Ferrexpo Regulatory News (FXPO)

17 April 2014

Ferrexpo plc

Interim Management Statement

Ferrexpo plc ("Ferrexpo", the "Company" or the "Group") today issues its interim management statement for the first quarter of 2014, in accordance with the UK Listing Authority's Disclosure and Transparency Rules.

Highlights 

· Pellet production from own ore up 9.2% to 2.7m tonnes (1Q 2013: 2.5m tonnes)

· Production of high grade 65% Fe pellets up 31.0% to 1.4m tonnes (1Q 2013: 1.0m tonnes)

· Sales volumes increased by 10.8% to 2.8m tonnes (1Q 2013: 2.6m tonnes)

· Average C1 cash costs down 21% to US$50.3 per tonne (1Q 2013: US$63.9 per tonne)

· Production growth on track to reach 12 million tonnes per annum run rate by year end

Production

For the three months ended 31 March 2014, pellet production from own ore was 2.7 million tonnes. This represented an increase of 9.2% compared to the same period in 2013, including production of 0.7 million tonnes of pellets from FYM ore as the mine continues to ramp up. Total pellet production year to date, including third party materials, was 2.8 million tonnes, an increase of 10.4% compared to the same period in 2013. Production of 65% Fe pellets from own ore grew by 21.1% in 1Q 2014, to 1.3 million tonnes, compared to 1.0 million tonnes in 1Q 2013.

Sales

Sales volumes of pellets for the three months to 31 March 2014 were 2,844 thousand tonnes in line with production, and an increase of 10.8% compared to sales of 2,565 thousand tonnes of pellets in 1Q 2013.

The market for pellets remained strong in 1Q despite a fall in iron ore prices with the average CFR China (62% fines) price falling by 11% to US$120 per tonne in 1Q 2014, compared with US$135 per tonne in 4Q 2013. The mix of sales to key markets remained broadly in line with 4Q 2013 with 54% of sales to traditional and 30% of sales to growth markets with the remainder to natural markets.

Pricing in 1Q 2014 for all long term contract sales was on an index basis derived from the CFR China price with adjustments for quality, freight and pellet premium. The average FOB Yuzhny Netback price in 1Q 2014 was 3% lower than 4Q 2013. This compares to a drop in the market index of nearly 11% with the difference due mainly to improved pellet premiums.

Costs

The Group's average C1 cash cost of production for the three months to 31 March 2014 reflected improvements in efficiency and output as well as devaluation of the local currency in which around 50% of production costs are denominated. The average exchange rate to the US Dollar was 8.9 in 1Q 2014 compared to the average rate in 2013 of 8.0. As a result C1 cost reduced to $50.3 per tonne in 1Q 2014 or by 21% compared to 1Q 2013 and a 13% reduction when compared to 4Q 2013.

Capital Investment

Growth in pellet production to 12 million tonnes per annum

The company remains on track and budget to increase production during 2014 to its target run rate of 12 million tonnes of pellets per annum and has made further good progress in 1Q 2014 increasing the amount of ore processed and pellets produced. Modernisation of the production facilities continues as part of the company's programme of maintenance capital investments.

Quality Upgrade Project

The project remains on track. In 1Q 2014 a second floatation plant, including additional vertimills to allow further fine grinding was successfully commissioned in line with the project schedule. Work is underway to refurbish floatation plant number 1 as well as construction of a third and final floatation section, with both projects due to be completed in 2014. These projects will enable the floatation of all iron ore production, which will allow FPM to improve the average concentrate grade as well as process lower grade stockpiles.

Yeristovo Concentrator Development

It is the Board's intention to continue to authorise expenditure for the concentrator project in stages in line with the capacity of the company to finance the project. At the current time US$30 million has been approved for detailed design work, which is ongoing along with US$40 million approved to be spent on ground works, infrastructure and foundations which are in progress. The order and approval for the long lead time items will be considered later in the year.

VAT

In 2014 the company has further stabilised its VAT position and has received refunds for both its operations in 1Q in exchange for the prepayment of corporate profit tax. As a result, the VAT balances outstanding in local currency remained broadly stable at UAH 2,468 million (31 December UAH 2,543 million) of which UAH 1,905 million relates to balances due from 2012 or earlier.

At the end of March, the exchange rate to the US dollar was 11.1 and as a result the value of the VAT balances outstanding, as expressed in US dollars, reduced by US$84.0 million compared to the year end. This movement will be reflected in the translation reserves.

The settlement of old outstanding VAT balances remains a priority and we are pleased to note that the government has announced that VAT bonds will be used to settle these liabilities. This is expected to occur during 2014, however the timing and the terms of this issuance, which will be in local currency, still remains uncertain.

As of 31 March 2014, the Group's closing cash balance was US$366 million (31 December US$390 million) and net debt was US$679 million (31 December US$685 million), of which, gross outstanding VAT and prepaid corporate profit tax, expressed in US dollars, amounted to US$308 million.

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Notes to Editors:

Ferrexpo plc ('Ferrexpo' or the 'Group') 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. The Group is the 5th largest supplier of pellets to the global steel industry and the largest exporter of pellets from the CIS. In 2013, it produced 10.8 million tonnes of pellets, a 12% increase compared to 2012. Ferrexpo has a diversified customer base supplying steel mills in Austria, Slovakia, the 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