Severstal to accumulate 100% of the Putu Iron Ore Project in Liberia

Severstal (hereinafter – Severstal or the “Company”), one of the world’s leading vertically integrated steel and steel related mining companies, today announces that its indirect subsidiary Lybica Holdings B.V. (“Lybica”) has entered into a legally binding heads of terms agreement (the “Heads of Terms”) with Afferro Mining Inc. and its wholly owned subsidiary Mano River Iron Ore Holdings Limited (“Mano”), for the purchase of 38.5% interest in the Putu Iron Ore Project, Liberia (“Putu”). Severstal currently holds the remaining 61.5% interest in Putu.

Thomas Veraszto, Senior Vice President of Strategy and Corporate Development of Severstal, commented:

“We are pleased to announce this transaction which will strengthen Severstal’s position in the global iron ore market. The acquisition is in line with our key strategic goals of being a leading global steel and steel related mining company with high quality iron ore and coal assets across the world. Severstal will continue to develop Putu and consider the best strategic options to advance the project. We would also like to express our gratitude to Afferro Mining for successful partnership between our companies during the last three years”.

Consideration Terms:

Under the Heads of Terms an initial cash payment of US$65 million will be payable on completion of a definitive sale and purchase agreement (the “SPA”) by no later than 28 February 2012. A deferred cash payment will be made in an amount to be determined in accordance with the following provisions:

A) At any time after the earlier of (i) June 30, 2013 and (ii) two months after the delivery of a definitive feasibility study (the “DFS”) relating to Putu, Mano may require Lybica to pay a cash payment of US$50 million. Such right shall terminate on the second anniversary of such right first arising.

B) Provided Mano has not exercised its rights under the above clause (A), in the event of the agreement by Lybica or Severstal on or prior to the date which is in the earlier of (i) 12 months after the delivery of a DFS and (ii) 31 March 2015 to directly or indirectly sell all or a material part, being not less than 10%, of Putu or otherwise realize commercial value for it (e.g. by the introduction of another investor acquiring a material interest in the project or offering of shares to the public in an entity holding Putu), Lybica shall make a cash payment to Mano equal to the greater of (i) US$70 million and (ii) a sum equal to 38.5% of the total consideration in respect of the sale or realization event less 38.5% of any further developments costs, less the initial cash payment of US$65 million, such sum to be multiplied by 50%. This payment would be payable 60 days from the date of completion of the relevant binding agreement for the sale or other commercializing transaction.

C) At any time after 30 June 2014, Lybica may at its sole discretion make a cash payment of US$70 million to Mano being a Deferred Payment. Upon receipt of such payment any rights of Mano under clauses (A) and (B) above shall terminate.

Timing and Next Steps:

Subject to the terms and conditions set out under the Heads of Terms, the parties plan to enter into the SPA by 23 December 2011. The transaction will require obtaining the approval of shareholders of Afferro Mining Inc. and regulatory consents.

Severstal is one of the world’s leading vertically integrated steel and steel related mining companies, with assets in Russia, the USA, the Ukraine, Latvia, Poland, Italy, Liberia and Brazil. Severstal’s gold business, Nordgold, was established in 2007 and comprises mines and exploration projects in Russia, Kazakhstan, Burkina Faso and Guinea. Severstal is listed on RTS and MICEX and the company’s GDRs are traded on the LSE. Severstal reported revenue of $13,573 million and EBITDA of $3,263 million in 2010. Severstal’s crude steel production in 2010 was 14.7 million tonnes. www.severstal.com

Afferro Mining Inc. is an established exploration and development company listed on the TSX-V (AFF) and AIM (AFF). Afferro’s portfolio includes the 100% owned Nkout iron ore project and surrounding iron ore targets in Cameroon. Afferro currently has a 38.5% interest in the Putu iron ore project in Liberia, which is currently intending ti sell to Severstal, the Company’s joint venture partner, under the binding heads of terms agreed between Severstal and Afferro.