Ferrexpo resumed production in Ukraine after agreement to raise $100 million
Mining company Ferrexpo with main assets in Ukraine has resumed production of iron ore products after a halt in early August. The company has launched one line for the production of pellets and, due to regular attacks on ports and ships in the Black Sea, will focus on exporting products to Europe.
This is stated in the Ferrexpo announcement, published on September 7 on the London Stock Exchange.
The company noted that it was able to mobilize its Ukrainian enterprises over the weekend after the results of a new capital raising of approximately $100 million were announced on September 4.
Production is currently resumed on one line for the production of iron ore pellets. Ferrexpo has not yet reported the timing of launching additional production capacities.
Exports will be redirected to Europe
Due to problems with Black Sea logistics, the company plans to focus on supplying products to European customers.
Ferrexpo directly referred to regular attacks on ports and ships in the Black Sea. The restriction of the main Black Sea export route was one of the reasons why on August 5 the company completely suspended the production of iron ore products at its mining and pelletizing enterprises in Ukraine.
Before the halt, Ferrexpo was already operating in a limited mode - using only one pellet production line. The company explained the reduction in capacity by a shortage of working capital, problems with energy supply and logistical restrictions.
"We are pleased to resume production in Ukraine. I would like to thank our employees who once again demonstrated dedication and determination, managing to restart the enterprise over the weekend", - said interim CEO of Ferrexpo Lucio Genovese.
Ferrexpo found investors for $100 million
As previously reported by Kurs Ukrainy, on September 4 Ferrexpo announced the results of the placement of new shares for approximately $100 million. The largest new investor is expected to be the founder and chairman of the board of Kernel Andriy Verevsky, who agreed to invest $50 million.
Another approximately $40 million is to be provided by Fevamotinico S.a.r.l. - the largest existing shareholder of Ferrexpo. The rest of the amount is provided by other new and existing institutional investors.
The company plans to use the new capital primarily to replenish working capital and support operations in Ukraine - paying for electricity, wages, materials, logistics and technical maintenance.
However, the raising of $100 million has not yet been formally completed. The general meeting of shareholders, which should approve the issue of new shares, is scheduled for September 21, and trading is expected to begin on September 22.
The company warned of insolvency threats
The resumption of production comes after a sharp deterioration in Ferrexpo's financial position. The company previously stated that raising new capital was the only realistic way to quickly provide the group with necessary financing.
Without it, Ferrexpo warned of significant risk to its ability to continue operations and the possibility of insolvency proceedings.
One of the reasons for the liquidity shortage cited by the company was the suspension of VAT refunds to its Ukrainian enterprises. As of the end of June, the amount of VAT to be refunded was approximately $88 million.
Earlier, the Financial Times also wrote that Ferrexpo was on the verge of insolvency amid financial problems and a dispute between the Ukrainian authorities and Kostiantyn Zhevago, associated with the group's largest shareholder.
Based on materials: Ferrexpo / London Stock Exchange, Kurs Ukrainy
