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Peter the Great marked the beginning of the state mining management by creating the Order of Mining Affairs and then the Berg (Mining) Board.
By the end of the 19th century mining takes the leading place among other branches of Russia industry. Number of workers employed in mining was 436 thousand. In connection with the development of metallurgy, railway and water transport coal mines construction stated in Donbass, the Ural, in Podmoskovny and Kuznetsk basins and the Far East . By the beginning of the 20th century coal production increased from 121 thousand tons in 1860 to 12 Mt in 1900 and 34.5 Mt in 1916.
1917 1941:
In the period of the Civil War coal production sharply decreased. The majority of mines were destroyed. In 1920-1928 dozens of mines were restored and constructed. First coal preparation plants were commissioned. At the end of the 20th years open cast coal mining started. In the period of 1928-1937 more than 200 mines with total capacity of about 100 Mt were constructed.
In the same period the home coal mining machinery manufacturing was created. In 1934-1935 the mass manufacturing of shovel excavators and dumpcars for opencast mining started.
Within the period of pre-war five-year plans the creation and development of mining science took place. The All-Union Coal Institute (VUGI) and the Institute of Mining of the USSR Academy of Sciences were set up.
1941 – 1960:
The occupation of a significant part of the country resulted in the loss of 60% of coal production capacities. It was compensated by the intensive coal industry development in Kuzbass, Pechora basin, in the Ural and other eastern regions. During war period miners uninterruptedly supplied the country with steam and high quality coking coal.
The development of opencast coal mining played very important role. In 1945 opencast mines produced 17.8 Mt, that is 11.9% of total coal production.
In 1947 the national holiday "Miners Day" was instituted. The prestige of mining profession became extremely high in the country.
1960 1991:
1960th years were marked by the fast development of mining science. The manufacturing of home made mining machinery and equipment proceeded alongside with the purchases of foreign technique.
From the beginning of 1970th years the most efficient opencast method of coal production developed very rapidly, especially in Kuzbass. Modern mining equipment was manufactured by machine - building plants. The development of large Kansk-Achinsk coalfield with big reserves of high quality steam coal as well as South-Yakutiya basin to supply power stations of the Far East and new industrial regions of Yakutiay with coal was started in the second half of 1970th years.
In 1988 coal production in Russia reached the highest level of 425.4 Mt, but then annual production gradually decreased. The majority of mines were old, the average depth of underground workings became critical, the danger of rock bumps, fires, roof falls and gas outbursts increased. Fatal accidents became frequent.
Mass strikes shook the coal industry in 1989-1990. They imposed on some negative tendencies, which had become distinct earlier. The restructuring of the whole coal industry was the only way out.
1991 – 2000:
The coal industry has been a long-standing problem for Russia. The number of people employed there, had reduced from 900 000 in 1991 to 400 000 in 2001. Since 1994, the government has spent more than $2 billion on reforming coal industry and has closed 150 unprofitable mines. At the same time, coal production had been decreasing until 1998. The industry has showed signs of growth only in the last two years: coal production in 2001 was more than 265 million tones.
Meanwhile, coal reserves in the Kansko-Achinsk coal deposit alone exceed 210 billion tonnes, which is enough for more than 800 years at current production rate. Today coal makes up about 17% of the country's energy balance and 30% of electrical energy production. These figures are to be doubled by 2020.
Private coal companies supply more than 60% of the coal on the domestic market and about 80% of coal exports. Russia exports about 20% of its coal production (more than 50% of it to Europe) and imports about the same amount (21% of consumption) from Kazakhstan. Therefore the industry growth is mostly due to the increase in exports. Thus in spite of slight increases in profitability the situation in the coal industry as a whole is still complicated. It is only in 2001 that the number of unprofitable companies fell below 50%.
The history of the coal industry in Russia is a heroic epic with elements of farce. However, it clearly depicts the hard way of the Russian economy towards efficiency in the past ten years.
