Court Blocks Construction Of Poltava GOK's Steel Mill.

The Krukov District Court of Kremenchuk refused to allow Vorskla Stal, a would-be subsidiary of Poltava GOK, a land plot for the construction of a steel mill. The suit was filed with the court by representatives of the political party Tretia Syla and concerned the ecological implications of the steel mill’s construction. Concorde Capital: We believe Tretia Syla’s law suit is nothing more than a publicity stunt. After the Parliamentary elections are held in late March, in our view, there will be subsequent court rulings that will allow the steel mill construction. The mill will consume ~5 mln pellets produced by Poltava GOK (PGOK: BUY) accounting for more that a half of its sales. However, there is a perceived risk that transfer pricing schemes may be employed in transactions between Poltava GOK and Vorskla Stal. Poltava GOK’s majority shareholder related to Finance & Credit group plans to control Vorskla Stal as well, and PGOK will only have a minority stake (~10%) in the steel mill. Nonetheless, in the mid term we believe PGOK will become fully transparent as the company is seriously considering going public on a foreign stock exchange.