Bloomberg OAO Mechel, Russia largest producer of coal used for steelmaking, may sell shares of its mining division next year and is considering listing them in Hong Kong as Chinese demand increases.
Mr Vladimir Polin senior vice president for strategy said “We plan to sell shares of Mechel Mining as soon as financial markets recover. He said that the earliest the sale may go ahead is in 2010, he said. Mechel is looking at stock exchanges including Hong Kong, and its choice will depend on investors’ preferences.”
Mr Polin said Mechel, which is controlled by billionaire Mr Igor Zyuzin may follow Russian aluminum producer United Co Rusal in tapping Hong Kong investors as China buys more of Russia’s commodity output. More than 30% of Mechel exports will go to China this year up from about 5% in 2008.
The coal producer scrapped the sale of shares in the mining unit in 2008 after global financial markets plunged. Mining accounted for a third of Moscow based Mechel sales last year and 93% of its earnings before interest, tax, depreciation and amortization. Mechel also makes steel and ferroalloys.
Mr Polin said the company is considering buying coking-coal assets in Australia and Africa. Mechel lenders who agreed to restructure USD 2.6 billion of debt in July imposed restrictions on further acquisitions. He said that “If there will be a valuable acquisition opportunity, we hope we will be able to convince banks to approve it.”
Mr Polin said Mechel coking coal output will decline this year from 15 million tonnes in 2008 after demand and prices slid in the H1. Monthly output in September and October was at about 85% of 2008 levels. Mechel will limit exports from its Yakutugol unit until prices climb further.
He said that production at Elga deposit in Siberia will begin by the end of 2010. The project will allow Mechel to become the world third largest coking coal producer. The alliance between Australia BHP Billiton Ltd and Japan Mitsubishi Corp is the biggest followed by Canada Teck Resources Ltd.
Mr Polin said US coal producer Bluestone Coal Corp which Mechel bought in April for USD 436 million and 83.3 million preferred shares, will add as much as about 20% to Mechel coking coal output.
He said that Bluestone which previously supplied power stations and steelmakers now focuses on higher-priced coking coal. Bluestone exports 90% of its coking coal to destinations including South Africa, China and Egypt. Production at the unit has risen to 3 million tons a year and costs fell to USD 55 a ton from USD 125.
Mr Polin said “We minimized steam coal production at Bluestone. It makes little sense to waste equipment on producing coal which costs only USD 45 per tonne. He said that contract prices for Australian coking coal at USD 129 a ton are the benchmark for Mechel exports from Russia and US.
