Russian coal producer Mechel to sell US mines: report

Russian coal producer Mechel has hired investment bank JP Morgan to sell its US business Mechel Bluestone, in order to reduce debts of over $9 billion, Reuters today reported, citing sources familiar with the matter.

Mechel, Russia's largest producer of coking coal required for making of steel, had acquired privately-held Bluestone Coal in 2009 in an $800 million deal.

One of the sources suggested to Reuters that Mechel Bluestone may now fetch around half the original value.

Mechel Bluestone's mining operations are located in West Virginia, one of the oldest and largest coal mining regions in the US.

The company operates three mining complexes - Justice Energy, Dynamic Energy and Keystone mining complex, comprising of four open pits and four underground mines.

It mines high quality low, mid and high volatile hard coking coal and sells 30 per cent of its production of 2 million tonnes of coking and steam coal to customers in the US, while the remaining 70 pert cent is exported to Canada, Europe, Asia and South America.

In October 2012, Mechel Bluestone idled all its mines due to high coal inventories and adverse market conditions. A warm winter last year, low natural gas prices and other factors suppressed demand for coal in the US.

In January, it reopened Justice Energy and Dynamic Energy open pit mining complexes, which produce around 135,000 tones a month, and later also resumed operations at the other mines.

In April, Mechel Bluestone said that it may produce 3 million-3.5 million tonnes of both coking coal and steam coal and process 2 million-2.5 million tonnes for sale, provided the current market situation is sustained.

Its Russian parent, the world's tenth-largest producer of coal, needs to reduce its high debts that are currently more than six times its market value.

The Moscow-based company has debts of more than $9 billion, mainly accrued in acquisitions prior to the 2008 global recession.