Magnitogorsk Iron and Steel Works, Russia`s third-largest steel maker, has bought 10.75 percent of coal miner and steel trader Belon Group and plans to increase its stake in the firm to secure raw materials. Magnitogorsk, or MMK, said in a statement on Thursday it acquired the stake in Novosibirsk-based Belon for an undisclosed sum from a company called Sapwood Investments Ltd. Shares in Belon jumped 10 percent on Moscow`s MICEX exchange. "We have the intention of increasing our stake, although it`s too early to say when this might happen," MMK spokeswoman Yelena Azovtseva said. She added it was possible MMK could eventually acquire control of Belon Group. MMK is unique among Russia`s major steel makers in not owning the companies that supply most of its coking coal and iron ore. The company has, however, acquired large iron ore deposits with a long-term view to securing raw materials. "Magnitogorsk is keen to get control of Belon. It wouldn`t solve their problem entirely in terms of sourcing coking coal, but it would be a big step in the right direction," said Sergei Donskoi, metals and mining analyst at Troika Dialog. Belon mines and exports coking coal, used in steel making, and steam coal, used in power generation. The company also produces bricks and other building materials and trades rolled steel produced by Magnitogorsk and other Russian steel mills. A Belon spokeswoman confirmed the deal but also declined to specify the price. Belon is ultimately controlled by its general director, Andrei Dobrov. It posted a net profit of 1.22 billion roubles ($48.96 million) in 2006 on revenues of 10.43 billion roubles ($418.5 million), down on the previous year due to lower prices. But analysts said Belon could expect a strong rebound in profits this year. The company produced 2.48 million tonnes of coal in the first half of 2007, or 46 percent more than in the same period last year, it said on its Web site, www.belon.ru. "Profitability should increase dramatically. There`s no big incentive to sell out unless he is offered a very good price," said Donskoi, referring to Belon`s majority owner Dobrov. Raiffeisen Bank Research said in a note MMK sourced most of its coking coal from Raspadskaya, which is part-owned by rival steel maker Evraz Group. "The current favourable market conditions allow MMK to look at different options, including M&A deals, for diversifying their raw material supply," Raiffeisen said. The bank also said MMK`s investment would help Belon achieve its plans to quadruple coking coal output by 2010. MMK, majority owned by billionaire chairman Viktor Rashnikov, operates Russia`s largest single steel mill in the city of Magnitogorsk. It posted a net profit of $866 million in the first half of 2007, up 47 percent year-on-year. The company plans to build an iron ore plant by 2016 to process ore from the Prioskolskoye deposit in Belgorod region that it acquired in November. It has also acquired the rights to develop the Bakalskoye deposit in Chelyabinsk region. MMK currently brings more than 70 percent of its iron ore across the border from Kazakhstan as part of a long-term supply agreement with the Sokolov-Sarbai Mining and Production Union.