Russia Metals and Mining

Interview with the CEO of Mechel on its debt restructuring!

Mechel is ready for various scenarios of its debt restructuring but the scheme with VEB’s bonds mostly appeals to the company. VEB will postpone the payment for 10-15 years, CEO of Mechel O. Korzhov says. In his interview with RBC he spoke about the banks that don’t participate in the negotiations on restructuring, the assets the company is ready to sell and whether creditors ask I. Zyuzin to quit.
Question (Q): The Government has decided not to make the company bankrupt and the most probable variant is the emission of euro bonds. What consequences for Mechel this might lead to?
Answer (A): For Mechel this is the most appealing variant by a number of reasons. First, it will allow us to restructure the part of the debt we have to pay in 2014, 2015 and 2016. The issue of these bonds will allow us to postpone the payment of a significant part of the debt: $8.3 bln and now the restructuring of another 180 bln roubles goes on. It will postpone a significant part of our debt for 10-15 years.
Second, in the framework of this restructuring we will be able to significantly cut the payment of interest by the bank loans that will give us an opportunity to have some free float. We save the vertically integrated company that keeps working and making money, form the operational profit.

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Cost of coal port Vera in the Far East may be $1 billion

The cost of the construction of the coal port Vera in the Far East to the investors will be around $1 billion, Rostekh - Global Resources’s general directors, Andrei Korobov said in an interview with the IATR-TASS. Rostekh, being initiator of the project and key partner, counts on the financial support from the state, including through the National Welfare Fund (NWF).
"The cost of the port, including all works related to the construction of moorings and port railways, is estimated at $1 billion; approximately half of the funds is required for the construction of roads and railways. We have technical specifications of Russian Railways for 20 million tons (planned capacity of the port), and these technical specifications are within the development of the railways, both in the region and along the entire length of the Baikal-Amur Mainline and Trans-Siberian Railway. We fit in the total picture of freight flows,"- said Korobov.

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1 billion roubles of tax claims are added to Mechel’s open-pit mine

The Investigating authorities have initiated a criminal case on the suspicion of tax evasion on a large scale at Mechel’s open-pit mine Tomusinsky. According to investigators, they understated the price for coal sold , the open-pit mine’s managements caused damage to the regional budget in the amount of 1 billion rubles.
As Investigation Department of the Russian Investigative Committee in the Kemerovo region reported, from 2009 to 2010, the management of the open-pit mine Tomusinsky (a part of coal company Southern Kuzbass, Mechel-Mining’s subsidiary) "deliberately understated the tax base for company’s income tax, as well as MET, understated the prices of coal". Thereby damaging in the amount of over 1 billion rubles was inflicted to the budget. These violations were identified by the Tax Inspectorate and police investigators of the Economic Security and Anti-Corruption Department under GU MVD of Russia in the Kemerovo region, the region’s Investigation Department specified.

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The cargo turnover of EVRAZ is up by 24% to 4.4 mln. tons in H1, 2014

The cargo turnover of “EVARZ Nakhodka Trade Sea Port” increased by 50% in June 2014 year on year, from 516 to 776 thousand tons of cargo of various assortment. It is said in a statement of the company. The total volume of transshipment increased by 24% in H1 year-on-year and made up 4.4 million tons.
There has been shipped 2.5 million tons of coal in January-June 2014 against 1.6 million tons last year at coal docks. Metal shipment made up 1.8 million tons (1.7 mln. tons in 2013).
The significant growth of cargo turnover is due to the reorganization and expansion of the storage space, the laying of new intra-port railroads and crane ways. The cargo classification gradually changes, focusing on the products of metallurgical and coal producing enterprises of EVRAZ.

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DTEK continues coal supplies to Russia

The DTEK energy holding continues coal supplies to Russia. DTEK has been supplying coal to Russia since 2010. Its coal is used in metallurgy, in the production of sugar and sodium carbonate, in housing services and the energy sector. The company works with the Russian contractors under the long and short term contracts. In June 2014, the company supplied to the Russian consumers 53,000 tons of black coal. In July 2014, the planned supplies to Russia are 54,000 tons of coal

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Vyksa metallurgical plant is acknowledged the best Russian exporter of ferrous metal products to the CIS states

On the results of the contest of the Ministry of Industry and Trade of Russia, the Vyksa metallurgical plant (VMZ) has been recognized as the best exporter to the CIS countries in the nomination "Ferrous metallurgy - ferrous metal products".
The Ministry’s Department of Foreign Economic Relations assessed the activity of enterprises of 23 industries in the contest "Best Russian Exporter-2013". Winners were named in each industry. The awarding ceremony will be held during the international industrial exhibition "Innoprom-2014" in Yekaterinburg on July 10, 2014.

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Severstal Metiz has invested 200 million rubles to development of fitting production

Severstal Metiz, a member of Severstal has launched the new equipment for large fittings production. The program for gradual enlargement of production capacities will enable to satisfy growing demand for fitting with screw diameter of over M20. Total investment is 200 million rubles.
The first stage of the project for the development of fitting production was the launch of the warm-heading press for screw nut production. The first device of the kind was launched in 2007. Before that, they used in fitting production in cold-heading devices only.
The next step was the launch of the new Belgian bolt automate device. It will release the equipment of the shop oriented to production of large fitting details.

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Chelyabinsk forge-and-pressing plant to supply a large shipment of flanges for construction of South Stream

The products of Chelyabinsk forge-and-pressing plant (ChKPZ) will be used for the construction of one of the most strategically important projects for Russia and Europe – the South Stream gas pipeline.
The negotiations with the new client started in spring. A company, which manufactures equipment for gas pipelines, ordered a large batch of high pressure flanges – a lot of them will be required in the construction of a number of South Stream’s facilities, as well as for the new branch of Nord Stream.

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Members of “Russia Steel” produced 4.77 mln tons of finished steel in May

The main enterprises-members of the non-commercial partnership “Russia Steel” in May 2014 produced 4.77 mln tons of finished steel, by 2.5% more than in May 2013 and 2.5% more than in April 2014. 0.49 mln tons of pipes were produced, by 6.8% more than in May 2013 and 9.65% more than in April 2014.
In Jan-May 2014 finished steel production rose 0.35% against the same period 2013 to 23.1 mln tons, pipe output fell 1.47% against the same period 2013 to 2.28 mln tons.

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Mechel might survive by the means of its new project in the Far East

Mechel might be able to settle $7.5 bln of its debt by obtaining 20% in a new mining and metallurgical company in the Far East. The basis of the consortium with the attraction of the Russian and foreign investors might become a number of the assets of Mechel, Evraz and “Amurmetal”,belonging to VEB Kommersant reports.
The interlocutor described the scheme in the following way: a consortium is formed with the participation of Russian and foreign investors. With their funds, plus the funds of the state banks and VEB, the consortium purchases all Mechel’s assets (besides the American Bluestone), the West-Siberian metallurgical plant (ZSMK), “Raspadskaya” and the iron ore project “Timir” (JV of Evraz, Alrosa and VEB in which it has the golden share) from Evraz as well as obtaining Amurmetal” (belonging to VEB).
The consortium will also comprise the shareholders of the Vanino port that will enter it into the registered capital. The consortium will pay for the assets in cash, using its own funds and bonds.

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