Ferrexpo subsidiary ordered to freeze bank accounts amid claims of underpaying royalties

Ferrexpo subsidiary ordered to freeze its bank accounts by Ukraine court amid claims of underpaying royalties

  • The Swiss-based company has denied all accusations related to the probe 
  • It is already experiencing major operational turmoil from the war in Ukraine 
  • Ferrexpo recently revealed that iron ore pellet production fell by 46% in 2022

A Ukrainian court has ordered the bank accounts of FTSE 250 Ferrexpo subsidiary Poltava Mining to be frozen as part of an investigation into royalty payments.

The Swiss-based commodities trader has denied all accusations related to the probe, which concerns the alleged underpayment of iron ore royalties between 2018 and 2021. 

A year ago, the firm’s two largest divisions – Poltava Mining and Yeristovo Mining – received requests from Ukraine’s Office of Prosecutor General for information and witnesses to help with its inquiry into the matter.

Soon afterwards, Poltava received a tax audit report from the authorities claiming it had failed to pay around $35,600 in royalties from April 2017 to June 2021. 

Investigation: Ferrexpo has vehemently denied all accusations related to the probe, which concerns the alleged underpayment of iron ore royalties between 2018 and 2021

Ferrexpo disagreed with the findings, later telling investors that Poltava had ‘compelling arguments to defend its position in the court.’

Following the recent court order against the subsidiary, the London-listed miner plans to appeal the decision.

Ferrexpo said: ‘The group has consistently followed the established legal due process for such disputes, and…has fully cooperated with local authorities throughout this process to date.

‘Furthermore, the group notes that the nature of the investigation is similar to two separate investigations previously faced by other major international metals and mining companies operating within Ukraine.’

Tuesday’s announcement represents the latest legal struggle for Ferrexpo, which is already experiencing significant financial and operational turmoil resulting from Russia’s invasion of Ukraine.

Last September, an appeal court ruled that a 40.2 per cent stake in Poltava sold to nominee businesses controlled by former chief executive Kostyantin Zhevago was not valid and had to be transferred to its previous investors.

Zhevago, a former member of Ukraine’s Parliament who is also Ferrexpo’s biggest shareholder, stepped down as one of its non-executive directors soon after being arrested by French police in late December.

An international arrest warrant was issued for him in 2021 concerning allegations of money laundering and embezzlement concerning the disappearance of $113million from Finance & Credit, a defunct commercial bank he once owned.

Zhevago has consistently denied any wrongdoing, while Ferrexpo insists his arrestwas unrelated to the company. 

In January, the firm revealed that iron ore pellet production plummeted by 46 per cent to 6.1 million tonnes last year due to the war.

Output was impacted by the Russian military blockade of vital Black Sea ports, and air strikes hitting Ukraine’s railway network and electrical infrastructure.

This particularly impacted the company’s operations during the fourth quarter, when it only produced about 400,000 tonnes of iron ore, compared to 3.1 million tonnes the previous year.

Ferrexpo shares were 2.75 per cent lower at 148.3p on late Tuesday morning, meaning their value has slumped by around 45 per cent in the past 12 months.

Read more at DailyMail.co.uk