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By John Helmer in Moscow

Evraz, the largest of Russia’s integrated steel and mining groups, has reported that an underground detonation of explosives in a shaft of its mine Yestyuninskaya — part of the group’s Vysokogorsky iron-ore combine — has killed at least nine miners, and another four are still missing. The incident near the city of Nizhny Tagil, in the Sverdlovsk region, where Evraz operates its lead Russian steelmill, occurred Wednesday at a depth of 180 metres. A local police source said that about 4 tonnes of ammonium-based explosive had detonated while being trasnsported in shaft trolleys.

Mikhail Tarasenko, head of the Mining-Metallurgical Trade Union told CRU Steel News the accident had “happened because of non-observance of technical regulations, specifically of those relating to transportation of explosives.” But he added it is too soon to say whether there was human error or fault on the part of the miners; or alternatively, a control system flaw for which the company and its management may be ultimately responsible. “It is too early to know the exact reason,” Tarasenko said. He also noted that earlier this year at the same Yestyuninskaya mine, 18 miners had been overcome by combustion gas, though not fatally. “I cannot say that Evraz systematically breaks the technical regulations;” Tarasenko said, “they pay close attention to labour protection, and miners wear modern protective outfits. But this accident needs detailed investigation”.

Russia’s smaller independent mining unions often differ with the established union in mine accident cases. But according to Alexei Kiselyov, head of the Federation of Trade Unions of the Sverdlovsk Region, there ought to be caution in pointing the finger of blame at this stage at management. “The most probable cause is human error,” and he excludes the possibility that a methane level violation in the mine shaft triggered an initial explosion, which then caused the explosives to ignite. Suppression of methane monitoring systems has been reported as a causative factor in earlier Russian coalmine accidents; unions say this has been a result of mine management policy.

Are miners at Yestyuninskaya under pressure of shift productivity targets or other management rules that may be unsafe, Kiselyov was asked. “Accusations of this kind imply criminal responsibility, so let’s wait for the expert commission’s conclusion”.

Reuters has quoted Evraz spokesman, Alexei Agureev, as saying that “all work at the Yestyuninskaya mine has been stopped. All staff have been evacuated.” A detailed statement by the company followed today. This offered condolences and express payment of compensation. The company also said that it expects repairs of the damaged shaft will be completed in three days, and that contractual obligations for deliveries would be met from current inventory stocks of about 80,000 tonnes, equal roughly to mone month’s output from the damaged mine. Agureev told CRU Steel News: “Methane was not the cause of the explosion, this is certain. The exact cause has not yet been found; the commission is working on it”.

Yestyuninskaya is one of four mines owned and operated by the Vysokogorsky unit of Evraz, with annual output of about 1.5 million tonnes of iron ore. They supply Nizhny Tagil. Total production capacity for sinter, pellet and iron-ore concentrate at all of Evraz’s Russian mining sites is about 17 million tonnes per annum. A report by Renaissance Capital steel analyst Boris Krasnojenov notes that because “the Yestyuninskaya mine contributes less than 5% to Evraz’s total iron-ore production volume in Russia… the negative impact for Evraz may be limited.” He added that the financial loss would be “neutral”, and he recommended buying Evraz shares.

Alfa Bank steel analyst Barry Ehrlich told his clients in a report on Thursday: “we do not think that [the accident] will have a significant impact on the company’s operations, as the mine is not that large. However, we believe the explosion could have a slightly negative impact on Evraz’s reputation and possibly lead to fines.”
Control of Evraz is divided between Roman Abramovich’s Millhouse group and Alexander Abramov, one of the founding shareholders, through their joint ownership of an offshore vehicle, Lanebrook Ltd, which holds 71% of the company’s shares. Millhouse occupies three seats on the board; Abramov and his allies, three also. The chief executive, Alexander Frolov, is an Abramov protégé.

As a group, with both coal and iron-ore mines, Evraz has one of the worst safety and casualty records in the Russian mining sector. In July of 2008, operations at the Evraz-controlled Raspadskaya coking coal mine were halted after federal safety inspectors found safety violations requiring correction. Yuzhkusbassugol (YKU), another mining unit of the Evraz group, was also hit with the stop-work order. Both resumed operations after a few days.

The sensitivity of the inspectors to violations had been raised by a series of fatal accidents that year, and in 2007, in the Kemerovo region. Anatoly Skryl, from the news source Rosinformugol (“Russian Coal Information”), told CRU Steel News at the time he was skeptical that the inspection orders would have anything but a brief impact. “What happened is typical situation for the coal industry. The inspectors come, find violations, stop the mine, and afterwards everything is fixed. So far as I know, Raspadskaya has big stock reserves, and also good management. It will be able to fix everything on time and there will be no problems.” In March and May of 2007, methane explosions at YKU’s Ulyanovskaya and Yubileinaya mines killed 110 miners and 38 miners, respectively. The Ulyanovskaya toll was the worst on record for a Russian mine disaster.

In 2006, Evraz’s two steelmills in Novokuznetsk city, in the Kemerovo region, were found to be in serious violation of waste-water emission standards and controls. A new water treatment facility costing Rb2.4 billion (then $92 million) was ordered by the federal government and agreed to by Evraz, after being threatened with closure of the mills, West Siberian (Zapsib) and Novokuznetsk.

Other Russian steelmining groups, Severstal, Novolipetsk and Mechel have also reported fatal accidents at coalmines supplying the steelmills.

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