarcity, succession planning cannot anticipate all management risks. The scarcity of experienced and skilled mining professionals is a particular risk. The Russian exposure is especially accentuated in the remoteness and in the harsh seasonal climatic conditions of certain of the Company's mining operations.

Generally, union relations are largely stable; a costly stoppage that EVRAZ experienced in South Africa in 2012 related rather to local conditions than to EVRAZ's industrial relations activity. EVRAZ seeks to meet its leadership and skill needs through retention of its employees, internal promotion, structured professional internal mentoring and external development programmes.

· 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, regulations or other requirements which could have an adverse impact on the Company's operations and business. Such developments could have the effect of limiting the Company's ability to obtain financing in international markets.

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.

· Business interruption

EVRAZ's mining, smelting, and refining operations are subject to a number of operational risks which could cause prolonged shut-downs or production delays. Any such event could have a material adverse effect on the Company's operating performance, production, financial condition and future prospects. In addition, long term business interruption may result in loss of customers, competitive advantage being compromised and damage to the Company's reputation. To mitigate such risks the Company has defined and established business continuity plans, procedures and protocols. The Company carries certain business interruption insurance, except for particular mining events. These plans, procedures and protocols are subject to regular review and audit of their appropriateness and effectiveness.

· Treasury and Taxation

EVRAZ, as with many other large and multi-national corporates, faces various treasury and taxation risks including liquidity, credit access, currency fluctuations, and interest rate and tax compliance risks. EVRAZ employs skilled specialists, both internal and external, to manage and mitigate such risks and the management of such risks is embedded in the established management internal controls. Oversight of the key risks is reported within the monthly Board reports and by the review of compliance with such internal controls by an independent internal audit function, which reports to the Audit Committee as a whole and individually to Audit Committee members and senior executive management by way of monthly internal audit reports.

EVRAZ's ability to incur debt is limited mainly to refinancing due to its existing Eurobond covenants. While EVRAZ has a total funding cap, the flexibility built into the Company's capital and maintenance expenditure permits EVRAZ to maintain its liquidity availability at a low level of cash generation. EVRAZ's corporate finance 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 Giacomo Baizini

Chief Executive Officer Chief Financial Officer

28 August 2013

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.

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

	Six months ended 30 June
	2013	2012
---	---	---
	(US$ million)
---	---	---
Consolidated EBITDA reconciliation
Profit from operations	183	439
Add:
Depreciation, depletion and amortisation	562	668
Impairment of assets	7	80
Loss on disposal of property, plant & equipment	10	25
Foreign exchange loss/(gain)	177	(28)
Consolidated EBITDA	939	1,184
Steel segment EBITDA reconciliation
Profit from operations	356	393
Add:
Depreciation and amortisation	277	257
Impairment of assets	(32)	64
Loss on disposal of property, plant & equipment	8	17
Foreign exchange loss/(gain)	42	(25)
Steel segment EBITDA	651	706
Mining segment EBITDA reconciliation
Profit from operations	72	74
Add:
Depreciation, depletion and amortisation	257	364
Impairment of assets	39	15
Loss on disposal of property, plant & equipment	2	8
Foreign exchange loss/(gain)	(16)	(42)
Mining segment EBITDA	354	419
Vanadium segment EBITDA reconciliation
(Loss)/profit from operations	27	(19)
Add:
Depreciation and amortisation	7	23
Vanadium segment EBITDA	34	4
Other operations EBITDA reconciliation
Profit from operations	45	71
Add:
Depreciation and amortisation	17	21
Impairment of assets	0	1
Gain on disposal of property, plant & equipment	(1)	0
Foreign exchange (gain)/loss	0	1
Other operations EBITDA	61	94
Unallocated EBITDA reconciliation
Loss from operations	(256)	(130)
Add:
Depreciation and amortisation	4	3
Loss on disposal of property, plant & equipment	1	0
Foreign exchange (gain)/loss	151	38
Unallocated EBITDA	(100)	(89)
Intersegment eliminations
Eliminations of intersegment EBITDA	(61)	50
Eliminations EBITDA	(61)	50

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 short-term bank deposits may be different from the calculation used by other companies and therefore comparability may be limited.


	30 June 2013	31 December 2012
	(US$ million)
Cash and short-term bank deposits Calculation
Cash and cash equivalents	1,471		1,320
Cash of disposal groups classified as held for sale	66		70
Short-term bank deposits	0		674
Cash and short-term bank deposits	1,537		2,064

Appendix 3

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, short-term deposits of acquiree (at the date of business combination), purchases of subsidiaries, net of cash acquired, proceeds from sale of disposal groups classified as held for sale, net of transaction costs, 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.

Free Cash Flow has been calculated as follows:


Free Cash Flow Calculation	30 June 2013
	(US$ million)
EBITDA (excluding non-cash items)	904
Changes in working capital	(150)
Income tax paid	(126)
Net cash flows from operating activities	628
Net interest and similar payments	(273)
Capital expenditure	(492)
Short-term deposits of acquiree (at the date of business combination)	-
Purchases of interest in associates, joint ventures and subsidiaries, net of cash acquired	66
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs	(1)
Other cash flows from investing activities	(15)
Free Cash Flow	(87)

Appendix 4

Total Debt

Total Debt represents 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 2013	31 December 2012
	(US$ million)
Long-term loans, net of current portion	6,750	6,373
Short-term loans and current portion of long-term loans	1,453	1,783
Add back: Unamortised debt issue costs	78	116
Nominal effect of cross-currency swaps on principal of rouble-denominated notes	193	76
Loans of assets classified as held for sale	120	79
Finance lease liabilities, including current portion	12	13
Total Debt under new methodology	8,606	8,440
Nominal effect of cross-currency swaps on principal of rouble-denominated notes	n/a	(76)
Unamortised debt issue costs	n/a	(116)
Total Debt, as previously reported	n/a	8,248

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 2013	31 December 2012
	(US$ million)
Total Debt	8,606	8,440
Short-term bank deposits	(0)	(674)
Cash and cash equivalents	(1,471)	(1,320)
Cash of assets classified as held for sale	(66)	(70)
Collateral under swaps	(26)	-
Net Debt under new methodology	7,043	6,376
Liabilities/(assets) under swaps	n/a	(76)
Unamortised debt issue costs	n/a	(116)
Net Debt, as previously reported	n/a	6,184

EVRAZ plc

Unaudited Interim Condensed Consolidated Financial Statements

Six-month period ended 30 June 2013

Contents

Report on Review of Interim Condensed Consolidated Financial Statements

Unaudited Interim Condensed Consolidated Financial Statements

Unaudited Interim Condensed Consolidated Statement of Operations

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income

Unaudited Interim Condensed Consolidated Statement of Financial Position

Unaudited Interim Condensed Consolidated Statement of Cash Flows

Unaudited Interim Condensed Consolidated Statement of Changes in Equity

Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements

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 2013 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 2013 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

28 August 2013

The maintenance and integrity of the EVRAZ plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial information since it was initially presented on the web site.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Unaudited Interim Condensed Consolidated Statement of Operations

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


		Six-month period ended 30 June
	Notes	2013	2012
			restated*
Revenue
Sale of goods		$ 7,142	$ 7,440
Rendering of services		220	179
		7,362	7,619
Cost of revenue		(5,877)	(6,020)
Gross profit		1,485	1,599

