Mechel PAO [MTL] Filings

20-F 1 d237462d20f.htm 20-F 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number

001-32328

MECHEL PAO

(Exact name of Registrant as specified in its charter)

RUSSIAN FEDERATION

(Jurisdiction of incorporation or organization)

Krasnoarmeyskaya Street 1, Moscow 125167, Russian Federation

(Address of principal executive offices)

Alexey Lukashov, tel.:

+7-495-221-8888,

e-mail:

alexey.lukashov@mechel.com

(Name, Telephone,

E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
COMMON AMERICAN DEPOSITARY SHARES, EACH COMMON ADS REPRESENTING TWO COMMON SHARES	MTL	NEW YORK STOCK EXCHANGE
COMMON SHARES, PAR VALUE 10 RUSSIAN RUBLES PER SHARE		NEW YORK STOCK EXCHANGE (1)
PREFERRED AMERICAN DEPOSITARY SHARES, EACH PREFERRED ADS REPRESENTING ONE-HALF OF A PREFERRED SHARE	MTL PR	NEW YORK STOCK EXCHANGE
PREFERRED SHARES, PAR VALUE 10 RUSSIAN RUBLES PER SHARE		NEW YORK STOCK EXCHANGE (2)

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

416,270,745 common shares, of which

45,020,456

shares are in the form of common ADSs

138,756,915 preferred shares (including 54,793,636 shares held by Skyblock Limited, a wholly-owned subsidiary of Mechel PAO), of which

9,625,014

shares are in the form of preferred ADSs

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of

Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☒		Non-accelerated filer ☐		Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

†	The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☐		International Financial Reporting Standards as issued by the International Accounting Standards Board ☒			Other	☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

(1)	Listed, not for trading or quotation purposes, but only in connection with the registration of common ADSs pursuant to the requirements of the Securities and Exchange Commission.

(2)	Listed, not for trading or quotation purposes, but only in connection with the registration of preferred ADSs pursuant to the requirements of the Securities and Exchange Commission.

Table of Contents

TABLE OF CONTENTS


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		6
CAUTIONARY NOTE REGARDING RESERVE AND MINERAL RESOURCE DISCLOSURE		7
Item 1.	Identity of Directors, Senior Management and Advisers	9
Item 2.	Offer Statistics and Expected Timetable	9
Item 3.	Key Information	9
Item 4.	Information on the Company	62
Item 4A.	Unresolved Staff Comments	132
Item 5.	Operating and Financial Review and Prospects	132
Item 6.	Directors, Senior Management and Employees	167
Item 7.	Major Shareholders and Related Party Transactions	177
Item 8.	Financial Information	178
Item 9.	The Offer and Listing	183
Item 10.	Additional Information	183
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	218
Item 12.	Description of Securities Other than Equity Securities	219
Item 13.	Defaults, Dividend Arrearages and Delinquencies	222
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	223
Item 15.	Controls and Procedures	223
Item 16A.	Audit Committee Financial Expert	225
Item 16B.	Code of Ethics	225
Item 16C.	Principal Accountant Fees and Services	225
Item 16D.	Exemptions from the Listing Standards for Audit Committees	226
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	226
Item 16F.	Change in Registrant’s Certifying Accountant	227
Item 16G.	Corporate Governance	227
Item 16H.	Mine Safety Disclosure	228
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	228
Item 17.	Financial Statements	229
Item 18.	Financial Statements	229
Item 19.	Exhibits	230
SIGNATURES		232

Unless the context otherwise requires, references to “Mechel” refer to Mechel PAO, and references to “Mechel group,” “the group,” “our group,” “we,” “us” or “our” refer to Mechel PAO together with its subsidiaries. Common American Depositary Shares representing common shares are referred to as “common ADSs,” Global Depositary Shares are referred to as “GDSs,” preferred American Depositary Shares representing preferred shares are referred to as “preferred ADSs” and common ADSs and preferred ADSs are together referred to as “ADSs.”

Our business consists of three segments: mining, steel and power. References in this document to segment revenues are to revenues of the segment excluding intersegment sales, unless otherwise noted. References in this document to our sales or our total sales are to third-party sales and do not include intra-group sales, unless otherwise noted.

