OREANDA-NEWS. November 17, 2010. UC RUSAL Pic (SEHK: 486, EuroNext: RUSAL/RUAL), the world's largest aluminium producer, announces its results for the nine months ended 30 September 2010.

Key highlights:

•           Net profit of USD 1,420 million for the nine months ended 30 September 2010 compared to net loss of USD826 million for the nine months ended 30 September 2009.

•           Revenue increased by 36.6% to USD8,029 million for the nine months ended 30 September 2010 as compared to USD5,876 million for the nine months ended 30 September 2009 due to higher aluminium prices.

•           Gain from operating activities of USD 1,467 million in the nine months ended 30 September 2010, as compared to a loss from operating activities of USD 161 million in the nine months ended 30 September 2009, representing operating margins of 18.3% and negative 2.7%, respectively.

•           Total aluminium output amounted to 3,034 thousand tonnes for the nine months ended 30 September 2010, an increase of 3% as compared to the nine months ended 30 September 2009.

•           Alumina output totaled 5,758 thousand tonnes for the nine months ended 30 September 2010, an increase of 7% as compared to the nine months ended 30 September 2009.

•           Bauxite production totaled 8.7 million tonnes for the nine months ended 30 September 2010 and decreased by 1% as compared to the nine months ended 30 September 2009.

•           Aluminium foil and packaging production volume increased by 22% to 60.2 thousand tonnes for the nine months ended 30 September 2010 compared to 49.3 thousand tonnes for the nine months ended 30 September 2009.

•           Investments1 in development of existing facilities and construction of new assets amounted to USD623 million.

•           Adjusted EBITDA increased to USD1,889 million for the nine months ended 30 September 2010 compared to USD328 million for the same period in 2009.

•           The refinancing of VEB debt with a new USD4.58 billion credit facility from Sberbank - the final step in the restructuring of the loan portfolio. The new loan, which has an interest rate of LIBOR plus5%, matures on 7 December 2013 and may be renewed for a further one and a half years.

•           With effect from 10 September 2010, the interest margin payable by the Company on its debt owed to international lenders has decreased from 5.5% to 4.5% as the Total Net

1 Calculated as acquisition ofproperty, plant and equipment, acquisition of intangible assets and contributions in jointly controlled entities.

Debt to Covenant EBITDA ratio has dropped. The interest margin has reduced by 36% as compared to the December 2009 margin of 7%.

•           In the third quarter of 2010, the Company has made debt repayments in the amount of USD309 million to its lenders (other than VEB) using dividends received by the Company from Norilsk Nickel.

•           In compliance with its obligations under the International Override Agreement, as at 30 September 2010, the Company had reduced the Total Net debt (excluding VEB and Onexim) by USD2.4 billion. As a result, the Company is ahead of its 2010 debt reduction targets by 73%. In addition, the Company's debt reduction targets for 2011 have already been met by 81%.

•           The Supervisory Board of VEB has approved the offering to the Company of a financing package amounting to RUR50 billion (about USD 1.7 billion) for UC RUSAL and RusHydro to complete the construction of the Boguchanskoye Energy and Metals Complex.

•           Market value of the Company's investment in Norilsk Nickel as at end of September 2010 increased by 21.1% as compared to the value of that investment at the end of 2009. As of 30 September 2010, the market capitalisation of the investment exceeded USD8.1 billion2.

Commenting on the results of the first nine months of 2010, Oleg Deripaska, CEO of UC RUSAL said:

"We have consolidated our success in reducing costs and improving production efficiency, which has allowed us, in spite of the rising costs of raw materials and energy, to achieve one of the most competitive production costs within the aluminium industry. This enabled us to meet the growing demand for aluminium by continuing to increase production volumes at existing facilities, as well as at the modernized Irkutsk aluminium smelter, where new modern highly efficient equipment was launched. Our aluminium production output grew by 78,000 tonnes over the period.

