Ferrexpo plc

Annual Report & Accounts 2022

Resilience &

commitment

STRATEGIC REPORT

Contents & At a Glance

Looking towards

alow emissions

future and the shift

toGreen Steel

Strategic Report 01

Chair’s Statement 02

War in Ukraine 04

CEO’s Review 06

Market Review 08

Our Business Model 12

Our Stakeholders 14

Strategic Framework 16

Key Performance Indicators 18

Financial Review 22

Operational Review 26

Responsible Business Review

Introduction 30

Chair’s Review 31

Safety and Our People 32

Environmental Stewardship 34

TCFD Disclosures 37

Diversity, Equity and Inclusion 42

Communities 44

Governance 46

Non-Financial Information Statement 47

Stakeholder Engagement – Section 172 48

Risk Management 56

Principal Risks 58

Viability Statement 75

Corporate Governance 77

Financial Statements 138

Additional Disclosures 211

Alternative Performance Measures 212

Glossary 214

At Ferrexpo, we are focused on the future –

boththe future of Ukraine and the future of

lowemissions steelmaking. We are long-term

investors in Ukraine, which has demonstrated its

resilience throughout Russia’s invasion, andwe

have demonstrated our resilience as a business

inUkraine. Despite the war, we have maintained

supplies to our European customers throughout

2022, and we are committed to provide stability,

where possible, for our stakeholders in these

difcult times.

References to Ferrexpo plc

References in this report to “Ferrexpo”, the “Company”, the “Group”, “we”, “us” and “our” are all references

toFerrexpo, Ferrexpo subsidiaries and those that work for Ferrexpo, albeit not a singular entity or person.

Such terms are provided as a writing style in this report, and are not indicative of how Ferrexpo or its

subsidiaries are structured, managed or controlled.

Words with the symbol A are dened in the Alternative Performance Measures section of the Annual Report

on pages 212 to 213.

1. “Green Steel” is considered to be the production of crude steel without greenhouse gas emissions.

Please see page 15 of the Group’s Climate Change Report for more information.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

01Annual Report & Accounts 2022Ferrexpo plc

High grade

production continues

Despite the war in Ukraine, we continued to

produce in 2022, demonstrating the resilience

of our operational and marketing teams. We

remain committed to high grade iron ore,

which represented 100% of our production.

Pivoting to direct

reduction pellets

Output of higher grade, 67% Fe direct

reduction pellets, which represent a low

emissions pathway to making steel, rose to 6%

of total pellet production in 2022 (2021: 4%).

Net cash position

supports balance

sheet resilience

Strong balance sheet metrics developed

through resilient business model, prudent

capital allocation and a focus on quality.

Our values

Responsibility

Make it happen

Integrity

Diversity within one team

Continuous innovation

See page 26

See page 6

6.1

% Fe

US$106

See page 22

See page 32

See page 31

See page 46

See page 42

See page 29

STRATEGIC REPORT

Annual Report & Accounts 2022Ferrexpo plc02

Chair’s Statement

US$3.3

Committed to Ukraine with more than

15 years of investment since our IPO in

2007, amounting to over US$3.3 billion.

Generating 3% of Ukraine’s export

revenues in 2022 (2021: 4%), despite a

decline in production and iron ore prices.

The Ferrexpo Humanitarian Fund

hassupported more than 70 projects

since the outset of the war in Ukraine,

providing direct assistance.

Resilience and

a commitment

to Ukraine

Image on the cover:

Championing selected

members of our

Ukrainian workforce

Thank you to all members

of our Ukrainian workforce

for their resilience and

commitment since the start

of the Russian invasion.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

03Annual Report & Accounts 2022Ferrexpo plc

The year 2022 will long be remembered as a consequence of Russia’s escalation

ofits invasion of Ukraine. It is a signicant moment in the history of our planet, and

weremain committed to Ukraine and our people at this difcult time.

At Ferrexpo, we are proudly Ukrainian.

Ferrexpo has successfully operated in

Ukraine for more than 15 years since our

listing, and we have consistently invested in

Ukraine, our people and our assets. Over

this time, our constructive relationships

have helped us build a company that is

capable of producing some of the highest

quality forms of iron ore that are

commercially available.

The world has supported Ukraine as it

defends itself from Russia’s invasion.

Wehave remained committed to Ukraine

throughout this conict, through providing

vital humanitarian support to those in need,

whilst continuing production and our

contribution to the Ukrainian economy. We

have nearly 10,000 people in our workforce,

with 95% normally based in Ukraine, and

we have strived to support them, their

families and local communities throughout

this conict. On a national scale, Ferrexpo

represents a signicant contributor to the

Ukrainian economy through taxes and

royalties, as well as our consistent use of

Ukraine’s infrastructure and serving as a

major employer in our region of Ukraine. We

are proud that our resilient business model,

and focus on high quality products, has

enabled us to continue shipments to our

European customers throughout 2022.

Resilience and commitment

In reviewing what we have learnt from the

past year, two key themes are evident:

resilience and commitment. Ukraine’s

resilience has been apparent in newspapers

around the world for more than 380 days. At

our operations, we have seen our workforce

come together with local communities.

In an effort to streamline our support, we

established a dedicated humanitarian fund

early in the conict, as it quickly became

apparent that large businesses would

needto support communities. Through

more than 70 individual projects, I am

proudto reect on the direct support that

we have been able to provide, and will

continue to offer, with over US$19 million of

humanitarian aid provided to date. I am also

proud that Ferrexpo has supported 3,500

internally displaced people eeing the war

as they pass through our area.

As the war enters its second year, we are

mindful of the wellbeing of our workforce

and the effects of living in a war zone. As

such, we are offering free support services

to those at our operations.

I am proud of the commitment that we have

shown to our stakeholders, and indeed

the commitment that they have shown

us. In Ukraine, we have worked closely

with communities to provide support

through our newly formed humanitarian

fund and the long-standing Ferrexpo

Charity Fund. Resilience is also evident

in our operations and marketing teams,

with their efforts enabling us to continue

shipping throughout 2022. As a modern

company, we are increasingly reliant on

electronic equipment for managing our

operations, and therefore protecting

our IT infrastructure from cyberattacks

has been critical since the war began –

more on our efforts here on page72.

More broadly, we have also continued our

decarbonisation strategy in publishing our

Climate Change Report as scheduled in

4Q 2022, as well as providing clear and

timely communications with stakeholders

throughout the war. We are also grateful

to our customers, who have shown

commitment to our products, and I would

like to thank them for their continued

support, which is only possible through

long-standing positive relationships.

Understanding our role in Ukraine

We are a major business in Ukraine and,

as such, we are a signicant contributor

to the local economy and economy of

Ukraine. In 2022, we contributed US$164

million in taxes and royalties, and we

have continued supporting our workforce

through our continued operations. We are

frequent and consistent users of Ukraine’s

utilities and infrastructure, helping to

contribute to the functioning of Ukraine

beyond our own operations. Through our

position as one of the world’s largest iron

ore pellet producers, we are able to be a

signicant contributor to Ukraine’s exports,

representing 3% of total exports by value in

2022, despite a 46% decline in production

and 25% lower iron ore prices in 2022.

Our footprint in Ukraine extends beyond

our own operations, and we are proud

to support local businesses and local

communities. Of the people that we employ

in Ukraine, almost allare based in local

communities, and 79%of our recruitment

in 2022 was from local communities.

Board developments

The past year has brought a number of

changes to strengthen the Board; we

welcomed Fiona MacAulay into the role

of Senior Independent Director, Ann-

Christin Andersen in the role of Chair

of the Health, Safety, Environment and

Community (“HSEC”) Committee and

Natalie Polischuk joined the Board in

December 2021. Furthermore, Jim North

was appointed as permanent CEO in

February 2022. In addition, Non-executive

Director Kostyantin Zhevago stepped

down from the Board in December 2022.

Looking to the future

Reecting on our long-term strategy as a

business, we remain committed to Ukraine

and its potential. There is a signicant

challenge ahead, once the war ends, for

companies and communities to help with

the rebuilding and healing of Ukraine.

More broadly, we are pleased to see the

global shift in the steel market towards

higher grade, higher quality materials as a

route to lower emissions across the steel

value chain. High grade iron ore has been

a strategic priority of Ferrexpo’s since

listing in 2007, and we are proud to be

able to help facilitate decarbonisation in

the steel industry, which accounts for 7%

of global greenhouse gas emissions

The coming period will be difcult given

thecontinued war in Ukraine, but if we are

to look beyond the war, we continue to be

excited by Ukraine’s potential and the future

that lies ahead in Green Steel. Through

working with our stakeholders, we are

proud to have built the business that we

have today, and the potential that it has

forthe future.

Finally, I would like to thank all of our

stakeholders, particularly those in Ukraine,

for their continued commitment to Ferrexpo.

I am hopeful that we will soon see an end to

the conict, and then we can look towards

a brighter future for Ukraine.

Slava Ukraini.

Lucio Genovese

Chair, Ferrexpo plc

1. Source: International Energy Agency (“IEA”), link.

(Accessed February 2023.)

04 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Case Study: War in Ukraine

As a business operating in Ukraine at the current time,

we have been signicantly impacted by the ongoing war.

Here we explore a selection of these impacts, and the

outlook for further consequences.

Our people

Our rst priority will always be the safety

and wellbeing of our people. Currently, we

have more than 1,500 people absent from

our workforce, including approximately 650

members of our workforce serving in the

Armed Forces of Ukraine

, who we have

supported with key protective equipment

such as bulletproof vests. Certain areas

of our business are affected more by

absences than others, and the situation is

helped by our operations running below

capacity. We are increasingly working to

assist wellbeing – including a programme to

provide counselling to those returning from

the armed forces, and a rehabilitation centre

for those returning to work after service.

Regrettably, we are now aware of

20 members

of our team have died

whilst serving in Ukraine’s military, and

we are supporting their families.

Local communities

It was quickly apparent in the early stages

of the conict that the people of Ukraine

would need humanitarian support at this

difcult time. The Ferrexpo Humanitarian

Fund has helped channel support to more

than 70 projects since the start of the

war

– see page 44 for more details.

Logistics constraints

The closure of Ukraine’s access to the Black

Sea has severely restricted our access

to seaborne markets and has therefore

limited our ability to pivot sales according

to regional demand around the world – as

seen previously during the global Covid-19

pandemic. Access to the seaborne market

is possible today, but at an elevated

cost and with additional restrictions.

Power supply

In late 2022, Russian attacks on civilian

electrical infrastructure increased, with a

signicant impact on electricity generation and

supply. Following the onset of this phase of the

war, the Group was not able to achieve stable

production for approximately ten weeks of

4Q 2022. As a means of reducing operational

risk around further power shortages, we are

replenishing pellet inventories at strategic

locations, as well as exploring our options

around self-generation of electricity.

Local currency and economy

The Ukrainian hryvnia depreciated by 34%

during the course of 2022

, and this has

impacted operating costs and carrying

value of assets – see page 22 for more

details. Looking forward, it is expected

that, should the war continue, the Ukrainian

hryvnia will continue to depreciate further.

Furthermore, the Ukrainian economy

experienced an ination rate of 27% in 2022

Supplier constraints

Throughout 2022, we have continuously

adapted to an ever-changing operating

environment, including changing suppliers

for key inputs as individual suppliers are

forced to close their operations or divert

logistics paths. We expect to have to

continue to adapt and evolve our supply

arrangements, to ensure supply and reduce

risk, for as long as the war continues.

Effects of

operating

inaconict

1. Information as of 10 March 2023.

2. Source: National Bank of Ukraine (“NBU”), link.

(Accessed 3 March 2023.)

3. Source: Reuters, link. (Accessed 3 March 2023.)

Remembering

those we have lost

As of 10 March 2023, we are aware of a

total of 20 members of our team that have

sadly died whilst serving in the Armed

Forces of Ukraine, and we are supporting

their families at this difcult time.

Dmytro Belikov Age 32

Oleksiy Bridnya Age 33

Andriy Chernya Age 37

Oleksandr Chugainov Age 54

Maksym Chystyakov Age 24

Andrii Dukanych Age 33

Oleksiy Khanilevych Age 24

Serhiy Kharlamov Age 57

Serhii Kondyk Age 31

Denys Koshovyi Age 30

Rostyslav Ledovskyy Age 25

Dmytro Lysachenko Age 28

Roman Lytvynenko Age 31

Kostyantyn Orchikov Age 30

Oleksandr Scherbakov Age 28

Denys Svyrydov Age 50

Yaroslav Taran Age 50

Oleksandr Terlenko Age 48

Oleksiy Yatskov Age 36

Anatoliy Zakupets Age 37

Slava Ukraini.

Image: Armoured

ambulance donated.

Image: School bell

at Ferrexpo Class.

05Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Displaced workforce

and communities

Currently c.650 members of our

workforce are serving in the Armed

Forces of Ukraine with additional

numbers absent as they seek safety.

Customers

Clear communications

havebeen required with our

customers throughout the war.

Health and wellbeing

Mindful of the stress caused by long-term

living in a war zone, we are offering a

range of support to our workforce.

Supplier constraints

Suppliers’ facilities have been

attacked, and business partners

have had to shut down.

Closure of Ukraine’s

Black Sea ports

Historically, we shipped around

half of our output via Ukrainian

ports, and closure limits the

marketswe can serve.

Local communities

The war has placed signicant strain on

the ability of local authorities to provide

consistent support to communities.

Power supply

Attacks on state-owned electrical

infrastructure resulted in ten

weeks of intermittent power in

4Q2022.

Local currency

The depreciation of Ukraine’s currency

and local ination have impacted our

accounts in a variety of areas.

Impact on

infrastructure

Ukraine’s railways have come

under constant attack and

seenincreased demand from

displaced trade. Diverting sales

via alternative logistics corridors

comes at an increased cost.

See page 44

See page 69X

See page 32

See page 59

See page 11

See page 44

See page 26

See page 22

See page 11

Humanitarian support

US$19

STRATEGIC REPORT

Annual Report & Accounts 2022Ferrexpo plc06

CEO’s Review

The morning of 24 February 2022 will live long in the

memory. Russia’s invasion of Ukraine has dened our

year, but we are proud of the resilience shown by our

workforce in continuing to support Ukraine’s economy.

We have a workforce of 10,000 people,

with more than 95% of them based in

central Ukraine and it is our duty to protect

and support them. I am proud to have

been a part of Ferrexpo in 2022, as we

have sought to engage with our workforce

and communities across Ukraine at such a

difcult moment in history, to understand

what we could do to help.

Supporting Ukraine

Through the creation of the Ferrexpo

Humanitarian Fund, we have been in a

position to provide direct support to those

in need, as well as help our suppliers and

customers provide contributions to ght

the effects of the humanitarian crisis that

isunfolding in Ukraine. Through this fund,

and additional support projects provided

directly by our subsidiaries, we have

provided more than US$19 million of

targeted humanitarian assistance to date,

supporting over 70 initiatives across eight

regions of Ukraine. Each individual project

is reviewed and approved by the Health,

Safety, Environment and Community

(“HSEC”) Committee to ensure good

governance practices remain, even in a

war zone. For more on our humanitarian

efforts, see page 45.

Despite the war in Ukraine and the difculties

our people have experienced in 2022, our

safety performance has remained strong.

We remain fatality-free for the second year

running, and our lost time injury frequency

rate continues to be materially below the

level recorded by our peers. See page 32

formore on our safety performance.

Drive towards Green Steel

As a constituent of the steel value chain, we

understand the importance of climate change

and how this point in time represents a pivotal

moment for the steel sector, with major

investment planned in the coming decades.

As a producer of a form of iron ore that helps

steelmakers reduce emissions, we are in a

position to supply the global steel industry

with blast furnace pellets today to reduce

emissions by 40%

as they switch away from

sinter nes. In parallel, we are developing

ouroffering of direct reduction pellets,

whichrepresent a potential pathway to low

emissions Green Steel, positioning us well

forthe future.

Our progress in decarbonisation, which to

date has seen us realise a 31% decrease in

emissions since our baseline year, has begun

well and we intend to maintain our positive

momentum in reducing our emissions. We

areexcited by our stakeholders’ desire to

understand our decarbonisation pathway,

andwe are looking into ways to collaborate

together going forward. Through our work

with environmental consultants Ricardo Plc,

we were also able to present expanded

targets for our emissions reduction

programme – please see our Climate Change

Report, which was published in December

2022, for more details.

Operating in a time of war

Production volumes fell by 46% in 2022,

primarily reecting the constraints imposed

by the war in Ukraine and the deterioration

of the economic environment in Europe

as energy prices and inationary risks

rose throughout the year. The war’s

restrictions on our access to the Black

Sea have made logistics routes for sales

outside of Europe less cost effective,

but this topic is a clear catalyst for 2023

should our Black Sea access resume.

Sales volumes in 2022 reected accessible

markets, with sales in the rst quarter

remaining buoyant as short-term supply

disruption led to steelmakers building

raw materials inventories. Subsequently,

sales declined throughout the year as

the complexity of the restrictions on our

business increased. We did, however,

continue to deliver our products to

our European customers throughout

the year, which is a testament to the

resilience and commitment of our

marketing and operations teams.

A committed leadership team

Given the conict in Ukraine, it is easy to

overlook our achievements in bolstering

the management and governance of our

business. My appointment as permanent

Chief Executive Ofcer was announced

in February 2022. In the same month,

Fiona MacAulay and Ann-Christin

Andersen were appointed as Senior

Independent Director and Chair of the

HSEC Committee respectively, and on

30 December 2021 we announced the

appointment of an additional Independent

Non-executive Director, Natalie Polischuk.

The appointments of Fiona, Ann-Christin

and Natalie bolster our leadership from a

diversity perspective, and we are seeing

progress in our executive management

team – Yaroslavna Blonska was appointed

Acting Chief Marketing Ofcer in October

2022, and in 2022 the proportion of our

management positions held by women

increased to 20.9% (2021: 20.1%).

It is important to thank all of our

stakeholders for their commitment to

Ferrexpo in 2022. It is our committed

workforce, the communities that grant us

our licence to operate, our long-standing

customer and supplier relationships, and

other key relationships, that have helped to

support us throughout this war. Through

operating a resilient business model, we

aim to come through this difcult time as a

stronger company, and this would not be

possible without this continued support.

Jim North

Chief Executive Ofcer, Ferrexpo

Stakeholder

support and

looking ahead

1. Source: Independent research provided by CRU.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

07Annual Report & Accounts 2022Ferrexpo plc

Revenue generated in 2022

US$1.2

2021: US$2.5

Underlying EBITDA

in 2022

US$765

2021: US$1,439

Underlying EBITDA

margin in 2022

2021: 57

08 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Market Review

Resilient pellet premiums

amid lower iron ore price

environment

The Group primarily generates its revenues

through the sale of iron ore pellets, the pricing

of which is governed by a number of quoted

market benchmarks, generating a net

realisedpellet price. The main contributing

components to the pricing of Ferrexpo’s

pellets are the high grade (65% iron, “Fe”)

ironore nes index, the pellet premium, a

rateapplicable for the freight component

oftransporting material to customers, and

anyapplicable additional premiums and

discounts. The Group currently only

produceshigh grade products, grading

either65% Fe or above, and therefore the

following text focuses on the high grade

indexfor iron ore nes pricing.

Iron ore nes prices

The index for high grade (65% Fe) iron ore

nes began the year at US$140 per tonne

androse to more than US$190 per tonne as

of early March, before steadily declining to a

low of US$91 per tonne in late October. The

primary factor behind this initial rise during

1Q2022 was the rising risk of conict in

Ukraine, ultimately followed by Russia’s

invasion commencing in February, which

putpressure on global iron ore prices as

steelmakers sought to source alternative

suppliers to Russian iron ore. This short-term

tightness in the iron ore market largely

persisted into 2Q 2022, before the impact of

elevated energy prices and concerns over the

global economic outlook, particularly for the

Chinese economy, began to erode condence

in end-user markets. Prices declined by

approximately US$40 per tonne between

early June and early July, before exhibiting a

more gradual decline thereafter, with market

commentators citing concerns over steel

margins in China and local restrictions within

China related to the global Covid-19

pandemic as the reasons for this decline

Moving into 2H 2022, efforts by steel mills to

stockpile material slowed, as they began to

secure access to alternative raw material

supply channels, and demand for iron ore

started to normalise. As such, the drivers

behind price movements returned to Chinese

supply/demand dynamics for iron ore and

steel, with China representing the largest

market for seaborne iron ore and the main

determinant of iron ore prices globally. The

beginning of 2H 2022 coincided with weak

demand for iron ore and steel, especially

withsentiment dampened by strict Covid-19

restrictions in China. A key effect of these

restrictions was the impact on consumer

sentiment in local property markets, which is

a major user of nished steel in China. This

generated a gradual decline in iron ore pricing

until early 4Q 2022. Expectations arose in

October regarding a potential unlocking of

restrictions in China, but these were short-

lived after the Chinese government reiterated

existing policies, sending prices to the full

year low of US$91 per tonne in late October.

Iron ore prices did ultimately recover as

restrictions in China were eventually eased

Reduced levels of price volatility

were seen in 2022 compared to

2021. Whilst iron ore prices declined

by 25%, blast furnace pellet

premiums rose by 20%, which

reects shifting demand for high

quality products.

Yaroslavna Blonska,

Acting Chief Marketing

Ofcer

Customer sales in 2022

6.2

Sales of 6.2 million tonnes (46%

reduction), despite conict-related

restrictions in 2022. Shipments to

Europe remained resilient, declining

by a lower degree (23%).

Five years of iron ore prices

(65% Fe Index)

US$ per tonne

US$139/t

US$186/t

US$122/t

US$104/t

US$90/t

2022

2020

2021

2019

2018

1. Source: S&P Global Commodity Insights.

Mar 22 Apr 22 May 22Feb 22 Jun 22 Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22Jan 22

250

200

150

100

S&P Platts’ Iron Ore Fines Index (65%)

Benchmark indices (US$/tonne)

Freight Rate (Baltic Capesize Index C3)

S&P Global Atlantic Blast Furnace Pellet Premium S&P Global Direct Reduction Pellet Premium

09Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

1. Source: S&P Global Commodity Insights.

2. Source: CME Group, Link (accessed 23 February 2023).

3. Source: Management estimate.

4. Source: CRU.

5. Dened as steelmakers that do not have material volumes of integrated iron ore supply,

excluding pellet imports listed without a dened destination (12% of the total pellet

market, typically relating to exports from certain producers in the Commonwealth of

Independent States (“CIS”) and India).

towards the end of 4Q 2022, ending the year

at US$131 per tonne.

Overall, the full year iron ore price declined

by25% in 2022, broadly reecting weaker

demand as a consequence of the conict

inUkraine and concerns over the Chinese

economy. It should also be noted that the

comparative period (2021) represented a

robust year across the commodity space,

asgovernments worldwide continued to

supply scal stimulus in response to Covid-19,

with iron ore pricing in 2019 and 2020 being

US$104 and US$122 per tonne respectively

– in line with the gure for 2022

Towards the end of 2022, it was widely

expected that 2023 would see a contraction

in global markets, with economies worldwide

already witnessing a slowdown in growth

during 2H 2022, as energy prices remained

elevated and central banks sought to contain

inationary pressures by raising interest rates.

However, recent news and developments in

China, such as reports of a potential easing of

Covid-19 restrictions, have resulted in iron ore

prices rising to US$138 per tonne as at the

end of February 2023. Futures contracts

reect the current uncertainty in the market,

with contracts for December 2023 deliveries

(62% Fe Index) trading at a level US$8 per

tonne below today’s spot market

The supply side of the iron ore nes market is

widely expected to remain balanced in 2023,

with supply from the major producers in Brazil

and Australia expected to remain largely in line

with the same level of output seen in 2022

High grade premiums

The premium for high grade iron ore, being

the difference between the 65% Fe Index and

the 62% Fe Index, contracted in 2022 in line

with the benchmark indices, falling by 28%.

This contraction is expected at times of steel

market weakness, when steel margins are

reduced and steelmakers seek to utilise lower

grade inputs to reduce raw material costs,

reecting a more conservative approach.

Similar to the nes index, the ferrum premium

of US$19 per tonne in 2022 was ahead of

levels seen in recent years (2019 and 2020:

US$11 and US$13 per tonne respectively) or

in line with other recent years (2018: US$21

per tonne). The year-on-year comparison,

however, shows a 28% reduction, with 2021

being a relatively high year for commodities

pricing (2021: US$26 per tonne).

Given the correlation of the grade of iron ores

and the degree of emissions produced by

steelmakers, with higher grade ores requiring

the production of lower emissions to generate

steel, it is expected that the ferrum premium

will continue to widen over the long term.

Pellet premiums

The pellet premium is a signicant factor in the

cash ow generation of a pellet producer, with

this component of pricing typically representing

a signicant additional premium over and

above the prevailing iron ore nes index.

For example, the Atlantic Pellet Premium

represented a 60% premium above the 62%

Fe iron ore nes index in 2022 (2021: 38%).

The high level of the pellet premium (relative

tobenchmark nes prices) reects the

scarcity of iron ore pellets relative to the

global nes export market. In 2022, the

globalpellet export market represented

approximately 111million tonnes

, compared

to global nes export trade of 1.1 billion

tonnes

. In addition, iron ore pellets typically

offer steelmakers the opportunity to raise mill

productivity and lower emissions due to

higher grades and the lack of a requirement

for sintering, which is a process that typically

utilises coal as its energy source.

Global exports of pellets decreased by

approximately 15% in 2022

, reecting a

reduction in supply from almost all major iron

ore pellet exporters for a variety of reasons.

Pellet exports from Russia have seen the

largest year-on-year decrease, falling by

approximately 7 million tonnes as steelmakers

switch suppliers following Russia’s invasion of

Ukraine. Additionally, lower pellet demand

from Chinese steel mills, with this demand

down approximately 60% in 2022, has

resulted in lower export volumes for pellet

producers that have historically supplied this

market – with Brazilian and Indian exporters

accounting for approximately half of this

decrease

Regionally, 2022 saw a clear split in the health

of global steel markets, with those markets

more closely correlated to Russian energy

supply (such as Europe) seeing the greatest

decline in demand for pellets. European steel

mills imported approximately one third lower

volumes of iron ore pellets in 2022, with this

reduction seen in both Western and Eastern

Europe. Outside of China, Asian steel mills

saw a lower reduction in buying activity, with

a 14% reduction year-on-year. The Middle

East and North Africa (“MENA”) region, which

is a region less dependent on Russian energy

supply, saw a 7% increase in pellet buying

activity in 2022.

An additional factor helping to promote our

exports to the MENA region is that this region

typically purchases direct reduction (“DR”)

pellets. Since DR pellets have a lower

emissions footprint than other forms of iron

ore, we are directing our strategy towards this

product and actively growing our footprint in

this region.

As a result of tightness in pellet markets

outside of China in 2022, both the Atlantic

pellet premium and DR pellet premium rose

materially during the year, and therefore

trended in the opposite direction to iron ore

nes prices. This divergence is due to iron ore

nes and pellets having different key drivers

– China accounted for 75% of iron ore nes

imports in 2022 (2021: 76%)

, and is therefore

the dominant market for this product. For

pellets, the key markets are Europe and

markets in North East Asia, where

independent steelmakers

in these two

regions collectively accounted for 60% of

dened pellet imports in 2022 (2021: 58%)

Factors related to climate change and

decarbonisation, with the pace of legislative

change faster in Europe than other markets,

are expected to have a greater bearing on the

pricing of iron ore pellets as a result of this link

to European buying.

Within the year, the Atlantic pellet premium

rose by 41% in 1H 2022 (in contrast to the iron

ore nes price, which remained broadly at).

Stockpiling efforts, which were in response to

increased risk of supply disruption following

Russia’s invasion of Ukraine in February 2022,

resulted in an increase in pellet premiums in

1H 2022. This buying activity was, however,

not matched by end-user demand and raw

material stockpile inventories increased,

particularly in Europe. With high prices for raw

materials and energy inputs, steel margins in

Chart: Market indices 2022

10 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Market Review continued

Europe decreased in the middle of 2022,

subsequently prompting several blast

furnaces to suspend operations in Europe.

ByOctober, a total of ten blast furnace

steelmaking facilities in the region idled at

least part of their operations

High pellet inventories, coupled with low blast

furnace steel output, resulted in a reduction in

pellet demand, and Atlantic pellet premiums

fell to approximately US$60 per tonne

towards the end of 4Q 2022.

Whilst pellet buying in European and

Asianregions declined in 2022, a signicant

proportion of pellet sales are conducted via

long-term contract – providing an additional

degree of stability (for example, 96% of

Ferrexpo’s pellet sales in 2022 were under

long-term contract). This therefore provides

stability for individual pellet producers, and

the overall pellet market, throughout the

commodity cycle.

Looking ahead to 2023, it is expected that

theoverall size of the pellet export market will

revert to a similar size as seen in recent years

(c.130 million tonnes), with the pace of this

recovery dependent on the war in Ukraine

and any resulting easing of constraints related

to energy supply (particularly energy supply

into Europe)

. China’s expected easing of

Covid-19 restrictions boosted iron ore nes

pricing in late 2022, albeit with relatively little

rm evidence of increased economic output.

Should China deliver a recovery in its growth

rate, which saw 3% growth in 2022 compared

to 8% in 2021

, it should be expected that

blast furnace pellet premiums will stabilise at

current levels. Pellet demand from European

steel mills in 2023 is expected to be linked to

energy prices, ination rates and the outlook

of the war in Ukraine. To mitigate risks to the

Ferrexpo business, it is important for the

Group to resume access to ex-European

markets in 2023 to provide support for

realised pellet premiums.

Freight rates

During the year, the C3 freight rate, which

describes the cost of shipping dry bulk

materials from Brazil to China, rose from a

lowof US$17 per tonne in January to a peak

of US$38 per tonne in May, with this increase

associated with rising energy costs and

buoyant commodity markets. In 2H 2022,

thesame freight index declined to US$22

pertonne by the end of 3Q 2022, where it

then largely remained for 4Q 2022. This

decline in2H 2022 can be attributed to an

economic slowdown in China, partially related

to local “zero Covid” rules, lower energy

prices and lower commodity pricing driving

reduced demand for shipping.

At US$24 per tonne, the average C3 freight

rate for 2022 represented a level US$3 per

tonne below the previous year as global

demand for dry bulk cargoes weakened.

Looking ahead, freight rates are expected

toremain above historical averages seen in

years prior to the global Covid-19 pandemic,

with elevated levels already seen in 2021 and

2022. This shift reects higher energy costs

and the potential for costs associated with

stricter environmental regulation to be passed

on to end users.

Steel

Ferrexpo’s iron ore pellets are used by

steelmakers to produce steel. Factors

such as global steel production, pricing

and margins therefore have a direct

impact on the benchmark indices

used in the pricing of pellets.

World steel production in 2022 fell by 4%

to1.8 billion tonnes, with a 2% contraction

inChina and larger declines in developing

economies such as the European Union

(11%decrease), Japan (7% decrease) and the

United States (6% decrease)

. Even before the

war in Ukraine started, production rates were

slower at the start of the year than in 2021,

with global output down 6% as of February

2022. This decit largely remained intact

throughout the remainder of the year.

Pricing for hot rolled coil (“HRC”) in Europe

began the year at €960 per tonne, before

rising sharply to over €1,400 in late March,

assteelmakers were able to transfer the

risingcost of raw material inputs to end users.

European economies demonstrated slowing

growth throughout 2022, as a consequence

of Russia’s invasion of Ukraine, elevated

energy prices and inationary pressures,

andconsequently have shown lower levels of

end-user demand for steel. As a result, HRC

steel prices declined to below €700 per tonne

by the end of the year, representing a level

33% below the start of the year. A similar

trend was seen in China throughout 2022,

albeit to a less pronounced extent, due in

partto a lower exposure to Russian energy.

Chinese HRC prices rose in 1Q 2022 to

approximately 10% above the start of the

year, then declined to 21% below this level

asof the end of the year

Looking ahead to 2023, the World Steel

Association’s Short Range Outlook,

issued in October 2022, projects a small

recovery in steel production, with 1%

growth to 1.8 billion tonnes. This growth is

attributed to infrastructure demand, despite

concerns over high ination, monetary

tightening and China’s slowdown.

Developments in Green Steel

A number of major steel producers announced

initiatives to produce Green Steel in 2022,

which is the manufacturing of steel without

the use of fossil fuels

, often announcing

agreements with end users (typically with

the automotive sector) for the offtake of

this material. The cost of Green Steel is

estimated to be up to 60% higher than

current prices, with this difference primarily

related to the expected additional cost of

producing and using green hydrogen

Whilst trial quantities of Green Steel were

produced in Sweden in 2022, widespread

commercial production is not expected to

commence until the medium to long term

1. Source: S&P Global Commodity Insights.

2. Source: Baltic Exchange.

3. Source: World Steel Association.

4. Figures restated compared to 2021 Annual Report.

5. Source: CRU (Iron ore outlook presentation, October 2022).

6. Management estimate.

7. Source: World Bank, link. (Accessed 3 March 2023.)

8. Source: Bloomberg.

9. As dened by the World Economic Forum, link. (Accessed 3 March 2023.)

10. Source: SteelOrbis link. (Accessed 3 March 2023.)

Summary of industry key statistics

(All gures US$/tonne, unless stated otherwise) 2022 2021 YoY change

Iron ore nes price (62% Fe, CFR China)

120 160 (25%)

Iron ore nes price (65% Fe, CFR China)

139 186 (25%)

Average 65% Fe spread over 62% Fe

19 26 (28%)

Atlantic (blast furnace) pellet premium

72 60

+20%

Direct reduction pellet premium

87 73

+18%

C3 freight (Brazil – China)

24 27 (9%)

C2 freight (Brazil – Netherlands)

13 14

(11%)

Global steel production (million tonnes)

1,832 1,912 (4%)

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

11Annual Report & Accounts 2022Ferrexpo plc

1. Source: PLANCO Consulting GmbH.

Verkehrswirtschaftlicher und Ökologischer Vergleich der

Verkehrsträger Straße, Bahn und Wasserstraße. 2007.

Case Study: Logistics exibility in a war

The war in Ukraine has highlighted the importance of

having exibility and diversity within our logistics chain,

withUkraine’s railways and our inland waterway subsidiary

providing essential services during the year.

Disruption due to conict in 2022

As summarised on pages 4 to 5, the

war in Ukraine in 2022 has resulted in

several disruptive effects on Ukraine’s

logistics network, from the closure of

Ukraine’s access to the Black Sea, to

targeted attacks on the railway network.

Indirect effects of the war also included

the diversion of Ukraine’s grain shipments

to non-Ukrainian ports, putting additional

pressure on Ukraine’s railway network.

Owner-operator model

At Ferrexpo, we have long sought to own

andoperate our logistics network, either

through the purchase of our own rail wagons,

operating our own inland waterway (barging)

subsidiary First-DDSG, or owning a stake in

aberth at a port in Ukraine. This practice

lowers operating costs (as utilising state-

owned railcars has an additional operating

cost associated with them), improves product

quality control (since we can manage the

maintenance of our own railway wagons and

vessels), and reduces operational risk. This

nal point has been key during the war in

Ukraine, when accessing European

customers has been periodically difcult

viaUkraine’s railway network.

Resilience in logistics

Whilst total shipments declined by 46% in

2022, shipments to Europe (being the only

practical market for us during the majority of

2022) only declined by 23%, as we managed

to maintain vital logistics pathways to

European customers. This achievement is

inpart thanks to our strong relationship with

Ukraine’s railway operator, which has

maintained its operations under exceptional

circumstances, despite numerous attacks.

A key consideration for us to increase our

production volumes will be when we will gain

additional clarity on our ability to deliver our

products to customers. A major development

would be the reopening of Ukraine’s ports, or

the re-establishment of access to seaborne

markets via an alternative port that is both

cost effective and capable of handling

material volumes. We are in advanced

discussions with an alternative port

operatorand are looking to resume

seaborneshipments in the near term.

Logistics

exibility in

2022

3,033

Number of Ferrexpo’s railcars

operating on the Ukrainian railway

network, providing operating

exibility and helping to maintain

product quality. An additional 183

railcars were purchased in 2022,

despite the war in Ukraine. Our

railcars are purchased from Ukrainian

producers, helping to provide

investment and jobs in Ukraine.

218

Number of First-DDSG vessels

operating on the River Danube,

helping transport Ferrexpo’s products

to European customers. Independent

research shows that transport via

inland waterway (barging) has a lower

total environmental cost than road or

rail transportation

Image: Ferrexpo railcars loaded with iron ore pellets at

our operations in Ukraine.

12 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Our Business Model

A clear strategy to help

grow stakeholder value

Key stakeholders

Underpinned by our values

Key strategic

considerations

Exploration

Mining

Processing

Logistics

High grade

iron ore pellets

Core business activities

Responsibility

See page 32

Integrity

See page 46

Make it happen

See page 31

Diversity within

one team

See page 42

Continuous

innovation

See page 29

Safety

Community support

Climate change

Diversity/inclusion

Value generation

for all

Workforce

Communities

Governments

Shareholders

The environment

Suppliers

Customers

Capital providers

Reinvestment for further development

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

13Annual Report & Accounts 2022Ferrexpo plc

Value generation

Ferrexpo’s business model is to work with its stakeholders and

their strategic priorities, to generate value for all stakeholders,

from its core business activities.

Environment

US$12

(35

)

Funding of environment initiatives

(2021: US$19M)

Government

US$164

(42

)

Taxes and royalties paid

(2021: US$281M)

Investors

US$155

(75

)

Shareholder returns (paid during year)

(2021: US$619M)

Capital providers

US$49

(78

)

Debt repayments and interest

(2021: US$221M)

Employees

US$98

(13

)

Wages and salaries paid

(2021: US$113M)

Customers

US$1.2

(50

)

Revenue generated

(2021: US$2.5BN)

Suppliers

US$912

(22

)

Suppliers of goods and services

(2021: US$1.2BN)

Communities

US$15

+125

Community support

(2021: US$6M)

STRATEGIC REPORT

Annual Report & Accounts 2022Ferrexpo plc14

Our Stakeholders

Future

Positive

Ferrexpo is part of the global steel value chain,

producing the highest grades of iron ore that are

commercially available, which help steelmakers

to reduce emissions and improve productivity

through higher iron ore grades and a lack of

requirement for sintering. The steel industry is

set to evolve rapidly, with companies adapting

to produce low emissions products, and

ultimately we see a world based on Green Steel.

To succeed, we engage with our stakeholders,

to understand the material issues that lie ahead

and adapt our business forthe future.

Read more on our Stakeholder

Engagement on page 48

Image: Ferrexpo uses sunower husks as a biofuel for natural gas substitution in our pelletiser,

sourcing 21% of our pelletiser energy needs from husks in 2022 (2021: 18%).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

15Annual Report & Accounts 2022Ferrexpo plc

Injury frequency rate of 0.51 in 2022,

continuing below our historic average (0.83)

Targeting a 50% reduction in Scope 1 and 2

emissions by 2030 (previously 30%)

1. Lost time injury frequency rate (“LTIFR”). Our historic average of 0.83 represents the ve year full year average for previous years (2017-2021 inclusive).

2. Source: Government of Ukraine.

3 Scope 1 and 2 emissions combined, on a per unit of production basis.

Total funding of assistance provided,

including the Ferrexpo Humanitarian Fund.

Ferrexpo represented 3% of Ukraine’s export

revenues in 2022 (2021: 4%)

The environment

The environment represents a key

stakeholder, reecting the interests of

future generations. Recent work has

enabled us to upgrade and broaden

ouremissions reduction targets.

See page 34

Local communities

Providing direct support to communities

and helping accommodate more than

3,500 internally displaced people.

See page 44

Ukraine

Through building a resilient business

model, Ferrexpo was able to continue

selling throughout 2022, maintaining

ourcontribution to Ukraine’s economy.

See page 11

Our workforce

Protecting a workforce operating in a

war zone, helping their families to remain

safe and providing wellbeing initiatives.

See page 32

US$19

0.51

2019

Where we are today

2022

2030

STRATEGIC REPORT

Annual Report & Accounts 2022Ferrexpo plc16

Strategic Framework

High quality

production

Elevating

sustainability

Low cost

operations

A world class

customer network

Disciplined capital

allocation

Strategic goal Goals

Understanding our strategic direction

Future facing, high grade

iron ore products for a low

emissions future.

Through sustainable, ethical

partnerships, delivering

value for all stakeholders.

Prioritising support for

Ukraine, where possible.

Maintaining a competitive

cost of production relative

toglobal peer group.

Selling our products to best

in class steel producers,

developing successful

partnerships for the future.

Managing our business in

aprudent and sustainable

manner, developing our

assets for the future.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

17Annual Report & Accounts 2022Ferrexpo plc

– Quality improvement: Increasing direct reduction (“DR”)

pellets to 6% of pellet production (2021: 4%), helping us

to cut our Scope 3 emissions per tonne by 1% in 2022.

– High grade focus: 100% high grade output (65% Fe

and above) for the third successive year.

– War in Ukraine: Resilience in operating, despite

challenges faced in 2022, producing 6.1 million tonnes.

– Safety: Maintaining high safety standards in 2022, with

low injury rates and zero fatalities.

– War in Ukraine: Initiating Ferrexpo Humanitarian Fund,

providing direct support.

– Climate change: Lowering Scope 1 and 2 emissions

atour operations by 1% (per unit of production basis).

Simultaneously lowering Scope 3 emissions by 1%.

– Cost control: C1 costs

rose by 49% amid conict risks

limiting production volumes, and diverting logistics,

plus global factors (energy costs and ination).

– Key driver: 64% decrease in total mining volumes

driving 19% cut to productivity of diesel consumption.

– Key driver: 46% decrease in pellet production driving

6% cut to productivity of natural gas consumption.

– Long-term partners: Sales into accessible markets

(Europe) only declined by 23% in 2022, despite the war

in Ukraine, demonstrating our supportive customer

relationships in this region.

– Future focus: Increasing offering of DR pellets to 6% of

total pellet production, reecting pivot to new markets.

– Customer engagement: Maintaining a customer

portfolio with a lower carbon footprint

– Balance sheet strength: Net cash position maintained.

– Capital investment continues: US$161 million invested

in operations in 2022, with growth projects completed

(see page 29 for more information).

– Shareholder returns: 55% of free cash ow in 2022

(2021: 37%), reecting the timing of distributions made

during 2022.

– Product portfolio: Continue to develop DR pellet offering, helping

tomaintain our portfolio of high quality customers.

– High grade focus: Continue to invest in high grade forms of iron ore.

– War in Ukraine: Resume Wave 1 Expansion once conict risks subside.

– Health and safety: Continue to deliver strong safety performance.

– War in Ukraine: Continue to work with our workforce and local

communities to respond to their needs; focus on wellbeing.

– Climate change: Publish life cycle assessment, representing

a study into the environmental impact of steel made from pellets,

benchmarked against steel production based on sinter nes.

– Community support: Initiatives via both the Ferrexpo Humanitarian

Fund and Ferrexpo Charity Fund.

– War in Ukraine: Working within the connes of the war in Ukraine,

adapt to new operating constraints and target strategic sales in a

complex operating environment.

– Cost control: Balance supply risks for key consumables with

effective cost control, targeting lowest quartile pellet production.

– Modernisation programme: Utilise available technologies to pivot

away from hydrocarbon use and lower cost alternatives, helping

toalso reduce emissions.

– War in Ukraine: Review cost effective solutions for returning to the

seaborne market, pending reopening of Ukraine’s Black Sea ports.

– Decarbonisation: Continue to liaise with customers and suppliers

on decarbonisation plans and pivot by steel producers towards

electric arc furnace technology (relevant for DR pellets).

– Pellet quality: Look to partner with existing and prospective

customers to help lower our Scope 3 emissions.

– Capital discipline: Ensure that the needs of all stakeholders are

metthrough a measured approach to capital investment and

shareholder returns, whilst maintaining the strong metrics of our

balance sheet.

– War in Ukraine: Approach in 2023 to be driven by conict risks

inUkraine, with the restart of investments in Wave 1 Expansion

should conict risks subside.

Achievements in 2022 Strategy for 2023

1. Source: CRU. Natural gas based direct reduction without carbon capture.

18 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Key Performance Indicators (“KPIs”)

Measuring our performance in 2022

US$765M

US$1,439M

US$859M

US$586M

US$503M

2022

2020

2021

2019

2018

US$220M

US$871M

US$635M

US$403M

US$335M

2022

2020

2021

2019

2018

Underlying EBITDA

US$765

Denition

Underlying EBITDA

represents prot

beforetax and nance plus depreciation

andamortisation, net gains and losses from

disposal of investments and property, plant

and equipment, share-based payments and

write-offs and impairment losses. Underlying

EBITDA

measures the Group’s ability to

generate cash as well as providing a useful

measure of operating performance excluding

certain non-cash items.

Underlying EBITDA

is an Alternative

Performance Measure – please see page 212

for more details.

The remuneration packages of the Group’s

executive management team, including the

Chief Executive Ofcer, include references to

the Group’s Underlying EBITDA

. Please see

page 124 for more details of the Group’s

incentive programme.

Our performance in 2022

Underlying EBITDA

declined by 47% to

US$765 million, in line with production

volumes, which declined by 46% as a result

of restrictions related to Russia’s invasion

of Ukraine in 2022. Additional factors

include the effect of lower production and

sales on operating costs, with reduced

economies of scale, as well as global

factors, such as rising energy prices and

ination. The devaluation of the Ukrainian

hryvnia is also reected in this metric,

providing a gain of US$339 million in 2022.

Looking forward to 2023

The Group expects to maintain a similar level

of Underlying EBITDA

margin in 2023 as

seen in previous years, which was 61% in

2022 and averaged 49% in the three years

prior to the war in Ukraine (2019–2021).

Production and sales volumes are largely

dependent on the easing of conict risks

facing the Ferrexpo business, and therefore

awide range of outcomes are possible in

theyear ahead. Resumption of cost effective,

consistent access to the seaborne market

would be a potential trigger for increased

production and sales, since it would enable

us to deliver material quantities to a broader

range of global markets.

Denition

In addition to Alternative Performance

Measures, Ferrexpo considers the IFRS

results of the Group to be an important

measurement of protability. Prot after tax

isdepicted in the Group’s Consolidated

Income Statement on page 151.

Prot after tax is the earnings of a business

after all income taxes have been deducted.

Our performance in 2022

Prot after tax fell by 75% to US$220 million

in2022, reecting the factors discussed

above (conict risks and operational/logistical

constraints related to the war in Ukraine, in

addition to global factors).

Looking forward to 2023

The Group’s outlook for the year ahead is

heavily dependent on the outlook for the war

in Ukraine and any easing of constraints

imposed by Russia’s invasion.

In addition to the factors discussed above in

the Underlying EBITDA

section, prot after

tax also considers the tax impact on the

Group and other factors such as interest

andnance expenses. Given that Ferrexpo

remains in a net cash position, with no debt,

these are currently not material in the Group’s

overall nancial performance. In light of the

Group’s net cash position and location in

Ukraine, the Group does not expect to

undertake any new material debt facilities in

2023, but remains in contact with a number

ofpotential capital providers.

Prot after tax

US$220

Financial KPIs

Link to strategy: 1, 2, 3, 4 and 5.

19Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

US$301M

US$1,093M

US$687M

US$473M

US$292M

2022

2020

2021

2019

2018

US$83.3/T

US$55.8/T

US$41.5/T

US$ 47.8/ T

US $43.3/T

2022

2020

2021

2019

2018

Net cash ow from operating

activities

US$301

C1 cash cost of production

(“C1 costs

”)

US$83.3/T

Denition

Net cash ow from operating activities

represents the cash ow generation ability of

the Group, and is a measure indicative of the

funding a company brings in from its ongoing,

regular business activities, such as pellet

production and sales. It is depicted on the

Group’s Consolidated Statement of Cash

Flows on page 154.

Net cash ow from operating activities

indicates the level of cash ow available

forinvestments, returns to shareholders

anddebt reduction.

Our performance in 2022

The primary factor in the Group’s nancial

performance, as discussed under the other

nancial metrics presented in this section, is

the war in Ukraine and the operational and

logistical restrictions related to it. Net cash

ow from operating activities declined by

72%to US$301 million in 2022 following the

impact of the war in Ukraine – see discussion

opposite for Underlying EBITDA

for the key

drivers of the Group’s nancial performance.

Looking forward to 2023

The Group’s nancial performance, including

net cash ow from operating activities, is

expected to be heavily reliant on the conict

risks facing the Group in 2023, with a wide

range of potential outcomes. Despite the war,

the Group has continued its focus on high

grade, high quality forms of iron ore, as has

been the Group’s strategy since listing in 2007.

As a result of producing high margin products,

the Group expects to remain competitive

throughout the commodities cycle.

Denition

The C1 cash cost of production

is the cost

ofproduction processes to the factory gate,

divided by production. This is an industry

standard measurement and assesses

Ferrexpo’s relative competitiveness compared

with other pellet producers.

C1 cash cost of production

is an Alternative

Performance Measure – please see page 212

for more details.

The remuneration packages of the Group’s

executive management team, including the

Chief Executive Ofcer, include references

tothe Group’s C1 cash cost of production

Please see page 124 for more details of the

Group’s incentive programme.

Our performance in 2022

The Group’s C1 cash cost of production

rose

by 49% to US$83 per tonne in 2022 (2021:

US$56 per tonne), reecting conict risks in

2022 and associated restrictions on the

Group’s ability to operate and ship at its

nameplate level of capacity. Additional global

factors, including rising energy prices and

ination, were key factors specic to 2022.

Looking forward to 2023

As discussed under the other nancial metrics

presented in this section, the war in Ukraine

represents a material factor in the Group’s

outlook and a wide range of outcomes are

possible depending on how the conict

evolves in 2023.

Should the conict-related risks and

restrictions ease in the coming year, the

Group would expect its C1 cash cost of

production

to reduce, as the Group would

benet from economies of scale through

operating at, or close to, its nameplate

capacity. Energy costs and ination persist,

however, and therefore it is expected that

costs will not fully return to historic levels until

these global factors, amongst others, return

to normal levels.

Link to strategy: 1, 2, 3, 4 and 5.

20 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Key Performance Indicators (“KPIs”) continued

Lost time injury frequency rate (“LTIFR”)

0.51 LTIFR

Denition

Safety is the Group’s highest priority. We

aimto ensure that our workforce operates

inasafe environment and is trained in safe

working practices.

An organisation’s LTIFR is a lagging indicator

of safety, and is calculated as the number of

lost time injuries incurred by an organisation’s

workforce (being employees and contractors)

per million hours worked. LTIFR is an industry

standard measurement and an important

indicator of how safe the work environment is.

The remuneration packages of the Group’s

executive management team, including the

Chief Executive Ofcer, include references to

the Group’s LTIFR. Please see page 124 for

more details of the Group’s incentive

programme.

Our performance in 2022

The Group’s LTIFR has remained at a

relatively low level for approximately four

years, falling from an average of 1.18

(2016–2018) to an average of 0.57 in

subsequent years. The result for 2022 (0.51)

was in line with recent performance and

ahead of the Group’s historical (ve year)

trailing average of 0.83. For context,

Ferrexpo’s iron ore producing peers in the

Pilbara region of Western Australia operated

with a LTIFR of 1.1 in the year to June 2021

(most recently published data).

Safety performance is also measured via the

number of fatalities at the Group’s operations,

which have remained fatality-free for more

than two years.

Looking forward to 2023

The Group has maintained a low level of

injuries and injury incidents in recent years,

with an incidence rate materially below its

industry peers. The Group aims to continue

this progress, through targeting no lost time

injuries. In 2022, Ferrexpo introduced a ‘Zero

Harm’ policy that aims to ensure all workers

return home safely from every shift. Please

see page 32 for more on our approach to

health and safety.

Denition

Diversity is an important aspect of any

modern business, and Ferrexpo has initiatives

to promote diversity in many forms – including

diversity based on gender, disability, sexual

orientation and cultural diversity.

Gender diversity is measured through a

number of metrics, including total workforce

and female representation in management

positions, dened as roles that are grade 10

and above (based on the Group’s internal

grading system).

The Group prefers to focus on female

representation in management roles as it

isareection of women progressing their

careers at Ferrexpo, rather than including

entry-level roles.

The remuneration packages of the Group’s

executive management team, including the

Chief Executive Ofcer, include references to

the Group’s workforce diversity. Please see

page 124 for more details of the Group’s

incentive programme.

Our performance in 2022

The Group has seen signicant progress in

increasing the level of female representation

in managerial positions, rising to 20.9% in

2022. This follows a multi-year trend, whereby

this gure has increased from 18% in 2019 to

the level seen today, with the Group setting a

target of achieving 25% by 2030.

Looking forward to 2023

The Group’s diversity programme is

targetingfemale representation in a number

of departments, at a range of levels within

ourorganisation. Our lead programme for

promoting gender diversity in management

roles is our “Fe_munity” women in leadership

programme, which is now in its third year of

selecting and training high potential future

female leaders of our business. This

programme has trained more than 200

participants since this project’s inception.

Please see page 42 for more on our approach

to diversity in our workforce.

Diversity in management roles

20.9

female

Non-nancial KPIs

0 .51

0.41

0.79

0.58

1.18

2022

2020

2021

2019

2018

20.9%

20.1%

18.2%

17.5%

17.7%

2022

2020

2021

2019

2018

Link to strategy: 1, 2, 3, 4 and 5.

Link to strategy: 1, 2, 3 and 5.

1. Source: Government of Western Australia (link).

21Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Greenhouse gas emissions

91kg/t

Sales volume by region

to Europe

Denition

The Group understands the importance

ofclimate change and we report emissions

ofgreenhouse gases (Scope 1, 2 and 3) as

ameans of tracking progress in our

decarbonisation efforts. Given the short-term

volatility in our production due to the war in

Ukraine, and our long-term growth ambitions

for production, we consider emissions per

tonne as the most representative metric for

our performance.

The remuneration packages of the Group’s

executive management team, including the

Chief Executive Ofcer, include references

tothe Group’s greenhouse gas emissions.

Please see page 124 for more details of the

Group’s incentive programme.

Our performance in 2022

Scope 1 and 2 emissions per tonne fell by 1%

in 2022, reecting a reduction in the ancillary

activities as a result of the war. Total

emissions (Scopes 1, 2 and 3) fell by 1% in

2022 as a result of the increased output of

direct reduction pellets, with downstream

useof pellets (steelmaking) representing 89%

of total emissions. Please see page 34 for

more. To date, we have reduced Scope 1 and

2 emissions

by 31% since our baseline year

(2019). Scope 3 emissions have been reduced

by 3% during the same timeframe.

Looking forward to 2023

The Group expects to continue its

decarbonisation pathway, aiming for a 50%

reduction in Scope 1 and 2 emissions

2030. Individual years may vary depending on

operational activities and restrictions relating

to the war in Ukraine, but the Group retains

itsstrategic goal of net zero production by

2050

. The Group also announced Scope 3

emissions targets on page 8 of its Climate

Change Report, published in December 2022.

Given the ongoing war in Ukraine and the

wide range of potential production outcomes

that could result in 2023, it is difcult to

estimate short-term achievements in

emissions reduction, but we remain focused

on our goals for 2030.

Denition

Ferrexpo believes it is important to have

adiversied customer base to be able to

withstand periods of volatility in specic

regions. Ferrexpo has, however, been

restricted in its sales portfolio in 2022 due

tothe war in Ukraine, which has closed

Ukraine’s access to the Black Sea.

In the past, Ferrexpo has utilised its central

geographic location between Europe, the

Middle East and Asia, as a natural hedge

against risk during periods of market

upheaval. The global Covid-19 pandemic

in2020 is a clear example of this, whereby

wesuccessfully pivoted our sales portfolio

towards China, increasing sales to this market

to more than 50% of the total, in response to

rising demand in this market.

Over time, this KPI will demonstrate the

shiftin our product portfolio towards greater

quantities of direct reduction (“DR”) pellets,

which, as of today, are primarily bought by

steelmakers in the Middle East and North

Africa (collectively “MENA”) and North

America. In the medium to long term,

itisexpected that buying of DR pellets

willincrease across global markets as

steelmakers seek to lower their emissions

ofgreenhouse gases.

Our performance in 2022

Given the Russian invasion of Ukraine in

2022, and related closure of Ukraine’s

access to the Black Sea, our sales portfolio

pivoted to customers in Europe as a result.

Aproportion of our DR pellet production was

sold to a European customer, for onward

transport to a facility outside of this region.

Looking forward to 2023

The Group is seeking to re-establish a

consistent and nancially viable link to the

seaborne export market via alternatives

toUkraine’s ports. Should the Group be

successful in this endeavour, or should the

conict in Ukraine ease in 2023, the Group

expects to gradually return to a sales mix

similar to previous years. In the event that

thisdoes not occur, the Group expects sales

to be similarly weighted towards European

customers in 2023.

1. Scope 1 and Scope 2 emissions on a combined basis, per tonne of production.

2. Net zero production for Scope 1 and Scope 2 emissions combined. The Group has a Scope 3 target of a 50% reduction

by 2050 (per tonne basis).

3. Note ‘Europe’ category includes sales to Turkey.

Region 2022 2021 2020

Europe, incl. Turkey

(BF pellet market) 83% 58% 36%

North East Asia

(BF pellet market) 4% 8% 5%

China & South East

Asia (BF pellet market) 11% 30% 56%

Middle East

& North Africa

(DR pellet market) 2% 0.4% 0%

North America

(DR pellet market) – 3% 2%

Link to strategy: 1, 2, 3, 4 and 5.

9 1kg/t

92kg/t

110kg/t

132kg/t

2022

2020

2021

2019

2018

Link to strategy: 1, 2, 3, 4 and 5

2022

2020

2021

22 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Financial Review

Investments to create

a resilient, high margin

business

Through a focus on premium

products and effective cost

controls, the Group has

maintainedstrong margins on

oursales, facilitating a stable net

cash position year-on-year.

Revenue

(50

)

Decline in revenues in line with 46%

reduction in sales volumes.

Underlying EBITDA

margin

Growing our Underlying EBITDA

margin by a further 4 percentage

points in 2022 (2021:57%).

Capital investment

US$161

Continued investments in 2022, with

a focus on near-term growth projects

(2021: US$361 million).

Summary

The war in Ukraine has shaped the

operational and nancial performance of

ourbusiness in 2022, with production and

sales volumes 46% lower as a result of the

restrictions imposed by the conict in Ukraine

(see pages 4 to 5 for a summary of the

impacts felt). Key drivers for the Group’s

nancial performance in 2022 include a

signicant impairment of US$254 million and

a net foreign exchange gain of US$276 million

(operating gain less non-operating loss), both

of which are related to the war in Ukraine.

The Group’s lower production and sales,

combined with escalating energy prices and

global ination, C1 cash cost of production

(“C1 costs

”) rose by 49%, resulted in a decline

in Underlying EBITDA

and prot after tax by

47% and 75% respectively. Despite the war, we

continued to invest in our assets in 2022, with

a further US$161 million of capital investment

Revenue

Group revenues declined by 50% to

US$1.2billion in 2022 (2021: US$2.5 billion),

which principally reects the restrictions

imposed on our business due to the war

inUkraine (see pages 4 to 5 for a summary

of effects of the conict), which reduced

pellet production by 46% to 6.1 million

tonnes in 2022 (2021: 11.2million tonnes).

Additional factors governing the Group’s

revenue in 2022 include a 25% decline in

thebenchmark iron ore price (65% Fe), a

6%reduction in freight rates, and an increase

in pellet premiums. For more information on

themarket factors governing pricing of the

Group’s products, please see pages 8 to11.

Furthermore, during the course of the year the

Group grew stockpiles of nished products

during 1H 2022 as the war in Ukraine created

instability in logistics pathways. Stockpiles

were subsequently reduced in 2H 2022 as

theoperating environment for production

deteriorated, but sales volumes generally

continued. This pattern ultimately reected in

total production and sales volumes remaining

broadly in line in 2022 (2021: in line).

Seaborne freight revenue arising from cost

and freight (“CFR”) sales decreased revenue

by US$94 million compared to 2021, reecting

the net effect of lower sales volumes to

seaborne markets.

Revenues from the Group’s barging and

bunker operations, First-DDSG Logistics

Holding, increased by US$4 million in 2022

compared with 2021 as a result of higher

freight rates and bunker volumes and prices.

C1 cash cost of production

The Group’s average C1 costs

for 2022 was

US$83.3 per tonne, compared with US$55.8

per tonne in 2021, reecting a 49% year-on-

year increase. Key drivers behind the higher

level of C1 costs

include the 46% reduction

in both iron ore pellet production and sales

volumes, with the war resulting in an

Nikolay Kladiev,

Chief Financial Ofcer

23Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

amended logistics landscape in 2022. The

Group’s higher unit C1 costs

were impacted

to a greater extent by the Group’s xed cost

base in 2022, as a result of 46% lower pellet

production volumes.

In addition to the factors discussed earlier

inthis section, 2022 saw signicant cost

ination associated with energy prices and

global ination, driven in part by the war in

Ukraine and restricted global energy supply.

As an example of the variability of energy

costs during the year, the Brent price of crude

oil rose from US$87 per barrel in January

2022 to a monthly peak of US$123 per barrel

in June 2022 (40% increase), before declining

to US$81 per barrel in December 2022

. This

escalation in energy pricing during the course

of the year represents a signicant factor in

the Group’s operating costs given that energy

has historically represented more than 40%

ofthe Group’s C1 costs

– see page 25 for

more information.

In more detail, the energy-related components

of the Group’s C1 costs

are electricity

(primarily used in beneciation operations),

natural gas and biofuels (used in the Group’s

pelletiser) and liquid fuels such as diesel

(principally used in mining operations). These

energy costs represented a combined 49% of

the Group’s C1 costs

in 2022 (2021: 45%),

with natural gas prices in Ukraine increasing

by 129% between 3Q 2021 (at a time when

prices were in line with the average for 2021),

and 1Q 2022, when supply risks relating to

Russia’s invasion of Ukraine were realised.

Since this initial price spike, natural gas prices

declined by 31% between 1Q and 4Q 2022,

reecting lower than expected demand in

global markets. Electricity prices in Ukraine

followed a similar trend in 2022, rising by 45%

between 3Q 2021 and 1Q 2022, before prices

subsequently retreated 18% by 4Q 2022

As detailed in the Group’s 2021 Annual Report

and Accounts, Ukraine implemented a new

royalty regime for iron ore producers that

came into force in January 2022. This regime

comprises a royalty payment based on the

spot iron ore (62% Fe) nes price, with no

reference to pellet premiums or freight rates,

which is structured as follows: (1) at monthly

iron ore prices (62% Fe) less than or equal to

US$100 per tonne, a royalty rate of 3.5% will

apply to iron ore product sales, (2) at prices

less than or equal to US$200 per tonne, a

royalty rate of 5% will apply and (3) at prices

above US$200 per tonne, a royalty rate of 10%

will apply. Royalties are not tiered and therefore

the rate applied will apply to the fullprice of

the iron ore product being sold. The regime

outlined above compares to theprevious

iron ore royalty calculation, whereby the

Group paid a at royalty rate of approximately

US$3.5 per tonne of all tonnes sold. As

shown in the Market Review section (see

table on page 10), benchmark iron ore nes

prices for material grading 62% Fe averaged

US$120 per tonne in 2022 (2021: US$160 per

tonne)

. Given the level of monthly iron ore

pricing in 2022, the impact of the royalty rate

on C1 costs

was US$7 per tonne in 2022.

In line with previous years, the Group’s C1

costs

represent the cash costs of production

of iron pellets from own ore (to the mine

gate), divided by production volume from

own ore, and excludes non-cash costs

such as depreciation, pension costs and

inventory movements, as well as the costs

of purchased ore, concentrate and gravel.

The C1 cash cost of production

(US dollars

per tonne) is regarded as an Alternative

Performance Measure (“APM”). For further

information, please see pages 212 to 213.

Selling and distribution costs

Total selling and distribution costs were

US$236 million in 2022 (2021: US$340 million),

reecting lower sales to seaborne markets due

to the war in Ukraine. As a result, international

freight costs from CFR sales decreased

by US$120 million compared to 2021.

General and administrative

expenses

General, administrative and other

expensesin 2022 were US$64 million (2021:

US$72million), with this decrease mainly

due to the net impact of higher ination and

lower production volumes, with the latter a

direct consequence of the war in Ukraine.

Currency

Ferrexpo prepares its accounts in

US dollars. The functional currency

of the Group’s operations in Ukraine

is the Ukrainian hryvnia, which has

historically represented approximately

half of the Group’s operating costs.

In 2022, the hryvnia depreciated by 34% from

UAH 27 per US dollar as of 31 December

2021 to UAH 37 per US dollar as of

31 December 2022. The National Bank of

Ukraine (“NBU”) set the exchange rate at

approximately UAH 37 per US dollar as of

21 July 2022, within the framework of the

Martial Law entered into force since

24 February 2022. As a result of the

introduced Martial Law, the NBU has

introduced signicant currency and capital

control restrictions in Ukraine. These

measures limit the possibility to convert local

currency into US dollars, and the ability to

transfer US dollars between onshore and

offshore accounts of the Group. See Note 30

(Commitments, contingencies and legal

disputes) for further information.

