UPDATE 2-Czech NWR to buy 25 pct stake in iron ore firm

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PRAGUE, Oct 20 (Reuters) - Czech coal mining group New World Resources (NWR) (NWRS.L) (NWRSsp.PR) will acquire a 25 percent stake in Ukrainian iron ore company Ferrexpo (FXPO.L), giving it a foothold in the vast Ukraine market, the company said on Monday.

NWR said it would buy the stake from NWR's majority shareholder RPG Industries, which acquired the Ferrexpo stake this year, for 126.6 million pounds ($221.3 million).

"We view this relatively cheaply acquired option as a way toward more strategic opportunities in Ukraine, a country with huge coal reserves," said NWR's chief finance officer Marek Jelinek in a telephone interview following the announcement.

NWR, owner of the Czech Republic's largest hard coal mines, made its debut on stock markets in London, Prague and Warsaw in May, raising 1.1 billion pounds from investors.

The Dutch-registered company has long eyed a move into Ukraine to go along with expansion in Poland, where it is investing up to 800 million euros ($1.08 billion) to open the Debiensko mine.

NWR is also investing 300 million euros into upgrades at its Czech mines.

The company said the Ferrexpo acquisition will be funded entirely from NWR's cash position, which was 688 million euros at the end of June.

However, Jelinek said it would only be paying for the stake for now and not contributing cash to Ferrexpo's investment plans for which the Ukraine miner has been looking for partners.

The deal would potentially impact 2008 dividends, but the 2009 dividend should be unaffected. NWR aims to pay 50 percent of profits in dividend, the company said.

An extraordinary general meeting of shareholders will be convened to seek approval for the transaction, it said.

"Whilst opportunistic, this transaction is entirely consistent with our regional consolidation strategy set out at the time of our IPO in May," NWR Executive Chairman Mike Salamon said in a statement.

NWR stock fell 7.7 percent to 102 crowns on Monday, after an initial jump of nearly 10 percent in early trade, while the Prague PX .PX index gained 3.8 percent.

The shares have been knocked about as global commodity prices come off July highs, shedding 80 percent since mid-August.

NWR will announce its third-quarter results on Nov. 20, after posting a fivefold jump in the net profit in the second quarter to 69.7 million euros, but missing analyst forecasts. Revenue grew 57 percent to 324 million euros.

The miner, which generates the majority of earnings from coking coal, pre-fixes prices for annual and semi-annual contracts, and Jelinek said the company will look at developments in global prices, as well as looking at regional conditions, such as a lack of supply.

Jelinek also said the company could issue a bond or other form of debt financing before the end of the year, but no concrete plans were on the table yet.

(Reporting by Jan Korselt, Jana Mlcochova and Jan Lopatka; Editing by Rupert Winchester)