Ukrainian mining company Ferrexpo is facing a severe financial crisis following a Russian drone attack that damaged a cargo ship carrying its iron ore pellets in the Black Sea. The incident, which resulted in the death of one crew member, has significantly worsened the group’s liquidity position and threatens to push the firm toward insolvency by the end of August.
The attack targeted a vessel transporting 55,000 tonnes of high-grade iron ore pellets through Ukrainian waters, which Ferrexpo described as an “unprovoked attack on a civilian vessel.” While the ship remains afloat, the company said that the condition of both the cargo and the vessel’s structural integrity remain uncertain. Efforts are reportedly underway to salvage the ship.
Ferrexpo’s financial difficulties predate the drone strike, stemming from ongoing disruptions linked to Russia’s invasion of Ukraine and legal actions related to the firm’s largest shareholder, Kostyantin Zhevago. The mining company, which operates iron ore mines in central Ukraine, first warned in April that it risked exhausting its cash reserves by August and would have to file for insolvency unless it raised $100 million in equity. The company’s shares were suspended due to delays in filing accounts.
Prior to the attack, the firm had managed to extend its cash runway into the early fourth quarter through cost-saving measures. However, the recent damage to its shipment has forced Ferrexpo to revise its cash flow forecast downward, projecting that available funds will only last through the end of August. At the end of June, the company reported holding $21 million in cash.
Ferrexpo’s value has fallen sharply since mid-2021, from a peak of approximately £2.7 billion to about £170 million at the time its shares were suspended. Its production and export capabilities have been increasingly constrained by ongoing military hostilities that disrupt power supplies and logistics. Additionally, the Ukrainian government’s suspension of VAT refunds, which amounts to tens of millions of dollars, has placed further strain on Ferrexpo’s finances. This suspension is linked to sanctions against Zhevago, who faces embezzlement accusations related to a failed bank he once controlled; he denies all charges. Zhevago retains near half ownership of Ferrexpo and must approve any equity financing, though his involvement raises legal and political complexities.
The company had planned to increase exports of its iron ore pellets through Black Sea ports to customers in the Middle East during the latter half of the year. Nevertheless, following the attack, ship owners have begun withdrawing vessels from the route, and Ferrexpo does not anticipate being able to ship additional cargo via this corridor in the near future. The firm currently holds about 189,000 tonnes of pellets designated for shipment, including the cargo aboard the damaged vessel, with associated production and delivery costs estimated at roughly $20 million.
Ferrexpo has initiated claims with its insurers but indicated that any potential compensation is unlikely to arrive soon enough to alleviate the present cash flow challenges. The company’s future now hinges on the successful completion of its planned $100 million equity raise amid ongoing geopolitical, legal, and operational uncertainties.