"These much improved results show that UC RUSAL has entered a new growth phase. RUSAL's strong financial position creates a solid platform for the Company's further development. EBITDA substantially increased over the first nine months of 2010, which led to in June and then in September a reduction in the interest rates on international loans from 7% to 4.5%. The group is well ahead of its debt repayment targets and has successfully completed its comprehensive programme to restructure its loan portfolio. The final step in this process was the refinancing of the USD4.58 billion VEB loan with a new credit facility from Sberbank, which matures in December 2013. The original loan was drawn in 2008 for the acquisition of a 25% stake in Norilsk Nickel, which remains a strategic investment for UC RUSAL. The market value of our investment in Norilsk Nickel remains significantly undervalued. We believe that the market capitalisation of Norilsk Nickel can easily double and, as one of the key shareholders of Norilsk Nickel, we will continue to advance the positive agenda for change that will enhance value for all shareholders.

"Several factors point to encouraging prospects for the aluminium market: the revival of the domestic market, increased economic activity in Germany, South America and Asia, spot premiums reaching an all-time high, partly due to China becoming a net importer of aluminium, as well as the projected reduction in inventories by less than 4-5% by the end of the year. Our action plan aimed at supporting Russian manufacturers of aluminium-consuming products has enabled us to increase sales in Russia by almost 50%. The letter of intent we have signed with China North Industries Corporation (NORINCO) to create a joint sales subsidiary in China and

Source: RTS (Russian Trading System) closing price for the last trading day of the period.

the offering of project finance approved by the Supervisory Board of VEB for the completion of the Boguchanskoye Energy and Metals Complex, a key growth project for the Company, further strengthen RUSAL's leading position in improving market conditions."

Market review

Aluminium industry in the third quarter of 2010

Worldwide production of primary aluminium in the third quarter of 2010 was 10.7% higher than in the third quarter of 2009 and for the first nine months of 2010 was up by 15% compared to the corresponding period of 2009. Aluminium consumption in the third quarter was 8.6% higher compared to the corresponding period of 2009 and for nine months of 2010 was up by 18% compared to the corresponding period of 2009.

Demand for aluminium has continued to improve throughout 2010 driven by strong economic activity in Germany, South America and Asia. Demand in the USA and Japan stabilized in the third quarter following a run up in consumption driven by the automotive and engineered products sectors. Underlying demand for consumer products, including packaging and beverage cans, has continued to support the rolled products segment.

Further evidence of physical demand improvement could be found in the regional premiums where the market has been supported by tight metal availability and minimal seasonal reductions in output. LME warehouse stocks, another indicator of regional demand, have been drawn down by 313.5kt since the start of 2010. Premiums continue to be at well above historical averages with the European Premium quoted at USD85-125 per tonne for the third quarter of 2010 and the US Premium trading at USD 13 7-145 per tonne for the same period. Product premiums for aluminium alloys have been similarly supported in Europe and the USA based on supply disruptions, smelter outages and restocking inventories.

Aluminium prices continued their recovery during the third quarter of 2010, but the average 3- month LME price was higher by 0.2% in the third quarter of 2010 at USD2,126.5 per tonne from an average of USD2,122.3 per tonne in the second quarter of 2010. In comparison with the nine months ending 30 September 2009, aluminium prices increased by 15% in the nine months ending 30 September 2010.

UC RUSAL's industry view and outlook

Based on robust demand for aluminium from China and the recovery of physical demand in the USA, Europe and Japan, demand for aluminium this year has surged by around 25% from 2009 levels. Importantly, growth excluding China has been very strong, indicating that Western markets have rebounded positively from the financial crisis.

UC RUSAL has benefited in all regions through the resurgence of the automotive and transportation segments, which have been particularly supportive of aluminium extrusion and cast product output. Flat rolled products in Europe have been supportive of the Company's expansion of alloys in this segment and medium term demand is forecast to remain strong.

