(Recasts to focus on timeline of the potential deal, Yakutia governor comments)
MOSCOW, Jan 28 (Reuters) - A decision on the future of the Elga coal project, one of the world's largest coking coal deposits, is likely in the first quarter of 2020, the regional governor said in an interview.
Expansion of the mine, first developed by Russian steel and coal producer Mechel, has stalled in recent years as the project in the remote Yakutia region of Russia's Far East demands significant investment to reach its annual operating capacity of 30 million tonnes.
Mechel, controlled by businessman Igor Zyuzin, has been weighing its options regarding Elga, its biggest growth asset, for some time as it continues talks with creditors over restructuring $6 billion in loans.
It sold a 49% stake in the mine in 2016 to one of its main creditors, Gazprombank, as part of a debt restructuring process.
On Tuesday, Russian company A-Property, owned by businessman Albert Avdolyan, said it had formally asked permission from the country's anti-monopoly regulator to buy the mine from Mechel and Gazprombank. Mechel's shares rose 8% on the news.
Mechel declined to comment on A-Property's request to Russia's anti-monopoly regulator. Gazprombank said it was interested in selling its stake to A-Property.
"I am optimistic that the issue of Mechel's debts to its creditors and the structure of this deal will be resolved in the first quarter of 2020," Aysen Nikolaev, head of Russia's Yakutia region, said in an interview.
Nikolaev said he has held regular meetings with both Zyuzin and Elga's prospective buyers to discuss the mine's future ownership as a ramp-up would require significant investment that Mechel's current financial position is unlikely to allow.
A main challenge requiring major funds is the expansion of the mine's transport infrastructure. A 320 km railroad built by Mechel can only carry 5-6 million tonnes of coal a year, Nikolaev said. Elga's reserves are seen at 2.2 billion tonnes.
Last year A-Property made a surprise offer to buy Gazprombank's stake in the mine, around the time when Mechel was asking its creditors to push back its debt repayments.
The offer prompted Gazprombank to give Mechel the option to buy back a 34% stake before the lender considered selling its share to A-Property or to a different buyer. That deadline expired on Jan. 20.
Analysts at BCS Global Markets said selling its stake in Elga could allow Mechel to reduce its debt burden by 12%, but would constrain its future development options and cash generating ability.
Mechel's debt at the end of the third quarter of 2019 stood at 408 billion roubles.
Little known A-Property has previously said its interest in Elga is in line with its plans to create an industrial cluster in the far east of Russia.
The cluster includes the gas producing Yakut Fuel and Energy Company, the Ogodzha coal project and the Vera coal terminal, A-Property said.
Reporting by Anastasia Lyrchikova, Gleb Stolyarov and Tatiana Voronova; writing by Polina Ivanova; editing by David Evans