(Adds analyst comment, updates shares, details)
By Eric Onstad
LONDON, Oct 6 (Reuters) - The majority owner of Ukrainian
iron ore miner Ferrexpo <FXPO.L> sold a 20.8 percent stake at a
big discount to the main shareholder of Czech coal producer New
World Resources <NWRS.L> <NWRSsp.PR> to satisfy a loan
agreement.
Fevamotinico, controlled by Ukrainian billionaire Kostyantin
Zhevago, said on Monday it retains a 51 percent stake in
Ferrexpo following the divestment at 86 pence a share, 30
percent below London-listed Ferrexpo's closing price on Friday.
The Ferrexpo stake was bought by New World Resources'
majority shareholder, RPG Industries. RPGI has offered to
transfer the Ferrexpo shares to New World at cost.
Ferrexpo shares fell 6.3 percent to 110 pence while New
World lost 17 percent to 540 pence by 1048 GMT, compared to a
9.7 percent slide in the UK mining index <.FTNMX1770>. Ferrexpo
shares have lost nearly half their value over the past two
weeks.
The sale resulted from a loan agreement Fevamotinico had
with JP Morgan, Ferrexpo said in a statement. Following the
sale, "the loan will be fully discharged and Fevamotinico's
remaining shareholding in Ferrexpo will be free of lien,
security or other charges granted in favour of JP Morgan."
Analyst Michael Rawlinson at Liberum Capital said it was
clear Zhevago was a forced seller when JP Morgan called in the
loan, for which the shares were held as collateral.
"As with other mining valuations, the market is pricing in a
crash in iron ore pricing -- something that we feel is a remote
possibility given the new entrants on the cost curve in recent
years and their high relative cost positions," Rawlinson said.
Ferrexpo, the world's 12th-largest producer of iron ore
pellets, doubled its first-half earnings per share on the back
of record prices and shortly afterwards launched a share buyback
to return excess cash to shareholders.
COOPERATION
"Fevamotinico and RPGI have committed to support any future
cooperation between NWR and Ferrexpo, which may include
reciprocal board seats," a statement by RPGI said.
Both New World and Ferrexpo said their respective boards
would hold separate meetings to discuss the development.
Ferrexpo said the sale had no bearing on the firm's
business. The company has locked in price rises of over 90
percent for its iron ore in annual price settlement that extends
through March 2009.
It has said it expected to conclude its search for a
strategic partner for growth projects in the fourth quarter.
The growth projects are the centrepiece of plans by Ferrexpo
-- which owns one of the biggest iron ore resources in the world
-- to raise production nearly fourfold to around 100 million
tonnes by 2018.
Ferrexpo was the first Ukrainian company to list on the main
market of the London Stock Exchange when it floated in June
2007.
New World, which operates the Czech Republic's biggest
mines, reported a fivefold jump in second-quarter net profit in
August thanks to soaring coal prices, but the figure missed
analyst forecasts because of higher costs.
NWR, also listed in Prague and Warsaw, sold a 36.2 percent
stake for 1.3 billion pounds in May in the biggest initial
public offering on the London exchange so far this year.
(Reporting by Eric Onstad; Editing by Quentin Bryar and John
Stonestreet)