Operating foreign exchange losses

Given that the functional currency of the

Ukrainian subsidiaries is the hryvnia, a

depreciation of the hryvnia against the

USdollar results in foreign exchange gain on

the Group’s Ukrainian subsidiaries’ US dollar

denominated receivable balances (from

thesale of pellets). The operating foreign

exchange gain in 2022 was US$339 million

compared to a loss of US$38 million in 2021,

when the hryvnia appreciated.

Key Financial Performance Indicators

US$ million (unless stated otherwise) 2022 2021 YoY change

Total pellet production (kt) 6,053 11,220 (46%)

Sales volumes (kt) 6,183 11,350 (46%)

Iron ore price (65% Fe Index, US$/t)

139 186 (25%)

Revenue 1,248 2,518 (50%)

C1 cash cost of production

(US$/t) 83.3 55.8 +49%

Underlying EBITDA

765 1,439 (47%)

Underlying EBITDA

margin 61% 57% +4pp

Debt servicing 42 215 (80%)

Capital investment

161 361 (55%)

Closing net cash 106 117 (9%)

Ukrainian hryvnia vs. US dollar

UAH per USD

Spot 28.02.23

36.5686

Opening rate 01.01.22

27.2782

Closing rate 31.12.22

36.5686

Average 2022

32.3423

Average 2021

27.2862

1. Source: Bloomberg.

2. Movements shown are based on quarterly averages.

3. Source: S&P Global Commodity Insights.

4. Source: National Bank of Ukraine.

24 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Financial Review continued

Non-operating foreign exchange

gains/losses

Non-operating foreign exchange gains are

mainly due to the reclassication of US dollar

denominated inter-company loans from quasi

equity to operating loans. In 2022, the Group

recorded a non-operating foreign exchange

loss of US$63 million (2021: loss of

US$3million), which was driven by a 34%

depreciation of the hryvnia during the year

against the US dollar, as well as uctuations

inthe euro/US dollar exchange rate. For

further information, please see Note 9

(Foreign exchange gains and losses) to

theConsolidated Financial Statements.

Underlying EBITDA

in 2022 decreased by

47% to US$765 million, with this decrease

reecting a 46% reduction in sales volumes,

lower market factors, including a 25%

reduction in the benchmark iron ore nes

price, and a 49% increase in C1 costs

The Group’s Underlying EBITDA

for 2022

includes a non-cash operating forex gain of

US$339 million (2021: non-cash operating

forex loss of US$38 million).

Interest

Interest expense on loans and borrowings

declined by 95% to US$0.5 million compared

to US$10 million in 2021, due to the

repayment of the Group’s pre-export nance

(“PXF”) facility in June 2021. Other than trade

nance lines (utilised only in Q1 2022 for an

average cost of 2.19%), the Group did not

have any nancial debt in 2022 and, therefore,

no related nancial expense (2021: average

cost of debt of 4.7% driven by the PXF that

was fully repaid in June 2021).

Further details on nance expense are

disclosed in Note 10 (Net nance expense)

tothe Consolidated Financial Statements.

At the same time, interest income increased

by 46% to US$0.9 million compared to

US$0.6 million in 2021, reecting the higher

global interest rate environment.

Tax

In 2022, the Group’s income tax expense

was US$119 million (2021: US$200 million).

The effective tax rate for 2022 was 35.0%

(2021: 18.7%). The increase in the effective

tax rate was predominantly driven by

an impairment loss of US$254 million

on the Group’s non-current operating

assets, which is not tax deductible.

In 2022, the Group paid income taxes of

US$110 million (2021: US$228 million), of

which US$91 million were paid in Ukraine

(2021: US$221 million).

Further details on taxation are disclosed in

Note 11 (Taxation) to the Consolidated

Financial Statements.

Items excluded from

underlyingearnings

The Group has recognised an impairment

charge of US$254 million as a result of a

reduction in the carrying value of the Group’s

assets in Ukraine, and the devaluation of the

local currency exchange rate seen in 2022.

Please see Note 13 (Plant, property and

equipment) to the Consolidated Financial

Statements for more information.

In the prior period, an impairment charge

ofUS$231 million was recognised as at

31 December 2021, with this relating to

stockpiled low grade ore as it cannot be

reliably predicted as to when this material

willbe processed.

Please see Note 17 (Inventories) to the

Consolidated Financial Statements for more

information.

Prot for the period

Prot for the period decreased by 75% to

US$220 million compared with US$871 million

in 2021, reecting a 62% decrease in

operating prot, as well as a foreign exchange

gain of US$339 million compared to a foreign

exchange loss of US$38 million in 2021.

Cash ows

Operating cash ow before changes in

working capital decreased by 70% to US$434

million, while the working capital outow in

Despite the Russian invasion into Ukraine

on 24 February 2022, the Group continued

to operate throughout the majority of 2022,

albeit at a much lower capacity. However, the

situation in Ukraine continues to represent

a signicant risk to the Group’s operations

and the point of time of the recovery of the

production and sales volumes to pre-war levels

is currently uncertain. As a result, the Group

continuously adjusts its long-term model

in order to reect the latest developments

in terms of possible production and sales

volumes as well as latest market prices

and production costs, which are adversely

affected by lower production volumes. These

factors, combined with a higher discount

rate to be used as a result of an increased

Country Risk Premium for Ukraine, had an

adverse impact on the value in use of the

Group’s non-current operating assets.

In accordance with IAS 36 Impairment of

assets, the Group recorded an impairment

loss of US$254 million as of 30 June 2022 as

the carrying value of the assets was exceeding

the computed value in use by this amount.

Case Study: Factors leading

to the Group recording an

impairment loss

Image: Iron ore pellet stockpile located at our assets in Ukraine,

where the Ukrainian hryvnia devalued by 34% in 2022.

US$83.3/t

(2021: US$55.8/t)

25Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

2022 was US$20 million (compared to an

outow of US$139 million in 2021). The overall

decrease in the working capital outow

largely reects a balance of lower trade

accounts receivable and higher inventories

and VAT receivable, and a decrease in trade

and other payables, which collectively

provided a lower net effect in2022.

As a result of lower operating cash ow,

the net cash ow from operating activities

decreased by 72% to US$301 million

in 2022 (2021: US$1,094 million).

With respect to capital allocation, investment

decreased by 55% to US$161 million (2021:

US$361 million), while dividends paid during

the 2022 calendar year decreased by 75% to

26.4 US cents compared to 105.6 US cents

in2021.

Capital investment

Capital expenditure in 2022 was US$161

million compared to US$361 million in 2021.

Of this amount for 2022, sustaining and

modernisation capex was US$57 million

(2021: US$113 million), covering activities at

allof Ferrexpo’s major business units. Given

operational and logistics constraints relating

to Russia’s invasion of Ukraine in 2022, the

Group maintained its levels of investment

relating to sustaining capital investment, and

reduced activities relating to expansion capital

investment

, particularly in relation to projects

that are expected to deliver returns in the

medium to long term. As such, major projects

advanced in 2022 include US$25 million

spent on stripping activities for future

production growth, US$17 million spent on

the completion of the Group’s press ltration

complex and US$2 million on completion of

the MFC-2 project, which will help raise

pelletising capacity in the near term once

operations return to full capacity.

Ferrexpo continued to invest in the primary

crushers upgrade project, investing US$4

million. A total of US$37 million was spent

onthe Group’s concentrator and pelletiser

aspart of the Wave 1 Expansion Programme,

and a further US$4 million was invested

in infrastructure facilities. The Group also

spent US$11 million in the development and

exploration of the Belanovo, Galeschynske

and Northern deposits, and US$2 million in a

hydrolysis plant for the trial of hydrogen use

as a fuel in the Group’s pelletiser. The Group

also invested US$3 million in the procurement

of new railcars in 2022. For further information

on the Group’s activities to grow its

business in 2022, please see page 29.

Shareholder returns

Total dividends paid to date in respect of

2022 are 13.2 US cents (2021 total: 52.8 US

cents). The Group has a shareholder returns

policy outlining the Group’s intention to deliver

30% of free cash ows as dividends in

respect of a given year. To date, the Group

has announced dividends in respect of the

2022 nancial year representing 55% of the

Group’s free cash ow in 2022.

Debt and maturity prole

Ferrexpo has maintained a strong balance

sheet in 2022, including low levels of gross

debt and had a net cash position as of

31 December 2022. As of 31 December 2022,

the Group’s net cash position was US$106

million (31 December 2021: US$117 million net

cash position). The Group had no debt

facilities as of 31 December 2022, compared

with US$50 million as of 31 December 2021.

The balance of cash and cash equivalents

held in Ukraine amounts to US$45 million

as at 31 December 2022 (31 December

2021: US$52 million). Despite the foreign

exchange control measures imposed

under Martial Law in Ukraine (see Note 30

Commitments, contingencies and legal

disputes), this balance is fully available to

the Group for its operations in Ukraine and

is therefore not considered restricted.

As of 31 December 2022, the credit ratings

agency Moody’s had a long-term corporate

and debt rating for Ferrexpo of Caa2, with a

negative outlook. The credit ratings agency

Fitch maintains a CCC+ rating on the Group.

While the credit rating of Ferrexpo is capped

by the sovereign credit rating of Ukraine, the

ceilings for credit ratings ascribed to Ferrexpo

by both Moody’s and Fitch are higher (one

notch above sovereign, Caa3, for Moody’s and

three notches above sovereign, CC, for Fitch).

During the course of 2022, as risks relating

to the Russian invasion of Ukraine escalated

after 24 February 2022, the credit ratings

agencies took a number of steps to update

their assessments of Ukrainian issuers. As

of 14 February 2023, Moody’s had a long-

term corporate and debt rating for Ferrexpo

of Caa3, with a negative outlook. Similarly,

as of 29 July 2022, Fitch had a long-term

corporate and debt rating for Ferrexpo plc

of CCC+. Whilst the credit rating of Ferrexpo

is capped by the sovereign credit rating

of Ukraine, the credit rating ascribed to

Ferrexpo by Fitch is higher. The credit ratings

agency Standard & Poor’s has temporarily

suspended the credit rating for Ferrexpo

plc, following an action to suspend coverage

of all Ukrainian issuers in March 2022.

Related party transactions

The Group enters into arm’s length

transactions with entities under the common

control of Kostyantin Zhevago and his

associates. For further information, please

see Note 34 (Related party disclosures).

Breakdown of C1 costs

in 2022

Electricity 22%

Gas + Biofuel 19%

Fuel (including diesel) 8%

Maintenance and repairs 20%

Personnel costs 9%

Royalties and other taxes 9%

Materials 6%

Grinding bodies 6%

Blasting 2%

Note: above numbers are rounded to nearest percentage.

Breakdown of C1 costs

C1 costs

in 2022 increased by 49% in

2022to US$83 per tonne, with this increase

principally related to the increasing unit

cost of energy such as natural gas, fuel

(principally diesel) and electricity. This

change is demonstrated in the chart above,

with energy-related costs comprising 49%

of our C1 costs

in 2022 (2021: 45%).

In light of the ongoing war in Ukraine, scaling

back of production activities and devaluation

of the local currency in Ukraine, maintenance

and repair costs fell to 20% in 2022 (2021:

22%), and materials costs reduced to 6% in

2022 (2021: 8%). The Group’s decision to

continue paying its workforce despite lower

production volumes resulted in a small

increase in percentage terms to 9% in 2022

(2021: 8%).

Royalties increased from 6% in 2021 to 9%in

2022 – please see page 23 for details of the

revised royalty regime that wasimplemented

at the start of the year.

26 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Operational Review

The Group managed to maintain

production throughout the majority

of 2022, and continued shipments to

customers for the entire year, despite

the challenges posed by the ongoing

Russian invasion of Ukraine.

Resilient production

6.1

Pellet production continues, despite

more than 250 days of Russia’s

invasion during the course of 2022.

Focus on quality

100

Output continues to be comprised

entirely of high grade forms of ironore.

Shifting to direct reduction pellets

Increasing proportion of direct

reduction pellets to 6% of total

pelletproduction in 2022 (2021: 4%).

As a producer of a bulk commodity, our

access to logistics is key in our ability to

produce and sell our products. As a

consequence of the war in Ukraine, our

activities in 2022 were therefore appropriately

scaled throughout the year, according to the

number of customers that were accessible

atany given time. Furthermore, attacks on

Ukraine’s state-owned electricity network

in4Q 2022 limited our ability to produce.

Shipments were, however, maintained

throughout the year, which is testament

tothecommitment of our operating and

marketing teams.

Health and safety

2022 represented our second successive

year with no fatalities, and we maintained

ourstrong performance in relation to our key

safety metric (lost time injury frequency rate).

Please see page 32 for more information on

our safety performance in 2022.

Reserves and resources

Ferrexpo controls licences covering a number

of deposits located along the Kremenchuk

Magnetic Anomaly, which is a magnetite

deposit that extends for more than 50

kilometres. The Group has active mines on

three deposits and additional licences for

deposits immediately to the north of our

active operations.

Across the Group’s three active mines, we

have a JORC-compliant Ore Reserve estimate

of 1.6 billion tonnes of iron ore, with an iron

(“Fe”) content of 32% Fe (2021: 1.6 billion

tonnes grading 32% Fe).

Our JORC-compliant Mineral Resource

estimate across our three active mines is

5.7billion tonnes of iron ore, with an iron

(“Fe”) content of 32% Fe (2021: 5.8 billion

tonnes grading 32% Fe), which is inclusive

ofOre Reserves.

In addition, at a number of exploration

properties immediately north of our active

mines, we have exploration stage properties

with a combined non-JORC compliant

Mineral Resource estimate of 14 billion tonnes

of iron ore, grading 34% Fe (collectively

referred to as the “Northern Deposits”).

A table detailing the Group’s JORC-compliant

Ore Reserves and Mineral Resources as at

1 January 2023 is provided on page 28 of

thisreport.

Mining activities

Throughout the year, we have scaled our

mining operations according to the ore

requirement of the processing plant, which

has been set by the degree of accessible

customer markets. See pages 4 to 5 for

moreinformation on the various impacts

imposed by the conict in 2022.

Overall mining volumes across the Group saw

a total movement of 55 million tonnes across

our three mines in 2022 (2021: 152 million

tonnes), with this 64% decline in total

Scaling operations in

line with accessible

markets

Viktor Lotous,

Head of Ferrexpo’s

Operations in Ukraine

(FPM

General Director)

27Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

movement reective of the war in Ukraine

andthe 46% decrease in sales volumes

during the year.

Following the outbreak of Russia’s invasion,

mining activities initially focused on both the

Poltava and Yeristovo mines, with strong

European demand for iron ore, and therefore

production volumes remained in line in 1Q

2022. Subsequently, production volumes in

2Q 2022 fell by 22% as logistics constraints

increased and European steel mills curtailed

buying activities having established larger raw

inventories to mitigate supply risks.

With additional logistics restrictions in 3Q

2022, principally relating to attacks on the

railway network and increased demand due

to the grain season in Ukraine, the Group

further lowered its production and focused

itsore mining activities on the Yeristovo mine,

to optimise mining costs.

Finally, in 4Q 2022, Russian attacks on

state-owned electricity infrastructure resulted

in a lack of power at our processing plant. In

response, mining activities were paused given

the lack of ore demand for production.

In light of the restrictions described above,

mining tonnages at all three mines fell by

between 50% and 80% during 2022, with

alower reduction of ore mining activities

seenat both Poltava andYeristovo mines

(30–50% reduction).

Processing activities

As referenced above, processing activities

were scaled according to accessible markets

throughout the year, given the ongoing war

inUkraine. As such, processing volumes

decreased by 44% during 2022 to 17 million

tonnes, reecting the above restrictions and

reduced demand for iron ore pellets as a

result of lower steel margins in Europe (being

the main customer market for the Group given

restricted access to seaborne markets).

A key area of focus of the Group’s processing

operations in 2022 was developing our

offering of direct reduction (“DR”) iron ore

pellets, which is a product that is typically

used in electric arc furnaces (“EAFs”). Since

an EAF represents a more energy efcient

process than the main alternative method of

steelmaking (blast furnace), DR pellets have

amaterially lower Scope 3 carbon emissions

footprint for the Group, whilst also generating

higher pellet premiums for us through a higher

iron ore grade.

In 2022, we produced 353 kilotonnes of DR

pellets, which is a decrease of 18% on the

previous year, but the proportion of total pellet

output increased to 6% (2021: 4%). Through

further developing our understanding of this

product, as well as using 2022 as an

opportunity to establish new relationships

with potential customers, we are condent

that we will emerge from the conict in

Ukraine with a more developed footprint for

global DR pellet markets.

The war in Ukraine has created delays and

uncertainty over our ability to sell our

production at specic points in 2022.

To maintain the strength of our balance sheet

throughout the conict, we have sought to

avoid the creation of signicant stockpiles

of nished iron ore pellets, as these capture

operating costs, but do not deliver immediate

opportunities to realise revenues. However,

iron ore pellets do not materially degrade if

stockpiled, and therefore it is not detrimental to

the Group if material is temporarily stockpiled.

Given uctuations in logistics availability

during 2022, the Group accumulated a

stockpile inventory of 1.0 million tonnes by the

middle of 2Q 2022, with production scaled in

2H 2022 to ensure an effective drawdown of

these stockpiles. As a result, the Group

ended the year with stockpiles similar in size

to the Group’s stockpiles as at 31 December

2021 (approximately 0.1 million tonnes larger

as of January 2023). The Group’s stockpiles

are located at our operations in Ukraine or at

staging points across our logistics network,

either within Ukraine or at key rehandling

locations overseas.

Growth programme

Our Wave 1 Expansion programme,

whichwould see us increase our production

capacity by an additional three million tonnes

of iron ore pellets per annum, remains an

objective of the Group. Signicant investment

in this programme remains on hold whilst

there are elevated risks associated with the

war in Ukraine, but it is our intention to

resume activities once the risk prole of the

Group normalises.

Operational performance

(000’t unless otherwise stated) 2022 2021 YoY change

Production

Iron ore mined 18,837 33,764 (44%)

Strip ratio 1.9 3.5 (45%)

Iron ore processed 17,375 31,111 (44%)

Concentrate production 8,430 14,655 (42%)

Pellet production 6,053 11,220 (46%)

– Direct reduction pellets (67% Fe) 353 431 (18%)

– Premium blast furnace pellets (65% Fe) 5,700 10,790 (47%)

– Basic blast furnace pellets (62% Fe) – – –

Commercial concentrate production 124 234 (47%)

Iron ore sales

– Pellets 6,055 11,115 (46%)

– Concentrate 128 234 (45%)

– Total products sold 6,183 11,349 (46%)

Iron ore mined volume

(4 4

)

Iron ore mining volumes fell by 44%

in 2022, broadly in line with the level

of reduction seen in iron ore pellet

sales volumes.

Total movement by quarter: gradual

impact of conict in Ukraine

4Q 2022

(Quarterly Average)

2Q 2022

3Q 2022

2022

2020

Read more on our KPIs on page 18

28 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Operational Review continued

JORC-Compliant Ore Reserves and Mineral Resources

Proven Probable Total

JORC-compliant Ore Reserves Mt

total

magnetic

% Mt

total

magnetic

% Mt

total

magnetic

Gorishne-Plavninske-Lavrykivske (“GPL”) 303 33 26 823 31 23 1,126 32 24

Yerystivske 211 30 25 290 33 26 501 32 26

Total 514 32 26 1,113 32 24 1,627 32 25

Measured Indicated Inferred Total

JORC-compliant Mineral Resources Mt

total

magnetic

% Mt

total

magnetic

% Mt

total

magnetic

% Mt

total

magnetic

Gorishne-Plavninske-

L a v r y k i v s ke ( “ G P L” ) 469 35 29 1,621 30 22 744 32 24 2,834 31 24

Yerystivske 260 35 29 571 34 27 382 33 27 1,213 34 27

Bilanivske 336 31 24 1,149 31 23 217 30 21 1,702 31 23

Total 1,065 34 27 3,341 31 23 1,343 32 24 5,749 32 24

1. The Group’s JORC-compliant Ore Reserves and Mineral Resources shown above are based on an independent review completed by Bara Consulting, and are shown on a depleted basis

as of 1 January 2023. The Group previously reported a resource estimate of 326Mt for the Galeschynske deposit, which is the subject of a legal dispute and is therefore not shown above;

please see page 199 for more information.

Russia. Additional factors affecting the

Group’s access to the railway network in

Ukraine may relate to demand from other

railway users, with shifting demand patterns

likely as Ukraine’s economy adapts to a

complex operating environment.

Furthermore, attacks on Ukraine’s state-

owned electricity infrastructure have

previously impacted our ability to operate,

and this is a factor that should be monitored

in 2023, should these attacks continue.

It is our intention to maintain our global

inventory of nished iron ore pellets at a

stockpile level in line with previous years,

but this may not be possible given periodic

uctuations in logistics availability. Should

changes in the level of available logistics result

in an increased inventory of pellets, the Group

may elect to moderate production volumes

in 2023 to ensure a stockpile drawdown,

similar in scale to that seen in 2H 2022.

Given the wide range in potential logistics

and production outcomes in 2023, it is

difcult to provide a clear expectation on

overall production volumes for 2023. Should,

however, the conict risks associated with the

war in Ukraine subside during 2023, then the

Group would expect to return to its nameplate

capacity as soon as it is practical to do so.

Despite the war in Ukraine, a number of

growth projects were completed or continued

in 2022. These projects principally relate to

projects that were close to completion as of

February 2022, or represent low cost, high

value projects that were deemed suitable for

completion during the year. Please see page

29 for more information on growth projects

completed in 2022.

Sustainability programme

We continued to implement our various

sustainability initiatives throughout 2022,

reducing our Scope 1 and 2 emissions

footprint (combined basis) by 1% (now

31% below our baseline year of 2019),

and further increasing gender diversity

amongst our management team. Please

see pages 30 to 47 for more information

on our sustainability programme.

Logistics activities

A major impact of the war in Ukraine in 2022

has been on our ability to ship our products.

Please see pages 4 to 5 for a summary of the

impacts incurred due to the conict.

The Group’s logistics network covers our use

of the Ukrainian railway network, and beyond,

for accessing European customers by rail. In

addition, we have our inland waterway

subsidiary First-DDSG for barging material

along the River Danube. Our access to the

seaborne market is typically via a berth at the

Ukrainian port of Pivdennyi (formerly known

as Yuzhny), but Russia’s invasion in 2022 has

limited Ukraine’s access to the Black Sea. We

have established potential routes into the

seaborne market via alternative ports, and we

are in advanced discussions to increase

volumes of material shipped via these routes.

The logistics capacity of the Ukrainian railway

network has remained under pressure during

the year as a result of (a) Russia’s attacks,

and (b) the grain season in the summer of

2022, which reduced spare capacity across

the network. Furthermore, power cuts across

Ukraine in 4Q 2022 placed additional limits

onthe railway network’s carrying capacity.

In terms of barging operations, First-

DDSG’s operations provided logistics

exibility at an important time for the

business, helping facilitate shipments

via an alternative logistics route.

Outlook

The Group expects that production volumes

will continue to be linked to the volume of

accessible sales in 2023.

We are currently operating with two of our

four pelletiser lines, with this production

predominantly being delivered to European

customers. Should Ukraine’s access to the

Black Sea be restored, or should we be able

to establish a port agreement that is

consistent, scalable and economically viable,

then returning to the seaborne market could

potentially represent a catalyst for increasing

output at our operations in the coming year.

The Group demonstrated its exibility in

logistics during the global Covid-19 pandemic,

when pellet sales to customers in China and

South East Asia increased from 30% in 2019

to 56% in 2020, as demand in other regions

fell. It would be the Group's intention to utilise

this exibility in global markets in 2023 if

regular access to seaborne markets were to

resume. An additional factor is the continued

availability of the railway network in Ukraine,

which is frequently subject to attacks by

29Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

In light of the ongoing war in Ukraine, we

havepaused our main expansion project –

theWave 1 Expansion Programme, which

amounts to more than US$600 million of total

investment, growing our production capacity

by approximately 25%. The Wave 1 Expansion

continues to represent a signicant growth

project, and we intend to resume activities

once the conict risks in Ukraine are reduced.

The past year, however, did see a number of

growth projects completed at our Ukrainian

operations. Total investment during 2022 was

US$161 million, of which US$104 million was

in growth projects, and the majority of this

expenditure was on projects either nearing

completion as of February 2022 or those which

represent low cost, high return opportunities.

The main project completed in 2022 is the

press ltration project in our beneciation

plant, which will help deliver more efcient

removal of moisture from concentrate as it

exits the beneciation plant. The equipment

installed includes Metso press ltration

technology, which represents a modern

alternative to our existing vacuum lter system.

Benets

are expected to include:

– Lower moisture levels will result in lower

energy costs in the pelletiser, where we

heat pellets to cure and harden them.

Consequently, natural gas consumption

rates are expected to be 3% lower on

average across all pellet types, with

associated benets for C1 costs

and

Scope 1 greenhouse gas emissions.

– Improved product quality, since excess

moisture in green (unred) pellets can lead

to cracking as they are heated. The Cold

Compression Strength (“CCS”) of our

pellets, which is a key metric for pellet

quality, is forecast to increase by 8% for

our Ferrexpo Premium Pellets (65% Fe).

– Through more effective moisture removal, we

will be able to increase throughput of material

throughout our processing plant, resulting in

3% higher throughput rates (on average).

– A more efcient process will also result in

lower losses of iron as concentrate is

converted to pellets. This will result in a

0.2% Fe uplift in pellet grades (average).

Growth:

Continuing to expand

anddevelop in 2022

Newly completed press ltration

complex expected to deliver a

3% reduction in natural gas

consumption

Case Study: Investment in growth projects

Image: The installation of an automated lathe in our maintenance department – an

example of modern equipment – has helped improve safety and performance.

1. Note that gures shown here in this case study are

preliminary management estimates.

Annual Report & Accounts 2022Ferrexpo plc30

STRATEGIC REPORT

Responsible Business Review

In reviewing the past year, our engagement with

local stakeholders in Ukraine has been key to

understanding our role. Companies have been

essential to the local response during Russia’s

invasion in 2022, supporting workforces, their

families and local communities.

Understanding the

role of sustainability

during a war

Safety and

Our People

See page 32

TCFD

Disclosures

See page 37

Environmental

Stewardship

See page 34

Diversity, Equity

and Inclusion

See page 42

Supporting

Communities

See page 44

Corporate

Governance

See page 46

Scan to read our latest

Responsible Business Report

US$19

Total humanitarian support provided to date,

including the Ferrexpo Humanitarian Fund,

assisting more than 70 individual projects.

0.51

Strong safety performance continues with

losttime injury frequency rate of 0.51 in 2022

(2021: 0.41).

% Reduction

Our greenhouse gas emissions footprint fell by

in 2022, despite the war in Ukraine.

31Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

As a responsible business, we understand

our role in Ukraine today: supporting our

people and communities across Ukraine,

and providing this support through our

experience and in-country presence. We are

long-term investors in Ukraine, its people

and its economy, which is only possible

through positive, long-term partnerships

with our Ukrainian stakeholders.

Our community engagement and support

throughout the conict in Ukraine has

primarily been conducted via our Ferrexpo

Humanitarian Fund (see page 44 for more

details). We also have our long-standing

Ferrexpo Charity Fund, which has been

providing direct support to communities for

more than 11 years now. In 2022, we were

also proud to publish our seventh Responsible

Business Report, which was published in

both English and Ukrainian for the rst time

– an important step in us broadening our

engagement with our local stakeholders.

Understanding the task ahead

It is clear that the war will have a long-lasting

impact on Ukraine. At this point in time, it is

important to understand the various impacts

of the war on the people and communities

of Ukraine, as well as Ferrexpo. Through

this understanding, we can begin to tailor

our approach to our Responsible Business

activities in the future, in particular, our

efforts in respect of the health and wellbeing

of our people and local communities, as

well as targeted humanitarian support.

With this in mind, we intend to revisit our

materiality assessment of sustainability

topics in the coming year, once the risks

associated with the conict have subsided.

An assessment today would likely be skewed

by a need for near-term humanitarian

support, which we are already providing.

With time, there will be an opportunity to

understand the longer-term needs of local

communities, and we will tailor our approach

according to the results of this work.

Safety and wellbeing

Health and safety is of paramount importance

to us at Ferrexpo, and I am proud that our

operations delivered another strong year in

safety. We have taken numerous measures

to protect our workforce from the threat

of the conict in Ukraine. As the war has

progressed, we have also begun providing

support for the wellbeing of our workforce,

as we are conscious of the impact that living

in a war might have on an individual’s mental

and physical health (see page 32 for more).

Levelling up our climate reporting

Understanding our environmental footprint and

reducing our greenhouse gas emissions are key

topics for modern companies. In 2022, despite

the war in Ukraine, we continued to reduce our

emissions, which fell by a further 1% in 2022,

and this now puts us 31% below our baseline

year of 2019

. We also maintained our focus

on developing our climate change strategy

in 2022, publishing our inaugural Climate

Change Report in December 2022, which

serves to summarise our rst phase of work

with environmental consultants Ricardo Plc.

In this report, we highlight a potential net zero

pathway for our operations, as well as providing

a detailed look at various climate change

related risks and opportunities. Through this

bespoke work, and our progress in reducing

emissions to date, we were also able to

upgrade our Scope 1 and 2 target for 2030

to 50% (from 30%)

and broaden our suite of

targets to include Scope 3 emissions – setting

reduction targets of 10% and 50% for 2030 and

2050 respectively

. Our Scope 3 emissions are

closely linked to our output of direct reduction

(“DR”) pellets, and more can be found on

this subject in our Climate Change Report.

Building an inclusive culture

We continue to make progress in our approach

to diversity. Our gender diversity initiative – the

“Fe_munity” women in leadership programme

– has recently accepted its third intake of

future female leaders of our business, and in

2022 we broadened this initiative to welcome

women from across Ukraine. To help drive

change, we are also now providing grants to

aid career journeys – more on this on page 42.

Driving change and transformation is an

integral part of being a sustainable business.

This can be through embedding a culture of

safety at our operations, which is now showing

tangible progress, through to our approach to

diversity, equity and inclusion (“DEI”), driven

by our rst diversity and inclusion ofcer at our

operations. Looking forward, we are seeing

an emerging phase of cultural change in

biodiversity, with baseline studies underway.

I am proud to be a part of Ferrexpo, having

seen the good work in sustainability being

conducted in Ukraine during my most recent

site visit in late 2021. We are proud to support

communities across Ukraine at this time and

look to a more positive future, when the war

is over. It is a pleasure to witness the changes

underway in sustainability at Ferrexpo, and I

would like to thank everyone involved, from our

workforce for their efforts to drive this change,

to our customers, investors and suppliers for

their engagement on sustainability topics.

Ann-Christin Andersen

Chair, HSEC Committee

1. Scope 1 and 2 emissions combined, on a per tonne of

production basis.

2. Scope 3 emissions on a per tonne of production basis.

Ann-Christin Andersen,

Chair, Health, Safety,

Environment and

Community (“HSEC”)

Committee

At Ferrexpo, we are proud to support

Ukraine. Through our local presence

and position as a long-term investor in

the country, we have been able to

provide targeted support throughout

the war. However, our efforts in 2022

have not been limited to humanitarian

aid, and we have continued to make

good progress in a number of areas.

32 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Safety and Our People

Case Study: Supporting

wellbeing in a war zone

Businesses in Ukraine at the present time are

playing a critical role in supporting individuals

and communities within Ukraine. As a business

located outside of the main conict zone,

Ferrexpo has been able to support more than

3,500 internally displaced people as they

relocate themselves and their families away

from danger, with accommodation available

at our hotels and other properties in the local

area. For our workforce, we have provided

psychological support, wellbeing classes

and on-site yoga. For communities, we have

trained local teachers to help extend our

wellbeing programme to local schools, and

are continuing to provide community support

via the Ferrexpo Humanitarian Fund and

Ferrexpo Charity Fund (see page 44 for more).

We are also supporting Ukrainian culture

at this critical time, with initiatives such as

marking Ukraine’s rst Statehood Day in

July, hosting a poetry reading competition

and publishing a book of employee

poems to celebrate Ukrainian Writing and

Language Day in November 2022.

Protecting

the safety of

our people

Our workforce comprises 10,000 employees and

contractors; with more than 95% of our team located

in Ukraine, it is critical that we protect our workforce

from immediate dangers, but also help support their

health and wellbeing at this difcult time.

Zero

Fatality-free for second successive

year (2021–2022), targeting a zero

harm working environment.

0.51

Ferrexpo achieved a lost time injury

frequency rate of 0.51 in 2022

(2021: 0.41).

Four consecutive years of low injury

rates, with results materially below

our historic average and also below

iron ore producing peers in Australia.

Image: Providing accommodation to internally

displaced people in Ukraine as they escape the war.

Scan to watch our employees

recite a Ukrainian poem,

“Iwant to live without war”.

33Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Protecting our people

At Ferrexpo, we have a global workforce

comprising almost 10,000 employees and

contractors, with more than 95% based in

Ukraine, and their safety is our rst priority.

Given the scale of our workforce, it was never

an option to evacuate our people during the

war in Ukraine, and therefore we have had to

take extensive measures to protect our

workforce with a war unfolding.

Measures taken have included remote working

for those with suitable roles, to ensure that

they were as far from the front line as possible.

Measures for our on-site workforce have

included the provision of air-raid shelters,

adjusting shift patterns to align with night-time

curfews and the provision of free meals in light

of disruption to supply chains in local

communities. In the early phase of the conict,

when uncertainty arose over the continued

provision of social services, the Group

commenced an on-site childcare facility for

the children of employees, which was staffed

by Ferrexpo volunteers, to ensure that children

could be close by and safe during such an

uncertain period of time. As the war evolved,

the need for such facilities diminished as life

began to resume in Ukraine, with schools

opening and a ‘new normal’ beginning.

As the conict evolved in 2022, so did our

response – in 2H 2022, we focused our

efforts on the supply of key equipment such

as armoured ambulances and food packages

to towns along the front line. We have also

moved to provide wellbeing initiatives to help

our workforce and community as they adapt

to the stress of living in a war zone, with free

psychological support.

We now have approximately 650 employees

who are currently serving in the Armed Forces

of Ukraine

. We are proud of their efforts to

defend Ukraine, and have supported them by

providing personal protective equipment and

other non-lethal equipment.

Operational safety initiatives

maintained

Despite the focus on the war in Ukraine, we

are proud that our operations teams managed

to record another year of excellent safety

performance. In 2022, the Group recorded a

second successive year without a fatality, and

the Group’s lost time injury frequency rate

(“LTIFR”) continues at a level materially below

both our historic average

and the Group’s

iron ore producing peers in Western

Australia

As demonstrated in the table above, the

Group’s performance in lagging indicators of

safety remained largely in line with 2021 on

lost time injuries and total injury frequency

rates. Near miss events saw a signicant

decrease, as did signicant incidents. In

terms of leading indicators, the Group’s

adoption of ISO 45001:2019 in 2021 resulted

in increased reporting of hazards in 2022

– demonstrating an improving culture for

reporting and understanding the safety of

theworking environment. Health and safety

inductions and training hours were both

signicantly reduced in 2022, reecting the

indirect effects of the war in Ukraine, with a

large number of our workforce currently

located off-site and lower levels of recruitment

during the year.

External recognition for

wellbeingprogramme

In January 2022, the Group learnt that it had

passed a Sedex Members Ethical Trade Audit

("SMETA") social responsibility audit, which is

a study into a company’s occupational health

and safety, environment, working conditions,

and suppliers' goodwill, with the Group

Chart: Ferrexpo’s ve year safety record versus benchmark

undertaking this exercise for the rst time.

Inpassing this audit, the independent

auditorhighlighted the quality of medical care,

management of social security and medical

insurance provided by Ferrexpo to its

employees.

1. Information as of 14 February 2023.

2. LTIFR full year average for 2017–2021.

3. Source: Government of Western Australia, link.

(Accessed 3 March 2023.)

4. Indicators shown on a Group basis.

5. Indicators shown for Ukrainian operations only.

6. Figure incorrectly provided as TRIFR in prior report.

Health and safety performance (2021/2022)

2022 2021 Change

Safety indicators (lagging)

Fatalities

0 0 –

Lost time injuries

10 9 +11%

Lost time injury frequency rate (“LTIFR”)

0.51 0.41 +24%

All injuries frequency rate (“AIFR”)

5,6

0.99 0.97 +2%

Near miss events

1 5 (80%)

Signicant incidents

8 12 (33%)

Restricted work days

934 497 +88%

Severity rate (average lost days per incident)

104 55 +88%

Safety indicators (leading)

Health and safety inspections 5,413 3,293 +64%

Health and safety meetings 1,388 1,165 +19%

Health and safety inductions 5,332 11,602 (54%)

Training hours 6,828 11,786 (42%)

Hazard reports 740 595 +24%

High visibility management tours 157 124 +27%

0.0

0.5

1.0

1.5

2.0

2019 2020 20212018 2022

Ferrexpo

Lost time injury rate (per million hours)

Peer Group (Years ended June)

34 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Environmental Stewardship

Developing

our net zero

pathway

Despite the war in Ukraine, we were able to publish

an upgraded suite of carbon emissions targets

following the publication of our inaugural Climate

Change Report in December 2022. Work

continues in our collaboration with environmental

consultants Ricardo Plc, with a life cycle

assessment to be published in 2023.

Updated target for Scope 1 and 2

emissions reduction by 2030

Newly published target for Scope 3

(value chain) emissions reduction by

2030

. See page 36 for more

information on Scope 3 emissions.

2050

Targeting net zero production for

Scope 1 and 2 emissions. Net zero is

dened as operating with minimal

avoidable emissions, as far as

possible, and offsetting any

unavoidable emissions.

In October 2021, we announced our

collaboration with environmental consultants

Ricardo Plc, with work completed to date

summarised in our rst standalone Climate

Change Report, which was published in

December 2022. Details of this work are

provided in this section, and as part of this

bespoke piece of work, we were able to

present a potential net zero pathway for us

to achieve our carbon emissions goals for

2050 (covering all emissions except Scope

3 emissions from steelmaking). The pathway

developed shows a potential route to reduce

absolute emissions of carbon dioxide by 92%,

despite a projected 100% increase in output

of iron ore pellets in the same timeframe.

To achieve this pathway, we intend to

investigate a number of key modern

technologies across our operations, to

minimise our consumption in three key areas:

diesel (predominantly in mining), electricity

(processing) and natural gas (pelletising). These

three aspects of our business collectively

accounted for 77% of Scope 1 emissions and

100% of Scope 2 emissions in 2022. Shown

to the left are a number of the technologies

we intend to investigate to help reduce our

emissions and achieve our net zero ambitions.

Case Study: Net zero

pathway developed in 2022

1. Scope 1 and Scope 2 emissions are presented on a per tonne of production basis.

2. Scope 3 emissions savings are presented on a per tonne of production basis.

35Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Climate Change Report published

Following the Group’s announcement of our

collaboration with environmental consultants

Ricardo Plc, and work throughout 2022,

the Group was able to publish its inaugural

standalone Climate Change Report in

December 2022. In this report, we cover

climate change related legislation that is

being enacted in the various jurisdictions into

which we sell our products, and the risks

and opportunities that these changes may

present to our business model. Through

this work, it is clear that legislative change

is fastest in the European Union (“EU”), with

an established emissions trading scheme

setting €98 per tonne of CO

as the price of

carbon emissions within the region as of early

20231. The EU’s Carbon Border Adjustment

Mechanism, due to begin its implementation

phase in 2025, will result in signicant, far-

reaching effects, well beyond the borders of

the EU. Further details of this legislation are

provided on page 17 of our Climate Change

Report (available at www.ferrexpo.com).

A second area of focus in the Climate Change

Report looks at the risks and opportunities

relating to climate change that are specic

to Ferrexpo, and these are summarised in

the Task Force on Climate-related Financial

Disclosures (“TCFD”) on page 37 of this report.

Our Climate Change Report also presents a

potential net zero pathway for decarbonisation,

highlighting the technologies required and

timing of investments, to achieve net zero iron

ore pellet production by 2050. Through this

work, we have established an estimated capital

cost of US$3.3 billion and a carbon abatement

cost of US$145 per tonne. The Group is able

to have a relatively low carbon abatement cost

due to the timing of capital expenditures for

decarbonisation at its operations. Since more

than 80% of the estimated capital cost of

decarbonisation relates to the implementation

of green hydrogen in our pelletiser and our

own renewables power, both of which are

projects that are predominantly implemented

after 2030, and therefore the net present

value of this capital investment

is reduced

due to its timing. In the meantime, we are

fortunate to be able to rely on clean power

sourced directly from the Ukrainian grid, as

we have been able to selectively purchase

low carbon forms of electricity since 2019.

Carbon targets upgraded

Through the work to develop our

decarbonisation pathway that was completed

as part of our Climate Change Report, we

were able to announce updated and

expanded carbon emissions reduction targets

in December 2022. Following the success

seen across 2019 and 2020, with Ferrexpo

reducing its Scope 1 and 2 emissions

footprint by 30% over this period, we were

able to announce an increase to our 2030

goal, and we are now targeting a 50%

reduction in this timeframe. Through greater

understanding of our Scope 3 emissions, we

have also been able to introduce targets for

this category, and are now targeting a 10%

reduction by 2030

A list of denitions for each Scope of carbon

emissions is provided on page 40 of the

Climate Change Report.

Scope 1 emissions

Our Scope 1 (direct) emissions principally

relate to three activities at our operations

– diesel consumption (primarily used in

mining activities), natural gas (primarily

used in pelletising activities) and gasoil

(primarily used in inland waterway logistics

activities). Collectively, these three sources

of emissions represented 97% of Scope 1

emissions in 2022 (2021: 98%). In addition,

we track a further 15 sources of Scope 1

emissions across our operations, ensuring

that multiple aspects of our operations

are covered in our emissions estimates.

Absolute Scope 1 emissions fell by 48% in

2022, reecting the reduced level of production

as a result of the war. Despite the conict,

we managed to reduce our emissions on a

per unit of production basis by 3%, which

reects a reduction of stripping activities in

the Group’s mines and increased biofuel

consumption in the pelletiser. In line with data

for 2021, our calculations of our Scope 1 and

Scope 2 emissions have been independently

assured for a second successive year, with

this work aimed at providing additional

condence in our climate change reporting.

Please see page 36 for more information.

Scope 2 emissions

Our Scope 2 (indirect) emissions relate

exclusively to our purchasing of electricity from

third parties, with electricity predominantly

used in our concentrator

. On an absolute

basis, this category of emissions fell by 45%,

in line with the lower level of production seen

in 2022 due to the war in Ukraine. Onaunit

SCOPE 1 (“S1”)

EMISSIONS

SCOPE 2 (“S2”)

EMISSIONS

SUBTOTAL

(S1+S2)

SCOPE 3 (“S3”)

EMISSIONS

Our performance in 2022

) +2

) (1

)

Our performance since benchmark year (2019–2022 inclusive)

) (52

) (31

) (3

)

Our medium-term goals (2030)

(50

) (10

)

Our long-term goals (2050)

Net zero (50

)

1. Source: European Union Emissions Trading System, link. (Accessed 3 March 2023.)

2. Scope 1 and Scope 2 emissions are presented on a per tonne of production basis.

3. Scope 3 emissions savings are presented on a per tonne of production basis.

4. Prior to the 2021 Annual Report and Account, Scope 2 calculations included the

purchase of steam for heating purposes, which have subsequently been excluded

following the independent assurance process completed in 2022. For more information,

please see the Reporting Criteria document provided alongside the 2021 Annual Report

and Accounts on the Group’s website.

36 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Environmental Stewardship continued

basis, Scope 2 emissions rose by 2%,

reecting the impact of the war in Ukraine

and associated power outages in 4Q 2022,

in addition to the increased output of direct

reduction pellets, which require additional

processing compared to blast furnace pellets.

Scope 3 emissions

For Ferrexpo, this category of emissions

primarily relates to the type of iron ore pellet

produced, since the downstream processing

of iron ore accounted for 95% of Scope 3

emissions in 2022. Through increasing the

output of direct reduction (“DR”) pellets to 6%

of total pellet production (2021: 4%), we have

seen a reduction in Scope 3 emissions on a

unit basis by 3% since 2019, with DR pellets

carrying a 49% lower carbon footprint than

blast furnace pellets

Independent assurance

In line with the process completed for 2021,

theGroup has completed an independent

assurance process for its Scope 1 and Scope

2 carbon emissions for 2022 (in addition to key

safety metrics). For more information, please

see the Limited Assurance Report, which is

provided alongside the Group’s full year

nancial results. Our Scope 3 emissions are not

yet independently assured, with an expansion

of the remit of the independent assurance

process to include this category expected to

represent the next phase of this process.

Methodology

Ferrexpo’s methodology for calculating its

GHG emissions footprint utilises, where

possible, emissions factors provided by the

Greenhouse Gas Protocol, which is in line

with reporting requirements under the Global

Reporting Initiative’s (“GRI”) framework for

reporting sustainability topics. Through using

carbon factors provided by the Greenhouse

Gas Protocol, the Group is able to provide

carbon dioxide-equivalent emissions gures

(“CO

e”) that also account for emissions of

both methane (CH

) and nitrogen oxide (N

O).

Water

We operate in an environment where we have

multiple interactions with the water cycle,

from the water ingress into our mines, to

recycling water in our processing operations,

to the River Dnipro, which is located next to

our operations. Testing of water quality has

continued throughout 2022, despite the war

in Ukraine, with any discharged water quality

tested across more than 12 different chemical

elements or attributes. In our processing

plant, where water is utilised in the processing

of iron ore, we once again recycled 98% of

process water (2021: 98%). We are currently

reviewing the possibility of removing water

prior to pumping material to our tailings dam,

which would have the advantage of reducing

water consumption as well as energy use,

with operations needing to pump a

signicantly lower mass of material to our

tailings dam if tailings are dry stacked. It is

estimated that water consumption in the

processing plant would decline by up to 20%

through the use of this technology.

Waste generation

The Group generates waste in the form of solid

waste in its mining operations (overburden

in the form of waste rock and sand), as well

as emissions of other gases and dust from

our mines and processing operations.

Waste removal in our mines declined by 70%

in 2022, which is as a result of the war in

Ukraine and lower production volumes (see

pages 4 and 5 for more details of the war’s

impact on our business in 2022). Overburden

and waste removed from our mining

operations is non-hazardous and is stored in

on-site waste dumps designed by our mine

planning department.

Aside from greenhouse gases, gaseous

emissions include those emitted from our

processing operations (NO

, SO

, and CO),

with emissions from such sources declining

by 50–60% during the year, in line with

mining volumes. A range of projects related

to dust suppression in our processing

complex were completed in 2022, resulting

in dust emissions falling by 62%, which

represents a level ahead of the production

decrease seen in 2022 (46% decrease).

Elsewhere in our operations, we expanded

our domestic waste recycling programme

to include additional operating subsidiaries

in Ukraine (FYM, FBM and Ferrostroy), with

collection bins and sorting facilities launched

in 2022. All four of our main operating

subsidiaries in Ukraine now have active

recycling programmes, and the focus for 2023

will be encouraging cultural change to increase

recycling rates throughout our business.

ISO-certied systems

Ferrexpo now has an ISO-compliant

environment management system (ISO

14001:2015) at both FPM and FBM, with the

latter achieving accreditation during 2022.

This is in addition to accreditation of our

Energy Management System (ISO 50001:2018)

at the same two subsidiaries, with FBM

also acquiring this accreditation in 2022.

Biodiversity baseline expanded

Despite the pressures imposed due to the war

in Ukraine, our Environmental Department in

Ukraine continues to make good progress

on a range of initiatives at our operations,

including an update to the Zoo-biota interactive

map identifying species of animals in the

vicinity of our operations, including 58 of

more than 500 species listed in the Red

Book of Ukraine. Furthermore, work was

completed in 2022 on a second interactive

map, covering species of plants located in

the vicinity of our operations (including 24 out

of 410 species in the Red Book of Ukraine).

Climate change: reporting journey

The Transition Pathway Initiative Global

Climate Transition Centre (“TPI Centre”,

www.transitionpathwayinitiative.org/) is an

independent, authoritative source of research

and data on the progress of the nancial

and corporate world in transitioning to a low

carbon economy. The TPI Centre publishes

a “Management Quality Staircase”

that

allows companies and stakeholders to map

their progress in terms of climate governance

maturity against ve levels, as shown in the

chart opposite. Following the publication of our

Climate Change Report and Scope 3 targets

in December 2022, in addition to independent

assurance work completed in July 2022, we

have assessed our progress to have reached

Level 4 of reporting. The TPI Centre’s Staircase

is particularly helpful for understanding the

forward-looking component of our reporting

journey that lies ahead, and highlights a need

for us to develop our understanding of the

impact of climate change on our business

costs as an area of focus for future work.

1. Source: CRU. Natural gas based direct reduction

without carbon capture. See page 10 of the 2021 Annual

Report for more information.

2. Source: TPI Centre, link. (Accessed 3 March 2023.)

Greenhouse

gas

emissions

footprint

and

energy

consumption

(2021/2022)

2022 Data (% change to 2021) 2021 Data

Absolute basis

(kilotonnes CO

Unit basis

(kg CO

e per

tonne)

Absolute basis

(kilotonnes CO

Unit basis

(kg CO

e per

tonne)

Scope 1 emissions 341 (-48%) 55 (-3%) 649 57

Scope 2 emissions 223 (-45%) 36 (+2%) 404 35

Subtotal (S1+S2) emissions 564 (-46%) 91 (-1%) 1,053 92

Scope 3 emissions 7,642 (-47%) 1, 237 (-1%) 14,362 1,254

Total emissions 8,206 (-47%) 1,329 (-1%) 15,415 1,346

Biofuels emissions (reported

separately) 6 (-37%) 1 (+18%) 10 1

Energy consumption (kWh) 3,052,942,993 (-44%) – 5,489,232,550 –

37Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Responsible Business: TCFD Disclosures

Recognising the need to provide

reliable information on climate-related

risks, opportunities and issues, and

preparing disclosures throughout the

year, including reporting informed by the

recommendations and recommended

disclosures produced by the TCFD.

Compliance Statement (FCA’s

Listing Rule 9.8.6(8)R)

For the purposes of Listing Rule 9.8.6R(8),

Ferrexpo considers that it has made climate-

related nancial disclosures consistent with

the four TCFD recommendations and 11

TCFD recommended disclosures save in

relation to the following areas, where full

compliance remains a work in progress:

– Strategy Recommended Disclosure c)

(strategic and organisational resilience).

In developing the Group’s approach to

climate-related risks, we intend to perform

in-depth nancial analysis of our operations’

exposure to such risks to determine

operational and strategic resilience once

baseline studies have been completed. It is

expected that future phases of work, which

will lead into this nancial modelling, will

require site visits to our operations in Ukraine,

which are not possible at the currenttime.

We will provide further updates on this

workstream in due course.

In determining this, we have taken into

account the TCFD’s Guidance for All

Sectorsand Supplemental Guidance for

Non-Financial Groups, as well as other

relevant materials. This assessment

reectsthe progress that Ferrexpo has

madeon its climate-related reporting over

thecourse of the year, as well as those

areaswhere full compliance with the TCFD’s

recommended disclosures (and some

aspects of the related guidance) forms part

ofour ongoing work streams.

The following recommended disclosures

are set out in our Climate Change Report

2022 (published in December 2022), which

is available on the Group’s website at www.

ferrexpo.com/investors/results-reports-and-

presentations:

– Governance Recommended Disclosure a)

(Board oversight of climate-related risks

and opportunities) – see page 11.

– Governance Recommended Disclosure

b) (management’s role in assessing

and managing climate-related risks and

opportunities) – see pages 11 and 12.

– Strategy Recommended Disclosure a)

(description of climate-related risks and

opportunities identied over the short,

medium and long term) – see pages 14 to 37.

– Strategy Recommended Disclosure

b) (impact of climate-related risks and

opportunities on the organisation’s

businesses, strategy and nancial planning)

– see pages 20 to 21 and 28 to 37.

– Risk Management Recommended

Disclosure a) (processes for identifying

and assessing climate-related risks) –

seepages 14 to 37.

– Risk Management Recommended

Disclosure b) (processes for managing

climate-related risks) – see pages 20 to 21

and 28 to 37.

– Metrics and Targets Recommended

Disclosure a) (metrics used by the

organisation to assess climate-related risks

and opportunities) – see pages 8 and 42.

– Metrics and Targets Recommended

Disclosure b) (Scope 1, 2 and 3 emissions

disclosures) – see pages 8 to 10.

We have set out these recommended

disclosures in this separate report to enable

us to provide information for interested

stakeholders in the context of our wider work

on mapping the Group’s carbon footprint

and exposure to climate-related risks and

opportunities, alongside details of the next

steps we are taking.

The following recommended disclosures are

set out in our Responsible Business Report

2021 (published August 2022), which is

available on the Group’s website at www.

ferrexpo.com/investors/results-reports-and-

presentations:

– Governance Recommended Disclosure

b) (management’s role in assessing

and managing climate-related risks and

opportunities) – see pages 77 to 81.

– Strategy Recommended Disclosure a)

(description of climate-related risks and

opportunities identied over the short,

medium and long term) – see pages 77

to 81.

– Strategy Recommended Disclosure

b) (impact of climate-related risks and

opportunities on the organisation’s

businesses, strategy and nancial

planning) – see pages 77 to 81.

– Risk Management Recommended

Disclosure a) (processes for identifying

and assessing climate-related risks) –

seepages 77 to 81.

– Risk Management Recommended

Disclosure b) (processes for managing

climate-related risks) – see pages 77 to 81.

– Risk Management Recommended

Disclosure c) (identifying, assessing,

and managing climate-related risks are

integrated into the organisation’s overall

risk management) – see page 48.

– Metrics and Targets Recommended

Disclosure a) (metrics used by the

organisation to assess climate-related

risks and opportunities) – page 43.

– Metrics and Targets Recommended

Disclosure b) (Scope 1, 2 and 3 emissions

disclosures) – page 43.

We have set out these recommended

disclosures in this separate report to enable

us to provide in more granular detail an

overview of the various physical and transition

risks the Group is facing, the time horizons

over which these may emerge, their nancial

implications and our risk mitigation efforts.

Broadening our reporting

Chart: TPI Centre’s Management Quality Staircase

INCREASING CLIMATE GOVERNANCE MATURITY

Level 0

Unaware

Does not recognise climate

change as a signicant

issue for the business

Explicitly recognises climate

change as a signicant

issue for the business

Has a policy commitment

to action on climate change

Has set energy efciency

(relative or absolute) GHG

emissions reduction targets

Has published information

on its Scope 1 & 2 GHG

emissions

Company has nominated

a board member or

committee with explicit

responsibility for oversight

of the climate change policy

Company has set

quantitative targets for

reducing Scope 1 & 2

GHG emissions (relative

orabsolute)

Company reports on

its Scope 3 emissions

Has had its Scope 1 &

2 GHG emissions data

veried

Company supports

domestic and international

efforts to mitigate climate

change

Company has reduced its

Scope 1 & 2 GHG emissions

over the past 3 years

Company provides

information on its business

costs associated with

climate change

Company has set long-

term quantitative targets

(>5years) for reducing its

GHG emissions

Company has incorporated

ESG issues into executive

remuneration

Level 1

Awareness

Level 2

Building

capacity

Level 3

Integrated into

operational

decision-making

Level 4

Strategic

assessment

38 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: TCFD Disclosures continued

In undertaking our modelling exercise,

climate scenarios were selected on the

basis of giving a range of outcomes (rate

ofenvironmental change and severity of

change) as a result of different levels of

legislative ambition taken by governments

in the coming years. Scenarios were also

selected on the basis of being produced

by a range of reputable independent

authorities on climate change.

1. International Energy Agency (“IEA”)

Sustainable Development Scenario

(“SDS”)

2. IEA Stated Policies Scenario (“STEPS”) 3. IPCC Shared Socioeconomic Pathway 4

(“SSP4”)

Description: a “well below” 2°C scenario,

achieved through policies that adhere to

the Paris Agreement.

Description: a worst case, “business as

usual scenario” (one of two modelled here).

A more conservative benchmark whereby

governments are assumed to not reach all

announced goals.

Description: a worst case, “business as

usual scenario” (one of two modelled here).

Divided approach to climate change

continues to widen through unequal

investments in human capital.

Summary:

This path sets out a plausible path to concurrently achieve

universal access to energy, the objectives of the Paris

Agreement, and a reduction in air pollution.

Summary:

The STEPS scenario provides a more conservative

benchmark for the future, because it does not take it for

granted that governments will reach all announced goals.

Instead, it takes a more granular, sector-by-sector look

at what has actually been put in place to reach these and

other energy-related objectives, taking account not just of

existing policies and measures, but also a look at those

that are under development.

Summary:

Inequality (A Road Divided). Highly unequal investments

in human capital, combined with increasing disparities

in economic opportunity and political power, lead to

increasing inequalities and stratication both across

andwithin countries.

Characteristics:

– A well below 2°C pathway.

– Surge in clean energy policies and green investment.

– All existing net zero pledges achieved in full.

– Extensive efforts to realise near-term emissions

reductions.

– Number of western economies to reach net zero

emissions by 2050, China by 2060, and a number

ofother countries by 2070 latest.

– In alignment with the United Nations Sustainable

Development Goals.

Characteristics:

– Sector-by-sector look at what has actually been put in

place to reach goals and other energy-related objectives.

– Takes into account not just existing policies and

measures but also those under development.

– Includes “Fit for 55” measures announced by the

European Commission in July 2021 (55% reduction in

emissions by 2030 compared with 1990 baseline).

Characteristics:

– A gap widens between an internationally connected

society that contributes to knowledge and capital

intensive sectors of the global economy, and a

fragmented collection of lower income, poorly

educatedsocieties that work in a labour intensive,

low-tech economy.

– Social cohesion degrades, and conict and unrest

become increasingly common.

– Technology development is high in the high-tech

economy and sectors.

– Globally connected energy sector diversies, with

investments in both intensive fuels like coal and

unconventional oil, but also low carbon sources.

Source: Ricardo Plc.

Scenario metric

IEA SDS (Sustainable Development Scenario) IEA STEPS (Stated Policies Scenario) IPCC SSP4 (Shared Socioeconomic Pathway 4)

Average global temperature increase (°C) by 2050 1.7°C 2.0°C 2.2°C

Average global temperature increase (°C) by 2100 1.6°C 2.6°C 3.7°C

Policy intervention

Increased policy beyond what has already

beencommittedto, from 2021

Only policies that are active in 2021, including what has

been committed to and what has been proposed

Increased policy after 2030, demonstrating

arapidtransition to decarbonisation

Time horizon Present day to 2100 Present day to 2100 Present day to 2100

Transition risks

(as a function of carbon price, with pricing correct as of

studies completed in June 2022)

HIGH

(US$95/t) in 2050

Global carbon price

MEDIUM

(US$90/t) in 2050

Global carbon price

MEDIUM

Regional carbon price in the short term,

globalcarbonpricein the long term

Transition risks

(as a function of carbon intensity of steel production)

HIGH

(0.6tCO

/t) by 2050

MEDIUM

(1.1tCO

/t) by 2050

N/A

Orderly or disorderly transition Orderly Potential for orderly or disorderly Disorderly

Low Medium High

Potential overall impact on Ferrexpo (determined via stakeholder

interviews and desktop studies, categorised on basis of

occurrence and likelihood, see risk matrix on page 40 for more).

“Well below” 2.0°C scenario (Paris Agreement aligned)

Scenario

analysis

selection

39Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

1. International Energy Agency (“IEA”)

Sustainable Development Scenario

(“SDS”)

2. IEA Stated Policies Scenario (“STEPS”) 3. IPCC Shared Socioeconomic Pathway 4

(“SSP4”)

Description: a “well below” 2°C scenario,

achieved through policies that adhere to

the Paris Agreement.

Description: a worst case, “business as

usual scenario” (one of two modelled here).

A more conservative benchmark whereby

governments are assumed to not reach all

announced goals.

Description: a worst case, “business as

usual scenario” (one of two modelled here).

Divided approach to climate change

continues to widen through unequal

investments in human capital.

Summary:

This path sets out a plausible path to concurrently achieve

universal access to energy, the objectives of the Paris

Agreement, and a reduction in air pollution.

Summary:

The STEPS scenario provides a more conservative

benchmark for the future, because it does not take it for

granted that governments will reach all announced goals.

Instead, it takes a more granular, sector-by-sector look

at what has actually been put in place to reach these and

other energy-related objectives, taking account not just of

existing policies and measures, but also a look at those

that are under development.

Summary:

Inequality (A Road Divided). Highly unequal investments

in human capital, combined with increasing disparities

in economic opportunity and political power, lead to

increasing inequalities and stratication both across

andwithin countries.

Characteristics:

– A well below 2°C pathway.

– Surge in clean energy policies and green investment.

– All existing net zero pledges achieved in full.

– Extensive efforts to realise near-term emissions

reductions.

– Number of western economies to reach net zero

emissions by 2050, China by 2060, and a number

ofother countries by 2070 latest.

– In alignment with the United Nations Sustainable

Development Goals.

Characteristics:

– Sector-by-sector look at what has actually been put in

place to reach goals and other energy-related objectives.

– Takes into account not just existing policies and

measures but also those under development.

– Includes “Fit for 55” measures announced by the

European Commission in July 2021 (55% reduction in

emissions by 2030 compared with 1990 baseline).

Characteristics:

– A gap widens between an internationally connected

society that contributes to knowledge and capital

intensive sectors of the global economy, and a

fragmented collection of lower income, poorly

educatedsocieties that work in a labour intensive,

low-tech economy.

– Social cohesion degrades, and conict and unrest

become increasingly common.

– Technology development is high in the high-tech

economy and sectors.

– Globally connected energy sector diversies, with

investments in both intensive fuels like coal and

unconventional oil, but also low carbon sources.

Scenario metric

IEA SDS (Sustainable Development Scenario) IEA STEPS (Stated Policies Scenario) IPCC SSP4 (Shared Socioeconomic Pathway 4)

Average global temperature increase (°C) by 2050 1.7°C 2.0°C 2.2°C

Average global temperature increase (°C) by 2100 1.6°C 2.6°C 3.7°C

Policy intervention

Increased policy beyond what has already

beencommittedto, from 2021

Only policies that are active in 2021, including what has

been committed to and what has been proposed

Increased policy after 2030, demonstrating

arapidtransition to decarbonisation

Time horizon Present day to 2100 Present day to 2100 Present day to 2100

Transition risks

(as a function of carbon price, with pricing correct as of

studies completed in June 2022)

HIGH

(US$95/t) in 2050

Global carbon price

MEDIUM

(US$90/t) in 2050

Global carbon price

MEDIUM

Regional carbon price in the short term,

globalcarbonpricein the long term

Transition risks

(as a function of carbon intensity of steel production)

HIGH

(0.6tCO

/t) by 2050

MEDIUM

(1.1tCO

/t) by 2050

N/A

Orderly or disorderly transition Orderly Potential for orderly or disorderly Disorderly

Worst case, “business as usual” scenarios

40 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

1. Source: CRU. Natural gas based direct reduction without carbon capture.

Material topics

(Note: denotes key focus area for Ferrexpo.)

External factor Key focus area?

Market and technology shift

Increasing demand for low carbon emissions

steelmaking

Movement towards circular economy principles

Mineral commodity shift: From iron ore to other

minerals

Policy and legal

Shipping: Targets and regulations on carbon

emissions

Carbon pricing/tax: Targets and regulations on

carbonemissions

Energy crisis in Ukraine

Reporting: Targets and regulations on carbon

emissions

Increase in insurance costs

Reputation

Increased consumer and investor climate

consciousness

Climate action transparency: Increased demand

fromconsumer and investors

Physical risks

Water stress (chronic)

Sea level rise (chronic)

Increase in storm intensity (acute)

Climate-induced conict

Surface temperature rise

Opportunity for increased community and host

country engagement over climate change related

issues

Responsible Business: TCFD Disclosures continued

Risk matrix

LIKELIHOOD

Code Issue area Matrix score

Top risk areas

identied

CC Climate-induced conict

CEP

Movement towards circular

economy principles

Carbon pricing/tax: Targets and

regulations on carbon emissions

CPU Energy crisis in Ukraine

IIC

Increase in consumer and

investor climate consciousness

LCS

Demand for low carbon emissions

steelmaking

SCE

Shipping: Targets and regulations

on carbon emissions

SI Increase in storm intensity (acute)

SR Sea level rise (chronic)

Low Low/Medium Medium/HighMedium High

SIGNIFICANCE

In respect of efforts to understand potential climate change related risks

for the other key risk areas (shipping targets and regulations and carbon

pricing), please see pages 31 and 32 of our Climate Change Report.

In terms of next steps with regard to climate change reporting, we are

currently nalising a life cycle assessment of iron ore pellets, which will

be a peer-reviewed study into the environmental emissions footprint

of iron ore pellets during their entire life cycle, benchmarked against

the most commonly traded form of iron ore (sinter nes). In order to

capture the emissions generated through converting iron ore to steel,

which account for more than 89% of our total emissions in 2022 (2021:

89%), this study will look at the footprint of iron ore from mining through

to steel production, and will therefore cover the different emissions

footprints of blast furnace and electric arc furnace steelmaking.

