1.4x FCF And Trading at 60% of TBV
This is also a high-quality business with a 5Y dividend yield of almost 40%.
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On February 24th 2026, news broke of a court proceeding to force bankrupcy.
This sounds worse than it actually is, because nothing can happen until another court ruling (supreme court) has passed their judgement.
However, it was another issue in a long line of issues that Ferrexpo is facing.
I’m a pretty patient guy, and uncertainty doesn’t phase me, but this scenario simply became too ‘stacked’ with problems.
For example, since the write up was published, the business is struggling to even operate in any capacity.
It’s electricity supplies have been attacked, which makes operations almost impossible.
The company trying to force bankruptcy is doing so through the Ukrainian courts, which are openly hostile to Ferrexpo.
In fact, there is a political campaign to literally kill the business.
This is all explained in the original write-up below, but the reason I exited was because things just seem to continue getting worse.
If I owned Ferrexpo whole, I’d be at the point of writing it off as a bad investment, with no hope of generating cash from it again.
Therefore, it seemed wise to sell the stock.
Published price = £0.55
Exit price = £0.50
This represents a loss of roughly 9%.
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Original post published on 23rd October 2025:
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Introducing today’s stock:
NCAV Ratio = 6.3
TBV Ratio = 0.6
EV/5Y FCF Ratio = 1.4
P/5Y FCF Ratio = 1.8
I explained my calculation of fair value in this post. For this business, I estimate there to be almost 300% upside from today’s price.
There is also at least 50% upside to the liquidation value of the business.
If we calculate the cash paid to shareholders in dividends over the last 5 years, the average annual yield, at today’s market cap, is 39.83%.
The 10-year figure is 27.87% and the 20-year figure is 17.97%.
The business has virtually no debt and $50m of cash in the bank on a market cap of around $480m.
Over the last 5 years, its FCF has averaged $269m per year (10 year avg = $232m, 20 year avg = $135m).
This is a solid business that, under normal circumstances, throws off lots and lots of cash.
Its core product is in global demand, which is expected to grow and grow over the next decade.
Annnnd, I know what you’re thinking….
I said ‘under normal circumstances’ so there must be some sort of dirty little catch.
Which, of course, is correct.
In fact, as I dug deeper into the story behind this business, and its recent sell-off, the story became darker and weirder.
This is a very unusual situation because there are essentially no issues with the business itself.
All of the ‘weirdness’ comes from external sources. Stuff that’s beyond the control of the management team, but also, insanely irrational.
I bought this stock because I believe that everything is lined up to generate a significant return for patient investors.
Welcome, ladies and gentlemen, to the second weirdest story I found this year (No.1 is here)...
The Business
Ferrexpo (FXPO) is a London-listed, Swiss-based iron ore mining company.
Its main assets are based in central Ukraine, and they sell high-grade iron ore pellets to premium steelmakers.
The curious thing about this situation is that it’s not actually the current war in Ukraine that poses the biggest threat to the business.
Of course, that’s part of it, but there is also much more going on beneath the surface.
I’ll get to all that shortly.
The business owns three mines (Poltava, Yeristovo, and Belanovo), a processing complex, and an integrated logistics network.
The logistics element is quite interesting to those that view stocks through the lens of business owners.
It seems like they own thousands of railcars along with barges and port facilities.
The idea is that they control the entire process, from digging the iron out of the ground, to delivering it to their customers.
They sell globally.
They have strong demand from China and south-east Asia, along with India and MENA, and central and western Europe.
Since the war started, they have been forced to focus mostly on local sales around Europe, and have restructured their logistics accordingly.
Although, they aim to resuming seaborne shipments via alternative ports, ASAP.
Almost all revenue is generated from selling iron ore pellets.
Pre-war, they started shifting focus to something called 67% Fe DR pellets. Apparently this type of iron is critical for the ‘decarbonisation’ of steel-making.
Without getting into a draw-out debate as to whether industrial steel-making can ever truly be called ‘green’, the bottom line is, the margins are much higher.
Whatever is good for margins, is, generally, good for owners.
Why It’s Cheap
Obviously, the invasion took its toll.
