Hello, good afternoon, ladies and gentlemen, I would like to welcome you to our conference call to discuss financial and operating results for EVRAZ for the year of 2016. I hope you have had an opportunity to download the presentation, which is available on our website, evraz.com, as we will be following it during the call.

Traditionally, before I begin, I would like to remind everyone that the matters discussed on this call will include forward-looking statements that are subject to many factors, risks and uncertainties that are described in detail on the second page of the presentation. We undertake no obligation to update any forward-looking statements.

Today on this call, I am being joined by our new CFO, Nikolay Ivanov, whom I am very pleased to introduce and Sergey Stepanov, the Head of our Coal division. I will begin by outlining key messages of today’s presentation, followed by a strategic update, I will turn the call to Nikolay who will go through the financial results in detail; Sergey will be available for all the operations on coal during our Q&A session.

Now let’s turn to the slides. We’ll start on Page 5.

During 2016, we have seen positive trends in steel prices as well as very sharp increase in coal prices, which are now softening, but still remain on the level higher than a year ago. Iron ore price is also on a positive trend rates in fleets, at the same time structural capacity is taking place and a factor of China influence on the global supply demand equation remains as uncertain as before.

In US it’s our prime focus in 2016 was on EBITDA improvement, development of our product portfolio has brought us $169 million in US and cost-cutting measures brought another $616 million EBITDA improvement. As a result, our EBITDA reached $1,542 million and our net debt has decreased by $0.5 billion down to $4.8 billion with a net debt-to-EBITDA ratio of 3.1 at the end of 2016.

So if I turn on Page 6, on this slide, I would like to say a few words about safety, which remains our top priority. We have ended 2016 with six fatalities, and slightly increased lost-time injury frequency rate.

Our LTFR number showed mixed dynamics, which is mostly linked to our continued work to improve transparency of our reporting. Our long-term goal here is the same as before, zero fatalities and LTFR below 1.

On Slide 7, I would like to remind you what our strategic priorities are, first is development of our product portfolio and retention of our low-cost position. We also remain cautious with our capital expenditures and we are continuously pushing our net debt down.

So, Slide 8, here I want to give you more details about our product portfolio development. As you know, we are number one producer of rails globally.

The Russian market remains priority for us, but we also development and for sale some rails out of Russia. We are leading producer of construction steel and we put a lot of efforts to promote more advanced construction technologies allowing the replacement of countries with our steel profile from the territory of Russian Federation.

2016 was a good year for our coal segment. We believe that EVRAZ will benefit from longer-term marketing promise here and as well as from our ability to enhance efficiency of our coal operations.

In North America in 2016, we have made material investments to upgrade our steel mill in Regina and we have also built new large-diameter pipe mill there. We are now well positioned to improve our share in North American large-diameter pipe market.

So, Slide 9, retention of low-cost position is another priority for us as already said. As you can see our cost of slabs, iron ore and coking coal in 2016 was lower than in 2015, which allowed us to benefit from positive market trends in all the segments.

So moving on Page 10, we have reduced our CapEx spend in recent years after completion of our major projects like rail mill construction in Novokuznetsk , development of Erunakovskaya-8 mine, and some other. In 2017, we expect moderate CapEx growth linked mainly to the construction of blast furnace number 7 in Nizhnij Tagil.

CapEx in coal segment would also increase slightly, but this would allow us to get immediate benefits on the improved coal market conditions. As you can see on Slide 11, our debt reduction trends is very consistent as we have achieved great results in 2015 and 2016 specifically.

Net debt has gone down to $4.8 billion and net leverage is at 3.1 now. We will continue our efforts here with the medium-term target to bring our net debt to EBITDA ratio below 2.

On Slide 12, we are providing you with a brief summary of our achievements in 2016 in the context of our strategic priorities. As you can see here, major EBITDA effects are 1.65 and $616 million that are committed to customer focus initiatives and cost-cutting program respectively.

As those are the two priorities I have already mentioned, our prudent CapEx strategy and our progress with the net debt reductions. So with this, I will pass the word to Nikolay Ivanov who would walk you through financial reviews.

So, Nikolay, please.

Thank you, Alexander, and good afternoon everybody. Before I turn to the slides, I would like to emphasize on the fact that 2016 was quite a good year for EVRAZ, especially the second half of the year.

Our revenue and EBITDA in the first six months of 2016 have been negatively affected by unsustainable low prices of steel and raw materials and decreased demand especially in the first quarter. The second half of the year saw a significant pick up and recovery both in steel and in coal segments.

We are able to deliver strong positive free cash flow and reduce net debt. Now moving to Slide 14 please.

