Ferrexpo - The Next Phase Revealed

Research Report From Edison Investment Research

LONDON, January 27, 2011 - Ferrexpo is currently producing c 9Mtpa of 62% and 65% Fe pellets from c
29Mtpa of iron ore mined. In its interim management statement, Ferrexpo
mapped out a route for increasing output firstly to 12Mtpa of 65% pellets
from 38Mtpa of iron ore by 2013 and then 20Mtpa of pellets from 60Mtpa of
iron ore by 2018 "at the latest". Management has approved a budget of $647m
to achieve the first phase of this development. The second phase will cost an
additional c $1.2bn. The initiative rejuvenates and expands a development
programme that was suspended in H208. At a long-term average pellet price of
US$130/t (the same as Edison's FY11 estimate), Edison estimates that this
production profile will be capable of supporting a share price 143% above its
current level.

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Based in Switzerland and listed in London, Ferrexpo is
a vertically integrated producer of iron ore pellets used in the production
of steel. The company operates an opencast iron ore mine, concentrator and
pelletiser in Ukraine and has rail access to export ports on the Black Sea.

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