Ferrexpo shares sag after news of overdue $10m VAT receivable

Shares in Ferrexpo were down almost 6% as investors in the the iron-ore pellet producer soured following news it has an overdue $10 million VAT receivable that was due for repayment at end-April.

The news came as the group issued a generally chipper trading update for first-quarter 2016 at its annual meeting today.

It said pellet production from own ore rose 6% to 2.9 million tonnes in the quarter, from the same period a year earlier. Output of premium 65% Fe pellets, from own ore, firmed 20% in the three-month period, on the year.

Overall, Ferrexpo said, premium 65% Fe pellets represented 96% of total production volumes, against 85% in the same quarter of 2015. Total output, including third-party ore, was in line with the first quarter of 2015 at 2.9 million tonnes.

The company said the average C1 cash cost of pellet production continued to fall in the first quarter due to increased production from own ore, lower oil prices and the Hryvnia devaluation against the US dollar.

The cash cost of production increased marginally in April following a recovery in oil prices.

"Year to date, sales volumes have been underpinned by strong demand for pellets. The company is pleased to report that in May it has made shipments to new high-quality customers in Western Europe and South East Asia," said Ferrexpo.

"With increasing demand, spot pellet premiums are improving from the low levels of December 2015 although, so far, they remain below 2015 average levels."

Ferrexpo added that, as at 30 April, it had repaid $103 million of debt amortisation and interest costs since 1 January.