Other than in China where there is significant year-on-year growth in floor space under construction and a strong outlook based on continuing trends in urbanization, the construction industry, however, has yet to stage a recovery.

More generally, aluminium production in China in 2010 is forecast to grow by 30% and reach 16.9 million tonnes, with consumption growing by 17% to 16 million tonnes. China became a net importer of aluminium importing 38 thousand tonnes since January 2010.

Furthermore, UC RUSAL forecasts that China will increase its imports of primary aluminium in 2011, to reach 3-4 million tonnes by 2015. It is estimated that more than 15% of China's domestic producers are unprofitable at the current aluminium price due to the increase in domestic electricity tariffs, higher raw material costs and wage inflation. Curtailment expectations have been further fuelled by Chinese government restrictions on outdated facilities and a strengthening currency. UC RUSAL anticipates that this will lead to a reduction in production of 1-1.5 million tonnes in 2010 and cuts in 2011.

Looking forward to the fourth quarter, UC RUSAL expects aluminium prices to sustain the current level of USD2,300/tonne through to the end of this year supported by positive underlying demand, whilst the continuing weakness in the US dollar supports the investment into physical assets from investors.

Despite the current volatility in the forward aluminium price curve, UC RUSAL expects physical aluminium stocks tightness to remain for the foreseeable future. Premiums are therefore expected to be supported at current levels, assuming the same level of regional economic activity.

Russian aluminium consumption

UC RUSAL expects its Russian and CIS market sales to grow by about 22% next year owing to a strong rebound, while export sales should drop by around 100,000-150,000 tonnes. The Company expects Russian and CIS aluminium consumption to increase by approximately 57% in 2010 to 760 thousand tonnes, as compared to 485 thousand tones in 2009. We expect Russian aluminium consumption to grow by another 22% to 928 thousand tonnes in 2011, mainly driven by the machinery, construction and packaging industries. The Company expects Russia's cumulative annual compound growth rate for aluminium consumption to be 8% between 2011 and 2015.

Alumina market

The Company has seen strong growth in alumina prices in the third quarter of 2010 and through the second half of this year as more third party alumina sales are tracking spot market prices as global producers try to de-link the alumina price from aluminium. The Company has started selling its free alumina at prices formed by a basket of indices including Metal Bulletin, CRU and Platts in August. UC RUSAL believes that alumina contract prices and the LME aluminium price should be de-linked as they do not fully reflect growing production costs and capital expenditure. De-linking the alumina price from the aluminium price should promote fair pricing for this raw material and create new investment opportunities.

Aluminium Exchange Traded Fund (ETF)

UC RUSAL, along with a number of other aluminium market players and financial institutions, recognises the potential demand created by the establishment of a physically-backed aluminium ETF to enable investors to take advantage of future growth in aluminium prices. Such funds may have the effect of stimulating demand for aluminium and balancing supply.

UC RUSAL remains committed to supporting the creation of an ETF for aluminium through the supply of metal to such a fund, subject to investor interest.

Business Review

Aluminium production results

UC RUSAL's total attributable aluminium output amounted to 3,034 thousand tonnes for the first nine months of 2010, as compared to 2,956 thousand tonnes for the first nine months of 2009. Output in the third quarter of 2010 increased by 1.5% to 1,038 thousand tonnes, as compared to 1,023 thousand tonnes in the second quarter of 2010, and by 6% as compared to 976 thousand tonnes in the third quarter of 2009, showing an overall upward trend in production during those periods. The table below shows the contribution from each facility.

The increases in volumes during each of the periods discussed above were mostly due to the restart of many of the Group's operations which had been previously idled in 2009. In addition, by the end of June 2010, potline 5 at the Irkutsk aluminium smelter (which was commissioned in April 2010) reached full capacity and throughout the third quarter has operated at full capacity.

