Gazmetal, a leading Russian metals and mining company, and Ukraine`s Industrial Union of Donbass Corporation have signed a merger deal, a respected business daily said Monday, according to RIA Novosti.

Gazmetal and the Industrial Union of Donbas, which integrates more than 40 entities, aim to establish a company with an annual output of 20 million metric tons of steel and 40 million metric tons of concentrate. , Vedomosti said.

"Gazmetal produces more than 6 million metric tons of steel a year, while the Industrial Union of Donbass rolls out more than 9 million metric tons, but the company has said it is carrying out $3 billion in modernization to bring output to 18 million metric tons by 2010," Vedomosti said.

According to the paper, a united company could outperform Russia`s largest metals company, Severstal, which produced 17.6 million metric tons of steel last year.

Established in December 1995, the Industrial Union of Donbass is one of the largest companies in Ukraine today. It produces steel, rolled stock, steel pipes, coke, equipment for the iron and steel industry and by-product coking industry.

In 2005, the company posted a net profit of $390 million, calculated in accordance with the International Financial Reporting Standards (IFRS).