1991 In March, striking miners of Russia (more than 50% of Russian coal production) demanded the resignation of the union leadership and the introduction of direct state management of the industry. At the end of April Boris Yeltsin went to Kuzbass . Following this trip 101 coal companies in the Kuznetsk basin and 13 in Vorkuta passed to Russian jurisdiction. This transfer meant that enterprises were granted full economic independence, including the choice of form of ownership. In mid-June, it was announced that total subsidies to the coal industry in Russia would exceed the grants to the Pension Fund in 1991. On August 19, Mkihail Shchadov, the Minister of the Coal Industry, announced that the State Emergency Committee (GKChP) would provide support and requested the committee to declare a state of emergency in the Kuznetsk coal basin, he did not rule out forcible suppression of the miners' strikes. The Ministry of the Coal Industry was disbanded in September.
1992 In October Prime Minister Yegor Gaidar formed a commission responsible for the creation of a joint-stock company Kuzbass Coal (AO Ugol Kuzbassa). Mikhail Kislyuk, the head of the Kemerovo regional administration, was appointed chairman of the commission. The meeting of the founding members of AO Ugol Kuzbassa, which was supposed to consolidate all the coal companies in the Kuzbass coal basin under the control of local administration and management, was scheduled for November 1. In October, the British government provided credits worth $280 million for the development of the Russian coal industry. From then on, reform in the industry was usually associated with the granting of credits. At the end of October, the managers of companies in the southern part of Kuzbass headed by Viktor Nekrasov, the general director of the Kuznetsk Coal (Kuznetskugol) concern, refused to join Ugol Kuzbassa. The meeting of the members of AO Ugol Kuzbassa on November 1 ended in failure: no one except Viktor Kuznetsov, the general director of Kuzbass Open-Pit Coal Mine (Kuzbassrazrezugol), supported the creation of a regional coal company. In November, the World Bank granted credits of $600 million to Russia, including $50 million in the form of a rehabilitation loan for the coal industry. At the beginning of December, Mikhail Kislyuk announced that privatization of Kuzbass coal companies would begin in 1993, with provision for the transfer of up to 30% of the shares in regional coal companies to Kuzbass residents.
1993 Boris Yeltsin's decree on privatizing the coal industry was issued on January 3. The privatization plan was as follows: the labor collectives of the new companies would receive 25% of the shares free and would buy another 10% on preferential terms; the company's administration would receive the right to buy 5% of the shares at face value; and 22% of the remaining 60% of the shares would be invested in the charter capital of state companies, while the rest would be transferred to state ownership. The only exception was formation of Kuzbassinvestugol, which partially duplicated the concept of AO Ugol Kuzbassa but was state-controlled. In February, the government recommended that coal companies conclude cartel agreements on coal prices with metallurgical companies and other users, since it could no longer subsidize coal production. The Russian Coal (Rossiysky ugol) corporation headed by the director of the Rostov Coal Association (Rostovskoe ugolnoe obedinenie), Viktor Zaidenvarg, was assigned the task of coordinating this process. The state company Russian Coal (Rosugol) was established in April to manage the state shareholdings of 90% of Russian coal companies. On June 20, the government issued the instruction "On Emergency Measures for Financial Stabilization of Coal Industry Operations," which prescribed the creation of a Fund for the Financial Support of the Coal Industry under the Ministry of Finance as of July 1, 1993. Wholesale coal prices at that moment covered only about 15-20% of production costs in the industry. The Fund was never created. On June 21, Boris Yeltsin issued the decree "On Measures to Stabilize the Situation in the Coal Industry," which fully liberalized pricing in the industry. As of July 1, 1993, companies were released from the obligation to sell their foreign-currency earnings from coal exports, the export duty on coal was removed. On July 28, the Council of Ministers suddenly backtracked on reform, since it was discovered that full price liberalization would threaten metallurgical companies with closure. An "excise tax" was introduced on cheap coal produced from open-pit mines, and budgetary subsidies for coal companies were transferred to Rosugol, headed by Igor Malyshev; the Rostopprom association; and the Kemerovo Regional Coal (Oblkemerovougol) association. On August 9, there were token strikes at mines in Rostov, Kuzbass, and Vorkuta. In addition to demands for higher pay, indexation of working capital, and an end to price increases for energy resources, there were also political demands for the government's resignation. A program for closing unproductive mines in Russia was adopted on October 26. It was vehemently opposed by the miners, since according to Rosugol's estimates, between 13 and 30% of the operating mines would have to be closed. On December 6, miners in Vorkuta and Norilsk halted coal production in protest against the government's decision to introduce open coal prices on July 1, 1994, with the aim of reducing subsidies to the coal industry.
