Ukraine launches bid to seize mine owned by London-listed Ferrexpo

London-Listed Mining Firm Ferrexpo Faces Ukraine Court Battle Over Mine Nationalisation

A major London-listed mining company, Ferrexpo, is heading towards a significant legal clash with Ukraine in international courts. The dispute centres on plans by the Ukrainian government to partially nationalise a key mine located in the Eastern European nation.

Ferrexpo’s Core Asset at Risk

Ferrexpo, a constituent of the FTSE 250 index, operates the Poltava mine and processing facility, situated approximately 200 miles south-west of Kyiv. This mine represents the cornerstone of Ferrexpo’s operations, establishing the company as the globe’s third-largest exporter of iron pellets, a crucial commodity in steel production.

Oligarch’s Investigation and Mine Seizure Attempts

The Poltava mine and Ferrexpo’s investors have become entangled in Ukrainian President Volodymyr Zelensky’s campaign targeting oligarch Kostyantyn Zhevago. Mr. Zhevago is currently under investigation for alleged financial misappropriation linked to the collapse of a bank he controlled in 2015.

Established during the Soviet era in 1960, Ferrexpo transitioned under Mr. Zhevago’s control in 2007, subsequently being listed on the London Stock Exchange. The businessman retains a substantial 49.5 per cent stake in the company, valued at £182 million.

The remaining shares are held by prominent asset management firms, including BlackRock, Fidelity, JP Morgan, HSBC, and Legal & General, managing pension funds for British savers.

Kyiv’s attempts to recover funds linked to Mr. Zhevago initially involved seeking to seize his stake through London courts in 2023. Following the failure of this effort, the Ukrainian government is now pursuing direct acquisition of a stake in the Poltava mine.

International Arbitration Looms

Ferrexpo contends that Ukraine’s actions are unlawful and represent a breach of the bilateral investment treaty between Ukraine and the United Kingdom.

According to a document obtained by this publication, Ferrexpo has officially informed Ukraine that it will initiate international arbitration proceedings if the partial nationalisation proceeds. The document states that “this month, the State Bureau of Investigation mandated the transfer of 49.5 per cent of the corporate rights of Poltava to Ukraine’s National Recovery and Management Agency.”

It further asserts, “Under the Ukraine-UK trade agreement, investors are entitled to directly enforce guarantees against Ukraine through international arbitration and before an independent tribunal.”

Shareholder Disquiet

A top-ten shareholder, speaking anonymously, expressed concern, stating to The Mail on Sunday: “Ukraine should not be acting in this manner. Such conduct was unexpected in Europe.”

Ferrexpo Chairman Lucio Genovese voiced his dismay: “I am shocked. Our investors deserve respect. It defies logic that Ukraine is disregarding principles enshrined in both Ukrainian law and bilateral investment treaties established between Ukraine and the UK.”

He further cautioned, “This sets a problematic precedent for Ukraine’s reconstruction efforts, particularly in attracting American and European businesses. The government must reconsider this approach.”

The inquiry into Mr. Zhevago pertains to the alleged embezzlement of £87 million from Bank Finance & Credit, a Ukrainian financial institution owned by the tycoon, which was declared insolvent in 2015.

Last month, President Zelensky enacted sanctions against Mr. Zhevago and other Ukrainian oligarchs, accusing them of undermining national security and collaborating with Russia.

The Ukrainian government has been approached for their comments on this matter.

DIY Investing Platforms

These investment platform listings are editorially curated. Please note that This is Money may receive compensation from some providers if you engage with these offers. This selection process remains independent of any commercial influence.

Compare top investing accounts to find the best fit for you.