Ferrexpo announced it received a $230 mln debt facility at a rate of LIBOR+7%. The facility, available for drawdown from January 1, 2010, will be repaid starting in 2013 in 24 monthly installments of $9.6 mln.

The primary purpose of the loan, according to management, is to repay the company’s old debt facility, which will have an outstanding balance of $208 mln on Dec 31, 2009, and on which the company repays $72 mln a year. Ferrexpo will in effect free up as much as $60-$65 mln in net cash a year for the next three years. These funds will likely be used both for stripping work at Yeristovskoye, a new deposit under development, and, more importantly, at the firm’s existing mine to increase internal its iron ore supply and pellets capacity utilization.

We estimate the total capital needed for stripping work for both projects at some $350 mln without machinery capital outlays. This means Ferrexpo may still need to raise more debt in the future. We rate the news POSITIVE, as the freed-up cash will allow the company to ramp up development work.