Mechel sold Donetsk Electrometallurgical Plant

Mechel announces signing an agreement with businessman Vadim Varshavsky for the disposal of 100% shares of Daveze Limited, which in its turn owns 100% shares of Donetsk Electrometallurgical Plant, for a nominal sum of 2,000 euro.

The buyer also assumes the obligation to ensure repayment of DEMZ’s debt to Mechel Group for a sum of up to 81 million US dollars depending on the time of the repayment. Operational management of the plant will be transferred to Vadim Varshavsky shortly. The deal is due to be closed in late 2013.

“In the current macroeconomic situation we see no further perspective for the plant’s development within Mechel Group, as we do not foresee significant improvement in the market where the plant operates over the next few years. This deal also helps decrease country risks for Mechel due to the specifics of doing business in Ukraine, which are often weighed down with non-market factors. Moreover, due to high scrap prices, which are partly due to several local producers’ monopoly status, production at the plant has become unprofitable and was halted in November 2012.

“In this year’s first quarter alone DEMZ’s net loss amounted to 16 million US dollars by US GAAP, with 50 million US dollars loss in 2012.

“Disposal of unprofitable assets will enable us to significantly improve our operational cash flows and focus on our priority businesses — mining and high value-added steel products,” Mechel’s Chief Executive Officer Evgeny Mikhel commented.