The world's largest steel producer ArcelorMittal has announced that it has entered into an agreement to acquire three coal mines and associated assets from Severstal-Resurs, a raw materials division of the Russian steel producer Severstal, for a total of $720 million.
According to the concluded agreement, ArcelorMittal will acquire a 97.59 percent stake in Berezovskaya Mine, a 99.35 percent stake in Pervomayskaya Mine and a 100 percent stake in Anzherskoye mine. While the first two mines produce coking coal, the latter one is a producer of steam coal. All three mines are based in Russia's Kemerovo region.
In addition, ArcelorMittal will acquire the license to develop the Zhernovskaya-3 deposit, which is a part of Pervomayaskaya Mine, as well as the Severnaya Coal Preparation Plant, which is the part of Berezovskaya Mine, and three companies that provide the concerned mines with associated services.
All the transactions are subject to regulatory approval.
The annual production from the three operating mines is 3.14 million metric tons of RoM, while their total reserve is estimated at more than 140 million metric tons.
Commenting on the acquisition, President and CEO of ArcelorMittal Mr. Lakshmi Mittal said, "We are pleased to be acquiring these mines which will provide an important and competitive source of coking coal supplies for our steel production, raising our self-sufficiency from 10 percent to 15 percent. This acquisition also helps ArcelorMittal establish a presence in Russia, a fast growing market for steel production."
It seems that the acquisition of coking coal assets in Russia has come just at the right time, when ArcelorMittal's Ukrainian subsidiary ArcelorMittal Kriviy Rih is having a hard time buying coking coal in the Ukrainian domestic market due to the shortage of this raw material, and has to import coking coal from abroad. Indeed, supplies of Russian-based coking coal will be more beneficial and cost saving for ArcelorMittal's Ukrainian plant than imports of this raw material from the USA and Canada as was planned for 2008.
On the other hand, the deal for the sale of its Kemerovo's coal assets is also serves the interests of Severstal well, as it had been trying to sell these assets for some time now (last year Severstal had offered its Kemerevo assets to Mechel) due to their remoteness from Severstal's main production faculties and poor infrastructure.