Russian steel maker pays $2.3 bln to win Yakutia coal assets
Russian coal miner and steel maker Mechel paid 58.2 billion roubles ($2.33 billion) on Friday to win an auction for extensive coal assets in the far eastern region of Yakutia.
New York-listed Mechel outbid Yakutia Coal Co, representing the interests of diamond monopoly Alrosa, to win 75 percent minus one share in Yakutugol and 68.86 percent of Elgaugol, plus associated infrastructure, officials told Reuters.
Russia`s State Property Fund started the auction at 47.40 billion roubles ($1.90 billion), about 23 percent below the price Mechel agreed to pay.
Fund spokesman Alexander Komarov said a third contender, Kolorprofil, did not meet all the conditions to participate in the auction and would be informed of the reasons by letter.
Industry sources said this company represented the interests of Arcelor Mittal, the world`s top steel maker.
Mechel, Russia`s sixth-largest steel maker, will assume 100 percent control of Yakutugol, having owned 25 percent plus one share prior to the auction. The company mines about 9 million tonnes a year of coal from three deposits in Yakutia. Executive Director Alexei Ivanushkin was quoted by Interfax news agency as telling reporters Mechel would expand output to between 12 million and 15 million tonnes.
Interfax also quoted Ivanushkin as saying Mechel would invest $3 billion in the next seven to 10 years bringing the Elga deposit into production.
Elgaugol has a licence for the Elga coal deposit and before the auction was owned by Russian State Railways and the local government of Yakutia, an area in northeast Russia the size of western Europe and home to the world`s coldest place.
The State Property Fund had previously said the winner of the auction must commit to opening a permanent railroad linking Elga to the national network by Sept. 30, 2010.
Mechel, separately to the Yakutia assets, is spending $700 million raising coal output by 47 percent to 25 million tonnes by 2011.
Russia is the world`s fifth-largest coal miner and ranks third in terms of exports behind Australia and Indonesia.
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