1994 On March 1, miners in Vorkuta held a one-day strike to demand an increase in subsidies to the coal-producing region and what is more, for the first time in history, - President Yeltsin's resignation. In June, Rosugol presented the first coal company withdrawn from state ownership - AOZT Raspadskaya and Co. based on the Raspadskaya mine in Mezhdurechensk. The mine was completely privatized by 1995.
1995 On February 8, miners all across Russia went on a one-day token strike. In March, First Deputy Minister of Finance Vitaly Artyukhov claimed that coal companies had become totally opaque to the control of government coal production subsidies with the connivance of the Ministry of Fuel and Energy and Rosugol. This was the first statement by a government representative on how money allotted to the coal industry was being stolen. In the meantime, an increasing number of mines in the region were coming under the financial control of organized crime. At the beginning of summer, the Communist leader of Kuzbass, Aman Tuleev, began attacking the former general director of the Kuzbassshakhtostroi concern, Viktor Bocharov, accusing him of unlawful privatization of the concern's property while creating the private Zadubrovsky open-pit mine. The Prosecutor General's office laid criminal charges against Bocharov, and Tuleev made a career as public protector out of exposing Bocharov and the "coal generals." In December, the Kemerovo regional Prosecutor General's office stopped the public prosecution against Bocharov for lack of evidence.
1996 From January 24 to 26, the Russian Committee of the Independent Coal Industry Workers' Union picketed Government House, for the first time on the notorious Gorbaty Most (a bridge behind Government House). The total amount owing to coal companies for coal dispatched in 1995 was 3.9 trillion rubles. In February, strike actions in the coal industry had spread to 163 out of 182 existing mines and 52 of the 63 open-pit mines. At least 500 000 miners were involved in the strikes. On February 12, Boris Yeltsin virtually abandoned industry reform. He transformed the state company Rosugol into AOOT Russian Coal Company (AOOT Rossiyskaya ugolnaya kompaniya); extended the period for assigning shares in coal companies to federal property to December 31, 1998, thus reversing privatization; and allowed state shareholdings to be committed to trust. On June 27, the World Bank granted loans totaling $500 million to Russia "to create socially stable conditions for coal sector reform." In December, the joint-stock companies Bashkiria Coal (Bashkirugol), East Siberian Coal (Vostsibugol), Krasnoyarsk Coal Company (Krasnoyarskaya ugolnaya kompaniya, Krasnoyarskugol, Leningrad Shale (Leningradslanets), and Khakassia Coal (Khakasugol) were committed to trust to the regional administrations by presidential decree.
1997 In April, Vice-Premier Anatoly Chubais held talks with the World Bank on allotting Russia a second coal credit tranche. The Bank's board of directors demanded that 25% of the country's coal had to be be produced independently of Rosugol by the time the credit was allotted. The Russian Fund for Federal Property (RFFI) and the Ministry of Property were preparing to privatize Kuzbass Coal (Kuzbassugol), the Southern Kuzbass (Yuzhny Kuzbass) company, and Krasnoyarskugol. However, Kuzbassugol was withdrawn from the tenders, the privatization of Krasnoyarskugol was suspended, and the World Bank did not give out the money. In June, a control packet of shares in the open-pit mines of Krasnoyarskugol were sold to Metaleks Bank, AO Krasnoyarsk Power (AO Krasnoyarskenergo), and structures with close ties to Anatoly Bykov, head of the Krasnoyarsk Aluminum Smelter (KrAZ). In summer, Anatoly Chubais expressed his opposition to the Rosugol state monopoly headed by Yury Malyshev. In November, Boris Yeltsin signed a decree liquidating Rosugol. All industry management functions, including distribution of World Bank funds and budgetary subsidies, were transferred to the Ministry of Fuel and Energy. Yury Malyshev resigned.
