Kuzbasskaya Toplivnaya Company OJSC Reports Operating Results for the Third Quarter and Nine Months of 2014

The volume of commercial products grew by 12%, to 2.47 million tonnes. Compared to the year-ago quarter, the volume of the Company's commercial products declined by 1%.

Coal processing amounted to 2.13 million tonnes, which is 21% more than in the previous quarter and 18% more than in the third quarter of 2013. Third quarter total coal washing fell by 1%, to 0.79 million tonnes, of which 69% relates to the Kaskad 2 washing plant. The volume of coal sorting grew by 35% compared to the second quarter of 2014 and amounted to 1.72 million tonnes.

The volume of stripping in the third quarter was 14.54 million cbm and fell by 5% Q-o-Q. The volume of blasted rock mass was 9.15 million cbm, an increase for the quarter by 3%. The share of blasted rock in the stripping was 63%. Third quarter average stripping transportation distance stood at 2.80 km, same as in the previous quarter and 7% less than in the year-ago quarter. The average stripping ratio in the quarter saw a decrease by 16% Q-o-Q and 12% Y-o-Y and reached 5.20 which is 2% above management expectations.

In the third quarter sales grew by 53% versus the volume of the previous quarter, reaching 2.89 million tonnes of coal. Year-on-year, this figure shows a contraction by 3%. Third quarter export sales increased by 24%, to 2.00 million tonnes, due to the sale of reserves previously stocked at the storages in Poland. For the quarter, the share of export in total sales fell to 69%.

Third quarter average selling price of coal rose by 18% compared to the second-quarter figure, amounting to RUB 1,059 per tonne. The quarterly average price hike was caused by a price increase in the domestic market, due to the heating season start in Eastern Siberia, and a gradual sales volume recovery as part of a new sales model in Poland. Compared to the year-ago quarter, the average price dropped by 8%.

For the nine months of 2014 the Company produced 7.59 million tonnes of coal, which is 3% more than in the previous corresponding period. Vinogradovsky open-pit mine was the main contributor to this growth and produced 2.90 million tonnes of coal, adding 17% Y-o-Y. Commercial product volume for nine months stood at 6.69 million tonnes, a contraction of 9% in yearly terms. This decrease in volume paired with production growth is due to a washing increase at Kaskad 2.

Coal processing amounted to 6.29 million tonnes, which is 4% lower than in the nine months of 2013. The share of processed coal in the commercial products was 94%. The total coal washing in the nine months grew by 45% to 1.62 million tonnes. The volume of coal sorting fell by 5% Y-o-Y and stood at 3.97 million tonnes.

During the nine months of 2014 stripping volume rose by 2% Y-o-Y and amounted to 45.04 million cbm. The volume of blasted rock mass was 26.81 million cbm, an increase by 31%. The average stripping ratio in the period dropped by 2% Y-o-Y and reached 5.90.

In the nine months of 2014 sales decreased by 8% versus the volume of the previous corresponding period, reaching 6.89 million tonnes of coal. Export sales stood flat in yearly terms, at 5.08 million tonnes, representing 74% of total sales. Domestic market coal sales declined by 25% Y-o-Y, to 1.81 million tonnes. The volume of coal purchased for resale dropped by 53%, to 0.47 million tonnes, to support sales of own coal.

For the nine months of 2014 the average selling was RUB 1,041 per tonne, a drop of 3% over a year-ago period. Exports to Asia-Pacific were the main driver for average selling price decrease.