Kuzbass to Offer IPO

Kuzbass Fuel Company, Russia's No. 7 steam coal miner, is preparing for a share sale that will let it fund capital spending of about 9.5 billion rubles ($330 million), a top company official said.

The company, also known as KTK, will make the investments between 2010 and 2015, chief financial officer Eduard Alexeyenko said in an interview.

"In order to remain competitive in the long term, we must offer the market higher-quality coal," Alexeyenko said in the interview, which was cleared for publication on Monday.

KTK is set to become the first Russian steam coal miner to carry out a large-scale public offering. The company, which already has a free float of about 11.1 percent as a result of earlier private placements, will place shares on the RTS and MICEX exchanges.

The offering is the latest in a wave of flotations by Russian natural-resource firms in the wake of aluminum giant United Company RusAl's $2.2 billion offering in January.

KTK plans to place up to 14.9 million newly issued ordinary shares, as well as 23.4 million ordinary shares held by chief executive Igor Prokudin and chairman Vadim Danilov.

Following the offering, KTK's free float is expected to reach 48 percent.

In a statement issued early on Monday, KTK set a range of $7.70 to $10.40 per share, implying an offering size of $295 million to $398 million.

Analysts have said the listing will act as a key indicator of investor interest in the Russian steam coal sector ahead of the possible flotation by the nation's largest miner, SUEK, in London.

A source told Reuters earlier this year that SUEK could raise about $1 billion in the second quarter.

Boosting exports is key to KTK's long-term strategy, which also includes increasing annual production capacity to 11 million metric tons from last year's 6 million metric ton level.

"The accent is shifting from the European market to the Asian. This market is growing, and Chinese energy demand is growing. There is no way around that," Alexeyenko said.

To improve the quality of its coal, KTK is building new coal processing and enrichment facilities.

Last year, KTK exported about 36 percent of its 7.4 million metric tons of coal sales, primarily to Poland, South Korea and China. This figure included 1.4 million metric tons of coal purchased from other miners in the Kuznetsk Basin, or Kuzbass.

Exports are expected to rise in 2010, but Alexeyenko did not say by how much shipments would increase.

The company has yet to sign delivery contracts for all of its second-half output, as it sees prices rising further.

"We expect substantial price increases [on the international market], particularly in the East," Alexeyenko said.

Earlier investments have left the company with 3.8 billion rubles ($130.2 million) of debt, roughly half of which is in dollars.

Modern equipment allows the company to attain per-metric-ton cash costs of about $13.80 on average at its three mines, considered by analysts to be among the lowest levels in the industry.

KTK reported 2009 net profit of 663 million rubles on sales of 10.66 billion rubles.

Alexeyenko did not provide any earnings guidance for 2010.