1998 In May, miners' unions and the coal lobby connected with the Coal Producers' Association of Russia (Soyuz uglepromyshlennikov Rossy) began a new strike campaign in response to the government's program for closing unprofitable mines. In the same month, the government granted tax concessions to a number of Kuzbass enterprises. At the end of the year, Anatoly Chubais, who by this time was the head of RAO UES of Russia (RAO EES Rossii), announced plans to create AO Buryat Fuel and Energy Complex (AO BurTEK) around Vostsibugol; the new company would unite coal companies with Buryat Power (Buryatenergo) and several Siberian state regional electric power stations and would be managed by Promtorgbank. The project was not implemented. In July, Prime Minister Sergei Kirienko negotiated with Japan for credit totaling $400 million "to develop the coal industry and create new jobs." The August crisis dashed hopes both for this money and for World Bank coal credits. On September 25, the Kemerovo Region Prosecutor General's office opened a case concerning illegal coal exports from the Chernigovets open-pit mine. Valery Tysyachny, the general director of ZAO Chernigovets, had no choice but to form an alliance with a politically powerful ally, in this case, Mikhail Zhivilo's MIKOM Group (MIKOM).
1999 In January, Metaleks Bank initiated a bankruptcy procedure against Krasnoyarskugol in a court of arbitration. Metaleks Bank was controlled by Anatoly Bykov, who made no secret of his plans to unite all the energy, raw material, and metallurgical enterprises of Krasnoyarsk Territory into a holding under KrAZ. Bykov suggested the creation of a trader based on Krasnoyarskugol, i.e., a territorial fuel company, to Governor Aleksandr Lebed. On February 16, the Court of Arbitration of Krasnoyarsk Territory postponed consideration of the bankruptcy case against Krasnoyarskugol. Governor Lebed made an agreement with Anatoly Chubais to transfer control of Krasnoyarskugol to the energy monopoly in exchange for liquidation of the company's debts. At the end of February, Prime Minister Evgeny Primakov ordered acting head of the Ministry of State Property Aleksandr Braverman to immediately transfer control of all state shareholdings in coal companies to the Coal Committee under the Ministry of Fuel and Energy, which essentially meant the recreation of Rosugol. Vladimir Shchadov, the son of Mikhail Shchadov, was appointed acting head of the committee. The Ministry of State Property managed to delay the matter until Primakov's dismissal. On March 22, Aleksandr Lebed refused the assistance of RAO UES of Russia in opposing Anatoly Bykov: Lebed's brother Aleksei, the Governor of Khakassia, found 72 million rubles to pay Krasnoyarskugol's debts. In May, the Russian government decided to privatize the state shareholdings (75.6%) in Krasnoyarskugol. On May 31, Lebed declared that the privatization of Krasnoyarskugol was "an issue of power in the country" and opposed the sale. He demanded that half of the state package be transferred to the regional administration. In June, the World Bank released the second tranche of the coal credit for reforming the industry and paid Russia $50 million. As a result, international creditors acknowledged that the government was intent on reforming the coal industry. In the autumn Kuzbassrazrezugol was sold to the Siberian Aluminum Group. At the end of November, Lebed agreed to the privatization of Krasnoyarskugol on condition that investors transfer a portion of the company's shares to the regional administration. Sergei Generalov, a former Minister of Fuel and Energy, began the search for investors. At the end of the year, the Russian coal industry recorded an 8.1% increase in coal production, the first increase in ten years.
