TIDMFXPO
RNS Number : 3919E
Ferrexpo PLC
10 May 2013
10 May 2013
Ferrexpo plc
Interim Management Statement
Ferrexpo plc ("Ferrexpo", the "Company" or the "Group") today
issues its interim management statement for the first quarter of
2013, in accordance with the UK Listing Authority's Disclosure and
Transparency Rules.
Production
As announced on 9 April 2013, total pellet production from own
ore in 1Q 2013 increased by 10% compared with 1Q 2012. This was the
first quarter of production of ore from the FYM open pit.
Production in Tonnes '000 Q1 Q4 Change Q1 Q1 Change
====================================
2013 2012 % 2013 2012 %
==================================== ======== ======== ======= ======== ======== ========
Production from Ferrexpo Poltava
Mining(FPM) ore
Iron Ore 7,142.7 7,290.9 (2.0) 7142.7 7,545.6 (5.3)
Concentrate 2,770.1 2,980.2 (7.0) 2770.1 2,843.4 (2.6)
Pellets
62% Fe 1,163.6 1,407.9 (17.4) 1163.6 1,198.4 (2.9)
65% Fe 994.0 959.0 3.6 994.0 1,059.1 (6.1)
-------- -------- ------- -------- -------- --------
Total Pellets 2,157.6 2,366.9 (8.8) 2157.6 2,257.5 (4.4)
Production from Ferrexpo Yeristovo
Mining (FYM) ore
Iron Ore 1,224.0 380.4 221.8 1,224.0 0.0 n/a
Concentrate 373.0 129.7 187.7 373.0 0.0 n/a
Pellets from FYM
62% Fe 288.5 107.8 167.6 288.5 0.0 n/a
65% Fe 39.7 0.0 n/a 39.7 0.0 n/a
-------- -------- ------- -------- -------- --------
Total pellets from FYM ore 328.1 107.8 204.3 328.1 0.0 n/a
Total Group production
62% Fe 1,452.1 1,515.7 (4.2) 1,452.1 1,198.4 21.2
65% Fe 1,033.6 959.0 7.8 1,033.6 1,059.1 (2.4)
-------- -------- ------- -------- -------- --------
Total Group production 2,485.7 2,474.7 0.4 2,485.7 2,257.5 10.1
Production from third party
materials
Pellets
62% Fe 65.7 59.4 10.7 65.7 53.3 23.4
65% Fe 0.0 0.0 n/a 0.0 3.8 (100.0)
-------- -------- ------- -------- -------- --------
Total Pellets 65.7 59.4 10.7 65.7 57.1 15.1
Total Pellets Produced 2,551.4 2,534.1 0.7 2,551.4 2,314.6 10.2
------------------------------------ -------- -------- ------- -------- -------- --------
62% Fe 1,517.8 1,575.1 (3.6) 1,517.8 1,251.7 21.3
65% Fe 1,033.6 959.0 7.8 1,033.6 1,062.9 (2.8)
Sales
Sales volumes of pellets for the three months to 31 March 2013
were 2,565 thousand tonnes in line with production, and an increase
of 15% compared to sales of 2,238 thousand tonnes of pellets in 1Q
2012. Sales volumes were lower than 4Q 2012 when stocks were drawn
down and the Group sold 2,716 thousand tonnes of pellets.
Consistent with recent reporting periods, the average realised
price in 1Q 2013 reflected a combination of contract pricing
mechanisms. This included quarterly negotiated fixed price
settlements and index pricing based on the average CFR China 62%
fines price (with standard adjustments for quality and pellet
premium). The index based contracts use a quotation period of
either monthly or quarterly averages. Overall, the average achieved
price in 1Q 2013 was 19% higher than 4Q 2012 broadly reflecting the
23% improvement in market prices, with fixed price settlements
generally lagging the market increase.
Sales to Traditional markets in 1Q 2013 were 48% of volumes
while sales to Natural and Growth markets were 17% and 35%
respectively. There was strong volume demand from all market
segments during the quarter.
Costs
The Group's average C1 cash cost of production for the three
months to 31 March 2013 was US$63.9 per tonne. This compares to
US$59.0 per tonne in 4Q 2012 and US$59.4 per tonne in 1Q 2012.
The increase in C1 costs was principally as a result of higher
costs associated with processing of the Yeristovo ore during its
planned build-up of production. The average cash cost of pellet
production from Ferrexpo Yeristovo Mining (FYM) ore in Q1 was
US$69.9 per tonne which dropped to US$60.1 per tonne in March.
