HONG KONG, Nov 16 (Reuters) - Russia coking coal and steel producer Mechel (MTL.N) plans an initial public offering of its mining division in the second half of 2011 at the earliest to fund growth, its Chief Financial Officer told Reuters on Tuesday.
The Justice family sold $229 million worth of Mechel preferred American Depository Shares in May, at $7.50 each, below an indicated range of $10.50 to $13.80. But Mechel share prices have since surged 228 percent to $24.6 apiece. [ID:nLDE6461RU]
“London and New York are our obvious choices, but we’ll also study Hong Kong. The question for us is where to get the best valuation,” said Stanislav A. Ploschenko, who is attending an emerging markets investor conference arranged by Renaissance Capital.
Its mining segment accounts for about 75 percent of Mechel’s EBITDA (earnings before interest, tax, depreciation and amortisation), thanks to the strong rise in coal sale prices. Mechel expects coking coal prices to grow 20-25 percent next year.[ID:nLDE69417S]
Currently, New York-listed Mechel trades at an enterprise to 2011 EBITDA multiple of 5.9 times, similar to that of Hong Kong-listed China Coal’s (1898.HK) 6.6 times, but below the 10 times forward multiple of Coal India (COAL.BO), the world’s largest coal company by production and reserves.
Mechel, whose market value stands at $10.3 billion, would continue to hold a controlling stake in its mining unit, which includes Southern Kuzbass Coal Co, Yakutugol, Mechel Bluestone Coal Co and Korshunov Mining Plant, said Ploschenko.
The size of the IPO, which would see 10 to 25 percent of the mining segment go public, depends on capital expenditure plans and would involve new shares only, he added.
Mechel, controlled by billionaire Igor Zyuzin, acquired U.S.-based Bluestone Coal from the Justice family last April for $436 million and 83.3 million preferred shares.
The mining unit has a 60 percent market share of coking coal concentrate in Russia and is the third biggest Russian coal producer. (Editing by Lincoln Feast)