OMK digs in Belgorod

According to Kommersant’s information, the structures of OMK owner Anatoly Sedykh intend to apply for an auction for the Prioskolsky iron ore deposit in the Belgorod Region. OMK needs a raw material base for its flagship project for the construction of an electric steel-smelting complex worth 150 billion rubles, the company is going to mine up to 22 million tons of ore per year. However, the asset is very complex due to the need for underground mining, which will affect the cost. According to experts, the stated production targets are difficult to achieve.

As it became known to Kommersant, one of the contenders for the Prioskolsky iron ore deposit in the Belgorod region may be the structures of the owner of the United Metallurgical Company (OMK), Anatoly Sedykh.

Thus, in July 2022, the governor of the Belgorod Region, Vyacheslav Gladkov, turned to Russian President Vladimir Putin with a request to put the deposit up for auction. In a letter from the governor, which Kommersant has at its disposal, the relevance of the issue was explained by OMK’s plans in 2022-2030 to implement a project for the extraction of iron ore and the production of premium quality DR pellets with an investment of 270 billion rubles. The deposit is planned to mine 22 million tons of ore per year underground with the production of 8 million tons of DR pellets.

According to Kommersant’s information, Vladimir Putin instructed Deputy Prime Minister Victoria Abramchenko to submit proposals for holding an auction, and Kommersant’s secretariat confirmed to Kommersant that they had given such an instruction to the Ministry of Natural Resources. The Rosnedra auction was officially announced on January 13. The press service of Vyacheslav Gladkov and OMK did not respond to Kommersant’s request.

The governor’s letter mentioned that pellets are needed for green metallurgy. In 2020, Ecolant, owned by Anatoly Sedykh, announced plans to build a full-cycle electric steelmaking complex in Vyksa, which will be able to produce 1.8 million tons of liquid steel per year using pellets. Finished products — slabs and bloom blanks — will be delivered to the Vyksa Metallurgical Plant, Interfax reported in February 2022, citing the Ministry of Industry and Trade. Investments were planned in the amount of 150 billion rubles, of which 100 billion rubles. should have been provided by VEB.RF, Sberbank and Otkritie. Ecolant announced the start of construction on February 9, 2022.

The auction for the Prioskolskoye field is scheduled for February 17. The starting size of a one-time payment is 15 billion rubles. with an auction step of 1.5 billion rubles. According to the auction documentation, iron ores, ferruginous quartzites and oxidized ferruginous quartzites were found at the deposit. The reserves are more than 45 million tons of rich ores (with an iron content of 50.31%) and 2.1 billion tons of ferruginous quartzites (33.5%).

In 2007, MMK Viktor Rashnikov received a license for the Prioskolskoye deposit, but abandoned it in 2014 amid falling ore prices and global overproduction of raw materials.

Ilya Kolomeets, director of business development and consulting practice at Metals & Mining Intelligence, says that the development of its own ore base is due to the desire not to depend on the supplier of pellets represented by Metalloinvest. “The Prioskolskoye field is a rather complex asset with underground production. The Yakovlevskoye field can be considered an approximate analogue. This is underground mining, which automatically means a higher cost: at least 3-7 thousand rubles. per ton more expensive than similar quarry deposits,” the expert comments. According to him, when the declared production volumes of 22 million tons per year are reached, the cost will probably be lower, but at the moment the achievement of these levels is questionable.

In terms of logistics, the transport shoulder between the Prioskolsky field and Vyksa looks quite attractive, says Boris Krasnozhenov from Alfa-Bank. “As for the extraction method, the development of the Prioskolsky deposit initially involved an open pit method. The media mentioned the desire of local authorities to apply the underground method of mining this deposit for environmental reasons. The decision on the method of developing the deposit will significantly affect the volume of investments and the cost of production,” he said.

Evgeny Zainullin, Dmitry Kozlov