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. Last Updated: 07/27/2016

Mechel Buys Sakha Coal Assets

Coal miner and steelmaker Mechel paid 58.2 billion rubles ($2.33 billion) on Friday to win an auction for extensive coal assets in the Sakha republic.

New York-listed Mechel outbid Yakutia Coal Company, 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 said.

The Federal Property Fund started the auction at 47.40 billion rubles ($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 ArcelorMittal, the world's top steelmaker.

Mechel will assume 100 percent control of Yakutugol, having owned 25 percent plus one share prior to the auction. The company mines about 9 million tons a year of coal from three deposits in Sakha. Executive director Alexei Ivanushkin said Mechel would expand output to between 12 million and 15 million tons, Interfax reported.

Ivanushkin also said Mechel would invest $3 billion in the next seven to 10 years bringing the Elga deposit into production, Interfax reported. Elgaugol has a license for the Elga coal deposit and was owned by Russian Railways and the Sakha regional government.

A banking source said Mechel has arranged a $2 billion, five-year pre-export syndicated loan to fund its acquisition of the coal assets.