Operating Results

In January–September 2007, production of steam coal increased by 32% to amount to 1,915,000 tons. Such growth was due to operation of the newly launched high-performance face No. 1108 at the Listvyazhnaya mine. The total production of the facility in the first nine months of 2007 amounted to 1,834,000 tons, which is 53% more than the respective index of the last year. In early 2008, when mining of the currently operating faces is completed, the Company will launch face No. 1110, the production capacity of which is similar to that of face No. 1108, and face No. 1307. The total volume of coal production at these facilities will equal 320,000 tons a month.

In January–September 2007, production of metallurgical coal at the Company’s enterprises totaled 1,398,000 tons, thus exceeding the respective index of the preceding year by 13%. A significant production increase (32%) was registered at the Chertinskaya-Koksovaya mine: from the beginning of the current year the enterprise has already produced 915,000 tons of coal.

Rapid buildup of coal output is based on the Company's corporate strategy, which is aimed at loading the Company’s preparation facilities with the maximum amount of self-produced coal. In total, due to the growth of production at the enterprises of the Group, by the end of 2007, the facilities of the Company are expected to produce 4.7 mln. tons of steam and metallurgical coal, and the total production of Belon Group, including coal sludge, will amount to 5.1 mln. tons.

The volume of coal preparation at the Belovskaya central coal preparation plant (CCPP) in the reported period amounted to 3,360,000 tons of bank coal and sludges, and thus slightly exceeded the respective index of the previous year. The plant produced 2,298,000 tons of metallurgical coal concentrate.

Currently, the Listvyazhnaya coal preparation plant is operating in a test mode for the new technology to be tried out. The construction of the facility was completed in August 2007. In September, the Listvyazhnaya coal preparation plant produced a pilot lot of steam coal concentrate in the amount of 3,000 tons. The enterprise is planning to reach the near-design capacity in October.

To further increase the Company's production capacities, primarily with regard to metallurgical coal, Belon Group continues the implementation of its investment programmes. Currently, the key investment object is the Kostromovskaya mine (under construction), which will produce metallurgical coal of “Zh” grade. The new mine is planned to be put into operation in the 2nd quarter of 2008. In addition, the Company continues open mining works at the Novobachatsky-1 and Novobachatsky-2 open-pit mines, which possess the reserves of “K” grade coal.