Poltava GOK To Consolidate A 50% Stake In Vostok Ruda.

Poltava GOK’s (PGOK: BUY) transport subsidiary Ferrotrans received a permit from the anti-monopoly committee for the purchase of over 50% in Vostok Ruda. In early 2004, Ferrotrans purchased a 49.43% stake in Vostok Ruda from a private shareholder. The remaining 50.57% stake remained in the government’s hands. However, in September 2004, the government made a decision to fully privatize the company. Concorde Capital: Vostok Ruda owns the Nova mine and a beneficiation factory with a design capacity of 1 mln mt of iron ore concentrate annually. The enterprise was originally put into operation in 1993 to mine scandium but stopped scandium extraction in 1995. Following this change the company mined iron ore but then halted operations in 2002. In 2004, the company resumed concentrate production, but this time from iron ore purchased from other parties. In our opinion, full operating control over Vostok Ruda by Poltava GOK will be value adding for the latter increasing its iron ore beneficiation capacities. We reiterate our June projections that the Nova mine will provide about 11%-13% of PGOK?s total concentrate output in 2006, and lower the company’s raw material costs.