Asset

Interest

Nine months ended

Change

 

 

30 September

 

year-on-year

(kt)

 

2010

2009

(%)

Russia (Siberia)

 

 

 

 

Bratsk aluminium smelter

100%

730

736

(1%)

Krasnoyarsk aluminium smelter

100%

728

710

2%

Sayanogorsk aluminium smelter

100%

402

394

2%

Novokuznetsk aluminium smelter

100%

199

178

11%

Irkutsk aluminium smelter

100%

292

258

13%

Alukom-Taishet aluminium smelter

100%

—

2

—

Khakas aluminium smelter

100%

222

222

—

Russia - Other

 

 

 

 

Bogoslovsk aluminium smelter

100%

85

89

(5%)

Volgograd aluminium smelter

100%

114

109

4%

Urals aluminium smelter

100%

53

64

(17%)

Nadvoitsy aluminium smelter

100%

52

41

27%

Kandalaksha aluminium smelter

100%

48

41

18%

Volkhov aluminium smelter

100%

14

9

65%

Ukraine

Zaporozhye aluminium smelter

97.6%

19

43

(56%)

Sweden

 

 

 

 

Kubikenborg Aluminium

100%

64

51

26%

Nigeria

 

 

 

 

ALSCON

85.0%

13

8

65%

Total production

 

3,034

2,956

3%

Alumina production results

UC RUSAL's total attributable alumina output amounted to 5,758 thousand tonnes for the nine months ending 30 September 2010, as compared to 5,395 thousand tonnes for the first nine months of 2009 (an increase of 7%).

Output in the third quarter of 2010 increased by 8% to 2,046 thousand tonnes, as compared to 1,889 thousand tonnes in the second quarter of 2010, and by 23% as compared to 1,657 thousand tonnes in the third quarter of 2009, showing an overall upward trend in production during these periods. The table below shows the contribution from each facility.

The increase in the volume of alumina production for the first nine months of 2010 as compared to the first nine months of 2009 was due to the substantial restoration of operations at Aughinish alumina refinery in Ireland. The increase of alumina production in the third quarter of 2010 is explained by the restart of the Windalco-Ewarton alumina works in Jamaica in June 2010.

Bauxite production results

UC RUSAL's overall bauxite production was 8.7 million tonnes for the first nine months of 2010, as compared to 8.8 million tonnes for the first nine months of 2009.

Output in the third quarter of 2010 increased to 3.3 million tonnes or by 19% as compared to the second quarter of 2010 or by 15% as compared to the third quarter of 2009, showing an overall upward trend in production in 2010. The table below shows the contribution from each facility.

Asset   Interest Nine months ended       Change

            30 September   year-on-year

(mt wet)

 

2010

2009

(%)

Jamaica

 

 

 

 

Alpart

65%

—

0.3

—

Windalco (Ewarton and Kirkvine)

93%

0.4

0.1

209%

Russia

 

 

 

 

North Urals

100%

2.2

2.5

(10%)

Timan

80%

1.6

1.6

3%

Guinea

 

 

 

 

Friguia alumina refinery

100%

1.6

1.2

27%

Kindia

100%

2.2

2.1

5%

Guyana

 

 

 

 

Bauxite Company of Guyana Inc.

90%

0.7

1.0

(32%)

Total production

 

8.7

8.8

(1%)

Foil and packaging production results

The aggregate aluminium foil and packaging material production from the Group's plants was 60.2 thousand tonnes for the nine months ended 30 September 2010, as compared to 49.3 thousand tonnes for the nine months ended 30 September 2009.

Output in the third quarter of 2010 of 20.5 thousand tonnes was in line with the second quarter of 2010, and increased by 6% as compared to 19.3 thousand tonnes in the third quarter of 2009, showing an overall upward trend in production during those periods. The table below shows the contribution from each facility.

The increase in volumes in each of the periods was mostly due to an increase in preliminary production orders in the first nine months of 2010 due to demand restoration.

