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ATON - Daily Dashboard, Metals and Mining, Mar 23, 2012.

Metals and Mining

Rosprirodnadzor Finds Major Licence Violations at Mechel's Yakutugol: Sounds Threatening But Should Only Result in Fines

Interfax reported yesterday (Mar 22) that the Federal Service for the Supervision of Natural Resource Usage (Rosprirodnadzor) has found numerous licence agreement violations by Yakutugol, a subsidiary of Mechel, which holds the licence to develop the Elga coal deposit.

(To view the full document, please click on the link below:

http://reports.aiidatapro.com/brokers/AtonEN/2012_3_23.pdf)

Among the violations reportedly identified by Rosprirodnadzor are lower production volumes than those stipulated in the licence agreements, the violation of requirements stipulated by technical documentation, and the absence of pollution monitoring at some of the mines. Rosprirodnadzor is in the process of writing an audit certificate to submit to Yakutugol, which will officially detail the violations. Rosprirodnadzor will then decide on penalties against the company.

Bottom line

The violation of licence agreements by coal companies is very common. Normally, state watchdogs impose fines and it is rare for them to withdraw the licence. In this case, we believe Yakutugol may be fined for the reported violations. Given the current market instability the news has already been taken negatively, but we believe this is an overreaction.

***

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For further Information please contact: Aton OOO (LLC),

27 Pokrovka str., bld.6, 105062 Moscow, Russia

phone: (495) 777-66-77, (495) 228-38-99

aton-line@aton-line.ru, http://www.aton.ru
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Publication:Russian Banks and Brokers Reports
Date:Mar 23, 2012
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