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Mechel (MTL) has been showing some nice relative strength of late - it has nice exposure to multiple areas of interest for me - steel, iron ore, coal. Friday's 7% move seems to be driven by news of a potential IPO for its mining division. We did discuss this in mid December [Mechel Reports Earnings, Considers Mining IPO] but now we appear to have more details.

  • Russian steel maker Mechel (MTL) is considering listing its mining division in Frankfurt in an initial public offering that could raise around $4 billion, Russian business daily Kommersant reported on Friday.
  • Mechel MTLR.RTS aimed to sell a 20 percent stake in a newly created mining division which it values at $20 billion -- considerably more than the entire company's current value.
  • New York-listed Mechel, Russia's sixth-largest steel maker, has a current market capitalisation of $8.3 billion, but has acquired extensive coal assets in the country's far east. It has since spent 58.2 billion roubles ($2.36 billion) to win access to large coal deposits in the far eastern Russian region of Yakutia. These include the Elga deposit, potentially Russia's largest coal field.
  • Mechel Mining would include the company's stakes in coal firms Yuzhny Kuzbass, Yakutugol and Elgaugol and may also include the Korshunov iron ore mining and concentrating plant, Kommersant said.
Mechel is still viewed as a steel maker, which is fine - since China and Russia have a relatively cozy relationship and I've viewed Mechel as a nice back door play on the needs of China infrastructure growth. It also has a lot of iron ore exposure - another hot spot in a continued "World of Shortages" scenario. But of course all these acquisitions in the coal market, make me the most happy. I continue to really like this undiscovered gem.

Technically, this is one of those select few stocks trading over its 50 day moving average, and in fact is only about 5% below its all time high. It has been beaten to a pulp during the January sell off (down to low $70s), but I surmise when the day comes the market regains its footing, this is the type of stock to shoot off like a cannon.
Disclosure: Long Mechel in fund; no personal position
Source: Mechel Considers German IPO for Its Mining Division