Ferrexpo PLC (LSE:FXPO) has issued force majeure notices to certain customers following the invasion of Ukraine by Russia.
The world's third-largest exporter of high-grade iron ore pellets said export activities at the port of Pivdennyi, located in southwest Ukraine, have been temporarily suspended following notification from the port authorities. Ferrexpo uses the port to ship pellets to customers.
Mykolaiv is on the Southern Bug (Pivdennyi Buh) river, northwest of Kherson, where Ukrainian and Russian forces fought over a bridge yesterday.
— Michael Duitsman (@DuitsyWasHere) February 25, 2022
The group's mining and processing operations, which are located adjacent to the city of Horishni Plavni in central Ukraine, continue to operate. While Ukraine's logistic networks continue to experience disruption Ferrexpo will stockpile its iron ore pellets on-site.
Liberum Capital Markets said that while mining and processing operations continue to operate, it expects them to be eventually affected “by the tragic situation in the country”.
“The company has the ability to stockpile its iron ore pellets and we estimate the company's cash position at $150m based on strong FCF year to date and post the 6.6 cents interim dividend. The outlook in the short term remains very uncertain but the shares now pricing in c.70% loss of asset, which we believe is overdone,” the broker said.
“Our view is that Russia can not maintain a sustainable footprint in the country and the assets will remain in institutional investor hands. In a bear case scenario, a loss of production for next twelve months would reduce our valuation by 15% for FXPO (excluding shutdown and start-up costs) to 380p,” it added.
Shares in Ferrexpo, which plunged yesterday, were up 4.9% at 149.2p in the first hour of trading on Friday.