Russia Coal Mining Sector Report

Coal Mining
Sector
Russia
November 2013
Produced by:
Any redistribution of this information is strictly prohibited.

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Table of Contents
I. Sector Overview III. Coal Market

1. Sector Highlights 1. Coal Reserves Worldwide
2. Economic Importance 2. Biggest Coal Producing Countries and Companies
3. Main Sector Indicators 3. Biggest Russian Producers and Exporters
4. Main Coal Basins 4. Best Performing Russian Coal Producers
5. PPI IV. Main Players
6. Average Producer Prices 1. SUEK
7. CPI 2. Mechel
8. IPI 3. Evraz
9. Foreign Trade 4. Ruscoal
10.Employment and Wages 5. Severstal
11.Government Policy V. Regional Distribution
II. Coal Production and Consumption 1. Coal Output by Region
1. Coal Production Highlights 2. Regional Distribution (2012)
2. Coal Output
3. Coal Consumption and Supply Highlights
4. Coal Consumption
5. Thermal (Steam) Coal
6. Coking Coal and Metallurgical Coal Highlights
7. Biggest Coking Coal Producing Countries and Companies
8. Coking Coal and Metallurgical Coal Production
9. Lignite and Brown Coal

I. Sector Overview

Reserves
The biggest coal reserves in the world can be found in the United States, Russia, China and India. Russia is estimated to have 500 years of
remaining reserves. The country has 193.3 billion tonnes proven reserves of coal and 4.451 billion tonnes of prognosed coal reserves, which on a
global scale corresponds to 12% and 30%, respectively. Its proven reserves include brown coal (101.2 billion tonnes), bituminous coal (85.3 billion
tonnes, of which 39.8 billion tonnes are coking coal) and anthracite coal (6.8 billion tonnes).
The country's coal reserves are widely dispersed and coal mining is now carried out in 25 regions and 16 coal basins. The bulk of coal deposits is in
Siberia (64%) and the Far East region (30%). The European part of the country and the Urals account for 6% of the coal deposits.
Production
Coal mining is carried out in 121 open-pit and 85 underground mines with a total annual production capacity of about 383 million tonnes. Coal in
Russia is currently mined primarily by open-pit mining (65%) due to its relatively lower production costs.
The 2012, coal output amounted to 353 million tonnes, up by 4.7% on the year. The coal supplies increased by 3.1% to 316 million tonnes, of which
127 million tonnes were exported (up by 19%).
As a result of restructuring of the coal industry and privatisation of coal assets, the entire sector is in private hands. As much as 78% of the sector is
controlled by the 11 biggest mining companies and 5 steel smelters.
Investments
In January 2012, Russia's then Prime Minister Vladimir Putin said the country will spend over USD 8 billion on coal industry development by 2030
as part of a wider investment programme. As a result, Russia plans to boost its coal output to 430 million tons by 2030 to meet growing domestic
and global demand.
The investment programme focuses on developing the country's traditional coal mining centres Kuzbass, Eastern Donbass, Vorkuta, as well as
exploring new fields in Tuva and Yakutia.

Economic Importance
Economic importance of coal mining sector
2007 2008 2009 2010 2011 2012
PPI 125.1 93.0 113.9 116.7 112.0 105.1
PPI of mining and quarrying 152.3 61.6 149.2 117.1 126.3 109.3
PPI of energy producing material mining 158.1 57.8 161.0 116.1 128.1 110.5
Coal exports, USD mn 5,354.7 7,751.8 7,367.1 9,180.5 11,373.3 13,015.1
Coal imports, USD mn 466.7 885.3 465.7 483.4 402.2 818.5
FDI total, USD mn 27,797.0 27,027.0 15,906.0 13,810.0 18,415.0 18,666.0
FDI in mining and quarrying, USD mn 13,933.2 4,978.7 3,174.8 2,034.9 4,627.0 3,529.1
FDI in energy producing materials, USD mn 13,669.7 4,644.8 2,798.7 1,755.2 3,896.9 2,740.5
Gross domestic product , RUB bn 33,247.5 41,276.8 38,807.2 46,308.5 55,799.6 62,599.1
GDP: gross value added (GVA) , RUB bn 28,484.5 35,182.7 33,831.3 40,040.1 47,505.5 53,284.5
GDP: annual: GVA: mining and quarrying , RUB bn 2,865.5 3,284.6 2,885.4 3,842.8 5,157.3 5,801.4
Source: Federal State Statistics Service, Federal Customs Office, CEIC

Main Sector Indicators
Mining and quarrying value, RUB bn Revenue breakdown per subsector
Energy producing materials 8,723 Mining except

Mining, excl nergy producing materials 7,714 energy
producing
Total
5,995 7,720 materials
5,119 6,746 11.5%
4,882
4,374
5,246
4,524 4,356
3,886
Energy
producing
969 1,003 materials
489 595 525 749 88.5%
2007 2008 2009 2010 2011 2012
Main sector indicators, mn tonnes
1988 2000 2008 2009 2010 2011 2012
Total mining 425.4 257.9 328.9 3026 323.4 334.7 352.7
- open-pit mining 178.7 167 224 195.2 220.9 235.8 255.1
- underground mining 246.7 90.9 104.9 107.4 102.1 100.9 99.6
Stocks - 190.4 191.4 176 790.6 188.3 194.2
Domestic power demand - 103.3 98.8 91.6 95.9 95.8 96.3
Source: Federal State Statistics Service, CEIC, Coal Age

Main Coal Basins
Coal production, mn tonnes
Resources Mining in Coal mining development is concentrated in the main coal

