Russian mining and metals company Mechel has won the auction to acquire the mining assets of Yukutugol and Elgaugol. It is to acquire 75% less one share of Yakutugol and 68.86% of the shares of Elgaugol.


Mechel also won a real estate complex owned by Russian Railways during the auction. The complex includes the railway spur track from Zeisk station of the Far Eastern Railway to the Elga coal deposit and an access road from Zeisk station to the Elga deposit.


The total cost of the acquisition stands at Rb58.2bn (US$2.3bn) and Mechel has issued a statement saying that the majority of the funds have been financed through a combination of its own cash, and borrowed funds, most of which were provided by VTB.


Commenting on the transaction, Mechel’s chief operating officer Alexey Ivanushkin says: “The acquisition of Yakutugol, which mines approximately 10mn tonnes annually, will enable Mechel to fulfill its strategic objective to mine about 30mn tonnes of coal next year. Once mining operations at the Elga project reach the planned capacity of approximately 230mn tonnes, Mechel will become one of the world’s largest coal companies with the annual output of over 60mn tonnes.”


Talking about the auction process, Igor Zyuzin, Mechel’s chief executive officer adds: “By acquiring Yakutugol, we have gained control over the last operating non-privatized coal asset, concluding a three-year privatization process. Although there had been some uncertainty among investors that Mechel would obtain control over Yakutugol, we are glad that we proved our ability to bring all our undertakings to conclusion.”


Yakutugol mines mainly coking coal, and the coal reserves are estimated to be about 200mn tonnes. The company is the largest Russian exporter of coal and exports most of its coal to the Asia Pacific market.


Elgaugol holds the license for the development of the Elga coal deposit, with total reserves of coking coals estimated to total 2.2bn tonnes.