Mine explosions to affect NLMK and Evraz
12 May 2010 (16:53)
‘In addition to the obvious negative impact the recent explosion in Raspadskaya mine will have on its owner’s business, this accident might also badly affect the company’s key coal consumers, that is, Novolipetsk Iron & Steel Works (NLMK) and Evraz Group. These companies buy 14% and 13%, respectively, of all the coal produced at Raspadskaya mine. We do not think it improbable that these enterprises might be faced with some steel production stoppages because of the shrinking coal supplies. This is why their stock might experience some pressure,’ Kapital Investment & Finance Company’s analyst Olga Mitrofanova announced via Finam.ru.
‘No coal whatsoever is being produced at Raspadskaya mine after the accident has occurred. According to the business representatives, they have enough coal in stock to supply their customers for two or three days, after which time the shipments might have to be reduced by 50% to 60%. It is presumed that another mine belonging to the company will produce the coal needed by consumers until Raspadskaya mine starts working again. However, this other mine’s capacity is definitely not great enough to make up for the stoppage of Raspadskaya,’ the analyst observed.
‘It is quite difficult to evaluate the scale of the problem at the moment. It is quite clear, nevertheless, that this disaster’s consequences will be felt keenly by the company. Raspadskaya mine is the enterprise’s key asset, responsible for producing some 70% of all the coal the company provides to its customers. So, if the mine stops working even for a few months (and chances are, we believe, that this period could be even longer given the demolished infrastructure), the company will find it hard to reach its production targets for 2010 (it had expected to raise its coal output by 15% against 2009). What is more, a lot of money will have to be invested in the mine restoration; added to this are the considerable incidental payments. All this will probably exert enormous pressure on the company’s cash generation in 2010,’ Ms Mitrofanova said.
‘No coal whatsoever is being produced at Raspadskaya mine after the accident has occurred. According to the business representatives, they have enough coal in stock to supply their customers for two or three days, after which time the shipments might have to be reduced by 50% to 60%. It is presumed that another mine belonging to the company will produce the coal needed by consumers until Raspadskaya mine starts working again. However, this other mine’s capacity is definitely not great enough to make up for the stoppage of Raspadskaya,’ the analyst observed.
‘It is quite difficult to evaluate the scale of the problem at the moment. It is quite clear, nevertheless, that this disaster’s consequences will be felt keenly by the company. Raspadskaya mine is the enterprise’s key asset, responsible for producing some 70% of all the coal the company provides to its customers. So, if the mine stops working even for a few months (and chances are, we believe, that this period could be even longer given the demolished infrastructure), the company will find it hard to reach its production targets for 2010 (it had expected to raise its coal output by 15% against 2009). What is more, a lot of money will have to be invested in the mine restoration; added to this are the considerable incidental payments. All this will probably exert enormous pressure on the company’s cash generation in 2010,’ Ms Mitrofanova said.
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