This report is expected to be available in the rst half of 2023.

The information above is taken from the work completed in our

collaboration with environmental consultants Ricardo Plc, with a full

summary provided in our inaugural Climate Change Report, which was

published in December 2022 and is available on the Group’s website

(www.ferrexpo.com). The results presented above emerged from the

scenario analysis described on pages 22 to 37 of this report.

As shown above, the top three risk areas identied are (1) low carbon

steel (risk relating to market and technology shift), (2) shipping targets

and regulations (policy and legal risk), and (3) carbon pricing and tax

(also a policy and legal risk).

In respect of low carbon steel, we have commenced a process to

produce greater volumes of direct reduction (“DR”) pellets, which are a

higher grade form of iron ore and are a known technological pathway

to low emissions Green Steel (via the electric arc furnace method of

steelmaking). Independent research shows that Ferrexpo’s DR pellets

have a 49% lower greenhouse gas emissions footprint than our blast

furnace pellets, and therefore offer us a substantial Scope 3 emissions

saving

(Note: Bubble size denotes the scale of the potential impact on the Ferrexpo business.)

LCS

CPU

CEP

SCE

IIC

41Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Summary disclosure against TCFD recommendations

Strategy

Climate-related risks and opportunities over the short, medium

and long term

Climate change is considered to be a Principal Risk to the Group, and this

risk is detailed on page 73 of this report, alongside risk mitigation actions.

A description of the specic climate-related issues potentially arising in the

short, medium and long term that could have a material nancial impact

on the Group is included on pages 22-37 of the Group’s Climate Change

Report, available at www.ferrexpo.com. These include transition risks and

physical risks associated with the transition to a lower carbon economy. The

time horizons for these risks and opportunities to emerge are also described

being short-term (less than two years), medium-term (more than two but

less than ten years) or long-term (greater than ten years). The denition of

each time horizon is broadly aligned to the Group’s medium-term climate

change targets for 2030, with a ten-year window for action following the

Group’s baseline year, with short-term and long-term horizons set at either

side of this denition. The Group’s risk identication process is described

onpages 38 to 40 of this report.

Impact on the Ferrexpo business, strategy and nancial planning

Consideration of topics relating to climate change is a fundamental aspect

of Ferrexpo’s business model (shown on page 12), with the Group releasing

a standalone report on climate change in December 2022. Through the

recent work completed with environmental consultants Ricardo Plc, the

Group was able to upgrade and broaden its suite of carbon emissions

reduction targets. The Group has a clear understanding of the likely

technologies to help meet these targets, and these are shown on page

35 of this report. Climate-related risks and opportunities have directed the

Group to increase its focus on direct reduction pellets, which have a lower

emissions footprint and represent a pathway to low emissions steelmaking.

In producing the Group’s products, Ferrexpo is seeking to research and

implement new technologies that will lower the Scope 1 and 2 emissions

footprint of the Group’s products, with the Group’s solar power pilot plant to

trial renewable power generation, and plans to build a hydrolysis plant to trial

the use of hydrogen as a fuel in the Group’s pelletiser as examples of such

activities. A summary of potential technological pathways to lower emissions

pellet production is provided on page 34 of this report. Climate-related

issues input into nancial planning processes through the consideration of

the potential carbon emissions footprint of existing and proposed operating

projects and capital investment

projects. Given the current war in Ukraine

and reduced level of operating activities in Ukraine, the Group is currently

not assessing new operational or capital investment

projects. Following a

reduction in the risks associated with the war in Ukraine, it is expected that

new investments will be assessed using a price of carbon that is reective

of the prevailing carbon price within the EU Emissions Trading System,

as was the case prior to the war in Ukraine. Climate-related factors are

expected to negatively impact nancial performance in the short to medium

term (operating costs and increased capital investment

), but present

opportunities in the long term through the expected rise in demand for iron

ore products that are relevant for low emissions steelmaking (Green Steel).

Resilience based on climate change scenarios

The Group has included an analysis of climate change scenarios, which

was conducted by environmental consultants Ricardo Plc as part of the

work completed for the Group’s Climate Change Report described in further

detail on pages 38 to 40. The Group intends to perform in-depth nancial

analysis of our operations’ exposure to such risks to determine operational

and strategic resilience once baseline studies have been completed. It is

expected that future phases of work will require site visits to our operations

in Ukraine, which are not possible at the current time. The Group will provide

further updates on this work stream in due course.

Governance

The Board’s role in oversight of climate-related risks

andopportunities

The Board of Directors has ultimate oversight of the Group’s strategy,

including its approach to the effect of climate change on the Group’s

business model. Climate change was a standing agenda item at all ve

scheduled Board meetings throughout the year. Further details of the

Board’s consideration of climate change and its oversight of the Group’s

goals and targets for addressing climate-related issues are on page 35.

TheHealth, Safety, Environment and Community (“HSEC”) Committee

hasbeen delegated management of climate-related issues, which includes

three members of the executive management team, and reports the Group’s

progress on climate change related matters to the Board of Directors.

Independent Non-executive Director Ann-Christin Andersen is the Director

primarily responsible for climate-related matters and Chair of the HSEC

Committee, which met four times during the year (2021: four) and climate

change has been a standing agenda item at all scheduled HSEC Committee

meetings throughout the year.

Management’s role in assessing risks and opportunities

In addition to the role of the HSEC Committee described above, the Group’s

executive management team monitors and assesses climate-related risks

through its risk monitoring activities as part of the Group’s Finance, Risk

Management and Compliance Committee, which met ten times in 2022

(2021: ten). The Group’s process for risk monitoring is described on page

56. The HSEC Committee receives information about climate-related issues

through activities such as internal briengs by members of the executive

management team and briengs from external advisors. Feedback from

thisCommittee is provided to the Board on a regular basis.

Risk management

Processes for identifying and assessing climate-related risks

The Group regularly assesses risks applicable to the Group through its

Finance, Risk Management and Compliance Committee, which assesses

risks based on the probability of occurrence and severity of impact should

an event occur. An overview of the Principal Risks facing the Group, and

the risk mitigation measures that the Group has put in place in relation to

these, is provided on pages 58 to 74, with climate change identied as

a Principal Risk and detailed on page 73 of this report. Within the topic

of climate change, the Group’s management has identied specic risks

and opportunities relating to climate change, ranging from policy and

legal topics, physical effects, emerging technologies, market factors and

reputational differentiators.

Managing climate-related risks

The Group’s approach to managing and mitigating risks, including climate-

related risks, is provided in the Principal Risks section, on page 73 of this

report. Risks, including climate-related risks, are prioritised according to

their assessment under the Group’s materiality matrix set out on page 40.

How Ferrexpo integrates these risks into the Group’s overall

riskmanagement

Ferrexpo’s governance relating to climate change risks has been designed

to ensure that the management of the nancial risks from climate change

are integrated across the whole governance system and embedded into the

existing risk management framework. The Group’s approach to assessing

and managing risk, including climate-related risks, is described on page 56.

Risks relating to climate change are determined in the same way as other

principal and emerging risks, and the relative signicance of climate risks

is assessed based on monetary impact, probability, maximum foreseeable

loss, trend and mitigating actions. A summary of the Group’s approach to

risk identication and risk mitigation activities is provided on pages 58 to 74

of this report.

Metrics and targets

Metrics used to assess climate-related risks and opportunities

The Group uses a wide range of climate-related metrics including

GHG emissions (Scopes 1, 2 and 3 and emissions intensity), as well as

consumption of diesel, electricity and natural gas – see further on pages 35

and 36. Metrics relating to carbon reduction progress are incorporated into

remuneration policies, as described on page 124 of this report.

Greenhouse gas emissions

Details of the Group’s Scope 1, 2 and 3 emissions are provided on page 36

of this report.

Targets

Our carbon emissions reduction targets are summarised on page 35 of this

report.

42 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Diversity, Equity and Inclusion

Fostering diversity

and inclusion

Ferrexpo has initiated a number of

diversity, equity and inclusion (“DEI”)

initiatives, which help us to form a baseline

understanding ofour workforce

composition andtoshape DEI efforts.

Ferrexpo’s diversity initiatives are focused on

helping us to develop a modern business with

a diverse workforce and an inclusive working

environment. Our efforts in DEI have

increased signicantly in recent years, with

increased stakeholder focus and a greater

focus on companies having a sustainable,

inclusive culture. Our DEI efforts have

continued in 2022, despite the war in Ukraine,

as DEI helps to generate a positive working

environment that supports people’s mental

health and wellbeing, regardless of age,

gender or other characteristics.

Progress continues to accelerate following the

appointment of our rst DEI ofcer in Ukraine

in 2021, and we are continuing to gain a

better understanding of our workforce and

corporate culture.

DEI progress in 2022

In 2022, we made signicant progress in

advancing our strategy to implement a

360-degree approach to DEI. Further to the

Group’s Diversity, Equity and Inclusion Policy

that was established in 2019, our local

operating entities adopted a policy to further

dene and understand denitions and

behavioural patterns for fostering a more

inclusive working environment. This policy is

designed to prohibit all forms of discrimination

(on the basis of disability, pregnancy and

parenthood, race, national or ethnic origin,

age, gender, sexual orientation, political

opinion, and social origin). As part of this

policy, we now have an internal mechanism

for addressing DEI-related concerns and

resolving potential incidents of discrimination.

In February 2022, Ferrexpo hosted an event

as part of the United Nations’ “HeForShe”

movement, which is aimed at providing

solidarity amongst the male population for

gender diversity initiatives. More than three

million men around the world signed

declarations of support, with 135 Ferrexpo

employees taking part at a mass-participation

event. Through their participation, Ferrexpo

aims to raise awareness of gender diversity

topics and help to ght discrimination.

Our Inclusion School, which is a training

programme for our employees in Ukraine,

began in 2021, and restarted in late 2022.

Topics covered in this programme are aimed

at fostering inclusiveness and diversity, and

how this can help Ferrexpo’s business model.

More than 200 of Ferrexpo’s employees

completed this course in 4Q 2022. Online

learning covers topics such as identifying

different forms of discrimination, why it is

important to eliminate prejudice and how

tolerance can help Ukraine to tackle its

wartime challenges. Similarly, the expansion

of our “Fe_munity” programme in 2022 (see

Case Study opposite), our Inclusion School

was also extended during 2022 to include

local authority employees who are keen to

learn more about challenging prejudice and

discrimination.

2 8.7

Positions held by women accounted

for 28.7% of our total employee

workforce in 2022 (2021: 29.2%)

20.9

Women in management roles across

the Group increased to 20.9% in

2022 (2021: 20.1%)

Target of 25% of management

positions to be held by women by

2030. Progress to date has seen an

increase from 18% in 2019 to 21%

in2022.

1. Of the total employee workforce in 2022 (7,978), 2,290

positions were held by women and 5,688 held by men.

2. Of the total number of management roles workforce in

2022 (388), 81 positions were held by women and 307

were held by men.

Greg Nortje,

Group Chief Human

Resources Ofcer

43Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Our “Fe_munity” women

inleadership programme

expanded in 2022 to include

women from across Ukraine.

The “Fe_munity” programme commenced in

2020 and over the course of three intakes of

participants, has helped to form an integral

aspect of our efforts to meet our goal of

reaching 25% of managerial positions held

bywomen by 2030.

Given the events of 2022, the Group was

made aware of a need to support the careers

of women across Ukraine, and we decided to

open up enrolment into our “Fe_munity”

programme to all participants, irrespective of

the sector in which they work. In September

2022, the FEMUNITY.UA project hosted 50

female participants from all over Ukraine, with

lectures over three months, led by eight guest

speakers and 32 mentors.

In addition, "Progression Grants" are now

being offered to participants to help

accelerate their learning and career

development.

Case Study: DEI initiative

expands in 2022

Image: Olena Sitarchuk, participant in 2022 intake of

FEMUNITY.UA programme.

Additionally, through the Ukrainian translation

of the Group’s 2021 Responsible Business

Report, we have been able to communicate

our recent progress in DEI to a broader

audience within Ukraine – this report is

available on our website at: www.ferrexpo.

com/investors/results-reports-and-

presentations/.

Gender diversity targets for 2030

At Ferrexpo, we have a gender diversity target

of ensuring 25% of managerial roles are lled

by women by 2030. To date, our diversity

efforts have enabled us to progress the level

of women in management roles from 18% in

2019 to 21% in 2022, which has been

possible through a range of diversity initiatives

in Ukraine and across the Group, as well as

sustainability-linked incentives within the

Group’s remuneration policy (see page 124

formore details).

We are specically targeting diversity at the

managerial level, rather than total diversity, as

this helps to encourage career progression

and opportunities for women, which may not

otherwise be available. Our workforce does,

however, include a higher proportion of

women (2022: 29%) than our mining-sector

peers that operate in the developing world

Women’s Empowerment Principles

As part of our DEI implementation plan,

Ferrexpo became a signatory to the Women’s

Empowerment Principles (“WEPs”) in October

2022, which is a United Nations-supported

initiative for business leaders to express

support for advancing gender equality. In

undertaking WEPs’ Gender Gap Analysis Tool

in 2022, Ferrexpo achieved a rank of “Leader”

within this framework, with this assessment

made on the basis of existing policies and

ourapproach to 18 different aspects of DEI,

including: addressing the gender pay gap,

parental leave and initiatives to create a

working environment free from violence,

harassment and sexual exploitation.

External recognition in 2022

Our DEI efforts are not going unnoticed, with

external recognition of the forward thinking

that Ferrexpo is introducing to its business.

In October 2022, the Group was ranked in the

top ten of employers in Ukraine for diversity,

equity and inclusion by the Ukrainian

Corporate Equality Index, which is a national

survey of corporate policies, rules and

practices of private companies to prohibit

discrimination in the workplace.

Diversity inclusion

As a large company operating within Ukraine,

we are subject to a local requirement for the

employment of our people to include a

minimum of 4% as those with a registered

disability, which is a requirement that

continues to be met through our employment

of 321 individuals with disabilities in 2022 (4%

of employee workforce). The majority of these

individuals are located at our operations in

central Ukraine, working at FPM and FYM.

Recently, we have published case studies

celebrating the contribution of those with

disabilities at our operations on our social

media channels, including individuals working

in our social services department, mining

department and in the local museum, which

we support through our Charity Fund. We

also sponsor disabled athletes to help

promote healthy lifestyles, and have

previously sponsored individuals to attend

World Championship canoeing events.

1. Comprising mining companies in the FTSE 350 Index

where the main focus of mining is outside of Australia

and Canada.

44 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Communities

Ferrexpo’s assets have a long association with

localcommunities, and this connection has been

important in 2022, enabling us to provide direct

assistance to communities during Russia’s

invasionof Ukraine.

Ferrexpo Humanitarian Fund

In the early stages of the war, it quickly

became apparent that large organisations

within Ukraine would play an important

part in supporting the people of Ukraine,

particularly as the government of Ukraine

focused on ghting a full scale invasion. As

a result, the Board of Directors approved

the formation of the Ferrexpo Humanitarian

Fund early in the conict, with the goal of

providing direct assistance to communities

affected by Russia’s invasion in 2022. Each

project is individually approved by the

Health, Safety, Environment and Community

(“HSEC”) Committee members to ensure good

governance in the approval process. To date,

more than 70 projects have been implemented,

and details of this work are provided in the

Case Study opposite. Additional support has

been provided throughout the war, with our

help in funding the "Unbreakable Mother"

programme, which offers residential stays and

psychological support for women and children

who have been affected by the war in Ukraine.

Ferrexpo Charity Fund

Our Ferrexpo Charity Fund has operated in

Ukraine for more than 11 years, and aims to

provide direct support to local communities

situated close to our operations in central

Ukraine. Funding for the Ferrexpo Charity

Fund, which is in addition to the Ferrexpo

Humanitarian Fund (see above), was UAH

77 million in 2022 (2021: UAH 87 million).

Work by the Ferrexpo Charity Fund focused

on providing budgetary support for local

authorities, support for educational and

medical institutions and direct aid to individuals

in the form of food and support packages.

Sustainability reporting for all

stakeholders

In August 2022, we published our latest

standalone Responsible Business Report,

with this timing in line with previous years

despite the impact of the war in Ukraine.

Thisis a credit to our communications team

inUkraine, who managed to achieve this

timing despite spending many days in air-raid

shelters and in remote locations, sheltering

from the conict.

We also achieved a signicant milestone in our

sustainability reporting in 2022 – in November,

we managed to publish our rst ofcial

sustainability report in Ukrainian, helping our

local stakeholders to understand the efforts

being undertaken to support Ukraine and

develop our business at the current time.

We value all of our stakeholder groups, and

are proud to reach a broader spectrum of

stakeholders through reporting in Ukrainian.

Direct support

for communities

across Ukraine

US$19

Total funding of humanitarian support,

including support provided via Ferrexpo

Humanitarian Fund.

projects

Over 70 individual projects supported.

Eight

regions

Humanitarian support across eight

regions of Ukraine during 2022.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

Ferrexpo plc 45Annual Report & Accounts 2022

Across all initiatives, including direct

donations provided by Ferrexpo subsidiaries,

we have provided the equivalent of

approximately US$19 million of support for

Ukrainian humanitarian causes since the

outset of Russia’s invasion in 2022. Examples

of projects supported include:

– Housing refugees: More than 3,500

internally displaced people have been

housed at our accommodation facilities.

– Providing free meals: Initially we

dedicated our catering facilities to

providing three free meals a day to

employees. More recently, these efforts

have been re-diverted to feeding local

communities. In total, we have donated

528 tonnes of food to local communities.

– Vehicle donations: Equivalent of over

US$5 million of vehicles donated to the

Ukrainian authorities (armed forces and

local territorial defence units). Donations

also include six armoured ambulances

donated in November 2022.

– Medical support: Through liaison with

local medical facilities, we have provided

PPE for local hospitals, the equivalent of

US$600,000 of helmets and body armour

for emergency response workers in the

Poltava region and a total of nine

ambulances.

– On-site children’s centre: Throughout

the early phase of the war, schools

remained closed and children’s learning

was put on hold. In response, Ferrexpo

facilitated an on-site childcare facility to

keep employees' children close and allow

children to continue their studies, with up

to 120 children attending daily.

– IT support: We provided the equivalent of

6,000 items of modern technology, such

as laptops, monitors, printers, mobile

phones and modems, to help to support

local authorities’ efforts to coordinate the

registration and housing of internally

displaced people.

Direct support

for Ukraine

In addition, to support Ukrainian culture, we

recently asked employees to express their

personal experiences of the war in poetry,

and we collated their words to form a

collective tribute: "I want to live without war".

In honour of Defenders Day in Ukraine, we

brought ve of our colleagues together to

recite the poem, spreading a message of

hope for a peaceful future for Ukraine in these

difcult times. Please see the link below for a

video of this project.

We have also sought to preserve a record of

this point in Ukraine’s history, understanding

the need for documenting the experiences of

those suffering during Russia’s invasion. We

have invited displaced people to voluntarily

record details of the war with our in-house

communications team, with a goal of

preserving a record of the acts of bravery and

resilience in defending Ukraine for future

generations. This project has to date

recorded 45 hours of footage from 59

contributors, and we will continue to record

people's reections as the war continues.

Case Study: Humanitarian efforts

Image: Ferrexpo volunteers coordinating humanitarian

aid to vulnerable families in local communities.

Scan to watch the full

story on LinkedIn

46 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Responsible Business: Governance

Governance:

Building trust

Female representation on the Group’s

Executive Committee (one out of ve

members).

Female representation on the

Group’s Board of Directors (three

outof seven Directors).

Target for gender diversity at Board

level, as set by the Hampton-

Alexander Review.

Five of the Group's seven Directors

appointed in the past four years.

With good corporate governance, companies are able

tobuild trust with their stakeholders. Through trust,

companies can enjoy the benets of a strong brand

thatstakeholders can associate with.

Board composition

Effective corporate governance starts with the

Board of Directors (“Board”). As of the date of

this document, Ferrexpo’s Board comprises

seven Directors – including one Executive

Director (Jim North) and ve Independent

Non-executive Directors. For more details of

the Board composition and activities during

the year, please see the Corporate

Governance section of this report (page 88).

Board changes

In December 2022, Non-executive Director

Kostyantin Zhevago resigned from the

Board. Mr Zhevago is the ultimate benecial

owner of the Group’s largest shareholder –

Fevamotinico S.a.r.l (“Fevamotinico”). Due to

the proportion of the Group’s issued shares

held by Fevamotinico, a relationship agreement

exists between Ferrexpo and Fevamotinico,

under which Mr Zhevago has the right to

appoint a nominee to the Board. Further

details are available on page 79 of this report.

Board position appointments

During the year, Independent Non-executive

Director Fiona MacAulay was appointed as

Senior Independent Director (“SID”), which is

an important role that helps facilitate dialogue

between fellow Directors and the Chair, and

enables shareholders to speak directly with

the Board.

In early 2022, following the appointment of

Fiona MacAulay as SID, the Board underwent

a number of changes. Independent Non-

executive Director Ann-Christin Andersen

moved to take up the role of Chair on the

Health, Safety, Environment and Community

(“HSEC”) Committee. Independent Non-

executive Director Natalie Polischuk, who

joined the Board in December 2021, was

appointed as a member of the HSEC and

Audit Committees in February 2022.

Finally, in February 2022, Jim North

was appointed as Chief Executive

Ofcer on a permanent basis, reecting

Mr North’s successful period as

Interim CEO, with Mr North already

appointed as an Executive Director.

FTSE Women Leaders Review

The FTSE Women Leaders Review is an

independent, business-led framework

supported by the Government, which sets

recommendations for Britain’s largest

companies to improve the representation

of Women on Boards and in Leadership

positions. As a result of this work, the FTSE

Women Leaders Review recommends

that companies listed within the FTSE 350

have at least 40% female representation

at Board level by the end of 2025, as

well as at least one woman appointed as

chair, senior independent director (“SID”),

CEO or CFO by the end of 2025.

As of the date of this report, Ferrexpo’s

Board is 43% female (31 December 2021:

38%), meaning that Ferrexpo satises

the recommendation for Board gender

diversity set by the FTSE Women Leaders

Review, as well as the requirement for

a female in one of the stated roles, with

Fiona MacAulay as the Group’s SID.

The Group is also focusing on increasing

diversity further down its organisational

structure; details of this work can be found

onpages 42 to 43, and in the Corporate

Governance Report on page 87.

47Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Parker Review

The Parker Review was an independent

review in 2021 led by Sir John Parker, which

considered how to improve the ethnic and

cultural diversity of UK Boards to better reect

their employee base and the communities

they serve. In order to encourage progress

in ethnic diversity, the Parker Review

proposed a target of one Director from

an ethnic minority group on the Boards of

FTSE 250 companies by December 2024.

The search for an independent Non-

executive Director from a minority ethnic

group has been launched and is ongoing.

Corporate governance controls

The Group’s nancial advisors are Liberum

Capital Limited (“Liberum”), which also

provide broking services to the Group. As a

London-listed company, it is best practice for

the Company to have a Sponsor to provide

advice and guidance on certain corporate

matters, with BDO LLP appointed in this role.

Stakeholder engagement

As a responsible, modern company, we

aimto engage with our shareholders, to

understand their concerns and priorities.

Shareholder engagement is conducted via

arange of methods – from various reports

published on an annual basis (Annual Report

and Accounts, Responsible Business Report

and Climate Change Report), to our corporate

website and social media channels.

We also endeavour to engage with

stakeholders located within Ukraine and

overseas, with this made possible through

communications in both Ukrainian and English.

In 2022, we communicated in both languages

across the majority of our social media

channels and the 2021 Responsible Business

Report, as well as selected press releases.

Please see page 48 for more details of how we

engage with each of our stakeholder groups.

Related party matters

The Group has a controlling shareholder

thatalso has a number of different

businesseswith which the Group has

acommercial relationship.

In order to maintain strong levels of corporate

governance, and to ensure that these

business relationships are conducted on an

arm’s length basis, the Group has both the

Committee of Independent Directors at the

Board level and the Executive Related Party

Matters Committee at the management level.

As discussed in previous Annual Report and

Accounts, the Committee of Independent

Directors (“CID”) conducted a review in

connection with the Group’s sponsorship

arrangements with FC Vorskla and concluded

its enquiry in March 2021. Arrangements were

put in place by Kostyantin Zhevago and his

associated entities, which were executed by

31 July 2022, and the CID can conrm that,

as of the date of this Annual Report and

Accounts, these arrangements have now

been completed.

Reporting requirements Reports, policies and standards Additional information Risks

Environmental

Climate Change Report

Tailings Management

Greenhouse gas emissions (pages 35 to 36)

Energy consumption (page 36)

www.ferrexpo.com/responsibility/protecting-environments

Principal Risks,

pages58 to 74

Employees

Ethics and Responsible Business Policy

Code of Conduct

Health and Safety Policy

Health and safety (page 32)

Diversity, equity and inclusion (page 42)

www.ferrexpo.com/responsibility/workforce-development

www.ferrexpo.com/responsibility/safety-performance

Principal Risks,

pages58 to 74

Human rights

Human Rights Policy

Data Privacy Policy

Anti-Slavery and Trafcking Statement

Information Security

Diversity, equity and inclusion (page 42)

Ferrexpo Code of Conduct

www.ferrexpo.com/about-ferrexpo/corporate-governance/

policies-and-standards

Principal Risks,

pages58 to 74

Social matters

Donations Policy

Community Policy

Chair’s Statement (page 2)

Social engagement (page 44)

www.ferrexpo.com/responsibility/supporting-communities

www.ferrexpo.com/responsibility/stakeholder-engagement

Principal Risks,

pages58 to 74

Anti-corruption

andanti-bribery

Anti-Bribery Policy

Anti-Money Laundering and

CounterTerroristFinancing Policy

Fraud Risk Management

Whistleblowing Policy

Chair’s Statement (page 2)

Governance (page 46)

Governance Report (pages 78 to 137)

www.ferrexpo.com/about-ferrexpo/corporate-governance/

policies-and-standards

www.ferrexpo.com/whistleblowing

Principal Risks,

pages58 to 74

Principal risks and

impact on business

activities

Business model (page 12)

Risk management (page 56)

Viability Statement (page 73)

Going Concern Statement (page 135)

Principal Risks,

pages58 to 74

Non-nancial KPIs

Key Performance Indicators (page 18)

Non-nancial information statement

The Ferrexpo Group complies with the non-nancial reporting requirements contained in Sections 414CA and 414CB of the Companies Act

2006. The table below, and information it refers to, is intended to help stakeholders understand the Company’s position on key non-nancial

matters. This builds on existing reporting that the Company already does under the following frameworks: Global Reporting Initiative, Guidance

on the Strategic Report (UK Financial Reporting Council), UN Global Compact, UN Sustainable Development Goals and UN Guiding Principles.

In addition to its Annual Reports, Ferrexpo also publishes a standalone report covering its Responsible Business activities, with the report for

2021 available on the Group’s website and the report for 2022 expected to be released during the course of 2023.

STRATEGIC REPORT

Annual Report & Accounts 2022Ferrexpo plc48

Stakeholder Engagement – Section 172

Our stakeholders

Employees and contractors

Environment

Customers

Government

Suppliers

Investors

Communities

Capital providers

More than 95% of our workforce is based

incentral Ukraine.

Ferrexpo’s inaugural Climate Change

Report, published in December 2022,

announced a 50% emissions reduction

target by 2030 (previously 30%).

Despite the war in Ukraine, we maintained

adiverse number of customers in 2022,

selling to a similar number of customers

asseen in 2021.

Ferrexpo continues to represent a

signicant proportion of Ukraine’s

exportrevenues, accounting for 3%

in2022(2021:4%).

US$912

Total paid to suppliers of US$912 million

in2022 (2021: US$1.2 billion), reecting

value generation through our production

processes.

Shareholder returns in 2022 representing

55% of the Group’s free cash ow,

meetingthe target set under the Group’s

Shareholder Returns Policy.

The Ferrexpo Humanitarian Fund has

approved support for more than 70

initiatives across Ukraine, with approved

funding of US$15 million.

US$106

Ferrexpo continues to remain in a

netcashposition, with US$106 million

asof31 December 2022

(31 December2021:US$117 million).

Through stakeholder engagement and an understanding

of materiality for each stakeholder, the Group can focus

ongenerating value for everyone as well as limiting its

environmental impact.

Image: Our workforce at our operations marking

Ukraine’s national Unity Day on 22 January 2023.

49Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

The Board of Directors acts to promote

the long-term sustainable success of the

Company for the benet of shareholders

as a whole, and in doing so recognises

the importance of having due regard to

the matters set out in Section 172(1)(a) to

(f) of the Companies Act 2006, being:

– the likely consequences of any decision in

the long term;

– the interests of the Company’s employees;

– the need to foster the Company’s business

relationships with suppliers, customers

and others;

– the impact of the Company’s operations

on the community and the environment;

– the desirability of the Company

maintaining a reputation for high standards

of business conduct; and

– the need to act fairly as between members

of the Company.

The Board receives regular training on

directors’ duties and briengs in relation to

corporate governance developments and

stakeholder engagement. New directors

appointed to the Board receive tailored,

individual briengs on their duties and

obligations as part of their induction.

The following section outlines the Group’s

different stakeholder groups, engagement

activities conducted in 2022 and feedback

that was received as part of this work. Each

section provides an overview of the work

completed to date in response to this

feedback, and any further plans that the

Board has for the year ahead.

How considering stakeholders in

decision-making works in practice

The Group engages regularly with

stakeholders, with interactions largely led by

the day-to-day management team with

Board-level interactions where appropriate.

Where management-level engagement has

taken place, feedback is provided to the

Board by way of regular updates at meetings

to help inform decision-making and ensure

stakeholder views and considerations are

taken into account.

During Board discussions, the Board

considers stakeholders’ interests and the

potential impact of decisions on relevant

stakeholder groups for the purposes of Section

172 of the Companies Act 2006. This includes

considering competing stakeholder interests

and the differential impact certain decisions

may have on different constituencies.

Those stakeholder groups the Board

considers to be fundamental to the Group

and their respective interests are set out on

pages 14 to 15, together with an explanation

of engagement activities undertaken during

the past year and the impact this has had on

Board-level decision-making. On page 55,

there is a more detailed case study of the

principal decisions taken by the Board during

the year in the context of the war in Ukraine

and how stakeholder interests were taken

intoaccount.

Further details on the Group’s approach to the matters outlined in Section 172 can be found in the following sections of this report:

Section 172 factor Key examples Page

Employees and wider

workforce

– Case Study: War in Ukraine

– Responsible Business: Safety & Our People

– Responsible Business: DEI

– Case Study: DEI programme expands across Ukraine in 2022

Suppliers and

customers

– Market Review

– Strategic Framework

Local communities

– Responsible Business: Communities

– Case Study: Humanitarian efforts

Environment

– Responsible Business: Environmental Stewardship

– Case Studies: Net zero pathway developed in 2022

– Scenario analysis selection and TCFD disclosures

High standards of business

– Responsible Business Review

– Responsible Business: Governance

– Risk Management

– Our Business Model

Investors

– Chair’s Statement

– CEO’s Review

– Our Business Model

50 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Section 172 continued

Employees and wider

workforce

Ferrexpo’s talented and engaged workforce is

a key strength of Ferrexpo’s business, which

we continue to rely upon following Russia’s

invasion of Ukraine in 2022. Through a close

working relationship between employer and

employees, company and contractor, we are

able to address the needs of our workforce.

Our engagement activities in 2022

Ferrexpo aims to communicate with its

workforce, which is based in a number of

geographic locations and a range of settings,

in a variety of ways in order to communicate

effectively with different individuals and

groups in multiple languages. Traditional

methods of communication, such as printed

media and formal meetings may be effective

in one setting, but may not be effective at

reaching another stakeholder group

particularly where lines of communication

have been disrupted by the ongoing conict.

We use a range of methods – from electronic

communications (email, online learning,

electronic bulletins, corporate websites and

social media channels) to printed newspapers

at our operations in Ukraine, social media

channels and national media in both Ukraine

and international locations where we have

corporate ofces, including the United

Kingdom and Switzerland.

We aim to engage throughout the calendar

year. Given that more than 95% of our

workforce is located in Ukraine, it is important

that the Board maintains a strong presence in

the country, both in Kyiv and in the region in

which we operate.

In September 2022, Independent Non-

executive Director Vitalii Lisovenko visited

our operations and hosted a number of

engagement sessions with a range of

stakeholder groups within our workforce

– including alumni of our “Fe_munity”

women in leadership programme,

employees at the Yeristovo mine, middle

managers and people with disabilities.

Over the course of two days, Mr Lisovenko

met with more than 150 members from

a cross-section of the workforce.

In addition to direct engagement, such as

face-to-face meetings in the workplace, the

Group utilises its website, public reports and

social media channels. As of February 2023,

the Group had approximately 25,000 followers

across Facebook, LinkedIn and Instagram,

with the majority of subscribers being located

in Ukraine. The Group typically issues two to

three posts on social media a week, with each

post representing an opportunity to convey

a key message to stakeholders, including

messages from Board members – for example,

an interview with Independent Non-executive

Director Ann-Christin Andersen, which was

posted on LinkedIn in December 2022.

Workforce engagement occurs across

multiple languages, to ensure that the Group

communicates with both its Ukrainian and

international stakeholders. The Group has

communicated on social media platforms in

both English and Ukrainian for several years,

and in 2022 published its Responsible

Business Report in Ukrainian for the rst time,

helping to keep local stakeholders informed of

the Group’s sustainability initiatives.

Our response to feedback

The Board understands the importance of

Ferrexpo having a strong presence within

Ukraine, where more than 95% of our

employees and contractors are based, in

order to ensure effective engagement. As

such, the Board includes two Independent

Non-executive Directors who are Ukrainian.

This has been of paramount importance

during Russia’s invasion of Ukraine in 2022,

for maintaining engagement despite travel

restrictions imposed as a consequence of the

war. Through this presence, Vitalii Lisovenko,

the Board’s nominated representative for

employee engagement, was able to visit our

operations in September 2022.

The Board regularly interacts with the Group’s

executive management team through its

various committees, and the Health, Safety,

Environment and Community (“HSEC”)

Committee comprises three Directors of the

Group and two members of the executive

management team.

Plans for engagement in 2023

Engagement activities will continue into 2023

to understand the evolving concerns and

requirements of our workforce. The Group

typically conducts an employee engagement

survey every year and intends to complete

such an exercise during 2023.

Customers

Our customers are key to the Ferrexpo

business model, with investments in high

grade and high quality forms of iron ore

designed to meet their needs. Through

constructive, long-term customer

relationships, the Group is able to succeed in

generating value for all stakeholder groups.

Our engagement activities in 2022

The past year has seen material disruption

tothe Group’s logistics network and sales

portfolio, with Russia’s invasion of Ukraine

inFebruary 2022 resulting in restrictions in

theGroup’s use of seaborne vessels, the

Ukrainian railway network, our own railway

wagons and our own inland waterway barging

subsidiary (First-DDSG). Further details of the

restrictions imposed as a consequence of the

conict are provided on pages 4 to 5.

As a result of the aforementioned operational

and logistics constraints, our ability to deliver

our products to customers was impaired in

2022, with 6.2 million tonnes sold during the

year (2021: 11.2 million tonnes). In the early

stage of the war, our marketing team held

extensive discussions with customers, and

through strong, long-standing relationships

the Group was able to navigate continued

sales to customers, which are typically

located in Europe (given logistical constraints

in accessing non-European markets).

Despite the war and its constraints, the Group

has been able to continue discussions with

prospective customers, particularly with

buyers of direct reduction (“DR”) pellets, with

the Group seeking to increase its presence in

this particular market. Through engagement,

we are developing our offering of DR pellets,

meeting the quality demands of this market.

In the early stages of the conict, the Group

was forced to serve force majeure notices

toa number of customers that are only

accessible via seaborne markets. See page 8

for further information. Such activity requires

signicant engagement for customers to

understand the nature of the situation and

potential outlook (which may be updated on a

frequent basis). The Group hopes to continue

or renew these valued customer relationships

in future when circumstances permit.

51Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Through engagement, the Group was proud

to raise awareness for humanitarian support

caused by the invasion and encouraged

customers to make donations directly to

various relief funds. We are grateful for these

acts of kindness. The Group is thankful for the

strong and supportive relationships that it has

with its customers.

Our response to feedback

Customers are increasingly focused on the

topic of climate change and sustainability,

which is particularly relevant in light of the

advent of Green Steel (being the production

of steel with low or zero associated emissions

of greenhouse gases). In order to provide

sufcient clarity to customers, the Board was

proud to issue the Group’s rst standalone

Climate Change Report in December 2022,

and as part of this report, the Group was able

to upgrade and expand its existing suite of

carbon reduction targets. Changes included

an increase to the medium-term (2030)

emissions reduction target to 50% (from 30%)

and inclusion of Scope 3 emissions targets

within the Group’s suite of forward-facing

targets. For more information, please see

page 34 of this report.

For more information on the marketing team’s

efforts during the year, please see pages 8 to

11 of this report.

Plans for engagement in 2023

The Group is in regular contact with its

customer network, both in terms of existing

customers in relation to existing or future

orders, as well as potential new customers.

One specic area of focus for the Group is the

DR pellet market, which is a market typically

relevant for steel mills in the Middle East and

North Africa region (“MENA”) and North

America, but demand for DR pellets is also

growing in other regions of the world due to

the low emissions footprint associated with

this form of iron ore. As such, the Group has

recently hired a Regional Marketing Manager

for its ofce located in Dubai, with a purpose

of engaging with potential DR pellet

customers in the MENA region and beyond.

Suppliers

The Group’s suppliers are key to operating

asuccessful, long-term sustainable business.

Suppliers represent a principal aspect of

thelocal and global footprint that the Group

creates through its day-to-day business

activities, which helps develop a positive

localpresence and a well-known international

brand that is identiable to other stakeholder

groups such as potential investors and

customers. Through conducting ourselves in

a clear and transparent fashion, we hope to

also promote Ukraine as a destination for

other businesses.

Our engagement activities in 2022

The Group’s operations paid a total of

US$912 million to suppliers in 2022 (2021:

US$1.2 billion). Given our the location of

ouroperations and the nature of events in

Ukraine, the Group has sought to engage

extensively with its suppliers in 2022 –

seeking clarication on the status of their

operations during the conict and identifying

alternative suppliers where disruptions have

occurred or the risk of disruption is perceived

to be high.

Through engagement, the Group was proud

to raise awareness for humanitarian support

caused by the invasion and encouraged

customers to make donations directly to

various relief funds. We are grateful for these

acts of kindness. The Group is proud to have

long-standing relationships with a number of

local and international suppliers, which have

helped to support the Group during the

ongoing war in Ukraine.

Our response to feedback

The Group is an integral part of the local

economy in the region of Ukraine where

theGroup operates, and therefore it is

important that it aims to develop

constructiverelationships with suppliers,

forexample by paying suppliers promptly.

By imposing a Code of Conduct and

engaging with suppliers, the Group aims to

reduce the risks associated to it through

issues in the supply chain such as

environmental concerns and modern slavery.

The Group’s Statement on the Modern

Slavery Act is available at www.ferrexpo.com.

Furthermore, engagement helps suppliers

improve their services, as well as gaining a

better perception of the Ferrexpo business, in

turn facilitating the Group’s ability to operate.

Plans for engagement in 2023

Supplier engagement is expected to continue

into 2023 with a similar focus as in previous

years – seeking local goods and services

where possible, to support the Ukrainian

economy, and engaging to ensure supplier

governance throughout Ferrexpo’s supply

chain. In addition, the Group is increasingly

engaging to understand the greenhouse gas

emissions footprint of suppliers, as this is

directly relevant to Ferrexpo’s Scope 3

emissions.

Communities

Without a social licence to operate, granted by

host communities, no business can succeed.

Ferrexpo has sought to develop close ties

to local communities over many years.

Our engagement activities in 2022

Over several years, the Group has developed

strong ties with local communities, since

Ferrexpo is the main employer in the local

area and a major employer and source of

revenue in the region of Ukraine where our

operations are located. We also understand

the connection between our workforce in

Ukraine and their families in local areas,

meaning that many more people rely on

Ferrexpo for the stability offered and value

generated by the Group.

This close relationship and historic

engagement was of paramount importance

in2022, enabling us to quickly connect with

local communities and community leaders

from the outset of Russia’s invasion, to

understand the material issues and risks

facing communities during the conict.

The Responsible Business Report was

published in Ukrainian to help engagement

with a wider audience on sustainability topics,

which are particularly relevant for local

stakeholders.

The Group regularly engages with communities

through traditional forms of communication

(for example, printed media and local television

channels), and electronic media such as

the Group’s websites, public reports and

dual-language social media channels.

52 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Section 172 continued

Our response to feedback

The Group regularly provides direct support

to local communities through the Ferrexpo

Charity Fund, which has been in operation

since 2011. During exceptional times, such

asRussia’s invasion of Ukraine in 2022 and

the global Covid-19 pandemic, the Board

hassought to provide additional support,

specic to the needs of a situation.

In the early stages of Russia’s invasion

of Ukraine, the Board established the

Ferrexpo Humanitarian Fund, which has

been a dedicated platform for reviewing and

approving funding and/or support of various

humanitarian projects in local communities

and across Ukraine. As the war in Ukraine

has evolved during 2022, the Board has

approved increasing levels of funding for

the Ferrexpo Humanitarian Fund, and as

of the date of this report, the Group has

provided humanitarian support amounting

to US$19 million, either via the Ferrexpo

Humanitarian Fund (with US$15million of

approved funding) or via support provided

directly by our subsidiaries. Projects are

individually reviewed and approved by

members of the HSEC Committee, to ensure

that governance standards are maintained,

with over 70 humanitarian projects approved

in 2022. Many projects are raised by local

community leaders and groups. The

Group will continue to support Ukraine and

communities throughout the country through

the Ferrexpo Humanitarian Fund and the

Ferrexpo Charity Fund during this difcult time.

Plans for engagement in 2023

The Board approved the 2023 Ferrexpo

Charity Fund budget at UAH 77 million

(approximately US$1.8 million). This support

is provided in parallel to the Ferrexpo

Humanitarian Fund, which is specic to

relief efforts associated with the war in

Ukraine. To date, this fund has an approved

expenditure limit of US$15 million, with

a total of US$19million of humanitarian

support provided to date by the Group.

The Environment

The natural environment is a key stakeholder

for the Group as it represents both the

present day success of our business with

multiple stakeholder groups and also

that of future generations. The natural

environment encompasses a number of

spheres, from greenhouse gas emissions

and emissions of other gases into the air,

to our interactions with the water cycle,

land rehabilitation and biodiversity around

our operations, amongst others.

Our engagement activities in 2022

Climate change is a key focus area for a

number of stakeholder groups, with rising

pressure to act to limit the effects of climate

change.

Engagement on the natural environment

occurs with local and national government

bodies to ensure compliance with local

legislation and best practice. Engagement

with local communities is conducted through

regular meetings with community leaders and

representatives. The Group interacts with its

workforce via regular staff meetings and

internal communications, which includes

feedback mechanisms to ensure local voices

are heard.

Our response to feedback

In response, the Board approved the

publication of the inaugural Climate Change

Report in December 2022. This report

represents the culmination of our collaboration

to date with environmental consultants

Ricardo Plc (“Ricardo”), which was a project

announced in October 2021. Through this

work stream, the Group has developed a

potential pathway to net zero iron ore pellet

production, as well as climate scenario

modelling to determine risks and opportunities

related to Ferrexpo’s business and industry

sector. For more information, please see

the Group’s website (www.ferrexpo.com).

The Group has also set revised, more

ambitious greenhouse gas emissions

reduction targets. The Group is now

targetinga 50% reduction in its Scope 1

and2 emissions by 2030 (on a combined

basis per unit of production). For more

detailsof the Group’s emissions reduction

targets, please see page 35 of this report.

In addition, the HSEC Committee maintains

climate change as a standing item on the

agenda for all meetings, with meetings held

on a quarterly basis.

Executive remuneration is also aligned to

theGroup’s climate change goals, with the

introduction of performance targets relating

toclimate-related matters, please see page

124 of this report.

Plans for engagement in 2023

The Group is continuing to expand its

reporting of its environmental footprint in 2023

with the completion of the life cycle analysis

that is currently being nalised. This work will

serve to provide a peer-reviewed study of the

environmental footprint of iron ore pellets,

benchmarked against the most commonly

traded form of iron ore (sinter nes).

Government

Ferrexpo engages with governments in the

countries in which the Group operates through

regular and clear dialogue with representatives

of host governments and local authorities. In

each jurisdiction, the Group aims to develop

long-term, positive relationships through

regular and transparent interactions.

Our engagement activities in 2022

The Group has a number of legal permits and

licences required to operate in host countries,

which are administered by the Group’s

internal legal and government liaison teams,

as well as external advisors.

53Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Engagement with the Ukrainian government

has been particularly important in 2022 given

the ongoing war in Ukraine. Well-developed

lines of communication have been necessary

to allow the Board and management to

understand the numerous changes to the

operating environment, which has changed

signicantly throughout the war, from port

closures, limitations to rail access and the

availability of electricity, amongst other

effects. Additionally, we have needed to keep

in constant contact with the government to

understand the needs of communities across

Ukraine as the war has evolved, helping to

meet humanitarian requests wherever we are

able to assist.

Our response to feedback

Through engagement, the Group aims to

establish a constructive line of communication

with host governments, to facilitate further

investment and continued operations in

each country. The Group has operations

and corporate ofces across seven different

countries, in addition to marketing ofces in

a further three countries, ensuring the Group

has a global presence in a global marketplace.

As part of the effort to raise awareness of

Ukraine’s needs during the Russian invasion

of Ukraine, the Group has sponsored two

policy papers, published in March and July

2022 “Global Britain and the Black Sea” and

“Deepening British-Ukrainian relations in a

more competitive era”. Both are available to

read at www.geostrategy.org.uk.

Plans for engagement in 2023

The Group aims to continue to proactively

engage with government stakeholders in the

jurisdictions where it operates, in line with

previous years.

Investors

The investment community is a key pillar

of the Group’s corporate brand, and

investment in Ferrexpo reects both the

nancial performance and reputation of the

Ferrexpo business. Through developing

close ties with investors of all sizes, the

Group can promote itself as well as raise

awareness of Ukraine’s potential.

Our engagement activities in 2022

The Group has maintained a premium

listing on the London Stock Exchange

since June 2007 and as a result has a large

investor base, comprising more than 500

institutions or organisations representing

retail shareholders as of January 2023,

located in more than 30 countries or

jurisdictions. The Group’s independent

shareholders range from international

investment funds managing billions of

dollars, to individual retail shareholders.

The Group regularly meets in person with

investors in London and Europe, and regularly

speaks to investors located around the world.

Direct engagement with investors can take

the form of ad hoc meetings, video calls or

telephone calls, as well as results calls

following either the full year or interim results

in March and August respectively. Following

each set of nancial results, the Group will

liaise with the sales team at its broker Liberum

to arrange a series of investor meetings,

referred to as an investor roadshow.

Additionally, the Group regularly speaks to the

analyst community at a number of investment

banks, which for Ferrexpo, are typically

located in London or Kyiv. Through this

interaction, the Group is able to assist its

analyst following to produce accurate and

considered investment research on Ferrexpo.

In addition to the above activities, the

Groupalso hosts its Annual General Meeting

(“AGM”)usually held in May each year, which

represents an opportunity for all investors to

meet and engage with the Board.

Our response to feedback received

The Group aims to communicate with all

shareholders and uses a range of methods to

do so. In 2022, we have published three formal

reports for our stakeholders – an Annual

Report and Accounts in April, a Responsible

Business Report in August and a Climate

Change Report in December. The Responsible

Business Report was also published in

Ukrainian to help engagement with a wider

audience on sustainability topics, which are

particularly relevant for local stakeholders.

InJanuary 2022, we unveiled a revamped

corporate website (www.ferrexpo.com),

whichincorporates much of the content and

commentary produced for the Group’s social

media channels, which are available in both

English and Ukrainian (on Facebook and

Instagram).

Given investors’ increasing reliance on

sustainability data in making investment

decisions, it is evident that there is a need to

ensure the quality of this information is high.

As such, we have sought to undertake an

independent assurance process of our safety

and carbon emissions data for 2022, which

mirrors a similar process on data for 2021

thatwas completed in July 2022.

Throughout the war in Ukraine, we have

regularly updated our investors with clear

andconsistent press releases, aiming to

keepthem informed of the war’s impact on our

business. During 2022, we published 34 press

releases, representing a 42% increase on the

prior year. In addition, we provide corporate

presentations for all stakeholders on our

website, which also cross-references material

produced for our social media channels.

At the AGM in June 2022, more than

20% of shareholders voted against two

Board-proposed resolutions. Although

both resolutions were passed, following

the AGM, the Group has engaged with

shareholders to understand the reasons

for the voting patterns seen and address

any concerns. For more information on

this process, please see page 93.

54 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Section 172 continued

Plans for engagement in 2023

The Group has a regular schedule of

engagement activities throughout the

calendar year, including (but not limited to)

theGroup’s annual reporting suite, investor

roadshows associated with nancial results,

quarterly production reports and a number

ofinvestor conferences. In addition, the

Group provides numerous press releases,

presentations and social media output on an

ad hoc basis, which are produced as required

for company news events or otherwise.

Capital providers

Since listing in 2007, the Group has

consistently relied upon the banking

community and providers of capital to help

operate its business model on a day-to-day

basis and to help nance our investments for

future growth projects. Over this period of

time, we have sourced multiple sources of

funding, including the issuance of corporate

bonds and engaging with lenders for

pre-export nance (“PXF”) facilities.

Our engagement activities in 2022

The Group’s treasury department manages

our liquidity position, which includes our

various relationships within the landscape

ofbanks, providers of capital and other

relevant third parties. Relationships are

alsomaintained with the main credit ratings

agencies, with the Group’s corporate ratings

detailed on page 25 of this report.

Regular meetings and calls are held with

theabove lenders and ratings agencies, to

maintain existing relationships, or develop

relationships for future lending or banking

arrangements. The above interactions involve

the provision of the Group’s press releases

and corporate presentations, in addition to

standalone presentations where required.

In addition to the normal course of business

activities and meetings held with capital

providers, additional engagement has been

required in 2022 in light of Russia’s ongoing

invasion of Ukraine, and the resulting

restrictions imposed on both Ukraine and

theGroup (see pages 4 to 5 for a summary

ofthese effects).

As of 31 December 2022, the Group had a

net cash position of US$106 million with no

debt facilities and minimal lease obligations

(31 December 2021: net cash position of

US$117 million).

Our response to feedback

Key considerations for capital providers are

the Group’s liquidity position and strength of

its balance sheet, as well as additional factors

relating to corporate governance, growth

plans and ESG practices, amongst other

aspects of our business.

Providers of capital and ratings agencies are

increasingly focused on ESG related topics,

which is driving a requirement for broader

and more detailed disclosures across a range

of topics. Whilst we have provided detailed

summaries of this work under the Global

Reporting Initiative (“GRI”) in our Responsible

Business Reports since 2016, the Board

determined that further action was required to

remain in line with expectations. As such, in

October 2021, we announced our collaboration

with environmental consultants Ricardo Plc

and our inaugural carbon emissions reduction

targets. Following the completion of the rst

phase of this collaboration, we published

our ndings in our Climate Change Report.

In addition, good corporate governance is a

matter of paramount importance for providers

of capital and ratings agencies, and the

Group’s treasury department regularly

engages with these parties on the various

initiatives and frameworks that the Group has

developed to bolster its governance practices.

In certain instances, members of the Board

have engaged directly capital providers to

enable a greater degree of understanding on

these topics.

Plans for engagement in 2023

It is expected the existing level of

engagement, which is at an elevated level

compared to previous periods, will continue

as long as the war in Ukraine continues to

restrict the Group’s ability to operate, and

factors specic to the Group and Ukraine, as

detailed on page 60 (Principal Risks: Ukraine

Country Risk), continue.

Typical engagement activities range from

formal face-to-face meetings and video calls,

to informal discussions on an ad hoc basis,

which are conducted as part of the day-to-

day operating of Ferrexpo’s business.

Additionally, in the past, the Group’s treasury

department has facilitated discussions with

other functions within the Group (for example,

Board members, CEO or CFO) and

representatives of capital providers or ratings

agencies, depending on the nature of topics

being discussed.

Given the focus of capital providers on

theGroup’s balance sheet, market factors

represent an additional consideration given

the direct impact of iron ore benchmark

prices, pellet premiums and freight rates on

our ability to remain protable. Therefore, the

Board is mindful of the need to ensure that

capital providers and ratings agencies are

suitably informed of such market factors, as

well as expectations around production and

sales volumes and the Group will continue to

provide these updates in the coming year.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

55Annual Report & Accounts 2022Ferrexpo plc

Case Study: Protecting stakeholder interests

The Board’s agenda during 2022 has been primarily focused on dealing

with the effects of the Russian invasion of Ukraine on the Group. This has

required the Board to make many challenging, time-pressured decisions

while considering multiple stakeholder interests.

Following the outbreak of the war, the

management team and the Board acted

swiftly to put in place appropriate measures

to protect the Group’s workforce based in

Ukraine – with the safety of people being of

the utmost importance, as well as ensuring

clear and regular lines of communication with

the workforce.

The Group also needed to take steps quickly

to protect the business. The Board took the

difcult decision to postpone performance

ofvarious contractual obligations, including

suspending deliveries to seaborne customers

who could no longer be serviced due to the

closure of logistics routes. The Board and the

management team were aware of the negative

impacts this would have on the Group’s

customers, but sought to communicate

clearly with customers so that they

understood the steps being taken and to

preserve (often long-standing) relationships

where possible with a view to maintaining the

Group’s reputation for high standards of

business conduct, even in exceptionally

difcult circumstances.

The Board acted quickly to set up a dedicated

Humanitarian Fund to support both the local

communities surrounding the Group’s

operations and country-wide initiatives. With

input from the HSEC Committee, the Board

approved terms of reference for the Fund

toensure there was clarity regarding the

humanitarian projects which the Fund

willsupport, and appropriate governance

arrangements to approve any funding

requests. Members of the workforce were

also given the opportunity to put forward any

proposals on how funds should be allocated

and suggestions were taken into account by

the Board and HSEC Committee. For further

details see page 44.

Given the uncertainties surrounding the war,

the Group has taken action to protect its

nancial position and preserve liquidity. This

has involved suspending non-essential capital

expenditure and minimising sustaining capex.

The Board recognised the impact these

decisions would have on the Group’s

suppliers, and their potential to impact the

Group’s operations in the future, but ultimately

needed to prioritise the Group’s nancial

stability. The Group also engaged with its

customers to reduce existing payment terms

where possible, to assist with cash ow

management. Engaging with customers and

suppliers has been key to maintaining existing

relationships during these unprecedented

times, and the Board has exercised oversight

of these matters throughout the year.

Board decision making during the

Russian invasion of Ukraine

The Board also carefully considered

stakeholder factors at the time of declaring the

dividends made to shareholders in 2022. In

addition to their legal obligations concerning

distributions, the Board also considered

the Group’s overall nancial position at that

time, forecast revenues and projected future

expenditures (including payroll obligations,

xed overheads and supplier payments)

over a dened period, as well as applying

an additional buffer amount, to ensure that

the likely consequences of the dividends

over the long term had been assessed.

The Group and the Board continue to have

stakeholder considerations front of mind

when making decisions and recognise that

many of the difcult decisions being taken by

the Group during these unprecedented times

will inevitability have an adverse impact on

stakeholders, and that some stakeholder

groups will be impacted more than others.

Where feasible, the Board will continue to

take mitigating steps to reduce these impacts.

Image: Flags ying outside Ferrexpo’s administrative

ofces at FPM (L-R: Poltava Region, FPM, Ukraine).

56 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Risk Management

Assessing and

managing risk

Ferrexpo identies and assesses risks based oneach

risk’s probability of occurrence and the severity of any

event. The Group aims to mitigate the potential impact of

each risk through its management of day-to-day activities,

takingaprudent approach to risk where possible.

Risk identication

Ferrexpo aims to manage risks across its

business through the early identication

ofpotential risks before they emerge,

withseniormanagers and the Group’s

executivemanagement team responsible for

maintaining risk registers for each area of the

Ferrexpo business. Risk registers are regularly

reviewed and updated, with local risk owners

reporting to senior management teams on a

regular basis.

The Group risk register records risks on the

basis of the likelihood of occurrence and level

of potential impact on the Ferrexpo business.

A total of 44 risks were included on the Group

risk register as of December 2022, with risks

ranging from the war in Ukraine (both direct

and indirect), risks relating to operating in

Ukraine, operational risks such as the risk of a

pit wall failure, health and safety-related risks,

and risks relating to information technology

and climate change. Further to the Group risk

serious potential impact and likelihood of

occurrence, operating entities maintain their

own local risk registers, which feed into the

Group risk register. In late 2022, the Group

implemented an enterprise risk management

(“ERM”) tool to help record and monitor risks,

which is the platform for the reporting and

assessment of risks within the Group.

The Group considers emerging risks to be

risks that are newly developing, or increasing

in potential severity of impact, or changing

risks that are difcult to quantify.

The risks that are assessed by the Group’s

management to be Principal Risks are

presented on pages 58 to 74.

Risk mitigation

Risks are inherent in operating a business and

it is through effective risk identication, risk

management, prudent decision making and

other risk mitigation measures, that the Group

can understand and reduce the risks that the

business faces. The Group’s management

team, however, understands that it cannot

eliminate risk. The Group’s approach to risk

mitigation for each of the Group’s Principal

Risks is presented opposite.

Risk governance framework

Risks are reported internally on a monthly

basis, as part of the Finance, Risk

Management and Compliance (“FRMC”)

Committee, with the Group’s senior

leadership team reviewing the Group-level

riskmatrix, which plots the likelihood of

occurrence against the potential severity of

impact, and identifying material changes in

either variable to all of the risks listed. Over 40

risks are reported on the Group risk register

to the FRMC Committee on a monthly basis,

with each risk attributed a potential monetary

impact should an event occur. The FRMC

Committee reports to the Group’s Executive

Committee, which in turn reports to the

Board, which has the ultimate responsibility

for the Group’s approach to risk management.

The Audit Committee, asub-committee of the

Board, assists the Board in its regular

monitoring of the risks faced by the Group.

The Group’s internal audit function assists

with the process of risk review, and conducts

ad hoc reviews of risk management controls

and procedures. For more information on

theAudit Committee’s monitoring and

assessment of the effectiveness of the risk

management and internal control systems,

see the Audit Committee Report on page 98.

Risk assessment for 2023

The risk matrix opposite depicts the Principal

Risks facing the Group.

Page 54 of the 2021 Annual Report and

Accounts highlighted a rising risk prole

facing the Group in 2022, with signicant

uncertainty relating to rising tensions between

Russia and Ukraine. Through the course of

2022, a number of these potential risks have

eventuated, following Russia’s invasion of

Ukraine in February 2022, which has had a

signicant impact on the Group’s ability to

operate. Further details on the conict risk

facing the Group are provided on page 59

ofthis report.

In addition to the war in Ukraine, a secondary

effect of the conict is the increased political

alignment within Ukraine. It is unclear as to

the eventual impact of this change on the

Group, which in turn creates a potential risk

for the Group should the political landscape

shift adversely. Further details of the risks

associated with operating in Ukraine are

provided on page 59.

The ongoing global Covid-19 pandemic

remains a Principal Risk facing the Group,

despite the gradual unwinding of government

restrictions around the world relating to

containing infection rates and treating those

infected. Given the lower impact of more

recent strains of Covid-19, the direct impact

of this risk is seen as reduced compared to

previous years. For further details on this risk,

please see page 74.

Climate change is a rising Principal Risk,

and the Group is facing both physical and

transitional risks, with increased reporting

requirements likely in the near term. This

topic is covered on pages 34 and 73 of this

report, with particular reference to climate

change related risk reporting under the

Task Force on Climate-related Financial

Disclosures (“TCFD”) framework.

Risk management process

57Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Key

1.1 Conict risk

1.2 Ukraine country risk

1.3 Counterparty risk

2. Global demand for steel

3.1 Changes in pricing methodology

3.2 Lower iron ore prices

3.3 Pellet premiums

3.4 Seaborne freight rates

4.1 Risks relating toproducing our products

4.2 Risks relating tothe delivery of our products

4.3 Risks relating tohealth andsafety

4.4 Risks relating tooperatingcosts

4.5 Risks relating to information technology

andcybersecurity

5. Risks relating toclimate change

6. Risks relating to the Covid-19 pandemic

Materiality matrix

1.2

1.1

4.1

1.3

3.2

4.2

3.4

3.1

3.3

4.3

4.44.5

Please see pages 58 to 74 of

thisreport for a full summary

ofPrincipal Risks

The Principal Risks identied inthe heat map

to the right highlight which risks could have

the greatest severity of impact onthe Group’s

operations andviability.

LIKELIHOOD

LEVEL OF IMPACT

Ferrexpo Board

– Takes overall responsibility for maintaining

sound risk management and internal

control systems.

– Sets strategic objectives and denes

risk appetite.

– Monitors the nature and extent of risk

exposure, which includes principal and

emerging risks.

Audit Committee

– Supports the Board in monitoring risk

exposure and risk appetites.

– Reviews effectiveness of risk management

and control systems.

Executive Committee

– Assesses and mitigates Group-wide risk.

– Monitors internal controls.

Health, Safety, Environment and

Community (“HSEC”) Committee

– Oversees corporate social responsibility

related matters and performance.

– Has specic focus on safety and climate

change related risks.

Finance, Risk Management

andCompliance (“FRMC”) Committee

– Monitors centralised nancial

risk management structures.

– Monitors Group compliance.

Internal audit function

– Supports the Audit Committee in reviewing

the effectiveness of risk management.

– Tests internal control systems and

recommends improvements.

Operational level

– Risk management processes and internal

controls embedded across all Ferrexpo

operations.

58 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks

Understanding risks and

our business model

Principal Risks are those considered to have the

greatest potential impact on the Ferrexpo business,

assessed on the basis of impact and probability.

Introduction

This section outlines the Principal Risks facing

the Group in 2022, each of which have the

ability to negatively impact the Group, either

in isolation or in tandem with other risk areas.

Principal Risks are dened as factors that may

negatively affect the Group’s ability to operate

in its normal course of business, and may be

internal, in the form of risks derived through

the Group’s own operations and activities, or

external, such as political risks, market risks

or climate change related risks. The Principal

Risks listed here are not exhaustive, nor are

they mutually exclusive, and therefore one risk

area may negatively impact another risk area.

Principal Risks include, but are not necessarily

limited to, those that could result in events

or circumstances that might threaten the

Group’s business model, future performance,

solvency or liquidity and reputation.

Risks are inherently unpredictable, and,

therefore, the risks outlined in this report are

considered the main risks facing the Group.

New risks may emerge during the course of

the coming year, and existing risks may also

increase or decrease in severity of impact

and/or likelihood of occurrence, and this is

why it is important to conduct regular reviews

of the Group’s risk register throughout the

year. The Group maintains a more extensive

list of risks, covering over 40 different risks

atthe Group level, with additional risks

considered in local risk registers at each

operating entity. The Group risk register is

reviewed on a monthly basis for completeness

and relevance by the Group’s Finance, Risk

Management and Compliance (“FRMC”)

Committee, which ultimately reports into the

Board for further review and approval of the

risk register. The Group risk register is also

reviewed by the Audit Committee at least four

times a year. The members of the Executive

Committee manage risk within the business

on a day-to-day basis. The Committee

includes the Chief Executive Ofcer, Chief

Financial Ofcer, Chief Marketing Ofcer,

Group Chief Human Resources Ofcer and

General Director of Ferrexpo Poltava Mining.

The Group’s management team continually

reviews and updates its view on, and

approach to, risks facing the Group. This

section of the Annual Report and Accounts

primarily covers risks facing the Group in

2022, but also early 2023, up until the

publication date of this report. A further

update on the Principal Risks will be

providedin the Interim Financial Results,

which is due to be published in August 2023.

Key theme: Russian invasion

ofUkraine in 2022

On 24 February 2022, Russia launched

a full scale military invasion of Ukraine,

with the conict continuing as of the date

of this report. This event has signicantly

changed the operating environment

for businesses in Ukraine on an

unprecedented scale. Please see page 59

for more information on this risk area.

Key theme: Ukraine country risk

This area has been listed as a Principal Risk

facing the Group since listing in 2007, and

theGroup has successfully operated amid

challenging circumstances for more than 15

years. The war in Ukraine has served to

escalate a number of risks relating to Ukraine,

including risks relating to the political

environment and the independence of the

legal system. Please see page 60 for more

information on this risk area.

Key theme: climate change

An important topic for any modern business,

with discussions with multiple stakeholder

groups centring on the Group’s efforts to

reduce emissions both in the Ferrexpo

business, but also in the Group’s value chain

(Scope 3 emissions). As a consequence of

rising stakeholder focus on this topic, the

Group published its rst standalone report on

climate change in December 2022. Please see

page 73 for more information on this risk area.

