ArcelorMittal signs production deal with Kremikovtzi

SOFIA, July 4 (Reuters) - ArcelorMittal (ISPA.AS) (MTP.PA) has signed a production agreement with Bulgaria's Kremikovtzi KMKV.BB, as part of the steel major's bid to take over the Balkan country's troubled steel mill.

Under the deal ArcelorMittal will provide raw materials to Kremikovtzi to produce steel and allow for urgent environmental and equipment upgrades, the mill said on Friday.

"This cooperation has a possibility to lead to potential investments in future. That will provide a long-term viability of the plant," Kremikovtzi said in a statement.

ArcelorMittal and Ukrainian billionaire Kostyantin Zhevago are vying to take over Kremikovtzi, which accounts for 10 percent of Bulgaria's exports but has run into financial trouble and faces insolvency.

Both suitors believe the indebted plant, once part of Bulgaria's industrial glory during the communist era, needs to go through bankruptcy before an acquisition can take place.

A Bulgarian court is due to hear the insolvency case at the end of July.

India's Essar Steel has also renewed its interest in the mill, whose debt has ballooned to 1.7 billion levs ($1.37 billion).

In May, ArcelorMittal extended 30 million euros ($47.09 million) in emergency funding to Kremikovtzi, which is 71 percent controlled by Pramod Mittal, the younger brother of ArcelorMittal Chairman Lakshmi Mittal.

ArcelorMittal, the world largest steel producer, has said that if it acquires Kremikovtzi, it would invest $500 million euros over four years in the plant that indirectly supports 100,000 livelihoods.

Kremikovtzi said initial steel production will be kept at 60,000 tonnes per month, but declined to provide details on the amount of steel to be produced under the tolling agreement, or the timeline of the contract. (Reporting by Tsvetelia Ilieva; editing by Sue Thomas)