Poltava Iron Ore's Owner Breaks Ground on New Steel Mill.

Vorsklastal, a private company controlled by Konstantin Zhevago, the main owner of Poltava Iron Ore (PGOK: HOLD), has launched the construction of its long-planned new steel mill in the Poltava region. A regional deputy governor said attempts by local politicians to block the project over environmental issues had been overcome. The mill is scheduled to be built in just under 3 years at a cost of more than $500m, and is planned to produce 3 mln mt of slabs a year using Midrex DRI technology with ore supplied from PGOK. Andriy Gostik: When completed, we expect the mill will allow PGOK to increase its iron ore sales by more than 50%. However, we are concerned that PGOK might not see real improvements in its financials. Transfer pricing risks remain high for PGOK, as a significant share of its earnings are now going to a related trading company Ferrexpo AG, which leads us to re-iterate our HOLD recommendation.