Kuzbass Asset Holding Limited, a subsidiary of the Russian steelmaker Novolipetsk Steel (NLMK), has agreed to sell its Prokopievskugol Group of Companies (Prokopievskugol) for $1 to Municipal State Company, which represents Prokopievsk City Administration.
NLMK purchased Prokopievskugol as a part of the company's larger acquisition of Altai-koks coking facility in April 2006.
However, regardless of the investment programs it implemented at Prokopievskugol, during the April 2006-December 2006 period NLMK incurred $50 million in net losses.
According to the NLMK release, the cost of production at Prokopievskugol is twice as high as the industry's average due to its low mechanization. The improvement of the mining company's profitability would require shutting down unprofitable mines and production facilities. However, this process will bring about the reduction of employment. Due to the importance of these social effects, NLMK believes that the Prokopievskugol restructuring program will be best carried out by the region's administration.