BHP Invited to Help Norilsk Develop Siberian Coal Field

Norilsk Nickel, the world's largest producer of the metal, said Wednesday that it planned to develop a 5.5-billion-ton Siberian coal field and asked BHP Billion to join the project.

The company paid $1.37 million at an auction Tuesday for the Syradasaiskoye deposit, Norilsk vice president Maxim Finsky said Wednesday. The deposit may produce 12 million tons per year of coking coal, used as a raw material by steelmakers, from 2016, Finsky said.

"There's a 23-million-ton deficit in coking coal in Europe that currently gets covered by Australian imports," Finsky said. "The plan is to sell most of the coal in Russia, but also export to Europe."

Coking coal prices jumped about 50 percent last year on supply disruptions in Australia and growing demand in Asia.

A BHP spokesman did not immediately return calls for comment.

Syradasaiskoye would become Norilsk's first coal project. The company looked at the site with Melbourne-based BHP, the world's biggest mining company, and has offered it a minority stake in the project, Finsky said.

The deposit is located 460 kilometers north of the nickel, copper, and palladium-producing factory town of Norilsk in the Krasnoyarsk region. It is 120 kilometers from the nearest settlement and does not have transport or power infrastructure.

Norilsk estimates $1.1 billion to $1.5 billion will be needed to access the Arctic Sea for export and the Yenisei River for domestic deliveries. The company also plans to build a rail link and washing plant to process the coal.