Russia's Mechel to acquire Oriel Resources of UK for $1.5 billion
27 Mar 2008
Mumbai: Mechel, Russia's largest producer of stainless steel and coking coal, has offered to buy Oriel Resources, a London-based chrome and nickel miner, for $1.5 billion in cash.
Mechel, which plans to boost its ferroalloys business in a period of rising commodity prices, said it had approval from shareholders who control 47 per cent of Oriel to buy their stakes.
Oriel owns the Voskhod chromite mine, which is scheduled to start production later this year as well as the Shevchenko nickel project in Kazakhstan and the Tikhvin ferrochrome smelter in the Leningrad region, which started production last year.
"The acquisition of Oriel will enable Mechel to increase its competitiveness by expanding the existing ferroalloy business, entering new markets and operating new production facilities," Mechel chief executive Igor Zyuzin, said in a joint statement by the two companies.
Oriel Resources is listed in Toronto and on London's Alternative Investment Market and its shareholders include Alexander Nesis of IST Group, who holds a beneficial interest through two holding companies, Israel's Baran Group and Alexander Mamut, formerly of Troika Dialog.
Mechel plans to use Chrome and nickel produced by Oriel in its own steel division, and also sell them to third parties.
"In the four years since Oriel's foundation, it has managed to build a valuable portfolio of significant ferroalloy assets," Oriel executive chairman Sergei Kurzin said in the statement. "Nevertheless, we believe that the offer from Mechel provides an attractive opportunity for Oriel shareholders to realise their investment," he added.
Mechel, which has been into mining nickel since 2001, bought Bratsky ferroalloy plant last year. The company plans to invest $2.7 billion for expansion of its steel and mining business over the next three years.
