Ferrexpo (Price: 139p | Target: 192p | Rec: Buy) FXPO’s H1 13 iron ore pellet output has increased by 11.4% compared to H1 12.

Approaching 900,000t of pellets have now been produced from FYM ore during the first half, which demonstrates that good progress at this new mine is being made.

Providing the ramp-up continues well at FYM, we believe the company will meet our forecast full year pellet output of 10.7Mt.

We reiterate our Buy recommendation and leave our numbers unchanged. * Production detail: During Q2 13, FXPO produced 2.07Mt of 62% and 65% iron ore pellets from its FPM operation and 0.53Mt of pellets from its new FYM mine.

Total output, including that from third party materials, was 2.69Mt.

In terms of output from its own ore, FXPO’s Q2 production was 4.6% higher than Q1 13 and total output in H1 was up 11.4% YoY. * Ramp up progressing well, production on track: FXPO’s production numbers show progress in the ramp-up of the group’s new FYM operations, with the contribution from this mine increasing by 62% from the previous quarter.

We believe that, providing FXPO continues to demonstrate incremental increases to FYM’s output, that the group should meet our FY13E pellet production forecast of 10.7Mt. * Valuation and recommendation: We make no changes to our numbers so reiterate our 192p target price which is derived from an equal weighting of our estimation of the group’s NPV, including a risked expansion scenario, and a peer group relative P/E valuation.

Given the upside to the current share price, we reiterate our Buy recommendation.
To access the full note please click here Analyst: Louise Collinge
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