Our Business Model

We deliver long-term value to shareholders at every stage of our value chain – mining, processing, transportation and shipment through port facilities, sales and distribution. Our integrated business model allows us to benefit from economies of scale and maintain our status as Russia’s leading coal producer.

Our business model

Mining

Business model mining

Our mining activities deliver a sustainable supply of high-quality thermal coal. Our strong reserve base and efficient operations enable us to maintain a leading position in the industry and pursue ambitious growth targets. To achieve these, we invest heavily in modern equipment and continually upgrade our production units.

We intend to expand our production of high-quality hard coal, principally for international sales to the Asia-Pacific region shipping through Vanino Bulk Terminal. We aim to operate our high-quality portfolio of assets safely, reliably and efficiently.

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Washing and processing

Business model washing

Our processing and coal-washing facilities enable us to enhance the quality of mined coal. By reducing ash and moisture, we can improve coal’s calorific value. Our overseas sales volumes are to a certain extent driven by our coal washing and processing capacity which enables us to meet the higher-quality requirements for coal sold on international markets.

We have responded to increasing global demand for higher-quality coal by building new facilities and by improving the operating efficiency of existing washing plants. Our actions have produced positive results and helped boost our international sales.

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Logistics

Business model logistics

The favourable locations of our coal assets, allowing easy access to key transport infrastructure and port facilities, enables us to cost-effectively supply the major markets of Russia, Atlantic and Asia-Pacific. Some of our assets are closer to key Asian markets than many of our competitors, so we benefit from reduced transportation costs.

We currently manage the rail distribution of our coal to over 1,300 customers in Russia, and to eastbound and westbound seaports for onward delivery to nearly 200 customers in 35 countries. We aim to eliminate bottlenecks through reconstruction of our rail stations and by adding new, higher-capacity rail cars to our fleet. We continue to invest heavily in our infrastructure near mines and to expand the capacity of our dedicated port – Vanino Bulk Terminal.

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Sales

Business model sales

We sell coal to a long-standing and diverse customer base through our established distribution and trading platform. Our products are sold in more than 35 countries internationally with the help of our representative offices worldwide. We maintain a strong focus on the key markets of Asia-Pacific and Europe. More than 80% of international sales are direct to end users.

We continue to expand our presence in international markets, primarily in China. We have made real progress in developing business to Japan and established long-term business in new markets such as Malaysia, Hong Kong and Sri Lanka.

In Europe, we have a strong retail network in Poland which we intend to expand. We also plan to increase sales to Mediterranean markets such as Italy, Morocco and Israel. Our coal sales in Russia are principally to power plants under long-term contracts. This creates an important synergy for us, providing stable demand from locations close to our mines.

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