Metinvest Group acquires a 100% stake in United Coal Company (UCC).

Metinvest announces today that it has acquired United Coal Company, LLC, an American producer of metallurgical and steam coal headquartered in Teays Valley, West Virginia (“UCC”). The acquisition has received all necessary approvals in the United States and Europe.

The key rationale for the acquisition of UCC was its significant reserves of high quality metallurgical coal, which will help Metinvest’s coke and chemical facilities produce a better quality feedstock. As a consequence, the Group’s steel works will be provided with a higher quality coke, reducing iron production costs and improving quality characteristics. The Group will thereafter be more competitive in current and prospective sales markets.

Igor Syry, the CEO of METINVEST HOLDING, LLC, commented: “We are extremely pleased with the agreement reached to acquire United Coal Company, and that we will be able to partner with the management team they have assembled. Metinvest is constantly looking for opportunities to improve our effectiveness and enhance the quality of our products. A higher quality of coke is especially critical in today’s environment, when Metinvest is reducing consumption of natural gas as a result of the increase in gas prices. Furthermore, we intend to maintain the existing business model of UCC, working closely with its excellent management team and employees. One of the things that attracted us to UCC was that they had managed to grow production quickly since 2005, and that they had several opportunities for additional expansion in the near term that matched our needs. Metinvest will continue to invest in the company in order to increase production.”

The companies of Metinvest Group have capacity to produce 10.8 million tons per year of crude steel, more than 11 million tons per year of rolled stock and semi finished steel, over 5 million tons per year of metallurgical coke and over 40 million tons per year of iron ore - enough to meet the Group’s internal demand in steelmaking raw materials and to be a key supplier to major steelmaking companies in Europe. The Group comprises 23 industrial companies in mining and steel, many of which are located in Metinvest’s home country of Ukraine. In Western Europe Metinvest has recently acquired Ferriera Valsider and Trametal – Italian re-rolling companies and British carbon steel plate producer Spartan UK.

“We are trying to apply a consistent approach to our strategy, to form an efficient and balanced metallurgical company, which will be a major player in the European and world markets” emphasized Mr. Syry. Having assets in the United States, the world’s most stable supplier, and having access to the world class mining methods employed by UCC with its tremendous record of and dedication to safety is a transformational step for Metinvest. This transaction positions us well for the rebound of world markets.”
“We at United Coal Company are very excited about the transaction,” commented Michael Zervos, CEO and President of UCC. “That Metinvest trusts our management team to continue to run the Company in the manner we have built it means everything to us. We have dedicated ourselves to building a world class producer of metallurgical coal, while keeping an unwavering focus on our core principles of employee safety and respect for the environment. That foundation of our Company will not change. As we built the Company, however, we saw that in order to maximize our growth opportunities, we would have to partner with an integrated steel producer so that our coals would have a sales outlet even in challenging market conditions. We believe that this transaction is a great outcome for all stakeholders in UCC, and we look forward to helping Metinvest achieve its goal of becoming the most efficient global steel producer.”

As both parties are privately held, further details concerning the transaction are unavailable.

Briefing note:
United Coal Company (UCC) is a privately-held coal company with operations in the Central Appalachian basin. UCC was formed in 2004 by private investors, (including James McGlothlin, who was one of the founders of the original United Coal Company in the 1970s), and grew through acquisitions of metallurgical coal producers. Since then UCC has grown to be one of the leading producers of metallurgical coal in the United States, ranking (by public company estimates) sixth among U.S. metallurgical coal producers. Production capacities of UCC’s four operating business units total approximately 7 mln. tons. UCC mines metallurgical and steam coal using both underground and surface mining techniques in the states of West Virginia, Virginia, and Kentucky. UCC’s proven coal reserves, as defined by U.S. Securities Exchange Commission standards, as of December 31, 2007, totaled 160 million clean metric tonnes of coal, 82% of which were metallurgical coal (coking coal and coals used for pulverized coal injection (PCI)).  UCC estimates that it is one of the five largest metallurgical coal reserve holders in the Central Appalachian region of the United States.

In 2008 UCC extracted 5.1 mln. clean metric tonnes of coal (both metallurgical and steam coal), which represented 17% growth over 2007 production. UCC’s metallurgical coal production accounted for approximately 4% of total U.S. metallurgical coal production in 2008. Revenues totaled more than $500 million in 2008.

UCC’s metallurgical coal customers are primarily steel companies and merchant coke producers in the Northeastern and Midwestern regions of the United States, although nearly half of metallurgical coal volumes were exported, primarily to South America and Europe. UCC’s steam coal customers are large utilities and industrial customers in the Eastern region of the United States.

The principal shareholder of UCC is The United Company, a private holding company with diversified interests including energy holdings.

Metinvest is an international vertically integrated mining and steel group of companies. Production facilities of Metinvest enterprises allow complete satisfaction of internal consumption of raw materials, liquid steel and semi-finished products in the company’s Ukrainian holdings, and allow Metinvest to be a key supplier to European and Asian enterprises. Metinvest Group shareholders are SCM Group (75%) and Smart-Holding Group of Companies (25%).

METINVEST HOLDING, LLC is the managing Company of Metinvest Group.