China may offer loans to coal and steel producer Mechel's costly Elga coal project in Russia and supply equipment for it in exchange for coal, Reuters reported, citing a senior executive at a Russian state bank.

China will supply some of the equipment and get part of coal exports from the mine, Alexander Ivanov, deputy head of Vnesheconombank's management board, was cited as saying.

He said it’s very likely that Mechel would reach a loan deal with the Export-Import Bank of China, but declined to say the scale of the loan.

Having previously agreed to lend $2.5 billion and is now organizing additional financing, Vnesheconombank has granted funding for the first stage of the project, which includes completion of railway construction and coal mining and a processing complex.

Analysts said a year ago that development of Elga, which has proven reserves of 2.2 billion tonnes, could cost $2 billion to $4 billion. 

As one of Russia's leading mining and metals companies, Mechel is saddled with $9.4 billion debt but is seeking to develop Elga, which has among the biggest reserves of coking coal in the world. 

Development of the project in remote Yakutia had been stymied for decades by poor transport links, and finally came on stream in August 2011.