Mechel OAO has closed a deal on the “disposal” of Mechel Bluestone’s mining operations, to a company owned by the Justice family. The deal includes an immediate cash payment of $5 million, royalty payments on coal mined and sold in an amount of $3/ton, and a portion of any future sale of the company and/or its assets of 12.5% of the sale price if within five years of transaction close or 10% of the sale price after year five, but before year 10.

In addition, as part of the transaction, the parties agreed to terminate all claims against each other, including their unresolved dispute related to the calculation of a contingent payment obligation arising out of the 2009 transaction in which Mechel obtained the Bluestone assets from Justice.

“With the market situation being what it is, mining at Mechel Bluestone’s mines and open pits is not profitable,” said Oleg Korzhov, CEO, Mechel. “The company’s average annual net loss since 2012 was around $60 million. Selling Mechel Bluestone will not only enable us to avoid these losses, but also takes some $140 million of liabilities off the group’s balance sheet and allows us to avoid more than $160 million worth of legal risks.”

The Justice family sold Bluestone Coal Corp. to Mechel in May 2009 for $436 million in cash and 83.3 million Mechel preferred shares. Bluestone consists of several coking coal mines and a processing plant in McDowell and Wyoming Counties in West Virginia.

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