Mining and steel company Evraz, with mines and mills in Russia, the US, Canada, the Czech Republic and Kazakhstan, said Aug. 10 it was launching soliciting of proposals for its North American subsidiaries acquisition.
A sale of the subsidiaries will allow to unlock the stand-alone value of the North America business, the company said, adding it did not intend to provide additional information on the process until it is finalized.
The solicitation process is being conducted under a certain general license issued by UK’s Office of Financial Sanctions Implementation, or OFSI. The transaction will be subject to regulatory and corporate approvals and applicable sanctions laws, and will require approval from relevant sanctions authorities, including OFSI, noted Evraz.
“The simplest answer” about why Evraz is seeking to sell its North American mills is “sanctions,” an analyst who wished to be unnamed told S&P Global Commodity Insights.
“The company is in a difficult position: its business remains registered in the UK (this was confirmed by Evraz), but most of it is in Russia,” said the analyst. “Reregistering in Russia seems to be impossible at this stage. At the same time, something needs to be done with [the company’s] assets around the world. One of the options is to simplify the structure by selling some of them retaining only what is in Russia.
“Additionally, the sale will help the company pay off part of its net debt, which stands at $3 billion [as of end-H1 2022], which would be very handy given its negative cash flow for the period,” the analyst said. “But whether Evraz will be allowed [by OFSI] to sell [its North American mills] is an open question.”
In 2021, Evraz made 1.88 million mt of crude steel and 1.66 million mt of steel products at its mills in North America. Its assets there focusing on the premium markets in the Western US and Canada offering plates, rails, large-diameter and OCTG pipes, comprise Canadian mills Regina, Camrose and Calgary and US mills Pueblo and Portland. The division has technology centers in Portland, Pueblo and Regina.
Evraz is constructing a high-efficiency long product mill at Pueblo, which will produce 100-meter rails using solar power. Last year, it made investments to upgrade equipment and expand production capacity also at Regina, Saskatchewan, and Red Deer, Alberta, the projects that could be completed this year.
Also, Evraz had considered launching this year digital transformation projects focusing on automation and optimization of its North American operations.
Since late February, as a result of Russia’s invasion of Ukraine, it has become one of the most heavily sanctioned metallurgical companies in Russia.
— Ekaterina Bouckley
