UPDATE 1-China may help finance Mechel coal project in Russia

Mon Apr 21, 2014 8:33am EDT

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MOSCOW, April 21 (Reuters) - China may help finance steel and coal producer Mechel's costly Elga coal project in Russia and supply equipment for it in exchange for coal, a senior executive at a Russian state bank said on Monday.

Mechel is saddled with $9.4 billion in debt but is seeking to develop Elga, which has among the biggest reserves of coking coal in the world. Development of the project in remote Yakutia has been stymied for decades by poor transport links.

"Some of the equipment will be supplied by China and coal exports will go in part to China," Alexander Ivanov, deputy head of Vnesheconombank's management board, told reporters in Moscow on Monday.

He said the chances were high that Mechel would reach a loan deal with China Exim Bank, although he declined to say how large the loan might be.

Vnesheconombank had previously agreed to lend $2.5 billion to the project and is now organising additional financing. It has granted funding for the first stage of the project, which includes completion of railway construction and coal mining and a processing complex.

Analysts said a year ago that development of Elga, which has proven reserves of 2.2 billion tonnes, could cost $2 billion to $4 billion. (Reporting by Oksana Kobzeva; Writing by Polina Devitt; Editing by Steve Gutterman)

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