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Russian mining company Mechel OAO (MTL - Analyst Report) has announced the launch of operation at the Uvatsk quartzite deposit. The first batch of raw materials weighing around 680 tons of quartzite was delivered from the deposit to Bratsk Ferroalloy Plant OAO.

Mechel’s Bratsk Ferroalloy Plant, in May 2008, won the tender for the rights to use the subsoil plot on the Uvatsk deposit of quartzite and quartz sandstones.

The Bratsk Ferroalloy Plant will be self sufficient, in the second half of 2013, with ore needed to produce high-quality ferrosilicon with 65%-75% silicon content. This will reduce the plant’s dependence on other sources for procuring raw materials. Mechel’s plant will in fact have its own supply of raw materials, which will also reduce its cost by 25%-30% from the current market prices. This will also reflect positively on the plant’s financial and economic results.

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 is mainly focusing on growth and cost-cutting measures.

Mechel owns and controls essential infrastructure, including ports, rolling stock and power plants, which provide access to the export markets. However, Mechel could be affected given its high debt and interest burden, and might not be able to keep up with its huge capital spending program.

Mechel currently retains a short-term Zacks Rank #4 (Sell).

Other companies in the steel industry with favorable Zacks Rank are Gibraltar Industries Inc. (ROCK - Analyst Report), Shiloh Industries Inc. (SHLO) and Nippon Steel and Sumitomo Metal Corporation (NSSMY). All of them hold Zacks Rank #1 (Strong Buy).

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