UPDATE 2: Severstal buys 12 bln rbl of Yakovlevsky mine debts

(Adds details in last two paragraphs)

MOSCOW, Jul 20 (PRIME) -- Russian steelmaker Severstal has closed a purchase of rights for over 12 billion rubles worth of debts of Metall-Group, owner of a license for development of the Yakovleskoye iron ore field and of the Yakovlevsky mine, from Gazprombank for 6 billion rubles, Severstal said in a statement on Thursday.

The Yakovlesvky mine is located within the Kursk Magnetic Anomaly. Its explored reserves amount to 9.6 billion tonnes with the iron content of about 61% meaning the ore does not need beneficiation. The mine’s capacity is about 1 million tonnes, but the facility has started an upgrade to raise it to 4.5 million tonnes a year.

Severstal said citing CEO Alexander Shevelyov that the company is familiar because it is one of Severstal’s suppliers of raw materials. The steelmaker also adheres to the principle of vertical integration, and may even consolidate a stake in Metall-Group.

“The company is interested in the asset as in a means of supporting self-sufficiency in high-quality raw ore materials in the long run. We are sure that the implementation of consolidation plans …will give us an opportunity to make the Yakovlevsky mine one of the leaders of the industry in its efficiency…It is evident that the current situation with the debt burden does not allow the asset to develop at full speed,” Shevelev said as cited by the company.

The company also said in a presentation that it plans to agree with owners of the mine and buy 100% in it. A source close to Severstal told PRIME that currently two producers – Metalloinvest and Kovdor – dominate the Russian iron ore concentrate market, so there is an ungrounded premium to the price of the raw material.

“Severstal is only 50% self-sufficient in the concentrate. Consolidation of the Yakovlevsky mine will allow the company to stabilize the Russian iron ore concentrate market,” the source said.

Alexei Kulichenko, deputy CEO for finance and economy, said in a conference call that the company hopes that Yakovleskoye will create added value for the company, but negotiations are still under way.

Severstal also has no plans for any new acquisitions soon besides the Yakovlevsky mine, he said.

(59.2418 rubles – U.S. $1)

End