Russian steel giant OAO Mechel delays selling stake in mining unit

26 Apr 2013

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OAO Mechel, Russia's largest producer of stainless steel and coking coal, has put on hold its plan of selling a quarter of its mining division due to the global economic slowdown, Reuters reported, citing sources with knowledge of the matter.

Mechel, which was hoping to raise around $1.25 billion by selling a 25 per cent of its mining division, has now put on hold the sale until later in 2013 following months of negotiations with potential buyers, said the report.

The New York-listed company, which has amassed debt of more than $9 billion because of expensive acquisitions just prior to the global economic meltdown in 2008, had last year said that it might bring in a strategic partner to develop its massive Elga coal deposit by selling up to 25 per cent of its mining division.

Potential suitors include China's Baosteel and Korean steel giant Posco, one of the largest consumers of Mechel's coal.

The company had also considered an IPO for its mining unit, but put this plan on hold to the financial crisis, and opted for a sale instead.

Mechel is one of the world's top seven metallurgical coal producers and Russia's top coking coal concentrate producer. The company controls over a quarter of Russia's total coking coal washing facilities.

Mechel's flagship mining project is the Elga coal project, one of the world's largest coking coal deposit, located in the south-east of isolated Yakutia.

The project has been delayed for a decade because of lack of infrastructure like roads to transport material to the site.

The company is now nearing completion of a 321kms railway line from Baikal-Amur Mainline's Ulak station to the Elga deposit.

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