Ukraine orders bank accounts frozen at Ferrexpo's biggest arm

(Reuters) - Ukraine-focused Ferrexpo said on Tuesday a local court had ordered the freezing of the bank accounts of the miner’s largest unit in the country as part of an ongoing probe related to the potential underpayment of iron ore royalties from 2018 to 2021.

The London-listed group’s shares were down 2.5% at 0845 GMT.

The order was issued against Ferrexpo Poltava Mining (FPM), a subsidiary operating Ferrexpo’s largest mine.

Ukraine’s Office of Prosecutor General is probing charges of underpayment against FPM and another subsidiary, Ferrexpo Yeristovo Mining (FYM), which represents the group’s second largest mine.

FPM received a tax audit report in February 2022 which charged that underpayment of iron ore royalty payments from April 2017 to June 2021 amounted to about $35.6 million.

Ferrexpo on Tuesday denied all accusations made as part of the investigation and said it would appeal the decision.

The court order adds to Ferrexpo’s legal tussles in Ukraine.

Last September, an appeal court ruled that a share sale in FPM sold to entities owned by former CEO Kostyantin Zhevago in 2002 was invalid, and that the 40.19% stake needed to be transferred to the unit’s former shareholders.

The group last said at the time it was exploring all options, including appealing to Ukraine’s Supreme Court.

Zhevago, who is also Ferrexpo’s controlling shareholder, stepped down from the group’s board in late December shortly after he was arrested in France at Ukraine’s request on suspicion of embezzlement and money-laundering.

Ferrexpo, the world’s third-largest exporter of iron ore pellets, has all its operations in Ukraine.

Last month it reported a slump in annual production of pellets owing to higher costs, logistical constraints and disruptions caused by Russia’s invasion of Ukraine.

Reporting by Muhammed Husain in Bengaluru; editing by Sohini Goswami and Jason Neely