UPDATE 1-ArcelorMittal enters Russia with $720 mln coal buy

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By Anastasia Teterevleva

MOSCOW, Jan 31 (Reuters) - ArcelorMittal (MT.N: Quote, Profile, Research) (ISPA.AS: Quote, Profile, Research), the world's largest steel maker, will enter the Russian market by paying $720 million to acquire three Siberian coal mines and associated assets, the company said on Thursday.

Analysts said the deal was profitable both for steel maker Severstal (CHMF.MM: Quote, Profile, Research), which sold most of the assets, and ArcelorMittal, which gains a foothold in Russia after an unsuccessful attempt to acquire coal mines at auction last year.

"For ArcelorMittal, this was a strategic decision -- get into Russia and buy coal assets," said Olga Okuneva, a metals and mining analyst with Deutsche Bank in Moscow.

Coal prices are expected to remain high this year as the world faces severe supply shortages. Chinese and South African exports have been hit by power crises and domestic demand is growing in traditional exporters, such as Indonesia. ArcelorMittal agreed to acquire a 97.59 percent stake in Severstal's Beryozovskaya mine and 99.35 percent of its Pervomayskaya mine, the firms said in separate statements adding the deal requires regulatory approval.

Both mines are located in the Kemerovo region of western Siberia and produce coking coal used in the steel industry.

ArcelorMittal's billionaire founder and chief executive, Lakshmi Mittal, said the acquisition of the two mines would boost his company's self-sufficiency in coking coal to 15 percent from 10 percent.

"This acquisition also helps ArcelorMittal establish a presence in Russia, a fast-growing market for steel production," Mittal said.