Ferrexpo's $90 Million Tax Hostage: How a Sanctioned Shareholder Is Draining the Miner's Cash

Ferrexpo's $69.4M in VAT refunds blocked by Ukraine sanctions on owner Zhevago; cash reserves only last to August, production at quarter of pre-war capacity.

The iron ore miner Ferrexpo is trapped in a paradox: personal sanctions against its majority owner Kostiantyn Zhevago are blocking $69.4 million in value-added tax refunds from the Ukrainian state, even though neither the company nor its operating subsidiaries are under any direct penalties. The resulting cash squeeze has left the London-listed group with barely enough money to survive August.

At mid-April 2026, Ferrexpo held roughly $20 million in available funds, of which only $17 million was truly accessible once funds tied up in the winding-down MBaer Merchant Bank are stripped out. A last-ditch sale of the bulk carrier Iron Destiny netted an extra $7.7 million, but internal forecasts still peg the cash runway at no more than the end of August. The company’s auditors have refused to sign off on a going-concern opinion unless at least $100 million in fresh equity is secured.

A Legal Tangle That Courts Cannot Untie

The core dispute turns on Article 200.4 of Ukraine’s tax code, which prohibits VAT refunds to any company whose ultimate beneficial owner is under personal sanctions. Zhevago, designated by Kyiv, holds his 49.32 percent stake through the Minco Trust and the entity Fevamotinico. As of March 31, 2026, the group’s net VAT receivable in Ukraine stood at $90.3 million, of which $78.9 million had been formally claimed. The $69.4 million tranche covering January to December 2025 is the sum the tax authority is explicitly blocking. Even court rulings in Ferrexpo’s favour have proved useless: Article 200.12 prevents the treasury from releasing the money regardless of judicial orders.

The deadlock has reached the Verkhovna Rada. A parliamentary committee on economic development has formed a working group to examine operational bottlenecks in Ukraine’s mining sector, with Ferrexpo’s Poltava mine as the first case study. At the inaugural session, representatives from the economy ministry, the central bank, the justice ministry, the tax service, and mine management all took part. One lawmaker raised an additional claim: that the parent company Ferrexpo AG owes Poltava Mining more than $500 million in unremitted foreign-currency revenues, a debt supposedly backed by international arbitration awards. So far, political pressure alone has not unlocked a single dollar of the blocked VAT.

Production at a Quarter of Pre-War Capacity

The financial crisis is compounded by operational devastation. In the first quarter of 2026, iron ore output tumbled 72.1 percent year on year to 592,751 tonnes, while pellet production fell 61 percent to around 525,000 tonnes. Nationwide strikes on Ukraine’s power grid had forced near-complete shutdowns; production has since resumed but only at roughly a quarter of pre-war capacity. The company now imports electricity from the European Union at significantly higher prices. The iron ore price of roughly $111 per tonne offers some relief, but new supply from mega-projects such as Simandou in Guinea and persistent weakness in China’s property sector are capping any sustained recovery.

Equity Raise Meets Shareholder Conditions

Ferrexpo’s only realistic escape route is a conditional placement of new shares to institutional investors. The company has secured non-binding expressions of interest, but specific terms remain open. The auditors’ requirement of at least $100 million in new equity is the formal precondition for lifting the trading suspension that has frozen Ferrexpo’s shares on the London Stock Exchange since early May. The stock last changed hands at 28.58 pence, barely above its 52-week low of 27.20 pence.

The largest shareholder, Fevamotinico, has signalled support for the capital increase — but only on condition that it can participate pro rata to maintain its 49.32 percent stake. Without both the equity injection and a resolution to the tax dispute in Kyiv, management warns that insolvency of the parent company or its subsidiaries is “highly probable.”

A Symbolic ETF Inclusion Offers No Comfort

In a development that carries more symbolism than substance, Ferrexpo has been added to the Ukraine Reconstruction ETF traded in London. Index provider VettaFi lowered its liquidity thresholds to accommodate the stock, and HANetf stressed that the inclusion is purely mechanical, following index methodology with no discretionary judgement involved. Ferrexpo’s shares will remain suspended until the 2025 annual report is published, and that report depends entirely on the capital raise being completed. With the cash clock ticking toward the end of August, the gap between a $100 million rescue and a $90 million tax trap could hardly be narrower.