Asset

Interest

Nine months ended

Change

 

 

30 September

 

year-on-year

(kt)

 

2010

2009

(%)

Russia

 

 

 

 

Sayanal

100%

28.4

23.4

21%

Urals Foil

100%

12.2

9.0

36%

Sayana Foil

 

1.6

1.4

16%

Armenia

100%

 

 

 

Armenal

100%

18.0

15.5

16%

Total production

 

60.2

49.3

22%

Norilsk Nickel Investment

The market value of the Company's stake in Norilsk Nickel increased by 21.1% from USD6,707 million as at 31 December 2009 to USD8,120 million as at 30 September 2010 due to positive share price performance in the reported period.

Financial Overview

Revenue

Revenue increased by 36.6% to USD8,029 million in the nine months ended 30 September 2010, as compared to USD5,876 million for the same period in 2009. The increase in revenue was primarily due to increase in sales prices for primary aluminium and alloys which accounted for 85.0% and 83.7% of UC RUSAL's revenue for the nine months ended 30 September 2010 and 2009, respectively.

Revenue from sales of primary aluminium and alloys increased by USD 1,905 million, or by 38.7%, to USD6,823 million in the nine months ended 30 September 2010, as compared to USD4,918 million in the same period in 2009. The increase in revenue over the period resulted primarily from the rise in weighted-average realised aluminium prices, by approximately 40.2% in the nine months ended 30 September 2010, as compared to the same period in 2009, due to the increase in the LME aluminium price and premiums over LME price in the different geographical segments.

Weighted-average realised premiums above LME aluminium price increased by 37.3% from USD83 per tonne in the first quarter of 2010 to USD114 per tonne in the third quarter of 2010. Premiums for delivery of physical metal continued to increase during 2009 and in the nine months ended 30 September 2010 despite volatility of the LME aluminium price. One of the key factors influencing higher premiums was the increased share of alloys (value-added products with the highest premiums) in the total production volume from 18% in 2009 to 34% in the third quarter of 2010 (the increased share of alloys for the nine months ended 30 September 2010 was 31%).

Revenue from sales of alumina increased by USD 141 million, or 52.6%, to USD409 million in the nine months ended 30 September 2010, as compared to USD268 million in the same period in 2009. The increase in revenue in the nine months ended 30 September 2010 was primarily the result of an increase in alumina weighted-average sales prices by 33.1%, in line with the rise in worldwide aluminium prices, as well as an increase in the volume of sales of alumina by 14.6%.

Revenue from sales of foil increased to USD209 million in the nine months ended 30 September 2010, or by 23.7%, as compared to USD 169 million in the same period in 2009, due to an

increase in the volume of sales of foil and an increase in average realised price during the nine months ended 30 September 2010 when compared to the corresponding period for 2009.

Revenue from other sales, including transportation and energy, increased to USD588 million in the nine months ended 30 September 2010, or by 12.9%, from USD521 million in the same period in 2009. The increase in 2010 was primarily due to an increase in volumes and the corresponding tariffs earned from the Group's transportation business in Kazakhstan due to an increase in coal consumption. Other factors contributing to the increase in other sales were increases in prices and volumes of various by-products and secondary materials, including silicon, hydrate, soda, aluminium powders and electricity following the overall recovery in the global economy and the resulting increase in capacity of a number of the Group's production entities.

Cost of Sales

Cost of sales increased by 10.8% to USD5,456 million in the nine months ended 30 September 2010 as compared to USD4,925 million in the same period in 2009, which was primarily due to an increase in cost of alumina, bauxite and other raw materials, energy costs and a decrease in the net change in provision for inventories. As a percentage of revenue, however, cost of sales decreased from 83.8% in the nine months ended 30 September 2009 to 68.0% in the same period in 2010.

Cost of alumina increased by USD97 million or 13.9% to USD793 million mostly due to increased average purchase prices. Cost of bauxite increased by USD55 million or 20.7% to USD321 million mostly due to increased purchase volumes. Cost of other raw materials increased by USD 165 million or 9.5% to USD1,904 million in the nine months ended 30 September 2010 as compared to the same period in 2009 due to increased prices.