Selling and distribution costs		(618)	(621)
General and administrative expenses		(448)	(428)
Social and social infrastructure maintenance expenses		(22)	(21)
Loss on disposal of property, plant and equipment		(10)	(25)
Impairment of assets	5	(7)	(80)
Foreign exchange gains/(losses), net		(177)	28
Other operating income		48	33
Other operating expenses		(68)	(46)
Profit from operations		183	439

Interest income		16	8
Interest expense		(377)	(322)
Share of profits/(losses) of joint ventures and associates	8	3	6
Gain/(loss) on derecognition of equity investments, net	4	89	-
Gain/(loss) on financial assets and liabilities, net		(71)	(26)
Gain/(loss) on disposal groups classified as held for sale, net		54	(2)
Other non-operating gains/(losses), net		(3)	(13)
Profit/(loss) before tax		(106)	90

Income tax expense	6	(16)	(136)
Net loss		$ (122)	$ (46)

Attributable to:

Equity holders of the parent entity		$ (111)	$ (34)
Non-controlling interests		(11)	(12)
		$ (122)	$ (46)
Earnings per share:
basic and diluted, for profit/(loss) attributable to equity holders of the parent entity, US dollars	11	$ (0.07)	$ (0.03)

* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2012 and reflect adjustments made in connection with the obligatory change in the accounting policies (Note 2).

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income

(In millions of US dollars)


		Six-month period ended 30 June
	Notes	2013	2012
			restated*

Net loss		$ (122)	$ (46)

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		(414)	(116)
Recycling of exchange difference to profit or loss (Note 4)		68	-
Net gains/(losses) on available-for-sale financial assets		4	6

Effect of translation to presentation currency of the Group's joint ventures and associates	8	(10)	4
Share of other comprehensive income of joint ventures and associates accounted for using the equity method		(10)	4

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)	-
Income tax effect		1	-
		(4)	-

Total other comprehensive loss		(356)	(106)
Total comprehensive loss, net of tax		$ (478)	$ (152)

Attributable to:
Equity holders of the parent entity		$ (430)	$ (140)
Non-controlling interests		(48)	(12)
		$ (478)	$ (152)

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statement of Financial Position

(In millions of US dollars)


	Notes	30 June 2013	31 December 2012
			restated*
Assets
Non-current assets
Property, plant and equipment	7	$ 9,773	$ 7,792
Intangible assets other than goodwill		545	586
Goodwill		2,131	2,180
Investments in joint ventures and associates	8	187	551
Deferred income tax assets		147	143
Other non-current financial assets		139	92
Other non-current assets		81	64
		13,003	11,408
Current assets
Inventories		1,851	1,978
Trade and other receivables		1,050	895
Prepayments		125	143
Loans receivable		9	19
Receivables from related parties	9	14	12
Income tax receivable		71	59
Other taxes recoverable		245	329
Other current financial assets		66	712
Cash and cash equivalents	10	1,471	1,320
		4,902	5,467
Assets of disposal groups classified as held for sale		916	930
		5,818	6,397
Total assets		$ 18,821	$ 17,805

Equity and liabilities
Equity
Equity attributable to equity holders of the parent entity
Issued capital	11	$ 1,473	$ 1,340
Treasury shares		(1)	(1)
Additional paid-in capital	11	2,310	1,820
Revaluation surplus		169	173
Other reserves	11	156	-
Unrealised gains and losses		9	5
Accumulated profits		2,893	3,004
Translation difference		(1,743)	(1,424)
		5,266	4,917
Non-controlling interests		509	200
		5,775	5,117
Non-current liabilities
Long-term loans	12	6,750	6,373
Deferred income tax liabilities		1,036	927
Finance lease liabilities		10	11
Employee benefits		611	578
Provisions		265	257
Other long-term liabilities		320	170
		8,992	8,316
Current liabilities
Trade and other payables		1,224	1,412
Advances from customers		122	157
Short-term loans and current portion of long-term loans	12	1,453	1,783
Payables to related parties	9	451	257
Income tax payable		82	48
Other taxes payable		216	195
Current portion of finance lease liabilities		2	2
Provisions		29	32
Dividends payable by the Group's subsidiaries to non-controlling shareholders		8	8
		3,587	3,894
Liabilities directly associated with disposal groups classified as held for sale		467	478
		4,054	4,372
Total equity and liabilities		$ 18,821	$ 17,805

* The amounts shown here do not correspond to the 2012 financial statements and reflect adjustments made in connection with the obligatory change in the accounting policies and a correction of a prior period error (Note 2).

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(In millions of US dollars)

	Six-month period ended 30 June
	2013	2012
---	---	---
		restated*
---	---	---
Cash flows from operating activities
Net loss	$ (122)	$ (46)
Adjustments to reconcile net profit/(loss) to net cash flows from operating activities:
Deferred income tax (benefit)/expense	(131)	(30)
Depreciation, depletion and amortisation	562	668
Loss on disposal of property, plant and equipment	10	25
Impairment of assets	7	80
Foreign exchange (gains)/losses, net	177	(28)
Interest income	(16)	(8)
Interest expense	377	322
Share of (profits)/losses of associates and joint ventures	(3)	(6)
Gain/(loss) on derecognition of equity investments, net	(89)	-
(Gain)/loss on financial assets and liabilities, net	71	26
(Gain)/loss on disposal groups classified as held for sale, net	(54)	2
Other non-operating (gains)/losses, net	3	13
Bad debt expense	(1)	10
Changes in provisions, employee benefits and other long-term assets and liabilities	(43)	(70)
Expense arising from the equity-settled awards	11	8
Other	(2)	(2)
	757	964
Changes in working capital:
Inventories	86	(38)
Trade and other receivables	(176)	(14)
Prepayments	15	(31)
Receivables from/payables to related parties	94	91
Taxes recoverable	68	186
Other assets	(3)	(55)
Trade and other payables	(224)	(53)
Advances from customers	(32)	(15)
Taxes payable	42	(17)
Other liabilities	1	71
Net cash flows from operating activities	628	1,089


Cash flows from investing activities
Issuance of loans receivable to related parties	(1)	(3)
Issuance of loans receivable	(1)	-
Proceeds from repayment of loans receivable, including interest	1	4
Purchases of subsidiaries, net of cash acquired (Note 4)	82	-
Purchase of interest in a joint venture (Note 8)	(16)	-
Restricted deposits at banks in respect of investing activities	(1)	(13)
Short-term deposits at banks, including interest	680	6
Purchases of property, plant and equipment and intangible assets	(492)	(565)
Proceeds from disposal of property, plant and equipment	3	4
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs	(1)	11
Dividends received	1	86
Other investing activities, net	(17)	-
Net cash flows from/(used in) investing activities	238	(470)

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(continued)

(In millions of US dollars)


	Six-month period ended 30 June
	2013	2012
		restated*
Cash flows from financing activities
Purchase of treasury shares in the course of the Group's reorganisation	$ -	$ (4)
Proceeds from bank loans and notes	1,776	2,072
Repayment of bank loans and notes, including interest	(2,849)	(1,807)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest	412	93
Payments under covenants reset	-	(7)
Gain on derivatives not designated as hedging instruments	19	42
Collateral under swap contracts	(26)	(21)
Payments under finance leases, including interest	(2)	(9)
Net cash flows from/(used in) financing activities	(670)	359

Effect of foreign exchange rate changes on cash and cash equivalents	(49)	(16)

Net increase/(decrease) in cash and cash equivalents	147	962
Cash and cash equivalents at beginning of year	1,320	801

Add back: decrease in cash of disposal groups classified as assets held for sale	4	-
Cash and cash equivalents at end of period	$ 1,471	$ 1,763
Supplementary cash flow information:
Cash flows during the period:
Interest paid	$ (302)	$ (271)
Interest received	17	3
Income taxes paid by the Group	(126)	(134)

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.