(bn tonnes) Ash Heating
Coal 2012 Sulfur basins Kuznetsk and Kansko-Achinsk. New deposits that will
Coal basin content capacity
types
A+B+
(mn
(%)
(%)
(micro joule/kg)
be subject to further development are located in Eastern Siberia
C2* tonnes) and the Far East (Urgalskoye, Elegestskoye, Elginskoye,
C1*
Apsatskoye deposits) alongside with the main coal basins. If
Kansk-Achinsk economically feasible, coal mining can be developed at
(Krasnoyarsk brown and
79.4 38.8 41.1 6-15 0.3-1 12.6-17.7 Seidinskoye (the Republic of Komi) and Sosvinskoye (the
Territory, black
Kemerovo region)
Khanty-Mansi Autonomous Area Yugra) deposits, as well as
in the Bering coal basin (the Chukot Autonomous Area). The
Kuznetsk or energy strategy also envisages the construction of required port
brown and
Kuzbass 51.5 1.7 201.5 10-16 0.3-0.8 22.8-29.8 infrastructure (the ports of Vostochny, Vanino and Ust-Luga, the
black
(Kemerovo area) Murmansk deep-water port) and construction of new ports with
high-capacity coal terminals, including ports on the Black Sea
Irkutsk (Irkutsk brown and coast, and, should the economic efficiency be proved, on the
7.6 4.6 14.2 7-15 1.5-5 17.6-22.6
region) black
North Pacific coast.
The Pechora basin spans over an area of some 90 thousand sq
Pechora (Komi brown and km near the northern Ural Mountains in a region with severe
7.2 0.48 13.6 8.5-25 0.5-1 18.1-26.7
Republic) black
climate, which results in 85% of the basin being under
permafrost. It is being developed as an underground mine. In
Donetsk (Rostov brown and
region) black
6.6 3.1 4.7 10.5-29 1.8-4.2 18.5-20.1 addition to being a significant reserve, the basin is also close to
markets.
The Kuznetsk Basin has an area of 26.7 thousand sq km and is
South Yakutia
black 4.5 2.8 9.2 10-18 0.3-0.5 22-37.4 located near Novosibirsk. There are both open-pit and
(Republic of Sakha)
underground mines, from which a variety of coals with variable
ash content and low sulphur content are being extracted.
MINUSA (Republic
black 5 0.35 12.3 6.6-29.7 0.5-0.6 18-32 The Kansk-Achinsk Basin contains significant deposits of brown
of Khakassia)
(sub-bituminous) coal with medium-to-low ash content and
*Note: Russia divides mineral concentrations into seven categories, in three major groups, based on the generally low sulphur content. Some of the mines ate connected
level of exploration performed: fully explored reserves or resources (A, B, C1), evaluated reserves or with power stations and carbo-chemical plants.
resources (C2) and prognostic resources (P1, P2, P3).
Source: Coal Age, Energy Strategy 2030, World Energy Council

PPI
PPI, prev month=100 PPI, same month, prev year=100

250
125
115 200
105 150
95 100
85 50
75 0
Mining and quarrying Energy producing materials Total Mining and quarrying Energy producing materials
PPI, prev Dec=100
158 161
155.0 152 149
127 133
135.0 136 117 128
125 110
117 126
116 109 Total
115.0 114 116 112
105 Mining and quarrying
95.0 93 94
89 Energy producing materials
75.0 Coal
62
55.0 58
2007 2008 2009 2010 2011 2012
Source: Federal State Statistics Service, CEIC

Average Producer Prices
Coal, RUB/tonne Bituminous coal, RUB/tonne

1,200 1,800
1,000 1,600
1,400
800 1,200
600 1,000
800
400
600
200 400
0 200
0
Coking coal, RUB/tonne Brown coal, RUB/tonne

800
3,500
700
3,000 600
2,500 500
2,000 400
1,500 300
1,000 200
500 100
0 0

CPI
CPI for coal, prev month=100

108
106
104
102
100
98
96
CPI for coal, same month prev year=100

130
125
120
115
110
105
100

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IPI
IPI in mining and quarrying, prev month=100

115
110
105
100
95
90
IPI, 1991=100 IPI, prev year=100
103.6
103.3
124.8 103.1
123.3 102.7
121.7
117.4 117.6 118.0
101.9
112.0 101.3 101.2
110.8 101.1
108.8
105.2 105.6 105.0 100.4 100.4
100.1
99.4
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Mining and quarrying Energy producing materials Mining and quarrying Energy producing materials

Foreign Trade
Coal exports volume and value Coal imports volume and value
13,015.1
11,373.3 885.3
818.5
9,180.5
7,751.8 7,367.1
466.7 30.9 465.7 483.4
5,354.7 130.4 402.2
105.1 115.7 110.5 23.4 23.8 21.4
98.0 97.4
14.8
1.7
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Volume, mn tonnes Value, USD mn Volume, mn tonnes Value, USD mn
Exports by destination Imports by destination
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
thou tonnes 11,169 13,869 8,342 13,084 10,462 11,565 thou tonnes 23,249 29,917 23,762 14,063 117 20,361
CIS CIS
USD mn 787 1,428 593 1,150 1,407 1,411 USD mn 436 656 450 332 18 590
thou tonnes 86,824 83,571 96,801 102,602 100,010 118,844 thou tonnes 192 998 51 707 1,568 1,007
Non-CIS Non-CIS
USD mn 4,567 6,324 6,774 8,031 9,966 11,604 USD mn 31 230 16 151 384 229
Source: Federal Customs Agency, CEIC

Employment and Wages
Number of employees
2007 2008 2009 2010 2011 2012
Mining and quarrying 974,526 975,753 914,739 897,873 917,314 935,110

Energy producing materials 619,418 621,799 590,477 579,210 588,442 598,975
Coal and Peat 197,552 190,802 173,238 166,524 168,111 168,276
- Coal 193,276 186,570 169,217 162,728 164,984 165,176
- Bituminous 166,412 161,887 147,396 142,124 144,820 145,537
- Brown 26,864 24,683 21,821 20,604 20,164 19,639
- Peat 4,277 4,232 4,024 3,796 3,129 3,103
Average monthly wage, RUB

