Ferrexpo still lacks license extension on 68% of its iron ore resources
1 June 2012
Ferrexpo Poltava Mine, a subsidiary of Ferrexpo (FXPO LN), has not had its licenses to five northern iron ore deposits extended as of the end of May, weekly Comments reported today, citing the State Geology Service of Ukraine. The Brovakivske, Kharchenkivske, Manuylovske, Vasylyevske and Zarudenske deposits jointly hold more than 14.2 bln tons of iron ore resources and account for 68% of the company’s total iron ore deposits. No reasons for not extending the permits, which expired in 2009, have been disclosed. Additionally, the license for Ferrexpo’s Yeristovo deposit, expiring in August 2012, has also not been extended yet, even though it has already received preliminary approval from a working group consisting of different state bodies, including the State Geology Service. In related news, US Ambassador to Ukraine John Tefft stressed during a site visit yesterday to Yersitovo Mine (on the Yeristovo deposit) that Ukraine badly needs to improve its business climate. Konstyantyn Zhevago said yesterday that he sees no impediments to the extension of the license for the Yeristovo deposit given that the company has already made sizable investments into the project of c. USD 150 mln. Ferrexpo expects to launch the Yeristovo Mine in 2013, which should increase its pellet production by 20%.
Roman Topolyuk: The news indicates that Ferrexpo faces a substantial risk related to the extension of its Yeristovo license and other perspective deposits. If Ferrexpo fails to extend its Yeristovo license on time, commissioning of the mine will be postponed, triggering a review of 2013 earnings estimates. The news highlights continuing pressure on the businesses of Konstyantyn Zhevago. Issues with the licenses to the five northern iron ore deposits not being extended started at the beginning of 2010. The company disclosed in its Eurobonds prospectus back in January 2010 that the State Geology Service of Ukraine obliged Ferrexpo Poltava Mine to make mandatory payments in order to extend the licenses, but Ferrexpo stated that it had made all required payments.