It made it difficult to export its product via the black sea, and employees left to serve on the front lines.
Energy prices went sky high, because the business couldn’t rely on local infrastructure (due to all the bombing and destruction).
However, the business was remarkably resilient.
When the CEO retired, a new interim chair was appointed to manage the crisis. He was very experienced in the industry, and had spent many years working in the business.
Everything he did, led to cost-reductions and more stability in the short term.
As a business owner looking in, I would have been very pleased with what I saw, in terms of how the company was managing the situation and the cash flow.
It was the best of a really bad situation.
However, things were about to get much worse…
The Risks
To understand why, we need to look at who owns the company.
49% of the stock is owned, via a holding company, by a guy called Kostyantin Zhevago.
He was a member of Ukraine parliament between 1998 and 2019. He was also Ferrexpo CEO until 2019.
In 2015, a bank that he owned went bankrupt.
During that time, $113m apparently went ‘missing’ and Ukrainian authorities have been chasing after it ever since.
This drama has escalated against the backdrop of war and martial law.
This took a twist when Ferrexpo received notice of a civil lawsuit, related to the liquidation of Zhevago’s bank.
Apparently, one of the creditors of the bank (Maxi Capital) believes that Ferrexpo gave a kind of guarantee to back up the obligations of the bank.
When the bank died, Maxi Capital came after the guarantor (Ferrexpo).
Ferrexpo deny that any such guarantees were signed by them, but have booked the full amount on the balance sheet, at $112m USD.
If this case is lost, and the $112m needs paying, it would cause a liquidity strain for sure.
However, the case will probably drag on for years, and, on its own, is something the company can absorb.
If I was the owner, I would be looking at some non-core asset sales and or some kind of ‘payment plan’ that reasonably factors in the reduced revenues in the near term.
Overall, I believe this risk is manageable, in the real-world.
But, there’s more…
Zhevago fled to France, and was arrested in 2022, but the French court ruled against extraditing him back to Ukraine.
When Zelensky got into power in 2019, one of his mandates was to ‘clean the swamp’ of oligarchs and corruption.
Zhevago was one of the people targeted by this crackdown.
Since the war, Ukraine has also stepped up its efforts to join the EU (when the war is over), and is determined to eliminate all forms of corruption.
This extra pressure is one of the main reasons they started turning the screw on Zhevago.
Their goal is to strip him of his assets, bring him to ‘justice’, and look like they’re doing something about corruption.
The simplest approach would be to take his shares in Ferrexpo, and funnel the future dividends into the public purse.
Sadly, the shares are listed in the UK and the company is based in Switzerland.
Those countries aren’t keen to strip away private assets of individuals at the whim of foreign bureaucrats.
In other words, Ukraine is in a bit of a pickle. It needs to make an example of Zhevago, but he isn’t there anymore.
They haven’t let this deter them…
Somehow, the bureaucratic mediocrity in Ukraine seems to have decided that the best way to get Zhevago, is to get Ferrexpo instead.
This has evolved into a campaign of corporate-terror.
At the beginning of 2025, they launched a three-pronged approach:
Suspend all VAT refunds to Ferrexpo
This squeezes cashflow and makes it incredibly difficult to remain profitable.
To do so requires reducing production, laying off Ukrainian workers and generally ruining the lives of many people in the process.
The reason they did this was because Zhevago is sanctioned and the Ukrainian state is trying to somehow use Ferrexpo as a ‘look through’ to punish him.
In Ukrainian law, it’s possible to refuse or suspend VAT refunds if the taxpayer is sanctioned. But it does not allow for use on non-sanctioned entities (like Ferrexpo).
I’m no Ukrainian legal expert, but it seems to me that this rule has been misapplied and, frankly, misunderstood.
The company has taken this to court and recorded all withheld payments as receivables on the balance sheet.
It seems quite likely that, in time, this will be overturned and the refunds reinstated along with back payments.
Nationalising the main assets
Their next trick was to announce the nationalisation of the core assets (the mine) of Ferrexpo.
More specifically, 49% of them (the same % as Zhevago’s holding).
In other words, the Ukrainian state is attempting to simply take ownership of Ferrexpo’s assets, without any kind of due process or compensation.