2007 2008 2009 2010 2011 2012
Mining and quarrying 28,108 33,206 35,363 39,895 45,132 50,401

Energy producing materials 33,276 39,051 41,568 46,271 51,588 57,210
Coal and Peat 18,397 22,574 23,172 27,067 32,251 35,697
- Coal 18,628 22,866 23,486 27,415 32,611 36,094
- Bituminous 19,301 23,584 23,945 28,018 33,365 36,943
- Brown 14,456 18,157 20,386 23,254 27,196 29,803
- Peat 7,959 9,706 9,964 12,149 13,224 14,564

In January 2012 , the government adopted a long-term programme for development
of coal industry until 2030. The document, which was prepared by the energy ministry,
consists of eight sub-programmes and encompasses the related existing federal
2030 programmes and sectoral strategies into one complex strategy.
development
The implementation of the programme relies heavily on public-private partnerships, as
programme
the states participation in its RUB 3.7tn budget is less than 9 % or RUB 251.8bm.
The programme suggests that by 2030 coal production will increase to 430 mn tonnes
as a result of the increase in productivity and new coal extraction equipment.
The programme also tackles one of the main price factors in a country with a vast geography
such as Russia, planning measures to reduce transportation costs and improve the efficiency Stages of implementation:
of coal supplies. As a result, the average of coal transportation is projected to decrease 1.2
times, including in the domestic market by 1.4 times. Some of the measures include boosting
Transportation the local use of mined coal, the construction of power plants with integrated utilisation of 1st stage 2011-2015
energy resources, especially coal and methane. Considering the trends in the formation of new
centers of coal mining , coal production will shift towards the eastern part of the country, 2nd stage 2016-2020
especially Eastern Siberia, whose share in coal share in coal mining is expected to increase
from 25.8 % to 32% and the Far East from 9.7% to 15.2 %. With China slowly turning into a 3rd stage 2021-2030
net importer of China, Russia will also secure supplies to this potentially significant market.
Another major goal of the programme is putting an end to the use of obsolete
equipment and technologies. The government will demand from new coal production
Modernisation facilities to have modern enrichment equipment in order to boost enrichment level in
coal to 60% from the current 40%. The programme also sets as a goal that 80% of the
mined coal pass through some sort of processing.
Source:
II. Coal Production and Consumption

Coal Production Highlights
Following the collapse of the Soviet Union, Russian coal production dropped from 425 mn tonnes in 1988 to 232 mn tonnes in
Soviet times
1998. The output reached 329 mn tonnes in 2003 and since then fluctuates in both directions.
At present, coal mining is carried out in 25 regions of the Russian Federation and 16 coal basins. Regardless of its sizeable
Current
reserves, Russia produces a relatively low amount of coal. In 2012, output amounted to 353 mn tonnes, up by 4.7% from the
situation previous year. The coal supplies increased by 3.1% to 316 mn tonnes, of which 127 mn tonnes were exported (up by 19%).
As a result of restructuring in the coal industry and the privatisation of coal assets, the entire sector is controlled by privately-
owned joint stock companies. These changes resulted in the formation of a number of large corporations and holding
Producers companies that own coal assets. In addition, all coking coal producers are integrated in metallurgical producers.
The largest 16 mining coal mining companies account for 78% of the total coal output in the country, including five steel
smelters.
The country's energy strategy outlines the following trends for the coal sector: depletion of the potential for development of
existing coal basins in the European part of the country and in the Urals; slowing down of the rates of new coal deposits
development; increase in coal mining and transportation costs; reduction in domestic demand for thermal coal; dependence of
Risks
coal companies on the amount of export revenues; high share of transport costs in the price of coal products; low quality of coal
products as compared with the world level; insufficient rates of fixed assets renovation and investment for large-scale
infrastructure projects.

Coal Output
Coal production, mn tonnes Coal production, mtoe

321.7 354.3
328.6 334.8
313.8 301.2 6.8% 6.3% 6.4%
5.8% 4.6%
4.7% 4.1% 3.7%
1.9%
1.3%
153.4 158.0 168.1
148.0 142.1 151.1
-7.4%
-8.3%
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Coal production, mn tonnes Change y/y, % Coal production, mtoe Change y/y, %
Coal production by type, mn tonnes
2007 2008 2009 2010 2011 2012
Hard coal* 240.1 245.2 267.7 275.0 282.4 n/a
- Bituminous coal 238.6 240.3 229.2 240.8 257.3 275.8
- Anthracite coal n/a n/a n/a 6.8 10.1 11.2
Lignite coal** n/a 82.5 68.8 76.4 76.9 77.8

Enriched coal n/a n/a n/a n/a 140.6 121.1
Coking coal 69.1 64.7 60.6 67.0 64.7 71.5

Metallurgical coke 33.9 32.0 27.4 27.0 27.0 27.1
Source: Federal State Statistics Service, CEIC, Coal Age, BP Statistical Review of World Energy June 2013, *EIA, **D&B
Coal Consumption and Supply Highlights
Coal is one of the major energy resources in Russia's power generation sector with about 14% share of the nation's energy
consumption. Its role is expected to increase with the support of the government, whose strategy for the coal sector
development until 2030 envisages an increase in coal production and the construction of coal-fired plants, which will free up
Power
natural gas for exports.
generation
Russia's energy matrix varies across regions. Siberia and the Far East rely heavily on coal-fired power utilities (about half of
electricity production), while in the European part and the Urals, electricity and heating come mostly from gas.
In addition to the energy sector, the other main consumer of coal is the metal processing sector.
Russia intends to upgrade its port and railway infrastructure in the Far East in order to boost coal exports to Asia. The uneven
distribution of coal deposits and the location of many of them far from markets results in transportation making up 60% of the
Transportation cost of coal. This burden makes the otherwise cheaper to produce Russian coal, a more expensive and, therefore, a less
competitive export item.
In order to deal with this issue, the country is undertaking measures to encourage the local use of coal at its production
location and also plans to expand its transportation infrastructure to support exports, particularly to the east.
Exports Russian coal is mainly exported via two terminals: Nakhodka (Eastern port) and Saint-Petersburg (port Ust-Luga). The main
bottlenecks for Russian coal exports to Asia are the insufficient capacities of the railways and ports.

