May 1 2007
Evraz Group S.A. and Mitsui & Co., Ltd. announce the termination of their joint venture agreement to develop the Denisovskoye coal field in Yakutia.
Development of this greenfield project was challenged by its remote location with limited available infrastructure. The project which included building of an underground mine and construction of a coal beneficiation plant, was adversely impacted by difficult geotechnical conditions such as permafrost areas and excessive water ingress, not identified during the preliminary geological exploration stage. Although some of the challenges had been successfully overcome, the actual development turned out to be less economically attractive than originally estimated.
In view of these new circumstances, Evraz and Mitsui reassessed the project and concluded to terminate the joint venture agreement at this early stage and pursue an exit option to avoid additional risk and investment.
Evraz and Mitsui have built a strong business relationship through the course of the Denisovskoye joint venture and will continue to discuss joint collaboration, mainly in the field of mineral resources and steel products, making full use of their respective competencies, including management, financing, and product marketing.
The termination of the joint venture was followed by a sale of Evraz’s interests in the project to local “Yakutia Coal – New Technology“ company for a total consideration of approximately US$94 million in cash.