Original Article: RBK
The authorities of the Donetsk and Lugansk People’s Republics (LPR and DPR) have leased 15 coal mines to Russian companies since the beginning of the year, and three more mines in the DPR will be transferred in the coming months. The tenants promise to invest more than 65 billion rubles in the received facilities.
How many mines are there in the DPR and LPR?
In the autumn of 2014, the first deputy Minister of the Ministry of Energy and Coal of Ukraine, Yuri Zyukov, said that before the start of the military conflict in Donetsk and Lugansk regions (until 2014), 95 mines were operating on their territory. In 2023, former Russian Energy Minister Nikolai Shulginov mentioned 114 mines, some of which are under conservation or in the liquidation stage. At the same time, he announced that 15 mines should remain in these regions.
The press service of the Ministry of Coal of the DPR said that, at the beginning of 2024, there were 17 operating mines in the management of the republican State unitary enterprises. The press service of the Ministry of Fuel and Energy of the LPR did not disclose the number of facilities operating in the region and declined to comment. After losing control over the territories of the DPR and LPR, the Ukrainian authorities imposed a transport blockade of the regions. In 2017, the authorities of the DPR and LPR introduced external management at the enterprises. Kiev considers the export of coal from the territory of the DPR and LPR illegal: according to the estimates of the Ukrainian authorities, about 2.8 million tons of coal worth $288 million were exported annually across the border with the Rostov region until 2022.
The Donetsk coal basin is one of the largest in the world. Its confirmed coal reserves are estimated at 47 billion tons, and projected resources add another 30 billion tons. In 2023, the Russian government developed a plan for the reform of the DPR and LPR coal industry that involves attracting private capital to the industry to increase its profitability. The transfer of mines to investors began in 2024.
RBK sent requests to the Ministries of Energy of Russia and Ukraine.
Investors in the LPR coal industry
At the St. Petersburg International Economic Forum held in early June, the government of the LPR transferred five mines (Molodogvardeyskaya, Krasny Partizan, Sukhodolskaya-Vostochnaya, Kharkov, Barakov Mine) and auxiliary production facilities (Nagolchanskaya Processing Plant, Rovenvskoye Loading and Transport Department). The company leased five more mines in April 2024. Three of them (Molodogvardeyskaya and Sukhodolskaya-Vostochnaya and Barakov mine) belonged to the Public Joint Stock Company Krasnodonugol of the Metinvest holding owned by the Ukrainian oligarch Rinat Akhmetov. The remaining two (Krasny Partizan and Kharkov) were part of the State Unitary Enterprise Sverdlovantratsit.
As Ilya Kolesnik, general director of the Donskoy Ugli Trading House, told RBK, the company plans to invest 49 billion rubles in these mines between 2024 and 2028: part will come from profits, part from borrowed funds. Ilya Kolesnik did not disclose which banks the company plans to seek financing from.
What is known about the investors
According to SPARK-Interfax, the LLC was established in July 2020 in Rostov-on-Don. As of April 4, 2024, it was 100% owned by Nikolai Kazakov, who also heads the Donetsk Alliance of Industrialists LLC (which he owns). In 2020-2023, Vitaly Donchenko and Alexander Maslyuk owned shares in the company. Interfax-Ukraine wrote that Ukrainian sanctions were imposed on Donchenko and Maslyuk in early 2021. In 2022, the Donskoy Ugli Trading House received 204 million rubles of profit with 9.7 billion rubles of revenue. In 2023, the company’s revenue fell sharply to 1.2 billion rubles, and the company suffered losses of 57.2 million rubles. 5.7 thousand people work in the Donskoy Ugli Trading House, and after receiving new mines for management, the number should rise to 11.5 thousand people.
“The fighting lasted for eight years, and there is damage to the infrastructure. The enterprises were not properly funded. It has been decided to transfer management to a private company. In three years, the state will decide on the transfer of ownership of enterprises. We must show the state a development plan, a financial model, wage growth, provide social guarantees, increase coal production, modernize production”, Kolesnik said.
Enterprises will “go down to zero” no earlier than five years after the start of the investment cycle when the company will increase production and sales of coal. In 2024, the company plans to produce 1.4 million tons of coal at its mines, and by 2029 production will increase to 10.5 million tons per year. The growth will be achieved through the introduction of new faces and the modernization of equipment.
“We have a wide range of coal: both metallurgical and anthracite. First, we plan to meet the needs of the newly joined territories. In the future, we plan to supply products to friendly countries if there is such demand”, added the interlocutor of RBK. The company has currently invested 1.5 billion rubles in the mines received in April. The funds were used to purchase equipment (loaders, dump trucks) and increase worker salaries.
DPR mines
During the forum, the administration of the neighboring DPR transferred the Volynskaya mine to GOK Energokoks LLC. The stakeholder will invest 211 million rubles in the facility, the press service of the Ministry of Coal and Energy of the republic told RBK. A representative of the ministry added that, in the spring, Impex-Don LLC leased four more facilities: Komsomolets Donbass, Progress, Zarya mines, as well as Lutugin Mine Management.
In the next five years, more than 16 billion rubles will be invested in the mines. The funds will be used for technical re-equipment, overhaul, and an increase in salaries of employees. Work on updating equipment is already underway, a representative of the department said. Investors will have the right to buy out mines “if there is a positive result”.
The Komsomolets Donbass mine was also part of Rinat Akhmetov’s industrial empire.
“Three more mines are at the stage of approval for transfer into the hands of investors: Shcheglovskaya-Glubokaya, Kommunarskaya, and Zhdanovskaya. One of them works with coking coal. Two are the T brand, which is also a fuel component to ensure energy security”, the press service added.
Until 2014, Shcheglovskaya-Glubokaya was part of the Donbass Mine Management Company of the State Property Fund of Ukraine according to the order of the Ministry of Coal Industry of Ukraine dated May 26, 2010.
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