Elga deposit

Mining and metals firm Mechel is anticipated to sign a deal with Export-Import Bank of China (China Exim Bank) to secure financing for the development of its Elga coal project in Russia.

Although Mechel has $9.4bn of debt as of December 2013 due to a drop in coal prices, the mining firm is seeking to develop the Elga project, which has estimated reserves of 2.2 billion tonnes of coking coal.

The development of the project located in Yakutia region has been facing difficulty due to lack of transport access.

The Russian bank Vnesheconombank had signed an agreement with Mechel and its units in March to provide $2.08bn and $418m of project financing for the Elga project and is currently arranging additional financing.

The funding from the state development bank was allocated for the development for the first phase of the project, including the completion of railway construction and coal mining and a processing complex as well as pay down $150m bridge loan granted in October 2013.

China could provide funds and supply equipments for the Elga project in exchange of coal supply.

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Vnesheconombank management board deputy head Alexander Ivanov was quoted by Reuters as saying: "Some of the equipment will be supplied by China and coal exports will go in part to China."

Ivanov said there is a high possibility that a deal will materialise, however, he declined to reveal the size of loan.

Image: Elga has estimated reserves of 2.2 billion tonnes of coking coal. Photo: courtesy of Mechel.