I would like to start with an overview of our financial performance here. Our full year EBITDA demonstrated a 7.2% increase to previous year, mainly due to numerous improvement initiatives and more favorable market conditions in the second half of 2016 as I have already mentioned.

Our EBITDA margin recovered to 20% in the reporting period in the view of our cost efficiency matters and market initiatives. Steel segment performance in 2016 is a result of comparatively worse market conditions in 2016 versus 2015.

EBITDA fell amid negative steel price trends and the reduction in sales volume. The Coal segment on the other hand benefited from significant price increase, healthy demand and productivity improvements leading to an 83.5% increase of EBITDA to $644 million.

The year 2016 was a rather challenging one for our North American business. Key driver of such performance were significant reduction in EVRAZ North American OCTG sales resulting from a markets ramp, amid low oil prices, big tubular and rail markets in North America and delays in pipeline projects.

Our unallocated expenses which are our corporate overheads decreased to $109 million from $130 million a year earlier. Eliminations mostly reflect unrealized profits or losses that relate to the inventories on inter-company transactions.

Moving to Slide 15 please. Our free cash flow for the year remained quite strong, $659 million and it allowed us to further reduce our debt.

Net cash flows from operating activities decreased slightly by 7.3% compared with 2015 and $160 million was attributed to the release in net working capital. Moving to the next slide, slide 16.

With our continuous focus on debt reduction, we have undertaken several refinancing initiatives during 2016 in various debt markets to proactively extend short-term debt maturities and reduce the cost of our debt. $765 million across 2017, 2018 EVRAZ and Raspadskaya’s Eurobonds was repurchased in 2016 on the markets and public tender offers.

We used all available sources of financing including bank loans and capital markets facilities including our 15 billion ruble bonds issued in March and $500 million Eurobonds issued in June. Remaining $177 million principal of the 2017 Eurobonds was called in full and settled in August.

During 2016, in order to reduce total debt and interest expense, as well as to extend the maturity profile, EVRAZ also prepaid several bank facilities. As a result of this effort, our average maturity rose to 3.3 years.

Our gross debt went down by $763 million and fell below $6 billion and our net debt also decreased by more than $0.5 billion and is now standing at $4.5 billion. As at December 31, 2016, EVRAZ was in full compliance with its financial covenants.

Cash amounted to more than $1.1 billion and short-term loans and current portion of long-term debt stood at only $392 million. Cash on hand and committed credit facilities are positioned to cover all of EVRAZ’s debt principals maturing in 2017 and 2018.

Going to the next slide 17, I would like to elaborate on development CapEx and our key investment projects. Over the last five years, EVRAZ completed a substantial investment program.

Current investment projects are focused on efficiency improvements and selective product portfolio developments. Mine highlights here are two projects at the EVRAZ Regina in Canada with the launch scheduled in the first quarter of 2017.

The Mezhegey Coal Mine project launched in the second quarter of 2016 and is now ramping up production volumes. And EVRAZ NTMK grinding ball mill construction project and also the Blast Furnace number 7 project.

First iron is scheduled at the end of 2017 beginning of 2018. Capital expenditures are summarized for your convenience in a table on the slide.

Over the medium-term, maintenance CapEx may increase to support current capacities like the construction of a new Blast Furnace at the EVRAZ NTMK and high CapEx to maintain coking coal mining cost. On Slide 19, we summed up outlook boils for 2017.

Generally, our view is such that even though commodity prices seems to be stabilizing and the whole steel markets sees relative improvements versus the beginning of 2016. The overall performance operating environment remains complex and volatile.

The key risks that we see here are the uncertainty around further change in capacity cost and other developments in China, as well as the general health of Russian economy. Given the current environment, EVRAZ will remain focused on cost efficiency and product development which will support its financial stability and enable us to deliver stronger financial results going forward.

We continue to expect positive free cash flow and progress towards reducing net debt in absolute terms. With this, I would like to thank you for listening to our presentation.

We have a few slides on our operational performance further in the presentation, which we decided not to talk through, but instead give you more time for your questions. I also will take this opportunity to note that our annual report for 2016 has been released today.

There you can find comprehensive information and in-depth details on our performance in 2016. And now, we are ready to take your questions.

Thank you.

Hi, thank you for the presentation. I have a couple of questions.

You’ve mentioned slightly high CapEx guidance for your 2017 and 2018 $550 million USD. Is this primarily on the back of increasing maintenance CapEx?

Can you just please provide more details? And also, with respect to your short-term debt, you don’t have significant maturities this year, but slightly higher maturities in 2018.

Given slightly low cost of borrowing in the international bulk markets, are you considering any refinancing this year? Thank you.

