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Russia region says could take ArcelorMittal mines

MOSCOW/YEKATERINBURG (Reuters) - Russia’s Kemerovo region has told ArcelorMittal, the world’s largest steel maker, to boost production at two local coalmines or give them up.

“If your team is not able to stabilise production at these facilities, then we propose that you hand them over without compensation,” Kemerovo governor Aman Tuleyev said in a telegram addressed to the multinational’s chief executive, Lakshmi Mittal, and cited in a statement on the Kemerovo website.

ArcelorMittal acquired three Siberian coal mines from Russia’s Severstal in 2008, becoming one of the few foreign companies to enter the market.

The company said in comments emailed to Reuters it was in talks with local officials over the possible sale of the Anzherskaya mine, which is predominantly a producer of steam coal, not the coking coal used in steel production.

“Under the current adverse economic situation, ArcelorMittal has decided that the best future for this mine would be to pursue alternative solutions to develop it, including selling it to interested strategic buyers,” the company said.

“We are in discussions with the local government to find the most optimal solution. We will continue to develop and operate the other two mines based on the demand for coking coal in the group.”

The second asset mentioned in Tuleyev’s telegram was the Pervomayskaya mine.

Russian coking coal producers have cut back output sharply in response to weak demand from the crisis-hit steel sector. ArcelorMittal is running at about half capacity due to the downturn, which has hit key customers such as automakers and construction firms.

In March, ArcelorMittal said it might temporarily close the Anzherskaya and Pervomayskaya mines if a cost-cutting programme did not have a satisfactory effect.

It also introduced a voluntary retirement programme at the two facilities.

The Kremlin is pressuring regional authorities to maintain stability after Prime Minister Vladimir Putin in June travelled to Pikalyovo, around 270 km (170 miles) from St Petersburg, and forced billionaire Oleg Deripaska to restart operations at several of his factories following protests from unpaid workers.

“I, as governor, am stating in a responsible manner that I will not allow the closure of our mines,” Tuleyev wrote in the telegram.

“It seems to me that, today, the mines have sufficient supplies of coal and a market can be found for them, and most importantly, experienced labour collectives are working here.”

The governor added in the telegram that if the chief executive did not reply, Keremovo would seek to revoke its licences.

ArcelorMittal also faces the threat of labour unrest in Kazakhstan, where a group of miners refused to leave a coal mine at the end of their shift on Friday.

The company said the protest took place at the Tentekskaya mine, where three workers died last month after part of the mine collapsed. It did not say why the workers were protesting.

Additional reporting by Olzhas Auyezov