	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	Other reserves	Unrealised gains and losses	Accumulated profits	Translation difference	Total	Non-controlling interests	Total Equity

At 31 December 2012 (as reported)	$ 1,340	$ (1)	$ 1,820	$ 173	$ -	$ 5	$ 3,356	$ (1,520)	$ 5,173	$ 200	$ 5,373
Correction of a prior period error (Note 2)	-	-	-	-	-	-	(96)	96	-	-	-
Change in accounting policies (Note 2)	-	-	-	-	-	-	(256)	-	(256)	-	(256)
At 31 December 2012 (as restated)	1,340	(1)	1,820	173	-	5	3,004	(1,424)	4,917	200	5,117
Net loss	-	-	-	-	-	-	(111)	-	(111)	(11)	(122)
Other comprehensive income/(loss)	-	-	-	(4)	-	4	-	(319)	(319)	(37)	(356)
Total comprehensive income/(loss) for the period	-	-	-	(4)	-	4	(111)	(319)	(430)	(48)	(478)
Issue of shares (Note 4)	133	-	478	-	156	-	-	-	767	-	767
Acquisition of non-controlling interests in existing subsidiaries (Note 4)	-	-	1	-	-	-	-	-	1	(3)	(2)
Non-controlling interests arising on acquisition of subsidiaries	-	-	-	-	-	-	-	-	-	360	360
Share-based payments	-	-	11	-	-	-	-	-	11	-	11
At 30 June 2013	$ 1,473	$ (1)	$ 2,310	$ 169	$ 156	$ 9	$ 2,893	$ (1,743)	$ 5,266	$ 509	$ 5,775

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.


	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 2011 (as reported)	$ 1,338	$ (8)	$ 2,289	$ 171	$ -	$ -	$ 3,606	$ (1,851)	$ 5,545	$ 236	$ 5,781
Change in accounting policies (Note 2)	-	-	-	-	-	-	(200)	5	(195)	-	(195)
At 31 December 2011 (as restated)	1,338	(8)	2,289	171	-	-	3,406	(1,846)	5,350	236	5,586
Net loss (restated)*	-	-	-	-	-	-	(34)	-	(34)	(12)	(46)
Other comprehensive income/(loss)	-	-	-	-	-	6	-	(112)	(106)	-	(106)
Total comprehensive income/(loss) for the period (restated)*	-	-	-	-	-	6	(34)	(112)	(140)	(12)	(152)
Issue of shares in the course of the Group's reorganisation	2	(4)	-	-	-	-	8	-	6	(10)	(4)
Acquisition of non-controlling interests in existing subsidiaries	-	-	1	-	-	-	(30)	-	(29)	(6)	(35)
Non-controlling interests arising on sale of ownership interests in subsidiaries	-	-	-	-	-	-	-	-	-	1	1
Contribution of a non-controlling shareholder to share capital of the Group's subsidiary	-	-	-	-	-	-	-	-	-	3	3
Buyback of own shares by a joint venture's subsidiary	-	-	-	-	-	-	(22)	-	(22)	-	(22)
Transfer of treasury shares to participants of the Incentive Plan	-	11	-	-	-	-	(11)	-	-	-	-
Share-based payments	-	-	8	-	-	-	-	-	8	-	8
Dividends declared by the parent entity to its shareholders	-	-	-	-	-	-	(228)	-	(228)	-	(228)
At 30 June 2012 (restated)*	$ 1,340	$ (1)	$ 2,298	$ 171	$ -	$ 6	$ 3,089	$ (1,958)	$ 4,945	$ 212	$ 5,157

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

Selected Notes

to the Unaudited Interim Condensed Consolidated Financial Statements

Six-month period ended 30 June 2013

1. Corporate Information

These interim condensed consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 28 August 2013.

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. In response the Group implemented a number of cost cutting initiatives, reduced capital expenditures and significantly reduced the level of debt subject to financial maintenance covenants.

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.

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 2012, which were prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, and also in conjunction with the explanation of the correction of a prior period error below as to how certain of those comparative figures have been restated to reclassify from other comprehensive loss to loss for the period, the cumulative amount of exchange differences relating to the foreign operations that were disposed of in 2012.

The comparative figures as of 31 December 2012 are not the Company's statutory accounts for the year ended 31 December 2012 in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012, in respect of which the audit report 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. Statutory accounts for the year ended 31 December 2012 have been filed with the Registrar of Companies.

Operating results for the six-month period ended 30 June 2013 are not necessarily indicative of the results that may be expected for the year ending 31 December 2013.

Restatement of Financial Statements

Correction of a Prior Period Error

According to IAS 21 "The Effects of Changes in Foreign Exchange Rates" on the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognised in other comprehensive income and accumulated in the separate component of equity, should be reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognised. In 2013, the Group discovered that in 2012 it did not reclassify the accumulated exchange losses in the amount of $96 million on the disposal of its subsidiaries - Dneprodzerzhinsk Coke Chemical Plant and Prichaly Kominterna. As such, the Group corrected this prior period error and has disclosed the restated consolidated statements of operations and comprehensive income, the statement of financial position and the relevant extract from the statement of changes in equity for the year ended 31 December 2012 below.

The correction of this error does not affect the Group's compliance with financial covenants at 31 December 2012.

2. Significant Accounting Policies (continued)

Basis of Preparation (continued)

Restatement of Financial Statements (continued)

Obligatory Change in the Accounting Policies Following the Amendments to IAS 19

Amended IAS 19 "Employee Benefits", which is effective for annual periods beginning on or after 1 January 2013, introduced a full recognition of deficit/(surplus) of a defined benefit obligation in the statement of financial position, net presentation of interest on the defined benefit liabilities and assets, new presentation of changes in defined benefit obligations and plan assets and additional disclosure requirements. These amendments are required to be applied retrospectively. As such, in these interim consolidated financial statements the Group adjusted the balances starting from the earliest prior period presented and the results of its operations for the respective periods.

