Coal and steel coming together in Central Europe

first_imgCentral Europe’s leading coking coal producer, New World Resources (NWR) has accepted the offer made by its majority shareholder, RPG Industries (RPGI), to acquire all of RPGI’s 147,156,037 Ferrexpo ordinary shares, representing a holding of 25% plus one share in Ferrexpo, a leading iron ore producer in the region, subject to shareholder approval and certain customary conditions. NWR says there is “potential to explore the development of a powerful regional growth platform in carbon steel materials.”Ferrexpo has a robust balance sheet, controls 6,500 Mt of JORC resources plus approximately 14,000 Mt of further Soviet-classified resources in Ukraine and has an ambition to become Europe’s largest iron ore producer.NWR and Ferrexpo are strongly complementary in terms of regional focus, customer base, strategy and management approach, which NWR believes will enhance the regional footprint and growth opportunities of both companies. The Transaction is expected to be earnings accretive in the first full year post completion.The NWR Board has also agreed to review the potential benefits of a formal strategic alliance with Ferrexpo. NWR says the transaction is consistent with its regional consolidation strategy and provides it with a significant shareholding in one of Central and Eastern Europe’s (CEE) largest iron ore pellet producers.Ferrexpo controls one of Europe’s largest, low cost iron ore resources and has announced expansion plans to increase production capacity to 35 Mt/y of iron ore pellets over the next 10 years. In 2007, Ferrexpo produced 28.9 Mt of iron ore and 9.1 Mt of iron ore pellets.The Transaction will diversify NWR’s earnings within the attractive carbon steel materials value chain and enhance its position in the CEE region, where strong GDP growth is expected to continue to drive demand for coking coal, thermal coal and iron ore. It will also facilitate the development of potential coal opportunities in Ukraine and provide NWR exposure to Ferrexpo’s significant organic iron ore development growth options in the Poltava area. There is also the chance to unlock the potential to leverage the broad range of overlapping existing customer relationships.Commenting on the Transaction, Miklos Salamon, NWR’s Executive Chairman, said: “We are taking advantage of a unique market opportunity to secure a significant holding in Ferrexpo at an attractive valuation. Ferrexpo will be Europe’s largest iron ore producer and has one of the world’s largest iron deposits. Whilst opportunistic, this transaction is entirely consistent with our regional consolidation strategy set out at the time of our IPO in May. We believe that Ukraine offers exciting opportunities for NWR. Both companies share a common management approach, strategy and regional customer base. Given the complementary nature of the NWR and Ferrexpo businesses, we believe that the relationship between the two companies is important as it presents the potential for us to create a powerful carbon steel materials business that diversifies our earnings and enhances our regional footprint and growth opportunities. We believe the outlook for both coking coal and iron ore remains attractive in the region and that this transaction better positions NWR for the future.”last_img

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