The Coal Trader

Coal Mining Elga Russia Coal Mine Railway Train

ELSI Sells Siberian Mines to Focus on Far East Coal Expansion

Russia’s coal producer ELSI is offloading its Siberian assets to focus on developing its flagship Elga coal complex in the Far East. The move involves selling mines to Bashkir Industrial Holding, a lesser-known copper producer, and marks a strategic shift for ELSI.

Details of the Deal:

  • ELSI is selling its four open-cut Siberian mines (Verkhneteshsky, Kolyvansky, Vostochny and Kiyzassky) producing anthracite, PCI, and high-c.v. thermal coal.
  • These mines will revert to the Sibanthracite name and be managed by their previous team.
  • The mines are located in Novosibirsk and Kemerovo regions, primarily exporting anthracite and thermal coal to Asian markets.
  • ELSI expects the mines to produce around 25 million tonnes of raw coal this year.
  • Sibanthracite also recently acquired licenses to develop the Kuznetskiy Yuzhny and Malinovsky open-cut mines that border the company’s existing mines in Kuzbass.

ELSI’s Focus on Elga:

  • The company will concentrate on developing its Elga coal complex, boasting better access to infrastructure and Asian markets.
  • To enhance export capabilities, ELSI is constructing Pacific Railways, a new line connecting Elga to a port in Manorskiy Bay.
  • The first stage of this project, due in 2024, will enable Elga to export 30 million tonnes of coal per year, with potential expansion to 50 million tonnes.
  • The new port will accommodate vessels up to 85,000 tonnes deadweight.
  • The cost of the railway line is estimated at around RUB140bn ($1.6bn).

The Rationale:

  • The sale of Siberian mines allows ELSI to concentrate resources on the larger, more strategic Elga complex.
  • Elga’s location offers easier access to Asian markets, reducing transportation costs and potentially boosting profitability.
  • The new railway and port project, despite its significant investment, will significantly enhance export capacity and efficiency.

Overall Impact:

  • This strategic shift highlights ELSI’s confidence in the Elga complex’s potential.
  • By focusing on Elga and investing in infrastructure, ELSI aims to become a major player in the Asian coal market.
  • The success of this strategy hinges on the timely completion of major infrastructure projects and continued demand for coal in the region.