The Uralwagonzavod Corporation will begin mining coal

28.08.2013 — News

MOSCOW

UVZ-Logistics, LLC (a subsidiary of the Uralvagonzavod Research and Production Corporation, OJSC) has entered into a preliminary agreement to purchase the Zarechnaya Coal Company, LLC.

UVZ-Logistics told RusBusinessNews that in addition to mining companies, the railroad-car manufacturer's holding company will also include a number of other assets owned by the businessman Viktor Nusenkis. The full list of the facilities being purchased has not yet been disclosed. Currently, Zarechnaya owns the Yurginsky machine-engineering plant with its branch, Esser, in Germany, the Czech company T-Machinery, the Baltic Coal Terminal in Latvia, and the railway operator Yu-Trans.

The management of UVZ-Logistics believes that getting into the coal business will help the Uralvagonzavod Corporation, which produces civilian and military equipment, to equip itself with raw materials and significantly increase its production of railway cars. In addition, UVZ has often mentioned its desire to acquire a steel mill in Europe and thus increase its production of rolling stock outside of Russia.

Dmitry Bogdanov, the deputy director, stated that the Zarechnaya Coal Company is considering partnering with Uralvagonzavod as a way to reduce logistics costs and improve financial performance. In 2012, Zarechnaya saw a net loss of 490 million rubles. This drop in profitability was attributed to lower coal prices and higher costs to ship the company's products, 85% of which are exported.

Despite these losses, the company continues to build coal-mining facilities: in 2013, Zarechnaya acquired Anzherskoye Mine Management, OJSC for the cost of its debts. The company's management announced that production at the Anzherskoye mine will increase from 560,000 tons in 2012 to three million tons in 2013. The increase in production has led to increased losses: at the request of creditors, the mining office was placed in receivership in April 2013.

UVZ-Logistics was undaunted by Zarechnaya's debts: commodity markets develop cyclically and thus the company, which owns its own fleet of railway cars and is experienced in rail transportation, expects very soon to see the economic benefits of this acquisition of non-core assets.