OAO Severstal announces that its subsidiary, Nord Gold NV an established pure play gold producer focused on emerging markets may be separated from its Severstal Group integrated steel operations.

The separation will be made by means of exchanges by its wholly owned indirect subsidiary, Lybica Holdings BV of 100% of the shares of Nordgold owned by Lybica for Severstal shares and Severstal GDRs held by Severstal existing shareholders and GDR holders. The separation is expected to be completed by late January 2012.

Mr Chris Clark Chairman of Severstal Board of Directors said “The transaction reflects a desire among our shareholders for Severstal to focus on its core strengths while also providing an opportunity for them to retain an interest in an established pure-play gold producer. The proposed separation will allow both Severstal and Nordgold to benefit from more focused operations and to continue to enjoy their market leading positions in the future while providing shareholders more flexibility with their investment strategies.”

Reasons for and benefits of the separation

Members of Severstal board of directors expressed views that the separation of Nordgold from Severstal, if implemented as proposed, will:-

1. Allow Nordgold and Severstal to focus on their respective core areas of activity and to adopt tailored business models, managerial approaches and reporting structures to reflect different positions in markets and geographies where they operate;

2. Enhance Nordgold industry profile substantially by positioning it as a new independent pure-play gold producer with a diverse portfolio of producing assets in West Africa, Russia and Kazakhstan and an attractive growth profile;

3. Increase Nordgold competitiveness by allowing it to react faster and with more flexibility to changing market developments than it can do now as the part of a large group with operations in other business sectors;

4. Provide Nordgold with a direct access to financing and growth opportunities that may not be currently available to it as Severstal subsidiary;

5. Create a platform for potential further expansion of Nordgold business through acquisitions in emerging markets, including in geographies outside of Severstal traditional areas of operations;

6. Allow existing Severstal security holders (within limitations of relevant laws) to participate in the ownership of both Nordgold and Severstal giving regard to shareholder preferences and without requiring additional cash investments from existing investors; and

7. Provide future investors with the opportunity to invest in each company with a more homogeneous business and risk profile in accordance with investors’ own risk preferences and investment strategies.