That’s an example of – let me quickly answer your first question about CapEx. As I mentioned, let’s say maintenance CapEx would not change much.

Generally sort of significant change we see it is in a coal side, but again, it’s not something let’s say – they are not any kind of big let’s say projects or changes there. We are just making some efforts to maximize current production or let’s say to be at quicker terms and quick volumes of additional coal which would lower our benefits from the current market conditions.

So this kind of maintenance was very quick payback. And on the debt, I pass on to Nikolay.

This is Nikolay, yes, as I mentioned, we don’t need to pay back a lot of debt in the year 2017. It’s below $400 million and the next significant payment needs to be done only in 2018 when our bonds mature.

So with high cash liquidity which is in excess of $1.1 billion, we don’t see an immediate need. But I would agree with you that the markets are very, very, very strong and we are monitoring them very, very closely.

So, if we believe that it’s beneficial for the company to enter the market, we will definitely do that.

Okay, thank you very much.

Hi, thank you. I had a few questions.

Looking at the US operations, what percentage of the crude, steel input comes from overseas production facilities? And if we were to see a border tax, what would be the ability to source your inputs to the crude, steel domestically within the US?

Also within the US, we talk about the Keystone pipeline, do the old contracted volumes still hold? Or is there a need for the pipeline to rebuy and also with the announcement that US pipeline is need to be made in the US to the maximum extent possible, what impact does that have on your ability to supply a volume to it?

And I have one last one, but I’ll let you answer those first please.

To the USA, tell what your last question is?

The last one is just about the loss on – the realized loss on derivatives this year. If we could just have a further more background about what that was.

I am not sure that I understood correctly, your first about our crude, steel, let’s say sourcing in the United States. Just for clarification, we have three production sites there.

One is in Portland which is a rolling mill and this mill mostly rolls blast produced [Indiscernible]. So then another site is in Regina which is electric furnace and the main product there we are making large-diameter pipes and some OCTG pipes and the third site is our mill in Pueblo where the main product is rail, some seamless pipes and some re-bars.

So, the first is sourcing material overseas, let’s say to source material locally would be pretty difficult because let’s say the closest, let’s say steel making will be relatively flow away, but I guess that historically, it was a stance of our business model important because as we are not relying on, let’s say fully integrated steel making and we have been quite flexible, buying slabs when needed and at the price which was let’s say meeting our pocket price. I am not sure that it answer – if let’s say, it doesn’t answer your question, then please let’s say, make it full up.

Let’s say talking about, let’s say Mr. Trump’s statement that pipes in US should be made fully in US.

I guess at this stage it’s very early to say what sort of impact it would finally make because, Secretary of Commerce which was appointed just yesterday has got 180 days to work out on this matter. And we just have to be patient to see what will happen.

We don’t really understand, let’s say, how it could impact our business because we don’t understand what sort of a legal background could be behind the changes, but again, we just need to wait and see. On, let’s say losses, I think, yes, the question was with regards to the gains and losses on deliveries.

So, to manage the currency exposure, on the ruble-denominated bonds, the company partially hedges those transactions. It took place in 2010, 2015 during this periods of time.

So basically what the company deals, we concluded currency flows and reached – we agreed to deliver US dollar-denominated interest payments and notional amounts in exchange for ruble-denominated interest payments and notional amounts. So this for both contracts.

We are not designed as hedge – sorry – we are not designed as cash hedges and we account for the swaps at the fair value. So, the net results which we disclosed in our financials for the year 2016 is $23 million gain.

We – this related swap contracts matured in the year 2014 and 2016, so, for those swaps, I don’t think we would be showing any – they will not have any impact on our income or loss in the current year.

Just one quick follow-up. I was more referring to the $250 million of realized losses.

Yes, I was talking about – and it’s connected with $273 million of unrealized gain.

Got it.

That set of those is 23 positive.

Got it. Understood.

Yes, and for more information, you can look at item 25, yes, or turn to 25 in our financial statement.

That’s great. Thank you very much for answering my questions.

Yes, hello. Thanks a lot.

A few questions from my side as well. First on mining costs in Russia.

In 2017, what is your assessment on this year performance, I mean, globally, costs are rising on the back of fuel, currencies, what would be your assessment for iron ore and coking coal cost this year? That’s my first question.

Is it cost or price?

Cost, cost of production.

Okay. Is it all the questions, sir?

No, the second question is on dividends case, it seems like that the first half of 2017 would be even stronger compared to second half of 2016 in terms of financials and you may well go below 2.5 times net debt to EBITDA. Will that trigger dividend payments after the first half?

