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Mechel and BelAZ Form ElgaBelAvto

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Russian miner Mechel OAO (MTL) has signed an agreement with BelAZ OAO to form a Russo-Belarusian joint venture that will be responsible for technical maintenance and repairs of BelAZ mining dump trucks in the Republic of Sakha (Yakutia), Russia. The joint venture will be called ElgaBelAvto OAO.

Mechel and BelAZ have decided to utilize Yakutugol Holding Company’s production area for setting up ElgaBelAvto’s plants and they also plan to create a subsidiary at the Elga Open Pit. ElgaBelAvto will provide services to meet the maintenance requirements of Yakutugol Holding Company's two biggest coal open pits — Neryungrinsky and Elga — which include more than 140 mining truck units in the medium run.

The ElgaBelAvto project is expected to create over 330 job opportunities, and will start operating in late 2013-early 2014. Investment in the joint venture is estimated to total $9.5 million before 2018. It is expected that ElgaBelAvto will extend its services to other BelAZ customers in the Republic of Sakha (Yakutia) and its neighboring regions in the future.

Mechel, on June 5, signed another agreement to supply coking coal to China’s Shasteel Group. Per the agreement, Mechel Carbon (Singapore), a trading subsidiary of Mechel’s mining unit, will supply 40,000 to 80,000 tons of coking coal a month from Russian Far East ports to Shasteel group.

Mechel Carbon had already supplied more than 500,000 tons of coking coal to Shasteel's main coke plant in Zhangjiagang, Jiangsu Province. The long-term agreement between Mechel and steel major Shasteel bears testimony to Mechel’s ability to successfully establish long-standing relationship with the world’s largest steel producers while positioning itself in diversified markets.

Mechel currently retains a Zacks Rank #3 (Hold).

Other companies in the steel industry with favorable Zacks Rank are Kobe Steel Ltd. (KBSTY), Shiloh Industries Inc. (SHLO) and LB Foster Co. (FSTR). While both Kobe Steel and Shiloh Industries hold a Zacks Rank #1 (Strong Buy), LB Foster retains a Zacks Rank #2 (Buy).

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