Coal Consumption
Coal consumption, mn tonnes Coal consumption, mtoe
8.8% 100.4
7.7%
93.4 91.9 90.2 93.7 93.9
7.4%
205.2 200.3 3.8%

190.5 184.1 198.3
-1.0% 188.2
-1.6%
0.2%
-5.1%
-1.8%
-3.3%
-10.3%
-8.4%
2007 2008 2009 2010 2011 2012
2007 2008 2009 2010 2011 2012
Coal consumption, mn tonnes Change, % Coal consumption, mtoe Change y/y, %
Coal consumption breakdown by users Electricity production from coal sources
18.9%
17.9%
12.7% 13.1% 12.9% 16.7% 16.5% 16.0%
12.5% 12.0% Others 15.5%
19.2% 19.8% 196,286

20.9% 19.5% 19.6% 177,889 169,128 165,603
163,651 163,659
Households
and agriculture
Metallurgy
51.4% 48.6% 48.6% 48.0% 51.4%
Power utilities
2006 2007 2008 2009 2010 2011
Electricity production, GWh % of total
2008 2009 2010 2011 2012
Source: Dun & Bradstreet, EIA, BP Statistical Review of World Energy June 2013, World Bank, CEIC
Thermal (Steam) Coal
Top 10 steam coal producing countries, mn tonnes (2012e) Thermal coal production in Russia in 2012
China 3,039
Sibuglmet 1%
RusskiyUgol
USA 782 SDS Coal 8% 3%
India 504 Evraz 1%
Indonesia 440 Mechel 3%
South Africa 258
Kuzbassrazrez Others 36%
Russia
Russia 201
ugol 14%
Australia 200
Kazakhstan 108
Colombia 85
Poland 68
SUEK 34%
Thermal coal consumption, mn metric tonnes Comments
312
293 Thermal coal accounts for the bigger portion of Russia's coal
259
11 Other reserves 3,641.9bn tonnes or 89%.
224 6
191 189 4 40 According to Russia's biggest coal producer SUEK, the domestic
38
4 37
Industry market for thermal coal in 2012 was shaped by soaring exports and
3 16 14
4 36 weaker domestic demand.
18
25 30 Utilities
26
20 Due to the favourable situation on the foreign markets, the exports of
23 232 247
201 thermal coal increased by 12.1 mn tonnes (12% on the year).
137 132
164 Power
However, the unusually warm winter in 2011/2012 resulted in a lower
Total demand from domestic utilities.
2008 2010 2015f 2020f 2025f 2030f
Source: World Coal Association, SUEK, Russian Coal Market Research Institute, Promishlenie Vedomosti
Coking Coal and Metallurgical Coal Highlights
As much as 447.1bn tonnes or 11% of Russia's prognosed coal reserves are coking coal. The country exports less than 30%
of the output with its largest foreign consumer being Ukraine. The reasons for the low exports volumes , according to research
Internal
firm Ignatov & Company Group is the deficit in Russia's own coking coal production it suffered from a temporary decline in
demand steel production during the global economic crisis, caused by a slump in demand for steel products from the construction,
automotive and machine building industries.
Steel industry Russia relies on domestic steel production to meet the internal demand, and therefore, the self-supply with ore and coke is
demands deemed very important. Also, most of the Russian coke is being produced directly with its direct consumers, the steel mills.
The Russian market of metallurgical coke has more than a dozen manufacturers. The market leaders are: CMI, Mechel, NLMK,
Main Severstal MC Industrial Metallurgical Holding and Eurasia. The six biggest steel producers in the country currently control of
producers the coking coal output and almost 100% of iron ore output, Ignatov & Company Group estimates show.
The major coking coal exporting countries expanded their new capacities in 2012. Russia raised its capacities by 13% to 16 mn
Capacities tonnes, coal miner Evraz said in its annual report. Other major expansions took place in Australia (up by 8% to 144 mn tonnes)
and North America (up by 5% to 95 mn tonnes).

Biggest Coking Coal Producing Countries and Companies
Top 10 coking coal producers, mn tonnes (2012e) Share of coking coal exports (2012 )
China 510
Mongolia 5%
Australia 147
USA 81 Russia 6%
Russia
Russia 75 Australia 49%
India 47 Others 8%
Canada 31
Mongolia 21
Ukraine 18
Kazakhstan 13
North America
Poland 12 32% Total exports: 294mn tonnes
Share of coking coal imports, mn tonnes (2012) Top 10 coking coal exporters, mn tonnes (2012)
China 18%
BMA 38
EU-27 14% Teck 25

Alpha Natural Resources 18
Others 22%
Anglo American 18
Mechel 15
BHP Billiton 13
India 13%
Peabody 13
Walter Energy 12
Japan, Rio Tinto 11

S.Korea and Xstrata 11
Taiwan 29% Total imports: 278mn tonnes
Source: World Coal Association, Evraz

Coking Coal and Metallurgical Coal Production
Coking coal output in Russia, mn tonnes Top 10 metallurgical coke producers by reserves, mn metric tonnes
71.5 BMA 3,357