Production costs from FYM ore are expected to fall below those of
Ferrexpo Poltava Mining (FPM) as the mine enters full commercial
production in 2H 2013.
Capital Investment
Ferrexpo Yeristovo Mining (FYM)
First production of pellets from FYM ore was achieved in 1Q
2013. Over 1.3 million tonnes was mined during the quarter and 1.2
million tonnes of ore was processed with the remaining ore placed
on stock for subsequent blending with run of mine ore as Yeristovo
enters commercial production in 2H 2013. Approximately 328 thousand
tonnes of pellets were produced from FYM ore at the Group's
existing benefication and pelletising facility during the
period.
The completion of the mine infrastructure continues according to
plan. FYM is finalising the detailed engineering design and costs
for a 10 million tonne per annum concentrator, subject to final
Board approval in late 2013. Down payments for long lead items are
currently anticipated to be placed around 4Q 2013.
Ferrexpo Poltava Mining (FPM)
Capacity Upgrade Project
As part of sustaining capital expenditure, FPM continues to
upgrade beneficiation sections and other key items of the
processing plant to ensure output of 12 million tonnes of pellets
in 2014. The Group remains confident that this target will be met
subject to the performance of Yeristovo ore in the processing
plant. Initial tests of the ore are promising. The exact yield will
be finally determined when meaningful production is achieved in 2H
2013.
Quality Upgrade Project
The quality upgrade project is designed to increase the average
iron content of the Group's pellets to 65% Fe by 2015. As of 31
March 2013, the project was 22% complete and US$72 million had been
spent (or contractually committed to) out of US$212 million. The
project is expected to be completed on time and to budget. FPM is
currently investigating if it may be beneficial to install
additional and or different filtration equipment due to
technological developments that could improve the finer ground ore
handling and enhance yield.
Northern Deposits
In April 2013, Ferrexpo successfully extended the exploration
licences for the Brovakivske, Kharchenkivske, Manuylovske,
Vasylyevske and Zarudenske deposits (the Northern Deposits) until
2018.
VAT
The Group's subsidiary FPM has received VAT refunds throughout
the quarter in exchange for the prepayment of corporate profit tax
equal to half of the total VAT reclaimed. The Group has not
received VAT refunds for its subsidiaries FYM or FBM (Ferrexpo
Belanovo Mining) as these companies are not yet in a position to
generate profits and pay associated taxation. The prepayment of
corporate profit tax in exchange for VAT refunds has become common
practice in Ukraine although this is not contained in any tax code
or legislation.
As of 31 March 2013, US$309 million of gross VAT was outstanding
compared to US$301 million as of 31 December 2012 and prepaid
corporate profit tax amounted to US$49 million (31 December 2012
US$25 million). Ferrexpo continues to work with local regional and
central authorities to resolve this issue and hopes to make
progress in 2013 to reduce the total outstanding balance of VAT and
prepaid corporate profit tax.
As of 31 March 2013, the Group's closing cash balance was US$485
million and net debt was US$539 million, of which, VAT and prepaid
corporate profit tax amounted to US$336 million.
Michael Abrahams, Ferrexpo Chairman, commented:
"Ferrexpo has performed creditably in the first quarter of the
year despite concern of impending overcapacity in the global steel
sector and local difficulties associated with VAT in Ukraine. The
Yeristovo mine is building up production output and is set to
reduce the Group's overall operating costs. Ferrexpo remains
committed to its growth projects, including increasing its volume
output to 12 million tonnes of ore and beyond, and will invest
prudently in the further development of the Company's processing
capability taking into account industry conditions and the economic
and political environment in Ukraine."
Ferrexpo:
Ingrid McMahon +44 207 389 8304
Pelham Bell Pottinger
Charles Vivian +44 207 861 3126
Lorna Spears +44 207 861 3883
Notes to Editors:
Ferrexpo is a Swiss headquartered iron ore company with assets
in Ukraine. It has been mining, processing and selling high quality
iron ore pellets to the global steel industry for over 35 years.
Ferrexpo's resource base is one of the largest iron ore deposits in
the world. In 2012, the subsidiary, Ferrexpo Poltava Mining (FPM),
produced 9.3 million tonnes of iron ore pellets, while first ore
was reached at the new Ferrexpo Yeristovo Mining (FYM) open pit.
Ferrexpo is the largest exporter of pellets in the CIS. The Group
has a diversified customer base supplying steel mills in Austria,
Slovakia, Czech Republic, Germany and other European states, as
well as in China, India, Japan, Taiwan and South Korea. Ferrexpo is
listed on the main market of the London Stock Exchange under the
ticker FXPO. For further information, please visit
www.ferrexpo.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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