KIEV, Dec. 21 - Ukraine’s largest steel and mining group, Metinvest, on Friday announced details of its ongoing merger with Smart-group, a major producer of iron ore, creating the country’s steel industry champion.

Smart-group, which contributes its iron ore and steel making assets in the merger, will control a blocking stake of 25% plus one share in the merged company, which will keep the name Metinvest.

The two companies announced the merger on Sept. 25, but only now released the details of the ownership structure, underscoring the progress of the talks and approvals from the country’s regulatory authorities.

Metinvest currently produces 20% of Ukraine’s steel and 30% of iron ore, but the merger will immediately allow the company to produce about 55% of Ukraine’s iron ore, a key raw material.

Metinvest is on track to produce about 9.4 million metric tons of steel in 2007, up from 8.5 million tons in 2006, and the merger will help the company to produce about 20 million tons/year of steel by 2017.

The merger also helps Metinvest to further increase the company’s foothold in the European Union, a key market for its steel.

The merger has been watched by analysts for clues over ownership in the merged company as the process involves assets controlled by some of the country’s wealthiest people.

Metinvest is currently 100% owned by Rinat Akhmetov, the wealthiest Ukrainian. This is a vertically integrated company that produces and supplies itself with coking coal and iron ore, produces steel and later uses its steel to produce steel pipes.

Metinvest currently incorporates coking coal producer KrasnodonVuhillia, Avdeyevskiy Coke-Chemical Plant, iron ore producers Pivnichniy HOK and Tsentralniy HOK, and steel makers Azovstal, Yekaniyevo Metallurgy Plant, and Khartsyzsk Steel Pipe Plant.

Metinvest also incorporates Ferriera Valsider, an Italian rolled metal plant, and a Swiss-based steel trader Leman Commodities.

Smart-group, which is currently 100% owned by Vadim Novinskiy, controls Inhuletskiy HOK, Ukraine’s biggest iron ore producer, a small steel maker Makeyevska Steel, and Promet Steel, a Bulgarian steel rolling company.

The complex ownership structure of each of the merging companies involves assets overseas and that’s why the merger will be complete only after regulatory authorities approve the transaction.

Metinvest and Smart-group said the merger is expected to complete before the end of the first quarter of 2008, three months later than had been earlier planned.

The merged company will have a great access to iron ore, a key raw material used in production of steel, allowing Metinvest to further boost its steel output.

Metinvest currently controls two iron ore producers, Pivnichniy HOK and Tsentralniy HOK, with a total capacity producing 17 million mt of iron ore annually.

But with an addition of Smart-group’s Inhuletskiy HOK, which produces about 13.8 million metric tons of iron ore annually, the merged company will be able to produce more than 30 million metric tons of iron ore. (sb/ez)