Mechel Suspends Work at Lenina Mine

Russian Mining company, Mechel OAO ( MTL - Analyst Report ) announced temporary suspension of work at its V.I. Lenina underground mine located in Russia. The work at the mine was halted after an order was passed by the Mezhdurechensk city court, following an inspection conducted by the Mezhdurechensk territorial branch of the Southern Siberian department of the Federal Agency for Ecological, Technological and Nuclear Monitoring.

As per the company, most of the monitoring agency's requirements have been met and most of the violations have been prevented. The company expects to resume work at the mine within a short period.

Last month, Mechel released its first-quarter 2012 financial results. The company recorded consolidated net income of $218 million in the quarter, down 29.5% from last year’s $309.2 million. Revenues in the quarter came in at $3 billion, up modestly from $2.9 billion posted in the year-ago period.

The company’s margins took a sharp hit as operating income dropped 30% from last year to $314 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 18.2% to $463.4 million in the quarter.

Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company has the largest coal reserve base in Russia and mainly focuses on growth and cost-cutting measures. Its main competitors include ArcelorMittal ( MT - Analyst Report ) .

Mechel owns and controls essential infrastructure, including ports, rolling stock and power plants, which provide access to export markets. However, the company could be affected by its high debt and interest burden and might not be able to keep up with its huge capital-spending program. Currently the company retains a Zacks #3 Rank, indicating a short-term (1 to 3 months) “Hold” rating.