REG - Ferrexpo plc - Investigations on use of waste product update

FerrexpoAnnouncement

02/11/2023 15:30

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RNS Number : 2414S  Ferrexpo PLC  02 November 2023

 

 

2 November 2023

Ferrexpo plc

("Ferrexpo", the "Group" or the "Company")

 

Investigations on use of waste product update and smaller related party
transaction

Ferrexpo plc (LSE: FXPO), a premium iron ore pellet supplier to the global
steel industry, announces an update with regard to the previously announced
investigation by Ukrainian authorities into the use of waste products from the
Company's Ferrexpo Poltava Mining ("FPM") operation.

Background

As previously disclosed, in January 2023 the State Bureau of Investigations
("SBI") in Ukraine performed several searches in respect of investigations on
alleged illegal extraction of minerals. The National Police of Ukraine also
carried out investigations on the same matter and made searches and collected
samples of the minerals in January 2023 at FPM.  FPM's position has been and
remains that the minerals in question are not a separate mineral resource but
are waste products ("rubble") left over from the crushing of iron ore during
the technical process for the production of iron ore pellets.

The sales of the rubble were subject to inspections by the State Service for
Geology and Subsoil of Ukraine for many years. The Group has not conducted any
sales of the rubble since September 2021. The position of FPM is that based on
the mining license held, FPM complies with the relevant legislation.

In June 2023, the SBI issued notices of suspicion to three representatives of
FPM's top management and the head of one division for allegedly selling the
rubble without the appropriate permit. This included Viktor Lotous, the FPM
General Director and Chair of the FPM Management Board.  The FPM employees
were detained by the SBI and subsequently released after FPM paid bails
totalling UAH122 million (US$3.4 million) in aggregate that were approved by
the court.

Update

In a further development the National Police of Ukraine issued a notice of
suspicion for the illegal extraction of mineral resources to the Chair of the
FPM Management Board.  On 26 September 2023, at an initial court hearing
concerning the claims, the Chair of the FPM Management Board was detained with
bail set at UAH999 million (approximately US$27 million).  As noted in the
Group's Production Report for 3Q 2023 an appeal was lodged against this
decision, and at a hearing on 30 October 2023 the bail was reduced to UAH400
million (approximately US$11 million).

Following a detailed assessment of the position by the board of directors of
the Company and taking into account the financial position of the Group, the
Group has elected to pay the reduced bail so that the Chair of the FPM
Management Board can be released to his family, and return to his role at
FPM.  The Group continues to believe that the claims regarding the sale of
waste products by FPM are without merit.

The payment of the bail amount is a smaller related party transaction for the
purposes of Listing Rule 11.1.10R.  This announcement is therefore made in
accordance with Listing Rule 11.1.10R(2)(c).  As per the requirements of
Listing Rule 11.1.10R the Company has obtained written confirmation from an

FCA-approved sponsor firm that the terms of the transaction are fair and
reasonable as far as the shareholders of the Company are concerned.

The Group notes that there remains a risk that the courts in Ukraine may seek
to impose further bail payments in connection with the waste products
investigation, or in connection with other existing or new legal challenges
against the Group or its senior management personnel.  To the extent any
further bail payments are requested, the Group would need to assess those at
the time, having regard in particular to the circumstances of the case and the
financial position of the Group, and there can be no guarantee that any such
bail payments will be paid by the Group.

The operations of Ferrexpo are unaffected. Further updates will be made on the
situation as and when appropriate.

This announcement contains inside information. The person responsible for the
release of this announcement is Mark Gregory, Group Company Secretary.

 

For further information please contact:

 Ferrexpo:
 Nick Bias       n.bias@ferrexpo.ch        +44 (0)20 7389 8305

                                           +44 (0)7733 177 831
 Tavistock:
 Jos Simson      ferrexpo@tavistock.co.uk  +44 (0)20 7920 3150
 Gareth Tredway                            +44 (0)7785 974 264

 

About Ferrexpo:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine and
a premium listing on the London Stock Exchange in the FTSE 250 index (ticker
FXPO). The Group produces high-grade iron ore pellets, which are a premium
product for the global steel industry and enable reduced carbon emissions and
increased productivity for steelmakers when the Group's iron ore pellets are
converted into steel, compared to more commonly traded forms of iron ore.
Ferrexpo's operations have been supplying the global steel industry for over
50 years. Before Russia's invasion of Ukraine in February 2022, the Group was
the world's third largest exporter of pellets to the global steel industry.
The Group has a customer base comprising of premium steel mills around the
world. For further information, please visit www.ferrexpo.com
(http://www.ferrexpo.com/) .

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