Monday, January 20 is the deadline of the offer, according to which “Mechel” Igor Zyuzin has the right to priority redemption of the 34% of the Elga project in Yakutia (one of the largest in Russia on production of coking coal, with reserves of 2.2 billion tons) from Gazprombank. The value of this share – 32.2 billion rubles.
Elga is a key investment project of Mechel. The field development and infrastructure construction to him, “Mechel” has been doing for more than 10 years. The company spent more than $2 billion.
In June 2016, it sold 49% of the project Gazprombank for RUB 34.4 billion under the deal, three years Gazprombank had the right to sell “Mechel” these shares back to 46.5 billion rubles., and if he refuses to deal is to find another buyer. In August 2019 Gazprombank announced that it had found a buyer for its stake in the project – “A property” of the founders of Yota albert Avdalyan and Sergey Adoniev.
They “systematically form the industrial cluster in Yakutia, which includes the Yakutsk fuel and energy company (“A-property” bought the debt), the Ogodzha coal project (“A-property” Ltd – minority shareholder) and the port of “Faith” in Vladivostok, explained then the representative of the “A-property”. The acquisition of a stake in the Elga “is a logical step in this strategy.” “A-property” intends to be actively involved in further development of the Elga Deposit, he said.
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“Mechel” at the end of September, all accepted the offer of Gazprombank on the purchase of a share in the Elga coal project, but not all, and 34% from 49%. The term of the offer expires January 20, Monday. The Bank does not intend to extend the term of the offer on prioritetom purchase of a share, knows a person close to Gazprombank. Another interviewee of “Vedomosti”, the signyy with the preparation of the transaction, doubts that “Mechel” will be able to collect the necessary sum for the ransom until Monday.
the Representatives of Gazprombank and Mechel declined to comment.
At the end of the first half of 2019 net debt of Mechel was $ 411 billion rubles, the debt burden of 6.4 EBITDA. Given the high debt burden, raising funds for the purchase of a package of Gazprombank is also unlikely, says the head of analytical research at Alfa Bank Boris Krasnozhenov.
“Mechel” not only does not exercise the right of first refusal to purchase the shares of Gazprombank, but ready to sell its stake in the project (51%), have informed on Friday, January 17, RBC with reference to sources. To confirm this, “Vedomosti” failed, but experts believe such a scenario is logical.
51% of the Elga project, you can get about 60 billion rubles, the analyst of Raiffeisenbank Irina Elizarovskaya. On the background of the debt at 411 billion rubles, it does not greatly reduce the debt burden of the company, she said, the company would lose the mining asset. And 32.5% of the company’s revenues (153,3 billion at the end of the first half of 2019) falls on the mining division. “On the other hand, the company still has no money to this asset to develop,” concludes Elizarovskaya.
previous topic: the New old problem of “Mechel”
“Mechel” could negotiate with foreign investors that would allow him to keep control of the company. But, as practice shows, the Russian mining companies are rarely able to find mutually acceptable terms with foreign, especially Asian, investors, says senior Director of ACRE Maxim Hudalov. The sale of Elga will definitely reduce the debt burden of the company to improve its financial stability and control, but not for long, he said: “in Itself the Elga project was very complex both from the point of view of infrastructure and from the point of view of product quality. Now its implementation is not the most successful. But this should not scare away investors, and with proper funding the project could become one of the largest in Yakutia”. To “Elga” became effective in the project, according to his counting, it is necessary to invest 80 billion rubles.
“the Elga project one of the largest in the world in the sector of coking coal in the status of the brownfield, says Krasnozhenov. – Open-pit premium brands of coal and tosichella the proximity to ports in the far East before making the competitive terms of cost. to to designed capacity (25-30 million tonnes of coal concentrate) the project requires a significant additional investment in the completion of the railway branch, energy infrastructure and concentrator”.
given the high debt burden of “Mechel” there are no funds for additional investments in the Elga continues Krasnozhenov. If “Mechel” sells the control over the El for $2 billion, and directs all funds to the payment of the debt, the situation with the debt load “is less critical”. Speculation about the sale of Elga already reflected in the current valuation of the company after a post-Christmas rally, in our view. In early January, shares of Mechel on the Moscow stock exchange for no apparent reason began to grow and in a few days increased by almost 30%, on the new York stock exchange – the company’s shares since the beginning of January rose by almost 55%.
at current prices for hard coking coal sales in Elga for $2 billion seems Krasnozhenova “optimistic scenario.” At the same time, he notes that the world market will remain a systemic shortage of hard coking coal brands with a growing increase in the demand for steel, primarily due to large infrastructure projects in Asia.
