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ArcelorMittal, the world's largest steel company, announced on January
ArcelorMittal, the world's largest steel company, announced on January 31 that it had signed agreements to acquire three coalmines and associated assets from Russia's Severstal for $720 million.

Lakshmi Mittal, President and CEO of ArcelorMittal, said: "This acquisition ... helps ArcelorMittal establish a presence in Russia, a fast growing market for steel production."

ArcelorMittal will acquire a 97.59% stake in the Berezovskaya mine and a 99.35% stake in the Pervomayskaya mine, which produce coking coal and are located in the Kemerovo Region, West Siberia. It will also acquire the Severnaya coal preparation plant, which is part of the Berezovskaya mine, and three companies that provide the mines with associated services, as well as 100% of the Anzherskoye mine.

All the transactions are subject to regulatory approval.

As part of the agreement, the global player will also buy the exploration and mining rights to the Zhernovskaya-3 coal deposit, a subsidiary of Pervomayskaya.

Alexei Mordashov, Severstal CEO, and Mittal quarreled several years ago when Mittal bettered Severstal's acquisition offer to Luxembourg-based Arcelor, then the world's second largest steelmaker.

But business is business, and some time later Severstal and ArcelorMittal decided to launch joint production of zinc-plated sheet steel, which Russia's rapidly growing automotive sector needs in huge amounts.

Mittal later withdrew from the deal, but has eventually agreed with Mordashov to buy the three coalmines, which have a combined estimated total reserve of more than 140 million tons of coking coal and produced 3.14 million tons in 2007.

Why has Severstal sold such attractive assets, and why to its former rival?

The Russian company said that its main steel plant, located in Cherepovets, in the Vologda Region north of Moscow, receives the bulk of its coal from the Vorkuta mines in the northern Urals, and can easily do without the Kemerovo coal. Besides, Mittal offered a very good price - again.

But this explanation does not explain why Severstal decided to sell at a time when coking coal prices are so high and keep growing.

Yevgeny Ryabkov, deputy chief analyst at the AntantaPioglobal investment group, said the partners had probably coordinated the deal when ArcelorMittal was leaving the joint zinc-coating business. He also said that Mordashov might need money to buy gold-producing assets. Besides, Severstal is positioning itself as a producer of high-quality steels and does not need burdensome raw material assets.

Mittal, who has created the world's largest steel company, is now buying coal assets in different countries. Last year he tried to buy coalmines in Yakutia, in Russia's Far East, but his company was not allowed to take part in the auction. His deal with Mordashov helped him get a foothold in Russia and has raised his company's "self-sufficiency from 10% to 15%."

The steel owner indicated that the deal is only the first step in establishing a firm presence in Russia's fast growing steel market. However, he can do this only by forming an alliance with a major local player.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


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