* Warns of potential "material adverse effect" on whole
* Loss-making Mechel has net debt of $8.6 mln
MOSCOW May 16 Further sanctions against Russia
over the Ukraine crisis could affect indebted Russian miner
Mechel's U.S. coal business Bluestone, Mechel said in
its annual report on Friday.
The situation in Ukraine since Russia' annexation of Crimea
has developed into the worst standoff between Russia and the
West since the Cold War, prompting Washington and Brussels to
impose sanctions on some Russian individuals and companies.
Western governments have so far refrained from imposing
sanctions on leading companies, but they have threatened further
measures that could target key sectors such as energy and
banking if the crisis escalates.
Mechel said the company could face sanctions affecting its
Bluestone coal assets in the United States and that it "cannot
assure that such developments (further sanctions) will not have
a material adverse effect on our business, financial condition,
results of operations and prospects".
The sanctions already imposed could have the indirect effect
of damaging the Russian economy, further accelerating capital
flight from Russia and negative investor sentiment towards the
country, making it harder for Russian companies to access
international financial markets, Mechel said.
The coalminer and steelmaker, controlled by businessman Igor
Zyuzin, has been hit by weak prices for its products, forcing it
to sell loss-making assets and to negotiate delayed debt
repayment with creditors.
Its 2013 net loss widened to a record $2.9 billion after
more than $2 billion of write-offs.
Mechel has been looking to sell Bluestone since the first
half of 2013 to lower its $8.6 billion of net debt. It had
temporarily halted mining at the company in late April because
of weak coal prices.
At the end of 2013 almost 20 percent of the company's total
borrowings were provided by international banks or their Russian
subsidiaries, Mechel said.
The Ukrainian economy is also facing significant risks
during the period of uncertainty, the company added in the
report. Its 2013 revenue from exports to Ukraine was $52.8
million, or 0.6 percent of its total revenue, which could
decrease in the current year.
(Reporting by Polina Devitt and Svetlana Burmistrova; Editing
by Jason Bush and David Goodman)