General director of the Mechel Steel Group Alexey Ivanushkin
Photo: Pavel Smertin
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Mechel Consolidates Coal Holdings
An auction will be held today to sell the state shares in the Yakutian coal assets OAO Yakutugol and OAO Elgaugol. Mechel, ALROSA and Arcelor Mittal will compete for them. Mechel expects the real battle to be with Arcelor Mittal. If the Russian metals company wins, it will unite the assets with its Yuzhny Kuzbass and sell 49 percent of the new structure to new investors.
ALROSA will be represented at the auction by OOO Yakutia Coal Co., and Arcelor Mittal will be represented by OOO Kolorprofil. Sources say that Arcelor Mittal is participating independently through Kolorprofil and together with ALROSA. If that is so, Arcelor Mittal is a serious threat to Mechel's intentions.
Yakutugol produces 8.5 million tons of coal per year. Mechel owns 25 percent plus one share in the company. The remaining shares belong to the government of Yakutia and are being auctioned off now. Elgaugol holds the license to develop the Elga coal deposit, which has total reserves of 2.2 billion tons. Russian Railways owns 29.5 percent of the stock in that company. The government of Yakutia owns 39.36 percent (which is being sold now). The Eastern Contract Construction Co. owns 28.79 percent, and Yakutugol owns 2.35 percent.
The starting price for the lot will be 47.4 billion rubles ($1.84 billion) and bidding will take place in increments of 100 million rubles. Elgaugol chief Mukhamed Tsikanov said that more than $3 billion in investment will be needed for the deposit, and the project should earn its money back in ten years. Competition at the auction is expected to be keen.
www.kommersant.com
All the Article in Russian as of Oct. 05, 2007
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