Ferrexpo remains on track, but legal battles continue

Switzerland-based iron ore group Ferrexpo has assured investors that it continues to operate at full capacity and has seen 'good' demand for its iron ore pellets in the year to date.

In the period to April 30th, own ore pellet production was 6.2% higher than the same period in 2011. However, sales were flat year-on-year as the average selling price fell 9% "reflecting customer mix and lower market prices", Chairman Michael Abrahams is expected to say at the company's annual general meeting later today.

He said that Ferrexpo is making significant progress with its capital projects and is on track to increase output to 12m tonnes of pellets per annum in 2014. "The board remains confident that it will deliver on its growth plans," he added.

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The group is continuing its negotiations with tax authorities to recover overdue value added tax (VAT). The total VAT balance on December 31st 2011 was $172m, which increased to $195m at the end of April. "The group continues to address this as a matter of priority".

Meanwhile, rumbling on in the background is the company's ongoing legal claim over a shareholding in Ferrexpo Poltava, the iron ore deposit in central Ukraine, which has been going on for the last six years. The issue is that the company believes it owns nearly the entire shareholding of the asset, while former shareholders led by Russian MP Alexander Babakov (known as Gilson and Co) say they own a 40% interest.

Ferrexpo said today that it continues to receive legal advice that the case against it has no merit under Ukranian law for legal, technical and practical reasons. A further hearing is scheduled for June 12th, at which it expects the case to be protracted.

BC