Evraz Group, the Russian steel maker part-owned by billionaire Roman Abramovich, plans to invest $1.5 billion bringing the Mezhegei coal field in Siberia into production after winning it at auction on Thursday.
Evraz bid $725 million to win the government tender to develop the field in the Russian republic of Tuva. It said in a statement the first coal would be mined in 2014.
Annual output is expected to reach 10 million tonnes of raw coal, or 8.4 million tonnes of coal concentrate, by 2016, Evraz said.
"The company will secure additional supply of high-quality coking coal to its existing steel making facilities as well as deliver extra volumes of the coal to meet growing demand from the market," Chairman and Chief Executive Alexander Frolov said. Evraz, Russia's largest steel maker by domestic volume, has increased its exposure to coking coal in the last two years by absorbing Siberian miner Yuzhkuzbassugol and acquiring three coking plants in Ukraine.
It also part owns Raspadskaya, another Siberian coal miner, giving its three Russian mills access to the crucial steelmaking raw material and allowing it to profit from soaring coal prices in a tight market.
The Mezhegei deposit is in central Tuva, a Russian republic bordering Mongolia with extensive coal and non-ferrous metals deposits. Several other steel companies participated in the tender, a source at an unsuccessful bidder told Reuters.
Evraz said the deposit contained 213.5 million tonnes of hard coking coal reserves and resources under Russian classification. It is also 800 km (500 miles) east of Novokuznetsk, the Siberian city that is home to two Evraz steel plants.
Evraz plans to produce 15.1 million tonnes of coal this year, including 10.5 million tonnes of coking coal.