And if yes, what could be the potential amount in overall your desire in the split in free cash flow between dividends and further leverage reduction?

Okay, so, starting from your last question. Our dividend policy is that we don’t pay any dividend if let’s say net debt to EBITDA ratio is above 3.

If this ratio would go below 3, which is very likely to happen on the back of third half of 2017 results, then our Board would consider how to distribute the cash flow and our prime goal would remain let’s say to reduce debt, because we believe as I said earlier that our comfortable zone is below 2. At the same time, I do not exclude the possibility that the Board may decide to pay some dividends, but it’s premature to discuss this subject right now.

Talking about cost on mining, we do not expect any major increase in 2017. So, our volumes remain in more or less the same with some slight growth and we have number of measures, let’s say how to improve efficiencies.

So, I would expect as a plateau, let’s say some reductions. If we speak about that onwards.

That’s in rubles or in US dollars?

I would say, this is – we can even say rubles.

Okay. Thank you.

Hi there. Congratulations on the great results.

I just wanted to follow-up on the question on liability management. We’ve seen success with issuance from – and resell.

I just wanted to know if you were to do some liability management, would you be looking to clear up the short-end of the curve. Or would you be looking to bring down your interest expense and look at your higher coupon outstanding bonds?

And if you were to do some liability management, are you more inclined to meet mill breaks that you are seeing from local banks – would you be more inclined to come to the market or would you be looking to – or tell us from locals? Thank you.

Okay. Thank you very much.

I don’t think we have an exact strategy. So currently, about two-thirds of our debt is public debt and one-third of that is a bank debt and we are quite comfortable with the current breakdown.

So, there is no exact plans with regards to the liability management if we will go to the public markets or to the banks. So we are just monitoring the market as it is and we will use those instruments which we believe are the most beneficial for EVRAZ we got at the moment of time.

With regards to the maturity levels, we believe that we are quite satisfied with the current level. So the company has been able to significantly extend the maturity, but we believe there is room for more extension.

So moving it into the substitute and increasing the average life of the debt.

Okay, so the aim would be to increase the average life of the debt and not necessary to reduce the interest expense?

We don’t exclude debt task as well, I mean, our average cost of debt slightly increased in the year 2016 because we slightly increased the share of ruble debt on our balance sheet and this debt was a nominal ten point at least is a bit more expensive. So, we certainly are looking for the potential to decrease our cost of debt and as you can see the markets are very, very good for this right now.

Okay, brilliant. Thank you very much.

Good afternoon, gentlemen. Thank you for the opportunity and congratulations on the results.

I have a few questions. The first one is on working capital.

I can see you turned negative in 2016. Do you think this is a sustainable level of working capital you can run any business on?

The second question is on Nakhodka Sea Port. I think there was some news suggesting that you might be willing to dispose of that asset.

Can you please confirm that? And if you do, please give us an indication of when the mill could be closed?

And the third question is on your North American business. I can see that the SG&A cost in North America or the implied SG&A costs according to my calculations, I had approximately 20% of revenues.

Is this because revenues have gone down so much and SG&A was quite stable? And is it temporary thing or is it something structural about that?

Thank you.

Okay, it’s Alexander Frolov. I doubt very much that G&A percentage in North America is as high as you have mentioned.

We can double check that of one. My understanding is and I have very kind of regular and detailed discussions with the management about that the G&A there in the level of 70% to compare with the revenue.

Let’s say, speaking about Nakhodka, we don’t think that fundamentally this asset is core asset for us. At the same time, we are using this port extensively and we would like to continue getting solid from this port.

So, we have been considering let’s say, number of possibilities of disposal, but I can’t say that at the moment, we are anywhere close to any sort of certainty there. It might happen in the future, but probably not short-term.

So, on the working capital, I guess, Nikolay could give you a comment.

Yes, on the working capital, yes, you are absolutely right, that there was slightly low relief from the working capital in the short-term compared to 2015. But let me assure you that our working capital practices are as robust as they were.

The key reason here is that, we were witnessing a growth cycle in terms of the pricing. So, it eventually led to higher cost of inventory on our balance sheet and higher – from our customers.

So that’s the key reason why the relief was slightly small.

So, can I follow-up?

Yes, sure.

I think on working capital, my question is, it has turned negative and the working capital balance, I mean, and the question is, is this sustainable? Do you plan to replenish your working capital in 2017?

And on North America …

Yes, I am sorry, can you extrapolate where did you come with this conclusion on our working on negative working capital?

Well, I am just calculating it from your financial statements.

Okay, we – if we can return to you off, I would probably suggest to put it off-line. My general comment would be, that there was nothing abnormal for our working capital at the end of the year and we have been on a level which we believe is sustainable level.