Energy costs also increased by USD61 million, or 4.4%, to USD1,453 million in the nine months ended 30 September 2010, as compared to USD1,392 million in the same period in 2009. The increase in energy costs over the period resulted primarily from the liberalisation of the electricity market in the Russian Federation. As a percentage of revenue, energy costs decreased from 23.7% in the nine months ended 30 September 2009 to 18.1% in the same period in 2010.

Gross profit

As a result of the foregoing factors, UC RUSAL reported a gross profit of USD2,573 million and USD951 million in the nine months ended 30 September 2010 and 2009 respectively, representing gross margins of 32.0% and 16.2%, respectively.

Results from operating activities

UC RUSAL reported a profit from operating activities of USD 1,467 million for the nine months ending 30 September 2010, as compared to a loss from operating activities of USD161 million in the same period in 2009, representing operating margins of 18.3% and negative 2.7%, respectively.

Adjusted EBITDA

Adjusted EBITDA, being results from operating activities adjusted for amortisation and depreciation, impairment charges and loss on disposal of property, plant and equipment, increased to USD1,889 million in the reporting period, as compared to USD328 million in the nine months ended 30 September 2009 mainly due to positive operating results in 2010.

(USD million)

Nine months ended 30 September 2010 2009

Change year-on- year (%)

Reconciliation of Adjusted EBITDA

 

 

 

Results from operating activities

1,467

(161)

—

Add:

 

 

 

Amortisation and depreciation

377

433

(12.9%)

Impairment of non-current assets

45

44

2.3%

Loss on disposal of property, plant and

 

12

(100.0%)

equipment

 

 

Adjusted EBITDA

1,889

328

476.0%

Finance income

Finance income increased by USD205 million to USD258 million in the nine months ended 30 September 2010 as compared to USD53 million in the same period in 2009. Finance income in the nine months ended 30 September 2010 was primarily represented by changes in the fair value of derivative financial instruments and net foreign exchange gain.

In November 2009, the Company entered into long-term electricity contracts with related parties through 2019-2021. The contract pricing contains a fixed or a cost based component and an LME-linked price adjustment. Management has analysed the contracts and concluded that the price adjustments represent embedded derivatives which were valued at USD570 million as at the end of 2009. Estimates of the fair value of the embedded derivatives are particularly sensitive to changes in the LME aluminium price. A change in the LME aluminium price between 31 December 2009 and 30 September 2010 resulted in a gain from revaluation of embedded derivatives amounting to USD 181 million.

UC RUSAL recorded a net foreign exchange gain of USD60 million in the nine months ended 30 September 2010, as compared to a net foreign exchange loss of USD65 million in the same period in 2009. This was primarily as a result of the continuing depreciation of the Ruble against the US dollar over that period.

Finance expenses

Finance expenses increased by 2.8% to USD964 million in the nine months ended 30 September 2010 as compared to USD938 million in the same period in 2009. The increase in finance expenses in the nine months ended 30 September 2010 was primarily due to increases in interest expense partially offset by net foreign exchange loss recognised in the nine months ended 30 September 2009.

Interest expenses on bank loans increased by USD214 million, or 30.1%, to USD924 million in the nine months ended 30 September 2010, compared to USD710 million in the same period in 2009. This increase was due to amortisation of the gain that was recognised on the completion of the debt restructuring.

Share of profits / (losses) and impairment of associates and jointly controlled entities

Share of profits of associates was USD849 million for the nine months ended 30 September 2010 and USD342 million in the same period in 2009 (including partial reversal of impairment). Share of profits of associates in both periods resulted primarily from the Company's investment in Norilsk Nickel.

