UPDATE 2-Russia's Mechel eyes record 2007, mining IPO

(Adds listing plans, CEO quotes)

By Anastasia Teterevleva

MOSCOW, Dec 11 (Reuters) - Russian steel maker Mechel (MTLR.RTS) is considering an initial public offering of its mining business as it prepares for a second consecutive year of record profits, the company's chief executive said on Tuesday.

New York-listed Mechel (MTL.N), Russia's sixth-largest steel maker, reported net profit of $706 million for the first nine months of 2007, up 89.7 percent year-on-year, as it produced more coal, steel and nickel and sold it at higher prices.

"We are considering the option of listing our mining sector on exchanges and are now engaged in this process," Mechel Chief Executive Igor Zyuzin told a conference call. "We don't rule out carrying this out in the near future."

Billionaire Zyuzin, who has the largest financial interest in Mechel, added the company intended to retain control of its mining business after any listing. He did not say where such a float might take place.

Zyuzin said earlier in a statement accompanying Mechel's nine-month results that 2007 would be a record year for the company, which operates coal mines and steel mills across Russia and also has assets in Romania.

"Net income for the first three quarters of this year far exceeded net income for the whole year of 2006, which was the best year for financial performance in Mechel's history," he said.

Mechel's nine-month revenues rose 47.9 percent to $4.65 billion, and earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 80.2 percent to $1.2 billion.

INVESTMENT

Mechel plans to invest $2.7 billion by 2011 -- $1.5 billion in steel and $1.2 billion in mining -- to boost production.

The company said the main contributors to revenue growth this year had been strong market demand and a related increase in selling prices for all its products, as well as higher output of value-added products and a decrease in production costs.

Mechel produced 8.3 percent more coal in the first nine months of the year -- 13.41 million tonnes -- and boosted nickel output 21.9 percent year-on-year to 12,840 tonnes.

Crude steel output rose 3.1 percent to 4.56 million tonnes, and output of rolled steel products rose 10 percent to 3.88 million tonnes. (Writing by Robin Paxton, editing by Will Waterman, Paul Bolding)