OREANDA-NEWS. December 30, 2007. Zaporozhstal announced that it had bought in Russia coking coal production and cleaning assets, which were purchased more than a year ago by the British shareholders of Zaporozhstal, UFC-Capital informs. The majority shareholders of Zaporizhstal OJSC continue to surprise the public. A slightly more than a year has passed since they announced about joining of five trading houses to the steelmaker, when the shareholders started to dump their own non-liquid assets onto this steelmaker.

On December 21, at the shareholders’ meeting of Zaporozhstal, the deputy CEO for corporate rights of the company – Anatoliy Salamatov – announced that the company acquired Sholokhovskoe production association and Bystrianskaya 1-2 Mine (both – Russia, the Rostov region) for production and cleaning of OS grade coking coal. According to Mr Salamatov, Sholokhovskoe complex includes a washhouse and loading-transport department. He also said that this complex allows various grades coal cleaning and the output capacity of the washhouse is 7.8 thousand tonnes a day. For 11 months of the year the association produced more than 900 thousand tonnes of coal concentrate. The raw material source for this washhouse is Bystrianskaya 1-2 Mine, producing 750 thousand tonnes of coking coal, and its reserves amount to more than 46 mln tonnes. As a result of cleaning process the aforesaid mined rock will yield 525 thousand tonnes of coking coal for steelmakers. Mr Salamatov said that the funds for acquisition of this complex in Russia were raised due to additional share issue carried out by Zaporozhstal and its statutory capital increase. At the same time he added that this asset will join Zaporozhstal together with the assets of 5 companies being part of Zaporozhstal financial and industrial group and attached at the decision of the shareholders.

However, there is one problem here – these assets are owned by the steelmaker long since, or rather – by its British shareholders – Midland Resources. At that, Sholokhovskaya washhouse was purchased back in July 2004 for RUR 23 million. Before, this washhouse had been part of Rostovugol that went bankrupt. The total investments into the mine have already amounted to about RUR 150 mn (approximately $5 mn), and the Russians openly specified that the washhouse was purchased by Zaporozhstal.

The situation with Bystrianskaya 1-2 Mine is also very interesting. Generally speaking, what is proudly called “a mine” is just a license for coking coal production in Tatsinskiy district of the Rostov region. Bystrianskaya 1-2 Mine is located within Tatsinskiy coal district of the eastern Donbass. The area of the licensed field is 7.53 sq. km. The reserves of the central block amount to 14.5 mn tonnes of coking coal. In July 2006, this license was purchased by Rostov Coal Company LLC, established in December of 2005. By strange coincidence its shareholders are also the “British shareholders” of Zaporozhstal. The second participant of the auction was Sholokhovskaya washhouse and, therefore, the license without any problems was purchased by Zaporozhstal at the price slightly exceeding the starting one – RUR 12.6 mn (approximately $470 thousand).

The construction completion is scheduled for the second half of 2012. According to some data, the cost of the mine’s first line is estimated at about $120-130 mn, and another two lines may be developed in future. The relative inexpensiveness of the project is explained by that fact that the mine is shallow – about 350-400 m, maximum – 600 m – for account of drifts. Bystrianskaya mine will produce coking coal of OS grade, which reserves amount to approximately 45-50 mln tonnes, and the seam thickness is 1-1.2 m.