By Eric Onstad
LONDON (Reuters) - Ukrainian iron ore producer Ferrexpo is selling its entire output and trading profitably, although spot prices remain under pressure, the London-listed company said on Tuesday.
It also advised shareholders to vote against a proposal to appoint two members to the board by a new shareholder with a stake of around 10 percent.
"Ferrexpo continues to perform well in extremely tough trading conditions," Chairman Michael Abrahams said. "Cash costs of production continue to benefit from the weaker Ukrainian hyrvnia, and Ferrexpo continues to trade profitably."
Sales volumes in April were 898,000 tonnes, more than its production in the month, the company said in a trading statement ahead of its annual general meeting.
"Importantly the company is now seeing a tentative recovery in demand from its core Ukrainian and European customers which historically account for about 85 percent of sales," analyst Michael Rawlinson at Liberum Capital said.
The shares, which have jumped 82 percent over the past month, gained 3.8 percent to 151.5 pence by 9:30 a.m., compared to a 4.7 percent increase in the mining index, lifted by strong metals prices and hopes of economic recovery.
Ferrexpo shares, however, are still only one-third of their value seen at record peaks last June.
The purchase of a 10 percent stake by Hanover Nominees Ltd is likely the reason behind the big surge in Ferrexpo shares recently, Rawlinson said.
"With Hanover's intentions unclear and with Ferrexpo's minimal and illiquid freefloat of about 15 percent, the drivers for the stock's performance are now not clear to us."
Ferrexpo is 51 percent-owned by Ukrainian billionaire Kostyantin Zhevago, who took the reins as chief executive several months ago.
TWO NEW BOARD MEMBERS?
In a separate statement, Ferrexpo said Hanover Nominees Ltd, requested a general meeting to vote on a proposal to nominate two members to the board.
Ferrexpo said under company law it is required to hold such a meeting, which will take place on June 12, but it has advised shareholders to vote against the proposal, without giving details.
A Ferrexpo spokesman said Hanover Nominees comprise Ralkon Commercial and Fayver Properties Inc, which issued a statement last week opposing a resolution at Tuesday's AGM to allow the firm to buy back up to 10 percent of its shares.
The firm has no immediate intention of buying back shares, but wants the flexibility for the future, the spokesman added.
The main reason for weak spot iron ore prices into China on an FOB basis were high freight rates from the Black Sea into China. But reliance of Ferrexpo on seaborne sales into China has been lessened recently since some demand has returned in its home market.
"The resumption of sales to certain European and Ukrainian customers indicates the start of a slow normalisation of sales conditions in these markets," the statement said.
"We expect pricing to remain under pressure in the current quarter and although there is a likelihood of improvements in the market, it is difficult to predict with certainty the outcome in the second half of the year."
(Reporting by Eric Onstad; Editing by Dan Lalor and Simon Jessop)