Mechel puts markets on metal float alert

Mechel, the Russian metals and mining group, plans to float a $5bn (£2.5bn) ferro-alloys spin-off next year, if it is successful with its bid for Oriel Resources, a smaller, UK-based rival.

Oriel, listed in Toronto and on the UK Alternative Investment Market, confirmed it had received an approach on 3 March, and a source said the company's ferro-chrome and ferro-nickel operations would be combined with Mechel's ferro-alloys division. Once merged, a flotation in either London or North America could signal a wider break-up of Mechel.

A source said: "Mechel is thinking about coming back to the market next year with a company worth an enterprise value of $4bn to $5bn. Mechel could also float its coal business and potentially split steel, but it's too early to be certain."

Mechel and Oriel have not announced a price, though the latter's market capitalisation was £637m at the market close on Thursday. Analysts expect an all-cash offer.

Oriel's operations are mainly in Kazakhstan and Russia; Mechel's plants are primarily in its homeland.