2000 The results of a sale tender for 75.6% of Krasnoyarskugol's shares were calculated in Moscow on January 11. The winner of the tender was KATEK-Invest, which bought the company for $30 million dollars and promised to invest in it a total of $40.006 million and 776 million rubles. Sergei Generalov, who had organized the sale, was none the worse fop the deal: about 40% of KATEK-Invest's capital was owned by ZAO Kolorit, which represented its interests; 33.99% belonged to ZAO Rosuglesbyt owned by Filaret Galchev; and only 25.01% went to an outside investor, ZAO Invest-Inter, controlled by Kirill Minovalov, president of AKB (Joint-Stock Bank) Avangard of Moscow. In February, MIKOM sold the shares of a number of enterprises that were members of Prokopevsk Coal (Prokopevskugol) and its own holding of shares in Kuzbassrazrezugol and OAO Mezhdureche to Avtobank and the Stilteks metal trading company. Mikhail Zhivilo left the coal business. In March, a new board of directors controlled by Siberian Aluminum (Sibal) was elected at Kuzbassrazrezugol. However, Sibal soon transferred Kuzbassrazrezugol's management and part of its sales to Evrazholding companies and Iskander Makhmudov's Ural Mining and Smelting Company (Uralskaya gorno-metallurgicheskaya kompaniya). The coal business turned out to be too complicated for Oleg Deripaska's company (Sibal). On November 1, Prime Minister Mikhail Kasyanov signed a resolution abolishing the coal industry committee under the RF Ministry of Energy, destroying the coal lobby's last hope for reestablishing centralized management of the industry either by the Ministry of Energy, the Ministry of the Coal Industry, Rosugol, or the committee. In October, the Ministry of Energy presented the project "An Energy Strategy for Russia for the Period to 2020 and Structural Reform in the Power Industry" to the State Duma. The government approved the document, which for the first time stipulated an increase in coal production in order to gradually decrease the use of natural gas at Russian electric power stations.
2001 On February 1, MDM Group (MDM) announced the acquisition of 36% of the shares in Vostsibugol. On February 12, MDM bought the 40% state share holding in Vostsibugol at an RFFI auction and became the company's owner. The head of Vostsibugol, Ivan Shchadov, the second son of Mikhail Shchadov, was later replaced by MDM representative Oleg Minsevra. In February RAO UES of Russia faced the first complaints about coal purchasing prices from the new coal industry owners. Mikhail Abyzov, the vice-president of governing board of UES of Russia, responded by announcing that UES would try to get quotas put on foreign coal exports. In his opinion, the coal industry's infatuation with exports was a threat to the country's security. In April, the government refused to use its "golden share" in Kuzbassrazrezugol and AO Yuzhny Kuzbass, marking the government's final withdrawal from an industry that was now on the rise. In April, MDM bought 51% of the state shares in the Chita Coal Company (Chitinskaya ugolnaya kompaniya), which MDM combined with Vostsibugol under the control of the Siberian Power Coal Company (Sibirskaya energougolnyaya kompaniya, SUEK) headed by Oleg Minsevra. On April 16, Sergei Bogdanchikov, the president of the Rosneft oil company, signed an agreement with the administration of Sakhalin Region and the Khabarovsk company Urgal Coal (Urgalugol) to develop the local coal industry as part of its plans to develop the coal sector of its business. On June 9, Evrazholding acquired a control stock of shares in Kuznetskugol from the government at an RFFI auction. The company was renamed Southern Kuzbass Coal (Yuzhkuzbassugol) On June 7, Yuzhny Kuzbass shareholders announced plans to begin a merger with the metallurgical and coal companies under its control, starting with AO MECHEL. At present, Igor Zyuzin's group owns only 20% of the shares in MECHEL, and the merger will not be completed before the end of 2002. On June 21, coal trader RATM-Energo, which was part of the RATM group, sided with the management of joint stock company Novosibirsk Power (AO Novosibirskenergo) in a dispute with RAO UES of Russia. In response, UES stopped RATM's coal deliveries to a number of Siberian power companies. In September and October, RFFI sold by auction80% of the shares in Kuzbassugol. The Magnitogorsk Metallurgical Combine (Magnitogorsky metallurgichesky kombinat) and Severstal bought 51% of these shares, and what later became the Russian Steel (Russkaya stal) partnership bought a package from the remaining 48%. At the end of 2001, Russkaya stal included the Novolipetsk Metallurgical Combine (Novolipetsky metkombinat), Evrazholding, AO Coke (AO Koks) of Kemerovo, and the Novosibirsk trading company Belon. Since the "golden share" was still valid, shareholders could not elect a new general director of the company or decide how they would manage it until the beginning of 2002. On December 27, President Vladimir Putin planned to take part in the opening of the joint stock company Rosterminalugol terminal in the port of Ust-Luga. Bad weather prevented the President from personally opening the large coal export facility. However, it turns out that the terminal will only start operations in the middle of next year at the earliest: at the time of the opening ceremonies, there was still no railway line leading to the terminal, not to mention the fact that numerous disputes had made investors stop investments in the project. But this fact will come to light only in 2002. (Published by Kommersant newspaper at February 5, 2002)
