Ferrexpo boosts pellet output 10% yoy in 1Q13

Ferrexpo (FXPO LN) increased its total production of iron ore pellets to 2.551 mmt in 1Q13 (+10.2% yoy, +0.7% qoq), the company announced Apr. 9. Pellet output from ore mined at its flagship Poltava Mine decreased 0.1 mmt to 2.16 mmt, or -4.4% yoy. The decline was more than offset by ore extraction from its newly launched Yeristovo Mine (FYM), which enabled the production of 0.328 mmt of pellets. Low-profit pellets from purchased concentrate grew 15% yoy to 0.066 mmt.

Roman Topolyuk: Having started operations at its Yeristovo Mine in end-2012, Ferrexpo continues to produce around 100 kt of pellets per month from Yeristovo ore. The company is reprocessing the initial layer of weathered ore, which may be the reason why the pellets-to-iron ore ratio for production sourced from Yeristovo Mine is lower than that of Poltava Mine’s (0.268x vs. 0.302x), suggesting higher costs for Yeristovo’s ore at this stage. The core ore body will be reached in 2H13, according to the management’s guidance, and we may be developed more actively to increase monthly output at Yeristovo. With up to 9 mmt of pellets to be manufactured at Poltava Mine, Ferrexpo may exceed our expectations of 10 mmt of pellets from own ore in 2013.