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Ferrexpo plc (FXPO)

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Friday 10 May, 2013

Ferrexpo plc

Interim Management Statement

RNS Number : 3919E
Ferrexpo PLC
10 May 2013
 



10 May 2013

Ferrexpo plc

Interim Management Statement

 

Ferrexpo plc ("Ferrexpo", the "Company" or the "Group") today issues its interim management statement for the first quarter of 2013, in accordance with the UK Listing Authority's Disclosure and Transparency Rules.

 

Production

As announced on 9 April 2013, total pellet production from own ore in 1Q 2013 increased by 10% compared with 1Q 2012. This was the first quarter of production of ore from the FYM open pit.

 

Production in Tonnes '000


Q1

Q4 

Change


Q1

Q1

Change

2013

2012

%

2013

2012

%

Production from Ferrexpo Poltava Mining(FPM) ore









Iron Ore


7,142.7

7,290.9

(2.0)


7142.7

7,545.6

(5.3)

Concentrate


2,770.1

2,980.2

(7.0)


2770.1

2,843.4

(2.6)

Pellets









62% Fe


1,163.6

1,407.9

(17.4)


1163.6

1,198.4

(2.9)

65% Fe


994.0

959.0

3.6


994.0

1,059.1

(6.1)

Total Pellets


2,157.6

2,366.9

(8.8)


2157.6

2,257.5   

(4.4)










Production from Ferrexpo Yeristovo Mining (FYM) ore









Iron Ore


1,224.0

380.4

221.8


1,224.0   

0.0

n/a

Concentrate


373.0

129.7

187.7


373.0

0.0

n/a

Pellets from FYM









62% Fe


288.5

107.8

167.6


288.5

0.0

n/a

65% Fe


39.7

0.0

n/a


39.7

0.0

n/a

Total pellets from FYM ore


328.1

107.8

204.3


328.1

0.0

n/a










Total Group production









62% Fe


1,452.1

1,515.7

(4.2)


1,452.1   

1,198.4   

21.2

65% Fe


1,033.6

959.0

7.8


1,033.6   

1,059.1   

(2.4)

Total Group production


2,485.7

2,474.7

0.4


2,485.7   

2,257.5   

10.1










Production from third party materials









Pellets









62% Fe


65.7

59.4

10.7


65.7

53.3

23.4

65% Fe


0.0

0.0

n/a


0.0

3.8

(100.0)

Total Pellets


65.7

59.4

10.7


65.7

57.1

15.1

Total Pellets Produced


2,551.4

2,534.1

0.7


2,551.4   

2,314.6   

10.2

62% Fe


1,517.8

1,575.1

(3.6)


1,517.8   

1,251.7   

21.3

65% Fe


1,033.6

959.0

7.8


1,033.6   

1,062.9   

(2.8)

 

 

Sales

Sales volumes of pellets for the three months to 31 March 2013 were 2,565 thousand tonnes in line with production, and an increase of 15% compared to sales of 2,238 thousand tonnes of pellets in 1Q 2012. Sales volumes were lower than 4Q 2012 when stocks were drawn down and the Group sold 2,716 thousand tonnes of pellets.

 

Consistent with recent reporting periods, the average realised price in 1Q 2013 reflected a combination of contract pricing mechanisms. This included quarterly negotiated fixed price settlements and index pricing based on the average CFR China 62% fines price (with standard adjustments for quality and pellet premium). The index based contracts use a quotation period of either monthly or quarterly averages. Overall, the average achieved price in 1Q 2013 was 19% higher than 4Q 2012 broadly reflecting the 23% improvement in market prices, with fixed price settlements generally lagging the market increase.

 

Sales to Traditional markets in 1Q 2013 were 48% of volumes while sales to Natural and Growth markets were 17% and 35% respectively. There was strong volume demand from all market segments during the quarter.

 

Costs

The Group's average C1 cash cost of production for the three months to 31 March 2013 was US$63.9 per tonne. This compares to US$59.0 per tonne in 4Q 2012 and US$59.4 per tonne in 1Q 2012.

 

The increase in C1 costs was principally as a result of higher costs associated with processing of the Yeristovo ore during its planned build-up of production. The average cash cost of pellet production from Ferrexpo Yeristovo Mining (FYM) ore in Q1 was US$69.9 per tonne which dropped to US$60.1 per tonne in March. Production costs from FYM ore are expected to fall below those of Ferrexpo Poltava Mining (FPM) as the mine enters full commercial production in 2H 2013.