Modern stage (since 2000)
Results for the Russian mining industry in the last four years have been mixed. The industry began to emerge from a prolonged depression in 1997, but in certain years, including 2000 and 2002, there were downturns in its expansion. For example, iron ore production started with a record figure of 86.8 million tons in 2000, dropped to 82.8 million tons in 2001, and then rose to 91.8 million tons in 2003. Overall, growth in the iron ore sector, as in many other mining sectors, was driven by increased demand for raw materials from industrial consumers and often failed to keep up with it. The situation in the coal industry looked a little better: the rise in coal production coincided with intraindustry redistributions of property. However, coal producers maintain that today's growth is akin to stagnation for them: owing to imbalances in energy resource prices and limited export possibilities for coal, the industry's resources are greatly underutilized. This situation may change in future. Growth in other mining sectors was directly related to the successes of its consumer partners. However, numbers are not the most important result of the past four years. The realignment of forces that took place in the mining industry theoretically opened the door to investments in new sectoral projects. What the first four years of Vladimir Putin's presidency actually meant for Russian mining companies will not become clear before the end of his second term at the earliest. The mining business is very ponderous and conservative, and there are no instant results. The situation where Russia's mining industry nearly stopped being considered an independent sector did not develop overnight. In the 1990s, Russian mining companies were probably in the most difficult position compared to the majority of industries. The system of vertical integration of mining and processing companies with strict obedience to the top of the production chain of primary producers was an axiom even in Soviet times. Norilsk Nickel separated mines, concentrating plants, and metallurgical plants in its structure in 1992 and 2002. But the idea of regarding mining raw materials for the Zavenyagin Norilsk Mining and Metallurgical Complex (GMK imeni Zavenyagina) as an independent business that might have other owners seems preposterous even today, like separating the head from the feet. At first glance, there would seem to be few objections to integrating raw material producers and processors. Out of the entire mining industry, only coal, diamond, nonmetallic mineral, and to some extent precious metal producers escaped integration, either because the circle of potential consumers was too large and attaching a coal producer to a specific power plant made no sense or, as in the case of gold and diamond producers, the processing market was dispersed all over the country and around the world.
Privatization processes that did not always or everywhere proceed according to the “mining and processing complex” structure established in Soviet times introduced a certain diversity. Many of the country's mining and concentrating combines (GOKs) were privatized separately. But in practice, the combines' territorial and production ties to metallurgical and other companies appeared to be stronger than property relations. Under the “one GOK, one consumer” conditions in the mid-1990s, failure to pay raw material producers was considered not so much acceptable as natural: where would they go? The bankruptcy level among mining companies was considerably higher than the average for heavy industry. And given the extremely high capital intensity of mining operations, owners and partners in the chain, or shareholders, if the companies were independent, relegated investments in expanding GOKs to last place. Mining companies that have started up in Russia is the last ten years can be counted on the fingers of one hand. A certain amount of growth in the mining industry after 1999 was not directly related to the effect of devaluation but was probably governed by increased demand for raw materials from processors. But this demand allowed mining to make a new bid for existence as an independent sector of the economy. The implicit opposition of the two trends – integration processes and the drive for independence – has defined the picture in the industry in the past four years. The most interesting episode in this struggle was the restructuring of the coal industry, the largest subdivision of Russia's mining industry. It was almost impossible to predict back in 1999 whether the most depressed economic sector of the early 