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CEO: Severnaya mine disaster cost Severstal US$21M in EBITDA

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CEO: Severnaya mine disaster cost Severstal US$21M in EBITDA

The explosion and subsequent closure of PAO Severstal's Severnaya mine in February has cost the company US$21 million, or 1% of EBITDA, but reduced its self-reliance in coal to 60% to 70%, forcing it to buy supplies from third parties at market rates, Interfax reported Sept. 23, citing Severstal CEO Alexey Mordashov.

"Severnaya has not had a big impact on our EBITDA," the newswire quoted him as saying.

But the bigger effect was forcing the company to begin purchasing coking coal to meet its steel making needs at a time when prices are surging due to increased demand in China and supply problems at mines in Australia, the top exporter.

The company's integration in coking coal was 110% before the Severnaya incident, according to a Sept. 23 email from Severstal's press office.

Severstal moved to flood its Severnaya mine in Russia earlier this year, after a series of blasts at depth in the shaft in late February left 36 miners and rescue workers dead.

A reopening of the mine is also looking less and less likely, after the company admitted that temperatures in some parts of the shaft remained at about 400 degrees to 700 degrees C, despite the flooding of the mine. Technical advisers have now proposed sealing the shaft to prevent a buildup of oxygen that could lead to more explosions.

Severstal could still access the reserves of the Severnaya mine by extending a corridor from the adjacent Komsomolskaya, Komi mine, which is expected to start up in 2020.