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. Last Updated: 07/27/2016

MMK Pays $230M for Belon Stake

Magnitogorsk Iron & Steel Works, or MMK, said Thursday it had paid $230.4 million to raise its stake in coal miner Belon to 41.3 percent, in a deal giving the country's third-largest steelmaker more access to raw materials.

MMK also said Thursday it had made a bid for Iran's Esfahan Steel, part of its strategy to help meet steel demand in the Middle East, and chairman Viktor Rashnikov said his company expected to post 2007 net profit in excess of $1.7 billion.

"Iran is a very interesting country for us. We sell more than 1 million tons a year of steel there," Rashnikov said during a news conference. He gave no details of the bid size.

MMK operates the country's largest stand-alone steel mill. The London-listed company has a market capitalization of $13.8 billion.

MMK said its partnership with Belon Group, in which it already held a 10.75 percent stake, would cover 55 percent of its coking coal and 60 percent of its steam coal requirements by 2012.

"This acquisition gives MMK an opportunity to share in Belon's profitability and the development of its coal interests, which will meet a sizeable part of our raw material requirement," Rashnikov said.

Belon, based in Novosibirsk, is investing about $500 million to raise coal output. MMK said Belon's coal output would rise to 10.8 million tons by 2012.

Belon produced 4.66 million tons of coal last year and plans to raise output by 50 percent in 2008. Belon president Andrei Dobrov said coking coal supplies to MMK would rise to 2 million tons this year from 600,000 tons last year.

Belon mines and exports coking coal, used in steel making, and steam coal, used in power generation. The company also produces bricks and other building materials and trades rolled steel produced by Magnitogorsk and other Russian steel mills.

The transaction involved the purchase by MMK of a 50 percent stake in Cyprus-based Onarbay Enterprises, which holds an 82.6 percent stake in Belon, including the 10.75 percent interest previously held by MMK.