Key theme: cybersecurity

As a business seeking to modernise, the

Group is increasingly reliant on electronic

software for the management of key

operational and administrative activities. As

abusiness primarily operating in Ukraine, the

Group has faced heightened cybersecurity

threats from malicious parties since 2014,

coinciding with Russia’s initial invasion of

Ukraine’s sovereignty. Please see page 72

formore information on this risk area.

Key theme: Covid-19

The war in Ukraine has resulted in signicantly

lower levels of testing for Covid-19 throughout

the country, and therefore this represents a

potentially unmonitored risk in the general

population of Ukraine. Please see page 74 for

more information on this risk area.

Each Principal Risk is linked to the

aspects of the Group’s strategy that

could be impacted if an event were

tooccur.

1. Produce high quality pellets.

2. Achieve low cost production.

3. Maintain strong relationships with

anetwork of premium customers.

4. Conduct business in a safe and

sustainable manner.

5. Retain a balanced approach to

capital allocation.

Risk currently considered

tobematerially increasing

insignicance to the

Group’sactivities.

Risk currently considered to

beneither materially increasing

nor materially decreasing

insignicance to the

Group’sactivities.

Risk currently considered

tobematerially decreasing

insignicance to the

Group’sactivities.

59Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

1. Country risk

On 24 February 2022, Russia began a full

scale invasion of Ukraine that has signicantly

impacted every layer of the Ukrainian state,

including the focus of the government,

companies’ ability to operate and the health

and wellbeing of each individual within

Ukraine. Prior to this date, major concerns

were raised about the possibility of an

invasion, following a signicant build-up of

military equipment and personnel along

Ukraine’s borders. Following 24 February

2022, people and companies within Ukraine

have faced direct military action in the form of

damage and destruction caused by military

conict, as well as indirect impacts of the war,

such as electricity blackouts and the closure

of the Black Sea for Ukrainian ports.

Ferrexpo’s main operations are in the

Poltava region of central Ukraine, which

has not seen any direct combat between

Russian and Ukrainian forces. The entirety

of Ukraine has, however, faced numerous

missile strikes and power outages, and the

Poltava region is no exception. The Group’s

facilities have not been directly targeted by

Russian missile strikes, but a number of

neighbouring third party facilities such as the

Kremenchuk oil renery and state owned

electricity infrastructure have been damaged

by such attacks. Such damage has materially

affected the Group’s ability to source fuel and

receive electricity, with damage to electrical

infrastructure in October 2022 resulting in the

partial suspension of production activities (as

announced on 11 October 2022). Following

repair work completed on the electrical grid

in the fourth quarter of 2022, the Group

resumed activities in December 2022, with

sufcient power to operate one pelletiser line.

This situation has continued, with the Group

restarting a second pelletiser line in March

2023, and the Group able to ship its products

throughout January and February 2023.

The war in Ukraine has placed an

unprecedented strain on the economy of

Ukraine, with a number of businesses closing,

rising unemployment, and tax revenues falling,

in addition to other factors negatively impacting

revenues. At the same time, spending on

the military and social programmes both

increased signicantly in 2022. Consequently,

the government of Ukraine has sought to

increase revenues through changes to its scal

policies, such as increases to railway tariffs,

as well as implementing measures to stabilise

the economy, such as enacting laws for the

repatriation of funds and currency controls. A

number of these measures have the potential

to either directly or indirectly impact Ferrexpo

negatively through consequences such as

lower revenues and/or a more restrictive

operating environment. Furthermore, given

the strain placed on the economy of Ukraine,

the exchange rate for the Ukrainian hryvnia

depreciated signicantly in 2022, with the

government introducing a peg for the hryvnia

to the US dollar. After the invasion of Ukraine in

February 2022, this peg was set at UAH 29.25

per US dollar, and was subsequently moved

to UAH 36.5 per US dollar in July 2022. Such

a rapid devaluation of the local currency in

Ukraine, which was approximately UAH 27.28

per US dollar as recently as the end of 2021,

has had a signicant impact on the Group’s

costs, assets and shareholders’ equity. For

more information, please see page 22.

As a result of the war, a proportion of the

Group’s workforce in Ukraine has enlisted

inthe Armed Forces of Ukraine, relocated

tosafer locations and/or moved to care for

lovedones. Additionally, perceptions around

the negative outlook for Ukraine and/or the

Group may result in key individuals seeking

employment outside the Group. As such, the

Group faces potential risks around being able

to adequately staff its operations and other

functions within its business.

Additional risks related to the war in Ukraine

include, but are not limited to, restrictions

related to the cost effective and timely

transport of the Group’s products, restrictions

in accessing markets, rising costs related to

reduced output and/or alternative supply

arrangements and the impact on employee

wellbeing. A summary of the war’s impacts is

provided on page 4 of this report.

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

1.1. Conict risk (external risk)

Risk mitigation

The health and safety of the Group’s

workforce, and those connected to the

Ferrexpo business such as suppliers and

logistics operators, is the primary concern.

Whilst it is difcult for a company such as

Ferrexpo to defend itself from direct military

activity such as Russia’s invasion or a

missile strike, the Group has taken several

measures over the course of the year to

help keep its workforce, and their families

and local communities safe from the threat

posed by Russia’s invasion. Measures

during the year have included remote

working for those able to do so, timing of

shift patterns to t with curfew hours, the

provision of on-site childcare facilities to

ensure children are close and employees

are not having to travel unnecessarily, the

provision of air-raid shelters and the provision

of protective equipment such as armoured

vests and helmets for employees serving

in the Armed Forces of Ukraine. The Group

has also engaged in extensive discussions

with local authorities, and has stepped up

to provide nancial assistance through the

Ferrexpo Humanitarian Fund, managed by

the Ferrexpo Charity Fund, with oversight by

the Board of Directors of Ferrexpo to ensure

good governance in all support activities.

Please see page 46 for more on this subject.

The Group will continue to take measures

as required to protect its workforce, and

their families and local communities, for the

duration of the war, and during the post-war

period where continued support is required.

The Group has a long track record of

providing direct support to the communities

in which it operates, with the Ferrexpo Charity

Fund in operation for more than 11 years.

60 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

1. Country risk (continued)

The considerations outlined here are separate to

the risks relating to the ongoing war in Ukraine,

but some or all of them may be exacerbated by

the current conict (see page 59 for risks relating

specically to the conict in Ukraine).

Ferrexpo’s main operations are in Ukraine,

which is considered to be a developing

economy under the classications provided by

the World Bank

. Ukraine is a country that

placed 77th in the United Nations’ Development

Programme’s (“UNDP”) Human Development

Index

, and is therefore classied as having a

“high” level of human development (based on

factors such as life expectancy and levels of

education). This ranking places it in a similar

bracket to China (79th) and Sri Lanka (73rd),

other countries considered to be developing

economies. As a result of operating in a

developing economy, the Group is subject to

anumber of elevated risks, such as the scal

and political stability of Ukraine, independence

of the judiciary, access to key inputs and capital,

exposure to monopolies and other inuential

businesses (particularly those that are related

parties to the government of Ukraine), in addition

to a range of other factors. As a result of being a

business in a developing economy, the Group is

exposed to heightened risks around corruption,

with Ukraine placing 122nd

in Transparency

International’s Corruption Perception Index

(“CPI”)

. Whilst Ukraine’s score in the CPI has

improved from a low of 25 in 2013 to 33 in 2022,

and its global position has improved by 28

places (including an improvement of six places

in 2022 alone), the country continues to remain

below the global average.

Through the Group’s exposure to an operating

environment in a developing economy, Ferrexpo

has been subject to a number of risk areas that

are heightened relative to those expected of a

developed economy. Risks associated with the

war in Ukraine are covered on page 59 of this

report, but there are indirect risks associated

with the war, such as the increasing political

unity within Ukraine and determination to drive

political, scal or economic change, the latter

ofwhich is often associated with nancial and

military agreements struck with western

governments and/or western organisations.

This change can be exhibited in a number of

practical applications, which can include, but

are not limited to, changes to the regulatory

environment, potential increases to tax and/or

royalty rates, increased disclosure requirements

or operational restrictions. Changes may be

made as a result of government decision

making, a third party international partner and/

or lender, or another party within Ukraine, and

therefore the rationale for changes may not

correlate with the ofcial agenda of the

government of Ukraine. As a result of this local

instability, which is amplied by the war in

Ukraine (see page 59), sources of capital for

businesses deriving their revenues from Ukraine

are limited at the present time, which in turn

reduces the operational exibility of the Group.

The independence of the judiciary in Ukraine has

been frequently referenced in the Principal Risks

section of the Group’s Annual Report and

Accounts, and this is a consideration that

remains particularly relevant for the Group today.

As described in Note 30 (Commitments,

contingencies and legal disputes) to the

Consolidated Financial Statements, the Group is

currently subject to several legal proceedings in

Ukraine that are similar in part to previously

heard legal proceedings, and it cannot be

guaranteed that the Ukrainian legal system will

always provide a ruling in line with the laws of

Ukraine or international law. As disclosed in the

2021 Annual Report and Accounts, the Group is

currently subject to a claim pursuant to which the

claimants are seeking to invalidate a share sale

and purchase agreement dated 2002 relating to

the acquisition of 40.19% of Ferrexpo Poltava

Mining, the Group’s main operating subsidiary

inUkraine (the “Claim”). Following a rst hearing

of the Claim in 2021, a court in Ukraine found

infavour of the Group. An appeal was heard in

September 2022, with the appeal court ruling in

favour of the claimants and ordering that 40.19%

of Ferrexpo Poltava Mining be transferred to the

claimants (as announced by the Group on

20 September 2022). Subsequent to this

ruling,the Group has moved to commence

proceedings at the Supreme Court of Ukraine,

with a preliminary hearing held on 1 December

2022 whereby it was agreed for the case to be

transferred to the Grand Chamber of the

Supreme Court, with the next hearing scheduled

to take place on 15 March 2023. As at the date

of this report the claimants have not sought to

enforce the appeal court ruling, but it remains

possible that they could seek to do so

notwithstanding the on-going proceedings

before the Grand Chamber of the Supreme

Court. If the Group is unsuccessful at the hearing

before the Grand Chamber of the Supreme

Court, and the original 2002 share sale and

purchase agreement is held to be invalid, this

would have a material adverse impact on the

Group, including through the loss of a signicant

proportion of the Group’s main operating asset

in Ukraine.

As referenced in the Group’s previous public

reporting, including in the Group’s Interim

Results published in August 2022, there are

outstanding allegations relating to the Group’s

controlling shareholder, Kostyantin Zhevago,

that remain unresolved, and there is a risk that

assets owned or controlled (or alleged to be

owned or controlled) by the Group’s controlling

shareholder may be subject to restrictions, in

Ukraine or elsewhere, or that the Group may be

impacted by, or become involved in, legal

proceedings relating to these matters, in

Ukraine or elsewhere.

On 27 December 2022, it was announced that

Mr Zhevago had been detained whilst in France,

and subsequently released on bail, at the

request of the authorities in Ukraine, who are

reportedly seeking his extradition to Ukraine in

connection with allegations relating to a former

Ukrainian bank owned by Mr Zhevago (Bank

Finance & Credit). Following this event,

Mr Zhevago resigned his position as Non-

executive Director on the Board of Directors. The

legal case relates to the potential extradition of

Mr Zhevago, and associated legal claims being

made in Ukraine, and remains outstanding as of

the date of this report. The risks relating to the

Group as a result of this legal action, and

potential further legal action, cannot be

accurately estimated at the present time, nor can

the potential timeline for resolving any matters.

As a consequence of recent events relating to

the Group’s controlling shareholder, as outlined

above, the Group may experience adverse

effects, such as negative media attention for

theGroup, a reduced ability to operate within

Ukraine and/or overseas due to negative

perceptions of the Group, and a restricted

operating environment for aspects of the Group’s

business, such as closure (or suspension) of

relationships with stakeholder groups such as

banking services. The Group’s relationships

bothupstream and downstream may also be

negatively impacted by events related to the

Group’s controlling shareholder, such that the

Group is limited and/or impaired in its ability to

do business overseas in a specic country and/

or region. In addition, restrictions imposed on the

Group’s controlling shareholder (and/or negative

perceptions of the Group’s controlling

shareholder) may potentially adversely impact

the Group within Ukraine, with a restriction on

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

1.2. Ukraine country risk (external risk)

61Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

1. Country risk (continued)

the Group’s ability to successfully operate its

business model. A number of legal claims or

legislative actions within Ukraine are known as

oftoday – as detailed in this section, and further

actions to restrict the Group’s ability to operate

may arise in the future. It is difcult for the Group

to predict the scale or nature of such restrictions,

and therefore the Group is limited in its ability to

pre-empt and mitigate risks in this area.

The Group is subject to a number of actions

bythe government of Ukraine that threaten to

destabilise, or have the effect of destabilising, the

operating environment in which the Group exists.

For example, in previous years, the government

of Ukraine has cancelled exploration licences by

Presidential decree, providing minimal detail in

terms of an explanation or rationale.

As previously referenced in the Group’s 2021

Annual Report and Accounts, in June 2021,

thegovernment of Ukraine cancelled a mining

licence for an early-stage exploration project

known as Galeschynske, which is a licence

heldby Ferrexpo Belanovo Mining and located

to the north of the Belanovo mine (without

forming part of this mine). This matter remains

outstanding, and there remains a risk that this

dispute may increase in scale and/or severity

for the Group. The Group has been informed

ofother licence disputes by the government,

which are similar in scale to the licence dispute

discussed above. It is difcult for the Group

topredict the outcome of existing licence

disputes, and whether new claims and/or

disputes may arise in relation to the Group’s

operating licences.

In 2022, the government of Ukraine questioned

the documentation relating to the management

of a now-dormant waste dump that was

originally constructed and operated prior to

Ukraine’s independence in 1991. The Group

continues to engage with local authorities and

the national government of Ukraine, aiming to

constructively resolve questions and concerns

raised. Please see section titled “Ecological

Claims” on page 199 for more information.

As previously referenced in the Group’s 2021

Annual Report and Accounts, a number of the

Group’s subsidiaries in Ukraine received letters

from the Ofce of the Prosecutor General,

notifying them of an ongoing investigation into

apotential underpayment of royalties between

2018 and 2021 (the “Investigation”). On

3 February 2023, one of the Group’s senior

managers in Ukraine received a notice of

suspicion in relation to this Investigation. On

6 February 2023, as part of the Investigation,

acourt order was issued in Ukraine freezing

thebank accounts of Ferrexpo Poltava Mining

(“FPM”). These actions by the government of

Ukraine mirror actions taken in similar

investigations into other metals and mining

companies in Ukraine, and therefore represent

a scenario that the Group was aware of and

able to partially mitigate the associated risks.

The Group is engaging with the authorities in

Ukraine and intends to appeal the court order

issued as part of the Investigation. Stakeholders

should note that the Group may not be able to

successfully challenge this court order to freeze

FPM’s bank accounts and/or may not be able

to successfully challenge the claims being

made as part of the Investigation. As of late

February 2023, the Group has managed to

getcertain aspects of this court order to be

repealed, enabling the Group to pay certain

amounts such as salaries (but other restrictions

remain in place).

The Group’s exposure to operating in Ukraine

can result in high velocity risks. Risk velocity

relates to how fast a risk may escalate in scale

and affect an organisation, with high velocity

risks considered to be those that move rapidly

from a starting point of having a low likelihood

and/or scale of impact, to having a high

likelihood and/or scale of impact. Examples

ofhigh velocity risks would be natural disasters

and armed conict, both of which could be

difcult to predict in advance and could have

asignicant impact on a business.

The risk factors discussed here in this section,

either individually or in combination, have the

ability to materially adversely impact the

Group’s ability to operate its pellet production

and other facilities, ability to export its iron ore

products, access to new debt facilities and

ability to repay debt, ability to reinvest in the

Group’s asset base, either in the form of

sustaining capital investment

(to maintain

production or expansion), capital investment

for future growth, or the Group’s ability to pay

dividends, could result in a material nancial

loss for the Group and/or could result in a loss

of control of the Group’s assets.

1.2. Ukraine country risk (external risk) (continued)

Risk mitigation

Ferrexpo operates in accordance with

relevant laws and utilises internal and external

legal advisors as required to monitor and

adapt to legislative changes or challenges.

The Group maintains a premium listing on

the London Stock Exchange and as a result

is subject to high standards of corporate

governance, including the UK Corporate

Governance Code and UK Market Abuse

Regulation. Ferrexpo has a relationship

agreement in place with Kostyantin Zhevago,

which stipulates that the majority of the

Board of Directors must be independent

ofMr Zhevago and his associates. For all

related party transactions, appropriate

procedures, systems and controls are in

place and adhered to.

Ferrexpo prioritises a strong internal control

framework including high standards of

compliance and ethics. The Group operates

a centralised compliance structure that is

supported and resourced locally at the

Group’s operations. Ferrexpo has

implemented policies and procedures

throughout the Group including regular

training. Ferrexpo prioritises sufcient total

liquidity

levels and strong credit metrics

toensure smooth operations should

geopolitical or economic weakness disrupt

the nancial system of Ukraine. Ferrexpo

looks to maintain a talented workforce

through skills training and by offering

competitive wages, taking into account

movements of the Ukrainian hryvnia against

the US dollar and local ination levels.

Ferrexpo has a high prole given its

international client base and London listing,

and it is important that Ferrexpo’s Board of

Directors and relevant senior management

continue to engage with the Group’s

stakeholders to effectively communicate the

economic contribution that Ferrexpo makes

to Ukraine and to show that it operates to

high international standards.

1. Source: World Bank, link. (Accessed 3 March 2023.)

2. Source: UNDP, link. (Accessed 3 March 2023.)

3. Source: Transparency International, link. (Accessed 3 March 2023.)

4. As of 28 February 2023.

62 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

1. Country risk (continued)

As a business operating in an emerging

market, and also as a business operating in a

country that is currently engaged in an armed

conict, there are signicant risks in respect

of the Group’s business interactions with third

party suppliers of goods and services. Risks

may relate to a number of subject areas,

including (but not limited to) governance and

corruption risks, risk of collapse, risks relating

to monopolies and/or situations whereby

alternative suppliers may not be available,

andcounterparty risks relating to the conict

in Ukraine whereby counterparties may be

exposed to Russia (with such relationships

potentially not being known to the Group).

The Russian invasion of Ukraine in 2022 has

imposed a signicant strain on the economy

of Ukraine and has therefore heightened the

counterparty risks facing the Group.

A secondary effect of the ongoing war in

Ukraine is that the Group may be impacted in

its ability to conduct effective due diligence

on counterparties given the imposition of

martial law in Ukraine, and other war-related

restrictions. The Group has had to change a

number of key suppliers in 2022, and in doing

so, has had to conduct due diligence checks

as part of each new relationship, which

carries inherent risk to the Group.

Counterparty risks may result in direct

consequences for the Group such as

nancialharm and operational issues in

sourcing material, and also include indirect

consequences such as damage to the

Group’s reputation either within Ukraine or

with international stakeholders, such as

investors, lenders and customers.

Additionally, as outlined on page 60 (Ukraine

Country Risk), recent events relating to the

Ultimate Benecial Owner (“UBO”) of the

Group have resulted in secondary effects

on a number of business relationships of the

Group. The Group is currently managing these

risks either through existing relationships

or through new relationships, and it should

be noted that any new (or change of

existing) business relationship carries an

inherent counterparty risk to the Group.

In recent times, the global Covid-19 pandemic

has placed a signicant strain on the nancial

stability of third parties and has also

increased the risk of collapse of

counterparties. Whilst the direct effects of

Covid-19 are less evident in Ukraine and

Europe in 2022, this remains a risk,

particularly given the global footprint of

Ferrexpo’s business model. As referenced

onpage 74, risks relating to Covid-19 are

heightened in Ukraine at the present time

given the national government’s focus on

defending its sovereignty in light of Russia’s

ongoing invasion. Consequently, testing for

Covid-19 has been signicantly reduced, and

the associated risks related to counterparty

failure are heightened as a result.

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Low

Link to strategy

1.3. Counterparty risk (external risk)

Risk mitigation

In terms of supplier governance, the Group’s

Compliance Department conducts regular

checks on all suppliers, screening entities

fora number of risks and elevating those

deemed to be higher risk for further checks

and consideration as to their eligibility. For

entities that the Group conducts business

with, the Group has developed a Code of

Conduct for Suppliers, which as of 2022 is

referenced in 90% of all contracts and over

1,300 due diligence checks completed on

potential third party suppliers (2021: 95%).

Note that the decrease in proportion of

contracts referencing compliance clauses

isattributable to the ongoing conict in

Ukraine, and associated restrictions.

The Group’s exposure to the failure of a

counterparty, or the failure of a party to

provide its contracted goods and services,

is managed through the Group engaging

with a range of suppliers, where possible,

inaddition to sufcient cash reserves to

maintain the Group’s overall liquidity. Where

it is not possible and/or practical to source

goods and services from multiple providers,

the Group considers alternative goods and

services to meet its needs and to reduce

single party risk.

With regard to the structures in place to

monitor and manage counterparty risk, the

Finance, Risk Management and Compliance

(“FRMC”) Committee, is an executive

sub-committee of the Board charged with

ensuring that systems and procedures are

inplace for the Group to comply with laws,

regulations and ethical standards. The

FRMC Committee met ten times in 2022

(2021: ten) and is attended by the Group

Compliance Ofcer and, as necessary,

bythe local compliance ofcers from the

operations, who present regular reports and

ensure that the FRMC Committee is given

prior warning of regulatory changes and

their implications for the Group. The FRMC

Committee enquires into the ownership of

potential suppliers deemed to be “high risk”,

and oversees the management of conicts

of interests below Board level and general

compliance activities (including under the

UK Bribery Act 2010, the Modern Slavery

Act, the Criminal Finances Act, and the EU

General Data Protection Regulation).

The Group aims to minimise risk around

thetimely provision of goods and services

through maintaining sufcient cash reserves

and liquidity, as well as maintaining

alternative suppliers should one

counterparty fail.

The Board aims to ensure adherence to the

highest standards of diligence, oversight,

governance and reporting with all charitable

donations, with the Health, Safety,

Environment and Community (“HSEC”)

Committee required to provide approval

forcommunity support expenditures.

63Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

2. Market related risks

The Group is a constituent of the global steel

value chain, which is a sector that is heavily

reliant on global connectivity, and global

factors that affect the supply and demand

balance of both steel and the raw materials

required for making steel.

Steel is typically made using processes

that involve iron ore, a degree of scrap steel

(depending on the process method) and a

source of energy (which can include coal,

natural gas and electricity). Prices for these

key inputs can be volatile, and are factors

that will move independently of any single

steel producer’s control, and will therefore

have the ability to signicantly impact the

protability of individual steel producers.

Additional factors governing the input costs,

and therefore protability, of steelmakers

include: the availability and cost of labour,

requirements for capital investments to

sustain and/or grow output, the availability

of raw materials and energy sources (in

addition to unit costs), the cost and availability

of logistics routes and the presence of

lower cost competitors in key markets.

Global steel demand varies considerably

andcan be signicantly inuenced by factors

outside of the control of a steel producer,

such as political instability (e.g. the war in

Ukraine), global energy prices, and outlook

forthe global economy. In addition to these

macro-economic environment factors,

individual steel producing facilities and

regions may be impacted by national, regional

and local factors such as political instability,

political intervention, weather events,

cybersecurity events, and climate change,

amongst other factors.

Given that the factors listed here have the

potential to materially impact the protability

of steel mills, individual companies and/or

facilities may respond to higher costs and/or

weaker market conditions by reducing or

halting steel production, until more favourable

market environment returns. This in turn could

have a material effect on suppliers to such

businesses, such as Ferrexpo.

A more recent trend has seen a surge in

awareness of climate change related issues,

which is driving increased changes within

various levels of the operating environment

forsteel companies – from local and regional

government enacting legislation related to

climate change, to customers and local

communities demanding that steel production

involve lower emissions. Efforts to counter the

effects of climate change in the steel industry,

which typically focus on the reduction of

carbon emissions in the production of steel,

are likely to generate higher operating costs

inthe near term, and higher requirements for

capital investment

in the medium to long

term. Furthermore, whilst steelmakers’

operating costs are likely to increase in the

near term as a result of emissions reduction

measures, end users of steel may not agree

to higher steel prices, and therefore prot

margins are likely to decrease until such

costsare successfully passed through to

enduser markets.

The structure of the global steel industry

relies on a consistent supply of materials

to steel mills and a consistent offtake of

nished steel by customers. As a consumer

of bulk commodities, such as iron ore and

coal, the timely and reliable delivery of

these materials is required for stable steel

prices, since any disruption in the delivery

process can create short and medium-term

spikes in steel prices. Equally, a scenario

whereby global markets encounter an

excessive supply of steel, either through an

unforeseen downturn in end-user demand,

or disruptive increases in steel supply, could

have a negative effect on steel prices.

Global steel markets also rely on the

consistent availability of logistics pathways,

and events such as the Russian invasion

ofUkraine in 2022 or the global Covid-19

pandemic, served to demonstrate the

possibility of short-term pricing uctuations

(both positive and negative) when global

logistics chains fail to function properly.

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Medium

Link to strategy

3 and 5

2. Risks relating to the global demand for steel

Risk mitigation

Under normal circumstances, the Group has

the ability to mitigate risks around demand

for steel through its global customer base,

with the Group having the ability to shift

sales to regions exhibiting higher demand

for steel. This was demonstrated in 2020

during the global Covid-19 pandemic, when

Ferrexpo’s sales to China were increased

signicantly in response to a shift in demand

away from Europe and North East Asia. At

the present time, however, the Group has

largely been unable to access the seaborne

market for the majority of 2022 due to

Russia closing Ukraine’s access to the Black

Sea. When the Group has been able to

access the seaborne market, it has not

beenin material quantities, or on nancially

favourable terms, and therefore the Group’s

ability to shift signicant sales volumes to

regions other than Europe has been

impaired in 2022. The ability of the Group to

pivot its sales is a measure that the Group

intends to utilise once consistent and

sizeable access to the seaborne market is

re-established, either through a Ukrainian

port, or otherwise.

Other risk mitigation activities include the

Group’s ability to produce high quality forms

of iron ore, which typically command higher

premiums with customers and also tend to

be more in demand throughout the

economic cycle.

Ferrexpo operates in a country whereby the

local currency, the Ukrainian hryvnia, is a

currency that is linked to the performance of

commodity prices, and historically the Group

has experienced depreciation in the hryvnia

at times of lower commodity prices, which in

turn reduces the Group’s dollar-denominated

cost base. Movements in the hryvnia-dollar

exchange rate can, however, be inuenced

by other factors and may not necessarily

reduce costs at times of low iron ore prices.

64 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

3. Risks related to realised pricing

Pricing formulas for iron ore pellets are

governed by a number of factors, including

the iron ore nes price, a premium for

additional ferrum content (if applicable), pellet

premiums, freight rates and additional quality

premiums and discounts depending on the

type of iron ore pellet or concentrate supplied

and its chemistry. Industry-wide factors,

which are outside of the Group’s control, can

inuence the methodology for pricing iron ore

products, in addition to the various premiums

and discounts that are applied by individual

customers and individual regions. Premiums

or discounts paid for specic characteristics

may change and adversely impact the

Group’s ability to market specic products.

Should the standard method pricing

methodology change in the future, it could

have a negative impact on the Group in the

form of lower realised prices for iron ore

pellets and/or iron ore concentrate, and

therefore resulting in a negative impact on

theGroup’s nancial performance. Additional

potential impacts of changing perceptions

around pricing methodology could include

arestriction in the Group’s ability to sell its

products to specic customers and/or

customer regions, should such stakeholders

elect to pursue a different pricing

methodology with an alternative supplier

ofiron ore products.

As a producer of high grade forms of iron

ore (grading 65% Fe and above), over time,

the Group has developed customer pricing

agreements with customers on the basis

of high grade benchmark nes indices

(grading 65% Fe). Such agreements enable

the Group to realise the value of the iron

content in its products, with high grade

(65%Fe) nes index trading an average of

US$19 per tonne above the medium grade

(62% Fe) in 2022 (2021: US$26 per tonne)

The premiums paid for material priced using

the high grade benchmark index reects the

restricted supply of high grade iron ores into

the global market, with the majority of supply

being either low or medium grade iron ores.

Premiums paid for higher grade iron ores

(referred to as the “ferrum premium”) also

reect the operational benets to steel mills

through higher blast furnace productivity

and lower emissions proles associated

with higher grade input materials.

Should customer agreements return to

pricingof its products using the medium

grade benchmark, the Group could

potentiallyexperience lower net realised

pricing for its products.

The Group also relies on pricing structures

for its pellets to include a pellet premium,

which reects the high quality, pelletised

nature of the iron ore delivered to customers.

Given the benets of pellets to steelmakers

(namely improved furnace productivity and/

or reduced greenhouse gas emissions), it is

accepted practice that steelmakers pay an

additional premium for iron ore pellets (the

“pellet premium”). Pellet premiums have varied

signicantly in recent years, which reects both

supply and demand-related factors. Given

the scale of the pellet premium relative to the

iron ore nes index and pelletising costs, any

move away from the market paying pellet

premiums would have a signicant impact on

our protability and our differentiation within

the global landscape of iron ore producers.

Furthermore, a number of pellet premiums

are quoted by third parties, which are

computed in a variety of ways. Any switch

from using one specied pellet premium to

another quoted pellet premium, may also

result in lower realised pricing for the Group.

Responsibility

Chief Executive Ofcer and

ChiefMarketingOfcer

Risk appetite

Medium

Link to strategy

1, 3 and 5

3.1. Changes in pricing methodology (external risk)

Risk mitigation

The Group aims to price its products

through clear and consistent engagement

with customers, with the Group seeking

todevelop mutually benecial long-term

relationships. Through consistent supply

andconsistent high quality of the Group’s

products, Ferrexpo aims to maintain strong

relationships with its customers.

Through strong customer relationships, the

Group aims to ensure that the net realised

prices received for its iron ore products are

in line with the international benchmarks for

pricing of similar products, in addition to

premiums paid for the quality and/or form

(i.e. pellet) of the iron ore being traded.

Ferrexpo endeavours to achieve the

prevailing market price at all times, and the

Group aims to be a low cost producer and

therefore cash ow positive throughout the

commodities cycle.

1. Source: S&P Global Commodity Insights.

65Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

3. Risks related to realised pricing (continued)

This factor is one that is connected to risks

related to the global demand for steel (see

page 59), since demand for steel directly

impacts the pricing of raw materials used to

produce steel, such as iron ore.

As a company that derives the majority of its

revenues from iron ore products, Ferrexpo is

inherently exposed to iron ore prices, either in

the form of benchmark iron ore nes prices,

or pellet premiums. Variations in iron ore

prices come in a number of forms, from the

underlying iron ore price, to the premium

paidfor the grade of iron ore (the “ferrum

premium”), or discounts applied for the

naturally occurring waste elements in each

ore such as silica and alumina.

The iron ore nes price is the largest

component of pricing for the Group’s products,

which averaged US$139 per tonne in 2022

(high grade iron ore nes index

, 2021: US$186

per tonne). As discussed in the Market Review

section (see page 8, iron ore nes prices are

predominantly affected by Chinese demand

for iron ore, which represented 75% of global

imports of iron ore nes in 2022 (2021: 76%),

and the economic outlook for China

The quoted price for iron ore nes is called

the benchmark index, and is applicable for

forms of iron ore that have a specied

chemistry that is amenable for steelmaking,

such as the percentage of each waste

material contained (e.g. silica, alumina,

phosphorus). The Group’s products

typicallyconform to the requirements of the

benchmark index, and therefore tend not to

have penalties applied as a result. Iron ores

that do not comply with the benchmark

index,however, will be subject to a range

ofpenalties, which may vary signicantly

depending on a range of market factors and

technical requirements of each steel mill. Any

variation in the quality and/or chemistry of

theGroup’s iron ore that is mined in a given

period could therefore result in penalties

being incurred.

A secondary component of the pricing

structure of the Group’s products is the pellet

premium, which is applied to the sale of iron

ore pellets. This premium is signicant to the

Group, and can represent a premium in

excess of 50% of the benchmark iron ore

nes index. This component of the pricing

structure of the Group’s products is

discussed in detail on page 9.

Should reputational concerns over the

Groupand its UBO affect existing or potential

relationships, the Group may no longer be

able to realise the same level of product

pricing as previously experienced.

Responsibility

n/a (Ferrexpo is not large enough to inuence

global demand)

Risk appetite

Medium

Link to strategy

1, 3 and 5

3.2. Lower iron ore prices (external risk)

Risk mitigation

The Group aims to mitigate price risk

through producing high grade, low

impurity iron ore products, which receive

premiums when sold to customers,

rather than penalties and/or discounts.

Through such products, the Group has

been able to build a high-margin business,

which in turn enables further investment

in the Group’s production facilities.

In addition, the Group aims to be a low

cost producer of iron ore products.

Through operating with a lower cost base

than the Group’s peers, particularly when

the premiums paid for grade and form

(pellets) are considered, Ferrexpo aims to

remain competitive on a global basis.

Furthermore, Ferrexpo’s operating costs

are partly correlated with commodity

prices. When the commodities cycle is

in a downward phase, Ferrexpo typically

receives a lower selling price, but the

Group’s cost base also tends to decline as

a result of local currency devaluation. The

Ukrainian hryvnia is a commodity-related

currency and historically over the long-term

it has depreciated during periods of low

commodity prices, although movements

of the Ukrainian hryvnia against the US

dollar can also be inuenced by short-term

political factors, in addition to other factors.

Ferrexpo regularly reviews its options in

respect of hedging the price of its output.

The Group’s current strategy is to not

enter into such hedging agreements

due to the relatively low liquidity of this

market and high cost of entering into such

arrangements. The Group will continue

to review this strategy as the market for

hedging iron ore pellets develops over

time, which may eventually reduce the

effective cost of such arrangements.

1. Source: S&P Global Commodity Insights.

2. Source: CRU.

66 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

3. Risks related to realised pricing (continued)

Pricing of the Group’s products includes a

component referred to as the pellet premium,

which references the pelletised nature of

Ferrexpo’s products, which reduces the

degree of processing required prior to

steelmaking. As a consequence of this

reduction in processing at the steelmaking

stage, buyers of iron ore pellets will pay a

premium over and above the prevailing iron

ore nes price. The pellet premium is one of

the principal factors that enables the Group to

generate a signicant margin on its products,

and therefore allows for a higher degree of

investment in the Ferrexpo business.

An example of a quoted pellet premium

is the monthly Atlantic Pellet Premium, as

quoted by S&P Global Commodity Insights,

which averaged US$72 per tonne in 2022

(2021: US$60 per tonne1) and therefore

represented a signicant premium to the

benchmark iron ore nes price. Note,

however, that numerous pellet premiums

exist, and the Group may agree pellet

premiums individually with customers that

do not mirror quoted pellet premiums.

Factors governing the pellet premium in any

given year include the overall supply of iron

ore pellets, which tends to be a relatively

stable industry, and the overall demand for

iron ore pellets. Demand factors can be

related to the health of the global economy

and steelmakers’ desire to maximise output,

which tends to result in higher pellet buying

activity to increase a steel mill’s productivity.

Pellet demand can also be impacted by

increasing regulation around emissions

reduction, since iron ore pellets do not need

to be sintered like other forms of iron ore.

Since sintering is a process that typically

involves the use of coal, steelmakers that

utilise a greater proportion of pellets in a blast

furnace’s input materials (partially replacing

sinter nes) can reduce the overall emissions

footprint of steel production.

The overall supply of iron ore pellets is

relatively constrained, with existing producers

typically producing at their nameplate

capacity and the construction of new

pelletiser capacity usually requiring signicant

capital investment

to build production

facilities, in addition to the associated

infrastructure required for delivering a bulk

commodity to end users. As a consequence,

limited new pelletising capacity has been built

in the past ve years. Supply-side disruption

has been a more prominent factor in recent

years, with the failure of two tailings dams in

Brazil resulting in signicant volatility in supply

from two of the largest pellets exporters to

the global steel industry. Both of the

companies involved in these incidents have

now resumed production from the affected

production facilities, and therefore the market

has resumed a degree of supply-side balance

not previously seen in recent years.

Should reputational concerns over the

Groupand its UBO affect existing or

potentialrelationships, the Group may no

longer be able to realise the same level of

pellet premiums as previously experienced.

Responsibility

Chief Executive Ofcer and

ChiefMarketingOfcer

Risk appetite

Medium

Link to strategy

1, 3 and 5

3.3. Pellet premiums

Risk mitigation

Despite being one of the largest iron ore

pellet exporters, the Group is not sufciently

sized to be a price setting company when

itcomes to iron ore pellet premiums and

therefore the Group’s realised pellet

premium tends to follow the level set by

themain market participants.

It is the Group’s strategy to target the low

cost production of its iron ore products,

thereby enabling the Group to remain

protable for a range of realised pellet

premiums. More specically, Ferrexpo has

historically operated with one of the lower

costs of pelletising across the spectrum of

global iron ore pellet production, and

therefore swing producers have tended to

moderate the pellet premium at times of low

pricing, through removing pellet supply from

the market. The Group uses natural gas in

its pelletising operations and has had to

operate below its nameplate capacity for a

period of 2022 due to the ongoing war in

Ukraine. As such, pelletising costs increased

to US$29 per tonne in 2022 (2021:

approximately US$19 per tonne). Despite

this increase, the Group has managed to

keep pelletising costs below the prevailing

pellet premium for the year.

The strategy of targeting low cost production

is enhanced through Ferrexpo’s location

in Ukraine, with the Ukrainian hryvnia

having a close correlation to commodity

pricing, which therefore tends to devalue

at times of low commodity pricing,

reducing the Group’s cost base.

1. Figure restated versus 2021 Annual Report and Accounts.

67Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

3. Risks related to realised pricing (continued)

The pricing of a bulk commodity, such as

Ferrexpo’s iron ore products, typically

includes a component of the net realised

pricing that considers the cost of transporting

material to the customer. For Ferrexpo, this

pricing typically refers to either the C3 or C2

freight indices (published by the Baltic

Exchange), as these are reective of the

shipping cost for accessing either the Asian

or European market (respectively). Freight

rates are a deduction from the pricing

received from the pellet, and therefore higher

freight rates will result in lower net realised

pricing for the Group, and vice versa.

The factors driving freight rates include the

prevailing fuel cost for ships, the availability of

vessels at a given point in time, and insurance

policies required for ships to service the

required route (the latter being a signicant

factor for chartering parties looking to ship

via the Black Sea during the present time).

As a guide, the C3 freight index increased

from below US$20 per tonne in early 2022, to

over US$38 per tonne in May 2022, with this

rise associated with the war in Ukraine and

rising energy costs. Freight rates declined to

US$20 per tonne towards the end of the year,

and averaged US$24 per tonne for the full

year (2021: US$27 per tonne)

Additionally, the war in Ukraine has had an

effect on the Group’s ability to charter vessels

with shipowners, as the closure of Ukraine’s

access to the Black Sea has resulted in

limited deliveries of the Group’s iron ore

pellets to the seaborne market, with external

factors impacting freight rates. Whilst the

increased costs associated with trading within

the Black Sea have been reected in freight

rates since the outset of the war in Ukraine,

the Group is still managing to charter vessels

at market level due to the Group’s strong

relationships with shipowners.

Further freight-related realised effects, or

potential risks, of the war in Ukraine include:

an increase in the insurance premiums

required for vessels travelling to Black Sea

ports (Ukrainian ports or otherwise), the

potential closure of the Bosphorus strait and

the Black Sea potentially becoming non-

committal for shipowners.

The Group is also aware of potential risks that

relate to recent events with the Group’s UBO

(see page 60), which may affect Ferrexpo’s

ability to conduct business relationships with

freight providers. Should third party concerns

relating to these matters prevent Ferrexpo

from engaging in business relationships with

specic freight providers, then the Group may

incur higher costs relating to booking of

freight from a smaller group of providers.

Responsibility

Chief Executive Ofcer and

ChiefMarketingOfcer

Risk appetite

Low

Link to strategy

2, 3 and 5

3.4. Freight rates (external risk)

Risk mitigation

The Group has its own in-house freight

manager, which helps the Group to receive

acompetitive rate for freight cargoes. The

Group’s management team includes freight

specialists based in Singapore, where many

shipping brokers and owners are located,

and it is therefore possible to maintain a

detailed understanding of both the global

freight market and shipowners.

As a result of the Group’s operations

beinglocated in Ukraine, seaborne freight

chartering has been reduced in 2022

(following Russia’s closure of the Black Sea

to Ukrainian ports – see page 4 for more),

and as such the Group has increasingly

relied on its European customer network for

sales. Despite this, the international freight

rate is still relevant for the business, as many

contracts reference a quoted freight rate.

The Group currently does not enter into

hedging arrangements for freight rates,

which is an approach consistent with the

Group’s strategy on other forms of hedging.

This approach is continually reviewed by

theGroup’s management team, and such

arrangements may be entered into if it is

deemed to be benecial to the Group.

The Group’s freight department regularly

monitors freight-related risks associated with

the war in Ukraine, or otherwise, with an aim

of ensuring effective decision making in light

of changes to the operating landscape.

1. Source: Baltic Index.

68 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

4. Operating risks

The Group’s operations involve the mining of

iron ore, which requires detailed planning of

blasting, excavation and transport operations,

to deliver sufcient quantities of iron ore to

theGroup’s processing plant, which crushes,

grinds and beneciates the material that it

processes from native iron ore grades

(ranging approximately 25-30% Fe) to high

grade concentrate (either 65% or 67% Fe)

forFerrexpo’s current product portfolio.

Pelletising operations then subsequently

convert high grade iron ore concentrate to

pellets via a series of kilns that operate at

approximately 1,300

C. The above processes

are complex and carry inherent risks as a

result. The Group is able to mitigate such

risks through a range of activities and the

collective experience of the Group’s executive

management team, but it may not be possible

to eliminate all risk factors.

As a business with its main operating assets

located in Ukraine, the Group has faced

signicant risks relating to the ongoing war

inUkraine, which are summarised in the

Principal Risks shown on page 60 of this

report. The Group has also faced a number

ofindirect consequences of the war in its

operations, such as a number of skilled

personnel departing Ferrexpo’s operations

toeither serve in the Armed Forces of Ukraine

or relocating away from the conict, the

Ukrainian authorities requiring the delivery of

specic equipment for military use (typically

light vehicles), the reduced availability of

specic materials relevant for the conict such

as detonators and fuel and restrictions on

operating practices, such as scheduled

blasting of in-situ rock in mining operations.

Outside of risks that directly relate to the war

in Ukraine, the Group faces material risks

relating to its mining operations that include

(but are not limited to) health and safety-

related risks, the risk of a pit wall failure or

fallof ground incident in the Group’s mines,

equipment failure (either due to operator

oversight, failures in maintenance practices

orfailure despite acceptable levels of

maintenance), weather events preventing

access to the Group’s mines, poor planning

processes resulting in a lack of high grade

iron ore for processing, or the failure of drilling

to identify the correct location of ore and

waste material. Risks in the processing plant,

covering the beneciation and pelletisation of

material, also include (but are not limited to)

equipment failure and/or unscheduled

equipment downtime, a lack of spare parts,

alack of key input materials, unsuitable

equipment for processing of certain ore

types, operating restrictions and extreme

weather events (or other events potentially

related to climate change) that may impact

the ability to produce or store the Group’s

products. As operations continue to be

modernised, the Group also faces

cybersecurity-related risks from cyber threats

and other factors that may impair the Group’s

ability to operate its electronic equipment –

see page 72 for more details.

The risks described above are typically

short-term events and the Group also faces

longer-term risks, such as climate change

(see page 73) and country risks related to

Ukraine (see page 60). Potential risks related

to climate change are also detailed on pages

34 to 41 of this report, and have been

identied through the Group’s recent

collaboration with environmental consultants

Ricardo Plc.

The Group is also aware of potential risks that

relate to recent events with the Group’s UBO

(see page 60), which may affect Ferrexpo’s

ability to source key input materials and

labour either within Ukraine or overseas.

Should third party concerns relating to these

matters prevent Ferrexpo from engaging in

business relationships with specic providers

of materials and/or labour, then the Group

may have challenges in its ability to produce,

or incur higher costs relating to the sourcing

of the same inputs from a smaller group of

providers and/or smaller group of people.

Responsibility

Chief Executive Ofcer, Chief Operating

Ofcer and Chief Marketing Ofcer

Risk appetite

Medium

Link to strategy

2, 3 and 5

4.1. Risks relating to producing our products

Risk mitigation

The Group employs an experienced

management team and has a management

structure in place to monitor, and where

necessary, manage risks as and when these

risks escalate. The Group’s business model

is in a sector that has inherent risk in the

mining and processing of materials, with

these risks being manageable and, where

possible, mitigation measures are utilised

toensure the safe operation of the Group’s

facilities to ensure the efcient production

ofthe Group’s iron ore products. The Group

maintains a risk register of more than 40

riskareas (as of January 2023), which is

monitored on a frequent basis by the

Group’s operational teams and reported

tothe relevant management committees.

Where an operational risk is deemed to be

sufciently signicant in terms of potential

impact and/or likelihood, appropriate risk

mitigation measures are sought, often with

the assistance of third party specialists,

where relevant.

69Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

4. Operating risks (continued)

The Group is a producer of a bulk commodity,

meaning that its business model relies on

timely and consistent access to a logistics

network with sufcient capacity to transfer

alarge volume of material to the Group’s

customer base around the world. Any

interruption to the scale, availability or

reliability of this logistics network has the

potential to signicantly impact the Group’s

ability to operate its business model and

generate cash ow. The nature of being a

producer of a bulk commodity means that

should an interruption of logistics occur, there

may be little time or excess funding available

to efciently remedy the situation and/or

stockpile excess material, potentially resulting

in a temporary suspension of the Group’s

production facilities and an associated impact

on the Group’s ability to generate revenues.

The Group’s logistics network is diverse

innature, covering the Group’s use of the

railway network in Ukraine and further aeld

across Europe, a stake in a berth at a port

facility in south west Ukraine (used for loading

vessels for the seaborne market), and an

inland waterway logistics business along the

River Danube.

Examples of risks relating to the Group’s

logistics network, aside from those

specically relating to the ongoing Russian

invasion of Ukraine (covered on page 59),

range from those potentially impacting railway

logistics, which include (but are not limited to)

the unexpected closure and/or suspension of

sections of the railway network in Ukraine or

Europe required for deliveries, a reduction in

rail capacity related to the phasing out of

outdated equipment and insufcient

investment in replacement equipment,

potential political interference in the Group’s

ability to book railway capacity and/or railway

wagons, extreme weather events (either

related to climate change or otherwise) and

alack of personnel to operate the railways

effectively. The Group faces similar risks

relating to its use of inland waterway logistics

on the River Danube, and in addition includes

risks relating to abnormally high and low

water levels, which may impede passage

ofvessels. Such risks are expected to be

exacerbated in the future by the potential

impact of climate change. Similar risks are

posed to the Group and its ability to access

seaborne markets should extreme weather

events (either climate change related or

otherwise) impact operations at the port of

Pivdennyi or other ports used by the Group,

or shipping routes such as the Suez Canal.

The Group is also aware of potential risks that

relate to recent events with the Group’s UBO

(see page 60), which may affect Ferrexpo’s

ability to secure bookings on key logistics

routes either within Ukraine or overseas.

Should third party concerns relating to these

matters prevent Ferrexpo from engaging in

business relationships with specic logistics

providers, then the Group may incur

difculties in its ability to ship products, or

may incur higher costs relating to the sourcing

of logistics options along alternative routes.

Responsibility

Chief Executive Ofcer, Chief Operating

Ofcer and Chief Marketing Ofcer

Risk appetite

Medium

Link to strategy

2, 3 and 5

4.2. Risks relating to delivering our products to customers

Risk mitigation

Since listing in 2007, the Group has sought

to invest in its logistics capabilities and

overall capacity, to ensure cost effective and

sufcient access to a logistics network. This

has involved the purchase of railcars, with

the Group now operating a eet of 3,033

railcars (with this gure increasing by 183 in

2022), which reduces operating costs and

helps to ensure product quality whilst pellets

are in transit to customers. Similarly, the

Group owns a 49.9% stake in a berth at the

port of Pivdennyi in south west Ukraine,

along with a trans-shipment vessel (“Iron

Destiny”), which previously enabled the

Group to load trans-shipment vessels for

theseaborne market. Iron Destiny was

outside of Ukrainian waters undergoing

routine maintenance at the time of Russia’s

invasion of Ukraine on 24 February 2022,

therefore ensuring that the Group still

controls this asset. The Group also owns its

inland waterway logistics provider (First-

DDSG), which is based in Vienna, Austria,

and has locations along the River Danube.

In order to maintain timely access to its

logistics network, the Group also maintains

close working relationships with logistics

providers such as the Ukrainian railway

operator, the port operator at Pivdennyi,

aswell as government bodies in Ukraine

thatare relevant for the Group’s logistics

operations.

70 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

4. Operating risks (continued)

Without effective management of health and

safety related risks, the nature of mining and

processing of iron ore into iron ore pellets can

involve inherent risks. The processes involved

in the mining and processing of metalliferous

rock has progressed signicantly in recent

years, but risks remain if policies and

procedures are not followed correctly,

orifequipment is not used correctly.

Mining activities involve the use of large

equipment, such as haul trucks, excavators

and bulldozers, with each item of equipment

weighing a considerable number of tonnes

and which are expected to regularly move

around to a number of locations throughout

ashift. The operation of mining equipment is

inherently dangerous if operators are not

correctly trained, or if due care and attention

are not applied when operating each item of

equipment. Activities within a mine include the

drilling and blasting of native rock, excavation

and transport of blasted rock to either the

processing plant or waste dumps, watering

ofsurfaces to reduce dust emissions and the

construction of waste dumps to a specied

design. Activities are typically conducted 24

hours a day, and whilst the Group has

extensive lighting on equipment and around

mining areas, low light conditions are a risk

for operators.

Responsibility

Chief Executive Ofcer, Chief Operating

Ofcer and Chief Human Resources Ofcer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

4.3. Risks relating to health and safety

Risk mitigation

The Group has a well trained workforce,

comprising 7,978 individuals and 1,796

contractors, with an extensive training

programme. In 2022, the Group provided

6,143 training courses to employees, 64%

ofwhich were safety-related courses (2021:

6,442 courses). The Group also trains

contractors, as safety risks do not vary

according to an individual’s contract status,

with 170 safety-related courses provided to

contractors in 2022 (2021: 931 courses).

The Group’s approach to mitigating safety

risks is to understand the causal factors

of safety incidents, through creating risk

registers for each activity being undertaken

or area within the Group’s main operations.

The Group also records leading indicators of

safety, with an aim to monitor and improve

these factors, to reduce the risk of a safety-

related incident occurring. Examples of

leading indicators include the number of:

training courses undertaken, high visibility

safety tours by senior managers, safety

inspections and hazard reports completed.

In the instance of a safety-related event

occurring, the Group aims to learn for

eachevent, to reduce the risk of a repeat

occurrence. Lagging indicators of safety help

the Group’s management team to record

the effectiveness of safety measures being

implemented, and the main indicators used

to track performance are the Group’s lost

time injury frequency rate (“LTIFR”), total

recordable injury frequency rate and fatalities.

Throughout its operations, the Group is

seeking to implement modern forms of

technology, including autonomous

equipment, which help to remove operators

from hazardous working environments.

Examples of such would be the Group’s

autonomous trucks in the Yeristovo mine.

71Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

4. Operating risks (continued)

The Group’s business comprises a number

ofopen-pit mining operations, an iron ore

processing complex and a range of ancillary

activities related to the production of iron ore

pellets and concentrate, which requires a

range of input goods and services. The

Group’s costs are subject to a range of

factors, some of which are controlled by

theGroup, whilst others are outside of the

Group’s control, meaning that resulting

protability may uctuate.

The Group operates in an energy intensive

industry, and therefore requires a range of

commodity-based inputs such as diesel and

natural gas, as well as electricity, which are

allsubject to market factors outside of

Ferrexpo’s control that will inuence the

Group’s overall protability. Examples of such

would be the movement of natural gas prices

in 2022, which rose as a consequence of

Russia’s invasion of Ukraine from less than

US$600 per thousand cubic metres in 3Q

2021, to a peak of more than US$1,200 per

thousand cubic metres in 1Q 2022, before

declining to below US$900 per thousand

cubic metres in 4Q 2022.

Further to energy costs, inationary pressures

were seen on a global scale in 2022, with

Ukraine no exception. Cost ination has the

potential to affect a wide range of the Group’s

input costs at its operations, with the Group

potentially not able to effectively counter such

pressures due to the benchmark pricing of

the Group’s products.

A primary cause of cost ination has been the

Group’s inability to operate at its nameplate

capacity due to the war in Ukraine, resulting

in higher unit costs. Additionally, inationary

pressures have been seen on a global basis

in2022, which are reected in energy prices,

capital costs for equipment and maintenance

costs. Ination in Ukraine in 2022 was

estimated by the government of Ukraine

tobe26.6%

(2021: 9.4%

), reecting the

exceptional circumstances experienced in

2022. Given that the Russian invasion of

Ukraine remains ongoing, it is expected that

the negative impacts of the war will continue

to be experienced by the Group, such as

lower production and higher unit costs.

The use of natural gas is a key component of

the Group’s pelletising operations and its use

is therefore essential for the production of iron

ore pellets.

The Group is also aware of potential risks that

relate to recent events with the Group’s UBO

(see page 60), which may affect Ferrexpo’s

ability to source key input materials and

labour either within Ukraine or overseas.

Should third party concerns relating to these

matters prevent Ferrexpo from engaging in

business relationships with specic providers

of materials and/or labour, then the Group

may incur difculties in its ability to produce,

or incur higher costs relating to the sourcing

of the same inputs from a smaller group of

providers and/or smaller group of people.

Responsibility

Chief Executive Ofcer and

Chief Financial Ofcer

Risk appetite

Low

Link to strategy

2 and 5

4.4. Risks relating to operating costs

Risk mitigation

The Group has operated through a number

of commodity cycles and the Group’s

operations have been in production for more

than 50 years, and through this experience

of operating, the Group’s management team

has developed an understanding of cost

effective production and the required level of

goods and services to maximise the Group’s

protability at any given level of production.

The Group has a number of measures in

place to reduce and minimise operating

costs, where possible, to ensure that the

Group maintains its protability throughout

the commodity cycle. For input goods that

are a requirement of the production of

pellets, the Group aims to minimise use and

develop alternative materials (substitutes) for

use in the Group’s operations, which would

help reduce reliance on a single input (or

limited number of inputs), and therefore

reduce risks relating to the cost and supply

of individual inputs. As an example, a partial

substitute would be the use of sunower

husks in the Group’s pelletiser, which is used

to fuel the pelletiser. In 2022, the Group

successfully sourced 21% of the pelletiser’s

heating energy from sunower husks (2021:

18%). Other examples of substitution of

goods within the Group’s operations include

the use of different manufacturers of mining

equipment, with different suppliers of spare

parts, which reduces operational risks and

can reduce operational costs.

1. Source: Reuters, link. (Accessed 3 March 2023.)

2. Source: World Bank, link. (Accessed 3 March 2023.)

72 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

4. Operating risks (continued)

The Group is increasingly reliant on modern

technology for the safe, efcient and cost

effective production of its products. With

ITsystems becoming increasingly more

important to the Group’s business model,

therisks associated with IT security and the

continued availability of IT systems have

increased in recent years, particularly in light

of the increased complexity of cyberattacks

on IT systems. Cybersecurity threats may

take the form of, but are not limited to:

malware, ransomware, phishing, denial-of-

service attacks, and password attacks.

Cyberattacks, such as malware and

ransomware, are often unreported in the

mainstream media by companies and

governments to avoid negative publicity. It is

therefore difcult to ascertain the full extent to

which the Group is facing cybersecurity risks.

In the past, published cyberattacks affecting

companies and governments have closed or

limited a company’s ability to produce, or

have withheld or disclosed condential

information, and have withheld access to

keyoperational infrastructure.

The Group is exposed to heightened risks

related to cybersecurity at the present

time given Russia’s ongoing invasion of

Ukraine, which is a conict taking place in a

number of environments, including attacks

on IT systems in Ukraine. Attacks can

be expected on any IT system in Ukraine

as a result of the conict, and therefore,

organisations such as Ferrexpo may be the

target of an attack due to its location, rather

than its business activities. Consequently,

it is difcult for the Group to predict the

source, scale or nature of any cyberattack,

which may appear random in nature.

Responsibility

Chief Executive Ofcer

Risk appetite

Low

Link to strategy

1, 2 and 3

4.5. Risks relating to information technology (“IT”)

systems and cybersecurity

Risk mitigation

The Group’s IT department conducts regular

reviews of the general IT landscape and

provides regular cyber awareness training

for employees as well as ad hoc notication

when new threats are identied. The Group

also regularly reviews requirements on data

protection, with email security bulletins

circulated to ensure internal IT users are

provided with up-to-date information on

cybersecurity. The Group has also

implemented a dynamic approach to

anti-malware policies, to ensure an adaptive

approach for new threats as they emerge.

Efforts in 2022 have had a focus on nalising

an extensive third party audit (ISO 2700x,

“Information Security Standards”) of

cybersecurity and internal IT/automation

processes. This audit had previously

commenced in 2021, with a number of

ndings identied early on during the war

inUkraine in 2022 that helped to mitigate

threats, which was achieved in part through

members of the audit team acting as a “red

team”. As a result of this audit, immediate

mitigation actions were taken across the

Group’s IT equipment and infrastructure,

including upgrades to the latest standards.

Purchases of specic software and

hardware were made in 2022, with

deployment to enhance cybersecurity.

In parallel, the Group has had to respond

tothe possibility of cyberwarfare and

conventional warfare tactics, with the

commissioning of additional IT infrastructure

in bomb shelters a good example of that

response. Other examples include the

deployment of extensive power control

systems, and urgent upgrades and

migrations due to vulnerabilities.

Further to existing practices and protocols,

the Group regularly updates the software

and hardware in use throughout its

business, to reduce the Group’s exposure

toknown weaknesses in cybersecurity.

73Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

5. Risks relating to climate change

Climate change represents a signicant

challenge for the modern world, with

governments, business organisations,

communities and individuals around the world

seeking to adapt to a low-emissions future.

Climate change poses a number of physical

and transition risks as the world seeks to

reduce emissions and its reliance on

technologies and activities that are relatively

intensive for the emission of greenhouse

gases. Physical risks are those that affect

thephysical environment – such as (but not

limited to) increased heat events, prolonged

droughts and low water levels, dust

emissions, and the increased severity of

precipitation events. Transition risks are those

that relate to society’s shift to a low emissions

future, such as reputational risks and the risk

of technologies becoming redundant in a

low-emissions future, amongst other potential

effects. A review of potential climate change

related risks was conducted as part of the

work carried out with environmental

consultants Ricardo Plc in 2022, with this

work detailed in the Group’s Climate Change

Report. A materiality assessment as part of

this work identied the following as the main

risk areas facing Ferrexpo: (a) demand for low

carbon emissions steelmaking, (b) shipping:

targets and regulations on carbon emissions

and (c) carbon pricing/tax: targets and

regulations on carbon emissions. Further

details of the work completed in collaboration

with Ricardo Plc are available in Ferrexpo’s

Climate Change Report on the Group’s

website (www.ferrexpo.com).

At this stage in the global development

curveon climate change science and

decarbonisation efforts, there is a

heighteneddegree of stakeholder focus

ondecarbonisation efforts. Given this focus,

there is an associated expectation of

progressbeing made that may not match

theavailability of relevant technology and

equipment, or the nancial viability of any

technology, and therefore there is a risk of

rising stakeholder concern if a company’s

decarbonisation plans and/or targets are not

effectively communicated, or are deemed

insufcient. Should stakeholders require

further action or increased efforts for

decarbonisation of a business, this may

create additional nancial, operational and

reputational risks for the business.

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

Risk mitigation

The Group understands the importance of

climate change, both in its impact on the

business, as well as the Group’s potential

impact on climate change. The Group aims

to reduce its emissions over time and has

set a series of reduction targets for its

greenhouse gases (principally carbon

dioxide) for the medium and long term (2030

and 2050 respectively). In December 2022,

the Group published its inaugural standalone

Climate Change Report, which represents

the rst phase of work completed with

environmental specialists Ricardo Plc. This

report details a number of measures that

theGroup is either utilising today to reduce

emissions, or plans to use in the future, in

order to achieve these emissions targets.

The full report is available on the Group’s

website (www.ferrexpo.com).

The Group has a streamlined approach to

reducing emissions, focusing where possible

on activities that generate the greatest

emissions, as well as identifying low cost

solutions that may reduce the Group’s

activities. The main source of the Group’s

overall emissions (being Scopes 1, 2 and 3

collectively) is the downstream use of iron

ore pellets in steelmaking, which accounted

for 85% of total emissions in the Group’s

baseline year of 2019. In order to reduce this

aspect of emissions, the Group is increasing

its focus on production of direct reduction

(“DR”) pellets, which are used in an

alternative method of steelmaking (the direct

reduced iron – electric arc furnace process),

which results in DR pellets generating 49%

lower emissions when converted to steel,

compared to the Group’s blast furnace

pellets, as assessed by independent

consultants CRU.

With regard to Scope 1 and 2 emissions, the

Group has initiated a number of projects to

reduce these categories of emissions. The

project yielding the greatest impact is the

Group’s clean power purchasing strategy,

which has resulted in Scope 2 emissions

falling by 52% since 2019, helping to deliver

a 31% saving in Scope 1 and 2 emissions

combined. In addition, the Group is studying

the electrication of its mining eet and use

of green hydrogen in the Group’s pelletiser,

with diesel and natural gas representing

80% of the Group’s Scope 1 emissions in

2022 (2021: 85%).

Through these projects, the Group aims to

produce iron ore pellets on a net zero basis

by 2050. For further details of the net zero

pathway identied through working with

Ricardo Plc, as well as the Group’s carbon

emissions reduction targets, please see the

Group’s Climate Change Report for 2022 on

the Group’s website (www.ferrexpo.com).

74 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Principal Risks continued

6. Risks relating to the global Covid-19 pandemic

The global Covid-19 pandemic continues

to affect communities around the world,

with varying levels of infection in different

countries resulting in a range of Covid-19

related measures in place with local and

regional governments, which may impact the

Group’s ability to do business in individual

countries, or conduct cross-border trade.

Whilst governments around the world are

gradually reducing Covid-19 related measures

and restrictions, there are reports of elevated

infection rates in a number of countries,

particularly those that have recently reopened

and/or have relatively low vaccination rates

in sections of society, such as the elderly or

specic regions within a country. The Covid-19

virus has demonstrated an ability to mutate

into different strains and therefore it should

be considered a risk that an as-yet unknown

variant of Covid-19 may emerge that has the

potential to signicantly impact communities

to a greater extent than previous variants.

As a business operating in Ukraine, Russia’s

continued invasion of Ukraine in 2022 has

resulted in signicantly lower testing for

Covid-19 and as a result infection rates

arelargely unknown at the present time. As

such, without widespread testing or active

measures to prevent transmission, the spread

of the Covid-19 virus in Ukraine represents a

potential risk, particularly if more transmissible

and/or severe strains of this virus were to

emerge in the near term. Given the focus of

the government on the defence of its territorial

integrity, it is unlikely that testing and/or

preventative measures will resume until the

war in Ukraine de-escalates or a ceasere is

called. The Group may therefore be required

to increase its efforts to monitor and test for

infections amongst its workforce, and

increase efforts to assist local authorities with

a community testing programme, should rates

of infection increase and/or the impact of

individual infections become more severe.

Whilst the response to Covid-19 by both the

Group and local authorities was proactive

prior to the war in Ukraine commencing in

February 2022, it should be expected that

theresponse to Covid-19 may be now more

reactive in nature, and therefore any impact

ofinfections in the Group’s workforce and/or

local communities may be felt to a greater

extent before counter-measures are

successfully initiated to aid affected

individuals and reduce infection rates.

Responsibility

Board of Directors and ChiefExecutiveOfcer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

Risk mitigation

The Group has maintained a number of

Covid-19 measures that were introduced in

2020 and were successful in the Group

maintaining low rates of infection at its

operations in 2020 and 2021. Such

measures include social distancing, mask

wearing (where relevant) and electronic

cameras capable of measuring an

individual’s body temperature. The Group

maintains the ability to reintroduce other

measures, such as changes to the timing of

shift patterns, the dissemination of food

outside of canteens and widespread testing

of employees and contractors, should the

risks associated with Covid-19, or the impact

of infections, increase to a material level of

impact on the business.

The Group has also continued to support

the local authorities’ efforts to vaccinate the

local population, including the Group’s

workforce. As of February 2022, over 6,000

of the Group’s employees in Ukraine (out of

a total employee workforce of 7,850) had

received a single dose of a Covid-19

vaccination and over 5,400 had received

asecond dose. Following the outbreak of

war in Ukraine, reporting of Covid-19

vaccinations has been reduced however.