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


Statement of Operations	Year ended 31 December 2012
	As previously reported	Reclassification of accumulated exchange losses	Change in accounting policies	Restated
Revenue
Sale of goods	$ 14,367	$ -	$ -	$ 14,367
Rendering of services	359	-	-	359
	14,726	-	-	14,726
Cost of revenue	(11,797)	-	15	(11,782)
Gross profit	2,929	-	15	2,944

Selling and distribution costs	(1,211)	-	-	(1,211)
General and administrative expenses	(860)	-	-	(860)
Social and social infrastructure maintenance expenses	(51)	-	-	(51)
Loss on disposal of property, plant and equipment	(56)	-	-	(56)
Impairment of assets	(413)	-	-	(413)
Foreign exchange gains/(losses), net	(41)	-	-	(41)
Other operating income	75	-	-	75
Other operating expenses	(129)	-	-	(129)
Profit from operations	243	-	15	258

Interest income	23	-	-	23
Interest expense	(645)	-	(9)	(654)
Share of profits/(losses) of joint ventures and associates	1	-	-	1
Gain/(loss) on financial assets and liabilities, net	164	-	-	164
Gain/(loss) on disposal groups classified as held for sale, net	114	(96)	-	18
Other non-operating gains/(losses), net	(6)	-	-	(6)
Profit/(loss) before tax	(106)	(96)	6	(196)

Income tax benefit/(expense)	(229)	-	-	(229)
Net profit/(loss)	$ (335)	$ (96)	$ 6	$ (425)

Attributable to:
Equity holders of the parent entity	$ (308)	$ (96)	$ 6	$ (398)
Non-controlling interests	(27)	-	-	(27)
	$ (335)	$ (96)	$ 6	$ (425)
Earnings/(losses) per share:
for profit/(loss) attributable to equity holders of the parent entity, US dollars, basic and diluted	$ (0.23)	$ (0.07)	$ -	$ (0.30)

2. Significant Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)


Statement of Comprehensive Income	Year ended 31 December 2012
	As previously reported	Reclassification of accumulated exchange losses	Change in accounting policies	Restated
Net loss	$ (335)	$ (96)	$ 6	$ (425)

Other comprehensive income/(loss)
Effect of translation to presentation currency	286	-	-	286

Reclassification of cumulative amount of the exchange differences relating to the disposal of subsidiaries to profit or loss	-	96	-	96
Net gains/(losses) on available-for-sale financial assets	4	-	-	4
Actuarial losses recognised in the period	-	-	(74)	(74)
Income tax effect	-	-	14	14
	4	96	(60)	40

Recognition of net actuarial gains/(losses) by the Group's joint ventures and associates	-	-	(2)	(2)
Net gains/(losses) on available-for-sale financial assets of the Group's joint ventures and associates	1	-	-	1
Effect of translation to presentation currency of the Group's joint ventures and associates	44	-	-	44
Share of other comprehensive income/(loss) of joint ventures and associates accounted for using the equity method	45	-	(2)	43

Total other comprehensive income/(loss)	335	96	(62)	369
Total comprehensive income/(loss), net of tax	$ -	$ -	$ (56)	$ (56)

Attributable to:
Equity holders of the parent entity	$ 28	$ -	$ (56)	$ (28)
Non-controlling interests	(28)	-	-	(28)
	$ -	$ -	$ (56)	$ (56)


Statement of Changes in Equity	31 December 2012
	As previously reported	Reclassification of accumulated exchange losses	Change in accounting policies	Restated
Accumulated profits	$ 3,356	$ (96)	$ (256)	$ 3,004
Translation difference	(1,520)	96	-	(1,424)

2. Significant Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)


Statement of Financial Position	31 December 2012
	As previously reported	Reclassification of accumulated exchange losses	Change in accounting policies	Restated
Assets
Non-current assets
Property, plant and equipment	$ 7,792	$ -	$ -	$ 7,792
Intangible assets other than goodwill	586	-	-	586
Goodwill	2,180	-	-	2,180
Investments in joint ventures and associates	561	-	(10)	551
Deferred income tax assets	66	-	77	143
Other non-current financial assets	92	-	-	92
Other non-current assets	103	-	(39)	64
	11,380	-	28	11,408
Current assets			-
Inventories	1,978	-	-	1,978
Trade and other receivables	895	-	-	895
Prepayments	143	-	-	143
Loans receivable	19	-	-	19
Receivables from related parties	12	-	-	12
Income tax receivable	59	-	-	59
Other taxes recoverable	329	-	-	329
Other current financial assets	712	-	-	712
Cash and cash equivalents	1,320	-	-	1,320
	5,467	-	-	5,467
Assets of disposal groups classified as held for sale	930	-	-	930
	6,397	-	-	6,397
Total assets	$ 17,777	$ -	$ 28	$ 17,805

Equity and liabilities
Equity
Equity attributable to equity holders of the parent entity
Issued capital	$ 1,340	$ -	-	$ 1,340
Treasury shares	(1)	-	-	(1)
Additional paid-in capital	1,820	-	-	1,820
Revaluation surplus	173	-	-	173
Unrealised gains and losses	5	-	-	5
Accumulated profits	3,356	(96)	(256)	3,004
Translation difference	(1,520)	96	-	(1,424)
	5,173	-	(256)	4,917
Non-controlling interests	200	-	-	200
	5,373	-	(256)	5,117


Non-current liabilities
Long-term loans	$ 6,373	$ -	$ -	$ 6,373
Deferred income tax liabilities	927	-	-	927
Finance lease liabilities	11	-	-	11
Employee benefits	294	-	284	578
Provisions	257	-	-	257
Other long-term liabilities	170	-	-	170
	8,032	-	284	8,316
Current liabilities
Trade and other payables	1,412	-	-	1,412
Advances from customers	157	-	-	157
Short-term loans and current portion of long-term loans	1,783	-	-	1,783
Payables to related parties	257	-	-	257
Income tax payable	48	-	-	48
Other taxes payable	195	-	-	195
Current portion of finance lease liabilities	2	-	-	2
Provisions	32	-	-	32
Dividends payable by the Group's subsidiaries to non-controlling shareholders	8	-	-	8
	3,894	-	-	3,894
Liabilities directly associated with disposal groups classified as held for sale	478	-	-	478
	4,372	-	-	4,372
Total equity and liabilities	$ 17,777	$ -	$ 28	$ 17,805

2. Changes in Accounting Policies

Basis of Preparation (continued)

Restatement of Financial Statements (continued)


Statement of Operations	Six-month period ended 30 June 2012
	As previously reported	Change in accounting policies	Restated
Revenue
Sale of goods	$ 7,440	$ -	$ 7,440
Rendering of services	179	-	179
	7,619	-	7,619
Cost of revenue	(6,029)	9	(6,020)
Gross profit	1,590	9	1,599
		-
Selling and distribution costs	(621)	-	(621)
General and administrative expenses	(428)	-	(428)
Social and social infrastructure maintenance expenses	(21)	-	(21)
Loss on disposal of property, plant and equipment	(25)	-	(25)
Impairment of assets	(80)	-	(80)
Foreign exchange gains/(losses), net	28	-	28
Other operating income	33	-	33
Other operating expenses	(46)	-	(46)
Profit from operations	430	9	439
		-
Interest income	8	-	8
Interest expense	(317)	(5)	(322)
Share of profits/(losses) of joint ventures and associates	6	-	6
Gain/(loss) on financial assets and liabilities, net	(26)	-	(26)
Gain/(loss) on disposal groups classified as held for sale, net	(2)		(2)
Other non-operating gains/(losses), net	(13)		(13)
Profit before tax	86	4	90

Income tax benefit/(expense)	(136)	-	(136)
Net loss	$ (50)	$ 4	$ (46)

Attributable to:
Equity holders of the parent entity	$ (38)	$ 4	$ (34)
Non-controlling interests	(12)	-	(12)
	$ (50)	$ 4	$ (46)
Earnings/(losses) per share:
for profit/(loss) attributable to equity holders of the parent entity, US dollars, basic and diluted	$ (0.03)	$ -	$ (0.03)

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 2012, except for the adoption of new standards and interpretations and revision of the existing IAS as of 1 January 2013.

