Mechel Mining OAO, a unit of Russian miner
), has clinched the Minex-2012 Mining Excellence Award's "Investor
of the Year" award for the development of its Elga coal project.
This is the second straight win for the Moscow-based company. Last
year, the company's Elga project received the award for "Successful
Development of a Mining Industry Project".
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The independent experts of the award committee assessed the volume
of work done by the company over the last year in an open poll and
recognized its contribution in the development of the mining
industry in Russia.
Mechel continues the development of the Elga mine which has one of
the largest coking coal deposits globally. The company invested
roughly $1.44 billion in the Elga coal complex in 2011 and expects
to spend around $1.42 billion more over the 2012-2014 timeframe.
Mechel, in early 2012, announced the completion of the construction
of a 321-kilometer railroad that connects the Elga coal deposit to
Baikal-Amur mainline. It has also built a seasonal washing plant at
the site for accelerating the production and sales of coking coal
concentrate. The plant, in which all the processing systems are
controlled in a real-time mode, has an annual processing capacity
of up to 3 million tons.
The company recently announced the commencement of the production
of first volumes of the coking coal concentrate at the Elga mine
following the commissioning of the seasonal washing plant at the
site. The launch of the washing plant now enables Mechel to mine
and process coking coal at Elga on production scale.
Mechel, which competes with
) among others, is a leading domestic steel and coal producer with
a strong position in key businesses, including production of
specialty steel and alloys. The company has the largest coal
reserve base in Russia and is mainly focusing on growth and
We are encouraged by the incremental opportunities stemming from
the Elga mine, which is expected to reinforce Mechel's position as
a metallurgical coal producer through capacity expansion.
However, Mechel's high debt level represents a serious concern. The
company could be handicapped because of its high leverage and
interest burden and may not be able to keep up with its huge
capital spending program.
Mechel currently holds a Zacks #4 Rank, which translates into a
short-term (1 to 3 months) Sell rating. We have a long-term Neutral
recommendation on the stock.