UPDATE: Russia’s Mechel sees risk of losing control over Donetsk plant

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MOSCOW, Jul 21 (PRIME) -- Russian metals producer Mechel has received an order from the government of the self-proclaimed Donetsk republic on the introduction of a temporary state control over the Donetsk Electrometallurgical Plant (DEMZ), Mechel said in a statement on Thursday.

“An order dated June 25, 2016 signed by Chairman of the Council of Ministers of the self-proclaimed People’s Donetsk Republic Alexander Zakharchenko says that an interim government administration is introduced over the entirety of assets of DEMZ, and that state enterprise Yuzovsky Electrometallurgical Plant is being established on base of DEMZ and all the property of DEMZ shall be transferred to this enterprise,” Mechel said.

The company said that as a result of these actions it can lose control over the plant for an indefinite term. The company has started a legal expertise of the situation and will take steps to protect its interests.

These events will not affect financial performance of Mechel because production at DEMZ was halted in 2012, and Mechel made reserves against the loss of value in 2013–2014.

Alexei Granovsky, the industry minister of the republic, said that the authorities will be ready to give the plant back to Mechel if the company promises to relaunch it.

“The facility has not been in operation since 2013, about 700 people used to work at the plant, now about 200 people remain… Salary arrears are about 20 million rubles. They do not pay either for the land, or taxes. The goal of the government is to preserve the plant itself and to provide people with jobs,” Granovsky said.

He said that the republic can also cede the plant to Mechel in case of an international recognition of the Donetsk republic as a legal entity.

(63.4183 rubles – U.S. $1)

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