Russian mining and steel group Mechel has announced that it has signed a series of agreements for the disposal of its Romanian steel assets - Ductil Steel Mechel, Campia Turzii S.A., Mechel Targoviste S.A., Mechel East Europe Metallurgical Division SRL, and Laminorul S.A - to a privately held Romanian group, Invest Nikarom SRL. The transaction terms will result in Mechel receiving a nominal contribution.
Mechel notified investors in November 2012 that, due to unfavorable prices in European steel markets linked to rising ferrous scrap prices and weak demand for finished products, production at Mechel’s Romanian steelmaking facilities were temporarily halted. While production at these steelmaking facilities was temporarily suspended, all necessary measures were undertaken to retain the affected facilities’ operational capability and to conduct maintenance works in an orderly manner.
According to the company's statement, the Romanian steel assets have had a negative impact on the group’s financial results and cash flow for some period of time. Mechel is strongly committed to concentrating on directing its resources towards those projects that offer the greatest return to its shareholders, i.e., its Elga coal deposit and universal rolling mill project. With the Romanian assets’ expected loss of RUB 2.4 billion ($79.6 million) in 2013, this transaction will have a marked financial impact for Mechel's shareholders. The freed cash flow will be used for operational activities as well as decreasing the company’s leverage