The reporting currency of our consolidated financial statements is the Russian ruble. The reason of adopting the Russian ruble as the reporting currency in the consolidated financial statements under IFRS is to allow a greater transparency of our financial and operating performance as it more closely reflects the profile of our revenue and operating income that are mostly generated in Russian rubles.

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References to “Russian rubles,” “rubles” or “RUB” are to the currency of the Russian Federation, references to “U.S. dollars,” “$” or “USD” are to the currency of the United States and references to “euro,” “€” or “EUR” are to the currency of the member states of the European Union that participate in the Economic and Monetary Union.

The term “tonne” as used herein means a metric tonne. A metric tonne is equal to 1,000 kilograms or 2,204.62 pounds.

Certain amounts that appear in this document have been subject to rounding adjustments; accordingly, figures shown as totals in certain tables or in the text may not be an arithmetic aggregation of the figures that precede them.

“CIS” means the Commonwealth of Independent States.

“CBR” refers to the Central Bank of the Russian Federation.

The following table sets forth by business activity the official names and location of our key subsidiaries and their names as used in this document:


Name as Used in This Document	Official Name	Location
Mining
Mechel Mining	Mechel Mining AO	Russia, Moscow
Southern Kuzbass Coal Company	Southern Kuzbass Coal Company PJSC	Russia, Kemerovo region
Yakutugol	Yakutugol Joint-Stock Holding Company	Russia, Sakha Republic
Korshunov Mining Plant	Korshunov Mining Plant PAO	Russia, Irkutsk region
Moscow Coke and Gas Plant	Moscow Coke and Gas Plant AO	Russia, Moscow region
Mechel Coke	Mechel Coke OOO	Russia, Chelyabinsk region
Port Posiet	Trade Port Posiet AO	Russia, Primorsky Krai
Port Temryuk	Port Mechel Temryuk OOO	Russia, Krasnodar Krai

Steel
Chelyabinsk Metallurgical Plant	Chelyabinsk Metallurgical Plant PAO	Russia, Chelyabinsk region
Izhstal	Izhstal PAO	Russia, Republic of Udmurtia
Urals Stampings Plant	Urals Stampings Plant PAO	Russia, Chelyabinsk region
Beloretsk Metallurgical Plant	Beloretsk Metallurgical Plant AO	Russia, Republic of Bashkortostan
Vyartsilya Metal Products Plant	Vyartsilya Metal Products Plant AO	Russia, Republic of Karelia
Mechel Nemunas	Mechel Nemunas UAB	Lithuania, Kaunas
Bratsk Ferroalloy Plant	Bratsk Ferroalloy Plant OOO	Russia, Irkutsk region
Port Kambarka	Port Kambarka AO	Russia, Republic of Udmurtia

Power
Southern Kuzbass Power Plant	Southern Kuzbass Power Plant PAO	Russia, Kemerovo region
Kuzbass Power Sales Company	Kuzbass Power Sales Company PAO	Russia, Kemerovo region
Mechel Energo	Mechel Energo OOO	Russia, Chelyabinsk region

Marketing and Distribution
Mechel Carbon	Mechel Carbon AG	Switzerland, Baar
Mechel Service Global	Mechel Service Global B.V.	Netherlands, the Hague
Mechel Service	Mechel Service OOO	Russia, Moscow

Other
Mecheltrans	Mecheltrans OOO	Russia, Moscow

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SUMMARY OF RISK FACTORS

An investment in our securities is subject to a number of risks, including risks relating to

COVID-19,

our financial condition, our business and industry, our shares and ADSs and the trading market and risks relating to the Russian Federation. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

COVID-19

•

Further development of situation with

COVID-19

outbreak may result in lower demand for our products, negatively impact our revenues and adversely affect our results of operations.

•

COVID-19

quarantine measures, including any import restrictions, may affect our ability to use the logistics infrastructure and deliver our products to the customers.

•

COVID-19

outbreak may result in inability of the group to receive goods and services from suppliers that we need for our

day-to-day

operations.

