January 31, 2020
PAO Severstal (“Severstal”; “the Company”), one of the world’s leading
vertically integrated steel and steel-related mining companies, today announces
its capital investment programme for 2020.
Severstal plans to invest approximately 110.5 billion rubles in 2020,
focusing on the key areas of the Company’s updated strategy as disclosed during
its Capital Markets Day in November 2019 – providing a superior client
experience, maintaining cost leadership and embracing new opportunities.
However, as previously announced, should the market situation become less
favourable, the Company maintains the flexibility to reduce our planned capital
expenditure by up to 30-40%, by postponing those projects that are the lowest
priority.
Severstal Russian Steel
Severstal will invest approximately 73.4 billion rubles into its Russian
Steel division in 2020, of which 56.4 billion rubles will be allocated to
development projects.
The most significant projects in 2020 will be the construction of the new
Blast Furnace #3 (expected to commence operations in 2020), the Coking Battery
#11 (to be launched at full capacity in 2022, replacing batteries #8 and #9)
and the Flat Steel Production Development Programme, aimed at improving the
Company’s product mix. All of these projects involve the use of cutting-edge
technologies, which will ensure the Company maintains highly innovative and
efficient production processes as well as best-in-class environmental
performance.
Severstal Russian Steel will invest 17 billion rubles in maintenance,
environmental and health and safety projects in 2020.
Severstal Resources
Severstal will invest approximately 30.9 billion rubles in its Resources
division in 2020, of which 12.7 billion rubles will be invested in asset
development.
One of the main investment areas within Severstal Resources is the
development of the Yakovlevskiy mine, which will receive investment of 6
billion rubles in 2020. This will enable the Company to increase its production
capacity to 5m tonnes by 2023.
Other significant investment projects include restoring production volumes
at Vorkutaugol, where the Company is planning to increase production of coking
coal concentrate to 6 mln tonnes by 2023, the construction of a conveyor belt
for run-of-mine transportation at the Tsentralniy pit, and increasing pellet
quality by introducing lime hydrate at Karelskiy Okatysh.
Alexey Kulichenko, CFO of Severstal, commented:
“Severstal has launched a major corporate transformation programme, which is
already allowing us to be one of the most effective steel companies globally.
Therefore, most of our capital investment programme will fund development
projects focused on achieving a significant long-term cost advantage in basic
steel products, offering our clients unique, complex solutions, growing our
steel volumes, and improving our vertical integration. Severstal will continue
focusing on high return projects (minimum internal rate of return of 20% for
every investment project). At the same time, taking into account the extreme
volatility of today’s markets, we prefer to maintain a flexible approach
towards our capital investments and, should the market situation become less
favourable, we could potentially cut up to 30-40% of our planned CAPEX,
postponing our lower-priority projects to guarantee our financial stability. I
would also like to remind our investors that, in order to maximise investor
value, Severstal will be using Adjusted FCF to calculate dividends during the
intensive stage of our investment programme. Any CAPEX that exceeds the
base-line level of $800m will not be taken into consideration when determining
the level of the dividend payout.”
The amounts are subject to adjustments dependent on FX changes. The majority
of the Company’s expenditure in 2020 will be in rubles.