The thermal coal miner, controlled by businessmen Iskander Makhmudov and Andrei Bokaryov, intends to boost coal exports by at least 11 percent this year from 22.7 million tons last year, if there is enough demand in the market, CEO Igor Moskalenko said.
"The target is 25 million tons," and exports are likely to remain at that level for the next four years, he said in an interview in the industrial town of Kemerovo in West Siberia, some 3,800 km (2,361 miles) southeast of Moscow.
"We have orders booked for this year, our contracts are being implemented, but I can't forecast how pricing trends will move."
The company is on track to boost output to 48.1 million tons per year by 2016, after cutting its production target to 45 million tons this year from 47 million in 2011 and 49.7 million in 2010 due to technical difficulties as it digs deeper to extract coal and to difficult market conditions.
"We have a five-year development plan which sees production reaching 48.1 million tons by 2016," Chief Technical Officer Stanislav Matva said. "Our coal deposits at the currently operational mines will allow us to mine for another 50 years."
Coal prices dropped from more than $200 per ton before the 2008-09 global recession to around $85 per ton since May, which many miners say is already below their production costs.
Cost-Cutting
Kuzbassrazrezugol is concerned about global coal market conditions, Moskalenko said, and is working to reduce production costs to keep its business afloat.
"We have no illusions today ... we need to hold our ground, gain a foothold on this market," he said.
"We have been working to reduce expenditures since March," he said. "We are looking rigorously at all costs, and we have tightened up control of expenses."
The company cut production costs by 100 roubles ($3.09) per ton from the beginning of the year under an investment program with a focus on modernization.
It plans to invest a total of 25 billion roubles this year, including 17 billion for new mining equipment.
"New equipment reduces costs, while new technology and control systems (also) allow us to minimise them," Stanislav Matva said.
The miner, which employs over 18,000 workers, is planning to lay off 10 percent of its engineering staff.
Railway Challenges
Kuzbassrazrezugol has also decided to more than double its fleet of railway cars to cut its dependency on an outdated national railway system, which is managed by state-run Russian Railways (RZhD).
A shortage of railway cars last year reduced its coal shipments, which fell by 4 percent, and pushed up its stockpiles to 5.4 million tonnes by the end of 2011 - more than twice the normal safety level, Moskalenko said.
"This was a serious catastrophe for us. We were unable to ship our commodity. We had (warehouse) fires (caused by overstocking); coal quality was decreasing; and we decided to buy low-sided cars (of our own)," Moskalenko said.
The company intends to buy 4,000 cars to reach a total fleet of 7,000, which is still below the 20,000 to 23,000 it needs to secure shipments, he said.
Buying its own cars will not solve the problem completely, however, because Russia's rail infrastructure still falls short of exporters' needs, he said.
"If we buy 20,000 low-sided cars, develop (logistics) and they are not be able to drive through (railway bottlenecks), then there's nothing good about it," he said. (Reuters)