The Group continues to support medical

institutions in local communities through the

Ferrexpo Charity Fund, which has been in

operation for more than 11 years and

represents one of the main avenues for the

Group to provide direct community support

(other avenues include direct support

provided by the Group’s own operating

subsidiaries, FPM, FYM and FBM). Further

details of community support funding are

provided on page 44 of this report.

75Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Viability Statement

Review of planning

process and outlook

Assessing the Principal Risks to our business

model and potential nancial impact of an event

occurring, protecting the equity value of our

business for the benet of all our stakeholders.

The Board monitors the Group’s risk

management and internal control systems

on an ongoing basis, and conrms that

during the year it carried out a robust

assessment of the principal and emerging

risks facing the Group, their potential

impact and the mitigating strategies in

place, asdescribed on pages 58 to 74.

Time horizon

The Board has reviewed the long-term

prospects of the business, which remain

aligned with Ferrexpo’s life of mine

assumptions. For the purposes of assessing

the Group’s viability, the Board has elected to

look at the Ferrexpo business on a ve year

time horizon, with a particular focus on the

short-term time horizon of 12 to 18 months,

in light of the current war in Ukraine, and

the material uncertainties that this poses to

the Group in terms of its going concern and

long-term viability. The Group has historically

reviewed the viability of its business model

over a ve year time period given the long life

nature of mining assets, including the period

required to invest insuch assets and taking

into account thecash ows generated by

those assets, as well as the cyclical nature

of the commodities industry. As such, a

ve year time period was considered an

appropriate length for the Board’s strategic

planning period, with a heightened focus on

additional risks in the coming 12 to 18 months.

Factors associated with the war

inUkraine

Due to the signicance, scale and

unpredictable nature of the war in Ukraine,

specic attention has been applied in the

Group’s approach to assessing its viability.

The war in Ukraine has represented, and will

continue to represent, a signicant risk to

the Group’s ability to continue its operations

in future periods. Following the Russian

invasion of Ukraine on 24 February 2022, the

Group’s executive management team has

held regular meetings to assess the various

risks that the business faces, including daily

meetings during the initial weeks of the war.

Emerging and existing risks are reported on

during these calls, with available risk mitigation

procedures discussed, and the results of

each meeting being reported to the Group’s

Board of Directors. Risks to Ferrexpo that have

been identied as a consequence of the war

in Ukraine include risks to the health, safety

and wellbeing of the Group’s workforce, the

Group’s ability to operate its assets, including

the supply of key input materials required for

the production process and theprovision

and availability of logistics capacity required

for the delivery of the Group’s products

to customers in its keymarkets. For more

information, please see the Principal Risks

disclosed on pages 58 to74 of this report.

Factors associated with

climatechange

The Group has considered a range of physical

and transition risks, as outlined on page 40 of

this report and depicted in detail in the Group’s

Climate Change Report. This process has

identied that the transition to a low carbon

economy and demand for low emissions

steelmaking as being the main climate-related

risk facing Ferrexpo and its business model.

A range of additional transition and physical

risks were considered as part of this review.

The Group has announced a range of

climate-related emissions reduction targets

for the years 2030 and 2050. The Group

is yet to set a net zero target for 2050 that

fully covers all categories of emissions,

specically the Group’s Scope 3 emissions,

and intends to continue working towards

full coverage of Scope 3 emissions in

order to align to the Paris Agreement.

In assessing the Group’s ability to meet its

2030 goals within its existing business model

and strategy, reference is made to the 31%

reduction achieved since 2019 for Scope 1

and 2 emissions (combined basis, per tonne of

production). The Group’s management team

understands that further reductions in these

emissions are possible in the coming seven

years in the form of additional clean electricity

purchases and mining electrication, the latter

of which will come in the form of incremental

capital investment

to replace existing eet

as it is retired. On Scope 3 emissions, the

Group intends to increase production of direct

reduction pellets to more than 20% of total

output by 2030, meeting the Group’s target.

Business planning process

In response to the Russian invasion of

Ukraine, the Group has temporarily revised its

approach to its business activities and

investments from its business model shown

on pages 12 to 13. This approach has been

implemented to concentrate on the Group’s

ability to generate cash in the revised

operating environment, which will enable the

Group tosustain its business. As a result,

investments are currently focused on

sustaining capital expenditure, with limited

expenditure on growth capital projects,

modernisation of existing equipment and

other development projects. Prior to the

beginning of the war, in order tomaintain a

clear strategic direction, theGroup’s

management team regularly assessed the

risks faced by the Group against the ability of

the Group to conductbusiness in accordance

with itsbusiness model.

This review is conducted regularly in order to

maintain a clear understanding of the risks

faced by the business and how thesefactors

are inuencing the business. Following the

start of the war in Ukraine, the Group’s

management team has also focused on

constantly assessing the risks that may

directly, or indirectly, impair the Group’s ability

to manage the Ferrexpo business in light of

theimpact of the war onthe business and

operating environment in Ukraine.

Modelling process

In the normal course of business, the Group

operates a detailed nancial model of its

business. Recently, this work stream has

focused on the potential impacts arising from

the ongoing war in Ukraine, in addition to

the more traditional input factors such asthe

market factors that inuence the price of the

Group’s products, and operational factors that

inuence the Group’s ability to produce the

76 Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT

Viability Statement continued

required volume and quality of iron ore pellets

demanded by the market, as determined

inthe Group’s forward-looking sales plan.

In assessing the inputs into this model, the

Group’s management team has assessed the

risks associated with the potential disruption

of the supply of key consumables, which

includes natural gas, electricity and diesel

fuel, in addition to the supply of key pieces

of equipment. The Group’s modelling has

also considered the risks surrounding a

further interruption to the Group’s logistics

network, in addition tothe existing disruption

faced due to the closure of Ukraine’s Black

Sea ports. In addition to the assessed risk

associated with continued production and

shipment of the Group’s products, the

Group has also assessed market factors that

represent the principal factors governing the

pricing of the Group’s iron ore products.

Stress testing

In determining the viability of the business,

the Directors have stress tested the individual

risks and combination of risks that could

materially impact the future viability of the

Ferrexpo business. At the present time, the

risk that the Group is primarily exposed to

is Russia’s invasion of Ukraine in 2022 (see

the Principal Risks section, pages 58 to 74).

In addition, Ferrexpo’s business model has

historically also faced risks relating to changes

in the iron ore nes price, pellet premiums

and cost ination, which are factors that

continue to govern the Group’s protability.

The Group’s ability to produce at full capacity

in 2023 will be contingent on the war in

Ukraine, and its impacts on the Group’s ability

to operate its assets in Ukraine, and deliver its

products to the Group’s customers. For a

summary of the war’s various impacts on the

Group, please see pages 4 to 5.

The Group has adjusted its long-term nancial

model to reect the lower production volume

expected as a result of the uncertain level of

available electricity and the sales volume

forecasted as a result. The Group’s sales

volumes in future periods will depend on the

possibility of seaborne sales to the Group’s

customers outside of Europe, with changes

toforecasted production volumes varying

accordingly. The Group’s nancial model

anticipates that production and sales

volumeswill return pre-war levels by 2025,

based on a range of operating assumptions

relating to the war in Ukraine.

The Group’s nancial modelling indicates that

a 10% reduction in the Group’s received price

in 2023 would, if not mitigated, reduce the

Group’s Underlying EBITDA

by US$15.3 per

tonne. Modelling also indicates that a general

production cost increase of 10% would

decrease Group Underlying EBITDA

US$7.2 per tonne, whilst a 10% decrease in

production volumes, and an associated 5%

increase inproduction costs, would decrease

Underlying EBITDA

by US$7.5 per tonne.

Itshould be noted that the impact of the

factors discussed above apply for 2023.

Anyimpact on additional years beyond 2023

will depend on the underlying sales and

production volumes and the level of realised

prices and production costs in each period.

As a result of the remaining material

uncertainty outside of the Group’s control,

theGroup has also prepared stress tests with

more severe adverse changes, such asa

combination of various sensitivities, which is

however less likely to incur due to a natural

hedge between iron prices and prices for

keyinput material, and a prolonged period

oflower production and sales volumes as

seen during the months December 2022 to

February 2023. In addition to stress testing

associated withthe ongoing conict in

Ukraine, the additional stress test scenarios

performed include the following:

– operational incidents that could have

asignicant impact on production

volumes;

– a deterioration in the Group’s long-term

cost position on the industry cost curve;

and

– operating constraints due to Ukrainian

country risk.

In respect of mitigating actions in response to

the conict in Ukraine, please see page 59 for

more detail. In more general areas, mitigating

actions implemented by the Group may

include, butare not limited to, a reduction or

cancellation of discretionary expenditure such

as dividends, non-essential capital investment

and repairs and maintenance, orother

operating costs, adjusting capital allocation,

reducing working capital requirements,

altering mining schedules andaccessing

additional funding. The Directors take comfort

in both the Group’s historical cash generation

ability, particularly in 2015 and 2016 at a time

when the iron ore price was trading at a

cyclical low, and the Group’s ability to repay

its debt facilities, with the early repayment of

the Group’s principal debt facility in June

2021. This ability to repay debt facilities is

derived from the operational exibility of the

Group and level of cash generation, as

demonstrated through the Group’s ability to

continued shipment of products in 2022,

despite the war in Ukraine. As a result of the

Group’s exibility and resilience, the Group’s

net cash position decreased by a relatively

small amount during 2022 (c.9% decrease).

Since the end of 2020, the Group has moved

into a net cash position, and had a net cash

position of approximately US$106.4 million as

of 31 December 2022 (as of 31 December

2021: US$116.9 million). As at the date of

theapproval of the Group’s Consolidated

Financial Statements, the Group is in a net

cash position of approximately US$114.6

million and has an available cash balance

ofapproximately US$120.4 million.

Based on the assessment performed, the

Directors have a reasonable expectation

that the Group will be able to continue to

operate and meet its liabilities as they fall

due over the period of their assessment.

This is, however, dependent on signicant

factors that are outside of the Group’s

control, and the Directors have assumed

the following when assessing the Group’s

resilience to the potential threat from

the war in Ukraine and its viability:

– the continued ability to operate in Ukraine;

– the ability to redesign the Group’s mining

and processing plans in order to align

them to changing circumstances;

– the continued availability of stable

electricity supply at the required level;

– the ability to secure supplies of key

consumables and equipment; and

– the ability to use the Group’s currently

available logistics network or make use

ofalternative options, if needed.

In performing this assessment, the Directors

have also considered the Group’s resilience

toclimate change risks (covering a range of

physical risks and transition risks).

As disclosed in Note 2 Basis of preparation

in the Group’s Consolidated Financial

Statements on page 156, although the

Group has managed to continue its

operations since the beginning of the war,

this continues to pose a signicant threat

to the Group’s mining, processing and

logistics operations within Ukraine. Having

assessed the current situation of the war

in Ukraine, all identied available mitigating

actions and the results of management’s

assessment of the Group’s going concern

and long-term viability, a material uncertainty

still remains as some of the uncertainties

are outside of the Group management’s

control, such as the duration and the impact

of the war, which cannot be predicted.

The Strategic Report was approved by the

Board on 14 March 2023 and signed on

behalf of the Board by:

Lucio Genovese

Chair

77Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Corporate Governance

A strong core

helps guide us

Strategic Report 01

Corporate Governance 77

Chair’s Introduction 78

Governance at a Glance 80

Board of Directors 82

Executive Committee 84

Corporate Governance Compliance 85

Diversity 87

Corporate Governance Report 88

Audit Committee Report 98

Nominations Committee Report 105

Remuneration Report 110

Directors’ Report 132

Statement of Directors’ Responsibilities 137

Financial Statements 138

Additional Disclosures 211

Alternative Performance Measures 212

Glossary 215

78 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Chair’s Introduction

Continuing to deliver on our promises

through resilience and commitment.

Dear

Shareholder,

Before reecting on the progress made during

2022, it is important to acknowledge the

devastating impacts which the Russian

invasion of Ukraine is having on Ukraine and

the people, local communities, businesses

operating within the country and the

day-to-day lives of Ukrainians. Now more than

ever strong governance is essential to help

see Ferrexpo through this very challenging

time. As you would expect, the Board has

been meeting regularly to discuss the ongoing

situation in Ukraine, receiving regular updates

from the management team as to the Group’s

response and scenario planning for different

eventualities. Protecting the Group’s

workforce remains a key priority, as well as

taking steps to protect the business and

thereby the stakeholders of the business.

Thiswill remain a key priority during 2023

andthe Board will continue to focus on

exercising strong governance during these

unprecedented and difcult times.

I am pleased to present the Corporate

Governance Report, which sets out an

overview of the means by which the Company

is directed and controlled, our governance

structure and highlights the governance

activities of the Board and its principal

committees during the course of the year.

The Board remains fully committed to

maintaining good corporate governance

practices throughout the Group which

underpins all of its actions. The structure,

policies and procedures we have adopted,

which are described in this report, the

Directors’ Report and reports from each

ofthe Board Committees, reect our

commitment. We recognise the need to keep

them under review and make changes where

necessary to ensure that standards are

maintained and reect ever-evolving best

practice. This report also explains how we

have complied with the principles of the UK

Corporate Governance Code during the year.

The Board’s role includes managing the risks

facing the business. This includes taking into

account the risks associated with the country

of operation, counterparties, operational and

nancial risks including health, safety,

environmental and climate change risks,

together with market volatility, pricing,

nancing and renancing exposures. As new

risks emerge our approach to evaluating risk

appetite is reassessed. The Board’s role is

also to support and challenge management

and to ensure that the way we operate

promotes the long-term sustainable success

of Ferrexpo plc.

Operation of the Board during

the war in Ukraine and

governance framework

Against the backdrop of the continuing

Russian invasion of Ukraine, we remained

focused on the health, safety and wellbeing

ofour people globally, who have continued to

deliver for the Group and our stakeholders

through the testing times over the last couple

of years. Our people have helped ensure

business continuity and have safeguarded our

operations, whilst maintaining good corporate

governance practices and our system of

internal control.

During the year, the Board has continued to

operate effectively and without disruption

notwithstanding the ongoing challenges

facing the Group. Some Board members

attended Board meetings virtually due to

travel restrictions. All scheduled Board

meetings were held and the Board continued

to uphold and maintain good corporate

governance, the corporate agenda and the

ow of information across the Group.

We have also ensured Director’s on-boarding

programmes continued as planned, albeit in

avirtual environment. The format of hybrid

(combination of physical and virtual) Board

meetings provided the Board with greater

opportunities to engage with each other,

management and employees. During 2022,

the Board site visit to our operations in

Horishni Plavni was cancelled due to the

Russian invasion of Ukraine and as was the

case in the previous two years due to the

global Covid-19 pandemic. The Board site

visit was replaced with a Board Strategy Day

followed by an ESG upskilling and Climate

Change Day, which focused on the pathway

for decarbonisation of the Group.

Despite the challenges of remote working we

continued to enhance our shareholder and

Lucio Genovese,

Chair

79Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Key highlights in 2022 and

early 2023:

– supporting our workforce and the

operations throughout the Russian

invasion of Ukraine;

– Health and safety and employee wellbeing;

– zero fatalities;

– publication of Climate Change Report;

– improved Board diversity;

– commenced search for a Director from

anethnic minority group;

– appointment of permanent CEO;

– appointment of female Senior Independent

Director;

– appointment of HSEC Chair;

– appointment of female Independent

Non-executive director to Audit and

HSECCommittees;

– appointment of female Acting Chief

Marketing Ofcer;

– succession planning at Board and

management level;

– strengthened cyber security; and

– focus on shareholder and key stakeholder

engagement.

Key priorities for 2023:

– supporting our workforce and the

operations through the Russian invasion

of Ukraine;

– Health and safety and employee wellbeing;

– climate change;

– recruit a Director from an ethnic minority

group;

– succession planning at Board and diversity

at management level;

– continue focus on shareholder and key

stakeholder engagement; and

– continue to strengthen cyber security.

I hope you nd this report useful and

informative. I look forward to engaging

withasmany of you as possible at our

2023AGMin person and would like to

encourage you to vote your shares even

ifyoucannot attend in person, so that we

gaina better understanding of the views

ofour shareholders as a whole.

Lucio Genovese

Chair

14 March 2023

– On 14 February 2022, Jim North was

appointed as permanent CEO having

successfully transitioned the Group into

anew phase of its corporate culture and

overall growth ambitions. Jim brings a

wealth of mining experience coupled with

excellent leadership and an adept ability

torefocus the Group’s strategy, further

promote an inclusive leadership model,

deliver a clear message on key topics

relevant to stakeholders, whilst also

continuing to deliver strong operational

performance across the Group.

– On 10 February 2022, the Board elected

toappoint Fiona MacAulay as Senior

Independent Director in place of Vitalii

Lisovenko after completing two and half

years in the role.

– Additionally, on 10 February 2022,

Ann-Christin Andersen was appointed

asChair of the Group’s HSEC Committee

and Natalie Polischuk was appointed as a

member of both the Audit Committee and

HSEC Committee.

– On 29 December 2022, Kostyantin

Zhevago stepped down as a Non-

executive Director of the Company.

Throughout the year, the Board committed

to search for an Independent Non-executive

Director from an ethnic minority group, led by

the Nominations Committee and supported

by external consultants.

Throughout 2022, there were three female

Directors further strengthening Board

independence and diversity. By the end of

theyear female representation on the Board

increased to 43%, which is welcomed by the

entire Board.

Board performance review

In line with the UK Corporate Governance

Code, Board performance was assessed

externally in 2021. Therefore, during the

year,an internally assessed review of the

performance and effectiveness of the

Board,its Committees and each of the

Directors was undertaken. A report on the

process, activities, ndings and actions of the

evaluation can be found on pages 94 to 96.

stakeholder engagement and we place their

interests at the centre of our considerations

for key decisions. Our Section 172 Statement

set out on pages 48 to 55 provides further

details on how the Board complied

throughout the year.

The Russian invasion of Ukraine has not

adversely impacted the operation of the

Board or its Committees.

Supporting local communities

during the war in Ukraine

During the year, in addition to our continued

support for communities locally, the Ferrexpo

Humanitarian Fund was set up as a dedicated

fund, initially in the amount of US$1.5 million

and during the year the fund increased to

US$15 million, to support the communities in

Ukraine as the humanitarian crisis quickly

unfolded. This funding enabled the purchase

of personal protective equipment and

equipment for local hospitals amongst other

things (see Responsible Business section of

the Strategic Report on pages 30 to 47).

In addition to the Ferrexpo Humanitarian

Fund, regular community support activities

took place largely in Ukraine and donations

were made within a Board-approved

framework agreed annually at the time of

setting the budget. All such community

support and donations are subject to internal

control and approval limits applicable within

the individual subsidiaries of the Group, which

are set by the Board.

The Board exercises control of the Ferrexpo

Humanitarian Fund and local charitable

spending via its Health, Safety, Environment

and Community (“HSEC”) Committee, which

oversees and directs these activities and

receives reports detailing the spend.

Board changes

The issue of diversity, both in the Boardroom

and throughout the entire Group, is taken

veryseriously by the Board as we believe

thisimproves effectiveness, encourages

constructive debate, delivers strong

performance and enhances the success of

the business. Ensuring that we have a culture

which promotes and values diversity, and one

which is maintained throughout the business,

is a continual prime focus and is underpinned

by our Diversity, Equity and Inclusion Policy,

which sets our objectives.

Further to signicant Board changes and

commitments made last year, we announced

further changes to Board and Board

Committee roles during the year. In

accordance with best practice requirements

of the UK Corporate Governance Code, the

Board keeps its balance of skills, knowledge,

experience, independence and diversity

under review which is benecial in itself in

bringing new perspectives to the Board.

80 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Governance at a Glance

Group structure

SHAREHOLDERS

BOARD

AUDIT

COMMITTEE

Responsibilities include:

– Monitoring integrity of nancial statements.

– Reviewing internal control and risk

management systems.

– Relationship with external auditor.

REMUNERATION

COMMITTEE

Responsibilities include:

– Reviewing and approving all aspects of

remuneration for Executive Directors and

members of the Executive Committee.

– Aligning remuneration policy and practices

to support strategy.

– Engaging with shareholders to receive

feedback on remuneration policy and

outcomes.

NOMINATIONS

COMMITTEE

Responsibilities include:

– Considering and approving the

knowledge, skills and experience mix

required for the Board to best deliver

the Company’s objectives.

– Identifying and nominating (for Board approval)

candidates to ll Board vacancies, having due

regard to the need to satisfy the Board’s skills

requirements.

COMMITTEE OF INDEPENDENT

DIRECTORS (“CID”)

Responsibilities include:

– Ensuring compliance with related party

transaction rules and the Relationship

Agreement.

– Authorising (if appropriate) related party

transactions on behalf of the Board.

– Conicts of interest procedure under

the Companies Act2006.

HEALTH, SAFETY, ENVIRONMENT

ANDCOMMUNITY (“HSEC”) COMMITTEE

Responsibilities include:

– Formulating and monitoring the

implementation of the Group’s policy

on issues relating to health and safety,

environment and community as they

affect operations.

– Specic focus on safety and climate

change impacts.

CHIEF EXECUTIVEOFFICER

ANDEXECUTIVE COMMITTEE

Responsibilities include:

– Execution of Board-approved strategies.

– Delegated authority levels for senior

management.

– Development and implementation

of Group policies.

– All material matters not reserved for

the entire Board.

Read the Audit Committee Report

on page 98

Read the Directors’ Remuneration Report

on page 110

Find out more on page 90 Find out more in the Responsible

Business section on page 30

Find out more on page 84

Read the Nominations Committee Report

on page 105

1. The Finance, Risk Management and Compliance Committee, Investment Committee and the Executive Related Party Matters Committee all report to the Executive Committee.

81Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Board balance

Independent: 5

Non-independent: 0

Chair: 1

Executive: 1

40-49: 1

50-59: 4

60+: 2

Board diversity – Gender

Board tenure

Board diversity – Ethnic group

Board diversity – Age

Board diversity, tenure and balance

Skills matrix

Female: 3

Male: 4

0-5 years: 6

9+ years: 1

White: 7

Mixed/Multiple

Ethnic Group: 0

Expertise 100%

% of Board

members

Mining, Global Resource Industry 58%

Business leadership and strategy 58%

Corporate governance 71%

ESG/Sustainability 54%

Financial, Audit & Risk 67%

CIS geographical experience 71%

Government and international relations 54%

HSEC 67%

Human capital management/Remuneration 71%

Investor relations management 67%

Risk management 79%

2022

82 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Board of Directors

Raffaele (Lucio) Genovese

Non-executive Chair

Fiona MacAulay

Senior Independent

Non-executive Director

Jim North

Chief Executive Ofcer

and Executive Director

Ann-Christin Andersen

Independent

Non-executive Director

Date of appointment

24 August 2020 as Chair

13 February 2019 as Non-

independent Non-executive Director

Current external appointments

Currently, he serves as chair of CoTec

Holdings, listed on NEX Board of the

TSVX, since 2021; non-executive

director of Nevada Copper Inc since

2016; and chief executive ofcer of

Nage Capital Management AG, a

Swiss based investment and advisory

rm, since 2004.

Previous appointments

Previously, he was non-executive

director of Mantos Copper SA, 2015-

2022; independent non-executive

director of Ferrous Resources

Limited, 2014–2019; chair of Firestone

Diamonds Plc, 2012-2020; an

Independent Non-executive Director

of Ferrexpo plc, 2007–2014; senior

executive ofcer, Copper Division,

Glencore International, 1996–1999

and chief executive ofcer, CIS

Operations, Glencore International,

1992–1998.

Skills, expertise and contribution

Lucio contributes to Ferrexpo plc over

35 years’ of commercial experience

in the metals and mining industry. He

worked at Glencore International AG

where he held several senior positions

including the CEO of the CIS region.

Lucio brings a deep knowledge

across the Ferrous and Non-Ferrous

Mining sector, including in iron ore. He

has extensive experience of operating

in emerging markets, specically in

the CIS states. As a previous Board

member (from 2007 to 2014) and as a

Board member of Ferrexpo AG, Lucio

has in-depth knowledge of the Group

which is extremely valuable to the

Company at a Board level.

Date of appointment

12 August 2019

10 February 2022 as Senior

Independent Director

Current external appointments

Non-executive director of Costain

Plc since April 2022; non-executive

director of Chemring Group plc since

2020; non-executive chair of IOG Plc

until 2 May 2023 when she will step

down at the AGM.

Previous appointments

Previously, she was non-executive

director of AIM listed Coro Energy,

2017–2022; chief executive ofcer of

Echo Energy plc, 2017–2018; non-

executive director, 2018–2019 and

chief operating ofcer of Rockhopper

Exploration plc, 2013–2017.

Skills, expertise and contribution

Fiona contributes to Ferrexpo plc over

35 years’ experience in the upstream

oil and gas sector including key roles

in a number of leading oil and gas

rms across the large, mid and small

cap space including Mobil, BG Group,

Amerada Hess, Echo Energy and

Rockhopper.

Fiona brings a strong focus on health,

safety, climate change and culture

with a deep understanding of the

factors inuencing the management

for safe, efcient and commercial

operations. In 2022, she completed

a Diligent Climate Leadership

Certication programme. She has

extensive operational experience in

emerging energy which enables her to

bring positive insight on a broad range

of issues to Board and Committee

discussions.

Date of appointment

14 February 2022 as

Chief Executive Ofcer

5 July 2020 as

Executive Director

28 May 2020 as

Acting Chief Executive Ofcer

1 November 2014 as

Chief Operating Ofcer

Current external appointments

None.

Previous appointments

Previously, he was Chief Operating

Ofcer of London Mining PLC, where

he was accountable for setting

the company’s operational and

investment strategy around the world.

He has wide-ranging operational

mining experience at a senior level

with BHP Billiton, Rio Tinto and Mount

Isa Mines in Africa, South America

and Australia covering commodities

including iron ore, coal, base metals

and aluminium.

Skills, expertise and contribution

Jim joined the Company in November

2014 and since then he has

successfully managed our operations,

enhancing operating efciency by

introducing world-class operating

practices. Over the past eight years,

Jim has developed the strategic

organic growth programme to expand

and increase production through

incremental browneld expansions to

FPM processing facilities signicantly

reducing the capital intensity required.

Jim brings multiple commodity

experience across the resources

value chain and extensive experience

to bear in managing the Company.

Date of appointment

1 March 2021

Current external appointments

Since 2021, Ann-Christin has served

as non-executive chair of Quantafuel

AS, and since 2020 served as chair

of the board of Å Energi AS (formerly

Glitre Energi AS) (unlisted), having

been appointed as a director in 2015.

Previous appointments

Previously, she has combined

her executive career in the oil and

gas industry with several board

assignments, e.g. non-executive

director for Maersk Drilling, Argeo AS,

Veidekke ASA.

Skills, expertise and contribution

Ann-Christin is an engineer with more

than 30 years’ experience in the oil

and gas industry.

Ann-Christin brings a wealth of

resource based industrial experience

in both mature and emerging markets

together with real life experience

on how to orchestrate business

transformation. In addition to

experience on how to implement

a culture of safety in a high-risk

industry, she brings knowledge of

stepping up automation to become

smarter, better, faster whilst driving

digital transformation for business

value.

Committee membership

Fiona was the Chair of the HSEC

Committee until February 2022.

Committee membership

Ann-Christin was appointed the Chair

of HSEC Committee and as a member

of the Nominations Committee in

February 2022.

An experienced and balanced Board

83Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Graeme Dacomb

Independent

Non-executive Director

Vitalii Lisovenko

Independent

Non-executive Director

Natalie Polischuk

Independent

Non-executive Director

Date of appointment

10 June 2019

Current external appointments

Currently, he serves as non-executive

director of Ecora Resources Plc

(formerly Anglo Pacic Group Plc)

since 2019.

Previous appointments

Previously, he was an audit partner of

Ernst & Young LLP for 26 years and

a Member of the Financial Reporting

Review Panel from 2011–2018.

Skills, expertise and contribution

Graeme contributes to Ferrexpo plc

over 43 years’ experience, of which

he was a partner at Ernst & Young

(“E&Y”) for 26 years. At E&Y he was

a senior partner in the extractive

industry, responsible for coordinating

the provision of a full suite of services

to multinational mining and oil and gas

clients including Xstrata, Fresnillo and

BP across a broad range of countries

including emerging markets. In

addition to audit services, he provided

critical advice for his clients on

corporate governance structures, risk

management and nancial systems

and controls.

Graeme brings extensive knowledge

of the extractive industry and his

nancial expertise gained as senior

audit partner provides a solid

foundation for his role as Chair of the

Audit Committee. He also brings an

invaluable perspective and insights

from his extensive international career.

Date of appointment

28 November 2016

Current external appointments

Currently, he serves as a non-

executive advisor to the Minister of

Finance of Ukraine, having previously

served as an executive counsellor

to the Minister of Finance. He also

serves as a non-executive director

of the Supervisory Board of National

Depositary of Ukraine since 2014.

Previous appointments

Previously, he was an executive

director of Ukreximbank (Ukraine),

2006–2010; an executive director

of Alfa Bank Ukraine, 2010–2014; a

non-executive director of Amsterdam

Trade Bank, 2013–2014; and a non-

executive alternate director, Black

Sea Trade and Development Bank

(Greece), 2014-2019; and since 1994

held various positions in the Finance

Ministry of Ukraine. He also was an

Associate Professor of Finance at the

Kyiv State Economic University.

Skills, expertise and contribution

Vitalii contributes to Ferrexpo plc over

25 years’ experience in government

nance. In 2005, he served as the

head of the Trade and Economic

Mission at the Ukrainian Embassy

in London. He was an Associate

Professor of Finance at the Kyiv State

Economic University.

Vitalii brings extensive experience

in the eld of Ukrainian government

nance together with a deep

understanding of geopolitical

developments in Ukraine which is

valuable to the Group.

Date of appointment

29 December 2021

Current external appointments

Currently, she serves as non-

executive director of Dobrobut

(Ukraine), since 2018.

Previous appointments

Previously, she was non-executive

director and treasurer of Lycée

Français Anne de Kyiv, 2014–2020.

Skills, expertise and contribution

Natalie brings over 25 years of private

equity experience in Eastern Europe,

having held a number of senior roles

at private equity funds in the region

and having acted as an independent

advisor on a number of M&A and due

diligence projects in Ukraine.

Committee membership

Graeme is the Chair of the Audit

Committee, where he acts as its

Financial Expert.

Committee membership

Non-executive Director designate for

workforce engagement.

Committee membership

Natalie was appointed as a member

of the Audit Committee and HSEC

Committee in February 2022 and the

Committee of Independent Directors

in February 2023.

Gender breakdown Key to committee membership

Male 57.1%

Female 42.9%

Audit Committee

Remuneration Committee

Nominations Committee

Committee of Independent Directors

(“CID”)

Health, Safety, Environment and

Community (“HSEC”) Committee

Chief Executive Ofcer and Executive

Committee

C Committee Chair

84 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Executive Committee

An experienced and focused

Management Team

Jim North

Chief Executive Ofcer and Chief

Operating Ofcer – combined role

Nikolay Kladiev

Chief Financial Ofcer

Viktor Lotous

Chief Operating Ofcer

and Head of Managing

Board, FPM

For more information see page 82 for details. Nikolay was appointed Group Chief Financial Ofcer

on 4 August 2021.

Nikolay joined the Group in 2005, and contributed

signicantly to the Group’s IPO. Since 2007, Nikolay

has served on the Board of FPM as CFO. During his

17 years with Ferrexpo, Nikolay has overseen FPM’s

nance function, and has been directly responsible

for maintaining the Group’s position as a low cost

pellet producer during this time. Prior to Ferrexpo,

Nikolay held a number of audit positions with Arthur

Andersen and Ernst & Young in Ukraine and Eastern

Europe.

Skills and experience

He is a Chartered Accountant (UK) and has a

Masters in International Economic Relations from

Kyiv National Economic University.

Viktor became Chief Engineer in 1997 and Head of

the Managing Board and Chief Operating Ofcer in

Apr i l 20 07.

Skills and experience

He is a graduate of Kryvyi Rih Mining and Ore

Institute, and of the Kyiv National Economic

University, specialising in Finance.

Greg Nortje

Chief Human Resources Ofcer

Yaroslavna Blonska

Acting Chief Marketing Ofcer

Greg joined Ferrexpo in January 2014.

He previously held a variety of international

Human Resources leadership positions with Anglo

American and BHP Billiton before establishing his

own human resources consultancy rm to a range

of clients across the UK. Particular specialisms

include project management and business change

execution, organisational effectiveness, talent

management, governance and compliance, and

leadership development.

Skills and experience

He has Advanced Management qualications from

the University of Stellenbosch Business School

and the Gordon Institute of Business Science,

a Bachelor of Arts degree and a postgraduate

Diploma in Education from the University of the

Witwatersrand.

Yaroslavna was appointed the Acting Chief

Marketing Ofcer on 22 August 2022.

Yaroslavna joined Ferrexpo in 2002.

Since joining Ferrexpo Yaroslavna has held a

number of key roles within the Group’s Marketing

team, including Head of Sales for customers in

Europe and Turkey, management of the Group’s

Asian and European customers, membership of the

representative board for the Group’s port loading

subsidiary, TIS-Ruda. Yaroslavna has been acting

as a focal point for the Group’s government and

public relations within Ukraine. She has also been

managing Ferrexpo’s ofce in Kyiv since 2006.

Yaroslavna has been helping to facilitate the Group’s

“Fe_Munity” women in leadership programme as a

speaker and a mentor.

Skills and experience

She holds a Master of Business Administration

degree from Kyiv State Economic University

and a post graduate Diploma in Law from Taras

Shevchenko National University, Kyiv.

85Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Corporate Governance Compliance

As a premium listed company on the London Stock Exchange, the Company is subject

to the 2018 Corporate Governance Code. This section explains how we applied the

principles of the 2018 Corporate Governance Code. A copy of the Corporate Governance

Code can be found at frc.org.uk.

Statement of Compliance (in accordance with Listing Rule 9.8.6R(5))

The Board considers the Company has complied throughout the year ended 31 December 2022 with all the provisions of the 2018 Corporate

Governance Code except as set out below:

– Provision 9: The Chair was not independent on appointment.

– Provision 15: The Chair’s appointment as a director of Audley Capital GmbH on 9 June 2022 was ratied by the Board on 29 July 2022.

– Provision 19: The Chair has remained in post for more than nine years since his rst appointment to the Board in June 2007. Mr Genovese’s

tenure ran from 12 June 2007 to 1 August 2014, and he rejoined the Board on 13 February 2019. Therefore, whilst the total tenure exceeds

nine years there was a signicant break in Mr Genovese’s tenure between 2014 and 2019.

Explanations for not complying with provisions 9 and 19 of the Corporate Governance Code as the Chair was not independent on appointment

and his tenure exceeds the recommended nine-year term are provided below. The non-compliance with provision 15 of the Corporate

Governance Code has arisen due to an inadvertent mistake and following discovery of this the Board took steps promptly to formally ratify

Mr Genovese’s appointment as a director of Audley Capital GmbH. Each of the directors have also since been reminded of the need to seek

prior Board approval before accepting any additional external appointments.

The Corporate Governance Code sets out the governance principles and provisions that applied to the Company during 2022. The Corporate

Governance Code is not a rigid set of rules, and consists of principles and provisions. The Company complied with all the principles and

detailedprovisions of the Corporate Governance Code in 2022 except for Provisions 9, 15 and 19. Provision 9 recommends that the Chair be

independent on appointment and Provision 19 recommends that the Chair should not remain in post beyond nine years from the date of rst

appointment to the Board. Provision 15 provides, amongst other things, that additional external appointments should not be undertaken by a

Director without prior approval of the Board.

Mr Genovese was rst appointed to the Board as a Director in June 2007 and retired in August 2014. After a near ve-year break, he rejoined the

Board in February 2019 as a non-Independent Non-executive Director and most recently was appointed as Chair of the Board in August 2020.

Independent mindset

The Board is satised that Mr Genovese is fully independent from all the Company’s shareholders and has been during his entire tenure as a

Non-executive Director. Additionally, upon his appointment as Chair the members of the Nominations Committee were comfortable based on

their own experiences that Mr Genovese conducts himself with professional and personal integrity with an independent mindset and brings

valuable challenge to the Board based on his in-depth understanding of the key drivers and challenges faced by the Group.

The Board is satised that Mr Genovese’s continuance as Board Chair adds considerable value to the business given his experience, leadership

qualities and detailed knowledge of the Group. He has more than 30 years’ experience of Ukraine together with in-depth knowledge of the

socio-political and economic environment. He has specic iron ore mining knowledge coupled with solid experience of UK plc corporate

governance matters. These qualities enable him to provide sound leadership to the Board based on his personal experience and knowledge

which facilitates constructive discussions and Board decisions.

Mr Genovese is committed to having a diverse and inclusive Board and workforce. He has overseen the design and implementation of

succession plans to facilitate increased independence and diversity. The Board considers that Mr Genovese continues to demonstrate

objective judgement and provides constructive challenge, and believes that his continued appointment is appropriate without xing a time

limitto his service.

Examples of the changes Mr Genovese has overseen during the last year include:

– appointment of permanent CEO;

– appointment of female Senior Independent Director;

– appointment of female Independent Non-executive Director to Audit and HSEC Committees;

– appointment of female Acting Chief Marketing Ofcer;

– succession planning at Board and senior management level;

– climate change – publication of Climate Change report;

– commenced search for a director from an ethnic minority group; and

– refocused the 2022 Board agenda to include Cyber Security, Climate Change and Environmental, Social and Governance matters.

86 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Compliance continued

Mr Genovese led the Board through the Russian invasion of Ukraine, ensuring continuity of the Board agenda and meetings together with

ongoing corporate initiatives and the establishment of the Ferrexpo Humanitarian Fund to support communities in Ukraine.

The Board believes Mr Genovese is the right person to Chair the Board. To provide continuity of his sound leadership, the Board request your

support to re-elect Mr Genovese at the 2023 AGM.

Further details on the composition of the Board and its Committees are set out on page 88 and further details of the role of the Senior

Independent Director are set out on page 90.

The Board conrms that at the date of this report, unless otherwise explained above, the Company fully complied with all relevant provisions of

the Corporate Governance Code. Further information on the Company’s compliance with the Principles of the Corporate Governance Code can

be found on the following pages:

Board leadership and

Company purpose

Principle A: Chair’s Statement page 2, Stakeholder Engagement – Section 172 Statement pages 48 to 54, Skills

Matrix page 81

Principle B: Chair’s Statement page 2, CEO’s Review page 6, Our Business Model pages 12 to 13, Understanding our

Strategic Direction pages 16 to 17, Stakeholder Engagement – Section 172 Statement pages 48 to 54

Principle C: Key Performance Indicators pages 18 to 21, Risk Management pages 56 to 57, Principal risks pages 58

to 74, Internal Controls pages 103 to 104

Principle D: CEO’s Review page 6, Our Stakeholders page 14 to 15, Responsible Business: Safety and our People

pages 32 to 33, Responsible Business: Communities pages 44 to 45, Responsible Business: Governance

pages 46 to 47, Stakeholder Engagement – Section 172 pages 48 to 54

Principle E: Non-Financial Information Statement page 47, Our engagement activities in 2022 page 49, Stakeholder

and workforce engagement page 92, Whistleblowing Policy page 104

Division of

responsibilities

Principle F: Chair’s Introduction page 78, Statement of Compliance page 85, Independent Mindset page 85, Role

Descriptions page 90, Board Leadership page 91 to 93, Board Evaluation page 94 to 96

Principle G: Group Structure page 80, Board of Directors pages 82 to 83, Role Descriptions page 90

Principle H: Corporate Governance At a Glance page 80, Board of Directors pages 82 to 83, Time Commitment page

89, Role Descriptions page 90

Principle I: Skills Matrix page 81, Time commitment and Non-executive Director external appointments during 2022

page 89, Board Leadership pages 91 to 93

Composition,

succession, evaluation

Principle J: Independent Mindset page 85, Diversity page 87, Nominations Committee Report page 105

Principle K: Board Diversity, tenure and balance page 81, Board Composition page 88, Skills Matrix page 81,

Succession Planning and Recruitment page 107

Principle L: Board Evaluation pages 94 to 96

Audit, risk,

internalcontrol

Principle M: External Audit page 104, Internal Audit page 104

Principle N: Audit Committee Report pages 98 to 104, Responsibility statement of the Directors in respect of the

Annual Reports and Accounts page 137

Principle O: Risk Management pages 56 to 57, Principal Risks pages 58 to 74, Internal Control and Risk Management

page 103

Remuneration Principle P: Remuneration policy pages 110 to 131

Principle Q: Our approach to remuneration page 111, Performance and Reward pages 111 to 112, Implementation of

the remuneration policy in 2023 page 112

Principle R: Remuneration Report pages 110 to 112

Disclosure Guidance and Transparency Rules

By virtue of the information included in this Corporate Governance Report and the Directors’ Report, the Company complied with the corporate

governance statement requirements of the FCA’s Disclosure Guidance and Transparency Rules.

87Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Diversity

We voluntarily report our Board and executive management diversity data as at 31 December 2022 in accordance with the new UK Listing Rules

disclosure requirements and our progress in meeting the new UK Listing Rules board diversity targets.

As at 31 December 2022, women represented 43% of the Board see page 79. On 10 February 2022, the Board elected to appoint Fiona

MacAulay as Senior Independent Director, see page 79 and therefore one of the senior Board positions was occupied by a woman; however,

there were no Directors from an ethnic minority background. The Board remains committed to enhancing its ethnic diversity and has also

committed to search for a further Independent Non-executive Director from an ethnic minority background, led by the Nominations Committee

and supported by external consultants, see page 108.

The gender diversity of the Board and executive management as at 31 December 2022:

Number of Board

members

Percentage of the

Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)*

Number in

executive

management

Percentage of

executive

management

Men 4 57% 3 5 83%

Women 3 43% 1 1 17%

Other categories – – – – –

Not specied/prefer not to say – – – – –

* CFO included although not a Board position.

The ethnic diversity of the Board executive management is as follows:

Number of Board

members

Percentage of the

Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

executive

management

Percentage of

executive

management

White British or other White (including minority-white groups) 7 100% 4 5 83%

Mixed/Multiple Ethnic Groups – – – 1 17%

Asian/Asian British – – – – –

Black/African/Caribbean/Black British – – – – –

Other ethnic group, including Arab – – – – –

Not specied/prefer not to say – – – – –

Notes:

– Executive management for these purposes includes the Company Secretary but excludes administrative and support staff (as dened by

theUK Listing Rules).

– The Company conrms that the approach to collecting data forming the basis of the gender and ethnic diversity of the Board and senior

management of the Company was consistent for the purposes of reporting under both LR 9.8.6R(9) and (10) and was consistent across all

individuals in relation to whom data was reported. Board members, members of executive management and the Company Secretary were

provided with a standard form questionnaire on a strictly condential and voluntary basis to allow the individual to self-report on their gender

and ethnicity (or to specify that they do not wish to report such data). The questionnaire was fully aligned to the denitions set out in the UK

Listing Rules, with individuals asked to specify:

i. self-reported gender identity – selection from (a) male, (b) female, (c) other category/please specify and (d) not specied/prefer not to say;

and

ii. self-reported ethnic background – selection from (a) White British or other White (including minority-white groups), (b) Mixed/Multiple

Ethnic Groups, (c) Asian/Asian British, (d) Black/African/Caribbean/Black British, (e) Other ethnic group, including Arab and (f) not

specied/prefer not to say.

– The Executive Committee includes the Company Secretary. For the purposes of the UK Corporate Governance Code, the gender balance

ofthose in senior management (i.e. the Executive Committee and their direct reports was 64.2% male and 35.8% female.

88 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Report

Controlling shareholder – Relationship Agreement

The Company’s majority shareholder is Fevamotinico S.a.r.l., which as at date of this report holds 49.5% of the voting rights in Ferrexpo plc.

Fevamotinico S.a.r.l. is wholly owned by The Minco Trust. The Minco Trust is a discretionary trust that has three beneciaries, consisting of

Kostyantin Zhevago and two other members of his family. Mr Zhevago is therefore considered a controlling shareholder of the Company. In

accordance with the UK Listing Rules, Mr Zhevago, The Minco Trust and Fevamotinico S.a.r.l. have entered into a Relationship Agreement with

the Company (the “Relationship Agreement”) to ensure that the Group is capable of carrying on its business independently, that transactions and

arrangements between the Group, Fevamotinico S.a.r.l., The Minco Trust and Mr Zhevago (and each of their associates) are at arm’s length and

on normal commercial terms, and that at all times a majority of the Directors of the Company shall be independent of Fevamotinico S.a.r.l., The

Minco Trustand Mr Zhevago. Under the Relationship Agreement, Mr Zhevago is entitled to appoint himself as a Director or another person as his

representative Director, in each case in a non-executive capacity. The Relationship Agreement terminates if, inter alia, the shareholding of

Mr Zhevago and his associates in the Company falls below 24.9%.

Statement of Compliance with UK Listing Rules, Rule 9.8.4 (14)

– Ferrexpo has complied with the independence provisions contained in UK Listing Rule 9.2.2ADR(1) during 2022.

– So far as Ferrexpo is aware, each of Mr Zhevago and Fevamotinico S.a.r.l. and their associates have also complied with the independence

provisions contained in UK Listing Rule 9.2.2ADR(1) during 2022.

– So far as Ferrexpo is aware, the procurement obligation set out in LR 9.2.2B(2)(a) (which requires Mr Zhevago and Fevamotinico S.a.r.l. to

procure that The Minco Trust, the non-signing controlling shareholders (being the beneciaries of The Minco Trust other than Mr Zhevago)

and their associates comply with the independence provisions contained in UK Listing Rule 9.2.2ADR(1)) has also been complied with

during2022.

The Board

The Board is responsible for setting the Group’s objectives and policies, providing effective leadership within the framework of prudent and

effective controls required for a public company. The Board has a formal schedule setting out the matters requiring Board approval and

specically reserved to it for decision. These include:

– approving the Group strategy and budget;

– annual and long-term capital expenditure plans;

– approving contracts for more than a certain monetary amount;

– monitoring nancial performance and critical business issues;

– approval of major projects and contract awards;

– approval of key policies and procedures including for dividends, treasury, charitable donations and corporate social responsibility;

– approval of procedures for the prevention of fraud and bribery; and

– through the CID, monitoring and authorising related party transactions.

Certain aspects of the Board’s responsibilities have been delegated to the Committees shown in the chart on page 80 to ensure compliance with

the Companies Act 2006, FCA Listing Rules and Disclosure Guidance and Transparency Rules and the UK Corporate Governance Code. The

terms of reference for each of the Audit Committee, Nominations Committee, Remuneration Committee and HSEC Committee are available on

the Company’s website at www.ferrexpo.com/about-ferrexpo/corporate-governance/board-committees.

It is the responsibility of the CEO and the Executive Committee to manage the day-to-day running of the Group.

Board composition and independence

As of 31 December 2022, the Board (excluding the Chair) comprised one Executive Director and ve Independent Non-executive Directors

whoare considered by the Board to be independent in accordance with the UK Corporate Governance Code. This structure ensures that the

Executive Director is subject to appropriate independent and constructive challenge by the Non-executive Directors, and that no single Director

can dominate or unduly inuence decision-making.

Composition of the Board and Committees as of 31 December 2022 is presented in the table below:

Board member Role Audit Remuneration Nominations CID HSEC

R L Genovese Non-executive Chair ••

F MacAulay Senior Independent Non-executive Director • •• • •

V Lisovenko Independent Non-executive Director and

Designate for Employee engagement • • • ••

J North Chief Executive Ofcer and Executive Director •

G Dacomb Independent Non-executive Director •• • • •

AC Andersen Independent Non-executive Director • • • ••

N Polischuk Independent Non-executive Director • •

1. The HSEC Committee also includes some members of senior management.

• Committee member.

•• Committee Chair.

89Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

The Board considers that it is of a sufcient size to ensure that the requirements of the business are met without placing undue reliance on any

one Director.

Biographical details of the Directors at the date of this report are set out on pages 82 and 83.

Time commitment

It is expected that a Non-executive Director of the Company will normally spend at least two and a half days a month, on average, on Ferrexpo’s

affairs. The expected time commitment for the Senior Independent Director, the Committee Chairs and, in particular, the Chair of the Board is

considerably more than that. The Non-executive Directors are required to conrm at least annually that they are able to commit sufcient time

tothe affairs of the Company, and all of our Non-executive Directors have given this conrmation in respect of 2022.

All of the Non-executive Directors have been able to make themselves available for the majority of the ad hoc Board and Committee meetings

and update calls held during the year, notwithstanding their external commitments. The attendance of the Directors at Board and Committee

meetings during 2022 is shown in the table below.

Non-executive Director external appointments during 2022

During 2022, Ms MacAulay was appointed as non-executive director of Costain Group PLC, a company that is listed on the London Stock

Exchange and a constituent of the FTSE Small Cap Index. This appointment was considered a signicant appointment for Ms MacAulay for

thepurposes of the UK Corporate Governance Code, and, in advance of the appointment, Ms MacAulay sought the prior approval of the Board.

As part of approving this additional appointment, the Board considered a range of factors, including the existing appointments of Ms MacAulay,

the time commitment expected in the role as a Ferrexpo Director, attendance records at Ferrexpo Board and committee meetings, institutional

investor guidance on the number of board roles in respect of over-boarding and the additional time commitment from the new role. The Board

was satised having regard to these matters that the additional role would not adversely impact the ability of Ms MacAulay to perform her

existing role on the Ferrexpo Board and its committees.

During 2022, Ann-Christin Andersen was appointed as a director of SDK Freja, a family owned non-listed business in Denmark, and Lucio

Genovese was appointed as a director of Audley Capital GmbH, a private company registered in Switzerland. Whilst these appointments were

not considered signicant appointments for the purposes of the UK Corporate Governance Code, in providing its approval or conrmation of

these appointments the Board had regard to the existing commitments of each of Ms Andersen and Mr Genovese, and was satised that the

additional role would not adversely impact the ability of Ms Andersen or Mr Genovese to perform their existing role on the Ferrexpo Board and

itscommittees.

Board and Committee meeting attendance in 2022

Attended/Eligible to attend

Director

Board Audit

Remuneration

Nominations

CID HSEC

Scheduled Ad hoc Scheduled Scheduled Ad hoc Scheduled Ad hoc Scheduled Ad hoc Scheduled Ad hoc

AC Andersen

4/5 16/17 5/5 1/1 3/3 1/1 3/4 13/13 4/4 1/1

G Dacomb 5/5 17/17 6/6 5/5 1/1 3/3 1/1 4/4 12/13

R L Genovese 5/5 17/17 3/3 1/1

V Lisovenko

4/5 17/17 5/6 4/5 1/1 3/3 1/1 4/4 13/13

F MacAulay 5/5 17/17 6/6 5/5 1/1 3/3 1/1 4/4 13/13

J North 5/5 17/17 4/4 1/1

N Polischuk

5/5 17/17 5/5 4/4 1/1

K Zhevago (until 29 December

2022) 5/5 15/17

1. Ms Andersen was appointed as Chair of the Health, Safety, Environment and Community Committee on 10 February 2022.

2. Mr Lisovenko was unable to attend one scheduled Board meeting and a scheduled Audit Committee and Remuneration Committee meeting due to the Russian invasion of Ukraine.

3. Ms Polischuk was appointed as a member of both the Audit Committee and HSEC Committee on 10 February 2022.

4. During the year, the HSEC Committee approved 87 Written Resolutions as part of the Ferrexpo Humanitarian Fund.

During the year, there were a number of ad hoc Board and Committee meetings which dealt with (amongst other things) the Russian invasion

ofUkraine.

90 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Report continued

Role descriptions

The division of responsibilities between the Chair and the CEO has been clearly established in writing and is agreed by the Board. A summary

ofthe roles of the Chair, the CEO, the Senior Independent Director, the Non-executive Directors and the Company Secretary is set out in the

following table. The table also includes an overview of the role of the Executive Committee and of the Committee of Independent Directors. The

roles of the Audit and Nominations Committees are set out later in this Corporate Governance Report, the role of the HSEC Committee in the

Strategic Report on page 30, and the role of the Remuneration Committee in the Remuneration Report on page 110.

Role Description

Chair The Chair is responsible for leadership of the Board, ensuring its effectiveness, setting its agenda, ensuring that it receives

accurate, clear and timely information, and ensuring effective communication with shareholders. The Chair also ensures

thatthere is a constructive relationship between the Executive and Non-executive Directors. At least once annually the

Chairholds meetings with the Non-executive Directors without the Executive Director present. Mr Genovese’s other current

responsibilities are set out in the biographical notes on page 82. Due to the complexity of the jurisdictions in which the Group

operates and in light of Russia’s current invasion of Ukraine, the time commitment of the role signicantly increased during

the reporting period especially with the need to engage proactively with the broad range of stakeholders.

CEO The role of the CEO is to provide leadership of the executive team, implement Group strategy through executive committees,

chair the Executive Committee, and oversee and implement Board-approved actions. Mr North as CEO has no other

directorships of quoted companies.

Senior

Independent

Director

The Senior Independent Director, in conjunction with the other Independent Non-executive Directors, assists in

communications and meetings with shareholders and other stakeholders concerning corporate governance matters. At least

once a year, the Senior Independent Director meets the Non-executive Directors, without the Chair present, to evaluate the

Chair’s performance. The Senior Independent Director is also available to discuss with shareholders any issues that the Chair

has been unable to resolve to shareholders’ satisfaction.

Non-executive

Directors

The Non-executive Directors provide an independent and objective viewpoint to Board discussions and bring experience

from a variety of industry backgrounds. Their role is to provide constructive support and challenge to executive management.

Acting either as the Board or as members of its Committees, the Non-executive Directors approve budgets; discuss and

contribute to strategic proposals and agree on corporate strategy; monitor the integrity, consistency and effectiveness of

nancial information, internal controls and risk management systems; monitor management’s execution of strategy against

agreed targets and determine their remuneration accordingly (see the Remuneration Report on page 110); and monitor

executive succession planning (for Board succession planning, see the Nominations Committee Report on page 105). From

time to time, where delegated by the Board, individual Non-executive Directors may take on additional functions in areas in

which they have particular knowledge or expertise.

Company

Secretary

The Company Secretary is responsible for ensuring that Board procedures are followed and that applicable rules and

regulations are complied with. The Company Secretary is also responsible for advising the Board on all governance matters

and for ensuring, with the Chair, that information reaches Board members in a timely fashion, so that they are alerted to

issues and have time to reect on them properly before deciding how to address them. All Directors have access to the

advice and services of the Company Secretary.

Executive

Committee

The Executive Committee is a key decision-making body of the Group, responsible for managing and taking all material

decisions relating to the Group, apart from those set out in the Schedule of Matters Reserved for the Board. It has delegated

responsibility from the Board for the execution of Board-approved strategies for the Group, for ensuring that appropriate

levels of authority are delegated to senior management, for the review of organisational structures and for the development

and implementation of Group policies. The Executive Committee meets regularly during the year.

Committee of

Independent

Directors

(“CID”)

The CID is composed of the Senior Independent Director and four other Independent Non-executive Directors. The CID

considers and, if appropriate, authorises on behalf of the Board, related party transactions and otherwise ensures

compliance with the related party transaction rules and the Relationship Agreement entered into between Fevamotinico

S.a.r.l., Mr Zhevago, The Minco Trust and the Company. The CID holds delegated authority to consider and, if appropriate,

approve situations which give rise to an actual or potential conict of interest for any member of the Board in accordance

with the Companies Act 2006. The CID keeps under review the authorisation and approval process relating to related party

transactions (which are also reviewed in detail by the Executive Related Party Matters Committee (“ERPMC”)) and satises

itself that, as required under the Relationship Agreement, transactions with the Group’s controlling shareholders or their

associates are conducted at an arm’s length basis and on normal commercial terms.

91Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Before setting out the Board’s activities in

2022, it is important to note that since the

Russian invasion of Ukraine, the Board has

continued to meet regularly to discuss the

ongoing situation in Ukraine, the execution

ofthe Group’s business continuity plans,

planning for different eventualities and

adjustments to the corporate calendar.

TheBoard receives regular updates from

themanagement team as to the Group’s

response and scenario planning for different

eventualities. Protecting the Group’s

workforce is a key priority, as well as taking

steps to protect the business and thereby the

stakeholders of the business. This will remain

a key priority for the Board during 2023.

Board activity in 2022

Five scheduled Board meetings were held

in2022 (supplemented by other ad hoc

meetings, telephone or video conferences

andwritten resolutions as required from time

to time). Although physical meetings were

resumed for scheduled Board meetings, some

meetings were held via video conference with

management team members and other Group

personnel joining to discuss matters as

appropriate. The Board intends to continue to

hold its scheduled meetings in person during

2023 provided it is safe to do so.

The Board’s programme of meetings allows

key areas of focus to be established and

reviewed on a regular basis. A review of the

Board forward agenda was undertaken

earlyin the year to align key focus areas

withstrategy. Rolling agendas have been

developed within the Board forward agenda

for the Board, Audit, Nominations and

Remuneration Committees to ensure the

necessary standing items are covered during

the course of the year, and sufcient time is

allocated to strategic discussions, with extra

time factored in for ad hoc and additional

items. Agendas are agreed with the Chair

(orwith the Chair of the relevant Committee)

and timeframes set in advance for the various

meetings, thereby ensuring that the full

agenda can be covered in the time allotted.

Board and Committee meeting packs are

prepared by management following input

onthe agendas formulated by the Company

Secretary and the respective Chairs, and

made available electronically prior to the

meeting via a secure online Board portal,

thereby allowing the Directors adequate

timeto consider the variety of issues to be

presented and discussed. In the minutes of

the meetings, issues identied for follow-up

are set out, ensuring that matters raised by

the Directors are actioned and reported back

in a timely manner.

At each scheduled Board meeting, the

Directors receive a report from each of the

Chair, the Chief Executive Ofcer and the

Chief Financial Ofcer and will review and

approve the minutes from previous Board

meetings and note Board Committee minutes.

There is also an oral report from the Chair of

each Board Committee, providing an

overview of the matters discussed at the

Committee meetings which are held before

the scheduled Board meetings. The Board

may also receive a report from the Chief

Marketing Ofcer relating to updates on the

Group’s marketing strategy, product

development and relationships with the

Group’s customers.

The Chief Executive Ofcer’s report will

include matters relating to production and

operations, safety measures and performance

against targets, iron ore market conditions,

growth projects, implementation of diversity

and inclusion policies and updates on the

position in Ukraine. The Chief Financial

Ofcer’s report covers nancial performance

as compared to budget, nancial forecasts

and cash ow position, with a particular

focusduring 2022 on the going concern

assessment given the situation in Ukraine.

The Chair will report on developments relating

to investor and stakeholder engagement

(including shareholder feedback), relevant

corporate governance matters and Board

refreshment and succession planning.

In addition to formal Board and Committee

meetings, the Chair holds meetings with the

Independent Non-executive Directors as

required, enabling open discussions without

the Executive Director present.

The following sets out an overview of the key

areas of focus for the Board during the year.

Russian invasion of Ukraine

The impact of the Russian invasion of Ukraine

was the key area of focus during the year,

with the Board undertaking regular reviews

ofthe Group’s response to the invasion. The

Board received daily and regular updates

from the Chief Executive Ofcer on the

Group’s response to the invasion, including

the safety, protection and wellbeing of the

workforce and details of the support provided

to those affected by the invasion and their

families. Updates on safety measures put in

place at the mine sites and other locations

toprotect the Group’s workforce and assets

were also provided. The Board also

established the Ferrexpo Humanitarian Fund

to support communities across Ukraine. For

further details see pages 44.

The Board had to respond quickly to make

challenging decisions such as declaring

forcemajeure on supply contracts due to the

closure of Ukraine’s access to the Black Sea.

Due to the uncertainty the invasion presented,

the Board reviewed and considered various

nancial re-modelling and forecasts under

several scenarios together with appropriate

actions to preserve the business. The Board

took the difcult decision to suspend

non-essential capital expenditure whilst

minimising sustaining capital expenditure.

More information can be found throughout

this Annual Report and Accounts.

Climate change and

decarbonisationtargets

Climate change has been a standing agenda

item at all scheduled Board meetings and

meetings of the HSEC Committee throughout

the year and will continue to be a standing

agenda item.

During the year, the Board approved the

publication of the Company’s inaugural

standalone Climate Change Report in

December 2022. The report covers the

climate change related legislation being

enacted in the various jurisdictions into

whichwe sell our products, and the risks

andopportunities that these changes may

present to our business model. The risks and

opportunities relating to climate change that

are specic to Ferrexpo are summarised in

the Task Force for Climate-related Financial

Disclosures (“TCFD”) on pages 37 to 41 of

theStrategic Report.

Financial position and liquidity

The Board continuously reviews the nancial

position of the Group, including performance

against targets, balance sheet strength and

liquidity.

During the year, the Group has maintained

astrong balance sheet, including low levels

ofgross debt and had a positive net cash

position of US$106 million as at 31 December

2022 (2021: US$117 million). The Group has

no debt facilities as at 31 December 2022

compared to US$50 million as at

31 December 2021.

The Company’s Preliminary and Interim

results and Annual Report were scrutinised

and approved by the Board.

Board Leadership

92 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Report continued

Cyber security strategy

In light of heightened cyber security risks

facing the business following the Russian

invasion, maximum protection against cyber

security attack is a top priority for the Group.

The Board received detailed presentations

from the Group’s Head of Information

Technology outlining the Group’s procedures

and controls in relation to cyber security. This

included an overview of protective actions

implemented. The outcomes of the 2021 audit

helped mitigate threats at the onset of the

invasion. Efforts in 2022 focused on nalising

an extensive third party audit (ISO 2700x

standard) of cyber security and internal IT/

automation.

Stakeholders and workforce

engagement

Stakeholder considerations and culture are an

important part of the Board’s discussions and

decision-making. The information on pages

48 to 55 provides a review of stakeholder

engagement activities during the year and

explains how the Board considers

stakeholders in decision-making.

In September 2022, over two days,

Mr Lisovenko, Non-executive Director

Designate for workforce engagement, visited

our operations in Ukraine and hosted a

number of engagement sessions with a range

of stakeholder groups within our workforce,

including operations personnel, a selection of

middle managers from all three mines, senior

female leaders, alumni of our “Fe_munity”

women in leadership programmes and people

with disabilities.

During the engagement sessions, employees

made comments, suggestions and posed

questions on a range of matters for response

by the Board. In December 2022, the Board

considered the comments, suggestions and

questions and provided feedback to the

employees. For example, employees

requested more interactive engagement

sessions made up of smaller groups as

opposed to larger townhall style engagement

sessions. For further details see page 49

Employees and wider workforce, Section 172

Statement.

The Group also engages with its employees

through the biennial employee engagement

survey, which was last conducted in 2021.

These surveys are an integral aspect of

understanding the priorities and concerns of

our employees, and help to set priorities for

the coming period. The Board considers the

results of the survey and discusses feedback

from the survey with the Chief Executive

Ofcer and the Chief Human Resources

Ofcer, including plans for further

engagement by functional heads with their

teams to better understand the results of

thesurvey and to develop joint action points

focusing on areas of strength and areas

forimprovement. The third Employee

Engagement Survey will take place in 2023.

Dividends

The Board considers proposed shareholder

dividends, taking into account the nancial

performance and liquidity position of the

Group and the Group’s shareholder returns

policy. As a result of the Group’s nancial

performance, the Group paid out dividends

during the year totalling US$155 million. Given

the uncertainties arising from the Russian

invasion of Ukraine, ahead of approving and

paying these dividends, the Board would

meet to consider the Company’s liquidity

position and future nancial commitments

(including related to operating and

development capital expenditure).

The Group has a shareholder returns policy

outlining the Group’s intention to distribute

30% of free cash ow as dividends in respect

of a given year. The Group has declared

dividends in respect of the 2022 nancial year

representing 55% of the Group’s free cash

ow in 2022.

For further details, see page 25 of the

Strategic Report.

Board balance and independence

Ensuring the appropriate balance of skills,

independence and diversity on the Board

remains a key priority of the Group.

In line with best practice requirements of the

UK Corporate Governance Code, during the

year, the Board reviewed the balance of skills,

knowledge, experience, independence and

diversity and focused on improving and

rebalancing Independent Non-executive

Director Board and Board Committee roles.

To that end:

– Fiona MacAulay was appointed as the

Senior Independent Director on

10 February 2022 in place of Vitalii

Lisovenko, who completed two and half

years in this position.

– Ann-Christin Andersen was appointed as

Chair of the Group’s Health, Safety,

Environment and Community (“HSEC”)

Committee on 10 February 2022.

– Natalie Polischuk was appointed as a

member of both the Audit Committee and

HSEC Committee on 10 February 2022.

For further details see page 105 of the

Nominations Committee Report.

Governance and risk

Following on from the governance

improvement work carried out in 2020,

duringthe year the Board carried out an

annual review of the terms of reference of

each Board Committee. Updates to the

termsof reference were incorporated to

reect current best practice.

