Mining company Ferrexpo, whose principal assets are located in Ukraine, reduced its additions to property, plant and equipment by over 50% year-on-year in January-June this year, to $13.892 million from $29.457 million.
According to Ferrexpo's half-year report, additions to property, plant and equipment amounted to $63.755 million as of the end of 2025.
At the same time, during the six-month period ended June 30, 2026, the net book value of disposals of property, plant and equipment totalled $5.509 million (December 31, 2025: $181,000; June 30, 2025: $1.218 million). Total depreciation charged during the period amounted to $12.951 million (December 31, 2025: $65.802 million; June 30, 2025: $34.418 million).
Assets under construction include capital projects in progress totaling $196.039 million (December 31, 2025: $197.838 million; June 30, 2025: $188.150 million) and capitalized stripping costs incurred prior to the commencement of mining, amounting to $29.280 million (December 31, 2025: $31.223 million; June 30, 2025: $31.712 million), relating to portions of ore bodies whose commissioning is expected only in future periods.
In addition, after ore mining begins, capitalized stripping costs are transferred to mining assets and depreciation begins to be charged.
The carrying amount of property, plant and equipment includes capitalized borrowing costs related to qualifying assets totaling $18.349 million (December 31, 2025: $21.4 million; June 30, 2025: $23.826 million). No borrowing costs were capitalized during the period ended June 30, 2026, or the comparable periods.
The statement explains that the group's asset impairment testing is based on cash flow forecasts over the remaining estimated useful lives of the Horishneplavni-Lavrykivske and Yeristovo deposits, which, according to current approved mining plans, are expected to end in 2058 and 2048, respectively.
According to the report, the group's long-term financial model is continuously updated. It takes into account current operating conditions, which depend to a significant extent on the stability of electricity supplies, energy prices, the available logistics network, as well as other potential adverse factors caused by the war. As a result of current constraints, the production capacity used to forecast cash flows under the base case is expected to be approximately 32% of the pre-war level in fiscal 2026, increase to around 63% in 2027 and recover to pre-war levels in the second half of 2028.
Regarding the key assumptions, an average index price for iron ore (65% Fe fines) of $115 per tonne on a CFR North China basis was used for the cash flow forecast for the next five years. In assessing the expected long-term selling price, the group takes into account the results of external and internal analyses of short- and long-term supply and demand dynamics in the international iron ore pellet and concentrate market, as well as specific local supply and demand indicators affecting the group's key customers. Due to growing demand for high-quality concentrate and the expected margin calculated based on projected market conditions, the share of concentrate production in the current long-term model has increased substantially.
At the same time, the group is expected to adjust the mix of iron ore products in its production plan in line with future market conditions and taking into account the operating situation that will prevail in Ukraine at that time. The group's main expense items, particularly production and transportation costs, are determined taking into account local inflationary pressures, movements in the hryvnia-to-U.S. dollar exchange rate, short- and long-term supply and demand trends for energy resources, as well as expected changes in the prices of raw materials related to steel production, which may have a significant impact on the cost of certain production materials. Regarding the logistics route through Ukraine's Black Sea ports, which is currently unavailable, management believes that, given the importance of this route both to the parties to the conflict and to global grain supplies, the situation will improve in 2027 and therefore expects Ukraine's Black Sea ports to become accessible to the group again for sales to certain markets.
Given the increased share of concentrate production in the current long-term model, management analyzed whether this could indicate that the assets used to produce pellets and concentrate represent two separate cash-generating units (CGUs). Following a thorough analysis, management concluded that it remains appropriate to test the group's non-current operating assets as a single CGU, taking into account the high degree of vertical integration of production at the group's principal subsidiary, Poltava Mining and Processing Plant, and the absence of substantially independent cash flows.
The group conducts transactions on market terms with entities under the common control of Kostyantyn Zhevago and related parties. Such transactions are considered part of the group's ordinary course of business. During 2025, the group posted bail of UAH 5 million (or approximately $120,000) for a senior executive of one of the group's subsidiaries in Ukraine. The bail payment was related to judicial and other legal proceedings initiated by certain government authorities against group subsidiaries and senior executives in Ukraine. In March 2026, a court canceled the bail decision, after which the funds were returned to the subsidiary. No similar payments were made during the first six months of 2026.
The group effectively has no debt obligations: as of June 30, 2026, it had a net cash position of $21 million (compared with $47 million as of December 31, 2025). Except for lease liabilities totaling $10 million (December 31, 2025: $11 million), as of June 30, 2026 and December 31, 2025, the group had no outstanding interest-bearing loans or borrowings.
As of June 30, 2026, Ferrexpo's long-term corporate credit rating and debt rating assigned by Moody's were Caa3 with a "negative" outlook. At the group's request, Fitch and S&P no longer provide ratings.
As reported, Ferrexpo ended the first half of 2026 with a net loss of $14.9 million, 13.2 times lower than in the first half of 2025, while revenue fell 2.3 times to $196 million. The company reduced capital expenditures (CapEx) to $10 million from $28 million in January-June 2025, allocating 88% of these expenditures to projects necessary to sustain operations and only 12% to development projects.
Ferrexpo owns a 100% stake in Yeristovo Mining LLC, a 99.9% stake in Belanovo Mining LLC, and 100% of the shares in PrJSC Poltava Mining.