New/Revised Standards and Interpretations Adopted in 2013:

§ Amendments to IAS 19 "Employee Benefits"

IAS 19 (revised) includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognised in other comprehensive income and permanently excluded from profit and loss; expected returns on plan assets that are no longer recognised in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures. The amended standard is required to be applied retrospectively. The effects of the application of the revised IAS 19 are disclosed in the Basis of Preparation above.

§ Amendments to IFRS 7 "Financial Instruments: Disclosures" - Offsetting Financial Assets and Financial Liabilities

The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with IAS 32.

§ IFRS 13 "Fair Value Measurement"

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 "Financial Instruments: Disclosures". Some of these disclosures are specifically required for financial instruments by IAS 34.16A(j), thereby affecting the interim condensed consolidated financial statements period.

2. Significant Accounting Policies (continued)

Changes in Accounting Policies (continued)

§ Amendments to IAS 1 "Presentation of Financial Statements" - Changes to the Presentation of Other Comprehensive Income

The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) now have to be presented separately from items that will never be reclassified (e.g., actuarial gains and losses on defined benefit plans and revaluation of land and buildings).

The amendment to IAS 1 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional voluntarily comparative information does not need to be presented in a complete set of financial statements.

An opening statement of financial position (known as the 'third balance sheet') must be presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does not have to be accompanied by comparative information in the related notes. Under IAS 34, the minimum items required for interim condensed financial statements do not include a third balance sheet.

§ IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine"

This Interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine.

If the benefit from the stripping activity will be realised in the current period, an entity is required to account for the stripping activity costs as part of the cost of inventory. When the benefit is the improved access to ore, the entity recognises these costs as a non-current asset, only if certain criteria are met. This is referred to as the 'stripping activity asset'. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset.

If the costs of the stripping activity asset and the inventory produced are not separately identifiable, the entity allocates the cost between the two assets using an allocation method based on a relevant production measure.

After initial recognition, the stripping activity asset is carried at its cost or revalued amount less depreciation or amortisation and less impairment losses, in the same way as the existing asset of which it is a part.

2. Significant Accounting Policies (continued)

Changes in Accounting Policies (continued)

§ Amendments to standards following the May 2012 "Improvements to IFRS" project

Except for IAS 19 (revised), the 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 following tables present measures of segment profit or loss based on management accounts.

Six-month period ended 30 June 2013


US$ million	Steel	Mining	Vanadium	Other	Eliminations	Total
Revenue
Sales to external customers	$ 6,641	$ 372	$ 148	$ 100	$ -	$ 7,261
Inter-segment sales	179	1,185	140	235	(1,739)	-
Total revenue	6,820	1,557	288	335	(1,739)	7,261

Segment result - EBITDA	$ 530	$ 248	$ 27	$ 36	$ (34)	$ 807

Six-month period ended 30 June 2012


US$ million	Steel	Mining	Vanadium	Other	Eliminations	Total
Revenue
Sales to external customers	$ 7,188	$ 157	$ 106	$ 94	$ -	$ 7,545
Inter-segment sales	177	1,171	147	334	(1,829)	-
Total revenue	7,365	1,328	253	428	(1,829)	7,545

Segment result - EBITDA	$ 662	$ 404	$ 38	$ 101	$ (52)	$ 1,153

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 2013


US$ million	Steel	Mining	Vanadium	Other	Eliminations	Total
Revenue	$ 6,820	$ 1,557	$ 288	$ 335	$ (1,739)	$ 7,261
Reclassifications and other adjustments	(404)	65	(20)	130	330	101
Revenue per IFRS financial statements	$ 6,416	$ 1,622	$ 268	$ 465	$ (1,409)	$ 7,362

EBITDA	$ 530	$ 248	$ 27	$ 36	$ (34)	$ 807
Exclusion of management services from segment result	75	23	2	2	-	102
Unrealised profits adjustment	8	-	(1)	-	(27)	(20)
Reclassifications and other adjustments	38	83	6	23	-	150
	121	106	7	25	(27)	232
EBITDA based on IFRS financial statements	$ 651	$ 354	$ 34	$ 61	$ (61)	$ 1,039
Unallocated subsidiaries						(100)
						$ 939


Depreciation, depletion and amortisation expense	(277)	(257)	(7)	(17)	-	(558)
Impairment of assets	32	(39)	-	-	-	(7)
Gain/(loss) on disposal of property, plant and equipment and intangible assets	(8)	(2)	-	1	-	(9)
Foreign exchange gains/(losses), net	(42)	16	-	-	-	(26)
	356	72	27	45	(61)	339
Unallocated income/(expenses), net						(156)
Profit/(loss) from operations						$ 183

Interest income/(expense), net						(361)
Share of profits/(losses) of joint ventures and associates						3
Gain/(loss) on derecognition of equity investments, net						89
Gain/(loss) on financial assets and liabilities						(71)
Gain/(loss) on disposal groups classified as held for sale						54
Other non-operating gains/(losses), net						(3)
Profit/(loss) before tax						$ (106)

3. Segment Information (continued)

Six-month period ended 30 June 2012 (restated)


US$ million	Steel	Mining	Vanadium	Other	Eliminations	Total
Revenue	$ 7,365	$ 1,328	$ 253	$ 428	$ (1,829)	$ 7,545
Forecasted vs. actual revenue	24	2	2	(8)	-	20
Reclassifications and other adjustments	(370)	53	8	121	242	54
Revenue per IFRS financial statements	$ 7,019	$ 1,383	$ 263	$ 541	$ (1,587)	$ 7,619

EBITDA	$ 662	$ 404	$ 38	$ 101	$ (52)	$ 1,153
Forecasted vs. actual EBITDA	-	10	1	2	-	13
Exclusion of management services from segment result	50	24	2	2	-	78
Unrealised profits adjustment	(48)	-	-	-	102	54
Reclassifications and other adjustments	42	(19)	(37)	(11)	-	(25)
	44	15	(34)	(7)	102	120
EBITDA based on IFRS financial statements	$ 706	$ 419	$ 4	$ 94	$ 50	$ 1,273
Unallocated subsidiaries						(89)
						$ 1,184


Depreciation, depletion and amortisation expense	(257)	(364)	(23)	(21)	-	(665)
Impairment of assets	(64)	(15)	-	(1)	-	(80)
Gain/(loss) on disposal of property, plant and equipment and intangible assets	(17)	(8)	-	-	-	(25)
Foreign exchange gains/(losses), net	25	42	-	(1)	-	66
	393	74	(19)	71	50	480
Unallocated income/(expenses), net						(41)
Profit/(loss) from operations						$ 439

Interest income/(expense), net						(314)
Share of profits/(losses) of joint ventures and associates						6
Gain/(loss) on financial assets and liabilities						(26)
Gain/(loss) on disposal groups classified as held for sale						(2)
Other non-operating gains/(losses), net						(13)
Profit/(loss) before tax						$ 90

In the six-month period ended 30 June 2013, the Group made a reversal of the allowance for net realisable value in the amount of $16 million.

