Mechel starts Elga railway construction

Russian mining and metals company Mechel has signed a contract and begun construction of a railway spur track to its Elga coal deposit in Yakutia.

The contract was signed between Mechel and Transstroy Engineering Corporation, a subsidiary of Transstroy Design and Construction Company, for the design and construction of the track between Ulak railroad station of the Baikal-Mur Mainline with the coal deposit.

The total length of the railroad will be approximately 315 kilometres. The railroad's throughput capacity after completion of all construction stages will be 25.0 million tonnes per year.

Construction of the railroad is the first stage in the development of the Elga deposit. Annual coal output of the deposit is expected to reach about 30.0 million tonnes. Commissioning of the railroad for permanent operations will take place not later than the end of September 2010.

"This project is a key aspect of our plans to develop the promising Elga coal deposit, and is consistent with the implementation of Mechel's strategic programme aimed at further growing its mining segment,” comments Mechel chief executive officer Vladimir Polin.

“The construction will be carried out in three phases. Concurrently with the railroad construction, development of the Elga deposit itself will start. This will enable Mechel to ensure the possibility to transport coal from the deposit simultaneously with the completion of the railroad Phase 1,” he adds.  

Mechel acquired majority stakes in two mining companies Yakutugol and Elgaugol as well as the real estate complex of a railway and road between the Zeysk Railway Station to the Elga coal deposits in October 2007.  It financed these acquisitions initially through short-term loans which were refinancing by a dual tranche pre-export US$2bn facility.