69.1 Mechel 2,541
67.0 Evraz 1,938
64.7 64.7
Vale 1,602
60.6
Alpha Natural Resources 1,361
Rio Tinto 1,271
Teck 1,034
JSW 896
2007 2008 2009 2010 2011 2012 Anglo American 895

Peabody 526
Biggest coking coal producers in Russia Top 10 metallurgical coke producers by output, mn metric tonnes (2012)
BMA 38
Teck 25
Severstal 9%
Yakutugol 9% Kuzbassrazrez Alpha Natural Resources 18
ugol 8% Anglo American 18
Yuzhny
Sibuglmet 10% Kuzbass 8% Mechel 15
BHP Billiton 13
Yuzhkuzbassu
gol 7% Peabody 13
Walter Energy 12
Raspadskya
Rio Tinto 11
Others 42% 7%
Xstrata 11
Source: Federal State Statistics Service, CEIC, Evraz, World Coal Association, Ignatov & Company Group, MetCoke
Lignite and Brown Coal
Lignite coal production, mn tonnes Share of electricity from brown coal by company (May 2012)
Fortum (formerly
82.5 Others, 22.5% Energopromsbyt
TGC-10), 5.7%
, 4.8%
Siberian
77.8 Generating Co, Kuzbassenergo
76.4 76.9 (TGC-12),
12.7%
4.60%
En+ Group,
3.7%
Ogk-2, 12.7%
68.8 Ogk-3 (third
Generation
Co), 2.20%
Inter RAO UES,
E.ON Russia, 0.80%
13.8% RAO Energy
Quadra-PGC,
Gazprom, Systems of the
2008 2009 2010 2011 2012 East, 24.1%
0.60%
14.2%
Brown coal producers, mn tonnes Comments
Germany 185
Russia 78
According to the U.S. Energy Information Agency, Russia's
Australia 73
power sector includes over 440 thermal power plants, of which
USA 72
77 are coal-fired.
Turkey 66
Poland 64
Greece 62 There are no official statistics about the number of power plants
India 43 in Russia that run on brown coal but researches indicate their
Czech Republic 43 number is about 25.
Serbia 38 Total production: 905mn tonnes
Source: D&B, World Coal Association, TU Delft

III. Coal Market

Coal Reserves Worldwide
Proven recoverable reserves according to World Energy Council, mn tonnes (end-2011) Proven recoverable coal reserves according to International Energy Agency
Bituminous
Sub-
including Lignite Total Hard Coal Brown Coal Total Coal
bituminous
anthracite
Australia 37,100 2,100 37,200 76,400
OECD Europe 18,322 54,820 73,142
Brazil n/a 6,630 n/a 6,630
Canada 3,474 872 2,236 6,582
OECD North America 218,818 35,614 254,432
China 62,200 33,700 18,600 114,500
Colombia 6,746 n/a n/a 6,746 OECD Pacific 41,477 38,033 79,510
Germany 48 n/a 40,500 40,548
Greece n/a n/a 3,020 3,020 Russia 69,946 91,607 161,553
India 56,100 n/a 4,500 60,600

China 167,000 25,000 192,000
Indonesia n/a 28,017 n/a 28,017
Kazakhstan 21,500 n/a 12,100 33,600
India 95,399 467 95,866
Poland 4,178 n/a 1,287 5,465
Russia 49,088 97,472 10,450 157,010 Rest of Asia 10,283 10,664 20,947
Serbia 1 10 13,400 13,411
South Africa 30,156 n/a n/a 30,156 South America 19,769 124 19,893
Turkey 322 n/a 8,380 8,702
Ukraine 15,351 16,577 1,945 33,873 Africa / Middle East 52,846 202 53,048
USA 108,501 98,618 30,176 237,295

Total world 736,112 283,184 1,019,296
Total world 403,197 287,333 201,000 891,530
Source: World Energy Council, IEA

Biggest Coal Producing Countries and Companies
Top 10 coal producing countries, mn tonnes (2012e) Biggest coal producers worldwide, mn tonnes
Shenhua 470.0
China 3,549
USA 935 Coal India 436.0
India 595 Peabody Energy 248.5
Indonesia 443 Chin Coal 176.0

Australia 421 Arch Coal 140.7
Russia
Russia 359 Datong 133.0
South Africa 259 Alpha 110.5
Total coal production
Germany 197 BHP Billiton 106.9
worldwide: 7,830 mn tones
Poland 144
Anglo American 99.3
Kazakhstan 126
SUEK 97.5
Top coal exporters (2012e) Biggest companies by sales worldwide, mn tonnes
Steam Coking Total Xstrata 76.0

BHP Billiton 72.7
Indonesia 380 3 383
Bumi Resources 69.3
Australia 159 142 301 Glencore 61.0
Russia 116 18 134 Anglo American 52.4

Rio Tinto 50.6
USA 51 63 114
Peabody Energy 41.0
Colombia 82 0 82 SUEK 38.8
South Africa 74 0 74 Adaro 36.5

Banpu 32.8
Canada 4 31 35
Source: World Coal Association, SUEK

Biggest Russian Producers and Exporters
Biggest Russian companies by output, mn tonnes Coal production in Russia in 2012
Kuzbassrazrez Ruscoal 3%
Sibuglmet 3%
ugol 45.4 Severstal 3%
Evraz 5%
SDS Coal 23.4 SDS Coal 6%
Mechel 24.2 Mechel 7% Others 33%

SUEK 97.5
Kuzbassrazrez
ugol 13%
Others 130.8
SUEK 27%
Market shares of Russian companies by exports volume Comments