During 2022, the Board also reviewed and

approved the revised Related Party Policy,

Group Treasury Policy and the Terms of

Reference for the Committee of Independent

Directors.

At each of its scheduled meetings the Board

also considers any updates to the principal

and emerging risks of the Group, and in

particular during 2022 considered the new

risks facing the Group as a result of the

Russian invasion and also changes to existing

country-related risks. For further details, see

pages 59 to 61 of the Strategic Report.

The Board is supported by the Executive

Committee, which meets approximately

monthly. All information submitted to the

Board by management is reviewed and

approved by the Executive Committee

priortosubmission.

Modern Slavery Act Statement

During the year, the Board reviewed and

approved the Group’s Modern Slavery

ActStatement for the year ended

31 December 2021 (a copy of which

isavailable at www.ferrexpo.com).

Executive appointments and

succession planning

Jim North was appointed permanent Chief

Executive Ofcer on 14 February 2022 after

stepping into the role of Acting CEO from

May2020.

Yaroslavna Blonska was appointed Acting

Chief Marketing Ofcer on 22 August 2022.

This appointment underscores the Group’s

robust talent management process which

identies individuals with high potential for

inclusion in succession plans for business

critical roles.

For further details see page 107 of the

Nominations Committee Report.

Board Leadership (continued)

93Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Other matters discussed were:

– oral reports from the Chair of Board

Committee meetings held before the

Board meeting;

– diversity and inclusion;

– internal succession planning – talent

review;

– succession planning for Non-executive

Director recruitment and appointments;

– review of agenda and approval of minutes

from previous Board meeting and note

Board Committee minutes;

– interactions with auditors;

– Chief Executive Ofcer’s report including

production and operations, iron ore market

conditions, and updates on the Russian

invasion of Ukraine and the position in

Ukraine;

– logistics update;

– new growth markets;

– Chief Financial Ofcer’s report including

status vs. budget, forecasts, cash ow

position, and funding update;

– related party matters (including Directors’

interests/conicts);

– investor relations report (including

shareholder feedback);

– strategy, business plan and budget;

– formal risk review;

– compliance matters;

– HSEC Committee matters, including

Health and Safety, carbon reduction and

community spending; and

– Board refreshment, succession planning,

Director independence and Committee

composition.

Matters reviewed as required included:

– the Group’s continued response to the

Russian invasion of Ukraine and actions

taken to protect the Group and its

workforce;

– review of half-year or annual results, going

concern and viability, dividend policy and

recommendations, investor presentation;

– geopolitical matters;

– internal evaluation of the performance of

the Board, Chair, Directors and Company

Secretary;

– review of the AGM statement, and proxy

agency comments and recommendations;

– annual review of bank relationships with

the Group within and outside Ukraine;

– annual review of the Treasury Policy;

– approval of the 2021 Modern Slavery

Statement; and

– the CSR budget.

During 2022, the Board also held sessions

atwhich the relevant executive heads of

department led detailed presentations on

operations, nance, HR and management

succession planning, sales and marketing,

investor relations and communications.

Board virtual site visit and

Strategy Day

Due to travel restrictions resulting from the

Russian invasion of Ukraine, the Board was

unable to conduct the planned visit of the

Group’s operations in Horishni Plavni,

Ukraine. The alternative arrangement was

aBoard virtual site visit and Strategy Day.

The Board received a progress update on

actions taken from 2021 and noted the

achievements and completion of all 2021

actions during the year. This set the

foundations for ‘where we are now’ and

‘where we are going’ against the backdrop

ofthe Russian invasion of Ukraine.

The Board received presentations from

executive management on:

– health, safety and environment;

– going concern;

– logistics update;

– organic growth projects; and

– future options.

All matters discussed aligned with the

Ferrexpo strategic pillars: Health and Safety,

Financial Strength, Technology and

Innovation, Product Quality, Growth and

Licence to Operate.

Although Health and Safety preformed well, it

had reached a plateau so further impetus was

needed to shift performance. A benchmark

review from leading companies was

presented together with a safety cultural

review and a proposal to transition to a new

approach to safety, known as “Just Culture”.

Just Culture is a systems thinking concept

which emphasises that, generally, mistakes

are a product of faulty organisational cultures,

rather than brought about by the person or

persons directly involved. In a Just Culture,

after an incident, the question asked is, “What

went wrong?” rather than “Who caused the

problem?”. A Just Culture is the opposite of

aBlame Culture and helps to create an

environment where individuals feel free to

report errors and help the business to learn

from mistakes through self and shared

responsibility and accountability.

The Board received a detailed and extensive

update on going concern. This involved a

rigorous assessment of the Group’s going

concern, which included assumptions, price

forecasts and scenario planning of the

long-term business model tested against

various sensitivities for a variety of

eventualities (including those related to the

Russian invasion of Ukraine).

The Board received a comprehensive logistics

update against the backdrop of no seaborne

access through the port of Pivdennyi. Several

logistics options were considered in the

process to maintain sales volumes while

maintaining economic feasibility.

The Board received an update on organic

growth projects and noted the completion

ofthree signicant projects; Section 9

concentrator capacity, MFC-2 dry ore

processing and Concentrate Stockyard to

process concentrate from otations as feed

tothe pellet plant or to railcars as sellable

concentrate.

Current status updates on other capital

expenditure projects, primarily Wave 1

Expansion were provided together with the

Ferrexpo exploration drilling programme,

noting suspension of capital expenditure

during the Russian invasion.

Future options included an overview of

inorganic growth options.

The actions from the Strategy Day were

collated and disseminated to the relevant

executives for execution during the year.

The Board virtual site visit and Strategy Day

was preceded by a Carbon Reduction

Strategy discussion including data collection,

validation and benchmarking and the carbon

reduction journey.

Post AGM engagement

During the year, we consulted with

shareholders in person and in writing on a

number of important corporate governance

issues, four of which were following signicant

votes against Resolutions 6, 9, 10 and 12 at

the 2022 AGM (re-election of Ann-Christin

Andersen, Vitalii Lisovenko, Fiona MacAulay

and Kostyantin Zhevago). Based on the

feedback received, the Board understands

that the votes against arose as a result of

concerns regarding over-boarding and certain

historic corporate governance issues. The

Board is satised with each Director’s

attendance and that each of the Directors

hassufcient time to commit to the role and

Ferrexpo’s business.

Board evaluation cycle

94 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Report continued

Board Evaluation

Board performance evaluation

Under the UK Corporate Governance Code, the Board is required to undertake annually a formal

and rigorous evaluation of its own performance and that of its Committees and individual Directors.

This evaluation should be externally facilitated every three years.

Review of 2021 external Board performance

The Board and its Committees consider their effectiveness regularly and the outcome and

ndings from the 2021 external review were progressed throughout the year with the following

actions taken:

Action to be taken Actions taken

Succession planning within

the business and senior

management including diversity

Appointment of a female Acting Chief Marketing Ofcer. This appointment demonstrates the

Group’s robust talent management process which identies individuals with high potential for

inclusion in succession plans for business critical roles.

Appointment of female Senior Independent Director.

Appointment of female Chair of HSEC Committee.

Female representation on the Board up from 38% in 2021 to 43% as at 31 December 2022.

Ensure Non-executive Directors

continue to bring the right skill set

and tobalance the workload of

the Board Committees

Following on from a refresh of the Board skills matrix last year, during 2022 a Board training and

development directory was established to facilitate individual director development plans to be

populated, which will be progressed over the next two years to enhance the overall skill set of

the Board.

Director training, upskill the

Board onallESG matters

The Board received training from external third party providers on: Part I, ESG background

andlegal framework, greenwashing and climate change; Part II, Decarbonisation pathway

development, future commitments on project and implementation on carbon pathway and

howto dene strategy for implementation.

Explore ways to enhance

workforce engagement and bring

ndings to the Boardroom

The Board reviewed and changed the format of employee engagement from large town hall

sessions into smaller more intimate groups where employees felt more comfortable to open up

and raise matters. Employees welcomed the change in format which was reected in their

feedback of the event.

Continue to improve Board

reporting, particularly

management report writing with

externally facilitated training

amongall report writers

Board reporting has improved with some key management reports streamlined.

Externally facilitated training among all report writers could not be carried out due to the Russian

invasion of Ukraine.

Ensure bolstered resourcing for

Secretariat and Internal Audit

functions

Internal Audit is now adequately resourced, with increased resourcing in Secretariat continuing

to be assessed.

2020: Internal

2021: External

2022: Internal

95Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

2022 Internal Board performance

During 2022, the annual performance evaluation of the Board and its Committees was carried out internally using a questionnaire led by the

Company Secretary with external input from Clare Chalmers Ltd. The purpose was to build on the recommendations and areas identied from

the externally facilitated evaluation in 2021.

The evaluation process involved the completion of questionnaires by Board and Committee members, with responses collated anonymously

andanalysed by Clare Chalmers Ltd together with the Company Secretary.

The thematic evaluation focus areas included:

– Board composition, succession, development, leadership and dynamics;

– Board oversight: Strategy, performance, risk, people and culture;

– stakeholders and decision making;

– Board efciency including secretarial support;

– leadership and succession decision making;

– Board planning; and

– the effectiveness of Board Committees.

Preparation, questionnaire design and content, formal interviews and reporting:

PREPARATION

– Chair and Company Secretary reviewed the 2021 recommendations and outcomes to set the scene for 2022.

– Chair and Company Secretary held a scoping meeting to understand context and priorities.

– Review of Board and Board Committee papers and other relevant documentation, including Strategy papers

andthe Board and Board Committee Forward Agenda Planner to identify key areas of focus.

– Individual interviews were scheduled with the Chair and all the Non-executive Directors.

QUESTIONNAIRE

DESIGN AND

CONTENT

A comprehensive questionnaire was designed covering:

– Board: Constitution and Commitment, Leadership, Efciency of Board Process, Board’s role, Development,

Stakeholders, of which there were 35 questions.

– Audit Committee: Constitution and Commitment, Leadership, Efciency of Committee Process, Committee’s role,

Relationships, Development, of which there were 21 questions.

– Remuneration Committee: Constitution and Commitment, Leadership, Efciency of Committee Process,

Committee’s role, Development, of which there were 20 questions.

– Progress/Achievement of 21 external evaluation recommendations, of which there were seven questions.

FORMAL

INTERVIEWS

– Led by the Senior Independent Director, the other Directors also met without the Chair present to evaluate the

Chair’s performance and, separately, the Chair evaluated the performance of the Directors.

REPORTING

– The completed questionnaires were collated anonymously and analysed externally by Clare Chalmers Ltd together

with the Company Secretary.

– Key ndings and recommendations were shared with the Chair and Company Secretary, and a draft report was

prepared for review.

– The report was circulated to the Board and the feedback and comments from the questionnaires were discussed

at a Board meeting, before deciding which recommendations to take forward.

The review also included feedback on individual performance. This informed the annual process of individual Director evaluation, led by the

Chair, which included one-to-one discussions with each Director on their performance, contribution and any additional training and development

needs. The Senior Independent Director led the annual review of the Chair, holding a one-to-one discussion to provide feedback on his

performance. This was informed by a closed session of the Non-executive Directors, excluding the Chair, led by the Senior Independent Director.

The Senior Independent Director also engaged the CEO and Company Secretary to obtain their views on the Chair’s performance.

96 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Corporate Governance Report continued

Board Evaluation (continued)

Feedback and report ndings

The report was circulated to the Board and the feedback and comments from the questionnaires were discussed at a Board meeting, before

deciding which recommendations to take forward. Led by the Senior Independent Director, the other Directors also met without the Chair

present to evaluate the Chair’s performance and, separately, the Chair evaluated the performance of the Directors.

The questionnaire results demonstrated, despite the challenges associated with the war in Ukraine, progress has been made. Board members

agreed that the Board is working effectively with the correct skills and experience to support and to deal with challenges faced by the business;

and that there is an open culture which responds well to constructive challenge.

The Board has made progress over the past year, and there are some ideas on areas for development to ensure the Board works even more

effectively. The evaluation process identied these development areas for focus in 2023. The Board will continue to consider and reect on its

composition and what may be required for a future Non-executive Director hire to include future roles, skills and Board diversity. Issues are

discussed and debated with full and frank discussions encouraged, as the Board continues to develop, even further input to Board discussions

would be welcome. One-to-one meetings with the Chair and Board members could be used to discuss tailored individual development plans.

The Board Chair, CEO and Group Company Secretary will ensure appropriate time is allocated to all agenda topics.

The Board has considered the ndings of the evaluation and, overall, the review concluded that the Board is well balanced in terms of Board

dynamics. The Board is very well led by a proactive and fully engaged Chair. The environment in the boardroom encourages appropriate

challenge and debate with no one voice dominating discussions. The Board and its Committees are well Chaired and run by committed

Independent Non-executive Directors.

In response to the main recommendations of the evaluation report, the Board has agreed the following key areas for focus in 2023:

Key areas for focus in 2023

Area Actions to be taken

Board composition – Continue to improve Board diversity with a Director from an ethnic minority background.

Succession planning – Succession planning within the business and senior management including diversity

requirements.

Balanced skill set – Ensure Non-executive Directors continue to bring the right skill set and to balance the workload

of the Board Committees, planning early for future skills and experience for Board succession.

Workforce engagement – Continue to explore ways to enhance workforce engagement and bring ndings into the

Boardroom, including additional Board visits to the operations when possible.

Board efciency and processes – Continue to improve Board reporting particularly management report writing. Further explore

processes for reviewing past performance and decisions to enhance future decision making.

Corporate resourcing – Ensure bolstered resourcing for Secretariat.

97Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Training and professional

development

The Chair is responsible for agreeing training

and development requirements with each

Director to ensure they have the necessary

skills and knowledge to continue to contribute

effectively to the Board’s discussions. All

Directors receive updates given to the Board

as a whole on changes and proposed

changes in laws and regulations affecting

theGroup, as and when necessary.

During 2022, the Board had a combined

training session with its legal adviser Herbert

Smith Freehills and broker Liberum Capital.

This training session was held shortly

after the Russian invasion of Ukraine, and

covered key areas relevant to the Directors

in responding to such unprecedented

events including directors’ duties in a time

of armed conict, workforce engagement

and health and safety issues, ongoing

market announcement obligations, listed

company obligations, and scenario planning

for a range of potential eventualities

including suspension of operations.

Later in the year, the Board also received

dedicated training on ESG issues from

specialist advisers and the Group’s legal

advisers (for further information see page 94).

An update was also given to the Board on

market disclosure obligations and lessons

arising from recent enforcement actions taken

by the Financial Conduct Authority against

other listed companies. Dedicated briengs

are also given to the Board Committees as

appropriate, for example updates given during

the year to the Audit Committee on the UK

government’s proposed audit reforms.

Usually, site visits are held for the whole

Board annually, so as to ensure that all

Directors are familiar with the Group’s

operations, and Directors may also visit the

operations of the Group independently to the

extent they feel this is necessary. Due to the

ongoing conict in Ukraine, the physical

Board site visit was cancelled and replaced

with a virtual site visit, as set out on page 93.

In addition, training was provided by the

Group’s advisors in respect of specic areas

of interest to the Board, including general

economic and market conditions,

developments in corporate governance

regulations and best practice and any other

matters as agreed by the Chair.

All Directors may take independent

professional advice at the expense of the

Company in the furtherance of their duties.

Induction

Following appointment, all Directors are

advised of their duties, responsibilities and

liabilities as a director of a public listed

company. In addition, an appropriate

induction programme is provided to each

Director upon appointment, taking into

consideration the individual qualications,

experience and knowledge of the Director.

Induction training includes meeting senior

executives of the Executive Committee,

a detailed and structured site visit (or

alternative arrangements, where required

as a result of the ongoing conict in

Ukraine), meeting the Company Secretary,

necessary training on corporate governance

aspects, and receiving various key

Company documentation and reports.

Ms Polischuk, who was appointed on

29 December 2021, received director induction

training in early 2022 and followed a tailored

induction programme covering a range of

key areas of the business. She met with the

Company Secretary, who provided a Board

Induction pack containing Company and

Board information to assist with building an

understanding of the nature and structure

of the Group, its business and markets. The

Board Induction pack also included information

to help facilitate a thorough understanding

of the role of a Director, the framework

which the Board operates, Group policies

and procedures, constitutional documents

and regulatory codes and guidelines.

Ms Polischuk visited site operations in

September 2022 and met with the three Mining

General Directors, senior and operational

management teams, who provided insight

into the operational side of the business.

In 2021, Ferrexpo introduced a Buddy

programme for newly appointed Directors.

The role of a Buddy is to provide mentoring

for the rst three months during orientation

with the Company and its business. During

the year, Ms MacAulay completed her Buddy

duties for Ms Polischuk.

Board Training and Development

98 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Audit Committee Report

Scheduled meetings

Committee member

Eligible

to attend Attended

Graeme Dacomb 6 6

Vitalii Lisovenko 6 5

Fiona MacAulay 6 6

Natalie Polischuk 5 5

Graeme Dacomb

Chair of the Audit Committee

Membership and

meeting attendance

February

– Considered assumptions used for the going

concern and long-term viability assessment and

impairment testing.

– Received an update on the progress of the 2021

audit and analysed further work required.

– Considered the draft Annual Report and

Accounts for 2021.

– Reviewed the questionnaire to be used to

assess the external auditor’s performance.

– Reviewed Compliance Report including

whistleblowing cases.

– Reviewed the Group’s risk matrix and register.

– Reviewed an update on the Directors’ Interests

list and transactions with Related Parties.

– Reviewed the Audit Committee 2022 Forward

Planner.

– Received an update on Audit Reform.

– Received an update on Cyber Security.

March

– Reviewed and discussed the status of key areas

of focus and audit matters and disclosure

provisions.

– Assessed material uncertainties and discussed

potential mitigating actions.

– Considered the draft of the auditor’s opinion.

– Reviewed the draft Annual Report and Accounts

for 2021.

– Considered the going concern and viability

statement.

– Reviewed Principal Risks and uncertainties.

– Reviewed the draft Audit Committee Report.

– Reviewed Compliance Report including

whistleblowing cases.

– Reviewed the Group’s risk matrix and register.

– Reviewed an update on the Directors’ Interests

list and transactions with Related Parties.

April

– Received the Report of the Auditors.

– Reviewed letters of representation.

– Reviewed the Audit opinion.

– Reviewed the auditor’s Letter of Independence.

– Reviewed the 2021 Report and Financial

Statements.

– Considered the going concern and viability

statement.

– Discussed identied material uncertainties and

assessment of mitigating actions.

– Reviewed the Audit Committee Report.

– Reviewed auditors 2021 performance (Statutory

Audit Service Order) – analysis of scores.

– Reviewed the assessment of the low-grade iron

ore.

– Held private meeting with the auditors.

Key activities of the Committee in 2022

Key activities of the Audit Committee during 2022 are set out below.

Focused on management’s going concern assessment while

continuing to monitor the integrity of the nancial results.

Dear Shareholder,

On behalf of the Board, I am pleased to present

the Audit Committee Report for the nancial

year ending 31 December 2022. The aim of this

report is to provide shareholders with insight into

key areas that have been considered, how the

Committee has discharged its responsibilities

and lastly provide assurance on the integrity of

the 2022 Annual Report and Accounts.

The situation for the Group during the

nancial year 2022 was strongly inuenced by

the ongoing war in Ukraine, which also led to

a signicantly increased involvement of the

Committee to timely identify and analyse the

additional risks in this unprecedented period

for the Group.

The matters requiring increased involvement

of the Committee were primarily the

assessment of the Group’s going concern

and viability in light of the material

uncertainties, but also the considerations

required when preparing the Group’s

impairment test for its non-current operating

assets as well as the escalation of a number

of matters to be considered as a result of the

change of the political environment in Ukraine.

The Committee agenda focuses on audit,

compliance and risk management within the

Group, working closely with nance, external

audit, internal audit and management. During

the year, the Committee has robustly assessed

the principal and emerging risks facing the

business. The Committee throughout the year

took into account the regular nancial and

internal audit reports made available to the

Board, as well as discussing issues with

management and the external auditors at

intervals throughout the year.

A critical area of focus for the Committee

sincethe year end, has been the going

concern assessment itself and consequently

the consideration of the preparation of the

consolidated accounts on the going concern

basis. On 24 February 2022, Russia began its

invasion into Ukraine using direct military force

and this has led to an intense armed conict in

Ukraine, which, as at the date of the approval

of these Consolidated Financial Statements, is

still ongoing. Although the Group has managed

to continue its operations, the war continues to

pose a signicant threat to the Group’s mining,

processing and logistics operations within

Ukraine and represents a material uncertainty

in terms of the Group’s ability to continue as a

going concern.

As a result of the war, the local audit team

could not be on-site in Ukraine. Our external

auditor MHA MacIntyre Hudson was on-site

atour ofce in Baar and was able to complete

its annual audit procedures for the preliminary

and year-end audits partly in person. Likewise,

the Committee has been able to physically

meet with both management and the auditors.

The current situation in Ukraine required

additional work from our external auditors,

primarily in terms of the material uncertainty

surrounding the Group’s going concern and

viability assessment in light of the ongoing war.

99Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

During the year, the Committee considered

the status of the proposed regulatory change

of the BEIS Consultation on ‘Restoring trust in

audit and corporate governance: proposals

on reforms’. The Committee reviewed the

future potential impacts this could have on the

Committee in order to understand

developments and plan accordingly.

TCFD disclosure requirements were a focus for

the Committee and environmental consultants

Ricardo Plc were appointed to help enhance the

Group’s existing climate change reporting,

scenario analysis and potential pathways to net

zero iron ore pellet production. Through this

work, Ricardo Plc’s analysis has helped to

enhance the Group’s carbon reduction targets,

as announced in the Group’s Climate Change

Report in December 2022. Further work is

underway to complete a life cycle analysis,

benchmarking the carbon footprint of iron ore

pellets against the most commonly traded form

of iron ore (sinter nes), with this study due to be

published in 2023. The Group also completed

its rst independent assurance process with

independent auditor MHA MacIntyre Hudson in

2022 on the Group’s carbon emissions (Scope

1 and Scope 2 emissions) and safety data for

2021. A similar process has been completed for

the same categories of data for 2022. Details of

the independent assurance processes

completed are provided on the Group’s website.

Detailed below is further information on the role,

structure and key activities of the Committee

and signicant judgements it has considered in

2022. I hope this additional information about

the Committee and its activities is useful.

Graeme Dacomb

Chair of the Audit Committee

Role of the Committee

The Committee’s objectives and

responsibilities are set out in its terms of

reference which are available to view online.

The Committee’s main responsibilities are:

– Monitoring the integrity of the annual and

interim nancial statements and the

accompanying reports to shareholders.

– Making recommendations to the Board

concerning the approval of the annual and

interim nancial statements.

– Reviewing and monitoring the adequacy

and effectiveness of the Group’s risk

management and internal control

mechanisms. Details of the Principal Risks

are contained on pages 56 to 74.

– Approving the terms of reference of the

internal audit function and assessing its

effectiveness.

– Approving the Internal Audit plan and

receiving regular reports from the Group’s

Head of Internal Audit.

– Overseeing the Group’s relations with the

external auditor, including an assessment

of their independence, effectiveness and

objectivity.

– Overseeing completion of the Group’s

going concern and viability assessment

and statements thereon.

– Reviewing and monitoring the Group’s

whistleblowing procedures and the

Group’s systems and controls for the

prevention of bribery and corruption.

During the year ended 31 December 2022,

the Committee has ensured that it has had

oversight of all these areas listed. The Board

also asked the Committee to advise it as to

whether the Annual Report and Accounts are

fair, balanced and understandable and

provide the information necessary for

shareholders to assess the Group’s position,

performance, business model and strategy.

Committee membership and

attendance

As at the year end, the Committee comprised

four Independent Non-executive Directors:

– Graeme Dacomb (Chair of the Committee);

– Vitalii Lisovenko;

– Fiona MacAulay; and

– Natalie Polischuk.

Natalie Polischuk joined the Committee

in February 2022. In addition to the six

meetings held in 2022, the Audit Committee

has met twice to date in 2023. All members

of the Committee are considered to

possess appropriate knowledge and skills

relevant to the activities of the Group, and

Graeme Dacomb has recent and relevant

nancial experience, including accounting

and auditing, due to his career as an

audit partner with Ernst & Young LLP.

In addition to its members, other individuals

and external advisers, and the Chair of the

Board, may be invited to attend meetings of

the Committee at the request of the

Committee Chair. Regular attendees at

meetings include the Chief Financial Ofcer,

Group Financial Controller, Company

Secretary and audit partners of our external

auditor MHA MacIntyre Hudson. The

Committee has an opportunity to meet with

the external auditors at the end of its

scheduled meetings, without the Executive

Director or management present.

Key activities of the Committee in 2022

Key activities of the Audit Committee during 2022 are set out below.

May

– Reviewed auditors 2021 performance (Statutory

Audit Service Order) – analysis of nal detailed

scores.

– Reviewed 2022 audit planning, key dates,

preliminary audit plan.

– Reviewed an update on 2021 recommendations

from Internal Audit.

– Received an update on proposed Audit Reform.

– Discussed the need for a risk assurance map.

– Reviewed a Compliance Report including

whistleblowing cases.

– Reviewed the Group’s risk matrix and register.

– Reviewed an update on Directors’ Interests list

and transactions with Related Parties.

– Reviewed the Audit Committee 2022 Forward

Planner.

July

– Presentation and review of half-year accounts.

– Going concern assessment, including Covid-19

related reporting and impairment test.

– Auditor’s Review Report to the Audit Committee.

– Reviewed the Group’s risk matrix and register.

– Reviewed the Directors’ Interests list and

transactions with Related Parties.

– Received an update on Cyber Security and IT

Security audit.

– Received an update on the ESG Disclosure

Audit.

– Received an update on proposed Audit Reform.

– Reviewed a Compliance Report, including

whistleblowing cases.

December

– Received a report on the outcome of the 2021

Internal Audit plan and progress update on

2022.

– Reviewed the preliminary Internal Audit plan for

2023.

– Considered the Group’s work plan for the 2022

year end.

– Received an update on Cyber Security, on Audit

results and ISO2700x compliance.

– Considered a report from the external auditors

on progress of the preliminary audit for 2022.

– Reviewed an external audit planning report.

– Received an update on the planned process for

the viability and going concern assessment.

– Received an update on proposed Audit Reform.

– Reviewed a Compliance Report including

whistleblowing cases.

– Reviewed the Directors’ Interests list and

transactions with Related Parties.

– Reviewed the Group’s risk matrix and register.

– Reviewed the Audit Committee 2023 Forward

Planner.

100 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Audit Committee Report continued

Signicant issues and judgements

The signicant issues and judgements considered by the Committee in respect of the 2022 Annual Report and Accounts are set out below:

Judgements/actions taken

Assessment of the Group’s going concern and viability statements (Note 2 to the Consolidated Financial Statements)

The war in Ukraine that commenced with the Russian invasion into Ukraine on 24 February 2022 is still ongoing. Even though the Group managed to

operate throughout the nancial year 2022, albeit at a much lower capacity, the situation in the country continues to pose a signicant threat to the

Group’s mining, processing and logistics operations.

As announced on 11 October 2022, the Group had to temporarily suspend its production of iron ore pellets as a result of Russian missile strikes on

state-owned electrical infrastructure. Although the Group restarted production later in December 2022, the level of production remains critically

dependent on the availability of power supplies which continue to be impacted by Russian attacks. The Group’s operation also continues to be adversely

affected by the fact that the Group’s seaborne sales through the port of Pivdennyi are suspended with Ukraine’s Black Sea ports closed as a result of the

Russian invasion. Consequently, the Group currently operates between one and two of its four pelletiser lines, reecting both the available guaranteed

supply of power and the need to align production volumes with the volume of sales currently accessible to the Group.

Despite the unprecedented and challenging situation, the Group’s net cash position has only decreased from US$117 million at the beginning of the

nancial year to US$106 million as of 31 December 2022, with the Group adjusting its business operation to the new environment to preserve as much

liquidity as possible. As at the date of the approval of these Consolidated Financial Statements, the Group is in a net cash position of approximately

US$114 million with an available cash balance of approximately US$120 million. In addition to the available cash balance, the Group has an outstanding

trade receivable balance of approximately US$21 million from its pellet and concentrate sales in January and February 2023, which are expected to be

collected in the next few weeks.

The Audit Committee has reviewed management’s going concern assessment, including the Group’s long-term model which has been adjusted to reect

the latest developments in terms of currently possible production and sales volumes as well as latest market prices and production costs, which are

adversely affected by lower production volumes. The latest base case of the long-term model shows that the Group has sufcient liquidity to continue its

operations at a reduced level for the entire period of the management’s going concern assessment, even allowing for reasonably possible or plausible

adverse changes in respect of realised prices, lower production and sales volumes as well as higher production costs.

However, as mentioned above, the production and sales volumes are heavily dependent on the level of supply of power as well as the logistics network

available to the Group.

The Audit Committee has also reviewed the Group’s reverse stress tests reecting more severe adverse changes, such as a combination of all reasonably

possible or plausible adverse changes in respect of realised prices, lower production and sales volumes as well as higher production costs, which is

unlikely to happen in combination as a result of the natural hedge of iron ore prices and prices for key input materials. Based on the stress tests

performed, it is expected that the Group would have sufcient liquidity for up to 12 months before making use of any available mitigating actions within

itscontrol, such as further reductions of uncommitted development capital expenditures and operating costs.

However, as at the date of the approval of these Consolidated Financial Statements, the Group has assessed that, taking into account:

– its available cash and cash equivalents;

– its cash ow projections, adjusted for the effects caused by the war in Ukraine, for the period of management’s going concern assessment covering

aperiod of 18 months from the date of the approval of these Consolidated Financial Statements; and

– the feasibility and effectiveness of all available mitigating actions within the Group management’s control for identied uncertainties, a material

uncertainty still remains as some of the uncertainties remain outside of the Group management’s control, with the duration and the impact of the war

still unable to be predicted at this point of time.

As at the date of the approval of these Consolidated Financial Statements, the Group’s operations, located adjacent to the city of Horishni Plavni, have

notbeen involved in the conict, but this remains a risk. Should the area surrounding the Group’s operations become a focal point of the armed conict,

there would be a signicant risk posed to the safety of the Group’s workforce and the local community, as well as a signicant risk to key assets and the

infrastructure required for the Group to operate effectively. See the update on the Group’s Principal Risks section on pages 56 to 74 for further

information.

In addition to the war-related uncertainties described above, the Group is also exposed to the risks associated with operating in a developing economy,

which may be exacerbated by the war. As a result, the Group is exposed to a number of risk areas that are heightened compared to those expected in

adeveloped economy, such as an environment of political, scal and legal uncertainties. Although the Group has operated successfully in difcult

circumstances in recent years, the war in Ukraine has led to an escalation of a number of risks, including risks relating to the political environment and the

independence of the legal system, which could have a negative impact on the Group’s business and reputation. For more information, see the update on

the Group’s Principal Risks section on pages 56 to 74 and Note 30 Commitments, contingencies and litigation to the Consolidated Financial Statements.

After consideration of the current situation of the war in Ukraine, all identied available mitigating actions addressing the uncertainties caused by the war,

as outlined on pages 59 to 60, and the results of the management’s going concern assessment, the Group continues to prepare its Consolidated Financial

Statements on a going concern basis. However, the Committee concurs with management’s view that, as a number of the identied uncertainties are

outside of Group management’s control and are of unpredictable duration and severity, these may cast signicant doubt upon the Group’s ability to

continue as a going concern. See Note 2 Basis of preparation to the Consolidated Financial Statements on page 156 for further information.

The Committee also considered management’s analysis of the impact of the war in Ukraine on the long-term viability assessment of the Group. Although

the Group has managed to continue its operations since the beginning of the war, the war continues to pose a signicant threat to the Group’s mining,

processing and logistics operations within Ukraine. The Committee concurs with management’s conclusion that, notwithstanding all of the available

mitigating actions, a material uncertainty still remains as some of the identied uncertainties are outside of Group Management’s control. See Viability

Statement on pages 75 to 76 for further information.

101Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Judgements/actions taken

Impairment considerations of the Group’s non-current operating assets as a result of the war (Note 13 to the Consolidated Financial

Statements)

The beginning of full scale war on 24 February 2022 was treated as a non-adjusting post balance sheet event in the Consolidated Financial Statements for

the year ended 31 December 2021, but became an adjusting event in the Consolidated Financial Statements for the period ended 30 June 2022. As

disclosed under Assessment of the Group’s going concern and viability statements on page 100, the war in Ukraine had a signicant impact on the

Group’s operations during the nancial year 2022. The Group’s cash ow generation was heavily affected by the Group’s seaborne sales through the port

of Pivdennyi having been suspended as a result of closed Black Sea ports in Ukraine since the beginning of the war and the level of supply of power

following severe Russian missile strikes on state-owned electrical infrastructure.

As a result, the Group had to adjust its long-term model based on the new facts and circumstances adversely affecting the business of the Group. Using

the base case of the Group’s updated long-term model prepared for the 2022 interim accounts, the value in use of the Group’s single cash generating

unit’s operating non-current assets, including property, plant and equipment, goodwill and other intangibles as well as other non-current assets, was

US$254 million below the total carrying value of these assets, reecting an impairment loss of this amount. As at the date of the approval of these

Consolidated Financial Statements, the war in Ukraine is still ongoing. Even though the Group managed to operate throughout the nancial year 2022,

theongoing war had an adverse impact on the Group’s cash ow generation and it is expected that this will continue until the war comes to an end.

A number of signicant judgements and estimates are used when preparing the nancial long-term model of the Group, which are, together with the key

assumptions used, reviewed by the Audit Committee with a specic consideration given to the realistically plausible production volumes in light of the

disrupted supply of power and the logistics network available to the Group, sales price and production cost forecasts as well as the discount rate used.

The Committee is aware that the level of judgement signicantly increased, compared to previous years, when preparing the Group’s long-term model

and the impairment test for the Group’s non-current operating assets as of 31 December 2022. Beside the normal judgement in terms of production and

sales volumes, anticipated prices for iron ore products and costs for input material, the outcome of the impairment test is also heavily dependent on when

the war is expected to end. Taking into consideration the ongoing disruption of the supply of power due to the war, management has assumed, for the

cash ow projections, that the production capacity will be 50% and 25% below the pre-war level for the nancial years 2023 and 2024, before recovering

in 2025 to the pre-war level.

Based on the updated long-term model and impairment test, the impairment of US$254 million recorded as of 30 June 2022 is not required to be

adjusted as of 31 December 2022, as a result of various offsetting effects. Whilst the weighted average cost of capital has been increased to 23.4%,

compared to 20.4% as of 30 June 2022, mainly due to a higher country risk premium for Ukraine, the carrying value of the assets to be tested for

impairment was impacted by the devaluation of the Ukrainian hryvnia from 29.255 to 36.569 compared to the US dollar in July 2022, which reduced

thecarrying value by another US$201 million.

As mentioned above, the preparation of the long-term model and the impairment testing in these unprecedented times involves a high degree of

judgement and any adverse changes in key assumptions would further reduce the value in use of the Group’s operating non-current assets. Based on

thesensitivities prepared, a delay of the recovery of the production and sales volumes to a pre-war level by another year would reduce the value in use of

the Group’s non-current operating assets by approximately another US$149 million, with all other assumptions remaining unchanged. A reduction of the

realised price by US$5 per tonne for the entire period covered by the long-term model would increase the impairment loss by approximately US$224

million and a decrease of the production and sales volume by 10%, combined with an increase of the production costs by 5%, again for the entire period,

would increase the impairment loss by approximately US$308 million. An increase of the pre-tax real discount rate by 3.0% would result in an increase of

US$164 million with all other assumptions remaining unchanged.

The recorded impairment during the nancial year 2022 will be reassessed at the end of any future reporting periods. If there are positive developments in

the Group’s future cash ow generation and the relevant macro-economic data, a portion of the impairment loss might reverse in future periods.

Taxation in general and tax legislation in Ukraine (Note 11 to the Consolidated Financial Statements)

On 27 June 2022, the Supreme Court of Ukraine ruled partially in favour of the State Fiscal Service of Ukraine (“SFS”) in respect of a claim made by the

SFS, despite two favourable verdicts received by the Group’s subsidiary from lower court instances. The claim was in respect of a tax audit performed for

the period from 1 September 2013 to 31 December 2015 at the Group’s major subsidiary in Ukraine with a focus on cross-border transactions. As a result

of this court decision, an amount of UAH 234 million (US$8 million) became a legally binding obligation and was paid in July 2022.

The Group operates across a number of jurisdictions through its value chain and prices its sales between its subsidiaries using international benchmark

prices for comparable products covering product quality and applicable freight costs. The Group judges these to be on terms which comply with

applicable legislation in the jurisdictions in which the Group operates. The pricing of cross-border transactions is an inherent risk for any multinational

group and regular audits are to be expected. On 18 February 2020, the State Tax Service of Ukraine (“STS”), formerly known as SFS, commenced two

taxaudits for cross-border transactions between the Group’s major subsidiary in Ukraine and two subsidiaries of the Group outside of Ukraine in relation

to the sale of iron ore products during the nancial years 2015 to 2017. Further to that, on 14 June 2021, the STS commenced another tax audit for the

nancial years 2015 to 2017 for cross-border transactions of another Ukrainian subsidiary with the same two subsidiaries of the Group outside of Ukraine.

Both audits have been affected by the Covid-19 related quarantine imposed in Ukraine during 2020 and the Martial Law declared by Ukraine in February

2022 as a result of the Russian invasion into Ukraine. The audits resumed on 25 January 2023 and the deadlines to provide the reports for the audits by

the STS are now 10 June 2023 and 15 November 2023, respectively.

There is a potential risk that the partially negative verdict of the Supreme Court of Ukraine might have an adverse impact on the tax audits described

above, as the STS might use the court verdict as a precedent for the currently ongoing tax audits. Having considered the background and history of the

court proceedings in respect of the claim partially lost in the Supreme Court of Ukraine, the Committee shares management’s view that the Group has

complied with applicable legislation for all cross-border transactions undertaken and that the court did not appropriately consider relevant technical

grounds and the applicable legislation when ruling on this case. The Group is exposed to the risks associated with operating in a developing economy,

including an environment of political, scal and legal uncertainties. As a result, there is a risk that the independence of the judicial system and its immunity

from economic and political inuences in Ukraine is not upheld. As of the approval of these Consolidated Financial Statements, no claims have been

made by the STS in respect of the audits commenced in 2020 and 2021. As a consequence, no provision has been recorded as at 31 December 2022 for

transactions and years subject to the audits commenced by the STS as it is impossible to reasonably quantify the potential exposure. Any potential claims

will be again defended in the courts in Ukraine.

102 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Audit Committee Report continued

Judgements/actions taken

Inventories: low-grade and weathered ore (Note 17 to the Consolidated Financial Statements)

Historically, inventories classied as non-current comprised low-grade and weathered ore that were, based on the Group’s processing plans,

not planned to be processed within the next 12 months. Following the approval of the Wave 1 Expansion project by the Board in October 2021,

management has had to revisit its mining and processing plans and strategies as the growth project means that signicant higher volumes of high

grade ore are required to meet both future production needs and market expectations. Whilst the stockpiled ore was still seen as an asset for the

Group, the changed circumstances have resulted in the calculation of the net realisable value of the existing stockpiled low-grade ore reducing

to nil. As a consequence, a full impairment totalling US$231 million of the stockpiled low-grade ore was recorded as of 31 December 2021.

As disclosed in the Group’s 2021 Annual Report and Accounts, it is expected that some or all of the impairment loss might reverse in the

future, once changed facts and circumstances can be considered in the net realisable value test of this asset. Whilst the stockpiled low-grade

ore is still considered as an asset for the Group, the ongoing war in Ukraine has made it difcult to accelerate the commenced engineering

studies for the exploration of possible options for new processing capabilities for the specic purpose of processing low-grade ore. As a result,

the Committee concurs with management’s view that there are no changes in facts and circumstances to be considered as of 31 December

2022 and the stockpiled low-grade ore remains fully impaired. Consequently, the volume of low-grade ore extracted during the year ended

31 December 2022 with a cost of US$10 million was fully recognised in the Consolidated Income Statement and included in the cost of sales.

Completeness of contingencies and legal disputes (Note 30 to the Consolidated Financial Statements)

The Committee is aware that the Group is, in addition to the war-related uncertainties described under Assessment of the Group’s going

concern and viability statements on page 100, also exposed to the risks associated with operating in a developing economy, which may or may

not be exacerbated by the war and/or the current circumstances facing the Group’s controlling shareholder. As a result, the Group is exposed to

a number of risk areas that are heightened compared to those expected in a developed economy, including an environment of political, scal and

legal uncertainties.

Although the Group has operated successfully in difcult circumstances in recent years, the war in Ukraine and other circumstances facing

theGroup has led to an escalation of a number of risks, including risks relating to the political environment and the independence of the legal

system, which could have a material negative impact on the Group’s business and reputation. The Group is currently facing the following

ongoing legal proceedings, disputes and potential contingencies, which are disclosed in full detail in Note 30 Commitments, contingencies

andlegal disputes to the Consolidated Financial Statements:

– share dispute related to the Group’s major subsidiary in Ukraine;

– royalty-related investigation and claim;

– currency control measures imposed in Ukraine;

– contested sureties claim;

– ecological claims; and

– cancellation of licence for Galeschynske deposit.

As mentioned above, the Group is operating in a developing economy and most of the matters to be considered by the Committee are seen to

be a result of operating in such an environment. The Committee is aware that there is a risk that the independence of the judicial system and its

immunity from economic and political inuences in Ukraine is not upheld, consequently Ukrainian legislation might be inconsistently applied to

resolve the same or similar disputes.

As a result, the Committee thoroughly reviewed management’s position and legal advice received for the matters listed above and concluded

that the disclosures made in Note 30 Commitments, contingencies and legal disputes to the Consolidated Financial Statements provide an

adequate level of detail to allow the reader of the accounts to understand the potential consequences and the related exposure. The Committee

also concurs with management’s view that no associated liabilities are required to be recognised in relation to these matters in the consolidated

statement of nancial position as at 31 December 2022.

Events after the reporting period (Note 35 to the Consolidated Financial Statements)

The following two events after the reporting period are summarised below.

On 9 March 2023, the Group received conrmation that the Kyiv Commercial Court had ordered the arrest (freeze) of 50.3% of Ferrexpo AG’s

(“FAG”) shareholding in each of Ferrexpo Poltava Mining (“FPM”), Ferrexpo Yeristovo Mining (“FYM”) and Ferrexpo Belanovo Mining (“FBM”). The

court order also prohibits each of FPM, FYM and FBM making changes to the amount of its authorised capital and does not affect ownership of

the shares in these three subsidiaries of the Group in Ukraine, but prohibits the disposal by FAG of 50.3% of its shareholding in each named

subsidiary.

This court order was issued by the Kyiv Commercial Court during a hearing in the commercial litigation between the Deposit Guarantee Fund

and Mr. Zhevago, the Group’s controlling shareholder, in relation to the liquidation of Bank F&C in 2015.

The Group has no intention, and never has had any intention, of transferring the shares in FPM, FYM, FBM or FAG. In addition, no impact on the

operations of the Group is expected as a result of this court order.

As announced on 10 March 2023, the Group transferred 9,513,000 shares from the treasury share reserves to the Group’s employee benet

trust reserve. Following the transfer of the shares, the issued share capital of Ferrexpo plc consists of 613,967,956 ordinary shares of 10 pence

each, of which 15,830,814 ordinary shares are held in treasury. As a result of this transfer, the interest of the Group’s largest shareholder,

Fevamotinico S.a.r.l, in the voting rights of Ferrexpo plc is now 49.5%.

For further details, see Note 35 Events after the reporting period of the Group’s Consolidated Financial Statements.

103Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Internal control and risk

management

The Board, with assistance from the Audit

Committee, regularly reviews the policies and

procedures making up the internal control

and risk management system, and any

signicant matters reported by the Executive

Committee. The risk register is considered at

every scheduled Board and Audit Committee

meeting, with specic risks discussed in detail

as and when required.

The Board has delegated its responsibility

forreviewing the effectiveness of the internal

control and risk management system to the

Audit Committee. In making its assessment,

the Audit Committee considers the reporting

provided to it during the year in relation to

internal control systems and procedures,

including the risk matrix and register, and

mayrequest more detailed investigations

intospecic areas of concern if appropriate.

Internal controls – general

The Board, with assistance from the Audit

Committee, regularly reviews the policies and

procedures making up the internal control

and risk management system, and any

signicant matters reported by the Executive

Committee. The risk register is considered at

every scheduled Board and Audit Committee

meeting, with specic risks discussed in detail

as and when required.

The Board has delegated its responsibility

forreviewing the effectiveness of the internal

control and risk management system to the

Audit Committee. In making its assessment,

the Audit Committee considers the reporting

provided to it during the year in relation to

internal control systems and procedures,

including the risk matrix and register, and

mayrequest more detailed investigations into

specic areas of concern if appropriate.

Key elements of the internal control and risk

management system include:

– The Group has in place a series of policies,

practices and controls in relation to the

nancial reporting and consolidation

process, which are designed to address

key nancial reporting risks, including risks

arising from changes in the business or

accounting standards and to provide

assurance of the completeness and

accuracy of the content of the Annual

Report.

– Regular review of risk and identication

ofkey risks at the Executive Committee

which are reviewed by the Audit

Committee and by the Board.

– The FRMCC, an executive sub-committee,

is charged, on behalf of the Executive

Committee or Audit Committee, as

appropriate, with ensuring that, inter alia,

systems and procedures are in place to

comply with laws, regulations and ethical

standards. The Group Compliance Ofcer

attends FRMCC meetings, and, as

necessary, local compliance ofcers from

the Group’s operations, attend and

present regular reports to ensure that the

FRMCC is given prior warning of regulatory

changes and their implications. The

FRMCC enquires into the ownership of

potential suppliers deemed to be “high

risk”, and oversees the management of

conicts of interests below Board level and

general compliance activities (including

under the UK Bribery Act, the Modern

Slavery Act, the Criminal Finances Act,

and the EU General Data Protection

Regulation). The FRMCC also reviews

nancial information, management

accounts, taxation, cash management,

risk including counterparty risk, risk

met ten times in 2022.

– Clearly dened organisational and

reporting structure and limits of authority

for transaction and investment decisions,

including any with related parties.

– Clearly dened processes for the review

and approval of related party listings and

transactions and appropriate review and

approval from the CID and its delegated

management sub-committee, the

Executive Related Party Matters

Committee (“ERPMC”). Additional

procedures are in place locally to ensure

the completeness and arm’s length nature

of related party transactions with related

parties under common control, such as

background checks and tender processes.

The ERPMC met eight times in 2022.

– Clearly dened information and nancial

reporting systems, including regular

forecasts and an annual budgeting

process with reporting against key

nancial and operational milestones.

– Investment appraisal underpinned by the

budgetary process, where capital

expenditure limits are applied to delegated

authority limits.

– The Investment Committee (an executive

sub-committee) meets as required in order

to consider and approve capital

expenditures within limits delegated by the

Executive Committee and the Board. The

Investment Committee only met twice in

2022 as no investment decisions were

required since the onset of the war.

– A budgetary process and authorisation

levels to regulate capital expenditure. For

expenditure beyond specied levels,

detailed written proposals are submitted to

the Investment Committee and Executive

Committee and then, if necessary, to the

Board for approval.

– Clearly dened Treasury Policy (details of

which are given in Note 27 Financial

instruments to the Consolidated Financial

Statements on pages 188 to 194), which is

monitored and applied in accordance with

pre-set limits for investment and

management of the Group’s liquid

resources, including a separate treasury

function.

– Internal audit by our in-house audit team

based in Ukraine (see below), which

monitors, tests and improves internal

controls operating within the Group at all

levels and reports directly to the Chair of

the Audit Committee, and to the CFO for

line management purposes.

– A standard accounting manual is used by

the nance teams throughout the Group,

which ensures that information is gathered

and presented in a consistent way that

facilitates the production of the

Consolidated Financial Statements.

– A framework of transaction and entity-level

controls to prevent and detect material

error and loss.

– Anti-fraud measures through an internal

security department operating in the

Company’s key operating subsidiaries.

– A whistleblowing policy is in place under

which staff may in condence, via an

independent, secure website, raise

concerns about nancial or other

impropriety, which are followed up by

Internal Audit and reported on to the Board.

The Audit Committee and the Board

continued to review ongoing litigation

affecting the Company throughout the year

(see Note 30 Commitments, contingencies

and legal disputes to the Consolidated

Financial Statements on pages 196 to 199),

and received regular update reports and

presentations from legal counsel.

Full details of the Group’s policy on credit,

liquidity and market risks and associated

uncertainties are set out in Note 27 Financial

instruments to the Consolidated Financial

Statements on pages 188 to 194. See also

the Principal Risks section of the Strategic

Report on page 56.

104 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Audit Committee Report continued

Internal audit

The internal audit function has a Group-wide

remit, and the Head of Internal Audit (who

hasmining experience) reports directly to the

Chair of the Audit Committee and to the CFO.

The Committee reviews at least annually the

effectiveness of the internal audit function by

assessing outcomes against plan targets, and

is satised, following its 2022 assessment,

with the rigour of the internal audits and with

management’s response to the audit ndings

and recommendations. The resources of

internal audit are also monitored to ensure

appropriate expertise and experience. An

Internal Audit plan for 2023 was approved by

the Audit Committee in December 2022.

The Internal Audit plan for 2022 was approved

by the Audit Committee. The full scope audits

focused on the operational risks relating to

Group sales for FAG and FME, Outbound

logistics for FPM, FYM and FBM, Group

Compliance audit, Fixed Assets Cycle (Capex)

for FPM, FYM and FBM, Inventory

Management – RM and MRO, FYM Repair

and Maintenance, FYM and FBM Energy

Management and First-DDSG Logistics

Holding GmbH. The Committee received a

report from the Head of Internal Audit twice

during the year, and reviewed the progress

ofthe Internal Audit plan with the external

auditors and the Head of Internal Audit. The

reports include the Head of Internal Audit’s

assessment of the operation and

effectiveness of relevant elements of the

Company’s internal control systems, and

formed part of the Committee’s ongoing

monitoring and assessment of such systems.

External audit

Auditor independence and assessment

of audit process effectiveness

The Audit Committee and the Board place

great emphasis on the independence and

objectivity of the Company’s external auditors

when performing their role in the Company’s

reporting to shareholders.

The effectiveness of the audit process and

the overall performance, independence and

objectivity of the external auditors are

reviewed annually at the end of the annual

reporting cycle by the Audit Committee,

taking into account the views of management.

This review is undertaken through a

structured questionnaire, assessing the

auditor’s performance under various

headings: the robustness of the audit, the

quality of delivery, the calibre of the audit

team and value added advice. The results of

the survey indicated that, overall, the external

auditor’s performance was considered very

good by the respondees. Certain areas for

improvement were noted but none impacted

on the effectiveness of the audit. The

outcome of the 2022 review in respect of the

2021 Annual Report and Accounts was

discussed with the relevant partners of MHA

MacIntyre Hudson.

The auditors also provide to the Audit

Committee information about policies and

processes for maintaining independence and

monitoring compliance with relevant current

requirements, including those regarding

the rotation of audit partners and staff, and

the level of fees that the Company pays in

proportion to the overall fee income of the rm.

The Committee concluded that the auditors

are providing the required quality in relation

to the audit and that they have constructively

challenged management where appropriate.

Taking into account the review of

independence and performance of the

external auditor, the Audit Committee has

recommended to the Board the

reappointment of MHA MacIntyre Hudson.

Resolutions reappointing MHA MacIntyre

Hudson as external auditor and authorising

the Directors to set the Auditor’s remuneration

will be proposed at the 2023 AGM.

The Company has complied with the

Statutory Audit Services Order issued by the

UK Competition and Markets Authority for the

nancial year ended 31 December 2022.

The Committee meets at least once a year

with the external Auditors without any

representation from management being

present.

Non-audit services

The Audit Committee operates policies in

respect of the provision of non-audit services

and the employment of former employees of

the auditors. These policies ensure that the

external auditors are restricted to providing

only those services which do not compromise

their independence under applicable

guidance and the FRC’s Ethical Standards.

The policy on the provision of non-audit

services prohibits the use of the auditors

forthe provision of transaction or payroll

accounting, outsourcing of internal audit

andvaluation of material nancial statement

amounts. Any assignment that is proposed

tobe given to the auditors above a value of

US$20,000 must rst be approved by the

Audit Committee (who are routinely notied

ofall non-audit services).

Fees for audit-related and non-audit related

services performed by the external auditors

during 2021 are shown in Note 7 Operating

expenses to the Consolidated Financial

Statements on page 158. For 2022, no

material non-audit services were performed

by MHA MacIntyre Hudson.

Audit-related assurance services as at

31 December 2022 include US$51 thousand

regarding ESG-related disclosures in the

Annual Report and Accounts under

International Standard on Assurance

Engagements ISAE (UK) 3000 (Revised) in

respect of the process for reporting of

selected safety and emissions data.

Financial reporting

The Board has asked the Audit Committee

to advise whether it considers the 2022

Annual Report and Accounts, taken

as a whole, to be fair, balanced and

understandable and that it provides the

information necessary for shareholders

to assess the Company’s position,

performance, business model and strategy.

In providing its advice, the Committee noted

that the factual content of the Annual Report

and Accounts has been carefully checked

internally, and that the document has been

reviewed by senior management in order

to ensure consistency and overall balance.

The Committee has also conducted its own

detailed review of the disclosures in the Annual

Report and Accounts, taking into account

its own knowledge of Ferrexpo’s strategy

and performance, the consistency between

different sections of the report, the accessibility

of the structure and narrative of the report,

and the use of key performance indicators.

The Committee is satised that, taken

as a whole, the 2022 Annual Report

and Accounts is fair, balanced and

understandable and that it provides the

information necessary for shareholders

to assess the Company’s position,

performance, business model and strategy,

and has advised the Board accordingly.

The Committee has also advised the Board

on the process which has been undertaken in

the year to support the longer-term Viability

Statement required under the UK Corporate

Governance Code. The Viability Statement is

set out in the Strategic Report on page 75

and a statement setting out the Board’s

assessment of the Company as a going

concern is contained in the Directors’ Report

on page 135 and Note 2 Basis of preparation

to the Consolidated Financial Statements on

page 156.

Whistleblowing policy

In accordance with the UK Corporate

Governance Code, the Board is

responsible for reviewing the Company’s

whistleblowing arrangements, and

receives regular reports from the Audit

Committee and the Head of Internal Audit

which detail any new whistleblowing

incidents and, where appropriate, steps

taken to investigate such incidents.

Graeme Dacomb

Chair of the Audit Committee

14 March 2023

105Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Nominations Committee Report

Dear Shareholder,

I am pleased to present the Nominations

Committee Report for 2022 and provide a

summary of the work that the Committee

completed in 2022. The role of the

Nominations Committee is to assist the Board

in regularly reviewing its composition and

those of its Committees, to lead the process

for Board appointments, and ensure effective

succession planning for the Board and senior

management. The key activities undertaken in

the year are described in more detail in this

report. The Committee’s terms of reference

are available to view online on the Company’s

website (www.ferrexpo.com).

In 2022, the Committee was formally

convened three times (2021: ve) where

thefollowing was considered:

– the composition and refreshment of

theBoard;

– developing a training portfolio aligned to

askills and experience matrix for directors

to ensure Board effectiveness;

– reviewing and making recommendations

as to the composition of the Board and its

Committees in order to maintain a diverse

Board with the appropriate mix of skills,

experience, independence and knowledge;

– the criteria for Non-executive and

Executive Director appointments;

– reviewing and making recommendations

as to the composition and diversity of the

Board, Executive Committee and direct

reports to Executive Committee members;

– the engagement of executive search

agencies to assist with Board

appointments;

– reviewing candidates and making

recommendations to the Board for the

permanent appointment of Jim North as

Chief Executive Ofcer, and the

appointment of Yaroslavna Blonska as

Acting Chief Marketing Ofcer;

– approving actions to be taken in 2022 in

support of the achievement of the Group’s

diversity and inclusion goals; and

– reviewing the results of the Group’s annual

talent review and succession plans for

business critical roles.

The Committee also agreed to undertake an

internal performance evaluation for the year

to31 December 2022 (for further information

see the Board’s Performance Evaluation on

pages 94 to 96). The Company will conduct

an external performance evaluation in 2024.

Lucio Genovese

Chair of the Nominations Committee

Read the Committee’s full objectives

and responsibilities online: www.

ferrexpo.com/about-ferrexpo/corporate-

governance/board-committees/

Membership and

meeting attendance

Scheduled meetings

Committee member

Eligible

to attend Attended

Lucio Genovese 3 3

Ann-Christin Andersen 3 3

Graeme Dacomb 3 3

Vitalii Lisovenko 3 3

Fiona MacAulay 3 3

The Committee is chaired by Lucio Genovese. The

Committee consists of four Independent Non-executive

Directors and, by invitation, is also attended by the Chief

Executive Ofcer and the Chief Human Resources Ofcer.

106 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Nominations Committee Report continued

In 2022, the Committee continued its ongoing

work to strengthen the overall governance

agenda of the Board and ensure that the

Board maintains an appropriate mix of skills

and experience. In support of this objective,

a training and development directory

was agreed by the Committee to inform

training and development for the Board.

All Directors conducted a self-evaluation

against the Board skills matrix to inform

individual development plans which will

be progressed over the next two years to

enhance the overall skill set of the Board.

The Board places great importance on

creating a workplace culture in which all

contributions are valued, different perspectives

are embraced, and biases are acknowledged

and mitigated. This commitment is set out in

the Company’s Diversity, Equity and Inclusion

policy which was approved by the Board in

2019. While the composition of the Board

now exceeds the gender diversity target

set by the Hampton-Alexander Review, the

Board is mindful of the need to enhance

diversity and foster inclusion below the

Board. The Committee therefore continued

to make recommendations to the Board on

appointments to the Executive Committee as

well as monitor senior appointments below the

Executive Committee. The execution of these

plans will remain a focus for the Committee to

eliminate gender imbalances below the Board.

The Committee recommended the

permanent appointment of Jim North as

Group Chief Executive Ofcer effective

from 14 February 2022, having acted in the

role since May 2020. The Committee also

participated in the process to nd a Chief

Marketing Ofcer following the resignation

of Brett Salt. The Committee reviewed

internal candidates and recommended the

promotion and appointment of Yaroslavna

Blonska as Acting Chief Marketing Ofcer.

This promotion enhanced the gender

diversity of the Executive Committee and

is a great reection of the Company’s

commitment to internal progression which

is explained further in this report.

The Group has formal policies in place to

promote equality of opportunity across

the whole organisation, regardless of

gender, ethnicity, religion, disability, age

or sexual orientation. In working towards

greater diversity, Natalie Polischuk

represented the Board at the launch of

the third “Fe_munity” women in leadership

programme at the Group’s operations in

Ukraine. This programme has been highly

successful and seeks to accelerate the

development of our senior female managers

and to support them as they navigate the

challenges and gender biases that might

hinder their career progression in the

workplace and within broader society. The

Company also hosts regular talks by senior

female leaders from inside and outside

our business, along with a mentoring

scheme as part of this same programme.

Since the inception of the “Fe_munity”

programme three years ago, more than 200

women have been through the programme

and the Committee was pleased to note

that, in the same timeframe, the proportion

of managerial roles held by women has risen

from 17.5% in 2019 (62 female managers) to

20.9% in 2022 (81 female managers), with

this upward trend expected to continue into

2023, despite the war in Ukraine. This trend

means that the Group is tracking well to

achieve its stated target of at least 25% of

managerial roles to be held by women by

2030. However, the Committee noted that

further work is needed below managerial level

where the overall number of women in the

workforce for 2022 has declined to 28.7%

(2,290 female employees) due to a number

of female employees leaving the country as

a result of the invasion of Ukraine by Russia

(2021: 29.2% (2,414 female employees)).

Following the success of the internal

“Fe_munity” programme, 2022 also saw

the inaugural launch of an external Ukraine-

wide programme, involving 50 senior

female business leaders from across

Ukraine, working for other organisations

and sectors of the economy with a further

programme for teenagers planned for

launch in 2023. These programmes are

part of the Company’s broader corporate

social responsibility initiatives to support the

overall development of Ukrainian society.

During the year, to demonstrate our

commitment to Diversity, Equity and Inclusion,

the Company signed the Women’s

Empowering Principles (“WEPs”), an initiative

by UN Women and the UN Global Compact

Ofce. WEPs are a set of principles providing

guidance on the promotion of gender equality

and women’s empowerment in the workplace,

marketplace and community. The WEPs are

informed by international labour and human

rights standards and grounded in the

recognition that businesses have a stake in,

and a responsibility for, gender equality and

women’s empowerment.

Aligned with the goals of the Parker Review,

the Committee is committed to ensuring

that the Board’s composition reects the

Group’s employee base and the communities

where the Group operates. The Committee

therefore commissioned an external search

consultancy to conduct research into how

comparable organisations are responding

to the Parker Review. The outcome of this

study was considered in the year which

enabled the Board to chart a course to

ensure a sustainable, diverse and ethnically

representative Board. The Committee has

therefore launched recruitment and expects

to appoint a Non-executive Director from an

ethnic minority group to the Board ahead of

the Parker Review deadline of December 2024.

As at 31 December 2022, the Committee was

composed of four Independent Non-executive

Directors, Ann-Christin Andersen, Graeme

Dacomb, Vitalii Lisovenko and Fiona MacAulay.

I would like to thank the members of the

Committee for all their work during the year.

Lucio Genovese

Chair of the Nominations Committee

14 March 2023

107Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Membership and meetings

The Nominations Committee is chaired by

Lucio Genovese and its other members are

Vitalii Lisovenko, Fiona MacAulay, Graeme

Dacomb and Ann-Christin Andersen.

The Committee is required by its terms of

reference to meet at least once a year and

met on three scheduled occasions in 2022.

All meetings were held face-to-face. All

Non-executive Directors have a standing

invitation to attend all Committee meetings,

with the consent of the Committee Chair.

In practice, most Directors generally attend

all meetings. Discussions at the meetings

covered the responsibilities outlined

earlier, with particular focus on Board skills

development and Non-executive and Executive

succession planning and recruitment.

Succession planning and

recruitment

The Nominations Committee is responsible

for the composition, structure and size of the

Board and its Committees, the appointment

of Directors and executive management, and

for ensuring effective succession planning for

the Board and other business critical roles to

full the leadership needs of the organisation.

The Committee also plays a vital role in

ensuring that we continue to adhere to the

high standards of corporate governance that

our stakeholders rightly expect. It, therefore,

works to ensure that the Board has the right

members both now and in the future to deliver

the Company’s strategy and ensure its

long-term success. The Committee plans

ahead for future recruitment to make sure

thatthe Board continues to have the diversity,

skills and experience it needs. The roles of all

Directors are summarised on page 90.

During 2022, the Committee agreed a

directory of training and development

interventions and activities to inform Board

development planning and recruitment

processes. This work followed on from the

previous year where the Committee refreshed

the Board skills matrix with all Directors

completing a self-evaluation against the

Board skills matrix (for further information see

the Board’s skills matrix on page 81) to inform

their individual development plans. This year,

the Board training and development directory

allowed for individual development plans to

be populated, which will be progressed over

the next two years to enhance the overall skill

set of the Board. It is anticipated that each

Non-executive Director will receive training

appropriate to their level of experience and

knowledge which would consist of a

combination of tailored training together with

individual briengs with Executive Committee

members and their teams to provide

information about the Group’s business,

culture and values, and other relevant

information to assist Non-executive Directors

in effectively performing their duties. In

addition, Non-executive Directors are

expected to spend time at the Group’s

operations to engage with management and

members of the workforce.

The Committee also participated in the

process to nd a replacement following the

resignation of the Chief Marketing Ofcer

(“CMO”) for the Group. The Committee

considered that attracting suitable external

candidates could be impacted by the ongoing

war in Ukraine, and therefore took a decision

to postpone conducting a formal search of

the market until the war ends. As an interim

measure, the Committee conducted

interviews with internal candidates in the

company’s marketing function and

recommended the internal promotion of

Ms Yaroslavna Blonska and appointment as

Acting CMO. This appointment underscores

the Company’s robust talent management

process which identies individuals with high

potential for inclusion in succession plans for

business critical roles.

Re-election

Except for Ann-Christin Andersen, who

willnot stand for re-election, in accordance

with the UK Corporate Governance Code,

allDirectors will stand for re-election by

shareholders at the Company’s AGM

scheduled for May 2023. The range of skills

and experience offered by the current Board

is mentioned in this report and is set out on

pages 82 to 83. The Committee and the

Board consider the performance of each

ofthe Directors standing for re-election to

befully satisfactory and that they have

demonstrated ongoing commitment to

theirrespective roles. The Board, therefore,

strongly supports the re-election of all

Directors standing for re-election and

recommends that shareholders vote in

favourof the relevant resolutions at the

Annual General Meeting.

Board diversity policy

The Board places great importance on having

an inclusive and diverse Board and workforce

and recognises the important leadership role

that the Board needs to play in creating an

environment in which all contributions are

valued, different perspectives are embraced,

and biases are acknowledged and mitigated.

