Mechel, the one of the leading Russian mining and metal company, submitted a non-binding proposal to ’Russian Railways' regarding Yakutugol and the development of the Elga coal deposits in Yakutia, on the second of March.
In its bid,
Mechel proposed the formation of the new company, Sakhaugol, in which
Mechel will acquire control of 51%, by contributing its 25%+1 share of Yakutugol and up to $300 million.
The other shareholders of the newly formed company, assumingly, would be ’Russian Railways', contributing 29.5 % of Elgaugol, which has the license to develop the Elga deposit, and the government of the Republic of Sakha, contributing 39.4 % of Elgaugol and 45%-1 of Yakutugol.
If
Mechel's proposal is to be accepted, Sahaugol would control about 70% of Yakutugol and 68.9 % of Elgaugol, where Yakutugol produced 9.9 million tons of coal in 2005, while the Elga deposit could be the largest coal reserve deposit in
Russia, with estimate of 2.2 billion tons of coal in reserve.
The bid, launched by
Mechel, is aimed to achieve the full control over Yakutugol and to enter in strategically attractive region, which is very rich in mineral resources. All of this is fully in line with Merhel's strategy to further strengthen its mining segment.