Metinvest Group has officially announced it has bought up to 24.99% stake in Donetsksteel’s coking coal producers for about $190 million. “The Group has secured additional long-term supply of high-grade coking coal by investing in production cooperation and acquiring up to 24.99% of some coking coal assets in Ukraine,” it said in a statement on the Irish Stock Exchange on August 16. “The assets include several extraction, enrichment and sale entities, the most significant of which is Pokrovske Colliery and Svyato-Varvarinskaya Enrichment Plant, which together form the largest coking coal extraction and production business in Ukraine [until recently, they were part of the industrial and financial group Donetskstal, also known as Donetsksteel],” the statement said.
They are located on the border of Dnipropetrovsk and Donetsk regions, close to Metinvest enterprises. The assets are registered in accordance with Ukrainian law and none is located in the non-controlled territories of Ukraine.
According to Metinvest, the acquisition is in line with the Group’s strategic priority of improving its self-sufficiency in coking coal to strengthen its vertical integration.
As of December 31, 2017, the long-life proven and probable coal reserves amounted to 81 million tonnes, as calculated according to JORC methodology as at January 1, 2013, and adjusted for production in 2013-17. In 2017, raw coal extraction was 4.3 million tonnes, while coking coal concentrate production was 2.6 million tonnes.
Metinvest says sale products mostly consist of high-quality K-grade coal (hard coking coal, most of whose quality characteristics are in line with the Platts requirements for the Premium Low Vol HCC benchmark), which is used in coke production.
The Metinvest Group is a vertically integrated group of steel and mining companies in Donetsk, Luhansk, and Dnipropetrovsk region. Its major stockholders are SCM with 71.24% and Smart-Holding with 23.76%, which jointly manage the group.
Metinvest, the largest mining and metal holding in Ukraine, in 2017 was 42nd in the list of the largest global steel manufacturers with the volume of 9.59 million tonnes compared with the 37th position in 2016 with the volume of 10.34 million tonnes, the 40th position in 2015 with 9.65 million tonnes and 33rd position in 2014 with 11.18 million tonnes.
According to the World Steel Association (Worldsteel), last year ArcelorMittal with 97.03 million tonnes of smelted steel was first in the 2018 edition of World Steel in Figures.
It is followed by China Baowu Group with 65.39 million tonnes, NSSMC (includes Nippon Steel & Sumikin Stainless Steel Corporation, with 100% of shares, and Nisshin Steel (51%), USIMINAS (31.2%) with 47.36 million tonnes.
The editions of World Steel in Figures of 2018, 2017, 2016 and 2015 did not contain other Ukrainian companies, apart from Metinvest. Industrial Union of Donbas (ISD), which was 44th in 2013 was not included in the next editions.
Worldsteel said that in 2017, Ukraine produced 21.3 million tonnes of steel and was 12th. Apparent steel use was 4.5 million and apparent steel use per capita was 101.5 kg.
Ukraine exported 15.2 million tonnes of steel products, being 12th in the global rating, while China was first and Russia was fourth.
Ukraine was fourth in net exports of steel in the world with 13.8 million tonnes (16.9 million tonnes in 2016, fourth). China was first with 60.9 tonnes and Japan was second with 31.2 million tonnes.
The revenues of Metinvest B.V. (the Netherlands), the parent company of Metinvest mining and metallurgical group, in February 2018 decreased by 9.4%, or by $95 million, compared to the previous month, to $914 million from $1.009 billion. According to the preliminary unaudited consolidated monthly financial results of the company, EBITDA for February was $196 million, which is 14% ($32 million) less compared to January ($228 million).
According to the report, the adjusted EBITDA of the metallurgical division of the group in February 2018 was $120 million (in January some $140 million), including $12 million from participation in the joint venture ($11 million), while that of the mining division was $113 million (in January $110 million), in particular from JV some $18 million ($14 million). The management company’s expenses amounted to $7 million.
Total revenues in February 2018 consisted of the income of the metallurgical division in the amount of $778 million ($866 million in January), the mining division in the amount of $322 million ($255 million), while intra-group sales stood at “minus” $186 million (“minus” $112 million). The company’s total debt in February fell by $53 million compared to January, to $3.042 billion from $3.095 billion, while the amount of cash increased by $9 million, to $282 million from $273 million.
Metinvest mining and metal group has placed eurobonds under the 2012 eurobond refinancing program and pre-export financing facility ((PXF-financing): $825 million bonds due on April 23, 2023 and $525 million bonds due on April 23, 2026. According to information in the Bloomberg system, five-year bonds were placed at 98.986% of their face value. Taking into account the coupon of 7.75%, yield for them is 8% per annum.
The eight year bonds were placed at 98.583% of their face value. Taking into account the coupon of 8.5%, yield for them is 8.75% per annum.
As reported, on March 19 Metinvest offered the holders of eurobonds circulating in the market, the total nominal volume of which is $1.187 billion, to redeem the securities ahead of schedule.
The group at the initial stage of the offer received proposals for the buyback of eurobonds for $1.068 billion. In addition, the holders of eurobonds worth $1.149 billion agreed to amend the terms of their circulation.
The deadline for applications for redemption expires at 16:00 London time on April 19, 2018.
Metinvest also reported on achieving agreement with the creditors, who provided PXF-financing, on the revision of the terms of loans, including their extension.
Synchronously the group announced the issue of new bonds.
Metinvest B.V. (the Netherlands), the parent company of the Metinvest mining and metallurgical group, in 2017 increased capital investments by 45% compared to the previous year, to $542 million.
According to the audited consolidated financial results for 2017, expenditures on support projects accounted for 83% of total investments (75% in 2016), on strategic projects some 17% (25%).
At the same time, the metallurgical segment accounted for 51% of capital investments (52% in 2016), mining for 48% (46%).
Corporate expenses were $9 million for the reporting period ($4 million for 2016).
The total amount of net cash used in financing activities in 2017 was $110 million, which is 5% more than a year ago.
Net cash used in investing activities increased by 36% over the period compared to 2016, to $449 million. The total cash flow for the acquisition of fixed assets and intangible assets was $465 million, which is 30% more than in 2016. There were no proceeds from the sale of subsidiaries and affiliated companies, while in January 2016 the company received $6 million from the sale of its stake in Black Iron (Cyprus) Limited. Proceeds from the sale of fixed assets and intangible assets stood at $1 million compared with $3 million in 2016. The total amount of interest received was $15 million compared to $18 million in 2016.
