Mechel Receives Permission to Operate Elga Deposit Railway - Analyst Blog

Russian miner, Mechel OAO ( MTL ) has obtained permission from the Federal Railway Transport Agency to run wagons along the non-public railway track leading to the Elga coal deposit, which is undergoing construction. The approval is valid until Jul 30, 2015. Share price of the company rose about 1.7% in the trading session following the news.

The Ulka-Elga railway track which is 321-kilometer long is currently being serviced by Mecheltrans Vostok OOO. Mecheltrans Vostok OOO is in charge for conducting cargo shipments in the track along with maintenance of the completed parts. According to the state property registration certificate, the railway track to the Elga deposit is 91% complete. The Federal Railway Transport Agency's permission confirms that the railway track is being maintained in a technically sound state.

The railway track, with a transport infrastructure that is ready for operation, is important for more intensive development of the Elga coal deposit and increased cargo turnover. Further, it will also ensure successful implementation of the Russian coal industry's long-term development program.

Elga is a key project for the entire Russian coal industry. Its development will enable Mechel to consolidate its position in the Far East and its reputation as a major coal exporter to Asia Pacific.

Recently, Mechel announced that it has mined the millionth ton of coal at its Elga coal deposit since it started operations. Since Aug 2014, the Elga coal complex has reached a monthly capacity of 200,000 tons of coal.

By the end of 2014, Mechel plans to mine 1.35 million tons of coal at the mine. Mechel already has contracts with several Russian steelmakers and leading Asia Pacific coal consumers who will buy more than half of the deposit's output in the future.

The tons mined at the Elga coal deposit consisted of high-quality coking coal. Work still continues on transferring Elga's seasonal washing plant to all-year operation mode. The work is expected to be complete by Oct-Nov. This will enable the plant to have an annual capacity of 2.7 million tons.

Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company currently carries a Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Rank include Grupo Simec S.A.B. de C.V. ( SIM ), POSCO ( PKX ), and ThyssenKrupp AG ( TYEKF ). While Grupo Simec sports a Zacks Rank #1 (Strong Buy), POSCO and ThyssenKrupp carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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