China may finance part of Mechel's coal project in Russia

China has expressed a desire to help Mechel Group finance the costly Elga coal project in Russia. In addition, China wants to supply equipment in exchange for coal. The fact is that the grades of coal from the Elga deposit are scarce for metallurgy in terms of their composition and properties.

The Mechel Group is saddled with $ 9.4 billion in debt while striving to develop the Elga region, which has some of the largest coking coal reserves in the world. The development of the project has been stalled for ten years due to poor transport links. The deposit is located in the southeast of Yakutia, 415 km from the city of Neryungri.

Vnesheconombank will arrange for part of the project financing on behalf of the debt-burdened Mechel Group. Alexander Ivanov, deputy head of the board of Vnesheconombank, told reporters in Moscow that "Some of the equipment will be supplied by China, and coal will be exported to China." He said that Mechel's chances of reaching a loan agreement with China's Eximbank are very high, although he declined to say how large the loan could be.

Vnesheconombank previously agreed to provide $ 2.5 billion for the project and is currently organizing additional financing. Funding was provided for the first phase of the project, which includes the completion of railway construction, coal mining and a processing complex.

Analysts believe that the development of the Elga field, which has proven reserves of at least 2.2 billion tons, could cost from 2 to 4 billion dollars.