•

Our operations could get disrupted if any of our employees test positive for

COVID-19

after returning to office or the production plants, which in turn could have an adverse effect on our ability to continue operations.

•

Our internal controls over financial reporting can be affected by the

COVID-19

outbreak, which may result in our inability to prevent or detect misstatements.

•

With further development of

COVID-19,

IT infrastructure and resources can become scarcely available to us due to shortage, remote working and limited capacity of existing infrastructure.

Risks Relating to Our Financial Condition

•

We have a portion of

non-restructured

debt and there is substantial doubt about our ability to continue as a going concern.

•

We have experienced and may continue to experience liquidity shortages and a working capital deficit.

•

Our creditors had accelerated and in the future may accelerate amounts due under our loan agreements, which may result in loss of our assets, including fixed assets and shares in our subsidiaries, adversely affect our ability to conduct our business and result in a significant decline in the value of our shares and ADSs.

•

We may fail to comply with the terms of the restructured indebtedness or be unable to complete restructuring.

•

We have a substantial amount of outstanding indebtedness with restrictive covenants and most shares and certain assets in our subsidiaries are pledged.

•

We may become subject to bankruptcy procedures, which may result in the inability of holders of our shares and ADSs to recover some or all of their investments.

•

If we fail to fulfill payment obligations under the group’s lease agreements, our lessors may require the return of the leased assets, which could materially adversely affect our business, financial condition, results of operations and prospects.

Risks Relating to Our Business and Industry

•

We operate in cyclical industries, and any local or global downturn, whether or not primarily affecting the mining and/or steel industries, may have an adverse effect on our business, financial condition, results of operations and prospects.

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•

The steel and mining industries are highly competitive, and we may not be able to compete successfully.

•

Our business is capital intensive, if we are not able to finance our capital investment program this may have a material adverse effect on our business and our ability to comply with applicable regulations.

•

Successful implementation of our strategy to expand our coal sales depends on our ability to increase our export sales and further development of transportation infrastructure.

•

Changes in our estimates of mineral resources and reserves or failure to implement mine development plans could result in lower than expected revenues, higher than expected costs or decreased operating margins.

•

Our business could be materially adversely affected if we fail to obtain or extend necessary subsoil licenses or fail to comply with the terms of our subsoil licenses.

•

Increasing energy, raw materials, transportation and labor costs could adversely affect our operating margins.

•

We are subject to mining and steelmaking operational risks associated with the exploration, development and production of natural resources, as well as the process of steelmaking, any of which could result in production shortfalls or damage to persons or property.

•

More stringent environmental laws and regulations or more stringent enforcement or findings that we have violated environmental laws and regulations could result in higher compliance costs and significant fines and penalties, or require significant capital investment, or even result in the suspension of our operations.

•

Failure to comply with existing laws and regulations could result in substantial additional compliance costs or various sanctions which could materially adversely affect our business, financial condition, results of operations and prospects.

•

The concentration of our shares with our largest shareholders will limit your ability to influence corporate matters and transactions with largest shareholders may present conflicts of interest, potentially resulting in the entering into transactions on less favorable terms than could be obtained on arm’s length basis.

Risks Relating to Our Shares and ADSs and the Trading Market

•

The suspension of trading and potential delisting of our ADSs could adversely affect the liquidity and the market price of our shares and ADSs.

•

The price of our shares and ADSs could be volatile and could drop unexpectedly, making it difficult for investors to resell our shares or ADSs at or above the price paid.

•

The depositary may be required to take certain actions due to Russian law requirements which could adversely impact the liquidity and the value of the shares and ADSs.

•

Voting rights with respect to the shares represented by our ADSs are limited by the terms of the relevant deposit agreement for the ADSs and relevant requirements of Russian law.

•

ADS holders may not be able to benefit from the United States-Russia income tax treaty and capital gains from the sale of ADSs may be subject to withholding tax in Russia.

•

Holders of ADSs may have limited recourse against us and our directors and executive officers.

Risks Relating to the Russian Federation

•

Emerging markets such as Russia are subject to greater risks than more developed markets, and financial turmoil in developed or other emerging markets could have a material adverse effect on our business and could cause the value of our shares and ADSs to fluctuate widely.

