) recently resumed coal mining operation at the New-Olzherassk
underground mine in Siberia. The company temporality suspended
production at the mine, in February 2012, due to coal-self heating.
High levels of carbon monoxide were detected at the mine's long
wall face 21-1-7. Production at the mine was halted after an order
was passed by the Mezhdurechensk city court.
ARCELOR MITTAL (MT): Free Stock Analysis Report
MECHEL OAO ADS (MTL): Free Stock Analysis
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The New-Olzherassk mine is a part of the company's subsidiary,
Southern Kuzbass Coal Company. The mine's long wall face 21-1-7 has
industrial coal reserve of 350,000 tons. The company noted that the
mining face has been equipped with the necessary infrastructure to
Earlier, on July 5, 2012, Mechel announced temporary suspension of
work at its V.I. Lenina underground mine in Russia. The work was
halted after an order was passed by the Mezhdurechensk city court.
However, operation was resumed within a few days following the
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 allloys. The company has the largest coa
reserve base in Russia and is mainly focusing on growth and
Mechel's profit slid 29.5% year over year to $218 million in
first-quarter 2012. Revenues rose modestly to $3 billion.
Despite a weak pricing environment, revenues from the mining
segment increased year over year in the quarter on the back of
higher coal product sales volume and increased iron ore concentrate
revenues. However, steel market dynamics were not favorable and
Mechel had to deal with lower demand for steel products.
We are encouraged by the incremental opportunities stemming from
the Elga mine, which are expected to reinforce Mechel's position as
a metallurgical coal producer through capacity expansion.
However, the company's high debt load represents a serious concern.
In addition, Mechel's cost advantage is in danger of being wiped
out as the company has seen its costs rising at a fast clip over
the last three years.
Mechel currently carries a Zacks #3 Rank, which translates into a
short-term (1 to 3 months) Hold rating. We have a long-term Neutral
recommendation on the stock.