Ferrexpo says arrest of controlling shareholder is not related to the company

Iron ore producer Ferrexpo has said the arrest of its largest shareholder by French authorities was unrelated to the business.

Kostyantyn Zhevago, a former member of the Ukrainian Parliament, was detained in the French ski resort town of Courchevel on Wednesday at the request of Ukraine’s State Bureau of Investigation.

He has been accused of embezzlement and money laundering related to the disappearance of $113million from Finance & Credit, a defunct commercial bank which he owned until its collapse in 2015.

Difficulties: Ferrexpo’s output of iron ore pellets has been heavily impacted by the conflict this year, partly because Russian forces have blockaded vital Black Sea ports

A court in Ukraine initially issued an arrest warrant for him in 2019, with investigators claiming Zhevago violated ‘the interests of the state and the bank’s depositors’ before Interpol put out an international warrant on him two years later.

Once dubbed Europe’s ‘youngest self-made billionaire’ by Forbes magazine, Zhevago owns a 50.3 per cent stake in Ferrexpo through his Luxembourg-based holding company Fevamotinico.

After joining the mining group’s board in 2007, he eventually rose to become its chief executive before stepping down three years ago, soon after the Ukrainian state prosecutor’s office called him for questioning as a suspect.

Ferrexpo told investors on Thursday that it was ‘aware that Mr Zhevago has been detained in France by the French authorities, and the company understand that this is in relation to matters unrelated to Ferrexpo’.

Its statement continued: ‘The board of directors of Ferrexpo is seeking to clarify the situation and will update the market as appropriate.’ 

Zhevago has always denied any wrongdoing.

Zhevago’s arrest comes towards the end of a tumultuous year for the commodity trader, whose primary operations consist of three iron ore mines and a pellet production facility in Ukraine.

Output at these sites has been severely disrupted by Russia’s full-scale invasion, primarily due to the blockading of vital Black Sea ports and air strikes damaging Ukraine’s railway network, which has also been dealing with increasing grain shipments during the harvest season.

In October, operations at all the firm’s mines were temporarily halted following Russian missile attacks on electrical infrastructure close to the city of Horishni Plavni in central Ukraine.

The FTSE 250 company revealed production from July to September was more than two-thirds lower than the same period last year, while sales plunged by 65 per cent to 1 million tonnes.

Output was less badly affected over the previous six months, only falling by 14 per cent, yet half-year profits still plummeted by 88 per cent as the group was hit by rising inflation and energy prices.

Because of the instability resulting from the Ukraine war, Ferrexpo shares have lost 45 per cent of their value this year. Just before noon on Thursday, they were down 0.8 per cent to 163.2p.

This post first appeared on Dailymail.co.uk