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27 Feb, 2008 04:54

Russian metal giant eyes stock market move

Russian mining and metals company Mechel says it's considering a stock market float for its mining assets. However, the firm's CEO says a placement would only take place if its assets are valued at more than $US 20 billion.

The news came at the signing of a deal between Russian Railways and Mechel.

Russian coal and steel company Mechel has been considering plans for a public offering since the end of last year.

That's prompted press speculation that the steel maker will float around 20% of its assets. On Wednesday, the company's CEO Igor Zoozin revealed those plans.

“We plan to list several parts of our group including the mining assets. We estimate that the upstream segment will be worth at least $US 20 billion. This is what we will be trying to achieve. However, I don't think now is the best time on the financial markets,” Zoozin said.

Analysts say with the recent dramatic growth in metal prices, now is the right time to move to the financial markets.

Strategic deal signed

The announcement came at the signing of a 20-year co-operation deal between Russian Railways and Mechel.

It will supply the state rail company with steel, mostly in the form of railway tracks. To build rail tracks suitable for high-speed transit, Mechel is investing more than $US 500 millions in a new plant.

Russian Railways already buys rails from the Evraz Group owned by Russian billionaire Roman Abramovich – and that relationship will continue for standard quality rail tracks.

“It's not enough for us to receive production of the quality we are buying now. We need to move on and cooperate with other partners. I think deals like this will only create better market conditions and healthy competition,” Russian Railways' President Vladimir Yakunin said.

Analysts say Russian Railways' need for rail tracks will only grow and that could one day open the door to foreign steel makers.