Share of losses of jointly controlled entities was USD36 million for the nine months ended 30 September 2010 mainly due to write-off of non-recoverable deferred tax asset at LLP Bogatyr Komir. There was profit of USD2 million in the same period in 2009. This represents the Company's share of results in the Company's joint ventures - BEMO and LLP Bogatyr Komir.

Profit / (loss) before income tax

UC RUSAL reported a profit before income tax of USD1,574 million for the nine months ended 30 September 2010, as compared to a loss before income tax of USD702 million for the same period in 2009. This was mainly due to results from operating activities (which increased by USD1,628 million) and the share of profits of associates (which increased by USD507 million).

Income tax expense

Income tax expenses increased by USD30 million to USD154 million in the nine months ended 30 September 2010, as compared to USD 124 million in the same period in 2009 due to a current tax increase by USD69 million partly offset by a deferred tax decrease by USD39 million.

Net profit / (loss) for the period

As a result of the above, UC RUSAL reported a net profit of USD 1,420 million for the nine months ended 30 September 2010, as compared to a net loss of USD826 million for the same period in 2009.

Cash Operating Costs

Aluminium Cash Operating Costs increased by 2.6% or USD43 per tonne (inclusive of exchange rate effects) from an average of USD 1,684 per tonne in the second quarter of 2010 to an average of USD1,727 per tonne in the third quarter of 2010. However, aluminium Cash Operating Costs were USD 1,700 per tonne (inclusive of exchange rate effects) for the first nine months of 2010.

Key factors contributing to the increase in Aluminium Cash Operating Costs in the third quarter of 2010 were increases of USD22 per tonne in power, USD34 per tonne in raw materials and USD 10 per tonne in other expenses, which were partially set-off by decreases of USD 18 per tonne in exchange rate effects due to the appreciation of the Ruble and USD6 per tonne in alumina expenses.

Alumina Cash Operating Costs decreased by 0.1% or USD0.3 per tonne (inclusive of exchange rate effects) from an average of USD271.8 per tonne in the first half of 2010 to an average of USD271.5 per tonne in the third quarter of 2010. Alumina Cash Operating Costs was USD271.8 per tonne (inclusive of exchange rate effects) for the first nine months of 2010. The principal factors in the decrease in the Group's alumina Cash Operating Costs from in the third quarter of 2010 were decreases in other expenses and exchange rate effect, which were partially offset by the increases in power and raw materials due to the increase of the market prices of utilities (including fuel-oil and gas), plant and shop expenses and payroll.

Assets and liabilities

UC RUSAL's total assets increased by USD1,133 million to USD25,019 million as at 30 September 2010 as compared to USD23,886 million as at 31 December 2009. The increase in total assets mainly resulted from the increase in interests in associates and jointly controlled entities, inventories and other current assets, as partly offset by a decrease in property, plant and equipment.

Total liabilities decreased by USD2,510 million to USD15,044 million as at 30 September 2010 as compared to USD17,554 million as at 31 December 2009. The decrease was mainly due to the partial repayment of USD2,143 million of the outstanding debt of the Group out of the IPO proceeds (Net cash proceeds of USD2,143 million less a fee of USD152 million to the international lenders and less the USD 115 million payment to Onexim). Total debt has been reduced to USD 12.3 billion in the nine months ended 30 September 2010. The Company is now significantly ahead of debt reduction targets and, as a result, with effect from 10 September 2010, the interest margin payable by the Company on its debt owed to international lenders has decreased from 5.5% to 4.5% as the Total Net Debt to Covenant EBITDA ratio has dropped. The interest margin has reduced by 36% as compared to the December 2009 margin of 7%.

Capital expenditure

UC RUSAL recorded total investment in the development of existing facilities and construction of new assets of USD623 million for the nine months ended 30 September 2010.

Consolidated Interim Condensed Financial Information

The following information is extracted from the unaudited consolidated interim condensed financial information of the Company for the three and nine months ended 30 September 2010 which was approved by the Directors on 11 November 2010 and reviewed by ZAO KPMG.