Russia's metals and mining stocks higher before prime minister meeting

MOSCOW Mon Nov 25, 2013 3:40am EST

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MOSCOW Nov 25 (Reuters) - The MICEX metals and mining index led Russian shares higher on Monday before a government meeting between Prime Minister Dmitry Medvedev and heavily indebted firms Rusal, Mechel and Evraz.

At 0816 GMT, the rouble-denominated MICEX was up 0.3 percent to 1,509 points. The dollar-denominated RTS index was up 0.2 percent to 1,447 points.

Medvedev will meet the steel and mining companies to discuss their debt loads and ways to boost industrial growth, daily Vedomosti reported on Monday.

The Economy Ministry confirmed a government meeting on the metals and mining industry would take place on Monday, but did not say which companies would attend.

Metals industry sources said Rusal, Mechel and Evraz were invited and that their debt would be the primary topic of discussion. The government's spokeswoman declined to comment.

Depositary receipts in Rusal rose 6.6 percent in Moscow trade. Mechel fell as much as 19 percent in early trading, but later recovered, to trade down 2.2 percent.

"Mechel local shares dropped on large volume, looks like someone sold stock that was used as collateral," a salesman at a Western bank said in a note to clients.

The Russian economy is growing at its slowest pace in four years with industrial output expected to barely expand this year.

Analysts said signs of government support for the metals industry would be positive for the stocks.

"The meeting itself stresses that the government considers the major metals and mining companies to be important, and intends to support them if the challenging situation with metals prices continues," analysts at VTB Capital said in a note, expecting some renewed buying of the stocks, especially Mechel, which strongly underperformed this month.

Mechel is undergoing debt restructuring negotiations. The firm's debt-to-EBITDA ratio was 9.0 in the first quarter, while one of its covenants states the ratio should not have exceeded 7.5 in the first half of 2013.

Net debt to core profit (EBITDA) ratio, a measure of a company's ability to pay off debts, stood at 11.8 at Rusal in the first six months of the year, and 4.0 at Evraz.

The Russian rouble weakened on Monday. The rouble was down 0.3 percent at 32.85 to the dollar and 0.3 percent weaker at 44.47 per euro. It was 0.3 percent lower against the euro-dollar basket at 38.08.

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