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•

Geopolitical disagreements between Russia and Ukraine and sanctions imposed as a result thereof could adversely affect our business, financial condition and results of operations.

•

Sanctions, as well as other politically related disagreements and allegations between Russia and other countries, may have a material adverse effect on our business, liquidity and financial condition, as well as value of our shares and ADSs.

•

Political and governmental instability could materially adversely affect our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

•

Weaknesses relating to the Russian legal system and legislation create an uncertain investment climate.

•

Selective government action could have a material adverse effect on the investment climate in Russia and on our business, financial condition, results of operations and prospects and the value of our shares and ADSs.

•

Due to still-developing law and practice related to minority shareholder protection in Russia, the ability of holders of our shares and ADSs to bring, or recover in, an action against us may be limited.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this document may constitute forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “plan,” “project,” “will,” “likely,” “goal,” “future,” “may,” “should” and similar expressions identify forward-looking statements. Forward-looking statements appear in a number of places including, without limitation, “Item 3. Key Information — Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects,” and include statements regarding:

•

strategies, outlook and growth prospects;

•

the ability to maintain and generate sufficient cash and other liquid resources to meet our operating and debt service requirements;

•

our ability to comply with the covenants and restrictions imposed by the existing and future financing arrangements and our ability to attract new financing or refinancing, as well as to restructure the debt;

•

the impact of competition;

•

capital expenditures;

•

demand for our products;

•

economic outlook and industry trends;

•

transactions with related parties;

•

regulatory compliance;

•

developments in our markets;

•

future plans and potential for future growth;

•

the results of any legal procedures;

•

the impact of regulatory initiatives; and

•

the strength of our competitors.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, and we may not achieve or accomplish these expectations, beliefs or projections. See “Item 3. Key Information — Risk Factors” for a discussion of important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements.

Except to the extent required by law, neither we, nor any of our agents, employees or advisers intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained or incorporated by reference in this document.

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CAUTIONARY NOTE REGARDING RESERVE AND MINERAL RESOURCE DISCLOSURE

Estimates of mineralization and other technical information included or incorporated by reference herein have been prepared in accordance with subpart 1300 of Regulation

S-K

(the “

New Mining Regulation

”).

Due to the uncertainty that may be attached to inferred mineral resource estimates, it cannot be assumed that all or any part of an inferred mineral resource estimate will be upgraded to an indicated or measured mineral resource estimate as a result of continued exploration. Confidence in an inferred mineral resource estimate is insufficient to allow meaningful application of the technical and economic parameters to enable an evaluation of economic viability sufficient for public disclosure, except in certain limited circumstances. Inferred mineral resource estimates are excluded from estimates forming the basis of a feasibility study.

The New Mining Regulation requires mining companies to disclose mineral resources using the subcategories of measured resources, indicated resources and inferred resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

A “feasibility study” is a comprehensive technical and economic study of the selected development option for a mineral project, which includes detailed assessments of all applicable modifying factors, as defined by this section, together with any other relevant operational factors, and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is economically viable. The results of the study may serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. A feasibility study is more comprehensive, and with a higher degree of accuracy, than a

pre-feasibility

study. It must contain mining, infrastructure, and process designs completed with sufficient rigor to serve as the basis for an investment decision or to support project financing. The confidence level in the results of a feasibility study is higher than the confidence level in the results of a

pre-feasibility

study. Terms such as full, final, comprehensive, bankable, or definitive feasibility study are equivalent to a feasibility study.

A “preliminary feasibility study” or

“pre-feasibility

study” is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a qualified person has determined (in the case of underground mining) a preferred mining method, or (in the case of surface mining) a pit configuration, and in all cases has determined an effective method of mineral processing and an effective plan to sell the product. A

pre-feasibility

study includes a financial analysis based on reasonable assumptions, based on appropriate testing, about the modifying factors and the evaluation of any other relevant factors that are sufficient for a qualified person to determine if all or part of the indicated and measured mineral resources may be converted to mineral reserves at the time of reporting. The financial analysis must have the level of detail necessary to demonstrate, at the time of reporting, that extraction is economically viable. A

pre-feasibility

study is less comprehensive and results in a lower confidence level than a feasibility study. A

pre-feasibility

study is more comprehensive and results in a higher confidence level than an initial assessment.

