Mechel in Media

Pavel Shtark: Plans for Elga Coal Field span 100 years


The 'Russian Energy Week' official magazine

Chief Executive Officer of Mechel Mining Management Company Pavel Shtark elaborates on the top priorities for contemporary coal miners and the prospects opening up as the Elga Coal Field in the Republic of Sakha (Yakutia) is developed.

– Mr. Shtark, what major trends would you identify among coal mining companies worldwide today?

– Coal mining companies all over the world are committed to increasing efficiency, improving industrial safety, and cutting costs. We are watching global trends closely, but we do not expect any major projects to be launched in the near future. The nature of the industry does not allow for production to be expanded right off the bat; it is a phased process requiring considerable financial outlays. In view of the current volatility on the commodity markets, few investors are considering such injections.

– Has the Elga Coal Field in Yakutia, which Mechel regards as its main investment project, already reached its projected capacity?

– Yes, definitely. In 2016, output at the Elga field stood at 3.7 million tonnes (some 1.7 million of which were exported), whereas this year production is expected to reach 4.5 million tonnes.

The Elga field is Russia’s largest and one of the world’s richest deposits of top quality coking coal, with 2.2 billion tonnes in reserves reported in accordance with the JORC Code. The deposit is an open-pit mine, which is much cheaper and safer than underground mining. Over the past few years, Mechel has injected over RUB 100 billion into the Elga project, most of it into infrastructure, building access roads and railways. The 321-kilometre Ulak-Elga branch line links the deposit to the Baikal-Amur Mainline. It counts a total of 80 bridges and 350 hydraulic facilities along its route. It is uncontestably the first time such a large railway infrastructure project has been built by a private investor.

As I mentioned earlier, the Elga field has now reached its average annual capacity of 4.5 million tonnes. At the next stage, output is set to be increased to 11.7 million tonnes of ROM coal. Production plans for the field span at least 100 years. At this point, it is operated by around 1,500 people from different regions of Russia working on a rotational basis. Most of the miners, however, come from the Neryungri district of Yakutia, making up the core of the team. We are hoping that development of the deposit will trigger the development of a new locality here in the not so distant future. Back in its day, the Neryungri open-pit mine with its 400 million tonnes in reserves, gave rise to the town of Neryungri around the deposit, which eventually became the centre of the Far Eastern coal mining industry. The Elga field reserves are five times greater. Mechel has established a mining and transport equipment production site and installed a number of facilities, including a camp for workers on rotation and a coal beneficiation plant to produce coking coal concentrate on site.

We expect roughly half the Elga coking coal to be marketed domestically and the other half exported. The product has a promising future, since the Elga field produces rich bituminous varieties of coal that are in short supply in Russia and in demand from iron and steel producers all over the world.

– What are the main markets for Mechel coal? How has the picture changed over the past few years?

– Asia remains our main export destination. We customarily ship large quantities of coal to Japan, China and South Korea. In 2016, China accounted for around 30% of our total exports (over 11 million tonnes of coal in total), South Korea for 25%, Japan for 20%, with a further 5–6% going to Vietnam, Indonesia, Malaysia, and India. Our key clients include 20 major Asian iron and steel companies. We count such corporations as Baosteel, Shasteel, Nippon Steel & Sumitomo Metal Corporation, JFE, and POSCO among our long-standing partners. We also supply coking coals to Russian companies, including Severstal, Magnitogorsk Iron and Steel Works, and EVRAZ NTMK. As for thermal coal, we market it both abroad and domestically, selling it to power generating and utilities companies. Mechel’s main markets have remained unchanged for a long time.

– Do you have any plans to increase the capacity of the Ulak-Elga branch line?

– At this point, the branch line’s carrying capacity stands at some 4 million tonnes of freight a year, so we will certainly be gradually expanding it. I should note that the Ulak-Elga branch line is not just used to transport Elga coal; it is also a strategically important infrastructure facility for the Baikal-Amur Mainline and the whole eastern outreaches and will provide access to a freight hub for decades to come. According to scientists, the reserves of the Toko Coal-Bearing Region (of which the Elga mine is a part) exceed 40 billion tonnes. Apart from the Elga deposit, two dozen other coalfields have been discovered in the area, in addition to iron ore, uranium, molybdenum, and gold reserves. The Ulak-Elga line opens up all of these deposits for exploration.

It is worth noting that the railway line built by Mechel has actually remedied a historical oversight. Back during the Soviet era, two routes were proposed for the Baikal-Amur Mainline: the northern route, which was understandably supported by industry, and the southern route, south of the Stanovik range, passing through less difficult terrain from a geological perspective. For cost efficiency purposes, the southern option was selected, with projected branch lines to Neryungri and in future as far as the Elga field. In the early 2000s, the Transport Ministry made an attempt to build a railway line to the Elga deposit without private investment. The project was eventually put on hold with 60 kilometres of rail laid down. Elga and its enormous coal reserves waited a long time for its day to come. It was not until Mechel acquired a licence to develop the field and approached the project comprehensively, on a truly national scale, with maximum attention to the transport infrastructure, that the deposit finally came to life.

– How would you describe Elga’s long-term prospects?

– The Elga deposit needs to be explored further, its output expanded, and the infrastructure improved – there is no other option. This is the future of the coal industry. The project is now an integral part of Russia’s coal industry development programme for the period to 2030, which sets out the need to shift the focus of coal mining towards the Far East and Eastern Siberia, considerably shortening the distance to sea ports. It is 1,900 kilometres by rail from the Elga field to the port of Vanino, and 2,430 kilometres to Possiet Commercial Port in Primorsky Territory. This logistical advantage certainly works to improve the economic viability of the project.

– As a representative of big Russian business, what are you expecting from Russian Energy Week?

– I believe that, as the successor to the ENES Forum, Russian Energy Week will keep the best of the previous event and evolve into the leading communications platform in the energy sector. Today, a lack of a clear state policy on energy saving and energy security issues makes it impossible for industrial companies to operate fully, or to implement strategic programmes and major investment projects. The matters to be addressed at the event are certainly relevant and critical for developing Russia’s economic potential. I am sure that, together, scientists, experts, public officials, and business representatives will be able to find the best possible solutions. And, later on, these solutions will be put into practice as a result of an equally constructive dialogue.

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