Wednesday, April 9, 2008

Mechel (MTL) Continues to Acquire Most of Eastern Europe

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I cannot keep up with all the transactions Mechel (MTL) is doing - all I know is this company is becoming a powerhouse. I was hoping to keep this one under the radar but I just noticed Cramer had to get behind this stock on Monday's show. Drats; the cat is out of the bag - now we can expect a lot of volatility and impatient investors who think the stock is terrible if it does not go up 5% a day, or the "story is over" when it drops 4%. I much prefer stories before the masses find them i.e. solar spring 2007, fertilizer summer 2007, coal fall 2007 -it's a much smoother ride without the masses of momentum traders pushing the stock around like a punching bag.

Mechel is currently my top position and I just cannot be more pleased with the news flow out of this company the past 2 quarters. Yet another acquisition today; smaller than their usual, but they continue to roll up a lot of resources, piece by piece. Further, it's Russia's largest producer of metallurgical coal which I have been blathering about constantly the past few days. [Posco Agrees to 200% Coal Price Increase] So by having their own coal supply not only do they not need to pay the huge price increases coming in the sector, since they have their own production in house - they can sell excess to other steel makers. Win. Win. Talk about a diamond in the rough. With my focus on companies not reliant on the subprime USA, companies like this are precious. (Even though it is due to sell off 20% the next time some publication says the commodities boom is dead)
  • Mechel (MTL), Russia's sixth-largest steel maker, has expanded its presence in Romania by acquiring rebar and wire rod producer Ductil Steel for 142 million euros ($221 million), the company said on Tuesday.
  • New York-listed Mechel said in a statement it had agreed to purchase 100 percent of Ductil, which last year produced 340,000 tonnes of crude steel.
  • Mechel, controlled by billionaire chief executive Igor Zyuzin, already owns two plants in Romania -- Mechel Targoviste and Mechel Campia Turzii. The acquisition of Ductil gives it access to plants in Buzau in the east of the country and Otelu Rosu in the west.
  • "The integration of Ductil Steel's production and marketing facilities will allow Mechel to further develop its steel business, particularly in Romania and eastern Europe," said Vladimir Polin, chief executive of Mechel's management company.
  • Mechel, also Russia's largest coking coal miner, has earmarked $2.7 billion by 2011 to increase steel production by 26 percent and improve its coal, iron ore and nickel mining operations. The company has also been on an acquisition spree recently. In the last year it has bought the Bratsk Ferro-Alloy Plant and large coal deposits in the Russian Far East, as well as agreeing the $1.5 billion acquisition of ferro-chrome producer Oriel Resources

Long Mechel in fund and personal account



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