1990s would exist independently. On the one hand, there was demand for coal from power companies, the availability of export markets for coal producers, and historical tradition. However, at the end of the 1990s, chairman of RAO UES of Russia (RAO EES Rossii) Anatoly Chubais proclaimed a policy of setting up coal and power complexes – the LUTEK holding was formed in Primorye Territory, and a similar structure based on Gusinoozerskaya and a number of other thermal power plants was planned for the Transbaikal (Zabaikalye) area. On the other hand, there was the traditional dependence of coal producers on coke consumers and metallurgical companies, organizations that were immensely wealthy compared to coal companies. In perspective, the coal industry should have had a high probability of being divided among power companies and metallurgists: coal companies, which had been privatized later than metallurgical companies, did not look like an independent force. An initiative of MDM Group, a structure with close connections to MDM Bank and its owners, literally blew the industry away. Over a three-year period starting in 1999, MDM Group and its coal division, Siberian Coal Energy Company [SUEK; later Baikal Coal (Baikal-Ugol)] consolidated nearly all the power-generating coal production assets in Western Siberia and the Far East. The first to fall to SUEK's onslaught was Krasnoyarskugol, and new acquisitions followed nearly every month (Chitaugol, Khakasugol, Vostsibugol, and ten other companies). Oleg Miserva, the head of the company, quickly announced SUEK's goal: to become the largest player on the coal market while preserving its independence, restructure its assets, and then operate as an independent force on the power-generating market. Another “outside” coal industry consolidator – Russian Coal (Russky ugol) – appeared at almost the same time. The company headed by Vadim Varshavsky had originally been set up on a parity basis with Rosneft and Mezhprombank. It was trying to rival SUEK in growth even at the stage of buying Krasnoyarskugol. However, Russian Coal was unable to reach an agreement with its shareholders: despite all the efforts of Sergey Veremeenko, Mezhprombank's managing director, Rosneft began a gradual withdrawal from Russian Coal in 2001; and Mezhprombank quit the company in 2003. Hired managers headed by Varshavsky bought out the company. By that time it had managed to cause quite a sensation and even acquire a fair number of power-generating coal production assets in Rostov Region, Kemerovo, and the Far East. In spite of the sharp conflicts between SUEK and Russian Coal, the only thing that stopped MDM Group's expansion into the coal sector was the fact that metallurgy, which had apparently not expected any major events in the coal industry, had recovered from the shock by 2001. Granted, there were few unshared assets left by that time. (Published by Kommersant newspaper at August 2, 2004)
Recent events
SIbUgleMet holding was established and it could become one of the top-level companies of the coal industry of Russia. Currently it incorporates Mezhdurechye, Polosukhinskaya, Antonovskaya, Bolshevik coalmines; 2 mines (Yuzhnaya and Sibirskaya) are under construction now and will be commissioned at 2010.
Until the end of 2005 Prokopyevskugol was affiliated with UGMK Holding; at the end of 2005 UGMK sold the company to NLMK (Novolipetsk Steel Mill) that wanted to acquire owen coalmining and coke-chemical assets that time. At 2006 NLMK owned Prokopyevskugol – but due to its high losses NLMK’s principal shareholder Vladimir Lisin decided to sell Prokopyevskugol to some external investor; beig bought from UGMK for $750 mln Prokopyevskugol was sold to Prokopyevsk Town Administration for only $1.
At autumn 2005 Mikhail Gutzeriev purchased 50% share in Russian Coal.
At January 24, 2005 Mechel has won an auction for the sale of ordinary shares in Open Joint Stock Holding Company Yakutugol that constitute 25 % + 1 share of the company’s Charter capital. At October 5, 2007 Mechel won the auction to acquire 75% less one share of Yakutugol and 68.86% of the shares of Elgaugol. The acquisition of the controlling stakes in the companies is in line with Mechel's strategy to further develop its mining segment, intensify synergies between the group’s subsidiaries, and increase its coking coal output. As the result of its winning at the auction, Mechel’s stake in the charter capital of Yakutugol increases to 100%, given that the company already held 25% plus one share in its ownership. In addition, a real estate complex owned by Russian Railways was put to the auction and acquired by Mechel The complex includes the railway spur track from Zeisk station of the Far Eastern Railway to the Elga coal deposit and an access road from Zeisk station of the Far Eastern Railway to the Elga deposit. Elgaugol holds the license for development of the Elga coal deposit with the total reserves of fat coking coals amounting to approximately 2.2 billion tonnes. According to the experts’ estimates, coal reserves in this region can reach 30 billion to 40 billion tonnes.
