Chinese cos prepared to invest 2.4 bln rubles in Inskaya Mine - CEO

KEMEROVO. Oct 25 (Interfax) - Four Chinese companies are prepared to provide 2.4 billion rubles of financing to Inskaya Mine LLC, a coal mine in Kemerovo Region that is having problems paying its workers, mine CEO and beneficiary Denis Nemykin told Interfax.

The regional division of Russia's State Investigative Committee opened a criminal probe into the wage delays at the mine on October 21.

Nemykin said "there is a real interest in joint activity on the part of four Chinese companies," which are prepared to provide 2.4 billion rubles to pay off the wage debt and bolster working capital in order to resume coal mining and tunnelling to prepare the next mine faces.

"All the necessary negotiations have been held, agreements on the financing have been reached, but the absence of quotas for railway shipments to overland border crossings with China does not make it possible to carry out this project," Nemykin said.

He said Inskaya mines premium, low-ash D-rank coal with low fluorine and phosphorus content. The concentrate made from such coal is the most suitable feedstock for semi coking, ferroalloy plants, and production of silicon with low ferric oxide and aluminum oxide content. Only a few mines in Russia produce coal of this quality, Nemykin said.

Speaking about the problem of quotas for railway shipments of coal eastward for export, he said the current procedure involves shippers getting quotas in "direct proportion to shipments westward."

"As concerns Inskaya Mine LLC, the company, as a newly created one [with the mine assets acquired in a bankruptcy proceeding], was deprived of earned quotas received by the previous shipper [previous mine owner], although shipments are made from the same station," Nemykin said.

As a result, "in order to earn volumes eastward," Inskaya was forced to ship coal to western seaports, where prices are lower than at eastern ones. The coal was essentially shipped at below cost, so the "owner was forced to find funds in the amount of at least 70 million-86 million rubles monthly by increasing accounts payable on current maintenance of the mine, including wages."

This resulted in a "paradoxical situation - in order for the mine to sell a sufficient amount of coal on the eastern route to break even, the mine was forced to sell coal at a loss westward," Nemykin said.

"The mine's management repeatedly appealed to the government of [Kemerovo Region], the Energy Ministry and [Russian Railways (RZD)] regarding the issue of increasing quotas for railway shipments eastward but, unfortunately, this issue has still not been resolved," Nemykin said.

He also said the mine has been idle for more than six months this year due to shutdowns ordered by Russian industrial safety watchdog Rostekhnadzor, and "only fulfilled the coal production plan, which corresponds to the profitability threshold, in January." As a result, the mine has lost 394,000 tonnes in coal output worth 700 million rubles, Nemykin said.

He estimated the wage debt to 458 employees for June-August at 86 million rubles and confirmed plans previously announced by the regional authorities to pay off the debt by October 28. The mine tried to get a loan but was refused by a number of major banks "due to industry risk," Nemykin said.

At the end of September, Nemykin brought in a co-investor, Alexander Mokhov, who acquired a 25% stake in Inskaya Mine and pledged to provide 520 million rubles in financing in the form of a loan. Interfax has a copy of the purchase-sale contract for the stake and the loan agreement.

Intmek LLC acquired the assets of the bankrupt JSC Razrez Inskoi, which operated as an underground mine declared bankrupt in June 2020, for 241 million rubles in August 2023. Intmek was renamed Inskaya Mine LLC in September 2023 and changed its place of registration to Novosibirsk, the Unified State Register of Legal Entities showed.

As of September 2023, Nemykin owned 100% of the company, but by the beginning of October 2024 his stake had shrunk to 51%, with Mokhov owning 25% and the remaining 24% held by Inskaya Mine LLC.