In support of this goal, the Board agreed a

Diversity, Equity and Inclusion policy (“DEI

Policy”) in 2019 which is kept under review by

the Nominations Committee. The DEI Policy

aims to promote equality of opportunity

across the whole organisation, regardless of

gender, ethnicity, religion, disability, age or

sexual orientation as well as address gender

diversity imbalances in the workforce while

also delivering sustainable talent pipelines for

succession to senior leadership roles. The

Board shares ownership with the Executive

Committee of the DEI Policy and progress

updates are presented to the Board for review

every six months to assess progress against

the targets and enable adjustments to be

made to the programme where necessary.

Asummary of the Board’s diversity

information can be found on page 87.

108 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Nominations Committee Report continued

In support of the Group’s DEI goals, Natalie

Polischuk represented the Board at the

launch of the third “Fe_munity” women in

leadership programme held at the Group’s

operations in Ukraine (for further details on

the “Fe_munity” programme see page 43).

This internal programme, which is run with

thesupport of external consultants, seeks

toaccelerate the development of our senior

female managers and to support them as

they navigate the challenges and gender

biases that might hinder their career

progression in the workplace and within

broader society. Since the inception of the

“Fe_munity” programme three years ago,

more than 200 women have been through

theprogramme and the Committee was

pleased to note that in the same timeframe,

the proportion of managerial roles held by

women has risen from 17.5% in 2019 (62

female managers) to 20.9% in 2022 (81

female managers), with this upward trend

expected to continue into 2023, despite the

war in Ukraine. This trend means that the

Group is tracking well to achieve its stated

target of at least 25% of managerial roles to

be held by women by 2030. However, the

Committee noted that further work is needed

below managerial level where the overall

number of women in the workforce for 2022

has declined to 27.8% (2,290 female

employees)(2021: 29.2% (2,414 female

employees)) as a result of a number of female

employees resigning and leaving the country

due to the invasion of Ukraine by Russia.

Following the success of the internal

“Fe_munity” programme, 2022 also saw the

inaugural launch of an external Ukraine-wide

programme, involving 50 senior female

business leaders from across Ukraine,

working for other organisations and sectors

ofthe economy with a further programme for

teenagers planned for launch in 2023. These

programmes are part of the Company’s

broader corporate social responsibility

initiatives to support the overall development

of Ukrainian society.

During the year, to demonstrate our

commitment to Diversity, Equity and

Inclusion, the company signed the Women’s

Empowering Principles (“WEPs”), an initiative

by UN Women and the UN Global Compact

Ofce. WEPs are a set of Principles providing

guidance on the promotion of gender

equality and women’s empowerment in the

workplace, marketplace and community. The

WEPs are informed by international labour

and human rights standards and grounded

in the recognition that businesses have a

stake in, and a responsibility for, gender

equality and women’s empowerment.

The Nominations Committee places high

importance on having a diverse and inclusive

Board and workforce and, to this end, the

Committee reviews and approves succession

plans each year for business critical roles,

including reviewing succession plans for the

Board. Following the appointment of two

Independent Non-executive Directors in the

year, the Committee is satised that the

present composition of the Board takes

account of the targets of the Hampton-

Alexander Review and provides an

appropriate mix of skills, experience, diversity

and perspectives on the Board. However, the

Committee is cognisant of the need to ensure

that the Company’s composition is congruent

with the goals of the Parker Review and is

reective of the Group’s employee base and

the communities where the Group operates.

To this end, the Committee commissioned

Wilbury Stratton, an external search and

research consultancy, to conduct research

into how comparable organisations have

responded to the Parker Review. The

outcome of this study was considered by the

Committee in 2022, resulting in plans being

put in place that will ensure a sustainable,

diverse and ethnically representative Board.

These plans include launching a formal

search for an Independent Non-executive

Director from a minority ethnic group to

advance the Company’s ethnic and cultural

diversity to reect the demographic

composition of communities surrounding

theGroup’s operations. An appointment

isexpected ahead of the Parker Review

deadline for FTSE 250 companies of

December 2024.

When progressing recruitment, the Board

seeks to ensure that a broad range of diverse

candidates are taken into account when

drawing up shortlists of candidates for

appointment to the Board, and the Board will

only engage executive search consultants

who have signed up to the Voluntary Code of

Conduct for executive search rms. The nal

decision to make appointments to the Board

is, however, made on merit against objective

criteria, so as to ensure that the strongest

possible candidate for the role is recruited.

However, the Committee will continue to

ensure that the DEI Policy is considered when

conducting all searches for Board positions,

and will take account of the recommendations

of the Hampton-Alexander and Parker reviews

regarding gender balance and ethnic diversity

on boards.

109Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Board diversity policy update

Board objective Progress in 2022

Foster a diverse and

inclusive workplace

culture aligned with the

Company’s Values,

Purpose and Strategy

– Upgrading of facilities and access points continued at operations to enable accommodation of people

withdisabilities.

– Board-sponsored third “Fe_munity” women in leadership programme to foster the advancement of women

into senior leadership roles hosted by Natalie Polischuk.

– Assessment of workforce technical skills in the plant continued and training conducted to ensure workforce

capability supports business requirements.

– Unconscious bias training implemented for junior and middle managers at operations to enhance diversity

awareness at leadership levels.

Increase Board gender

diversity and women in

management below the

Board

– Board training and development directory implemented to enhance the current skills of the Board linked to

the Board’s skills matrix.

– Formal search launched for an additional Non-executive Director from a minority ethnic group to meet the

requirements of the Parker Review.

– Initiatives progressed in 2022 advanced women in leadership to 20.9% (81 female managers) (2021: 20.1%

(62 female managers)); target for 2023 (towards target of 25% by 2030) set at 21.5% by end of 2023.

– Total female representation as percentage of the workforce currently at 27.8% (2,290 female employees)

(2021: 29.2% (2,414 female employees)).

– Board review conducted of the Group’s talent pipeline and succession plans for senior business critical

leadership roles, including identication of female candidates for accelerated development.

– Undergraduate bursary programme targeting women continued in 2022.

Monitor diversity

programme outcomes and

make adjustments to

ensure overall objectives

are met

New and repeat activities planned for 2023, subject to the cessation of the war in Ukraine, will include:

– Workforce Diversity and Inclusion education.

– Unconscious bias training for senior management.

– Science, technology, engineering and mathematics (“STEM”) ambassador visits to local schools and colleges.

– STEM streamers competition run online with students from local schools.

– “Fe_munity” programme for teenagers.

– Selection of bursary award school leavers.

Workforce diversity

Ferrexpo’s policy is to employ a diverse

workforce and thought is given to recruit

aswidely as possible, taking into account,

amongst other things, gender, race, social

background, education and disability. In

2019,the Board set a diversity target of 25%

women in leadership to be achieved by 2030.

Achieving this target remains a challenge in

view of there being a very limited number of

female applicants for technical jobs in the

Resources sector historically while the

Group’s workforce is set to grow due to

theGroup’s organic growth plans.

During the year, the Committee reviewed the

progress made towards the Group’s target

and although the overall number of women

inthe workforce declined to 28.7% (2,290

female employees) (2021: 29.2% (2,414

femaleemployees)), the number of women

inleadership positions advanced to 20.9%

(81female managers (2021: 20.1% (62 female

managers)). The Committee was gratied with

this result and in order to sustain this upward

trend in 2023 and beyond, the Committee

approved diversity and inclusion actions for

execution in 2023.

Gender diversity targets were included in the

Executive Business Scorecard for the rst

time in 2021 to provide additional focus and

attention on the achievement of this strategic

imperative. A diversity target has again been

included in the scorecard for 2023 of 21.5%.

This target represents the appointment of an

additional three women in senior leadership

positions by the end of 2023.

Disability

Ferrexpo is proud to employ registered

disabled staff representing more than 4%

ofour Ukrainian workforce. This helps us to

reect the diversity in wider society as well

asdeliver on our legal obligations.

The Corporate Governance Report was

approved by the Board on 14 March 2023.

Lucio Genovese

Chair of the Nominations Committee

14 March 2023

110 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report

Scheduled meetings

Committee member

Eligible

to attend Attended

Fiona MacAulay 5 5

Graeme Dacomb 5 5

Vitalii Lisovenko 5 4

Ann-Christin

Andersen 5 5

Main objective

To establish and maintain on behalf

ofthe Board a policy on executive

remuneration to deliver the Company’s

strategy and value for shareholders; to

agree, monitor and report on the

remuneration of Directors and senior

executives and to review wider

workforce remuneration and other

policies in accordance with the UK

Corporate Governance Code.

A statement to shareholders

fromthe Chair of the

RemunerationCommittee

As Chair of the Remuneration Committee,

Iam pleased to present the Directors’

Remuneration Report

for the year ended

31 December 2022.

1. This report has been prepared by the Remuneration

Committee (the “Committee”) on behalf of the Board in

accordance with the requirements of the Listing Rules of

the UK Listing Authority, Schedule 8 of the Large and

Medium-sized Companies and Groups (Accounts and

Reports) Regulations 2008 (as amended in 2013, 2018

and 2019) and the UK Corporate Governance Code. The

elements subject to audit are highlighted throughout.

This report is split into the following sections:

1. this Statement from the Chair of the

Remuneration Committee –

summarising the decisions taken by the

Committee;

2. an “At a glance” overview of

remuneration;

3. the Directors’ Remuneration Policy

asapproved by shareholders at the 2021

AGM with over 98% support from our

shareholders;

4. the Annual Report on Remuneration,

setting out how we have paid Directors in

2022 and how we intend to operate the

policy in 2023.

Our approach to remuneration

The Committee strives to align the interests

ofthe executives with shareholders, and the

Board keeps under review the structure and

level of remuneration afforded through short

and long-term incentive schemes. It is the

policy of the Board to align executive and

shareholder interests by linking a substantial

proportion of executive remuneration to

performance, basing short-term rewards on

a balanced portfolio of nancial, operational,

ESG and strategic performance targets with

Fiona MacAulay

Chair of the Remuneration Committee

Read the Committee’s full objectives

and responsibilities online: https://www.

ferrexpo.com/about-ferrexpo/corporate-

governance/board-committees/

Membership and

meeting attendance

February

– Planning stakeholder engagement for 2022.

– Determining the 2021 bonus outturn.

– Determining vesting of the 2019 Long-term

Incentive Plan awards.

– Setting 2022 annual bonus targets.

– Reviewing 2022 LTIP TSR peer group

constituents.

March

– Considering the impact of the war in Ukraine

on 2022 remuneration.

– Approving the application of the Remuneration

Policy for 2022.

– Determining the size of 2022 Long-term

Incentive Plan awards and the performance

conditions.

– Approving awards under the Company’s share

plans.

– Signing off the 2021 Remuneration Report.

Key activities of the Committee in 2022

The Committee’s key activities during the 2022 nancial year were:

The Committee is chaired by Fiona MacAulay. The

Committee consists of three independent Non-executive

Directors as required by the UK Corporate Governance

Code and is also attended by the Chair of the Board and,

by invitation, the Chief Executive Ofcer, the Chief Human

Resources Ofcer, and a representative from Korn Ferry,

the Committee’s independent advisor.

111Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Restrictions on our access to Black Sea ports

and increased logistics costs made sales

outside of Europe less cost effective. Sales

volumes in 1Q 2022 were buoyant, but

declined over the year, most notably in the 2H

2022, following attacks by Russia on civilian

energy infrastructure.

The economic consequences were also

felt by employees in other Group ofce

locations as soaring energy prices and higher

ination impacted households worldwide.

Given these inationary pressures, the

Committee agreed adjustments in base

salary for all employees aligned with

CPI in Company’s various locations.

The Group CEO and the senior leadership

team faced continued and multiple challenges

to which they have responded with resilience

and rigour, but for their efforts, Group

performance could have been far worse. Prior

to the invasion by Russia, a Crisis Management

Team was formed that initially met on a daily

basis and continues to meet weekly to review

the situation on the ground and take critical

decisions and implement actions to safeguard

business continuity and ensures that the safety

and wellbeing of people remains paramount.

In the context of the operational, nancial and

strategic performance detailed above, the

CEO achieved a bonus at 50% of the

maximum (75.1% of salary) (2021: 67.1% of

maximum; 100.7% of salary) for the year

under review. This payment was consistent

with the wider bonus awards in the Company

and the Committee was comfortable that this

bonus award reected the challenging year

for the Group and the wider stakeholder

experience, and therefore did not apply

discretion. Full details of the performance

assessment are set out on page 125.

long-term rewards earned subject to creating

above average long-term total shareholder

returns and, since 2021, achieving the

Company’s decarbonisation targets.

Our policy is purposefully weighted towards

short-term performance targets given the

Company’s focus on operational excellence

and the fact that Ferrexpo does not control

the price of iron ore which is dictated by

market conditions. As a result, setting

performance targets that align to the factors

directly within the control of the executive

team is considered appropriate.

We ensure that remuneration packages are

competitive through assessing remuneration

packages against the relevant market

comparables to ensure that Ferrexpo can

attract, motivate and retain talented

executives. We further enhance the alignment

with shareholders through the performance

conditions we set, share-based pay including

through a combination of partial deferral of

annual bonus into shares, annual awards

under a performance share plan and market

consistent share ownership guidelines. This

approach applies across the executive

leadership team and has resulted in a robust

link between pay and performance to date.

Board changes during 2022

Mr North was permanently appointed to the

position of Chief Executive Ofcer (“CEO”) on

14 February 2022 and his base salary was

increased by US$100,000, equivalent to the

“acting up” allowance that he received while

serving as Acting CEO since May 2020. He

continued to participate in the annual bonus

scheme and remained eligible for annual

awards under the LTIP. Details of his pay are

set out pages 122 to 131.

Mr Zhevago resigned from his role as Non-

executive Director and stepped down from the

Board with effect from 29 December 2022.

He received no further remuneration for his

role on the Board from this date. Mr Zhevago

maintains a consultancy arrangement with

the Company and received a consultancy fee

for providing strategic advice to the CEO and

the acting Chief Marketing Ofcer (“CMO”)

and management of relationships with key

stakeholders (in line with the agreement

operated since and rst disclosed in the

2020 Annual Report and Accounts). This

consultancy arrangement reects the time

commitment associated with the role and

is kept under review. Mr Zhevago does

not receive any wider Company benets

in connection with this consultancy role.

Performance and reward in 2022

The war in Ukraine created signicant

uncertainty and necessitated that the Group

be agile in its approach to remuneration in

2022. Given the effect on the Company’s

remuneration schemes, the Committee spent

time overseeing Group-wide pay decisions as

well as assessing the need to use discretion

in exceptional circumstances to recognise

changes and ensure that the Group’s

remuneration policy fulls its original intent.

At the start of the invasion, the Company took

steps to ensure that employees in Ukraine

could access their salaries despite disruption

to banking systems and increased overtime

payments to compensate for changes in shift

rosters resulting from employees being called

up for military service and provided nancial

assistance to employees needing to relocate

themselves and their families away from areas

of intense ghting.

Key activities of the Committee in 2022

The Committee’s key activities during the 2022 nancial year were:

July

– Consideration of AGM feedback.

– Considering additional payments made to

employees in Ukraine and across the Company

in response to the war in Ukraine and the wider

inationary environment.

– Reviewing market pay benchmarking data and

approving any proposed salary increases for

members of the Executive Committee.

– Reviewing market developments and institutional

investor issues raised during the 2022 AGM

season.

– Considering the treatment of share awards for

departing executives.

December

– Considering performance to date against 2022

annual bonus targets.

– Reviewing shareholder advisory body guideline

updates for 2023 AGM Season.

– Approving amendment of the rules governing

Long-term Incentive Plan awards.

– Approving the 2023 Remuneration Committee

Planner.

Anticipated key activities of the

Committeein2023

– Consider AGM feedback.

– Conrm the 2021 Remuneration Policy continues

to support the Company’s strategy.

– Consider the evolution of performance targets in

line with the implementation of the business

strategy through the current challenging

operating environment.

– Monitor senior management remuneration.

– Ensure remuneration decisions are taken in the

context of the wider stakeholder experience

through the period.

112 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

With regard to the 2020 LTIP, vesting was

based on three-year total shareholder return

performance over the period to 31 December

2022 with Ferrexpo’s performance assessed

relative to the performance of a bespoke Index

of comparable Iron Ore and Composite Miners.

The Committee assessed the performance

of the Company over the full three-year

performance period and also to the period

of the Russian invasion of Ukraine.

The Company had delivered exceptional

relative performance against the comparator

group until the start of 2022 and while the

potential for a Russian invasion had started to

weigh on the share price in the early months of

the 2022, we remained well ahead of maximum

vesting target at the time of the invasion on

24 February 2022. As a result, the Committee

considered whether it was appropriate for the

impact of the Russian invasion, over which

participants had no control, to take vesting

from full vesting to zero vesting with no

change to the underlying performance of the

Company through the period to the invasion.

Having considered the above, the Committee

determined that it would make an adjustment

to the basis of testing the performance

condition and also make a corresponding

reduction to the potential number of shares

that were eligible to vest. The approach the

Committee took to ensure that there was

alignment between performance and reward

was to test the Company’s performance

relative to the comparator group up until

the day before the Russian invasion on

23 February (so consider actual performance

from 1 January 2020 to 23 February 2022)

and then to track the performance of the

TSR peer group forward from 24 February

to 31 December 2022. This achieved a fair

proxy for the expected performance that

the Company would have delivered for the

balance of the performance period had the

Russian invasion of Ukraine not taken place.

In light of this adjustment to the basis of

testing the three year performance condition,

which is possible as a result of the Russian

invasion of Ukraine being considered a relevant

event under the plan rules to enable the

Committee to adjust the approach to testing

the condition so that it fullled its original intent

and remained no less challenging but for the

event in the opinion of the Committee, the

Committee decided that it would reduce the

maximum number of shares eligible to vest.

This reduction was proportionate to period

of the performance period elapsed to the

Russian invasion of Ukraine (i.e. the original

award was reduced to 71.6% of the shares

originally granted to reect the number of

months from 1 January 2020 to 24 February

2022 relative to the full three-year period).

Full details are provided on page 126.

With remuneration outcomes aligned across

the executive leadership of the Group and

after considering wider stakeholder

experience through the year, the Committee

was comfortable with remuneration outcomes

with the policy operating as intended.

Implementation of the remuneration

policy in 2023

Whilst there are no changes proposed to

theDirectors’ Remuneration Policy for 2023,

the recommended application of the

remuneration policy has been inuenced by

the ongoing impact of the war in Ukraine, in

particular, with respect to the range of

performance targets set for the 2023 STIP

which have been set to reect the current

operating environment. The key points are:

– In 2023, the general approach to CEO and

senior executive salary reviews will be to

undertake a review against the relevant

market data where the executive is located

with any increases effective from

1 January. The factors considered as

partof the review process include the role

itself and any changes to that role, the

performance in the post and the typical

rate of increase awarded across the

workforce. Salary budgets were set taking

into account the rates of ination in the

locations in which Ferrexpo operates and

ranged from 2% to 15%. Given the location

of the CEO and his overall remuneration

package, his salary was increased by 2%

with effect from 1 January 2023.

– The annual bonus opportunity will be

unchanged at 150% of salary for the CEO.

Performance will continue to be measured

against a balanced scorecard of structured

nancial, operational and ESG targets

(60% of the total bonus) and tailored

strategic targets (40% of the bonus).

25%of any bonus earned is deferred

intoshares for two years.

– The Committee’s approach to long-term

incentive awards is that these are less than

50% of salary and for 2023 the CEO is

expected to equate to circa 45% of salary.

Performance will continue to be measured

based on Ferrexpo’s relative total

shareholder return compared against the

performance of an index derived from a

group of iron ore and composite miners and

based on sustainability targets which are

higher grade iron ore pellet production

targets with higher grade iron ore pellets

improving the productivity of blast furnaces

such that their carbon footprint is reduced

by 40% for every tonne of sinter nes

replaced (Source: CRU). For the 2023

awards, we are replacing the carbon

reduction target with an underpin that will

enable the Committee to reduce vesting if

progress in reducing carbon is not in line

with the Board’s carbon strategy having

had regard to the dynamic situation created

by the Russian invasion of Ukraine which

has resulted in the need to be exible in

terms of our sources of, and investment in,

power and associated technologies. The

revised weightings for 2023 are, therefore,

85% of the award based on TSR

performance and 15% based on higher

grade iron ore pellet production. It is the

Committee’s intention to reintroduce

carbon reduction as a primary performance

measure in the future.

Further details of the performance conditions

and targets for 2023 are set out on page 128.

Consideration of shareholders

andemployees

We consulted with shareholders in 2021 in

relation to the Directors’ Remuneration Policy

and were pleased to receive over 98%

support for that resolution at the 2021 AGM

and have received equally strong support for

the remuneration report resolutions in recent

years. The Committee receives any feedback

provided by shareholders and considers it in

the context of decisions made.

The Committee also noted feedback on

remuneration provided by the Employee

Engagement Non-executive Director, Vitalii

Lisovenko, which was elicited directly from

employees during a series of employee

engagement sessions held with all levels of

employees. These sessions tested a range of

employee engagement elements including the

effectiveness of remuneration and benets

policies and the understanding of the

alignment between executive remuneration

and wider company pay policy

As in prior years, while policies are

understood and are generally considered

tobe working effectively, work remains

ongoing to improve the alignment between

remuneration with individual performance

outcomes. The progress made to date will

beprogressed further in 2023 by the Chief

Human Resources Ofcer (“CHRO”). The

CHRO will also work with the designated

Employee Engagement Non-executive

Director, Vitalii Lisovenko, to further develop

two-way feedback in relation to remuneration

policies and practices.

I hope you are able to support the rationale

for the decisions we have taken during the

year and support the resolution for the

approval of the report at the 2023 AGM.

If you have any question or comments,

please feel free to reach out through the

Group Chief Human Resources Ofcer

(email: g.nortje@ferrexpo.ch).

Fiona MacAulay

Chair of the Remuneration Committee

14 March 2023

— Ferrexpo — 2022 LTIP Index

—

FTSE 250 Index

—

FTSE All-Share Index

100

200

300

31 Dec

2019

31 Dec

2020

31 Dec

2022

31 Dec

2021

Value (£)

10%

20%

30%

40%

50%

60%

70%

80%

90%

Group

EBITDA

Safety –

LTIFR

Diversity

Ratio

Carbon

reduction

Full cash

costs

reported

Production

from

own ore

FPM Total

movement

Pellet

stockpile

Total

Bonus payment (% of salary)

113Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Business scorecard (60% of bonus) Total Shareholder Return

At a glance (not subject to audit)

Element Operation Time-horizon

2022 2023 2024 2025 2026

Salary:

To attract and retain talent by ensuring base

salaries are competitive in the market in which

the individual is employed

– Annual review by the Committee

– Increases typically in line with wider

workforce

Pension amd benets:

To provide market competitive benets

– Aligned with pension and benets offered

to local workforce

Short-Term Incentive Plan (“STIP”):

To focus management on delivery of annual

business priorities which tie into the long-term

strategic objectives of the business

– Maximum opportunity of 150% of salary

– Target opportunity of 75% of salary

– Performance conditions based on a

scorecard of nancial, operational and

common strategic objectives

– Safety underpin

– 25% of bonus deferred into shares for two

years

Long-Term Incentive Plan (“LTIP”):

To motivate participants to deliver appropriate

longer-term returns to shareholders by

encouraging them to see themselves not just

as managers, but as part-owners of the

business

– Policy maximum of 200% of salary

– Performance based primarily on relative

TSR (75% weighting) in conjunction with

production (12.5% weighting) and carbon

emissions (12.5% weighting)

– Performance measured over three

yearswith two-year post vesting

holdingperiod

Share ownership guideline:

To provide alignment of interests between

Executive Directors and shareholders

– Executive Directors required to build

andmaintain a shareholding of 200%

ofsalary

– Applies for two years post-cessation

ofemployment

200% of salary

114 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Part A: policy section (not subject to audit)

This part of the Directors’ Remuneration Report sets out the Remuneration Policy for the Directors of the Company. This

Directors’ Remuneration Policy was approved by shareholders at the Company’s AGM on 27 May 2021 and is intended to apply

for three years from that date, unless shareholder approval is sought for earlier changes. The Report has been reproduced

herefor ease of reference, with factual data updated where appropriate (e.g. scenario charts, contractual terms, and page

references). The Policy as approved by shareholders can be found in the Ferrexpo plc Annual Report & Accounts 2020 available

on the company’s website.

Committee

The terms of reference for the Committee were updated during 2020 to comply with changes made to the UK Corporate Governance Code. The

revised terms of reference were approved by the Board and its duties include the determination of the policy for the remuneration of the Chair of

the Board, Executive Directors, the members of the Executive Committee, and the Company Secretary as well as their specic remuneration

packages, including pension rights and, where applicable, any compensation payments. In determining such policy, the Committee is expected

to take into account all factors which it deems necessary to ensure that members of the senior executive management of the Group are provided

with appropriate incentives to encourage strong performance and are, in a fair and responsible manner, rewarded for their individual

contributions to the success of the Group.

The composition of the Committee and its terms of reference comply with the provisions of the UK Corporate Governance Code and are

available for inspection on the Group’s website at www.ferrexpo.com.

Key principles of the remuneration policy

Ferrexpo’s remuneration policy is designed to help attract, motivate and retain talented executives to help drive the future growth and

performance of the business. The policy aims to:

– align executive and shareholder interests;

– link an appropriate proportion of remuneration to performance;

– reward based on a balanced portfolio of performance conditions (e.g. Total Shareholder Return (“TSR”) relative to sector peers, annual

business priorities, nancial and operational targets and individual performance); and

– provide rewards that are competitive in the relevant markets to help attract, motivate and retain talented executives.

In determining the Company’s remuneration policy, the Committee takes into account the particular business context of the Group, the industry

segment, the geography of its operations, the relevant talent market for each executive, the location of the executive and remuneration in that

local market and best practice guidelines set by institutional shareholder bodies. The Committee will continue to give full consideration to the

principles set out in the UK Corporate Governance Code in relation to Directors’ remuneration and to the guidance of investor relations bodies.

From the policy review undertaken, the Committee is satised that the remuneration policy and its application takes due account of the six

factors listed in the UK Corporate Governance Code:

– Clarity – our policy is well understood by our management team and has been clearly articulated to our shareholders. A key part of our Chief

Human Resources Ofcer’s role is engaging with our wider employee base on all our people matters (including remuneration) and we monitor

the effectiveness of this process through the feedback received. The Board is comfortable that our remuneration policy is clearly understood

by our employees.

– Simplicity – the Committee is very mindful of the need to avoid overly complex remuneration structures which can be misunderstood and

deliver unintended outcomes. Therefore, one of the Committee’s objectives is to ensure that our executive remuneration policies and

practices are as simple to communicate and operate as possible, while also supporting our strategy.

– Risk – our remuneration policy is designed to ensure that inappropriate risk-taking is not encouraged and will not be rewarded via: (i) the use

of a balanced scorecard in the short-term incentive plan which employs a blend of nancial, operational and non-nancial metrics; (ii) the use

of equity in our long-term incentive plan (together with shareholding requirements); and (iii) malus/clawback provisions which the Executive

Directors are required to accept to receive payments under the STIP and awards under the LTIP and which would normally be enforced by

reducing the number of shares and/or cash subject to outstanding and unvested awards in the rst instance.

– Predictability – our incentive plans are subject to individual caps, with our share plans also subject to market standard dilution limits. The

scenario charts on page 119 illustrate how the rewards potentially receivable by our executives vary based on performance delivered and

share price growth.

– Proportionality – there is a clear link between individual awards, delivery of strategy and our long-term performance. In addition, the

signicant role played by incentive/at-risk pay, together with the structure of Executive Directors’ service contracts, ensures that poor

performance is not rewarded.

– Alignment to culture – Ferrexpo has a strong operational focus which is reected in its incentives with safety at the heart of its activities

and this is supported through the use of a specic safety measure in the annual bonus and the ability to reduce the formula-based outcomes

based on safety performance. Similarly, both the annual bonus and the LTIP incorporate climate-related performance targets linked to the

Company’s strategic climate goals as set out on pages 34 and 36.

115Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Executive Director policy table

This section of our report summarises the policy for each component of Executive Director remuneration. The principles below also apply where

appropriate to the members of the Executive Committee.

Purpose and link to strategy Operation Opportunity Performance metrics

Fixed pay

Base salary

To attract and retain talent

by ensuring base salaries

are competitive in the

market in which the

individual is employed.

Base salaries are reviewed annually, with

reference to the individual’s role, experience and

performance; business performance; salary levels

for equivalent posts at relevant comparators; cost

of living and ination; and the range of salary

increases applying across the Group.

Base salary increases are applied

in line with the outcome of the

review, which will not exceed 5%

p.a. (or, if higher, the applicable

ination rate) on an annualised

basis over the period over which

this policy applies. Increases

above this level may be applied

where appropriate to reect

changes in the scale, scope and

responsibility attaching to the role

and market comparability.

Business and, where

relevant for current

Executive Directors,

individual performance

are considerations in

setting base salary.

Pension

To provide retirement

benets.

Executive Directors will, as appropriate, be

offered membership of a scheme which complies

with relevant legislation (where necessary,

additional pension entitlements will be provided)

or cash in lieu of pension.

For information, pension for UK-based

employees is currently set at 5% of salary with

pension for Swiss-based employees set at 10%

of salary. Whilst pension in Dubai is not typically

provided, a statutory lump sum gratuity is

accrued each year and will be payable on

termination in line with the relevant legislation.

Executive Directors will receive a

pension that is aligned with the

typical (i.e. most common) practice

for employees in the location that

the executive is based.

The employer contribution

willnormally be limited to a

percentage of base salary.

Associated benets and variable

pay will only be included where

there is a statutory requirement to

do so.

The employer contribution will be

limited to 10% of salary or higher

subject to compliance with local

statutory requirements to reect

actual practice in the Company.

Not performance

related.

Benets

Competitive in the market

inwhich the individual is

employed.

Benets are paid to comply with local statutory

requirements and as applicable to attract or

retain executives of a suitable calibre. They

include life insurance and medical insurance.

Where appropriate, additional benets may be

offered, including, but not limited to,

accommodation allowances, travel, enhanced

sick pay, relocation/expatriate relocation

benets, tax and legal advice.

Benets’ values vary by role and

eligibility and costs are reviewed

periodically. Increases to the

existing benets will not normally

exceed applicable ination.

Increases above this level may be

applied, where appropriate, to

reect changes in role, scope,

location and responsibility.

Not performance

related.

116 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Purpose and link to strategy Operation Opportunity Performance metrics

Variable pay

Short-term Incentive Plan

(“STIP”)

To focus management on

delivery of annual business

priorities which tie into the

long-term strategic

objectives of the business,

which include, but are not

limited to, developing the

reserve base, increasing

production, reducing costs,

reducing the risk prole of

the business, expanding

the customer portfolio, and

expanding geographically.

Targets are set at the start of the year against

which performance is measured. The Committee

determines the extent to which these have been

achieved. The Committee can exercise discretion

to adjust the formulaic outcome or amount of

bonus payable, taking into account such factors

as it determines to be relevant, including factors

outside of management control or where it

believes the outcome is not truly reective of

individual performance or in line with overall

Company performance.

Normally paid as a mixture of cash and deferred

shares with the cash portion paid following the

publication of the audited results. The deferred

share portion will normally be a minimum of 25%

of the total bonus (with after tax bonus used to

acquire shares or the deferral taking place

through a deferred share award) with the shares

eligible for release after a period of two years.

Dividend equivalents may accrue on deferred

bonus shares.

Malus and clawback provisions will apply in the

case of individual gross misconduct, an error in

assessing performance against the condition,

corporate failure (for which the individual was

partly or wholly responsible) and/or in the event

that the individual is found legally responsible for:

– a material misstatement of the Annual

Accounts; or

– a failure of risk management or reputational

damage to the Company.

Maximum opportunity of 150% of

salary.

The target opportunity is 50% of

maximum and the threshold

opportunity is one-third of

maximum.

Performance related.

Performance targets

can include nancial,

non-nancial and

personal achievement

criteria measured over

one nancial year.

The Committee has

discretion to make

changes in future years

to reect the evolving

nature of the strategic

imperatives that may be

facing the Company.

117Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Purpose and link to strategy Operation Opportunity Performance metrics

Long-term Incentive Plan

(“LTIP”)

To motivate participants to

deliver appropriate

longer-term returns to

shareholders by

encouraging them to see

themselves not just as

managers, but as part-

owners of the business.

The LTIP framework was approved by

shareholders at the 2018 AGM. To the extent that

an LTIP award vests, this will include the

applicable dividends on the shares earned during

the vesting period. Subsequent dividends on

shares held by participants are paid in shares.

Vesting of LTIP awards is subject to performance

measured over a period of at least three years. In

addition, for any shares to vest, the Committee

must be satised that the outcome is a fair

reection of Ferrexpo’s underlying business

performance.

For LTIP awards from 2018 onwards a two-year

holding period applies to shares vesting under

th e LT I P.

Malus and clawback provisions will apply in the

case of individual gross misconduct, an error in

assessing performance against the condition,

corporate failure (for which the individual was

partly or wholly responsible) and/or in the event

that the individual is found legally responsible for:

– a material misstatement of the Annual

Accounts; or

– a failure of risk management or reputational

damage to the Company.

The LTIP provides for annual

awards of performance shares,

options or cash up to an

aggregate limit of 200% of salary

in normal circumstances. This

limit may be exceeded in

exceptional circumstances but

will not exceed 300% of salary.

The threshold opportunity is 20%

of maximum.

The Committee reviews

the LTIP performance

conditions, in advance

of granting each LTIP

cycle.

Relative TSR will be the

primary performance

condition. Other

performance conditions

may, however, be used

in combination with

relative TSR.

From 2021, the

performance conditions

were broadened to

include both a

sustainability (carbon

reduction) and a

production target (DR

pellets as a proportion

of annual volume) to

operate alongside

relative TSR.

Share ownership

guideline

To provide alignment of

interests between

Executive Directors and

shareholders.

The Company operates a shareholding

requirement which is subject to periodic review.

As a minimum, Executive Directors are expected

to retain all of the post-tax shares vesting under

the LTIP and shares deferred under the annual

bonus (from 2022 on an after tax basis) until the

shareholding requirement is met.

Following cessation of employment, Executive

Directors are expected to hold the lower of 200%

of salary and the value of shares held on

cessation for two years.

The Committee maintains discretion to disapply

the policy as it considers appropriate in

exceptional circumstances (e.g. death). The

guideline will apply to shares deferred under the

annual bonus (from 2022 on an after tax basis)

and shares which vest under existing and future

LTIP awards (after tax).

Executive Directors are required to

build and maintain a shareholding

to the value of at least 200% of

salary.

The lower of 200% of salary and

the value of shares held on

cessation must be held for two

years post cessation.

Not performance related.

118 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Rationale for performance targets

The STIP is based on performance categories that are key to delivering on our long-term strategy. Performance targets are set at the beginning

of the nancial year to reect business priorities and other corporate objectives, and can include nancial, non-nancial and personal

achievement criteria.

Performance targets are set at such a level as to be stretching but achievable, with regard to the particular strategic priorities and economic

environment in a given performance period. The STIP target is set with reference to the annual budget approved by the Board. Where

appropriate, the Committee sets a performance zone (threshold to stretch) around the target, which it considers provides an appropriate degree

of “stretch” challenge and an incentive to outperform. The Committee believes that using multiple targets for the purposes of the STIP provides

for a balanced assessment of performance over the year.

For the LTIP, the Committee believes that relative TSR is the most objective external measure of the Company’s success over the longer term.

Relative TSR helps align the interests of Executive Directors with shareholders by incentivising share price growth and, in the Committee’s view,

provides an objective measure of long-term success. The Committee has discretion to review the comparator index if any of the constituent

companies are affected by corporate events such as mergers and acquisitions. The Committee also reviews the constituents and their

weightings prior to the start of each LTIP cycle in order to ensure that they remain appropriate. Details of the comparator group will be set out

inPart B of the Remuneration Report for the year immediately following the year in which the grant is made. Part of the LTIP will normally also

include other performance metrics (e.g. production or sustainability metrics) for a minority of the award to ensure that the long-term targets are

appropriately balanced in light of the Company’s strategic objectives.

Remuneration of senior executives below the Board

The policy and practice with regard to the remuneration of senior executives below the Board is broadly aligned with that of the Executive Directors.

Senior executives participate in the LTIP with the same performance targets applied as for the CEO. Long-term incentive awards may be

granted to participants below the Board without performance conditions, for example, if it is considered necessary to attract executives of

the appropriate calibre.

Payments resulting from existing awards

Executive Directors are eligible to receive payment resulting from the vesting of any award made prior to the approval and implementation of the

remuneration policy detailed in this report.

Non-executive Director policy table

This section of our report summarises the policy for each component of Non-executive Director remuneration.

Purpose and link to strategy Operation Opportunity Performance metrics

Fees

To attract and retain talent

by ensuring fees are market

competitive and reect the

time commitment required

of Non-executive Directors

in different roles.

Annual fee for the Chair.

Annual base fee for Non-executive Directors.

Additional fees are paid to the Senior

Independent Director and the Chairs of the

Committees and/or in relation to the Non-

executive Director who will be a representative

ofemployees as well as for representation on

subsidiary Boards, where appropriate, to reect

additional responsibility.

Fees are reviewed from time to time, taking into

account the time commitment, responsibilities

and fees paid by comparable companies, and

also taking into consideration geography and risk

prole.

Changes to Non-executive

Director fees are applied in line

with the outcome of the review

undertaken by the Chair and

Executive Directors.

Additional remuneration may

beprovided in connection with

fullling the Company’s business

(e.g. any expenses incurred

fullling Company business may

be reimbursed including any

associated tax).

The maximum aggregate fees,

per annum, for all Non-executive

Directors allowed by the

Company’s Articles of

Association is £5 million.

Not performance related.

119Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Pay-for-performance: scenario analysis

For the CEO, who is currently the sole Executive Director, the graph below provides estimates of the potential future reward opportunity and the

potential split between the different elements of remuneration under four different performance scenarios: “Below threshold”, “On-Target” and

“Maximum” and “Maximum assuming 50% share price growth”. In illustrating potential reward opportunities, the following assumptions have

been made:

Scenario Fixed pay STIP LTIP

Below threshold Base salary, pension

and benets as

applicable for 2023

nancial year

No STIP (0% of salary) No LTIP vesting (0% of maximum)

On-target On-target STIP (75% of salary) On-target vesting of LTIP (40% of maximum)

Maximum Maximum STIP (150% of salary) Full vesting of LTIP (100% of maximum) –

assumed normal policy maximum of 200% of

salary although in practice awards to Executive

Directors are signicantly lower

Maximum, assuming 50%

share price growth

Maximum STIP (150% of salary) As for Maximum, but modelling the impact of a

50% increase to share price

1. Benets have been included at US$221,183 based on the annualised benet provision to Executive Director.

CEO US$ (‘000)

Maximum

Target

Minimum

1,000 2,000 3,000 4,000 5,000 6,000

Fixed Pay STIP LTIP LTIP value with 50% share price growth

2,324

1,1 9 9

100%

52% 31% 17%

26% 32% 42%

4,623

Maximum

with 50%

share price

growth

21% 26% 35% 18%

5,602

120 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Remuneration policy for new appointments

The Committee’s approach to setting remuneration for new Executive Directors is to ensure that the Company’s pay arrangements are in the

best interests of Ferrexpo and its shareholders. To do this, the Company takes into account internal pay levels, the external market, location of

the executive and remuneration received at the previous employer. The Committee reserves discretion to offer appropriate benet arrangements,

which may include the continuation of benets received in a previous role. Variable pay awards (excluding any potential “buy-out” awards,

described below) for a newly appointed Executive Director will be as described in the policy table, subject to the same maximum opportunities.

Different performance targets and conditions may be set initially for the STIP and LTIP awards, taking into account the responsibilities of the

individual, and the point in the nancial year at which he or she joined, and subject to the rules of the plan. The rationale will be clearly explained

in each case.

In addition, the Committee may make an award in respect of a new appointment to “buy out” existing incentive awards forfeited on leaving a

previous employer. In such cases, the compensatory award would typically be on a like-for-like basis with similar time to vesting, performance

conditions and likelihood of the targets being met. The fair value of the buy-out award would not be greater than the awards being replaced.

Tofacilitate such a buy-out, the Committee may grant a bespoke award under the Listing Rules exemption available for this purpose.

In cases of appointing a new Executive Director by way of internal promotion, the Group will honour any contractual commitments made prior

tohis or her promotion to Executive Director.

In every case, the Board will pay both the appropriate, but also the necessary, rate of pay to attract an executive who in the view of the Board

willcontribute to shareholder value.

The approach to setting Non-executive Director fees on appointment is in line with the approach taken for the fee review set out in the Non-

executive Director policy table earlier in this report and will also take into account fee levels for existing Non-executive Directors.

Details of Executive Director’s service contract

The Executive Director is employed under a contract of employment with Ferrexpo Middle East FZE, a Group company (the “employer”). Due

tochanges in UAE employment law, the Executive Director’s service contract will be converted in 2023 to a ve-year xed term contract

(renewable).

The principal terms of Mr North’s existing service contract will be mirrored in his new service contract. The principal terms not otherwise set out

in this report are as follows: save in circumstances justifying summary termination, Mr North’s service contract with the employer is terminable

on not less than three months’ notice to be given by the employer or not less than three months’ notice to be given by Mr North, which is the

maximum permissible period of notice in the UAE, and has no special provisions in the event of a change of control.

Notice period

Executive Director Position Date of contract Length of current contract From employer From employee

J North CEO 30 September 2015 5 years 3 months 3 months

Under his service contract, Mr North is entitled to 25 working days’ paid holiday per year plus public holidays and other forms of leave in

accordance with applicable legislation. The Executive Director’s service contract contains a provision exercisable at the option of the employer to

pay an amount on early termination of employment equal to the respective notice period. If the employer elects to make such a payment (which

in practice it will do if the speed and certainty afforded by this provision are thought to be in the best interests of shareholders), the Executive

Director will be entitled under his contract to receive all components of his base salary, and accrued but untaken holiday where applicable and

required under law for the extent of the notice period. In addition to the contractual rights to a payment on loss of ofce, any employee, including

the Executive Directors, may have additional statutory and/or common law rights to certain additional payments, for example, in a redundancy

situation. Under UAE law, upon loss of ofce the Executive Director is entitled to a one-way business class ticket to his country of origin and the

service gratuity payment referred to on page 123.

Policy for loss of ofce payments

The following principles apply when determining payments for loss of ofce for the Executive Director and any new Executive Directors.

The employer will take account of all relevant circumstances on a case-by-case basis including (but not limited to): the sums stipulated in the

service contract (including base salary during his or her notice period, accrued but untaken holiday, and allowances/benets but excluding STIP);

whether the Executive Director has presided over an orderly handover; the contribution of the Executive Director to the success of the Company

during his or her tenure; and the need to compromise any claims that the Executive Director may have. The Company may, for example, if the

Committee considers it to be necessary:

– enter into agreements with Executive Directors which may include the provision of legal fees or the settlement of liabilities in return for a single

one-off payment or subsequent payments subject to appropriate conditions;

– reimburse reasonable relocation costs where an Executive Director (and, where relevant, their family) had originally relocated to take up the

appointment;

– terminate employment other than in accordance with the terms of the contract (bearing in mind the potential consequences of doing so); or

– enter into new arrangements with the departing Executive Director (for example, consultancy arrangements).

121Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

If the individual is considered a “good” leaver (e.g. for reasons of death, ill-health, injury or disability, retirement, redundancy, their employing

company ceasing to be a member of the Group, the business (or part) of the business in which they are employed being transferred to a

transferee which is not a member of the Group, or any other reason which the Committee in its absolute discretion permits) any outstanding

LTIPawards will, except in the case of death, be pro-rated for time and performance conditions will be measured. The Committee retains

discretion to alter these provisions (as permitted by the relevant plan rules) on a case-by-case basis following a review of circumstances, in order

to ensure fairness to both shareholders and participants. In considering the exercise of discretion as set out above, the Committee will take into

account all relevant circumstances which it considers are in the best interests of the Company, for example, ensuring an orderly handover,

performance of the executive during his tenure as Director, performance of the Company as a whole and perception of the payment amongst

theshareholders, general public and employee base. In the event of a change of control, the vesting period under the LTIP ends and awards

maybe exercised or released to the extent to which the performance conditions have, in the Committee’s opinion, been achieved up to that time.

Pro-rating for time applies but the Committee has discretion to allow awards to be exercised or released to a greater extent if it considers it

appropriate having regard to the circumstances of the transaction and the Company’s performance up to the date of the transaction.

It is the Committee’s policy to review contractual arrangements prior to new appointments in light of developments in best practice. The

Executive Director’s service contract is available to view at the Company’s registered ofce.

External appointments

It is the Board’s policy to allow the Executive Directors to accept directorships of other quoted companies, provided that they have obtained the

consent of both the CEO and Chair of the Board and which should be notied to the Board. No external directorships of quoted companies are

currently held by the Executive Directors.

Details of Non-executive Directors’ letters of appointment

The Chair and Non-executive Directors have each entered into a letter of appointment with the Company. The Non-executive Directors are each

appointed for an initial period of three years, and their appointments may then be renewed on a three-yearly basis, subject to re-election when

appropriate by the Company in a general meeting; in 2011 the Company adopted the practice of annual re-election of all Non-executive

Directors. The key terms of current letters of appointment are as follows:

Non-executive Director Position Date of rst appointment Date of election/re-election

L Genovese Chair 12 February 2019 2023 AGM

AC Andersen Non-executive Director 1 March 2021 Not standing

G Dacomb Non-executive Director 10 June 2019 2023 AGM

V Lisovenko Non-executive Director 28 November 2016 2023 AGM

F MacAulay Non-executive Director 12 August 2019 2023 AGM

N Polischuk Non-executive Director 29 December 2021 2023 AGM

K Zhevago

Non-executive Director 1 December 2020 Not standing

1. Mr Zhevago resigned as a Non-executive Director with effect from 29 December 2022.

Employee context

In making remuneration decisions, the Committee also considers the pay and employment conditions throughout the Group. Prior to the annual

pay review and throughout the year, the Committee receives reports from the CEO setting out the circumstances surrounding, and potential

changes to, broader employee pay. The CEO consults as appropriate with key employees and the relevant professionals throughout the Group.

This forms part of the basis for determining changes in Executive Director and senior executive remuneration which also takes into consideration

factors detailed earlier in this report.

Consideration of shareholder views

The Committee takes into consideration views expressed by shareholders regarding remuneration, either at the AGM, or by correspondence, or

atone-to-one or Group meetings and shareholder events or otherwise by considering these views at the relevant Committee meetings which are

subsequently reported to and considered by the Board as a whole. The Committee takes shareholder feedback into careful consideration when

reviewing remuneration and regularly reviews the Directors’ remuneration policy in the context of key institutional shareholder guidelines and best

practice. It is the Committee’s policy to consult with major shareholders prior to making any major changes to its executive remuneration structure.

122 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Part B: Annual Report on Remuneration (audited)

The following section provides details of how the remuneration policy was implemented during the year. Throughout this report,

the remuneration of Directors who are paid in foreign currencies are disclosed in local currencies to facilitate year-on-year

comparisons, uninuenced by exchange rate uctuations.

Committee membership in 2022

The Committee comprises four Independent Non-executive Directors. Fiona MacAulay is Chair of the Remuneration Committee, with the other

members of the Committee during the year being Graeme Dacomb, Vitalii Lisovenko and Ann-Christin Andersen. The Committee met on ve

scheduled occasions in 2022. Attendance at meetings by individual members is detailed in the Corporate Governance Report on page 89.

A summary of the topics discussed at meetings in 2022 is set out in the Chair’s Introductory Statement on pages 110 to 112.

The CEO and the Chief Human Resources Ofcer (the “CHRO”) usually attend meetings of the Committee at the invitation of the Chair of the

Committee, and the Company Secretary acts as secretary to the Committee. The Company Chair, other Non-executive Directors and other

members of management may also attend meetings by invitation where appropriate. No Director is present when their own remuneration is

being discussed.

Advisors

Following a competitive tender, the Committee appointed Korn Ferry in October 2019 to provide advice to the Committee. Korn Ferry is a

member of the Remuneration Consultants Group and adheres to its code of conduct.

Korn Ferry’s fees for services provided to the Committee in 2022 totalled £65,856 which were charged based on the time spent advising the

Committee. Korn Ferry also provides general remuneration advice to management in respect of remuneration elsewhere in the Group. The

Committee evaluates the support provided by its advisors periodically and is satised that the advice received is independent and objective

andthat the advisors did not have any connections with Ferrexpo which may impair their independence.

The CEO and the CHRO provide guidance to the Committee on remuneration packages of senior executives employed by the Group (but not in

respect of their own remuneration).

Single total gure of remuneration – audited

The table below sets out in a single gure for each currency of payment the total remuneration received by Mr North for the year ending

31 December 2022 and the prior year.

Salary

Benets

STIP

LTIP

Pension

Total

(single gure)

Total xed

remuneration

(single gure)

Total variable

remuneration

(single gure)

Executive Directors

J North (2022) US$959,050 US$221,183 US$720,000 US$246,618 – US$2,146,851 US$1,180,233 US$966,618

J North (2021) US$959,050 US$196,948 US$965,544 US$351,922 – US$2,473,464 US$1,155,998 US$1,317,466

The gures have been calculated as follows:

1. Base salary: amount earned for the year.

2. Benets: the taxable value of benets received in the year (accommodation allowance/provision and healthcare).

3. STIP: the total bonus earned based on performance during the year. Further details are provided on pages 123 to 125.

4. LTIP: the market value of shares that vested based on performance to 31 December of the relevant year (2022: 71.6% vested and 2021: 100% vested). LTIP value includes dividends of

US$89,845 over the performance period from 1 January 2020 to 31 December 2022.

5. Pension: Mr North does not participate in a pension scheme in line with normal practice in Dubai. Whilst working in Dubai, under local legislation he accrues a lump-sum gratuity payment

which is paid on leaving employment and is equivalent to c.8.33% of salary per year of his service. Within the reporting period an amount of US$80,088 (2021: US$111,234) was accrued

towards the statutory gratuity.

6. Average exchange rates: 2022 – £1=US$1.2105; 2021 – £1=US$1.3757.

7. Mr North assumed the role of Acting CEO from the 2020 AGM on 28 May 2020 and was appointed CEO on 14 February 2022. Mr North was appointed to the Board on 5 July 2020.

Remuneration for 2022 is in respect of the period as Acting CEO from 1 January to 13 February 2022 and as CEO from 14 February to 31 December 2022.

123Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

The table below sets out in a single gure for each currency of payment the total remuneration received by each Non-executive Director for the

year ending 31 December 2022 and the prior year.

All gures shown in currency of payment, US$000

2022 2021

Fees Benets Pension Total Fees Benets Pension Total

Non-executive Directors

L Genovese (Chair)

500 – – 500 500 – – 500

V Lisovenko (Senior Independent Director)

190 – – 190 190 – – 190

F MacAulay (Senior Independent Director)

2,3

188 – – 188 175 – – 175

AC Andersen

153 – – 153 113 – – 113

G Dacomb

161 – – 161 155 – – 155

N Polischuk 136 – – 136 – – – –

K Zhevago

135 – – 135

1. Mr Genovese retired from the Ferrexpo plc Board on 1 August 2014 and was subsequently reappointed on 12 February 2019. He was appointed Chair of Ferrexpo plc on 25 August 2020.

Mr Genovese also serves as a Non-executive Director of Ferrexpo AG and, in 2022, received a fee of US$80,000 p.a (2021: US$80,000).

2. Mr Lisovenko served as the SID until 10 February 2022, the post was then assumed by Ms MacAulay with effect from 10 February 2022.

3. Ms MacAulay served as Chair of the HSEC Committee until 9 February 2022, the post was then assumed by Ms Andersen with effect from 9 February 2022.

4. In addition to his base fee, Mr Dacomb received a one off payment of US$30,000 for additional time spent overseeing the preparation of the Group’s nancial accounts and dealing with

the Group’s external auditors.

5. Mr Zhevago stepped aside from the role of CEO on 25 October 2019 following which he was appointed a Non-independent Non-executive Director of the Company. He continued to

receive an annualised fee of US$240,000 until 31 December 2020 when it was agreed that Mr Zhevago will receive a fee in line with other Non-executive Directors (i.e. US$135,000).

Mr Zhevago resigned from his role of Non-executive Director with effect from 29 December 2022.

6. In addition, and to reect Mr Zhevago’s wider role at the Company in providing strategic advice and managing key relationships with stakeholders, he receives a consultancy fee set at

US$90,000 per year. This fee reects the time commitment of the role and is kept under review. Mr Zhevago does not receive any wider Company benets in connection with his

consultancy role.

Implementation of remuneration policy

Salary

Base salaries are reviewed annually with reference to the individual’s role, experience and performance; business performance; salary levels at

relevant comparators; and the range of salary increases applying across the Group.

On being appointed to the position of CEO on 14 February 2022, Mr North’s annual base salary was increased by US$100,000. This increase

was equivalent to the “acting up” allowance that Mr North received while serving as Acting CEO since May 2020. Following the Company’s

annual pay review, with salary budgets varying between 2% and 15% of payroll, the CEO salary was increased by 2% with effect from 1 January

2023 after having regard to his location and remuneration package.

Base salary at:

Executive Director Position 1 January 2023 1 January 2022

J North CEO US$978,240 US$959,050

1. This included an “acting up” allowance of US$100,000 referred to above.

Pensions and other benets – audited

The Group does not operate a separate pension scheme for Executive Directors. In line with standard company practice in Dubai, Mr North does

not participate in a pension scheme. Whilst working in Dubai, under local legislation he accrues a lump-sum gratuity payment which is paid on

leaving employment in the country and is accrued at a rate equivalent to c.8.33% of salary per year of his service. In the reporting period, an

amount of US$80,089 was accrued towards the statutory gratuity (2021: US$111,234).

Mr North is eligible for other benets whilst he is an Executive Director as set out in the Executive Director remuneration policy earlier in the

report. This includes an allowance toward the cost of accommodation, schooling for his dependent children and use of a car in Dubai up to

amaximum of US$225,000 p.a. In 2022, Mr North utilised US$204,687 of the allowance (2021: US$185,589).

2022 STIP outcome – audited

The Company, as a single product producer of iron ore pellets with a focused customer portfolio, sets its performance targets to ensure that

theDirectors and senior executives are motivated to enhance shareholder value both in the short term and over the longer term.

Key performance targets based on the budget and the Company’s key strategic priorities for 2022 were set for the Directors and senior

executives. Targets during the year related to nancial performance, ESG and operational performance, as well as strategic targets relating to

enhancing female diversity in leadership positions. Safety (behavioural safety initiatives and improvements in risk management) was included as

a modier, decreasing the total result in the event of a fatality.

124 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

The targets and performance against these for 2022 are shown in the table below. Financial and operational targets are normalised, as in

previous years, to take account of actual iron ore prices and sales pricing outside of a 5% band, operating forex losses or gains, and other major

raw material cost price items such as gas, electricity and fuel prices as appropriate, to the extent that these were not under the direct control of

management. These adjustments ensure that the targets full their original intent and are no more or less challenging than when set in light of the

adjustments made. No adjustments were made to safety, sales or production indicators such as volumes and costs.

The Committee has discretion to manage bonus outcomes retrospectively; it can conrm, increase, reduce or cancel bonus payments to reect

current market conditions and affordability.

In 2022, the threshold performance equated to a bonus potential of 50% of salary, on-target performance to a bonus potential of 75% of salary

and stretch performance to a bonus potential of 150% of salary. The level of achievement against each of the targets for 2022, as determined by

the Committee for Mr North as CEO, is summarised below.

Business scorecard (60% of STIP)

KPI Measure/target

Weighting

Threshold

50%

Target

75%

Stretch

150%

Scorecard

outcome Assessment

Max

as a %

of salary

Bonus

awarded

as a %

of salary

Financial Group EBITDA (US$, million) 15.0% 581 623 665 345 Below threshold 22.5% 0.0%

ESG LTIFR <WA Mines trailing 5yr

average (%) 5.0% -10.0% -30.0% -50.0% -38.2% Above target 7.5% 5.3%

Diversity Ratio (% Women in

leadership (grade 10+)) 5.0% 19.7% 20.7% 21.2% 20.1% Below target 7. 5% 5.1%

Carbon reduction (reduction from

2019 as a base) 5.0% -1.0% -3.0% -5.0% -0.7% Below threshold 7.5% 0.0%

Operational Production from own ore

(GPL+Y) (kt) 10.0% 11,450 12,091 12,200 6,053 Below threshold 15.0% 0.0%

Full Cash Costs reported

(C1 costs GPL+Y) (US$/tonne) 5.0% 62.1 61.1 59.6 52.3 Stretch achieved 7.5% 7.5%

FYM Total Movement

Cost (US$/tonne) 5.0% 3.4 3.2 3.1 3.7 Below threshold 7.5% 0.0%

Sales &

Marketing Pellet stockpile (kt) 10.0% 400 200 100 167 Above target 15.0% 10.0%

Total 60.0% 90.0% 27.9%

Scorecard outcome 27.9%

In determining the outcome for the Business scorecard, the Committee reected that 2022 had been an unprecedented year for the Business. In

response, management took appropriate steps to protect the workforce and maintain business continuity. In respect of nancial targets, it was

noted that the Company had been unable to fully run production as a result of attacks by Russia on electrical infrastructure. This together with

higher primary energy costs, such as oil and electricity, as well as the cost maintenance spares were impacted by devaluation of the local

currency against the dollar. These factors had all served to have a negative effect on the scorecard’s EBITDA, and Operational results. Similarly,

some of the positive progress made in respect of ESG targets in the previous year, had been eroded while safety had remained good, including

exceeding safety, diversity and carbon reduction targets but mining volumes had to be exed and therefore production volumes had not been

achieved. This lower than threshold result had also impacted target pellet production which was consequently below threshold. Although lower

than budget, the Committee considered that production volumes were notable given the context of the war. Reecting on the impact of these

items on the overall scorecard outcome, the Committee did not adjust the overall result and conrmed an outcome of 27.9% (against a maximum

of 90%) for all participants.

125Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Strategic objectives (40% of STIP)

Objective Weighting

Threshold

50%

Target

75%

Stretch

150% Outcome Assessment

Max

as a %

of salary

Bonus

awarded

as a %

of salary

Decarbonisation

strategy

10.0% Ricardo

strategy

conrmation

completed

Mining eet

electrication

approved

Ahead of

carbon

reduction

prole

Between

threshold

and target

Pathway

communicated to the

market

15.0% 5.8%

One Ferrexpo and

Optimise Group

structures

10.0% Implementation

of operational

One Ferrexpo

planned

objectives

Review and

optimisation plan

for future global

tax regime

Approved and

Implementation

under way

Stretch Optimisation plan

developed and in

execution

15.0% 15.0%

Effective Crisis

Management

5.0% CMT Response

developed

Effective

Management

Business

Continuity

maintained

Stretch Business continuity

maintained

15.0% 15.0%

Project Development 10.0% Implementation

of planned

activities for

2022

Low grade

processing

strategy

completed

External

communication

of growth plans

as part of

analyst site visit

Target Strategy presented to

Board & ready for

approval when

capital programme

can be executed post

war

7.5% 5.0%

Underground Mine

Feasibility Study

5.0% Strategy

developed to

recommence

U/G drilling

programme

post conict

Plan & progress

with U/G

feasibility study

shared and

actions agreed

with Board

All FY2022

actions

successfully

completed

arising from

Board

presentation

Between

target and

stretch

Drilling program

continued with own

resources due to

withdrawal of

external drillers due

to war; studies

presented to the

Board with options

and development

prioritisations

7.5% 6.4%

Total 40.0% 60.0% 47.2%

Total STIP (Composite result of business scorecard and personal objectives achievement) 150.0% 75.1%

Outcome as a percentage of salary 75.1%

The Committee considered Mr North’s personal performance against his strategic targets during 2022 as shown above and conrmed that the

CEO had made a signicant contribution to maintaining business continuity in the very challenging and difcult operating environment of the

invasion of Ukraine by Russia. This was largely due to the leadership and strong personal performance of the CEO. Despite most KPIs being

directly impacted by the war, the CEO had nevertheless been able to achieve all but one strategic KPI at target or above. The Committee was

therefore comfortable with conrming the payment of a bonus at 47.2% of salary in respect of his personal strategic objectives and did not use

any discretion.

In light of the performance delivered against the targets set both from the business scorecard and from his personal strategic objectives, the

Committee determined that a bonus of 50% of the maximum (75.1% of salary) was earned by the CEO. In determining that the nal bonus

amount was appropriate, the Committee had regard to the wider stakeholder experience during the year, including the returns generated for

shareholders and the bonus awards made across the executive leadership team which were calculated on the same basis.

In line with the policy, 25% of the bonus (net of tax) will be deferred into shares which will be released after two years.

STIP framework for 2023

The CEO’s 2023 STIP opportunity will remain at 150% of salary for maximum performance, calculated as a percentage of salary earned during

the year. A balanced scorecard of nancial, operational, ESG and strategic targets will again operate. Due to commercial sensitivity, details of

performance targets will be disclosed retrospectively and in certain instances may be aggregated.

25% of any bonus earned, net of any tax, will either be required to be deferred into shares for two years, or alternatively, the Committee may

determine that 25% of any bonus earned is deferred into a share award which vests after two years.

126 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

KPI Weighting

Financial

Underlying cash EBITDA 15.0%

ESG

Safety

Diversity

Carbon reduction 15.0%

Operational

Production

C1 cost

management

Total mining movement cost 20.0%

Sales and Marketing

Pellets stockpile 10.0%

Strategic

Organisational growth

Organisational optimisation

Project development

Decarbonisation execution 40.0%

Total 100.0%

LTIP award vesting (audited)

The performance period for the 2020 LTIP awards ended on 31 December 2022. The 2020 LTIP rewarded TSR outperformance of a tailored

comparator group with 20% of the maximum award vests for TSR performance in line with the index, rising to full vesting for TSR

outperformance of 8% p.a.

As detailed in the Chair’s Introductory Statement, in light of the Russian invasion of Ukraine, the Committee considered this to be an exceptional

event and determined that it was appropriate to adjust (i) the basis of testing the performance condition (i.e. to track Ferrexpo’s TSR performance

from the Russian invasion of Ukraine forward in line with Index of its TSR comparator group) and (ii) reduce the maximum potential vesting arising

from the award proportionate to the start of the performance period to the Russian invasion of Ukraine on 24 February 2022 (i.e. the original

number of shares was reduced to 71.6% of the initial award being the portion of the performance period elapsed prior to the Russian invasion of

Ukraine on 24 February 2022).

If the TSR condition is tested based on Ferrexpo’s TSR over the full performance period, the award would not vest with Ferrexpo delivering a

TSR of 11% over the performance period versus the TSR of the Index of 60%. However, tracking performance forward from the date of the

invasion results in an adjusted TSR of 146% as detailed in the chart below.

With the performance condition being met at 100% on the basis described above, 71.6% of the original award will vest.

For completeness, the chart below provides a summary of Ferrexpo’s relative performance over the full three year performance period and the

impact of the amendment to the basis on which the condition was tested (the dotted blue lines being Ferrexpo’s actual TSR performance post

the Russian invasion of Ukraine and also tracking performance forward in line with the Index). The chart is based on a six-month rolling average

TSR which is consistent with how TSR performance condition is tested for awards prior to 2022).

Ferrexpo 2020 Award – TSR performance

31/12/2021, 190%

23/02/2022, 155%

31/12 /2022, 11%

31/12/2021, 97%

23/02/2022, 88% 31/12/2022, 60%

31/12/2021, 121%

23/02/2022, 112%

31/12/2022, 84%

31/12/2022, 146%

-50%

50%

100%

150%

200%

250%

300%

Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22 Jul 22 Oct 22 Jan 23

Ferrexpo Ferrexpo 23/02/22 - 31/12/22 Index Index + 8% p.a. Ferrexo to 23 Feb 2022 and then Index match

127Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

For completeness, the Committee was comfortable with the vesting outcome at 71.6% for the following reasons:

– With Ferrexpo’s assets solely in Ukraine, it was directly impacted by the Russian invasion in a way that did not apply to other comparator

companies.

– The Committee took account of the overall shareholder experience which was an 11% TSR over the full performance period notwithstanding

the Russian Invasion of Ukraine through reducing the maximum number of shares available to vest.

– At the point of the Russian invasion of Ukraine Ferrexpo’s TSR was 67% above the TSR performance of the comparator Index and 43% above

the maximum outperformance of the Index (+8% p.a.) required for maximum vesting as illustrated in the simplied performance test in the

chart opposite. As with prior awards, the comparator companies in the Index had a 60% weighting on iron ore miners (Cleveland Cliffs,

Fortescue Metals, Kumba Iron Ore and Mount Gibson Iron) and a 40% weighting on composite miners (BHP Billiton, Rio Tinto, Glencore and

Vale).

