The Russian mining and steel producing company Mechel has confirmed to SteelOrbis that on October 5 it won the auction for a 68.86 percent stake in Elgaugol and a 75 percent minus one share stake in Yakutugol, both of which are located in the Russian Federal Republic of Sakha Yakutia (Yakutia).
Mechel, through its subsidiary Mechel-Invest, paid the highest bid of Ruble 58.196 billion ($2.3 billion) for the stakes in the two companies and for an unfinished 320 kilometer stretch of the Ulak to Elga railway, which were all auctioned in a single lot.
Mechel's closest competitor in the auction was the Russian diamond mining company Alrosa. Meanwhile ArcelorMittal, which had also expressed its wish to participate in the auction, was banned from bidding just prior to the start of the auction by the Russian Federal Property Fund. No reason was given for this ban.
As a part of its obligations as the winner of the auction, Mechel will have to put the unfinished stretch of railway into operation no later than September 30, 2010.
In addition, Mechel also plans to invest about $3 billion in the development of the deposits held by the two Yakutia-based companies over the next seven to 10 years.
As previously reported by SteelOrbis, Yakutugol holds the rights to develop the Nerungrinskoe coal deposit with an annual mining capacity of 8.5 million metric tons of coal, five million metric tons of which is coking coal. On the other hand, Elgaugul holds the license to develop the Elga coal deposit, which has 2.2 billion metric tons of coal reserves.