The rating downgrade reflects the absence of progress in the settlement of the tremendous debt plaguing Mechel OAO Group which includes OJSHC Yakutugol. This failure is proven by the numerous legal actions brought by the group's principal lenders against the parent company and subsidiaries including OJSHC Yakutugol.

The adverse market conditions have aggravated the rated Company's debt burden. The lower selling prices and the narrower demand for Yakutugol's products causes major losses cutting into its market capitalization and challenging the Company's ability to meet the debt obligations on the short-term horizon.

Just as in 2013, OJSHC Yakutugol posted a negative profit for 2014, its 12-month net increased 5.2 times to almost RUB 30 billion. As a result, retained balance-sheet loss totaled RUB 29.6 billion at the start of 2015.

While Yakutugol's losses increased in 2014, its debt obligations, primarily those with short maturities, also kept climbing up mechel.ru/. In 2014, the Company's short-term loan debt soared 2.7 times; for the first time in recent years, the amount of short-term debt exceeded the long-term obligations at the start of 2015. Yakutugol's debt profile deteriorated considerably in 2014, the percentage of short-term debt liabilities exceeding 50% at the beginning of 2015 compared with 28.8% in 2013.

At the end of 2014, total loan debt of OJSHC Yakutugol was RUB 118.3 billion. Total debt to revenue ratio increased to 6.3, short-term debt to revenue ratio reached 3.2.

In 2013 and 2014, Yakutugol's interest coverage ratio was below zero, indicating that the Company finds it difficult even to service its current loan interest at its own expense.

Besides, the effective debt settlement is still on the agenda and has fairly vague prospects of being ultimately solved, given that the Company is financially challenged.

OJSHC Yakutugol established in 2003 on the basis of state unitary enterprise Yakutugol has been part of the Mechel Mining holding since 2008. Mechel Mining OAO currently holds 100% of the shares in OJSHC Yakutugol. Today, OJSHC Yakutugol is one of Russia's leading coal mining companies and one of the few domestic hard coking coal producers. The Company has all the necessary licenses for coal mining operations. If demand is sufficient, the Company's total annual coal output reaches 11.5 million tonnes. OJSHC Yakutugol's surface and underground mines account for about 80% of all the coal output in Russia's Sakha Republic / Yakutia. The Company exports a large part of its clean coal. OJSHC Yakutugol operates four mining enterprises (the Neryungrinsky mine, the Kangalassky mine, the Dzhebariki Khaya underground mine and the Elga Coal Complex), the Neryungrinskaya Coal-Washing Plant, as well as auxiliary enterprises and facilities supporting the primary activity (motor depot for the company's transport vehicles, loading and transportation department, repair office/shop, commercial department, etc.).

This press release is based on the results of monitoring the current credit rating assigned to OJSHC Yakutugol.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as advice on the purchase and sale of securities or the provision of loan facilities.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

AK&M Rating Agency

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www.akmrating.ru

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.