Proposed Purchase of Rail Car Wagons

RNS Number : 8320B

Ferrexpo PLC

25 February 2011

 



25 February 2011

Ferrexpo plc

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

Proposed acquisition of up to 1,000 newly built open rail car wagons ("the Proposed Transaction")

Ferrexpo today announces that the Group's subsidiary, Open Joint Stock Company Ferrexpo Poltava GOK Corporation ("FPM"), in which it holds approximately 97.3% of the share capital, has agreed to buy from the Open Joint Stock Company "Stakhanov Wagon Works" ("the Supplier"), 400 newly built open rail car wagons of 12-9046 model (the Open Wagons) with an option to purchase an additional 600 Open Wagons.

The Supplier is an associate of Mr Kostyantin Zhevago, Chief Executive Officer of Ferrexpo, and therefore a related party of the Company. Accordingly, the Proposed Transaction is classified under the Listing Rules as a "related party transaction" and is subject to shareholder approval.

The Open Wagons are to be used for the transportation of FPM's iron ore pellets to the Ukrainian border for delivery to its customers. It is proposed that the Open Wagons shall be delivered in consignments of 50 units per month, the first of which will be delivered in March 2011. The price of an Open Wagon shall be US$65,000, although this price shall, by agreement between the Parties, be subject to adjustment for each monthly consignment to reflect the current market price of open wagons in the CIS. The price, however, of an Open Wagon shall not exceed US$120,000. There is no fee attached to the option but the option shall expire on 31 December 2012.

The terms and conditions agreed between FPM and the Supplier ("the Parties") are set out in a conditional contract between the Parties dated 25 February 2011. FPM shall fund the consideration for the Open Wagons from its own cash resources, or shall put in place a leasing arrangement with one of the leading Ukrainian banks for all or some of the Open Wagons.

As part of its growth and marketing strategy, Ferrexpo is committed to the development of its logistic capabilities by investing in its own fleet of railway cars. The Directors believe that such investment is required to support medium-term production growth which is expected to increase by a third to 12 million tonnes of pellets per annum by 2013.

A Circular providing additional detail on the Proposed Transaction will be sent to shareholders today ahead of a General Meeting to be held on 15 March 2011.

Michael Abrahams, Chairman of Ferrexpo commented:

"This acquisition adds to and benefits Ferrexpo's extensive logistics capabilities and secures our access to quality wagons in the extremely tight CIS market. This comes at an important time in Ferrexpo's development with our production growing significantly in the medium-term."

For further information, please contact:

Ferrexpo:
Ingrid McMahon	[phone]
Pelham Bell Pottinger
Charles Vivian	[phone]
James Macfarlane	[phone]

Notes to Editors:

Ferrexpo:

Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It is principally involved in the production and export of high quality iron ore pellets, which are used in the manufacture of steel. Ferrexpo's resource base is one of the largest iron ore deposits in the world. Its current producing asset, FPM, produced approximately 10 million tonnes of iron ore pellets in 2010 making it the largest exporter of pellets in the CIS. The Company has a diversified customer base supplying steel mills in Austria, Serbia, Slovakia, Czech Republic, Germany and other European states, as well as in China, India, Japan, and other Asian countries. Ferrexpo is listed on the main market of the London Stock Exchange under the ticker FXPO. For further information, please visit www.ferrexpo.com 

 

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