The material changes in property, plant and equipment during the six-month period ended 30 June 2013 other than those disclosed above are presented below:


US$ million	Steel	Mining	Vanadium	Other	Total
Additions	$ 224	$ 205	$ 14	$ 18	$ 461
Acquired in business combination	-	2,628	-	-	2,628

4. Purchases/Sales of Ownership Interests in Subsidiaries

Acquisition of Controlling Interest in Corber

In October 2012, EVRAZ plc concluded a preliminary agreement with Adroliv Investments Limited for an acquisition of a 50% ownership interest in Corber subject to the receipt of regulatory approvals and fulfillment of certain other conditions. On 16 January 2013, all the conditions were met and the Group obtained control over the entity. As a result, Corber became a wholly owned subsidiary of the Group on 16 January 2013.

Management believes that this acquisition will increase the Group's coking coal self-coverage and generate substantial operational synergies to the Group, including the optimal use of various coal grades.

The purchase consideration includes 132,653,006 shares of EVRAZ plc issued on 16 January 2013, warrants to subscribe for an additional 33,944,928 EVRAZ plc shares exercisable at zero price in the period from 17 January to 17 April 2014 and a cash consideration of $202 million to be paid in equal quarterly installments to 15 January 2014. Fair value of the consideration transferred totalled to $964 million, including $611 million relating to the shares issued, $156 million representing the fair value of the warrants and $197 million of present value of the cash component of the purchase consideration. The fair value of shares and warrants was determined by reference to the market value of EVRAZ plc shares at the date of acquisition.

In accordance with IFRS 3 "Business Combinations" in a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss in the income statement. The fair value of the equity interest previously held by an acquirer is further added to the purchase consideration in the purchase price calculation. The fair value of the equity interest previously held by the Group was $658 million. The fair value of the investment in Corber was determined using the market price of shares of Raspadskaya at the date of acquisition of an additional 50% share in Corber.

The Group recorded a $94 million gain on derecognition of the equity interest in Corber held before the business combination. This gain was determined as follows:


US$ million	16 January 2013
Fair value of shares held before the business combination	$ 658
Less: carrying value of the investment in the joint venture at the date of business combination based on equity method of accounting (Note 8)	(496)
Less: accumulated foreign exchange losses of the acquiree attributed to the Group's share in the joint venture	(68)
Gain on derecognition of equity investment	$ 94

4. Purchases/Sales of Ownership Interests in Subsidiaries (continued)

Acquisition of a Controlling Interest in Corber (continued)

The acquisition of a controlling interest in Corber was accounted for based on provisional values as the Group, as of the date of authorisation of issue of these financial statements, has not completed a purchase price allocation in accordance with IFRS 3 "Business Combinations".

The table below sets forth the provisional fair values of Corber's consolidated identifiable assets, liabilities and contingent liabilities at the date of acquisition:


US$ million	16 January 2013
Mineral reserves and property, plant and equipment	$ 2,628
Other non-current assets	71
Inventories	102
Accounts and notes receivable	134
Cash	144
Total assets	3,079


Deferred income tax liabilities	363
Non-current liabilities	614
Current liabilities	123
Total liabilities	1,100
Non-controlling interests	357
Net assets	$ 1,622

Purchase consideration	$ 1,622

Cash flow on acquisition for the six-month period ended 30 June 2013 was as follows:


US$ million
Net cash acquired with the subsidiary	$ 144
Cash paid	(51)
Net cash inflow	$ 93

As of 30 June 2013, the unpaid purchase consideration was $151 million.

For the period from 16 January 2013 to 30 June 2013, Corber reported a net loss amounting to $82 million.

Acquisition of a Controlling Interest in MediaHolding Provincia

In the six-month period ended 30 June 2013, the Group acquired an additional 45.5% ownership interest in MediaHolding Provincia for a cash consideration of $11 million. The fair value of the equity interest previously held by the Group (30%) was $4 million. The Group recorded a $5 million loss on derecognition of the equity interest in MediaHolding Provincia held before the business combination. The Group recognised $3 million of goodwill on the transaction. Subsequently, the Group acquired all non-controlling interests settled by the transfer of property and recognised the excess of the carrying value of the acquired non-controlling interests over the amount of consideration amounting to $1 million in additional paid-in capital.

Disclosure of Other Information in Respect of Business Combinations

If this business combination had occurred as of the beginning of 2013, the revenue and net profit/(loss) of the combined entity would have been $7,388 million and $(129) million, respectively.

5. Impairment of Non-current Assets

For the purpose of the impairment testing as of 30 June 2013 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 cash-generating 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.

The key assumptions used by management in the value-in-use calculations with respect to the cash-generating units to which the goodwill was allocated are presented in the table below.


	Period of forecast, years	Pre-tax discount rate, %	Commodity	Average price of commodity per tonne in 2013	Average price of commodity per tonne in 2014	Recoverable amount of CGU, US$ million	Carrying amount of CGU, US$ million

EVRAZ Palini e Bertoli	5	13.82	steel plates	€487	€504	267	189
EVRAZ Vanady-Tula	5	12.99	vanadium products	$21,598	22,720	229	110
Vametco	5	13.87	ferrovanadium products	$27,077	$30,827	256	39
EVRAZ Nikom, a.s.	5	12.17	ferrovanadium products	$23,303	$24,538	48	40
EVRAZ Inc. NA Canada - Calgary unit	5	11.72	steel products	$1,290	$1,341	456	378
EVRAZ Inc. NA cash-generating units:
EVRAZ Claymont Steel	5	12.92	steel products	$788	$832	341	299
EVRAZ Pueblo	5	11.20	steel products	$1,258	$1,322	167	129
EVRAZ Camrose	5	11.72	steel products	$1,169	$1,244	309	187

5. Impairment of Non-current Assets (continued)


	Period of forecast, years	Pre-tax discount rate, %	Commodity	Average price of commodity per tonne in 2013	Average price of commodity per tonne in 2014

EVRAZ Dnepropetrovsk Iron and Steel Works	5	12.98	steel products	$579	$647
EVRAZ Nizhny Tagil Iron & Steel Plant	5	12.99	steel products	$664	$688
EVRAZ United West-Siberian Iron & Steel Plant	5	13.26	steel products	$525	$577
EVRAZ Caspian Steel	5	12.00	steel mill under construction	$509	$557
EVRAZ Yuzhny Stan	5	12.00	steel mill under construction	$553	$604
EVRAZ Bagleykoks	5	15.11	coke	$225	$246
Strategic Minerals Corporation	5	12.92	ferrovanadium products	$38,560	$42,995
Yuzhkuzbassugol	18	13.14	coal	$82	$93
Mezhegeyugol	30	14.00	undeveloped coal field	$121	$128
EVRAZ Kachkanarsky Mining-and-Processing Integrated Works	8	14.59	ore	$77	$82
EVRAZ Sukha Balka	20	15.39	ore	$64	$66
EVRAZ Vysokogorsky Mining-and-Processing Integrated Works	1	11.67	ore	$93	-
Evrazruda	21	14.59 -15.61	ore	$81	$93
EVRAZ Nakhodka Trade Seaport	5	12.99	port services	$11	$11
Raspadskaya	23	12.65	coal	$75	$74

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.