An “indicated mineral resource” is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of adequate geological evidence and sampling. The level of geological certainty associated with an indicated mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Because an indicated mineral resource has a lower level of confidence than the level of confidence of a measured mineral resource, an indicated mineral resource may only be converted to a probable mineral reserve.

An “inferred mineral resource” is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. The level of geological uncertainty associated with an inferred mineral resource is too high to apply relevant technical and economic factors likely to influence the prospects of economic extraction in a manner useful for evaluation of economic viability. Because an inferred mineral resource has the lowest level of geological confidence of all mineral resources, which prevents the application of the modifying factors in a manner useful for evaluation of economic viability, an

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inferred mineral resource may not be considered when assessing the economic viability of a mining project, and may not be converted to a mineral reserve.

A “measured mineral resource” is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. The level of geological certainty associated with a measured mineral resource is sufficient to allow a qualified person to apply modifying factors, as defined in this section, in sufficient detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Because a measured mineral resource has a higher level of confidence than the level of confidence of either an indicated mineral resource or an inferred mineral resource, a measured mineral resource may be converted to a proven mineral reserve or to a probable mineral reserve.

A “mineral reserve” is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which includes diluting materials and allowances for losses that may occur when the material is mined or extracted.

A “mineral resource” is a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as

cut-off

grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of all mineralization drilled or sampled.

A “probable mineral reserve” is the economically mineable part of an indicated and, in some cases, a measured mineral resource.

A “proven mineral reserve” is the economically mineable part of a measured mineral resource and can only result from conversion of a measured mineral resource.

Figures related to our mineral resource and reserve estimates are rounded to reflect the relative accuracy of the estimates, and totals may not add correctly. In addition, the mineral resource and reserve estimates are based on the factors related to the geological and grade models discussed in “Item 4. Information on the Company,” and the criteria for reasonable prospects of eventual economic extraction as described therein. The mineral resource and reserve estimates may be affected, positively or negatively, by additional exploration that expands the geological database and models of the properties described. The mineral resource and reserve estimates could also be materially affected by any significant changes in the assumptions regarding forecast product prices, mining efficiency, process recoveries, or production costs. If the price assumptions decrease or the assumed production costs increase, then the

cut-off

grade would increase. The potential impacts on the mineral resource and reserve estimates may be material and such estimates may need to be

re-evaluated.

The mineral resource and reserve estimates are also based on certain critical assumptions, such as requisite mining permits continuing to be granted

as-needed,

tax rates remaining stable, and the absence of additional regulations on the corresponding properties. Except as described in “Item 4. Information on the Company” and the Technical Report Summaries (as defined below), Phoenix Mining Consultants Ltd., our qualified person, is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political, or other relevant factors that could materially affect the mineral resource and reserve estimates.

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PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

Selected Financial Data

The financial data set forth below as of December 31, 2021, 2020, 2019, 2018 and 2017, and for the years then ended, have been derived from our consolidated financial statements. Our reporting currency is the Russian ruble and we prepare our consolidated financial statements in accordance with International Financial Reporting Standards (“

IFRS

”) as issued by the International Accounting Standards Board (“

IASB

”).

In April 2020, we disposed of the Elga coal complex, which was recognized as a discontinued operation in our consolidated financial statements. As a result, the financial data for the years ended December 31, 2019, 2018 and 2017 have been adjusted to reflect the disposal. For more information, see note 24 to the consolidated financial statements.

The selected financial data set forth below should be read in conjunction with, and is qualified in its entirety by reference to, “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements and the notes thereto included in this Annual Report on Form

20-F.