Kuzbassrazrez
ugol 20%
SUEK 29%
SDS Coal 13%
Russia's biggest coal producer is SUEK with 27.5% of coal output. It is
also the country's biggest coal exporter with 38.8mn tonnes sold abroad,
which corresponds to a 27.6% market share.
Mechel 8%
Others 30%
Source: SUEK
Best Performing Russian Coal Producers
Top 15 coal producers by sales revenue in 2012, USD mn Top 15 coal producers by net income in 2012, USD mn
IFRS or IFRS or
Company 2011 2012 2012/ 2011 Company 2011 2012 2012/ 2011
RAS RAS
1 SUEK RAS 2,074 2,217 68.7% 1 SUEK RAS 579 581 100.4%
2 Kuzbassrazrezugol RAS 1,135 1,764 106.9% 2 Kuzbassrazrezugol RAS 281 324 115.5%
3 SUEK-Kuzbass RAS 1,324 1,083 155.5% 3 Yakutugol (Mechel) RAS 447 222 49.6%
4 Sibuglemet RAS 1,480 1,052 81.8% 4 SUEK-Krasnoyarsk IFRS 8 172 2257.6%
5 Southern Kuzbass (Mechel) RAS 1,198 983 71.1% 5 Mezhdurechye (Sibuglemet) RAS 197 142 72.1%
6 Vorkutaugol (Severstal) RAS 1,153 955 82.0% 6 SUEK-Kuzbass RAS 172 122 70.9%
7 Yuzhkuzbassugol (Evraz) RAS 812 768 82.9% 7 Vorkutaugol (Severstal) RAS 378 94 24.9%
8 Kuzbass Fuel Company IFRS 1,177 742 94.7% 8 Southern Kuzbass (Mechel) RAS 479 94 19.5%
9 Yakutugol (Mechel) RAS 788 584 63.0% 9 Kuzbass Fuel Company IFRS 69 60 87.5%
10 Belon (MMK) RAS 354 567 74.1% 10 Sibuglemet RAS 283 37 13.1%
11 SUEK-Krasnoyarsk IFRS 723 542 160.3% 11 Yuzhkuzbassugol (Evraz) RAS 343 13 3.8%
12 Raspadskaya IFRS 638 531 75.0% 12 Russian Coal RAS 35 9 24.5%
13 Zarechnaya Mine RAS 528 468 83.2% 13 Belon (MMK) RAS 62 0.3 0.4%
14 Russian Coal RAS 415 375 88.7% 14 Zarechnaya Mine RAS 4 -13 -
15 Mezhdurechye (Sibuglemet) RAS 2,074 2,217 90.3% 15 Raspadskaya (Evraz) IFRS 136 -31 -
Source: Dun & Bradstreet, SPARK Database, Interfax-CNA

IV. Main Players

SUEK
Financial performance (RUB bn) Highlights
167.01 175.21
148.98 The Siberian Coal Energy Company (SUEK) is Russia's
131.20 largest coal company (among top 10 worldwide) with a 27.5%
115.96
share (92.2mn tonnes) in Russian total coal production,
covers 41% of thermal coal demand from the domestic energy
30.02
generation industry and a 28% share in Russian thermal coal
24.87
9.05
exports in 2011.
3.63
SUEK runs 29 mines (17 open-pit and 12 underground

2008 2009 2010 2011 2012 mines), 7 preparation plants, a bulk terminal at the Vanino
-10.64
port, and other industrial transportation and maintenance

Revenue Net profit facilities. The company has 30,000 employees.
SUEK enterprises produced 97.5mn tonnes of coal in 2012,
Key operating indicators, tonnes which represented an increase of 5.3mn tonnes (6%)
compared to 2011. A substantial part of SUEKs production in
2010 2011 2012 2012 (approximately 62%) was hard coal; while the
production of brown coal accounted for 38%.
Sales 90.4 88.9 91.7
Domestic sales 61.3 55.2 52.9
In the next five years, the company intends to increase its
production of high-quality coal for both domestic and export
Export sales 29.1 33.7 38.8 markets through boosting the capacity of existing mines and
Production 89.1 92.2 97.5 open-pits, and with the concurrent development of
transportation infrastructure. The total investments in coal
Hard coal 49.6 53.9 60.2 production and preparation and in transportation infrastructure
Brown coal 39.5 38.3 37.3 are expected to average USD 650mn per year in the 2013-
Transhipment in Vanino Bulk 2017 period.
8.0 10.1 12.0
Terminal
Source: Company data

Mechel
Financial performance (USD bn) Highlights

12.541
11.275
9.747 9.951
Mechel OAO, founded in 2003, is a mining and metallurgy
company, operating in Russia, the United
5.754 States, Kazakhstan and Lithuania.
1.229
0.803
0.692
0.076
The company groups some 30 production enterprises,
producing coal, iron ore, steel, rolled products, ferroalloys,
2008 2009 2010 2011 2012 heat and electric power. The holding company also owns
-1.665
three trade ports, transport operators and international

sales and service networks. The company employs over
Net revenues Net income
80,000 people.
Key operating indicators, thou tonnes Mechels mining segment (Mechel Mining) includes
production and sales of coking coal concentrate, iron ore
concentrate and coke, which are chief raw material for
FY 2011 FY 2012 production of steel and steam coal. Apart from providing for
the needs of the steel and power segments, it also sells raw
materials to third-parties.
Coal (run-of-mine) 27,625 27,763
The group controls 25% of Russia's coking coal washing
facilities. In 2012, the company produced 27.8 mn tonnes of
Pig iron 3,728 4,161 coal.
Steel 6,118 6,532

Evraz
Financial performance (USD bn) Highlights
19.990
16.400
14.726
13.394
9.505
Evraz, established in 1992 under the name Evrazmetall, is
3.632
a vertically integrated steel, mining and vanadium business

0.470
0.453
0.195
with operations in Russia, Ukraine, the United States,

Canada, the Czech Republic, Italy and South Africa. It
2008 2009 2010 2011 2012
-0.335
employs about 110,000 people.
Revenues Net profit