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 additional impairment at EVRAZ United West-Siberian Iron & Steel Plant, EVRAZ Yuzhkuzbassugol, Raspadskaya, EVRAZ Dnepropetrovsk Iron and Steel Works and EVRAZ Claymont cash-generating units. If the discount rates were 10% higher, this would lead to an additional impairment of $479million.

5. Impairment of Non-current Assets (continued)

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 0.9%-5.9% in 2013 - 2017 and 3.0% in 2018 and thereafter. Reasonably possible changes in sales prices could lead to an additional impairment at EVRAZ United West-Siberian Iron & Steel Plant, EVRAZ Dnepropetrovsk Iron and Steel Works and EVRAZ Nikom cash-generating units. If the prices assumed for the 2nd half of 2013 and 2014 were 10% lower, this would lead to an additional impairment of $392 million.

Sales Volumes

Management assumed that the sales volumes of steel products would increase by 2.6% in 2014 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 Dnepropetrovsk Iron and Steel Works cash-generating units. If the sales volumes were 10% lower than those assumed for the 2nd half of 2013 and 2014, this would lead to an additional impairment of $210 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, EVRAZ Dnepropetrovsk Iron and Steel Works, EVRAZ Bagleykoks and EVRAZ Nikom cash-generating units. If the actual costs were 10% higher than those assumed for the 2nd half of 2013 and 2014, this would lead to an additional impairment of $669 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	0.28%	(0.14)%	(0.31)%	0.09%
EVRAZ Yuzhkuzbassugol	5.60%	-	-	-
Raspadskaya	4.90 %	-	-	-
EVRAZ Nikom	-	(8.65)%	-	4.77%
EVRAZ Dnepropetrovsk Iron and Steel Works	11.07%	(9.48)%	(11.61)%	5.02%
EVRAZ Bagleykoks	-	-	-	9.20%
EVRAZ Claymont Steel	8.35%	-	-	-

5. Impairment of Non-current Assets (continued)

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


Six-month period ended 30 June 2013
US$ million	Goodwill and intangible assets	Property, plant and equipment	Total

Kazankovskaya	$ (14)	$ -	$ (14)
Yuzhkuzbassugol	-	(54)	(54)
Evrazruda	-	31	31
EVRAZ Dnepropetrovsk Iron and Steel Works	-	38	38
Others, net	-	(13)	(13)
	$ (14)	$ 2	$ (12)

The major drivers that led to the reversal of impairment were the changes in the costs forecasts and weighted average cost of capital.

In addition to the reversal of impairment losses recognised as a result of the impairment testing at the level of cash-generating units, the Group made a write-off of certain functionally obsolete items of property, plant and equipment.

6. Income Taxes

Major components of income tax expense were as follows:


	Six-month period ended 30 June
US$ million	2013	2012
Current income tax expense	$ (149)	$ (206)
Adjustment in respect of income tax of previous years	2	40
Deferred income tax benefit/(expense) relating to origination and reversal of temporary differences	131	30

Income tax expense reported in the consolidated statement of operations	$ (16)	$ (136)

7. Property, Plant and Equipment

The movement in property, plant and equipment for the six-month period ended 30 June 2013 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 2012, cost, net of accumulated depreciation	$ 181	$ 1,607	$ 3,188	$ 177	$ 1,446	$ 16	$ 1,177	$ 7,792
Assets acquired in business combinations	-	119	241	45	1,976	5	249	2,635
Additions	3	1	2	2	18	-	439	465
Assets put into operation	-	59	513	16	76	2	(666)	-
Disposals	-	(4)	(10)	(1)	-	-	(1)	(16)
Depreciation and depletion charge	-	(76)	(273)	(21)	(124)	(3)	-	(497)
Impairment losses recognised in statement of operations	(1)	(6)	(10)	(1)	(39)	-	(29)	(86)
Impairment losses reversed through statement of operations	-	14	26	-	52	-	1	93
Impairment losses recognised in other comprehensive income	-	(1)	-	-	(2)	-	(2)	(5)
Change in site restoration and decommissioning provision	-	1	-	-	9	-	-	10
Translation difference	(7)	(99)	(191)	(15)	(231)	(1)	(74)	(618)
At 30 June 2013, cost, net of accumulated depreciation	$ 176	$ 1,615	$ 3,486	$ 202	$ 3,181	$ 19	$ 1,094	$ 9,773

7. Property, Plant and Equipment (continued)

On 1 January 2013, the Group changed its estimation of useful lives of property, plant and equipment, which resulted in a $28 million decrease in depreciation expense as compared to the amounts that would have been charged had no change in estimate occurred. In addition, the Group updated its mining plans relating mostly to the extraction of coking coal reserves. Consequently, the depletion charge in the six-month period ended 30 June 2013 is lower by $75 million compared to the amount that would have been charged in accordance with the previous mining plans.

8. Investments in Joint Ventures and Associates

The movement in investments in joint ventures and associates during the six-month period ended 30 June 2013 was as follows:


US$ million	Corber	Timir	Streamcore	Other associates	Total
At 31 December 2012 (restated)	$ 497	$ -	$ 36	$ 18	$ 551
Additional investments	-	149	-	-	149
Share of profit/(loss)	-	-	3	-	3
Dividends paid	-	-	-	(1)	(1)
Acquisition of controlling interests (Note 4)	(496)	-	-	(9)	(505)
Translation difference	(1)	(8)	(2)	1	(10)
At 30 June 2013	$ -	$ 141	$ 37	$ 9	$ 187

Timir Iron Ore Project

On 3 April 2013, the Group acquired a 51% ownership interest in the joint venture with Alrosa for the development of 4 iron ore deposits in the southern part of the Yakutia region in Russia. The Group's consideration for this stake amounts to 4,950 million roubles (approximately $160 million) payable in installments to 15 July 2014. Total investments in the first phase of the Timir project are estimated at $1.8 billion during the period from 2013 to 2018, with major investments starting from 2017. The Group and Alrosa are expected to finance the Timir project on a pro rata basis.

The acquisition of an interest in Timir was accounted for based on provisional values as the Group, as of the date of authorisation of issue of these financial statements, has not completed purchase price allocation. The Group accounted for its interest in Timir under the equity method.

The table below sets forth the provisional fair values of Timir's consolidated identifiable assets, liabilities and contingent liabilities at the date of acquisition:


US$ million	3 April 2013
Mineral reserves and property, plant and equipment	$ 336
Accounts and notes receivable	2
Cash	2
Total assets	340


Deferred income tax liabilities	27
Non-current liabilities	7
Current liabilities	25
Total liabilities	59
Net assets	281
Net assets attributable to 51% ownership interest	143
Purchase consideration	$ 149
Goodwill	$ 6

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 2013	31 December 2012	30 June 2013	31 December 2012
Kazankovskaya	$ -	$ 23	$ -	$ -
Raspadsky Ugol	-	2	-	42
Vtorresource-Pererabotka	2	3	45	45
Yuzhny GOK	9	4	248	163
Liability to management of Raspadskaya for the acquisition of Corber (Note 4)	-	-	150	-
Other entities	14	14	8	7
	25	46	451	257
Less: allowance for doubtful accounts	(11)	(34)	-	-
	$ 14	$ 12	$ 451	$ 257

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	2013	2012	2013	2012

Interlock Security Services	$ -	$ -	$ 27	$ 24
Raspadsky Ugol	-	5	5	61
Vtorresource-Pererabotka	7	6	205	226
Yuzhny GOK	34	33	71	67
Other entities	5	3	20	16

	$ 46	$ 47	$ 328	$ 394

In the six-month period ended 30 June 2013, Kazankovskaya and Raspadsky Ugol, a subsidiary of Raspadskaya, ceased to be related parties as the Group obtained control over these entities (Note 4).

