Metals and Mining
December 14, 2015
Ferrexpo’s business model has been hammered by 2015’s long slump in benchmark iron ore prices, which are down by 45% YtD, compounded with a 55% YtD decline in the pellet-to-fines premium. With no short-term improvement in the market likely, we forecast that Ferrexpo’s EBITDA will plummet by 75% YoY in FY16 to USD 65mn, possibly leaving the company unable to cover its interest costs. If no liquidity injection is provided by the group’s majority owner, we expect Ferrexpo to default on part of its heavy debt load as soon as 1Q16. At current market prices, Ferrexpo’s equity & bonds thus look overvalued to us.
