Ferrexpo (LON:FXPO), the London-listed iron ore pellet producer with a mine and plant in Ukraine, has reported a total production of 5.35 million tonnes of iron ore pellets of which 5.14 million tonnes had an average grade of 65% Fe while the remaining 215,000 tonnes reported a 62% Fe content. It’s encouraging to see the global production increase (up 5.3%) while the production of the higher value 65% pallets was increased by almost 8%.
Despite the cost escalation due to the domestic inflation in Ukraine which increases the production cost (on a C1 basis) from US$43 to US$46 per tonne, Ferrexpo should still be printing money considering the iron ore price remains firmly above $100/t. The company’s financial results should be out soon, and it will be interesting to see the company’s cash flow statements as the net debt reduction of just $62M compared to the end of last year is a bit disappointing. Perhaps some of the cash has been tied up in the working capital (inventory levels, accounts receivable while the iron ore is being shipped,…). Time will tell.