So we do not expect any major injection into working capital during 2017. Let’s put it that way.

Thank you.

Hi there. I have three questions.

The first one just on the coal prices, if you look at domestic coal prices in Russia, they have been pretty stable year-to-date, but we’ve seen a pretty sharp drop in the SLB Australia benchmark that everybody looks at . Would you expect that to be some weakness in domestic coal prices going into the second quarter?

And then the second question just on the impairment. And you flagged that one of the reasons for the impairments was changes in your expectations over long-term prices for iron ore and steel products.

But given those are relatively more positive at the moment, I just wanted to understand a little bit more about what was driving that impairment there? Thank you.

So, what I suggest that, third question, Sergey Stepanov could answer, because he is fully aware at the time partner situation and then Nikolay will take the second one. So, Sergey, please.

Okay. Thank you.

It’s Sergey Stepanov. So as I understood the question is what will happen with prices in Russia in second quarter.

So first of all, our pricing is quarterly based. So that means that we have long-term agreements with most of the clients and we fix price for three months, that’s why for the first quarter, the prices will be stable and secondly, our prices are linked to international quotes.

So, and if we will see the quarterly price for the second quarter, much lower than for the first quarter, it will be reflected in our Russian prices as well. So, we have with all Russian clients, we have formulates, price formulates which linked the not spot price, but quarterly price even Russia with quarterly prices in FOB basically between Australia and Japanese clients.

So, first quarter prices are quite high. Let’s say, like, very high, but, now we see some downward trend in the market.

If these trends will stay the same, definitely the prices will be lower in the second quarter for the Russian clients as well. However, we are still waiting for Chinese government to decide on the volumes limitation.

We expect that the beginning of first maybe half of much China will announce its policy regarding the volume limits of production in China and from this point, we would – it would be easier to predict the price movements when we follow-on. So if this answer your question, I would probably pass the word to Nikolay.

Yes, thank you.

Yes, thank you. With regards to the impairment, yes, you are absolutely right.

The Group has recognized an impairment loss in the amount of $465 million for the year 2016, and absolute majority of this impairment loss is related to our efforts in North America. So, you also need to understand that this average is being done on an annual basis, it has not been done in February or in January.

It was done during the preparation of the financial statement and that this year we did in the end of quarter. So, should we be doing it today, I am sure the results would be slightly differ, but again, this is an assumption and this is the loss we recognized when we did our modeling back in the end of the year.

Okay, understood. Thank you.

Sorry, I just had a small follow-up on coking coal domestic contracts. Can you point out what’s the relevant basis for domestic contracts?

Is it more linked to hard coking coal or quarterly price assuming soft coking coal quarterly price for Shell and FOB? Thank you.

Yes, it’s more linked to hard coking coal, but it doesn’t reflect it fully. So the dynamic will reflect, but the formula brief on kind of combination of Russian price environment, which was, let’s say, in 2015, when we agreed with more – most of our clients and second part – first part is kind of Russian price reality, second part is hard coking coal quotes.

So it’s a combination of these two. And yes, and mostly to hard coking coal dynamics.

And another follow-up if I may, is it more linked to quarter-over-quarter price performance or the underlying change in netback priority for Russian domestic prices?

If quarterly FOB benchmarks, sort of international quarterly FOB benchmarks.

So it’s not expert’s base netbacks for Russian domestic prices, just the quarterly performance? Thank you.

Yes.

Yes, two more questions please for me. First one on MUK-96.

Given improving price environment for coking coal, would you consider restoring operations of that mine? And the second question is on Timir.

Can you please update us on the state of affairs there? And are you still – do you still have any outstanding sort of payments to make to ALROSA for the stake in Timir?

Thank you.

I can announce on MUK-96, it’s Sergey Stepanov, so, we believe that we have other efforts, for example, Raspadsky open pit, Raspadskaya Mine, Hochschild Mine which reduce coal with a slightly higher quality and all these efforts have potential for increase of production if required. So, that’s why we would not – we do not plan to launch MUK-96 now.

We can ramp up on other assets. So it would have enough kind of transportation, logistics and or other conditions.

Okay, and then, speaking about Timir. I think that there is still some portion remains to be paid, but it’s not material amount.

If it answers your questions?

And not material means, what? Tens millions of dollars or something more than that?

Whatever, roughly, so, I do not remember the exact number.

Okay. This is my end.

Thank you

Ladies and gentlemen, if there are no further questions, we would like you to thank – we thank you for your interest in EVRAZ and for being with us today on this call. Have a great day.

Bye.

Thank you very much.

Thank you.

Thank you.

Bye.

Bye.