This hasn’t happened. They’re just telling everyone they’re going to do it.
This is obviously ludicrous.
The main reason this most likely won’t happen is that Ukraine signed a treaty with Switzerland back in 1995.
The treaty guaranteed that Swiss investors (in this case Ferrexpo), would be protected from political persecution.
For example, it states that there will be no appropriation without compensation. The compensation should be prompt and effective.
In other words, if Ukraine wants to take the assets, they need to pay a fair price for it, immediately.
Considering the company recently described its mines as having ‘over 50 years’ of operating capacity remaining, this would be expensive.
The same treaty grants access to international arbitration, in case of any disputes.
Ferrexpo has already served notice to the Ukrainian authorities to commence with the arbitration process.
In my view, this prevents a situation where Ferrexpo shareholders are deprived of the value of their assets.
Even if Ukraine nationalises, they will need to pay the fair value, which is considerably higher than reflected in today’s stock price.
This gives Ferrexpo a solid, internationally backed shield to avoid the theft of its assets.
Launched a civil claim of $3.8 billion
My personal favourite, is the claim for ‘environmental damage’ apparently caused by Ferrexpo’s mining activities.
It started out as an allegation about the ‘illegal sale of waste products’ and then evolved into ‘illegally mining and selling subsoil’.
There has been no evidence presented to back this up and the case is likely to drag on for years.
They also failed to explain the logic behind the figure of $3.8 billion USD, which is around 10x the current market cap of Ferrexpo.
This is so ludicrous, it’s scarcely credible as a risk.
Even in the highly unlikely event the company did decide to start digging up sub soil and selling it to random people, the final compensation claim is unlikely to be anything close to this figure.
This seems like a ploy to add public pressure to Zhevago, while temporarily destroying value for the rest of the shareholders.
From my owners-view, I believe this is something that will drag on in the background for many years.
I don’t view it as a material risk, because the claim is so awkwardly presented, and clearly linked to the efforts to pressure Zhevago.
The Investment Case
This is the kind of situation that gives even the hardiest deep-value investors PTSD.
It’s a horror-show of risk and uncertainty.
However, underneath all this is a core business that, normally, generates lots and lots of cash for its owners.
The war in Ukraine has blunted it, and the political pressure on its majority owner is squeezing the life out of its operating business in the short term.
However, perhaps bizarrely, I don’t believe this indicates terminal decline for Ferrexpo.
If I was the co-owner with Zhevago, and unwanted by Ukrainian authorities myself, I would be viewing all this as a horrific violation of my investor-rights.
The actions of Ukraine appear bureaucratic, irrational, and, ultimately, ineffective in their end goal of ‘getting’ Zhevago.
My focus for the business would be on short-term survival, above all else.
Reduce production, eliminate costs, break even and just weather the storm.
At the same time, fight the nonsensical attacks one at a time. First, the VAT refund suspension.
Once that is overturned, the Swiss-Ukraine BIT arbitration, until Ukraine starts to understand their losing hand, and back down.
Finally, I would drag out the civil claim process for as many years as possible, while using all the other attacks as evidence of Ukrainian political persecution.
Eventually, a ceasefire will be announced and everything will start going back to normal on the ground.
This will make the operating business far easier, and things will start to turn in our favour.
At today’s price, I believe there is significant upside potential to double or even triple an initial investment.
To be clear, I won’t be holding Ferrexpo for any longer than necessary, and I will be exiting as soon as sentiment clears and a rerating occurs.
But I do believe that the business can struggle on, and ultimately come out the other side of this very dark storm.
Ben Graham gave us the perfect template for making money from these types of situations.
The portfolio-dynamic.
I have allocated a very small percentage of my capital to Ferrexpo and will patiently hold until the rerating occurs.
However, if the business does die, it will merely result in a ‘bad year’, rather than anything terminal or long lasting for my capital base.
Mr Deep-Value also offers:
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Separately managed accounts for US clients
Er - what catalyst is starting to play out?
I remember reading this article a little while ago. Now I see it posted under a blurb saying that this stock has a catalyst starting to play out. Was the article updated to discuss this catalyst?