Ferrexpo plc, whose main assets are Ukrainian iron ore producers Poltava and Yeristovo mining and processing plants, raised iron ore pellet production 4.6% year-on-year in H1, 2020, to 5.598 million tonnes, the company said in a press release.
Output of pellets with 65% Fe-content grew 7.1% year-on-year, to 5.5 million tonnes while output 62% Fe fell 54.4%, to 98,000 tonnes.
Ferrexpo did not produce pellets from third-party feedstock.
Pellet production rose 5.4% quarter-on-quarter in Q2, 2020, to 2.873 million tonnes, including 2.848 million tonnes of 65% Fe, up 7.4%, and 24,700 tonnes of 62% Fe, down 66.3%.
The company’s facilities “continue to operate with minimal impact on operations to date, and the company continues to closely monitor its workforce,” Ferrexpo said in a COVID-19 update. “The infection rate in the local communities surrounding the company’s operations remains low,” it said.
The London-listed Ferrexpo plc owns 100% of Ferrexpo AG, which owns 100% of each of Poltava Mining and Yeristovo Mining and 99.9% of Belanovo Mining. Ferrexpo’s main customers are steelmakers in Austria, Germany, Japan, South Korea, Taiwan, China, Slovakia, the Czech Republic, Turkey, Vietnam and the United States. Pellet production grew 0.8% to 10.519 million tonnes on 2019.
Mining enterprises of Ukraine in January-May 2020 increased the export of iron ore raw materials in natural units by 11.9% compared to the same period of 2019, to 18.875 million tonnes.
According to statistics released by the State Customs Service, foreign exchange earnings from iron ore raw materials exports increased by 5.7%, to $1.51 billion over that period.
Iron ore raw materials were exported mainly to China (58.06% of supplies in monetary terms), Poland (10.07%) and the Czech Republic (6.87%).
Iron ore raw materials imported to Ukraine from the Netherlands to Ukraine amounted to $28,000, from Sweden, to some $10,000, from Germany to some $1,000 and from Hungary to some $1,000 in a total volume of 84 tonnes over two months of 2020, while 45 tonnes of iron ore with cost of $24,000 were imported in January-May 2019.
Canada’s Black Iron, implementing the investment project to create a new iron ore production facility in Kryvy Rih (Dnipropetrovsk region), has said that it received expressions of interest from European banks and export credit agencies to provide $250 to $300 million of debt.
The company said in a press release that Black Iron management continue to make sound progress arranging the financing for Shymanivske project construction.
Construction of phase one to produce four million tonnes per year of 68% iron content pellet feed is estimated to cost $436 million, as further detailed in Black Iron’s most recent Preliminary Economic Assessment. As is typical for financing the development of mining projects, based on discussions with potential investors and financiers, the company estimates that some $175 million (40%) will be equity and the balance around $261 million (60%) financed as debt, not including financing charges and working capital.
Black Iron CEO Matt Simpson said that strong interest from well known, highly regarded, providers of debt financing for project construction is seen.
“The indicative interest rates, grace period prior to starting repayment and loan duration in the expressions of interest received by the Company are very competitive. The recent announcement of the MOU between the Company and Ukraine’s government to transfer a critical parcel of land to the Company is an important milestone that both anchor offtake and debt investors have been waiting to see. The Company is currently negotiating binding terms for the land transfer, including the compensation amount, and expect this to conclude following a binding product sale (i.e. offtake) agreement as a portion of the funds invested by the offtake company will be used to cover the land transfer costs. Now that an MOU on land transfer has been reached, we look forward to commercial negotiations for project construction financing being accelerated,” he said.
Majority of the required equity for project construction is anticipated to come from offtake by a large trading company and/or steel mill that is interested to purchase Black Iron’s pellet feed on a long-term contract at a slight discount to market price in exchange for making both a prepayment and acquiring ownership in the Shymanivske project. Several multi-billion companies, including Glencore, as previously announced, are currently conducting due diligence to consider such an investment.
Additionally, there are two Asia based construction companies that have conducted site visits and expressed serious interest to invest up to $50 million of equity in kind in exchange for being awarded the construction contract.
From a sequence standpoint, discussions are being held simultaneously with equity and debt investors as both are ultimately required to fund project construction. It is likely the anchor equity and offtake investor will be announced first followed by completion of an updated feasibility study and environmental impact assessment upon which the debt financing can be secured to allow for construction start around the end of next year, the company said.
Iron ore mines run by Ukraine’s Metinvest raised output in January-September 2019. An industry source told Interfax that Northern Mining (Pivnichny GOK) produced 6.542 million tonnes of merchant iron ore pellets in the 9M, up 1% year-on-year, including 422,000 tonnes in September; and 9.147 million tonnes of iron or concentrate, up 13.4%, including 923,000 tonnes in September.
Central Mining (Central GOK) raised merchant pellet output 0.1% in 9M 2019 to 1.779 million tonnes and concentrate 1.8% to 3.259 million tonnes, including respectively 209,000 tonnes and 390,000 tonnes in September.
Inhulets Mining (INGOK) reduced concentrate output 0.9% in 9M to 8.351 million tonnes, including 918,000 tonnes in September.
The vertically integrated Metinvest’s main shareholders are System Capital Management (SCM, 71.24%) and Smart Holding (23.76%).
Ukrainian businessman Ihor Kolomoisky has proposed to increase the iron ore production royalty from 8.8% to 75%. “… If you export raw materials [from the country], then give back at least 75% from $80 per tonne – this is $60, and keep $20,” Kolomoisky said in an interview with the Censor.net ezine.
According to the businessman, these current royalty rates stimulate the export of raw materials.
“However, there is a second option – don’t sell ore right away!.. Produce steel – you have capacities, and instead of loading enterprises you reduce capacities, because now it is easier for you to sell ore, and not engage in production,” Kolomoisky said.
In addition, he stated the need for nationalization of the largest enterprises and the development of mineral resources.
“For the salvation of Ukraine, the universal nationalization of large state-forming enterprises plus the nationalization of the deposit development, that is, in several sectors, we need state capitalism,” the businessman said.
Ukrainian metallurgical enterprises are expected to increase steel production by 4% by the end of the year compared to 2018, up to 21.895 million tonnes.
According to background documents of Economic Development and Trade Ministry available for Interfax-Ukraine, a total rolled steel output will see 3% rise by the end of 2019, up to 18.937 million tonnes, when pig iron will see 0.4% down, to 20.748 million tonnes.
Such forecast was made following the performance indicator of January-July 2019, the ministry said.
The agency’s source in the ministry also said that under ongoing trends scrap metals supplies to the enterprises would decrease by 3%, to 3.238 million tonnes.
Besides, pipe output in 2019 may grow by 19%, to 1.144 million tonnes, coke output will drop by 5%, to 10.305 million tonnes, metalware output will drop by 1%, to 186,000 tonnes.
Meanwhile, the metal and mining enterprise can increase iron ore extraction by 4%, to 76.095 million tonnes, iron ore concentrate output by 5%, to 63.568 million tonnes, ready iron ore raw materials may increase by 1%, to 53.696 million tonnes. Sinter cake output will remain on the level of previous year with 31.706 million tonnes, steel pellets output will increase by 3% reaching 21.989 million tonnes.
