Switzerland-based iron ore miner Ferrexpo, whose main interests are in Ukrainian iron ore assets, has said that its outlook for 2010 is considerably more positive than it was for 2009, marked by increased visibility and strengthening iron ore prices, adding that it is well placed to capitalize on any growth opportunities.
As the iron ore market began to show signs of stability in the second half of 2009, since the beginning of the current year Ferrexpo has been able to increase the number of long-term contracts on its books and to increase earnings visibility, witnessing also strong prices for iron ore. The company said that, in addition to consumption from China, it sees a "slow but definite recovery in steel demand" in Europe, where it traditionally sells most of its iron ore production due to its competitive advantage of short transportation routes via rail and port in Ukraine.
"The group has resumed contract sales to its higher margin traditional market customers, but retains the ability to access the seaborne market to compensate for any recurring weakness in these markets. The group is exposed to the positive outlook for iron ore pricing. In view of higher pricing, we expect Ferrexpo to continue to trade profitably and to increase margins in the year ahead," reads the company's statement.
In January and February this year, Ferrexpo sold over 90 percent of its sales under long-term contracts and 63 percent to customers in its traditional markets. Its average iron ore prices to date are slightly ahead of the fourth quarter of 2009.
Throughout 2010, Ferrexpo said it will "continually assess opportunities to accelerate investment into key development projects, in line with the economic climate."
The company's core development projects are focused primarily on the increase of output, enhancing product quality from its existing operations and accessing more of the group's substantial ore reserves at the Yeristovskoye deposit with the aim of doubling production.
In 2010, Ferrexpo will continue stripping at its Yeristovskoye mine, where the company has completed a definitive feasibility study, and plans to move to ore production in early 2013. The company will also continue with its strategy of producing more higher grade 65 percent iron pellets, in line with its stated objective to increase sales of higher margin products.