Moscow, Russia – April 27, 2006 – Mechel OAO (NYSE:MTL) has announced the acquisition of a 100% stake in Metals Recycling OOO, a Chelyabinsk-based metal scrap processing company through its subsidiary, Mechel Service OOO for approximately US$6.0 million. The transaction is a part of Mechel’s policy to ensure its steel segment’s self-sufficiency in raw materials.
Metals Recycling OOO is a full-scale metal scrap collector and processor, and is comprised of eight operating facilities. It produced 178 thousand tonnes of metal scrap in 2005. Metals Recycling OOO has a modernization program underway aimed at increasing this output.
The consolidation of Metals Recycling OOO into Mechel is expected to lower the purchases of metal scrap on the open market by Chelyabinsk Metallurgical Plant (CMP) and Izhstal, thereby reducing operating costs. In 2005, CMP and Izhstal together used a total of approximately 2.6 million tonnes of scrap including over 1.1 million tonnes of scrap produced internally. The acquisition will increase these facilities’ control over metal scarp supplies and help reduce their exposure to fluctuations on the metal scrap market.
“One of the main objectives of our overall strategy is to increase the efficiency of Mechel’s steel segment. The key factor here is the reduction of our production costs by expanding our own raw material base.” said Mechel’s COO Alexey Ivanushkin.
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