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. Last Updated: 07/27/2016

RusAl and Kazakhs in Coal Pact

United Company RusAl and Kazakh state firm Samruk Holding have agreed to set up a joint venture on the basis of RusAl's coal mines in Kazakhstan, RusAl said Thursday.

The joint venture will develop the Ekubastuz coal field in the area of Bogatyr and Severny coal mines in northern Kazakhstan, a RusAl statement said.

The coal may be used to generate power for metals production. In addition, RusAl and Samruk will examine opportunities for the development of the Kazakh energy sector, it said.

Samruk will compensate RusAl in cash the value of its 50 percent participation in the joint venture. The exact sum is to be evaluated by an independent international authority.

The reserves of Bogatyr and Severny are estimated at 4.5 billion tons of coal. Output totals 42 million tons a year, which is about 45 percent of all coal produced in Kazakhstan.

The joint venture intends to raise the capacity of the mines to 60 million tons of coal per year.

RusAl was formed in March through a merger of Russian Aluminum with smaller domestic rival SUAL and the alumina assets of Swiss trader Glencore.

The Kazakh mines were transferred to RusAl by Access Industries, a SUAL shareholder, as a result of the merger.

Prior to the merger, SUAL announced plans to build a $1.5 billion smelter in Ekibastuz to add 500,000 tons per year to the company's aluminum output from 2011.

RusAl had approached Kazakh authorities with a proposal to invest $3.5 billion in building an energy and aluminum complex on the basis of the mines and a utility, Kommersant reported in October

RusAl has said the company was discussing various energy projects with Kazakhstan that could form the basis for such a project, but gave no details.

RusAl agreed last week to buy a blocking stake of 25 percent plus one share in Norilsk Nickel, from co-owner Mikhail Prokhorov. The deal can only happen if his co-owner, Vladimir Potanin, fails to take an earlier offer to buy his stake for $15.7 billion by the end of the year.