Vostokugol Dmitry Bosov and Alexander Isaev offered Rosatom to buy a coal project in Taimyr from the company. Possible reasons for the sale are lower coal prices and demand, as well as claims from Rosprirodnadzor.
VostokUgol, which is owned on a parity basis by businessmen Dmitry Bosov and his partner Alexander Isaev, suggested that Rosatom buy back its coal project in Taimyr from the company. The operator of this project is the "daughter" of VostokUgly Arctic Mining Company (AGK). This was reported to RBC by three sources close to the parties to the negotiations.
Possible reasons for the sale of the project, according to RBC's interlocutors, are a decrease in coal prices and claims from Rosprirodnadzor that arose to AGK. Rosatom is still studying the issue, evaluating the business, there is no solution, the source of RBC, close to the state corporation, said.
Representatives of VostokUgol and Rosatom declined to comment.
What is known about the project in Taimyr
VostokUgol created the Arctic Mining Company to mine coal (the so-called Arctic Carboniferous) in Taimyr in 2014. It was already planned to start production in 2019: the approved reserves of the Malolemberskoye field - 2 million tons, Nizhneleleberovsky - 67 million tons. Back in 2017, Dmitry Bosov announced plans to mine up to 30 million tons of coal per year in Taimyr and the intention to build two deep-water ports there with capacity over 10 million tons per year each. “According to our plans, every year we will be able to increase production by about 5 million tons, reaching 30 million tons of total production by 2022–2023,” the businessman announced. But later plans were adjusted: now the company plans to produce about 19 million tons by 2024.
Last year, under the implementation of the project, the Ministry of Natural Resources specially changed the borders of the Great Arctic Reserve, where the deposits are located. At the same time, the ministry considers only 1 million tons per year to be the real production volume for the VostokUgol project by 2024. Mining in the fields has not yet begun. Officially, the company does not comment on the reasons.
Why VostokUgol decided to sell AGK
Interlocutors of RBC indicate two possible reasons for finding a buyer for a coal project.
The first is the reduction in the cost of coal. Steam coal prices fell by 40% from last spring to February 2020, to $ 47 per ton, which is why Vostokugol's profitability has declined, says Maxim Khudalov, head of the ACRA Sustainability Risk Assessment Group. In addition, in Europe there is a trend towards a reduction in coal consumption.
VostokUgol, which is owned on a parity basis by businessmen Dmitry Bosov and his partner Alexander Isaev, suggested that Rosatom buy back its coal project in Taimyr from the company. The operator of this project is the "daughter" of VostokUgly Arctic Mining Company (AGK). This was reported to RBC by three sources close to the parties to the negotiations.
Possible reasons for the sale of the project, according to RBC's interlocutors, are a decrease in coal prices and claims from Rosprirodnadzor that arose to AGK. Rosatom is still studying the issue, evaluating the business, there is no solution, the source of RBC, close to the state corporation, said.
Representatives of VostokUgol and Rosatom declined to comment.
What is known about the project in Taimyr
VostokUgol created the Arctic Mining Company to mine coal (the so-called Arctic Carboniferous) in Taimyr in 2014. It was already planned to start production in 2019: the approved reserves of the Malolemberskoye field - 2 million tons, Nizhneleleberovsky - 67 million tons. Back in 2017, Dmitry Bosov announced plans to mine up to 30 million tons of coal per year in Taimyr and the intention to build two deep-water ports there with capacity over 10 million tons per year each. “According to our plans, every year we will be able to increase production by about 5 million tons, reaching 30 million tons of total production by 2022–2023,” the businessman announced. But later plans were adjusted: now the company plans to produce about 19 million tons by 2024.
Last year, under the implementation of the project, the Ministry of Natural Resources specially changed the borders of the Great Arctic Reserve, where the deposits are located. At the same time, the ministry considers only 1 million tons per year to be the real production volume for the VostokUgol project by 2024. Mining in the fields has not yet begun. Officially, the company does not comment on the reasons.
Why VostokUgol decided to sell AGK
Interlocutors of RBC indicate two possible reasons for finding a buyer for a coal project.
The first is the reduction in the cost of coal. Steam coal prices fell by 40% from last spring to February 2020, to $ 47 per ton, which is why Vostokugol's profitability has declined, says Maxim Khudalov, head of the ACRA Sustainability Risk Assessment Group. In addition, in Europe there is a trend towards a reduction in coal consumption.
The second is the claims arising against the company from Rosprirodnadzor, which have already become a pretext for litigation. The service claims that AGC, having obtained a license only for geological exploration of coal in the area of the Malolembersky deposit, mined it on an industrial scale and made a profit. The amount of the claim is 600 million rubles. The company, in turn, explained this with trial lots and a test of market demand. At the end of January 2020, the Moscow District Arbitration Court dismissed the appeal of the AGK against the courts supporting the position of the service. But VostokUgol intends to continue to challenge this decision in the Supreme Court, a company representative told RBC. Due to suspicions of illegal production at these fields, the FSB launched a criminal case last spring against illegal business activities (Article 171 of the Criminal Code) against AGK top management. However, at the end of 2019, the FSB returned the case to court, according to two RBC sources familiar with the investigation. Another lawsuit against AGK for more than 500 million rubles. Rosprirodnadzor filed in December 2019, but its essence is not disclosed in the court materials. The representative of the company does not comment on this lawsuit. RBC sent a request to the service.
