(Alliance News) - Russian steel maker Evraz PLC said Tuesday it is considering the strategic merits of, and possible structures for a potential demerger of its coal business.
"The potential demerger may allow Evraz to focus on developing its steel business and establish the coal business, currently consolidated under PAO Raspadskaya, as an independent leading regional producer of high quality metallurgical coal," Evraz said.
At the end of December, Evraz completed the consolidation of its coal businesses, establishing its Raspadskaya unit as one of Russia's largest metallurgical coal producers.
Raspadskaya comprises seven mines, two open pits and three processing facilities in Kemerovo Region and one mine in the Tyva Republic. The combined reserve base accounts for 1.9 billion tonnes of coal.
The firm transferred of all of its shares in AO UCC Yuzhkuzbassugol to Raspadskaya. The deal valued AO UCC Yuzhkuzbassugol at RUB67.74 billion, about GBP668.2 million.
Speaking Tuesday, Evraz said: "The board continues to evaluate various strategic options for the company and there can be no assurances that the potential demerger will be undertaken. If undertaken, the potential demerger would be subject to regulatory, shareholder and other third-party approvals. The board will keep shareholders updated as appropriate with further announcements."
Evraz has enlisted the help of JPMorgan and Citigroup Global Markets as financial advisors and Linklaters LLP as a legal advisor to assist with the ongoing review of, and preparation for, the demerger.
In the third quarter, Evraz saw raw coking coal output increase by 15% to 4.78 million tonnes from 4.17 million tonnes. This, alongside improving market conditions led to a 24% rise in sales to 3.46 million tonnes from 2.80 million tonnes.
In its third quarter update, issued in October, Evraz guided for a rise in raw coal production in the fourth quarter, following the elimination of mining and geological violations at the Raspadskaya and Raspadskaya-Koksovaya mines.
In the six months to June 30, the firm's coal business contributed USD218 million, or 20%, to its total earnings before interest, taxes, depreciation and amortization of USD1.07 billion.
Shares in Evraz were trading 1.8% higher in London on Tuesday afternoon at 523.40 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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Evraz (EVR)