A significant portion of the company's internal consumption
of iron ore and coking coal is covered by its mining
Coal products sales volumes, kt operations.
Steam coal
8,595 concentrate
203
7,566
Steam coal
Raw coking coal production increased to 8.5 mn tonnes (up
1,215 by 35%) as a result of operational efficiencies, while steam
652 Coking coal coal output declined to 2.3 mn tonnes (down by 23%).
concentrate
Intersegment
Coking coal
3,163
3,285
Steam coal The group is listed on the London Stock Exchange and is a
concentrate constituent of the FTSE 250.
1,560 Steam coal
1,439
Coking coal
1,209 597
External
concentrate
222 729
Coking coal
987 702
36 162 Total
2011 2012

Ruscoal
Financial performance (RUS bn) Highlights
15.503
14.088
Anthracite producer Russian Coal, established in 2002,

4.951 5.937
operates 6 open-cut mines and coal enriching facility, and
1.038
0.261
0.197
is also active in the fields of energy supply, transport

enterprises and repair services.
2009 2010 2011 2012
-0.213
Its main producing assets are located in Kemerovo, Amur

and the Republic of Khakassia. The company employs
Revenues Net profit
around 4,000 people.
Revenue breakdown, RUS bn

In the beginning of 2013, the company estimated its total
2011 2012 2011 2012 reserves at 444.3 mn tonnes and its ultimate reserves at
Rostov Domestic market
313.8 mn tonnes.
3.37 2.05 1.17 1.35
Coal 2.51 1.68 Exports 0.75 0.22
Domestic market 1.41 1.24 Inventories 0.22 0.29 Russian Coal mined 10 mn tonnes of coal that year, mostly
Exports 1.11 0.44 Khakassia 6.58 6.54 anthracite. As much as 8.1 mn tonnes of them were
Inventories 0.86 0.36 Coal 6.23 6.21 extracted through the open-cut method and the company
Amur 3.38 3.48 Domestic market 3.16 2.70
plans to boost this amount by 4% on the year in 2013. The
Coal 2.85 3.01 Exports 3.07 3.52 exports amounted to 1.3 mn tonnes.
Domestic market 2.85 3.01 Inventories 0.35 0.33
Inventories 0.54 0.47 Krassnoyarsk 0.07
Kuzbass 2.13 1.86 Coal 0.07
Coal 1.92 1.57 Domestic market 0.07
Source: Company data, e-disclosure.ru

Severstal
Financial performance consolidated (USD bn) Highlights
15.812 16.066
14.104 Severstal is one of the world's leading vertically integrated
12.819
steel and steel related mining companies.
9.076
The company has assets in Russia, the United States,
2.174
2.062
-1.100
-0.515
0.820
Ukraine, Latvia, Poland, Italy, Liberia as well as

investments in Brazil. It has about 63,000 employees.
2008 2009 2010 2011 2012
Severstal has 3 divisions: Severstal Russian Steel,
Severstal International and Severstal Resources.
Revenues Net profit
Severstals Russian steel operations are almost all self-

Coal resources and sales
sufficient in iron ore and coking coal, respectively. Severstal
2011 2012 Resources is the group's producer of iron ore and coal.
Production, tonnes Severstals mining division was formed by acquisitions
Crude steel 15,293,407 15,140,185 made over the last 12 years.
Hot metal 10,543,687 10,256,881
Sales volumes, tonnes
Severstals key asset is the Cherepovets Steel Mill,
Severstal Resources Coal: 10,634,866 10,479,136
an integrated steel plant with coking coal, agglomeration,
Coking coal concentrate, including: 7,591,670 7,513,436
blast furnaces, steel-smelting and rolling facilities.
Vorkutaugol 5,127,440 5,267,442
PBS Coals 2,464,229 2,245,993
Raw coking coal, Vorkutaugol 289,556 622,318 The group is listed on MICEX/RTS and its GDRs are traded
Steam coal, including: 2,753,640 2,343,382 on the LSE.
Vorkutaugol 2,028,358 2,191,132
PBS Coals 725,283 152,251

V. Regional Distribution

Coal Output by Region
Coal mining breakdown by regions, thou tonnes

2007 2008 2009 2010 2011 2012
Coal mining 313,787 328,554 301,227 321,701 334,831 354,330
- Central Federal District (CF) 299 360 201 235 259 226
- North Western Federal District (NW) 12,956 12,929 11,799 13,625 13,494 13,631
- Southern Federal District from 2010 (SF) 7,398 7,081 4,938 4,725 5,281 5,633
- Volga Region Federal District (VR) 534 515 312 387 318 492
- Ural Federal District (UF) 3,459 3,354 2,023 2,154 2,401 2,328
- Siberian Federal District (SB) 256,953 271,982 254,134 268,902 280,865 297,126
- Far East Federal District (FE) 32,188 32,333 27,820 31,673 32,213 34,894
Bituminous coal 238,561 240,256 229,154 240,787 257,266 275,795
- Southern Federal District from 2010 (SF) 0 0 0 4,721 5,282 5,633
Anthracite coal
- Southern Federal District from 2010 (SF) n/a n/a n/a 4,721 5,282 5,633
- Siberian Federal District (SB) n/a n/a n/a 2,086 4,803 5,684
- Far East Federal District (FE) n/a n/a n/a n/a n/a 334
Coking coal
Brown coal n/a n/a n/a n/a n/a 35,928
- Central Federal District (CF) n/a n/a n/a n/a n/a 203
- Volga Region Federal District (VR) n/a n/a n/a n/a n/a 385
- Ural Federal District (UF) n/a n/a n/a n/a n/a 1,930
- Siberian Federal District (SB) n/a n/a n/a n/a n/a 48,140
- Far East Federal District (FE) n/a n/a n/a n/a n/a 12,111
Enriched coal n/a n/a n/a n/a 140,613 121,098
- North Western Federal District (NW) n/a n/a n/a n/a 7,623 5,114
- Southern Federal District from 2010 (SF) n/a n/a n/a n/a 4,099 4,228
- Ural Federal District (UF) n/a n/a n/a n/a 863 730
- Siberian Federal District (SB) n/a n/a n/a n/a 119,768 98,860
- Far East Federal District (FE) n/a n/a n/a n/a 8,260 9,127
Metallurgical coke 33,910 32,017 27,424 27,042 27,011 27,101
- Central Federal District (CF) 5,255 4,889 3,361 3,191 3,159 2,985
- Volga Region Federal District (VR) 2,347 2,345 1,976 2,127 2,163 1,775
- Ural Federal District (UF) 10,946 9,985 9,024 9,050 9,156 9,513

