Ferrexpo’s Ukraine shutdown deepens fight for survival

Switzerland-based Ferrexpo (LSE: FXPO) has halted iron ore production in Ukraine after Russian attacks restricted its Black Sea export routes, leaving the miner dependent on fresh funding to restart.

The halt covers Ferrexpo’s mines and pellet plant beside Horishni Plavni in central Ukraine, about 280 km southeast of Kyiv, according to a regulatory filing Tuesday. Ferrexpo can still supply European steelmakers from stockpiles, but a restart depends in part on more working capital.

“In the absence of additional funding, the group expects its net accessible cash resources to be sufficient until mid-September,” Ferrexpo said in the filing.

The shutdown turns a wartime shipping disruption into a threat to one of Europe’s main suppliers of high-grade pellets. Ferrexpo ranked as the world’s third-largest iron ore pellet exporter before Russia’s invasion of Ukraine in 2022. Its products help steelmakers cut emissions compared with lower-grade iron ore feed.

Trading in Ferrexpo’s London shares has been suspended at 28.58 pence since May 1 after the company missed the deadline to publish its audited 2025 accounts. Ferrexpo said it could not finish preparing the accounts until it secured enough funding to show the business could keep operating.

Shipping blow

Russian drones struck a third-party vessel carrying Ferrexpo pellets in Ukrainian Black Sea waters late last month, killing one crew member. The vessel held 55,000 tonnes of direct-reduction-grade pellets bound for Middle Eastern customers.

The owner has since moved the ship out of the war-risk area and is towing it to a nearby port for inspection. Ferrexpo has not determined the condition of the cargo.

The shipment formed part of 189,000 tonnes of pellets earmarked for sale, including about 90,000 tonnes of direct-reduction material held in stockpiles. Ferrexpo put the production and delivery cost of that inventory at about $20 million (C$28 million).

Attacks around Ukrainian ports prompted shipowners to cancel bookings and derailed Ferrexpo’s plan to boost Black Sea shipments to the Middle East during the second half. The company can still move some products west by rail and barge, but those routes mainly serve European customers. Ferrexpo said it could keep supplying European customers from stockpiles but did not disclose how long the inventory would last or whether expected sales were included in its cash forecast to mid-September.

Cash squeeze

Ferrexpo began seeking at least $100 million in equity financing in April to fund 18 months of reduced operations. It had only $17 million in accessible cash on April 17 and has yet to complete a financing.

Ukraine’s tax authorities have withheld value-added tax refunds from Ferrexpo’s subsidiaries since March last year. Ukraine owed Ferrexpo $90.3 million in refunds at March 31, tying up cash as wartime energy and transport costs stayed high.

Production had already fallen sharply before the latest halt. Ferrexpo produced 1.56 million tonnes of commercial product in the first half, down 54% from a year earlier. It was running only one of four pellet lines.

Ferrexpo Poltava Mining, its main Ukrainian operating unit, faces separate bankruptcy proceedings over a disputed civil claim. A local court appointed an insolvency manager in February even though Ukraine’s Supreme Court had not ruled on the underlying dispute. Ferrexpo has warned it could lose control of the subsidiary.