Ferrexpo's $69 Million VAT Dispute Deepens Cash Crisis as August Funding Deadline Looms

Ferrexpo's cash near depletion after $69.4M VAT refund blocked due to Ukraine sanctions on its owner. Equity raise needed to avoid insolvency by August 2026.

The iron ore miner Ferrexpo is caught in a pincer movement between a sanctions-linked tax dispute and a vanishing liquidity buffer. While its shares have been suspended from trading in London since 1 May, the real pressure is building inside the company's treasury. Blocked value-added tax refunds from Ukrainian authorities, totalling $69.4 million, have become the single biggest obstacle to restoring financial stability — and no court ruling has yet forced the money to flow.

The net VAT receivable stood at $90.3 million, of which $78.9 million had been claimed for repayment. But the tax office refused to release $69.4 million, citing Article 200.4 of the Ukrainian tax code, which bars repayments to entities whose ownership includes sanctioned individuals. The beneficial owner, Kostiantyn Zhevago, is under personal Ukraine sanctions. He is the beneficiary of the Minco Trust, which controls Fevamotinico — the company's largest shareholder with a 49.32% stake in ordinary shares. This legal link has frozen a critical source of working capital.

Ferrexpo's cash position has deteriorated sharply as a result. Net liquidity fell from $47 million at the end of December to roughly $20 million by 17 April 2026, with only about $17 million directly accessible once funds held at the winding-down MBaer Merchant Bank are excluded. The company warns that without a successful capital injection, available cash will run out approximately by the end of August 2026. If the VAT impasse persists, insolvency of the parent or group entities becomes "highly probable," according to management.

To stay afloat, the board sees an equity raise as the only viable route. Expressions of interest from institutional investors exceed $100 million, but the terms have not aligned with the tight timeline. Fevamotinico has signalled support, provided it can participate pro rata and the total capital raise does not exceed $100 million. Any deal must be completed before audited 2025 accounts can be published — the final condition for lifting the trading suspension. No reliable date for a resumption has been given.

Operationally, the company is running at a fraction of its capacity. Iron ore pellet production in the first quarter collapsed to 592,751 tonnes, a 72.1% drop year-on-year and a 44.8% decline from the previous quarter. Sales of pellets reached 524,926 tonnes, down 61.0% from a year earlier. The slump followed nationwide attacks on Ukraine's power grid and energy infrastructure in January, which forced a full production halt. Only one of four pellet lines has restarted since late February, and output remains reduced.

Management has responded by slashing costs: reduced working hours, lower procurement spending, and a freeze on non-essential investment and voluntary expenditure. Sales to European customers continue, though the limited capacity constrains revenue. A short, three-day ceasefire between Russia and Ukraine, accompanied by an exchange of 1,000 prisoners, has brought a glimmer of hope that energy infrastructure might be spared in the future. But the deal is fragile, and Moscow's talk of peace talks remains conditional.

In Kyiv, a parliamentary committee has taken up Ferrexpo's case as a test model for mining companies facing similar bottlenecks. A working group is examining power shortages, high energy costs, blocked VAT refunds, and overdue foreign-exchange payments from the parent. One lawmaker noted that Ferrexpo AG owes the Poltava mining and processing plant more than $500 million in unpaid hard-currency revenues — a claim backed by international arbitration rulings.

The company's London-listed shares last traded at 28.58 pence, giving a market capitalisation of roughly £168 million. The 52-week range of 27.20 to 87.10 pence underscores how war, production losses and the liquidity squeeze have hammered investor confidence. For now, the path back to normality depends on one thing: a capital inflow that buys enough time to resolve the VAT deadlock. Until then, Ferrexpo is racing two clocks — one financial, one operational — and both are ticking down to the same August deadline.