• Co faces liquidity issues due to halted VAT refunds
• Production limited to one pellet line, output at 1.35 mln tonnes
• Total quarterly output highest since war in Ukraine began

April 7 (Reuters) - Ukraine-focused miner Ferrexpo (FXPO.L) , opens new tab reported a 26% drop in first-quarter iron ore pellet production on Monday, as a suspension of its VAT refunds in the country cut liquidity and forced it to scale back operations.

Shares in the London-listed company fell 8.3% to 43.9 pence in early trading, amid a global market rout in the wake of drastic U.S. tariffs.

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"The environment in which we are operating has become increasingly challenging," Interim Executive Chair Lucio Genovese said, citing lower funds and "significant" cost-cutting measures across the business.

Last month, the miner said Ukrainian tax authorities suspended its VAT refund worth 512.9 million hryvnias ($12.5 million) due to sanctions on its largest shareholder who was accused of alleged embezzlement.

Ferrexpo had said the sanctions were not imposed directly on it or its units.

"We continue to make representations to the Ukrainian government and other stakeholders to restore the refund of VAT," Genovese added.

Ferrexpo said it could only operate one pellet line during the quarter, leading production to fall to 1.35 million metric tons from 1.81 million tons in the three months to March 31.

Total commercial production, which also includes iron ore, grew 20% quarter-on-quarter to 2.13 million tonnes, its highest quarterly output since the beginning of the war in Ukraine.

However, this did not translate into improved earnings due to high input costs, particularly imported electricity, and deteriorating iron ore prices, the company said.

($1 = 41.1000 hryvnias)

https://www.reuters.com/markets/commodities/ferrexpos-pellet-production-drops-26-ukraine-halts-vat-refund-2025-04-07/