Compensation to Key Management Personnel

In the six-month periods ended 30 June 2013 and 2012, key management personnel totalled 57 and 54 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	2013	2012

Salary	$ 13	$ 11
Performance bonuses	-	10
Social security taxes	2	3
Share-based payments	5	4
	$ 20	$ 28

10. Cash and Cash Equivalents

Cash and cash equivalents were denominated in the following currencies:


US$ million	30 June 2013	31 December 2012

US dollar	$ 1,068	$ 855
Russian rouble	325	347
Ukrainian hryvnia	42	9
Euro	22	17
South African rand	9	10
Canadian dollar	3	80
Other	2	2
	$ 1,471	$ 1,320

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

At 30 June 2013 and 31 December 2012, the assets of disposal groups classified as held for sale included cash amounting to $66 million and $70 million, respectively.

11. Equity

Share Capital


Number of shares	30 June 2013	31 December 2012

Issued and fully paid
Ordinary shares of $1 each	1,472,582,366	1,339,929,360

Share Issue

On 16 January 2013, EVRAZ plc issued 132,653,006 shares in connection with the acquisition a controlling interest in Corber (Note 4).

These shares were valued at their market quotation at the date of acquisition of Corber. The excess of the market value of shares issued over their nominal value in the amount of $478 million was recognised in a merger reserve under section 612 of the Companies Act 2006 as all of the criteria for merger relief have been satisfied.

The purchase consideration for Corber includes warrants to subscribe for an additional 33,944,928 EVRAZ plc shares exercisable at zero price in the period from 17 January to 17 April 2014. The number of the shares to be issued under these warrants is adjustable for dividends that could be paid during the period from the date of issue of the warrants until the date of their exercise. The fair value of warrants issued amounting to $156 million was credited to a separate reserve within equity.

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.

11. Equity (continued)

Earnings per Share (continued)

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
	2013	2012
Weighted average number of ordinary shares outstanding during the period	1,492,577,321	1,337,900,998

Profit/(loss) for the period attributable to equity holders of the parent entity, US$ million	$ (111)	$ (34)
Earnings/(losses) per share, basic and diluted	$ (0.07)	$ (0.03)

The warrants issued in connection with the acquisition of a controlling interest in Corber (Note 4) 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 periods ended 30 June 2013 and 2012, 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

The Board of directors decided not to declare a final dividend for 2012 and this decision was approved by the Annual General Meeting of shareholders of EVRAZ plc in June 2013.

12. Loans and Borrowings

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


US$ million	30 June 2013	31 December 2012

Bank loans	$ 2,203	$ 2,562
European commercial papers	247	242
8.875 per cent notes due 2013	-	534
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	-
13.5 per cent bonds due 2014	611	658
9.25 per cent bonds due 2013	-	494
8.75 per cent bonds due 2015	119	-
9.95 per cent bonds due 2015	459	494
8.40 per cent bonds due 2016	611	658
Liabilities under 7.75 per cent bonds due 2017 assumed in business combination	400	-
Other liabilities	9	1
Unamortised debt issue costs	(78)	(116)
Interest payable	86	93

	$ 8,203	$ 8,156

12. Loans and Borrowings (continued)

At 30 June 2013 and 31 December 2012, the liabilities of disposal groups classified as held for sale included bank loans amounting to $120 million and $79 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 2013 and 31 December 2012, the Group had inventory with a carrying value of $205 million and $319 million, respectively, pledged as collateral under the loan agreements.

Extension of the 9.25% Notes Due 2013

In March 2013, the holders of 9.25% rouble-denominated notes received an option to accept a new coupon of 8.75% per annum till 20 March 2015 or put the notes back to the Group at a nominal value. By 26 March 2013, the date of the expiration of the option, the Group re-purchased back notes totalling 12,265 million roubles ($399 million at the exchange rate as of the date of the transaction). The remaining notes with the aggregate principal amount of 2,735 million roubles ($84 million at the exchange rate as of 30 June 2013) continue to be traded on the Moscow Exchange.

The Group has a right to resell the repurchased notes on the market at any time and at its own discretion. In April and May 2013, the Group resold part of the notes for 100 roubles each and received 1,150 million roubles ($35 million at the exchange rate as of 30 June 2013).

Issue of Notes and Bonds

In April 2013, the Group issued notes for the amount of $1,000 million due in 2020. The notes bear semi-annual coupon at the annual rate of 6.50% and must be redeemed at their principal amount on 22 April 2020. The proceeds from the issue of the notes were used for the repayment of the 8.875% notes maturing on 24 April 2013, as well as certain bank loans.

Compliance with Financial Covenants

At 30 June 2013, the Group had $404 million liabilities under loan agreements which contained financial restrictions which could have been breached upon the issue of the interim consolidated financial statements. The Group repaid these liabilities in full and terminated the loan agreements in July 2013.

Unutilised Borrowing Facilities

As of 30 June 2013, the Group had unutilised bank loans in the amount of $863 million, including $358 million of committed facilities.

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. 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 $74 million.

Contractual Commitments

At 30 June 2013, the Group had contractual commitments for the purchase of production equipment and construction works for an approximate amount of $474 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 252 million euro. The agreement is within the scope of IFRIC 4 "Determining whether an Arrangement Contains a Lease". At 30 June 2013, 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 $108 million under these programmes in the second half of 2013.

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 2013 to 2022, under which the Group will perform works aimed at reductions in environmental pollution and contamination. As of 30 June 2013, the costs of implementing these programmes are estimated at $293 million.

13. Commitments and Contingencies (continued)

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 2013			31 December 2012
US$ million	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Assets measured at fair value
Available-for-sale financial assets	25	-	-	21	-	-
Derivatives not designated as hedging instruments	-	-	-	-	2	-

Liabilities measured at fair value
Derivatives not designated as hedging instruments	-	220	-	-	115	-
Deferred consideration payable for the acquisition of Inprom	-	-	-	10	-	-
Contingent consideration payable for the acquisition of Stratcor	-	-	12	-	-	12

The following table shows fair values of the Group's bonds and notes at 30 June 2013.


US$ million	Carrying amount	Fair value

European commercial papers	$ 247	$ 247
8.25 per cent notes due 2015	566	618
7.40 per cent notes due 2017	605	612
9.5 per cent notes due 2018	503	550
6.75 per cent notes due 2018	854	828
6.50 per cent notes due 2020	1,007	916
13.5 per cent bonds due 2014	627	663
8.75 per cent bonds due 2015	122	122
9.95 per cent bonds due 2015	465	472
8.40 per cent bonds due 2016	614	603
Liabilities under 7.75 per cent bonds due 2017 assumed in business combination	403	407

	$ 6,013	$ 6,038

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

15. Subsequent Events

There are no events subsequent to the reporting period which require disclosure in these interim condensed financial statements.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR ZMGZRKLVGFZG

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