 

Capital Investment 

Ferrexpo Yeristovo Mining (FYM)

First production of pellets from FYM ore was achieved in 1Q 2013. Over 1.3 million tonnes was mined during the quarter and 1.2 million tonnes of ore was processed with the remaining ore placed on stock for subsequent blending with run of mine ore as Yeristovo enters commercial production in 2H 2013.  Approximately 328 thousand tonnes of pellets were produced from FYM ore at the Group's existing benefication and pelletising facility during the period.

 

The completion of the mine infrastructure continues according to plan. FYM is finalising the detailed engineering design and costs for a 10 million tonne per annum concentrator, subject to final Board approval in late 2013.  Down payments for long lead items are currently anticipated to be placed around 4Q 2013.

 

Ferrexpo Poltava Mining (FPM)

Capacity Upgrade Project

As part of sustaining capital expenditure, FPM continues to upgrade beneficiation sections and other key items of the processing plant to ensure output of 12 million tonnes of pellets in 2014. The Group remains confident that this target will be met subject to the performance of Yeristovo ore in the processing plant. Initial tests of the ore are promising. The exact yield will be finally determined when meaningful production is achieved in 2H 2013.  

 

Quality Upgrade Project

The quality upgrade project is designed to increase the average iron content of the Group's pellets to 65% Fe by 2015. As of 31 March 2013, the project was 22% complete and US$72 million had been spent (or contractually committed to) out of US$212 million. The project is expected to be completed on time and to budget. FPM is currently investigating if it may be beneficial to install additional and or different filtration equipment due to technological developments that could improve the finer ground ore handling and enhance yield.

 

Northern Deposits

In April 2013, Ferrexpo successfully extended the exploration licences for the Brovakivske, Kharchenkivske, Manuylovske, Vasylyevske and Zarudenske deposits (the Northern Deposits) until 2018.

 

VAT

The Group's subsidiary FPM has received VAT refunds throughout the quarter in exchange for the prepayment of corporate profit tax equal to half of the total VAT reclaimed. The Group has not received VAT refunds for its subsidiaries FYM or FBM (Ferrexpo Belanovo Mining) as these companies are not yet in a position to generate profits and pay associated taxation. The prepayment of corporate profit tax in exchange for VAT refunds has become common practice in Ukraine although this is not contained in any tax code or legislation.

 

As of 31 March 2013, US$309 million of gross VAT was outstanding compared to US$301 million as of 31 December 2012 and prepaid corporate profit tax amounted to US$49 million (31 December 2012 US$25 million). Ferrexpo continues to work with local regional and central authorities to resolve this issue and hopes to make progress in 2013 to reduce the total outstanding balance of VAT and prepaid corporate profit tax.

 

As of 31 March 2013, the Group's closing cash balance was US$485 million and net debt was US$539 million, of which, VAT and prepaid corporate profit tax amounted to US$336 million. 

 

Michael Abrahams, Ferrexpo Chairman, commented:

 "Ferrexpo has performed creditably in the first quarter of the year despite concern of impending overcapacity in the global steel sector and local difficulties associated with VAT in Ukraine. The Yeristovo mine is building up production output and is set to reduce the Group's overall operating costs. Ferrexpo remains committed to its growth projects, including increasing its volume output to 12 million tonnes of ore and beyond, and will invest prudently in the further development of the Company's processing capability taking into account industry conditions and the economic and political environment in Ukraine."

 

Ferrexpo:                            


Ingrid McMahon

+44 207 389 8304



Pelham Bell Pottinger


Charles Vivian

+44 207 861 3126

Lorna Spears

+44 207 861 3883

 

Notes to Editors:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It has been mining, processing and selling high quality iron ore pellets to the global steel industry for over 35 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. In 2012, the subsidiary, Ferrexpo Poltava Mining (FPM), produced 9.3 million tonnes of iron ore pellets, while first ore was reached at the new Ferrexpo Yeristovo Mining (FYM) open pit. Ferrexpo is the largest exporter of pellets in the CIS. The Group has a diversified customer base supplying steel mills in Austria, Slovakia, Czech Republic, Germany and other European states, as well as in China, India, Japan, Taiwan and South Korea. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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