Regional Distribution (2012)
Siberian District
Northwestern District Coal mining - 297,126 thou tonnes
Central District Coal mining - 13,631 thou tonnes Anthracite - 5,684 thou tonnes
Coal mining 226 thou tonnes Bituminous coal - 13,640 thou tonnes Coking coal - 51,928 thou tonnes
Brown coal 203 thou tonnes Coking coal - 11,562 thou tonnes Brown coal - 48,140 thou tonnes
Metallurgical coke 2,985 thou tonnes Enriched coal - 5,114 thou tonnes Enriched coal - 98,860 thou tonnes
Metallurgical coke - 3,501 thou tonnes Metallurgical coke - 9,233 thou tonnes
Southern District
Coal mining - 5,633 thou tonnes
Bituminous coal - 5,633 thou tonnes
Anthracite - 5,633 thou tonnes Far Eastern District
Enriched coal - 4,228 thou tonnes Coal mining - 34,894 thou tonnes
Bituminous coal - 20,655 thou tonnes
Anthracite - 334 thou tonnes
Coking coal - 9,093 thou tonnes
Brown coal - 12,111 thou tonnes
Enriched coal - 9,127 thou tonnes
North Caucasian District
Urals District
Volga District
Coal mining - 2,328 thou tonnes
Coal mining 492 thou tonnes
Brown coal - 1,930 thou tonnes
Brown coal - 385 thou tonnes
Enriched coal - 730 thou tonnes
Metallurgical coke - 1,775 thou tonnes
Metallurgical coke - 9,513 thou tonnes
Source: Federal State Statistics Service, CEIC (data), Wikipedia (map)

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Coal Mining

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I. Sector Overview III. Coal Market

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Economic importance of coal mining sector

2007 2008 2009 2010 2011 2012

PPI 125.1 93.0 113.9 116.7 112.0 105.1

Coal exports, USD mn 5,354.7 7,751.8 7,367.1 9,180.5 11,373.3 13,015.1

Coal imports, USD mn 466.7 885.3 465.7 483.4 402.2 818.5

FDI total, USD mn 27,797.0 27,027.0 15,906.0 13,810.0 18,415.0 18,666.0

Source: Federal State Statistics Service, Federal Customs Office, CEIC

Mining and quarrying value, RUB bn Revenue breakdown per subsector

Energy producing materials 8,723 Mining except

2007 2008 2009 2010 2011 2012

Main sector indicators, mn tonnes

1988 2000 2008 2009 2010 2011 2012

Total mining 425.4 257.9 328.9 3026 323.4 334.7 352.7

- open-pit mining 178.7 167 224 195.2 220.9 235.8 255.1

- underground mining 246.7 90.9 104.9 107.4 102.1 100.9 99.6

Stocks - 190.4 191.4 176 790.6 188.3 194.2

Domestic power demand - 103.3 98.8 91.6 95.9 95.8 96.3

Source: Federal State Statistics Service, CEIC, Coal Age

Coal production, mn tonnes

Resources Mining in Coal mining development is concentrated in the main coal

Source: Coal Age, Energy Strategy 2030, World Energy Council

PPI, prev month=100 PPI, same month, prev year=100

PPI, prev Dec=100

Source: Federal State Statistics Service, CEIC

Coal, RUB/tonne Bituminous coal, RUB/tonne

Coking coal, RUB/tonne Brown coal, RUB/tonne

Source: Federal State Statistics Service, CEIC

CPI for coal, prev month=100

CPI for coal, same month prev year=100

Source: Federal State Statistics Service, CEIC

IPI in mining and quarrying, prev month=100

IPI, 1991=100 IPI, prev year=100

Source: Federal State Statistics Service, CEIC

Volume, mn tonnes Value, USD mn Volume, mn tonnes Value, USD mn

Exports by destination Imports by destination

Source: Federal Customs Agency, CEIC

2007 2008 2009 2010 2011 2012

Mining and quarrying 974,526 975,753 914,739 897,873 917,314 935,110

Average monthly wage, RUB

Mining and quarrying 28,108 33,206 35,363 39,895 45,132 50,401

Source: Federal State Statistics Service, CEIC

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Coal production, mn tonnes Coal production, mtoe

Coal production by type, mn tonnes

2007 2008 2009 2010 2011 2012

Hard coal* 240.1 245.2 267.7 275.0 282.4 n/a

- Bituminous coal 238.6 240.3 229.2 240.8 257.3 275.8

- Anthracite coal n/a n/a n/a 6.8 10.1 11.2

Lignite coal** n/a 82.5 68.8 76.4 76.9 77.8

Coking coal 69.1 64.7 60.6 67.0 64.7 71.5

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Coal consumption, mn tonnes Coal consumption, mtoe

205.2 200.3 3.8%

Coal consumption breakdown by users Electricity production from coal sources

19.2% 19.8% 196,286

Thermal coal consumption, mn metric tonnes Comments

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