“Given the fines for projects in the Arctic, the sale of the asset to Rosatom looks like a reasonable strategy for monetizing the asset, which will not start production in the near future due to the need to develop project documentation and coordinate it with supervisory authorities - now they will be more thoroughly scrutinized proposed design solutions, ”notes Khudalov. But it will be problematic for shareholders of the AGK, which has not yet begun commercial production, to sell the company for an amount greater than the fines of Rosprirodnadzor, the source said.
As a RBC source familiar with the situation noted, “VostokUgol is considering various investment decisions to develop its projects.” “One of the possible solutions is joining large state corporations, including Rosatom, in the project. No final decisions have been made in this regard. Consultations are being held, ”said the interlocutor of RBC.
Why does Rosatom need coal mining in Taimyr
The implementation of the May’s decree of President Vladimir Putin depends on the implementation of AGC plans for coal mining in Taimyr. He set a goal - to increase freight turnover along the Northern Sea Route (NSR) from 26 million tons (in 2019) to 80 million tons by 2024. At the end of 2018, the government appointed Rosatom as the single infrastructure operator for the development of the NSR. As the Deputy Director General of Rosatom Vyacheslav Ruksha (project manager for the development of the NSR) noted, the implementation of the project for the extraction of 19 million tons of coal by 2024 in Taimyr, proposed by VostokUglem, could move a year later. Another problem of this project is that VostokUgol does not have its own ice-class fleet for coal export in winter, said Ruksha.
“Given the fines for projects in the Arctic, the sale of the asset to Rosatom looks like a reasonable strategy for monetizing the asset, which will not start production in the near future due to the need to develop project documentation and coordinate it with supervisory authorities - now they will be more thoroughly scrutinized proposed design solutions, ”notes Khudalov. But it will be problematic for shareholders of the AGK, which has not yet begun commercial production, to sell the company for an amount greater than the fines of Rosprirodnadzor, the source said.
As a RBC source familiar with the situation noted, “VostokUgol is considering various investment decisions to develop its projects.” “One of the possible solutions is joining large state corporations, including Rosatom, in the project. No final decisions have been made in this regard. Consultations are being held, ”said the interlocutor of RBC.
Why does Rosatom need coal mining in Taimyr
The implementation of the May’s decree of President Vladimir Putin depends on the implementation of AGC plans for coal mining in Taimyr. He set a goal - to increase freight turnover along the Northern Sea Route (NSR) from 26 million tons (in 2019) to 80 million tons by 2024. At the end of 2018, the government appointed Rosatom as the single infrastructure operator for the development of the NSR. As the Deputy Director General of Rosatom Vyacheslav Ruksha (project manager for the development of the NSR) noted, the implementation of the project for the extraction of 19 million tons of coal by 2024 in Taimyr, proposed by VostokUglem, could move a year later. Another problem of this project is that VostokUgol does not have its own ice-class fleet for coal export in winter, said Ruksha.
The state corporation itself has one small regional coal project. The subsidiary of the state corporation Priargunsky Industrial Mining and Chemical Association is producing coal at the Urtuiskoye field in Transbaikalia: in 2019, the volume of production amounted to more than 3.5 million tons of coal. The company supplies it to the Krasnokamenskaya TPP and Kharanorskaya TPP, as well as to foreign partners in China. In addition, the state corporation has an investment project for the extraction of zinc, lead and silver in Novaya Zemlya.
How Rosatom is expanding in the Arctic
Rosatom recently concluded a major deal to develop logistics in the Arctic. In December 2019, it became known that the state corporation will receive 30% in the Delo group of Sergey Shishkarev, who shortly before that won the auction for the purchase of control in Transcontainer, the largest container operator in Russia. The goal of Rosatom is to realize the advantages of the NSR so that it competes with the Southern Sea Route through the Suez Canal. The distance along the “northern” route is 40% shorter, the delivery time of goods is 20–30% less (depending on ice and weather conditions); in addition, there may be a comparable prime cost at the NSR and there is the possibility of its optimization when using atomic icebreakers, as indicated in the materials of Rosatom.
How Rosatom is expanding in the Arctic
Rosatom recently concluded a major deal to develop logistics in the Arctic. In December 2019, it became known that the state corporation will receive 30% in the Delo group of Sergey Shishkarev, who shortly before that won the auction for the purchase of control in Transcontainer, the largest container operator in Russia. The goal of Rosatom is to realize the advantages of the NSR so that it competes with the Southern Sea Route through the Suez Canal. The distance along the “northern” route is 40% shorter, the delivery time of goods is 20–30% less (depending on ice and weather conditions); in addition, there may be a comparable prime cost at the NSR and there is the possibility of its optimization when using atomic icebreakers, as indicated in the materials of Rosatom.
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