Ferrexpo reports stable production in Q12016

5 April 2016

After rather sound (taking into account iron ore market decline and other negative developments in Ferrexpo business environment during last year) Y2015 performance, the company reported relatively stable production volumes in Q1 2016.

In latest quarter total production volume made 2,887k tons of pellets, exactly on the level of Q1 2015 and by 3.3% lower vs. Q4 2015. Almost all production 2,875k tons made pellets from own ore. On positive side: like in previous quarter, 96% of total production made premium 65% Fe pellets (at the moment premium for such types of pellets is quite sizable, while competition among producers is lower vs. 62% Fe). For comparison, in Q1 2015 the share of 65% Fe pellets was at 85%, for Y2015 as a whole close to 89%. In the beginning of Y2015 the company finished large-scale investment program, which (in addition to total increase of potential production volumes) allowed it to significantly increase 65% Fe pellets share in total production (vs. 52.7% in Y2014, 46.3% in Y2013).

After decline to the lowest levels in December-January, in February-March16 iron ore prices demonstrated significant recovery and are currently at about USD 55 per 1 ton level. Taking into account our earlier expectations as for marginal ability of Ferrexpo to repay due debt in Y2016 basing on assumption of average USD 45 index price per 1 ton pf 62% Fe ore and current C1 cash cost of USD 25 per 1 ton of pellets (in this case projected annual EBITDA about USD 300M, total debt to repay USD 196M, total interest and maintenance expenses USD 100-110M), if current index price will be maintained at least until the end of H1 2016, we expect debt servicing ability of the company will be largely improved (it is also can be noted that in January-February Ferrexpo repaid USD 39M of loans principal)

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