The Russian steel and mining conglomerate Evraz intends to increase capital expenditures by 20 per-cent in 2011. The company’s outlays for capital projects will be USD 1.1 billion. 

Evraz Group is the largest steel producer in the world with complete vertical integration, having upstream and downstream assets in Russia, Ukraine, the United States, Italy, Slovakia, and the Czech Republic.

Evraz Group’s existing limits on capital expenditures are calculated on the basis of Evraz’s debt to EBITDA ratio. For 2010 the capital outlays cap was USD 950 million, and the company invested approximately the full amount authorized. Evraz’s management estimates that in 2011 the cap will be 20 to 30 percent higher, somewhere between USD 1.2 and USD 1.3 billion.  

The current debt load of Evraz is USD 8 billion, and the outstanding balance is decreasing. The company’s EBITDA figure for 2010 is expected to be USD 2.4 billion. The ratio of net debt to EBITDA will be at 3 at the start of 2010. Meanwhile, the covenants contained in the debt instruments allow the ratio to be as high as 5.8. The company is also planning to reduce leverage in the near future.   

Evraz finished the first half of 2010 with a net loss of USD 270 million under international financial reporting standards. The losses resulted chiefly from write-downs, as the company reduced the book value of its assets because the assets were overvalued in relation to the market value. Without the write-downs, the company would have a net profit of USD 284 million. Interim management accounting shows that the debt was USD 7.811 million as of the end of September 2010. The debt also included short-term obligations in the amount USD 1.373 billion. Cash and cash equivalents on hand totaled USD 698 million. Revenue from sales increased by 35 percent, reaching USD 9.729 billion. The company’s adjusted EBITDA increased twofold to USD 1.766 billion. 

At the present time, Evraz Group is getting ready to launch the Sobstvenno-Kachkanarskoye deposit of titanomagnete and vanadic ore. The new site will enter production after the reserves at the Gusevogorskoye deposit will be exhausted. The steady supply of ore is critical to the operation of the company’s Nizhniy Tagil Iron and Steel Works. Evraz is currently undertaking expansion programs at the Nizhniy Tagil enterprise, placing a second converter unit at the plant. Thus, if the plant’s capacities increase, the supply of raw materials needs to increase in a corresponding fashion.      

Evraz further has plans to invest in its mining asset of Evrazruda. The parent company views sustained output levels important to continued growth across all other units of Evraz. 

Evraz is the only company in Russia that is engaged in mining ferrovanadic ore. The company is also one of the largest producers of vanadium slag in the world. The Kachkanar-Vanadii mining complex of Evraz is developing the Gusevogorskoye deposit.

In March of 2010, Evraz finished exploration activities at the Sobstvenno-Kachkanarskoye site located 5 kilometers away from the Gusevogorskoye deposit. Gusevogorskoye’s reserves are estimated at 3 billion tons of ore with iron content exceeding 16.6 percent.