	Year Ended December 31,
	2021			2020			2019			2018			2017

	(In millions of Russian rubles, unless stated otherwise)
Consolidated statement of profit or loss and other comprehensive income data:
Revenue from contracts with customers		402,074			265,454			287,153			303,795			291,543
Cost of sales		(223,993	)		(170,605	)		(183,086	)		(174,058	)		(158,196	)

Gross profit		178,081			94,849			104,067			129,737			133,347
Total selling, distribution and operating income and (expenses), net		(75,415	)		(74,924	)		(69,867	)		(78,591	)		(76,367	)

Operating profit		102,666			19,925			34,200			51,146			56,980
Total other income and (expense), net		(13,536	)		(57,550	)		(15,212	)		(27,596	)		(37,331	)
Profit (loss) before tax from continuing operations		89,130			(37,625	)		18,988			23,550			19,649
Income tax expense		(6,511	)		(2,528	)		(7,913	)		(2,653	)		(1,844	)
Profit (loss) from continuing operations		82,619			(40,153	)		11,075			20,897			17,805
Profit (loss) after tax from discontinued operations		—			41,609			(6,790	)		(7,361	)		(5,235	)
Profit		82,619			1,456			4,285			13,536			12,570
Less: profit attributable to non-controlling interests		2,049			648			1,876			908			1,013

Profit attributable to equity shareholders of Mechel		80,570			808			2,409			12,628			11,557

Profit		82,619			1,456			4,285			13,536			12,570
Exchange differences on translation of foreign operations		(152	)		2,042			(1,771	)		(9	)		313

Re-measurement of defined benefit plans		1,070			200			(867	)		487			145
Net (loss) gain on equity instruments designated at fair value through other comprehensive income		(27	)		53			—			—			—
Total comprehensive income, net of tax		83 510			3,751			1,647			14,014			13,028

Table of Contents


	Year Ended December 31,
	2021			2020			2019			2018			2017

	(In millions of Russian rubles, unless stated otherwise)
Total comprehensive income attributable to non-controlling interests		2,066			652			1,857			918			1,016

Total comprehensive income (loss) attributable to equity shareholders of Mechel		81,444			3,099			(210	)		13,096			12,012

Earnings (loss) per share from continuing operations (Russian rubles per share), basic and diluted		199			(99	)		22			48			40

Earnings (loss) per share from discontinued operations (Russian rubles per share), basic and diluted		—			101			(16	)		(18	)		(12	)

Earnings per share (Russian rubles per share) attributable to common equity shareholders, basic and diluted		199			2			6			30			28
Dividends declared per common share (Russian rubles per share)		—			—			—			—			—

Dividends declared per preferred share (Russian rubles per share)		—			1.17			3.48			18.21			16.66

Weighted average number of common shares		404,776,126			412,589,910			416,256,510			416,270,745			416,270,745
Mining segment statement of profit (loss) data (1) :
Revenue from contracts with customers		164,973			105,283			121,227			125,653			134,846
Cost of sales		(61,783	)		(53,842	)		(57,547	)		(53,384	)		(46,722	)

Gross profit		103,191			51,441			63,680			72,269			88,124
Total selling, distribution and operating income and (expenses), net		(35,193	)		(37,333	)		(36,905	)		(38,178	)		(40,050	)

Operating profit		67,999			14,108			26,775			34,091			48,074

Steel segment statement of profit (loss) data (1) :
Revenue from contracts with customers		268,426			173,510			180,919			193,764			180,382
Cost of sales		(205,898	)		(143,480	)		(153,433	)		(149,349	)		(146,369	)

Gross profit		62,529			30,030			27,486			44,416			34,013
Total selling, distribution and operating income and (expenses), net		(25,081	)		(23,510	)		(20,399	)		(24,602	)		(24,859	)

Operating profit		37,447			6,520			7,087			19,814			9,154

Power segment statement of profit (loss) data (1) :
Revenue from contracts with customers		45,419			43,457			44,327			43,245			42,562
Cost of sales		(31,396	)		(29,368	)		(31,269	)		(30,807	)		(29,907	)

Gross profit		14,022			14,089			13,058			12,438			12,655
Total selling, distribution and operating income and (expenses), net		(15,133	)		(14,397	)		(11,642	)		(15,811	)		(11,457	)

Operating (loss) profit		(1,111	)		(308	)		1,416			(3,374	)		1,198