Ferrexpo allocates USD 40 mln for concentrator, shifts approval for 2014
17 October 2013
Iron ore miner Ferrexpo (FXPO LN) reported on October 17 it sold 7.6 mmt of pellets in 9M13 (+9% yoy), 5.6% lower than production during the period, due to a lag in shipments. The selling price declined 4.5% qoq (to USD 120/t on a FOB/DAF basis, we estimate) in 3Q13. C1 cash costs in 3Q13 decreased 2.5% qoq to USD 58.2/t due to higher production volumes and a higher quality of ore extracted from Yeristovo.
The company boosted its budget for its quality upgrade project (enabling it to produce 100% higher grade pellets, 65%-Fe, starting 2015) by USD 24 mln to USD 236 mln to fund the construction of its additional tailings facilities. On top of that, the company approved USD 40 mln for the development of the infrastructure for a new 10 mmt concentrator, labeling the prospects of the project as strong. Ferrexpo expects to announce further approvals of the project in 2014, according to the release.
Roman Topolyuk: Ferrexpo explained the decrease in average selling price by a lag in fixed contracts settled with customers in Europe, so the company’s selling price might improve in 4Q13 as the spot price for 62%-Fe fines (CFR, China) grew 4.8% qoq in 3Q13. Despite the company labeling the concentrator project as the one that has strong prospects, partially financing its implementation, in fact Ferrexpo has effectively shifted approval of the project to 2014, representing a cautious approach to spending USD 600-700 mln in CapEx in an uncertain pricing environment.
