UPDATE 2-Metalloinvest slashes iron ore output, steel steady

* Iron ore production 65 pct below 2008 peak

* Facing over $360 million in payment arrears

* No plans to revise 10-year investment programme

* Expects higher EBITDA in 2008 than $2.7 bln in 2007

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By Alfred Kueppers

NOVOTROITSK, Russia, Nov 20 (Reuters) - Metalloinvest, Russia's largest iron ore miner, has slashed output of the steel making raw material as clients have fallen over $360 million into payment arrears, its chief executive said on Thursday.

Metalloinvest, half-owned by billionaire Alisher Usmanov, has managed to retain steel output levels throughout the world financial crisis and expects substantially higher core earnings this year than in 2007, CEO Maxim Gubiyev told reporters.

But the company is running iron ore production in November and December at 65 percent below peaks reached earlier this year, Gubiyev said at Metalloinvest's Ural Steel plant.

Steel makers worldwide and suppliers of their raw materials have been forced into drastic production cuts by the sudden decline in demand during the crisis. Russian rivals Severstal (CHMF.MM) and Evraz Group (HK1q.L) have reduced output.

Metalloinvest was owed 15.4 billion roubles ($561.2 million) by its clients, of which 10 billion roubles ($364.4 million) was already late, Gubiyev said.

"We understand the situation, since we have been working with our clients for many years, and we will continue working with our partners when the crisis is over," he said.

He added U.S. Steel Corp (X.N), whose plant in Slovakia is a major buyer of Metalloinvest iron ore, was paying regularly and on time for all its raw materials.

Russia is the world's fifth-largest iron ore miner, with a 6 percent share of global production, and its reserves in the ground outstrip those of larger producers such as China, Brazil, Australia and India.

Metalloinvest produces about 40 percent of Russia's iron ore and operates the country's two largest mines, Lebedinsky GOK and Mikhailovsky GOK. Each produced approximately 20 million tonnes of iron ore concentrate last year.

NO CAPEX CUTS

Metalloinvest, which also owns the Ural Steel plant and Oskol Electric Steel Works, has no plans to revise its 10-year investment programme, although certain projects could be delayed within this time frame, Gubiyev said.

"We are not changing our plans," Gubiyev said. "We are just asking when we will start certain projects, because if we wait we will receive more competitive prices."

Speaking in the offices of the 53-year-old Ural Steel plant, he forecast earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2008 would be significantly more than the $2.7 billion recorded last year.

The company on Thursday relaunched production at an electric arc furnace and 48-year-old mill at the Ural Steel complex following a 14 billion rouble ($507.8 million) refit. The furnace has annual capacity of 2.0-2.2 million tonnes of steel.

Metalloinvest, through its Mikhailovsky GOK subsidiary, would also pursue its plan to enter the copper market by developing the enormous Udokan deposit in eastern Siberia, for which it won a licence in September.

Gubiyev said the company had so far paid 4.5 billion roubles of the 15 billion roubles needed to acquire the Udokan licence. (Writing by Robin Paxton; editing by James Jukwey)