Baikal Forestry Company (BLK) in Russian Republic of Buryatia plans to build plant to recycle sawmill waste to produce fuel pellets, acquire lumber grading line, pay off debt, following deal in which Japan's Mitsui acquires 40% stake

Audrey Dixon

CHITA, Russia , August 12, 2013 (Interfax Russia & CIS Business and Financial Newswire) – Japan's Mitsui & Co. Ltd has acquired a 40% stake in Baikal Forestry Company (BLK), the biggest producer and exporter of forest products in Buryatia, for 1 billion rubles by buying a new share issue, the regional economy ministry told Interfax.

The regional government's press service said in a statement that representatives of Mitsui and the government of Buryatia signed a trilateral cooperation agreement on Monday.

Mitsui and BLK began negotiations on the acquisition of a stake in the Russian company in 2011. All of the money raised with the share issue will be invested in the company's development. There are plans to build a plant in Buryatia to recycle sawmill waste and produce fuel pellets, as well as acquire a line to determine the quality and grade of lumber.

BLK also plans to use some of the money to pay off current debt to Sberbank (RTS: SBER). There are plans to invest about $2.5 million in the next three to four months.

BLK includes logging operations, timber transfer bases and a sawmill. The company's resource base amounts to 368,000 hectares of forest. Prior to the share issue, BLK was wholly owned by LLC Bail, which in turn is owned by four private individuals, according to the SPARK-Interfax database.

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