ZAO Severstal Resurs, which manages the mining assets of OAO Severstal has informed the Celtic Resources that Severstal’s subsidiary, Bluecone, has agreed to acquire for cash approximately 12.3 million shares of ^0.25 each in the Celtic, a circa 22% interest in the current issued share capital.

Severstal is an international steel producer with a listing on the Russian Trading System and the London Stock Exchange. Incorporated in 1993, the company focuses on high value-added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. Severstal’s mining assets in Russia are securing its supplies of raw materials. In 2006 Severstal produced 17.6 Mt of steel and had revenues of $12.4 billion, PBT of $1.8 billion and EPS of $1.27.

Celtic operates the Suzdal and Zherek gold mines and the Shorskoye molybdenum mine in Kazakhstan and has a 74.51% interest in the Tominskoye copper project in the Chelyabinsk region of southern Russia. It produced approximately 62,000 oz of gold in 2006 and had a pre-tax profit of $39.8 million. It is a leader in processing refractory gold ores and operates the only BIOX plant in the FSU at its Suzdal mine.

Celtic intends to use its strong balance sheet, sound operating record and cash flow from its three operating mines to achieve the following key targets within three years:

· Substantially increase our gold reserves by acquisition and internal growth

· Increase gold production to more than 300,000 oz/y

· Maintain cash operating costs at less than $350/oz

· Develop highly profitable base metal projects through acquisition and exploration with selected partners

· Build on current levels of profit and to continually strengthen the balance sheet.

Severstal Resurs consists of four mining complexes in northwest Russia and in Western Siberia producing iron ore and coking coal, and is the second largest producer of pellets and coking coal in Russia. In 2006 Severstal’s Mining division produced 5.4 Mt of coal concentrate, 2.2 Mt of coking coal, 2.1 Mt of steam coal, 9.5 Mt of iron ore pellets and 4.5 Mt of iron ore concentrate. The reserves and resources of the company were estimated by IMC Limited to be 1,800 Mt of iron ore as at 1 January 2006 and 700 Mt of coal as at 1 April 2006.

The scrap business of Severstal Resurs consists of à number of scrap metal yards in the Northwestern, central and Southern parts of Russia. The total processing capacity is 1.3 Mt/y of scrap. Scrap is delivered to Europe and the Middle East through the ports of St. Petersburg, Murmansk, Arkhangelsk, Rostov and Taganrog.