Severstal subsidiary signs mineral development agreement for the putu iron ore project in Liberia

OAO Severstal (“Severstal”) (LSE: SVST; RTS: CHMF), one of the world’s leading vertically integrated steel and mining companies, announces that its 61.5% subsidiary has entered into an agreement with the Government of Liberia to develop the Putu iron ore project. The Mineral Development Agreement (“MDA”) was signed on 3rd September 2010, approved by the President of Liberia and ratified by the Liberian Legislature on 9th September 2010.

Eхploration completed thus far at the Putu project indicates a mineral resource of 1.08 billion tonnes of iron mineralization at an average grade of just under 40%. The project is situated on a 13km long ridge, located only 120km inland from the deepwater shoreline of southeastern Liberia. Exploration works are continuing and the deposit has the potential to contain significant additional resources. A pre-feasibility study on the project should be completed by September 2012. Since 2008 Severstal has held a 61.5% interest in the project following the investment of $30 million into the pre-feasibility study. African Aura, an exploration and development company listed on the TSX-V (AUR) and London's AIM (AAAM), holds a 38.5% interest in the Putu project. Severstal also holds a 3.56% interest in African Aura.

The MDA fixes inter alia the fiscal and commercial regime for the development and mining of the Putu iron ore project. The MDA term is for a period of twenty five years and this can be extended further in line with the life of mine. It also sets out the main principles of corporate and social responsibility with total social contributions of $15.75 million for 2010−2017 and thereafter $3 million per year or 0.5% of the prior year’s taxable income.

Vadim Larin, CEO of Severstal Resources commented: “The granting of the Mineral Development Agreement represents a tremendous opportunity for Severstal, our partners and the people of Liberia. The project will bring important inward investment into the country and generate significant tax revenues. We are fully committed to the sustainable and socially responsible development of the project in the interests of all stakeholders. It represents an important new opportunity for Severstal by providing access to the international seaborne markets as we continue our development as a leading international mining business.”