– Tracking Ferrexpo forward in line with the Index from the date of the Russian invasion to the end of the performance period resulted sustained

out-performance of the Index and the out-performance of the Index required for maximum vesting.

– All participants in the plan will be treated consistently since they are all considered by the Committee to have contributed to managing the

Company through exceptional circumstances following the Russian invasion and supported the delivery of exceptional performance and

shareholder value creation prior to the Russian invasion.

– The Committee did consider whether the CEO should be treated differently to wider participants in the 2020 LTIP, but noting his exceptional

leadership, especially since his appointment as CEO in May 2020 and the fact that his 2020 LTIP award was granted prior to his appointment

to the Board (being over shares worth 22% of salary at grant), the Committee concluded that the adjustment to the testing of the performance

condition should apply to the CEO as well as wider participants.

– The Committee considered the potential for windfall gains in relation to the vesting of the 2020 award and noted that (i) the awards were

granted based on a share price of £1.43 which was a share price taken prior to the onset of COVID (i.e. it predated the general market fall

from February through May 2020) and (ii) the impact of the Russian invasion has been to reduce the share price at vesting. As result, the

Committee was comfortable that there was no potential for windfall gains in the 2020 award vesting.

Overall, the Committee is comfortable with the use of discretion noted above to adjust the basis of testing the TSR target and the overall

relationship between performance and reward achieved in 2020 in what have been exceptional circumstances.

Mr North was granted the 2020 LTIP award in respect of his role as Chief Operating Ofcer. Details of the number of shares vesting are set out in

the table below.

Date of grant

Number of

Award share

price

Value awarded

based on grant

price

Vesting

percentage

Number of

vesting

Value vesting

based on

grant price

Share price at

date of

vesting

Value based

on vesting

price

Impact of

share price

appreciation

J North 27.03.20 117,000 142.7p £166,959 72% 83,772 £119,543 136.8p £114,600 (4%)

1. Based on the average share price over the three-month period from 1 October to 31 December 2019 preceding the start of the performance period.

2. Based on the three-month average share price to 31 December 2022 of 136.8 pence.

3. Excludes value of 35,540 shares in lieu of dividends throughout 2022.

LTIP granted in 2022 (audited)

Mr North was granted a 2022 LTIP award in respect of 152,400 shares, which had a face value of 45.7% of salary based on the share price on

the date of grant of 186.9 pence.

Executive Director Date of grant Number of shares Face value

Face value

(% of salary)

Vesting for minimum

performance

(% of maximum)

End of

performance

period

J North 01.06.22 152,400 £376,580 46% 20% 31.05.25

The 2022 LTIP award will vest to the extent that the performance conditions set out below are met. Given the uncertainty created by the initial

impact of the invasion of Ukraine by Russia on the business in early 2022, the Committee deferred the grant of the award until June to enable

anassessment of the scale of the conict to be undertaken. Concluding that the conict was unlikely to be a short term event, the Committee

resolved to grant the 2022 awards on similar terms as in prior years. However, reecting the delay to the award, the performance period over

which TSR will be tested was set to run from 1 June 2022 to 31 May 2025 as opposed to the three years ending 31 December 2024. The

Production and Carbon emission reduction measures will continue to be assessed over the three nancial years to 31 December 2024 to align

with reported numbers included in the year end Annual Report and Accounts.

The change to the performance period for measuring TSR resulted in the Committee changing the base averaging period for TSR prior to the

start and end of the performance period from six to three months for all companies. This ensured that the impact of the Russian invasion of

Ukraine was captured in the performance condition. At the same time as making these changes, the Committee also introduced a windfall gain

provision to ensure that if there was an immediate bounce back in the Company’s share price due to the conict being resolved quickly, that

thiscould be taken into account in any vesting. This provision also took into account the lower average share price at the time of grant used to

determine the number of shares in the awards being £1.87 for 2022 versus £2.16 for 2021. Other factors noted by the Committee when the

awards were granted were the exceptional circumstances in place, the application of consistent principles to all participants in determining the

size of individual awards and the fact that this was the rst award granted to Jim North following his appointment as permanent CEO and the

relatively modest headline grant levels (e.g. 45.7% of salary) at a time when the retention and motivation of key talent was critical to the Company.

Consistent with the inclusion of the windfall gain provision, and the Committee’s broader discretion, at the time of vesting the Committee will

consider whether any adjustments to the awards are required for example to ensure that the formulaic outcome is in line with underlying intent

of the performance conditions (e.g. did lower production than planned impact the achievability of carbon reduction targets).

128 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

A two-year holding period will apply to any shares that vest and in line with the policy, malus and clawback provisions also apply to the award.

Performance condition Weighting

Threshold target

(20% vests)

Maximum target

(100% vests)

Straight line vesting

takes place between

performance points

TSR

75.0% Index Index + 8.0% p.a.

Production of 67% Fe pellets 12.5% 3.0% over period 7.0% over period

Carbon emissions reduction 12.5% 3.0% p.a. 5.0% p.a.

1. TSR is measured against an index of iron ore and diversied miners. The constituents of the index for the recent awards are summarised in the table below.

2. Subject to the re-opening of export port facilities enabling delivery to DR-pellet customers.

2019 2020 2021 2022

Focused iron ore miners Weighting 60% 60% 60% 60%

Cleveland-Cliffs    

Fortescue Metals    

Kumba Iron Ore    

Mount Gibson    

Mineral Resources – –  

Global diversied miners Weighting 40% 40% 40% 40%

Anglo American

– –  

BHP    

Rio Tinto    

Vale    

Glencore    

1. The Committee reviewed the constituents of the comparator index in 2021 and included Mineral Resources in the Focused iron ore miners and Anglo American in the Global diversied

miners given the nature and scale of their operations

TSR is calculated on a common currency basis to ensure that comparisons with international comparators listed overseas are fair, with a TSR

shareprice averaging period of three months for the 2022 award to ensure short-term movements in Ferrexpo’s share price or the share price of

comparator companies does not unduly impact the performance assessment and the impact of the war in Ukraine was captured by the TSR target.

Dividends accrue on performance shares over the vesting period and are paid on shares that vest. Dividends that arise post vesting are paid to

participants in shares.

LTIP framework for 2023

This Directors’ Remuneration Report is published prior to the grant date of awards under the LTIP. The Committee intends to grant Mr North an

LTIP award which is expected to have a face value of c.45% of his CEO salary which sits at the lower end of the award possible under the policy.

The number of shares under Mr North’s LTIP award for 2023 will be based on the share price prevailing at the time the size of his LTIP award is

set and the Committee will retain the ability to adjust the number of shares vesting in the event that there was to be a perceived windfall gain.

The performance metrics for the 2023 LTIP awards will be based on a mix of TSR, production and sustainability targets.

– The relative TSR target will determine 85% of the 2023 LTIP award based on our performance measured relative to the performance of an

index derived from a group of iron ore and composite miners with vesting taking place between matching the index and outperforming the

index by 8% p.a. (see above for details of the index constituents which will be the same as per the 2022 award).

– The production target will relate to 15% of the 2023 LTIP award and directly aligns with the core strategic objective of improving the product

mix to higher grade iron ore pellets. We are targeting increased production in pellets above 65% Fe (i.e. DR pellets) of between 3% and 7%

over the period to the end of 2025.

The 2023 TSR and production targets detailed above are aligned with those used for the 2022 award but the weightings have been increased

from 75% and 12.5% respectively. The carbon reduction targets used in 2022 had been removed for 2023. Given the impact of the Russian

invasion on the Company’s energy usage and ability to invest in new technologies, the Committee considers it more appropriate to retain

discretion to reduce vesting if progress in delivering the Board’s carbon reduction objectives is not achieved, allowing for the dynamic

circumstances in place as a result of the Russian invasion. This is envisaged as a temporary change to the current application of the

Remuneration policy.

Under the TSR and production metrics, 20% of the award vests at the threshold performance level rising to 100% at maximum performance

levels. Each target operates independently.

Any shares vesting from these awards will be subject to a two-year holding period and recovery provisions (as detailed in the Remuneration

Policy on page 117 will apply should it be required.

129Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Non-executive Directors (including the Chair)

The fee for the Chair, Lucio Genovese, was reviewed in 2022 considering the time commitment of the role, noting that additional time above

andbeyond that of the typical FTSE 250 Board Chair is required at Ferrexpo given the jurisdictions in which the Company operates, especially

inlight of Russia’s current invasion of Ukraine and the need to engage proactively with the broad range of Company stakeholders. For 2023,

theRemuneration Committee determined that the Chair fee should increase by 5% and be set at US$525,000 per year. This level of fee was

recommended given the time commitment involved and considering that fees for the Chair and the Non-executive Directors have not risen for

aconsiderable period of time and, with ination, have declined in real terms and not kept up with increases in remuneration for the wider

workforce. The Board was comfortable that this level of fee for the Chair was appropriate and reected the additional time commitment and

requirements of the role.

The Non-executive Directors’ fees were also reviewed in light of the workload and time commitment increasing and taking into account all

relevant factors including external market levels and considering the level of involvement that Non-executive Directors are required to devote to

the activities of the Board and its Committees. For 2023, the Board (excluding the Non-executive Directors) determined that all Non-executive

Directors should receive a base fee of US$142,000 p.a. Given the time commitment involved, the Board was comfortable this was an appropriate

base fee for all Non-executive Directors.

Role Current fee levels Change

Chair fee US$525,000 +5.0%

Non-executive Director base fee US$142,000 +5.2%

Committee Chair fee US$20,000 N/A

Senior Independent Director fee US$35,000 N/A

Audit Chair fee US$35,000 +75.0%

Remuneration Chair fee US$25,000 +25.0%

Employee Engagement Director fee US$35,000 N/A

1. The fee applies to the Chairs of Committee of Independent Directors, Health, Safety, Environment and Community Committee and Nominations Committee.

2. Audit Chair fee increased from US$20,000 to US$35,000 with effect from 1 August 2022.

3. Remuneration Chair fee increased from US$20,000 to US$25,000 with effect from 1 March 2023.

In addition to his fee for Chair of the Board, Mr Genovese serves as a Non-executive Director of Ferrexpo AG for which he received a fee of

US$80,000 in 2022.

As previously disclosed, Mr Zhevago stepped aside from the role of CEO in October 2019 and from this time served as a Non-independent

Non-executive Director. During 2020, his remuneration arrangements were reviewed and from 1 December 2020 Mr Zhevago received a fee in

line with other Non-executive Directors (i.e. US$135,000 p.a.). Mr Zhevago stepped down from the Board with effect from 29 December 2022.

He received no further remuneration for his role on the Board from this date. Mr Zhevago receives a consultancy fee for providing strategic

advice to the CEO and the Acting Chief Marketing Ofcer (“CMO”) and for management of relationships with stakeholders. The consultancy fee is

set at US$90,000 p.a. and reects the expected time commitment of the role and is kept under review. He does not receive any wider Company

benets in connection with this role.

Directors’ shareholdings (audited)

Total interests of the Directors in ofce (and connected persons) as at 31 December 2022:

At 31 December

2022

At 31 December

2021

AC Andersen – –

G Dacomb – –

L Genovese 233,651 233,651

V Lisovenko – –

F MacAulay 3,536 –

J North 566,233 336,364

K Zhevago

296,077,944 296,077,944

1. Mr Zhevago is interested in these shares as a beneciary of The Minco Trust, which is the ultimate shareholder of Fevamotinico S.a.r.l., which owns 296,077,944 shares in the Company.

Mr Zhevago resigned from the Board on 29 December 2022.

Executive Directors are subject to shareholding requirements under which they are required to build up a holding of shares of equivalent value to

200% of salary. Executive Directors will be expected to retain their vested LTIP shares on an after tax basis until the required level is achieved.

Shares deferred under the annual bonus (from 2022) and shares that have vested under the LTIP but which are still subject to the two-year

holding period will also count towards the guideline, on a net of tax basis if applicable.

A post-employment share ownership guideline applies under which departing Executive Directors will be expected to retain the lower of their

share ownership at cessation of employment and 200% of salary for a minimum period of two years. As with the ‘in service’ share ownership

guideline, shares deferred under the annual bonus (from 2022, on an after-tax basis) and all shares which vest under existing and future

long-term incentive plan awards (after tax) will count for the purposes of the post-cessation guideline. The Committee will retain discretion to

disapply the guideline in exceptional circumstances (e.g. death).

1 30 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Remuneration Report continued

Mr North’s shareholding against the guideline as at 31 December 2022 was as follows:

Shareholding

requirement

(% salary)

Owned

outright

Subject to

performance

Current

shareholding

(% salary)

Requirement

met?

J North 200% 566,233 240,200 112.4% In progress

1. Performance awards are conditional awards. Further details of shares subject to performance are provided below.

2. Based only on shares owned outright at 31 December 2022 and a share price of 157.2 pence on 31 December 2022 and an exchange rate of £1=US$1.21.

Details of LTIP awards held by Mr North (which are subject to performance) are provided below.

Award

At 1 January

2022

Granted

(2022 award) Vested Lapsed

Total at

31 December

2022

Award share

price

(pence)

End of

performance

period

J North 2020 Award

117,000 – 83,772 33,228 0 142.7 01.01.23

2021 Award 87,800 – – – 87,80 0 216.4 01.01.24

2022 Award – 152,400 – – 152,400 247.1 30.05.25

Total 204,800 152,400 83,772 33,228 240,200

1. Based on the average share price over the three-month period preceding the start of the performance period. For the 2022 Award, based on the three-month volume weighted average

price prior to 28 February 2022 of 247.1 pence.

2. The number of shares for the 2020 award was reduced to 71.6% of the initial award being the portion of the performance period elapsed prior to the Russian invasion of Ukraine

24 February 2022.

There have been no changes in the interests of the Directors from the end of the period under review to 14 March 2023 being a date not more

than one month prior to the date of notice of the AGM. Total outstanding (i.e. awarded but not yet vested) awards granted under the LTIP as at

the end of 2022 are equivalent to 0.040% of issued share capital.

Payments to past Directors and for loss of ofce (audited)

Mr Genovese serves as a Non-executive Director of Ferrexpo AG and, in 2021, received a fee of US$80,000 p.a. Wolfram Kuoni retired from the

Ferrexpo plc Board on 28 November 2016 and serves as the Chair of Ferrexpo AG, for which he received a fee of US$100,000 p.a. in 2022.

No other payments were made to past Directors in the year.

Percentage change in Directors’ remuneration compared to employees

The table below sets out the percentage change in salary, taxable benets and annual bonus between 2021 and 2020, and prior periods for the

Directors of the Company and the average for an all-employee population.

2021 vs 2022 2020 vs 2021 2019 vs 2020

Change in

salary/fees

Change in

benets

Change in

bonus

Change in

salary/fees

Change in

benets

Change in

bonus

Change in

salary/fees

Change in

benets

Change in

bonus

All employee average

3.0% 0% -16.8% 13.4% 0% 37.1% 24.0% 0% 2.9%

J North (CEO)

0% 9.8% -25.5% 0% 1,703.4% -0.5% 11.6% 0% 12.8%

L Genovese (Chair)

0% 0% 0% 0% 0% 0% 400.0% 0% 0%

V Lisovenko (EED/SID)

0% 0% 0% 0% 0% 0% 0% 0% 0%

AC Andersen

0% 0% 0% – – – – – –

G Dacomb

9.7% 0% 0% 0% 0% 0% 35.0% 0% 0%

F MacAulay

(SID) 0% 0% 0% 0% 0% 0% 35.0% 0% 0%

N Polischuk

0% 0% 0% – – – – – –

K Zhevago

0% 0% 0% 0% 0% 0% -44.0% -100.0% 0%

1. The All Employee population is based on the remuneration for the Executive Committee excluding the CEO. This population is being used as Ferrexpo plc does not have any employees.

The chosen population is considered the most relevant employee comparative group given the Group-wide nature of roles performed by incumbents.

2. Mr North, the CEO, was appointed to the Board in July 2020. In 2022, Mr North received Company-provided healthcare and a location allowance totalling US$221,183.

3. Mr Genovese was appointed to the Board in February 2019 and appointed Chair in August 2020.

4. Mr Lisovenko served as SID from August 2019 until February 2022 when he was appointed Employee Engagement Director (“EED”) and received the same additional fee as when he

served as SID.

5. Ms Andersen was appointed to the Board in March 2021. There is no comparable information for prior years and therefore percentage changes are not shown above.

6. Mr Dacomb was appointed to the Board in June 2019. In August 2022, his fee was increased as a Chair of the Audit Committee.

7. Ms MacAulay was appointed to the Board in August 2019, and was appointed SID in February 2022.

8. Ms Polischuk was appointed to the Board in December 2021.

9. Mr Zhevago stepped aside from the role of CEO in October 2019 and served as a Non-executive Director until he resigned from the role with effect from 29 December 2022.

131Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Relative importance of spending on pay

The table below shows Ferrexpo’s dividend and total employee pay expenditure (this includes pension and variable pay, including STIP and fair

value of LTIP, but not social security) for the nancial years ended 31 December 2021 and 31 December 2022, and the percentage change.

US$ million 2022 2021

Year-on-year

change

All-employee remuneration

84 95 -11.4%

Distributions to shareholders

155 619 -75.0%

1. Includes dividends and share buy-backs.

Comparison of Company performance and Executive Director pay

The graph shows the value, at 31 December 2022, of £100 invested in Ferrexpo’s shares on 31 December 2012 compared with the current value

of the same amount invested in the FTSE 250 and All-Share indices and in the shares of the LTIP comparator group. The FTSE 250 and All-Share

indices are chosen because Ferrexpo was a constituent member of the FTSE 250 for the majority of the period.

Historical TSR performance

Growth in the value of a hypothetical £100 holding over the ten years to 31 December 2022.

— Ferrexpo — 2022 LTIP Index — FTSE 250 Index — FTSE All-Share Index

100

200

400

300

31 Dec

2019

31 Dec

2020

31 Dec

2022

31 Dec

2021

Value (£)

Chief Executive Ofcer’s pay

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

KZ KZ KZ KZ KZ KZ KZ CM/JN JN JN

Single gure total remuneration (US$000)

243 243 243 243 255 251 257 595/1,147 2,473 2,147

STIP vesting (% max) K Zhevago did not participate in the STIP 36/67 67 50

LTIP vesting (% max) K Zhevago did not participate in the LTIP 0/0 100 72

1. 2020 single gure remuneration total based on the total for Mr Mawe in the period from 1 January to 28 May 2020 and for Mr North in the period between 28 May and 31 December 2020.

Statement of shareholder voting

The following table shows the results of the binding vote on the remuneration policy and the advisory vote on the 2021 Remuneration Report at

the 2021 and 2022 AGMs, respectively.

For Against Withheld

(millions) %

(millions)

Remuneration Policy (at 2021 AGM) 499 9 8.1% 10 1.9% 0

2021 Remuneration Report (at 2022 AGM) 492 99.2% 4 0.8% 0

This report was approved by the Board on 14 March 2023.

Signed on behalf of the Board

Fiona MacAulay

Chair of the Remuneration Committee

14 March 2023

132 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Directors’ Report

Introduction

The Company was incorporated under the name Ferrexpo plc as a public company limited by shares on 22 April 2005. Ferrexpo plc listed on the

London Stock Exchange in June 2007 and is a member of the FTSE 250 Index.

The Directors present their Annual Report and Accounts on the affairs of the Group, together with the nancial statements and auditor’s report,

for the year ended 31 December 2022.

The Russian invasion into Ukraine on 24 February 2022, which is ongoing, has resulted in a signicant impairment loss on the Group’s non-

current assets as at 31 December 2022 and there could be a further nancial impact on the Group’s non-current assets in the future (see Notes

13 Property, plant and equipment for further details), which is predominantly dependent on the Group’s cash ow generation and the macro-

economic environment at the point of time of future impairment tests.

In addition, the war poses a material uncertainty in respect of the Group’s going concern assessment (see Note 2 Basis of preparation to the

Consolidated Financial Statements on page 156 for further details).

Information about the use of nancial instruments by the Group is given in Note 27 Financial instruments to the Consolidated Financial

Statements on page 188.

Dividends

Results for the year are set out in the Consolidated Income Statement on page 151.

Overall, in 2022 the Group paid out dividends of US$155 million, a 75% decrease compared to 2021 (US$619 million).

In view of Russia’s invasion of Ukraine, the Board has decided not to declare an interim dividend in conjunction with the Group’s full year results

for 2022. The Board will continue to assess the situation and, when appropriate, will make a decision in relation to shareholder returns.

Directors

The Directors of the Company who served during the year and up to the date of approval were:

– Ann-Christin Andersen

– Graeme Dacomb

– Lucio Genovese

– Vitalii Lisovenko

– Fiona MacAulay

– Jim North

– Natalie Polischuk

– Kostyantin Zhevago (resigned 29 December 2022)

Except for Ann-Christin Andersen, who will not stand for re-election at the forthcoming AGM, all of the current Directors will retire at the

forthcoming AGM and, being eligible, will offer themselves for re-election.

Further details about the Directors and their roles within the Group are set out in the Directors’ biographies on pages 82 to 83. Details of the

remuneration of the Directors, their interests in shares of the Company and their service contracts or letters of appointment are contained in the

Remuneration Report on pages 110 to 131.

Appointment and replacement of Directors

Directors may be elected by the shareholders (by ordinary resolution) or appointed by the Board. A Director appointed by the Board holds ofce

only until the next AGM and is then eligible for election by the shareholders.

Powers of the Directors

Subject to the Articles, the Act and any directions given by special resolution, the business of the Company will be managed by the Board which

may exercise all the powers of the Company.

Directors’ and ofcers’ insurance

The Company maintains Directors’ and Ofcers’ Liability Insurance in respect of legal action that may be brought against its Directors and

Ofcers.

Directors’ indemnity provision

During the period under review, the Group had in force a qualifying third party indemnity provision in favour of each of the Directors of Ferrexpo

plc against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Act.

133Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Additional disclosures

Additional disclosures which are incorporated by reference into this Directors’ Report, including any information required in accordance with

Listing Rule 9.8.4R of the FCA’s Listing Rules or the Act can be located as set out in the following table:

Page

Capitalised interest (LR 9.8.4R (1)) See Note 10 Net nance expense to the Consolidated Financial

Statements

164

Details of long-term incentive schemes (LR 9.8.4R (4)) Remuneration Report 117

Contracts of signicance (LR 9.8.4R (10)) See Note 30 Commitments, contingencies and legal disputes and

Note 34 Related party disclosures to the Consolidated Financial

Statements. Transactions with FC Vorskla are considered to be

contracts of signicance under the Listing Rules

199

Contracts for the provision of services by a controlling

shareholder (LR 9.8.4R(11))

See Remuneration Report for details of the consultancy

agreement entered into with Mr Zhevago

129

Details of waivers of dividends by shareholders

(LR 9.8.4R (12) and (13))

As at 14 March 2023, the Employee Benet Trusts contain

10,090,370 Ferrexpo Ordinary Shares for satisfying existing and

future awards under management incentive schemes. A

dividend waiver is in place in respect of these shares.

–

Relationship Agreement with controlling shareholder

(LR 9.8.4R (14)). Also see Note 34 Related party disclosures

Corporate Governance Report 88

Disclosures concerning greenhouse gas emissions Strategic Report 36

Engagement with suppliers, customers and others Strategic Report and pages 50 to 51

Financial instruments The Group does not hold any derivative nancial instruments.

Group policy on nancial instruments is set out in Note 27

Financial instruments to the Consolidated Financial Statements

188

Events since the balance sheet date See Note 35 Events after the reporting period to the

Consolidated Financial Statements

204

Statement of Directors’ responsibilities in respect of the

Annual Report and Accounts

Corporate Governance Report 137

Information that fulls the requirements of DTR 7.2

(other than DTR 7.2.6)

Corporate Governance Report 78

Disclosures required by statute

Employees

Information on the Group’s employment policies can be found in the Strategic Report on pages 42 to 43. Employee numbers are stated in Note

29 Employees to the Consolidated Financial Statements on page 196. The Group employs fewer than 250 staff in the United Kingdom and

therefore it does not disclose its policies on employee involvement or employing disabled people. However, the Group gives fair consideration

to applications for employment from disabled people.

Political donations

The Group made no political donations, political expenditure or political contributions during the year.

Energy consumption and greenhouse gas emissions reporting

In the UK, our energy consumption is less than 40,000kWh, which is below the threshold for energy and greenhouse gas emissions disclosure.

The Group does report on its global energy consumption and greenhouse gas emissions and this information can be found in the Strategic

Report on page 36. UK energy consumption was the equivalent of less than 0.001% (2021: 0.001%) of the Group’s energy consumption in 2022

and UK greenhouse gas emissions were the equivalent of less than 0.001% (2021: 0.001%) of the Group’s greenhouse gas emissions in 2022.

Share capital and rights attaching to the Company’s shares

The Company has a single class of Ordinary Shares of 10 pence each.

Subject to applicable statutes and other shareholders’ rights, shares may be issued with such rights and restrictions as the Company may by

ordinary resolution decide, or (if there is no such resolution or so far as it does not make specic provision) as the Board may decide. At each

AGM, the Board proposes to put in place annual shareholder authority for the Company’s Directors to allot new shares in accordance with

relevant institutional investor guidelines.

Details of the issued share capital of the Company are shown in Note 31 Share capital and reserves to the Consolidated Financial Statements

on page 199.

134 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Directors’ Report continued

Variation of rights

Subject to the provisions of the Act, the rights attached to a class of shares may be varied or abrogated either with the consent in writing of the

holders of at least three-quarters of the nominal amount of the issued shares of that class (excluding any shares of that class held as treasury

shares) or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class validly held in

accordance with the Articles.

Transfer of shares

Any share in the Company may be held in uncerticated form and, subject to the Articles, title to uncerticated shares may be transferred by

means of a relevant system. Registration of a transfer of an uncerticated share may be refused in the circumstances set out in the Uncerticated

Securities Regulations 2001 and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncerticated share is

to be transferred exceeds four.

Subject to the Articles, any member may transfer all or any of their certicated shares by an instrument of transfer in any usual form or in any

other form which the Board may approve. The Board may decline to register a transfer of a certicated share if it is not in the approved form. The

Board may also decline to register any transfer of any share which is not a fully paid share. The Board may decline to register a transfer of any of

the Company’s certicated shares by a person with a 0.25% or greater interest if such a person has been served with a notice and has failed

within 14 days to provide the Company with information concerning interests in those shares required to be provided under the Act, unless the

transfer is shown to the Board to be pursuant to an arm’s length sale.

The Company is not aware of any agreements between holders of securities that may result in restrictions on the transfer of securities or that

may result in restrictions on voting rights.

Repurchase of shares

Subject to authorisation by shareholder resolution, the Company may purchase its own shares in accordance with the Act. Any shares which

have been bought back may be held as treasury shares or cancelled immediately upon completion of the purchase.

The Company was given authority to make market purchases of up to approximately 10% of its existing Ordinary Share capital by a resolution

passed on 15 June 2022. This authority will expire at the conclusion of the Company’s 2023 AGM. A special resolution to renew the authority will

be proposed at the forthcoming AGM. Details of the resolution renewing the authority to purchase Ordinary Shares will be set out in the Notice

of AGM.

The Company did not make use of the authority mentioned above during 2022.

Dividends and distributions

Subject to the provisions of the Act, the shareholders may by ordinary resolution, from time to time, declare dividends not exceeding the amount

recommended by the Board. The Board may pay interim dividends and also any xed rate dividends whenever the nancial position of the

Group, in the opinion of the Board, justies their payment.

Under the Company’s Articles, the Board may withhold payment of all or any part of any dividends or other monies payable in respect of the

Company’s shares from a person with a 0.25% or greater interest (as dened in the Articles) if such person has been served with a notice under

Section 793 of the Act and has failed within 14 days to provide the Company with information concerning interests in those shares required to be

provided under the Act.

Voting

At a general meeting of the Company, every member has one vote on a show of hands and, on a poll, one vote for each share held. Under

theAct, members are entitled to appoint a proxy or proxies to exercise all or any of their rights to attend, speak and vote at a general meeting.

Amember that is a corporation may appoint one or more individuals to act on its behalf at a general meeting as a corporate representative.

Restrictions on voting

No member is entitled to vote at any general meeting in respect of any shares held by them if any call or other sum outstanding in respect of that

share remains unpaid. Currently, all issued shares are fully paid. In addition, subject to the Articles, no member shall be entitled to vote if they

have failed to provide the Company with information concerning interests in those shares required to be provided under the Act.

Shares held in the Employee Benet Trust (“EBT”)

The trustees of the Company’s EBT may vote or abstain from voting on shares held in the EBT as they think t and in doing so may take into

account both nancial and non-nancial interests of the beneciaries of the EBT or their dependants.

Deadline for voting rights

The Articles provide a deadline for submission of proxy forms of not less than 48 hours before the meeting. The Directors will also specify in the

notice of any general meeting a time, being not more than 48 hours before the meeting, by which a person must be entered in the register of

members in order to have the right to attend and vote at the meeting. The Directors may decide, at their discretion, that no account should be

taken of any day that is not a working day when calculating the 48-hour period.

135Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Substantial shareholdings

As at 31 December 2022, the Company had been advised, in accordance with the Disclosure Guidance and Transparency Rules, of the following

notiable interests in its voting rights.

Name of shareholder Ordinary Shares Number of voting rights

% of the Company’s total

voting rights at date of notication

Fevamotinico S.a.r.l. 296,077,944 296,077,944 50.30%

Schroder Investment Management 32,100,540 32,100,540 5.45%

BlackRock, Inc. 29,449,440 29,449,440 5.00%

As at 14 March 2023, the latest practicable date prior to publication of the Annual Report and Accounts, the following interests in voting rights

had been notied to the Company.

Name of shareholder Ordinary Shares Number of voting rights

% of the Company’s total

voting rights at date of notication

Fevamotinico S.a.r.l.  296,077,944 296,077,944 49.50%

Schroder Investment Management 32,100,540 32,100,540 5.45%

1. Fevamotinico S.a.r.l. is a wholly owned subsidiary of The Minco Trust of which Kostyantin Zhevago is a beneciary.

2. The above holding is based on the Company’s understanding of Fevamotinico S.a.r.l’s interest in voting rights following the treasury share transfer on 9 March 2023.

Signicant agreements – change of control

The Company does not have any agreements with Directors or employees that would provide for compensation for loss of ofce or employment

resulting from a takeover. There are no circumstances connected with any other signicant agreements to which the Company is a party that

would take effect, alter or terminate upon a change of control following a takeover bid, except those referred to below:

LTIP

The rules of the Company’s LTIP set out the consequences of a change of control of the Company on employee rights under the plan. Generally,

such rights will vest on a change of control to the extent that the performance conditions have been satised and on a time pro-rated basis,

subject to the discretion of the Remuneration Committee. Participants will become entitled to acquire shares in the Company, or in some cases,

to the payment of a cash sum of equivalent basis.

Relationship Agreement

Details of the Relationship Agreement entered into between Fevamotinico S.a.r.l., Kostyantin Zhevago, The Minco Trust and the Company can

be found in the Corporate Governance Report on page 88. The Relationship Agreement ceases to apply if Ferrexpo’s shares cease to be listed

and traded on the London Stock Exchange, or if the holding of Fevamotinico S.a.r.l., The Minco Trust or Mr Zhevago individually or collectively

falls below 24.9% of the issued share capital of the Company and they are no longer a controlling shareholder for the purposes of the UK

Listing Rules.

Going concern

As at the date of the approval of these Consolidated Financial Statements, the war in Ukraine that commenced with the Russian invasion into

Ukraine on 24 February 2022 is still ongoing. Even though the Group managed to operate throughout the nancial year 2022, albeit at a much

lower capacity, the situation in the country continues to pose a threat to the Group’s mining, processing and logistics operations and represents

a material uncertainty in terms of the Group’s ability to continue as a going concern.

As part of management’s going concern assessment, the Group continuously adjusts its long-term model in order to reect the latest

developments in terms of possible production and sales volumes as well as latest market prices and production costs, which are adversely

affected by lower production volumes.

Considering the threats caused by the ongoing war, the Group prepared also sensitivities for reasonably possible or plausible adverse changes,

but also reverse stress tests for more severe adverse changes. See Note 2 Basis of preparation to the Consolidated Financial Statements for

further information.

As at the date of the approval of these Consolidated Financial Statements, the Group has assessed that, taking into account:

i) its available cash and cash equivalents;

ii) its cash ow projections, adjusted for the effects caused by the war in Ukraine, for the period of management’s going concern assessment

covering a period of 18 months from the date of the approval of these Consolidated Financial Statements; and

iii) the feasibility and effectiveness of all available mitigating actions within the Group management’s control for identied uncertainties,

a material uncertainty still remains as some of the uncertainties remain outside of the Group management’s control, with the duration and the

impact of the war still unable to be predicted at this point of time.

Considering the current situation of the war in Ukraine, all identied available mitigating actions addressing the uncertainties caused by the war

and the results of the management’s going concern assessment, the Group continues to prepare its Consolidated Financial Statements on a

going concern basis. However, many of the identied uncertainties are outside of the Group management’s control and are of unpredictable

duration and severity, which may cast signicant doubt upon the Group’s ability to continue as a going concern.

136 Ferrexpo plc Annual Report & Accounts 2022

CORPORATE GOVERNANCE

Directors’ Report continued

In addition to the war-related uncertainties described above, the Group is also exposed to the risks associated with operating in a developing

economy, which may or may not be exacerbated by the war and/or the current circumstances facing the Group’s controlling shareholder (see

Ukraine country risk on page 60). As a result, the Group is exposed to a number of risk areas that are heightened compared to those expected

in a developed economy, such as an environment of political, scal and legal uncertainties. Although the Group has operated successfully in

difcult circumstances in recent years, the war in Ukraine and other circumstances facing the Group has led to an escalation of a number of

risks, including risks relating to the political environment and the independence of the legal system, which could have a material negative impact

on the Group’s business and reputation. For more information on critical judgements made by management in preparing these Consolidated

Financial Statements, see also Note 30 Commitments, contingencies and legal disputes. The critical judgements made are predominantly in

respect of the ongoing share dispute relating to Ferrexpo Poltava Mining and the imposed currency control measures in Ukraine under the

Martial Law.

Statement on disclosure of information to auditors

The Directors who held ofce at the date of approval of this Directors’ Report conrm that, so far as they are each aware, there is no relevant

audit information (as dened in the Act) of which the Group’s auditors are unaware, and that each Director has taken all steps that they ought

to have taken as a Director in order to make themselves aware of any relevant audit information (as dened) and to establish that the Group’s

auditors are aware of that information.

Amendments to Articles of Association

The Articles may be amended by special resolution in accordance with the Act.

AGM

The Board currently intends to hold the AGM of the Company on Thursday 25 May 2023 at 11.00am. Further information will be sent to

shareholders in a separate letter from the Chair summarising the business of the meeting together with the Notice convening the AGM.

The Strategic Report on pages 2 to 76 and this Directors’ Report have been drawn up and presented in accordance with, and in reliance

upon, applicable English company law, and any liability of the Directors in connection with these reports shall be subject to the limitations

and restrictions provided by such law.

The Directors’ Report was approved by the Board on 14 March 2023.

For and on behalf of the Board

Lucio Genovese

Chair

14 March 2023

137Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Statement of Directors’ Responsibilities

Statement by the Directors under the UK Corporate Governance Code

The Directors are responsible for preparing the Annual Report and the nancial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare such nancial statements for each nancial year. Under that law the Directors are required

to prepare the Group nancial statements in accordance with International Financial Reporting Standards as adopted in the United Kingdom

(“UK adopted IFRS”) and have also chosen to prepare the Parent Company nancial statements in accordance with the United Kingdom

Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 Reduced Disclosure Framework,

and applicable law).

Under company law, the Directors must not approve the nancial statements unless they are satised that they give a true and fair view of the

state of affairs of the Group and the Parent Company and of their prot or loss for that period.

In preparing the nancial statements, the Directors are required to:

– select suitable accounting policies and apply them consistently;

– make judgements and estimates that are reasonable and prudent;

– state whether applicable UK adopted International Financial Reporting Standards have been followed for the Group nancial statements and

United Kingdom Accounting Standards, comprising FRS 101 Reduced Disclosure Framework have been followed, subject to any material

departures disclosed and explained in the nancial statements; and

– prepare the nancial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufcient to show and explain the Group’s and Parent

Company’s transactions and disclose with reasonable accuracy at any time the nancial position of the Group and Parent Company and enable

them to ensure that its nancial statements comply with the Companies Act 2006. The Directors are also responsible for safeguarding the assets

of the Group and Parent Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and nancial information included on the Company’s

website. Legislation in the United Kingdom governing the preparation and dissemination of nancial statements may differ from legislation

in other jurisdictions.

Responsibility Statement of the Directors in respect of the Annual Report and Accounts

We conrm that to the best of our knowledge:

(a) the Group nancial statements, prepared in accordance with UK adopted IFRS, give a true and fair view of the assets, liabilities, nancial

position and prot of the Company and the subsidiary undertakings included in the consolidation taken as a whole and attention is drawn to

the material uncertainty in terms of the Group’s ability to continue as a going concern on page 135 of the Directors’ Report and Note 2 Basis

of preparation of the Consolidated Financial Statements on page 156;

(b) the Parent company nancial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising

FRS 101 Reduced Disclosure Framework, give a true and fair view of the Company’s assets, liabilities and nancial position of the Parent

Company;

(c) the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the

subsidiary undertakings included in the consolidation taken as a whole, together with a description of the Principal Risks and uncertainties

that they face; and

(d) the Annual Report and nancial statements, taken as a whole, is fair, balanced and understandable, and provides the information necessary

for shareholders to assess the Group’s and Company’s position, performance, business model and strategy.

The Directors’ Report (including Corporate Governance Report) comprises the information on pages 78 to 137.

This responsibility statement was approved by the Board of Directors on 14 March 2023 and is signed on its behalf by:

Lucio Genovese

Chair

Jim North

Chief Executive Ofcer

14 March 2023

138 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent

Auditor’s Report 139

Primary Statements

Consolidated Income Statement 151

Consolidated Statement of

Comprehensive Income 152

Consolidated Statement

of FinancialPosition 153

Consolidated Statement

of Cash Flows 154

Consolidated Statement

of Changes in Equity 155

Notes to the Consolidated

Financial Statements 156

Notes

Section 1: Basis of Preparation

Corporate information 1 156

Basis of preparation 2 156

New accounting policies 3 158

Use of critical estimates

and judgements 4 159

Notes

Section 2: Results for the Year

Segment information 5 159

Revenue 6 160

Operating expenses 7 162

Other income 8 163

Foreign exchange gains and losses 9 164

Net nance expense 10 164

Taxation 11 165

Earnings per share and

dividends paid and proposed 12 169

Section 3: Assets and Liabilities

Property, plant and equipment 13 171

Leases 14 175

Goodwill and other

intangible assets 15 176

Other non-current assets 16 178

Inventories 17 178

Trade and other receivables 18 179

Prepayments and other

current assets 19 180

Other taxes recoverable

and payable 20 181

Trade and other payables 21 182

Pension and post-employment

obligations 22 182

Provisions 23 186

Accrued and contract liabilities 24 186

Notes

Section 4: Financial Instruments

and Financial Risk Management

Cash and cash equivalents 25 187

Interest-bearing loans

and borrowings 26 187

Financial instruments 27 188

Section 5: Other

Share-based payments 28 195

Employees 29 196

Commitments, contingencies

and legal disputes 30 196

Share capital and reserves 31 199

Consolidated subsidiaries 32 200

Investments in associates 33 201

Related party disclosures 34 201

Events after the reporting period 35 204

Parent Company

Financial Statements 205

Additional Disclosures 211

Alternative Performance Measures 212

Glossary 214

Financial contents

139Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

For the purpose of this report, the terms “we” and “our” denote MHA MacIntyre Hudson in relation to UK legal, professional and regulatory

responsibilities and reporting obligations to the members of Ferrexpo plc. For the purposes of the table on pages 142 to 145 that sets out the

keyaudit matters and how our audit addressed the key audit matters, the terms “we” and “our” refer to MHA MacIntyre Hudson. The Group

nancial statements, as dened below, consolidate the accounts of Ferrexpo plc and its subsidiaries (the “Group”) and include the Group’s share

of associates. The “Parent Company” is dened as Ferrexpo plc, as an individual entity. The relevant legislation governing the Parent Company is

the United Kingdom Companies Act 2006 (“Companies Act 2006”).

Opinion

We have audited the nancial statements of Ferrexpo plc and its subsidiaries for the year ended 31 December 2022 which comprise:

– the consolidated income statement;

– the consolidated statement of comprehensive income;

– the consolidated statement of nancial position;

– the consolidated statement of cash ows;

– the consolidated statement of changes in equity;

– the notes to the consolidated nancial statements, including signicant accounting policies;

– the Parent Company statement of nancial position;

– the Parent Company statement of changes in equity; and

– the notes to the parent Company nancial statements, including signicant accounting policies.

The nancial reporting framework that has been applied in the preparation of the Group nancial statements is applicable law and International

Financial Reporting Standards adopted for use in the United Kingdom (“UK adopted IFRS”). The nancial reporting framework that has been

applied in the preparation of the Parent Company nancial statements is applicable law and United Kingdom Accounting Standards, including

FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).

In our opinion:

– the nancial statements give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 31 December 2022 and of the

Group’s prot for the year then ended;

– the Group nancial statements have been properly prepared in accordance with UK adopted IFRS;

– the Parent Company nancial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice; and

– the nancial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under

those standards are further described in the auditor’s responsibilities for the audit of the nancial statements section of our report. We are

independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the nancial

statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fullled our other ethical

responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufcient and appropriate to

provide a basis for our opinion.

Independent Auditor’s Report

To the members of Ferrexpo plc

140 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

Material uncertainty relating to going concern

We draw your attention to Note 2 to the consolidated nancial statements on pages 156 and 157, which indicates that the ongoing armed conict

in Ukraine poses a threat to the Group’s mining, processing and logistics operations within Ukraine and may cast signicant doubt on the ability

of the Group to continue as a going concern. As stated in Note 2, management has assessed that the unpredictable duration and severity of the

impact of the war in Ukraine indicate that a material uncertainty exists as some of the uncertainties identied are outside of the Group

management’s control. In addition to the war-related uncertainties, management has indicated that the Group is also exposed to the risks

associated with operating in a developing economy like Ukraine. As such, the Group is exposed to a number of risks such as an environment of

political, scal and legal uncertainties which could have a material negative impact on the Group’s business and reputation. Some of these risks

are outlined in Note 30. These circumstances indicate the existence of a material uncertainty that may cast signicant doubt upon the Group’s

ability to continue as a going concern. Our opinion is not modied in respect of this matter.

In auditing the nancial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the

nancial statements is appropriate.

For further details, refer to the Audit Committee’s Report on page 100 and other areas of the Annual Report (including the Chair’s Statement

on page 3 the CEO’s Statement on page 6, Principal Risks on page 59 and longer-term Viability Statement on pages 75 and 76).

Our evaluation of the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going concern basis of

accounting, having considered the impact of the war Ukraine and of the general risks related to the political, scal and legal uncertainties of

operating in Ukraine, included:

– challenging management’s assessment of the potential risks and uncertainties relevant to the Group as a result of the ongoing war;

– challenging whether the Group’s further mitigating actions are reasonable and within the Group’s control;

– assessing for reasonableness the assumptions applied in the going concern assessment cash ow forecast, evaluating the potential future

impact of the war on the cash available to the Group, including the ability to continue its operations in case of disruption to supplies and to its

logistics network, as well as assessing management’s downside scenarios;

– reviewing recent production and trading activity to verify the operational results following the year end, to verify the underlying data on which

the going concern assessment is based;

– testing the mathematical accuracy and appropriateness of the model used to prepare the forecasts;

– reviewed management’s assessment of the legal proceedings in which the Group is involved, including the probability of outows of

resources, as detailed in the key audit matter “Contingencies and completeness of litigations and claims”; and

– assessing the Group’s going concern related nancial statement disclosures.

In relation to the Group’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention

to in relation to the Directors’ Statement in the nancial statements about whether the Directors considered it appropriate to adopt the going

concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

141Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Overview of our audit approach

Scope We directed and supervised Baker Tilly member rms (“Component Auditors”) to report on the operations of the two main

mining and processing entities in Ukraine and we directly performed work over the two other material subsidiaries being the

Swiss and Middle East sales and marketing companies and we also performed the work over the Parent Company.

Material subsidiaries were determined based on:

– nancial signicance of the component to the Group as a whole; and

– assessment of the risk of material misstatements applicable to each component.

Our audit scope results in all major operations of the Group being subject to audit work, covering 99% of the Group’s revenue,

99% of the Group’s prot and 95% of the net assets.

Materiality The materiality that we used for the Group nancial statements was US$35.7 million (2021: US$42 million), which was

determined as 5% of the three-year average of prot before tax (“PBT”) (2021: 5%).

The materiality used for the Parent Company nancial statements was US$8.2 million (2021: $US9 million), which was

determined as 2% of the Company’s net assets (2021: 2%).

Performance materiality was set at 60% of materiality for both the Group and Company nancial statements (2021: 60%).

Key audit matters The key audit matters that we identied in the current year were:

– impairment of PPE and other intangibles;

– completeness of related party transactions;

– taxation – IFRIC 23 and critical judgements of transfer pricing and the international structure;

– management override of controls; and

– completeness of provisions for litigations and claims.

Our assessment of the Group’s key audit matters is consistent with 2021 except for the removal of the accounting treatment

and valuation of low-grade ore and the addition of the impairment of PPE and other intangibles.

142 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

The scope of our audit and our key audit matters

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the nancial statements and the

nancial report. In particular, we looked at where the Directors made subjective judgments, for example, in respect of signicant accounting

estimates that involved making assumptions and considering future events that are inherently uncertain.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most signicance in our audit of the nancial statements of the

current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) that we identied. These

matters included those which had the greatest effect on:

– the overall audit strategy;

– the allocation of resources in the audit; and

– directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we do

not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be

communicated in our report.

Impairment of PPE and other intangibles

Key audit matter

description

Due to the ongoing war in Ukraine, management does not expect the Group to be operating and trading at full capacity for an

uncertain period in the future, resulting in reduced expected cash ows from the Group’s assets over the period of uncertainty.

The increased country risk for Ukraine has also been reected in a higher discount rate than in previous years to be applied to

the expected cash ows.

The calculation of the value in use to assess the recoverable amount of the Group’s cash generating unit (“CGU”) as at the

year-end date is derived from management long-term model and is driven by a number of key inputs which are obtained either

from external sources or management’s best estimates. Therefore, this is an area subject to a high level of estimation

uncertainty and judgement.

Furthermore, the allocation of the impairment loss needs to be considered in accordance with the requirements in IAS 36,

which mandates that the carrying amount of any goodwill is reduced rst, and then the loss is allocated to the other CGU

assets pro rata on the basis of the carrying amount of each asset in the unit.

We draw attention to Note 13 to the consolidated nancial statements which describes the uncertainty related to the estimate

of the recoverable amount of the Group’s CGU. Our opinion is not modied in respect of this matter.

How the scope

ofour audit

responded to the

key audit matter

Reviewed the mathematical accuracy of the calculation and that there are no computational errors which have fed into the

forecasts.

We have challenged management as to the source and selection of the data used in the Group’s forecasts to ensure that

these are relevant and reasonable in light of the Group’s circumstances and the ongoing war in Ukraine.

We have challenged the key judgements and assumptions underpinning the forecasts to ensure that these are appropriate

and reasonable based on our understanding of the Group’s circumstances and the ongoing war in Ukraine.

We have reviewed, with the help of our valuation expert, the determination of the discount rate applied in the value in use

calculation and considered whether it is reasonable in the Group’s circumstances.

We have considered whether the value in use calculation has considered all available relevant information and veried whether

it is mathematically accurate.

We have considered whether the assets included in the carrying amount of the CGU were accurate and veried the amount

ofthe impairment loss.

We have reviewed the allocation of the impairment loss across the Group’s assets to ensure this is in line with IAS 36.

We have reviewed the disclosures in respect of the impairment assessment including the appropriateness of the sensitivities

detailed and the accuracy of their nancial impact.

Key observations The results of our audit regarding the Impairment of PPE and other intangibles were satisfactory, and we concur that the

recorded impairment and disclosures are materially appropriate.

143Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Completeness of related party relationships and transactions

Key audit matter

description

The Group enters into a number of related party transactions and has reported an expense of US$29.1 million (2021: US$42.2

million) and other income of US$0.6 million (2021: US$0.7 million) in 2022.

Our risk assessment and audit approach reected the identication of a signicant risk in respect of the existence of

unidentied or undisclosed related parties and transactions, including the risk relating to signicant transactions outside

thenormal course of business that could involve related parties.

We therefore considered completeness of related party transactions to be a key audit matter in light of the potential for

unidentied or undisclosed related party transactions. This risk was considered greatest in respect of transactions outside

thenormal course of business.

The related party disclosures are set out in Note 34 to the consolidated nancial statements and the Group’s controls are

described in the Report of the Audit Committee on page 103.

How the scope

ofour audit

responded to the

key audit matter

We reviewed and evaluated management’s process for identifying and recording related parties into its register and recording

transactions with those related parties.

We reviewed the minutes of meetings of the Board of Directors and relevant sub-committees to assess whether there are

newrelated party transactions entered into in 2022 that are signicant or outside the normal course of business.

We used our data analytics tool to search for transactions with related parties which had not been included in the related

party disclosures.

We completed a reconciliation of related party transactions extracted from management’s system for the related party

disclosures to ensure that it was complete.

We tested a sample of suppliers in Ukraine to establish whether they are genuine businesses against information held on

public record.

We performed independent searches of the Board of Directors’ other appointments and shareholdings and to identify any

counterparties on the list which were not included in the related party disclosures.

Obtained representation from the Board of Directors as to the completeness of the list of related parties and transactions with

those related parties.

Reviewed the Related Party disclosures in the consolidated nancial statements against the relevant reporting requirements

and the results of our work.

Key observations We are satised that the related party transactions and balances are appropriately disclosed in the nancial statements.

144 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

Taxation – IFRIC 23 and critical judgements of transfer pricing and the international structure

Key audit matter

description

A key area in which the Group has applied critical judgement is transfer pricing and international taxation.

The Group conducts signicant business across the globe through a complex value chain and prices its sales between its

subsidiaries using international benchmark prices for comparable products covering product quality and applicable freight

costs. The Group judges these to be on terms, that comply with applicable legislation.

In August 2017, the State Tax Service of Ukraine (“STS”), previously known as the State Fiscal Service commenced a tax

auditfor the period from 1 September 2013 to 31 December 2015 at the Group’s major subsidiary in Ukraine with a focus

oncross-border transactions in terms of its pellet sales to another subsidiary of the Group. The STS made a formal claim for

UAH448 million (US$16.4million) as at 31 December 2021 (2020: US$15.8 million).

The Group’s subsidiary initiated legal proceedings and this case passed through the Poltava court of rst court instance and

the Northern Commercial Court of Appeal. Both cases were ruled in favour of the Group. The STS subsequently led an

appeal of cassation to the Supreme Court of Ukraine in December 2019. On 27 June 2022, the Supreme Court of Ukraine

ruled partially in favour of the STS. As a result of this court decision, an amount of UAH234 million (US$7,999 thousand)

became a legally binding obligation and was paid in July 2022.

The STS launched two additional tax audits on 18 February 2020 into the cross-border pricing arrangements with other

Groupsubsidiaries and for other nancial periods. In addition to the above cases, the State Bureau of Investigation (“SBI”) has

launched a pre-trial investigation into the sale of iron ore products between Group subsidiaries for the nancial years 2013to

2019.

As of the date of approval of these nancial statements, the results of the subsequent tax audits as well as the SBI

investigation have not been made available by the relevant authorities.

Signicant judgement is required in applying the transfer pricing and international taxation rules, with the interpretation of

thetaxpayer differing from that of the tax authorities which leads to uncertainty in the correct tax treatment. It is therefore

necessary to determine the probability of any loss particularly in connection with the Ukrainian tax audits in accordance with

the IFRIC 23 reporting standard.

This matter is described in Note 11 to the consolidated nancial statements and considered by the Audit Committee on page

101 of the Annual Report and Accounts.

The IFRIC 23 framework can be challenging to apply in the context of international taxation and contentious transfer pricing

matters, in particular regarding the fact that the treatment of transfer pricing cases will typically shift from matters of policy and

application in an enquiry to matters of evidence and jurisprudence in an adjudication by a court. In an enquiry, a tax authority

has the disadvantage of not knowing the full facts and circumstances upfront in the same way as a taxpayer. The framework

therefore asks the taxpayer to equalise this dynamic by basing any IFRIC 23 analysis on the assumption that there is no

information asymmetry as between the taxpayer and the tax authority. Further, in an enquiry, it is accepted that any

disagreement will likely be settled by a negotiation in the rst instance. There will be many factors to account for in predicting

the outcome of a negotiation such as the nature of the dispute as well as wider commercial and policy pressures. The nature

of court proceedings is that there is a need for clear adjudication on matters of law and jurisprudence. This means that

negotiation does not come into it at all, albeit the parties are free to settle the dispute at any time. Rather the court process is

an impartial evidence-based process that involves judges applying the law to the facts. The lower courts will usually resolve

points of fact and the higher courts will usually address points of law. Adjudication of points of law tends to be a more

technically involved process whose outcome is extremely difcult to predict. Consequently, the higher the level of court

hearing a matter, the more difcult it becomes to apply the IFRIC 23 framework. This is because the highest courts operate

atthe highest levels of discretion.

How the scope

ofour audit

responded to the

key audit matter

We have involved transfer pricing and international tax specialists to assess appropriateness of various international matters

potentially impacting the Group. In particular, this included the key risk regarding the transfer pricing policies and

documentation in place prepared by management.

We have reviewed key correspondence and calculation of the assessed risk with assistance from international tax and transfer

pricing specialists. In addition, we have reviewed recent similar cases in Ukraine and the results of the court proceedings. We

have relied on experts to assess the risk of an adverse ruling taking place based on their knowledge of the Ukrainian legal

system.

The consideration of IFRIC 23 requires the Group to consider the position at each nancial year end based upon the

information as at that date. We have challenged management and considered a sensitivity analysis upon the application of

IFRIC 23 to consider the signicant judgements made in relation to both transfer pricing and international taxation matters

impacting the Group. This included a detailed IFRIC 23 assessment for the inherent risks in the international structure.

Key observations The results of our audit regarding transfer pricing and international taxation were satisfactory, and we concur that the recorded

tax provisions and disclosures are materially appropriate.

145Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Management override of controls

Key audit matter

description

In accordance with ISA 240 (UK) management override is presumed to be a signicant risk. The ability to override controls

puts management in a unique position to perpetrate or conceal the effects of fraud. This may take a number of forms, such

asfalsifying accounting entries in order to conceal misappropriation of assets or other manipulation of accounting entries

intended to result in the production of nancial statements which give a misleading view of the entity’s nancial position or

performance.

How the scope

ofour audit

responded to the

key audit matter

We have performed the following procedures in addition to other specic procedures performed which are outlined in the

other key audit matters and basis of opinion section of this report:

– We held discussions with a broader range of senior management, being the Chief Executive Ofcer and Acting Chief

Marketing Ofcer, Group Legal Counsel and with lower-level operational management throughout the organisation and

atdifferent levels and in different functions to identify if they are aware of any instances of override of controls.

– We evaluated the design and implementation of key controls including, in particular, high-level management review

controls and controls over purchase-to-pay procurement processes, as part of our risk assessment.

– We reviewed internal audit reports to help identify signicant control deciencies and the whistleblower reports for

anyactual or suspected non-compliance with controls.

– We tested the appropriateness of journal entries and other adjustments recorded in the general ledger and other

adjustments in the preparation of the nancial statements at both the Parent Company and consolidated Group level.

– We evaluated whether the judgments and decisions made in determining the accounting estimates included in the

nancial statements, even if they are individually reasonable, indicate a possible bias on the part of the entity’s

management that may represent a risk of material misstatement due to fraud.

– We evaluated the business rationale for signicant transactions that are outside the normal course of the business

forthe entity.

– We held discussions with the Audit Committee, senior management and internal audit regarding the risk of fraud,

effectiveness of key oversight controls and any fraud or suspected fraud identied during the year.

Key observations We did not identify any instances of management override of controls.

Contingencies and completeness of litigations and claims

Key audit matter

description

As indicated in Note 30 to the consolidated nancial statements, the Group is subject to a number of legal proceedings.

Management has assessed the probability of an outow of resources in the various proceedings and considered how to

account and/or disclose the claims in accordance with IAS 37.

The Group has disclosed the contingencies which exist as a result of past transactions or events in Note 30 to the

consolidated nancial statements. Our audit has given particular consideration to the three main claims in which the Group is

involved, being the FPM share dispute, the royalty related investigation and the currency control measures imposed in Ukraine.

Management judgement is involved in assessing the accounting for contingencies and claims. Particular judgement is

required in considering the probability of any claim against the Group being successful and we have accordingly designated

this as a key audit matter of the audit.

The key risk related to the claims and contingencies is mainly associated with the completeness of the disclosure and

provisions in the nancial statements.

We draw attention to Note 30 to the consolidated nancial statements which describes the uncertainty in the application of

local legislation in Ukraine in respect of the outcome of the proceedings in which the Group is involved. Our opinion is not

modied in respect of this matter.

How the scope

ofour audit

responded to the

key audit matter

In response to the risk of the completeness of litigations and claims in the nancial statements, we completed the following

audit procedures:

– We enquired directly and obtained documentation from the Group’s internal and external legal advisors and counsel

about their assessment of the various claims to evaluate the appropriateness of management’s conclusions.

– We discussed the cases with management and reviewed correspondence and other documents exchanged between

the Group and the other parties involved.

– We considered and assessed the likelihood of an outow of resources arising as a result of each individual claim on the

basis of the information obtained.

– We used the component auditor’s in-house legal specialists to review certain cases to conclude on the likelihood of the

claims’ outcome.

– We read the minutes of the Board meetings and inspected the Group’s legal expenses, in order to ensure all cases have

been identied.

– We discussed and challenged the disclosures for completeness and accuracy of any nancial impact based on our

procedures detailed above.

Key observations The results of our audit regarding contingencies and the completeness of litigations and claims were satisfactory, and we

concur that the disclosures are materially appropriate.

146 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

How we tailored the audit scope

Our Group audit was scoped by obtaining an understanding of the Group and the Parent Company and their environments, including internal

control, and assessing the risks of material misstatement. The Group’s Parent entity and nance companies are in the UK, while the head ofce

and marketing companies are based in Switzerland and the primary mining operations are located in Ukraine.

Considering operational and nancial performance and risk factors, we focused our assessment on the signicant components and performed

full scope audits of the Ukrainian Ferrexpo Poltava Mining and Ferrexpo Yeristovo Mining components; the sales and marketing entities Ferrexpo

AG and Ferrexpo Middle East; Ferrexpo Finance plc; and Ferrexpo plc entity; along with specied Group-level audit procedures over the assets

of the non-operating Ukrainian Ferrexpo Belanovo Mining component; the assets of the Hungarian Helogistics Asset Leasing Kft entity including

the vessels; and revenue of the Hungarian DDSG Mahart Kft entity. Our full scope and specied audit procedures cover revenue (99% of Group

total), prot before tax (99% of Group total) and net assets (95% of Group total).

The remaining 20 components represent 1% of the Group’s prot before tax and individually do not represent more than 1% of the Group’s

protbefore tax. The work performed by the component audit teams is guided by the Group audit team and is executed at levels of materiality

applicable to each individual entity, which were lower than Group materiality and ranged from US$1.4 million to US$7.0 million (2021: US$0.9

million to US$16 million).

Full scope

Specied audit procedures

Analytical procedures

Revenue (%) Prot before tax (%) Net assets (%)

The Group audit team was involved in the audit work performed by the component auditor in Ukraine through a combination of our Group

planning meetings and calls, provision of Group instructions (including detailed supplemented procedures), review and challenge of related

component interofce reporting and of ndings from their work (which included the audit procedures performed to respond to risks of material

misstatement), attendance at component audit closing conference calls and weekly interaction on audit and accounting matters which arose.

Asa visit to the Ukrainian team was not practicable due to the ongoing war in Ukraine, the Group audit team intensied the interaction with that

local team through video conferences to review and direct the audit approach taken in respect of signicant risks and a number of other relevant

risks of material misstatement.

Ferrexpo plc and Ferrexpo Finance plc are registered in the UK; hence the audits were carried out by the Group audit team.

The Swiss and Middle East sales and marketing entities have a common nance function with the Group nance team and as such the audits

ofthese components were carried out by the Group audit team.

At the Parent entity level, we also tested the consolidation process and carried out analytical procedures to conrm our conclusion that there

were no signicant risks of material misstatement of the aggregated nancial information of the remaining components not subject to audit or

audit of specied account balances.

Our application of materiality

The scope of our audit was inuenced by our application of materiality. Our denition of materiality considers the value of error or omission on

the nancial statements that, individually or in aggregate, would change or inuence the economic decision of a reasonably knowledgeable user

of those nancial statements. Misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the

nature of identied misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the nancial statements

as a whole. Materiality is used in planning the scope of our work, executing that work and evaluating the results.

147Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows:

Group nancial statements Parent Company nancial statements

Overall

materiality

Group materiality

(US$ Million)

2022 2021

35.7 42.0

Parent Company materiality

(US$ Million)

2022 2021

8.2 9

How we

determined it

We have determined materiality by using 5% of a three-year

average of prot before tax (2021: 5%)

2% of Parent Company’s net assets (2021: 2%)

Rationale for the

benchmark

applied

The prot before tax for the years 2020–2022 has been

normalised in determining materiality to exclude items which,

due to their variable nancial impact and/or expected

infrequency of the underlying events, are not considered

indicative of continuing operations of the Group. The impact

of the war in Ukraine has had a signicant impact on the

Group’s operations in the current year, and the continued

use of a three-year average has assisted in normalising the

materiality benchmark.

These items do not form part of the Group’s internally or

externally monitored primary key performance indicators,

and which if included, would distort materiality year-on-year.

We consider this approach of using a three-year average to

be more appropriate than an assessment based on

current-year results alone given the nature of the mining

industry which is exposed to cyclical commodity price

uctuations and to therefore provide a more stable base

reective of the scale of the Group’s size and operations.

We set our 2022 performance materiality at 60% of overall

materiality (2021: 60%), amounting to US$21.4 million (2021:

US$25.2 million) to reduce the probability that, in aggregate,

uncorrected and undetected misstatements exceed the

materiality for the nancial statements as a whole. In

determining performance materiality, we considered a number

of factors – the history of misstatements, our risk assessment

and the strength and robustness of the control environment.

We consider the chosen benchmark to be appropriate due to

the nature of Parent Company’s operations being a holding

company of the Group.

We set our 2022 performance materiality at 60% of overall

materiality (2021: 60%), amounting to US$4.9 million (2021:

US$5.4 million) to reduce the probability that, in aggregate,

uncorrected and undetected misstatements exceed the

materiality for the nancial statements as a whole. In

determining performance materiality, we considered a number

of factors – the history of misstatements, our risk assessment

and the strength and robustness of the control environment.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.

We agreed with the Audit Committee that we would report to them all audit differences in excess of US$1.8 million (2021: US$2.1 million) for the

Group as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. All differences in excess of

US$410,000 (2021: US$450,000) are reported for the Parent Company.

We also report to the Audit Committee on disclosure matters that we identied when assessing the overall presentation of the nancial statements.

The control environment

We evaluated the design and implementation of those internal controls of the Company which are relevant to our audit, such as those relating to

the nancial reporting cycle. We also tested operating effectiveness, but did not place reliance on certain controls over several of the key

business cycles.

We deployed our internal IT audit specialists to gain an understanding of general IT controls and perform walkthroughs of the key operating cycles.

148 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

Climate-related risks

In planning our audit and gaining an understanding of the Group, we considered the potential impact of climate-related risks on the business and

its nancial statements. We obtained management’s climate-related risk assessment, along with relevant documentation and reports relating to

management’s assessment and held discussions with management to understand its process for identifying and assessing the related risks.

We engaged internal specialists to assess, amongst other factors, the benchmarks used by management, the nature of the Group’s business

activities, its processes and the geographic distribution of its activities.

We critically reviewed management’s assessment and challenged the assumptions underlying its assessment. We made enquiries to understand

the extent of the potential impact of climate change risks on the Group’s nancial statements. This has included a review of critical accounting

estimates and judgements, and the effect on the MHA audit approach. We also considered the ongoing viability of the business in respect both

to direct climate risks and changes in legislation as nations grapple with their commitments to reduce emissions.

Other information

The other information comprises the information included in the Annual Report and Accounts other than the nancial statements and our

auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report and Accounts. Our opinion

on the nancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not

express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the

other information is materially inconsistent with the nancial statements, or our knowledge obtained in the course of the audit, or otherwise

appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine

whether this gives rise to a material misstatement in the nancial statements themselves. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act

2006.

In our opinion, based on the work undertaken in the course of the audit:

– the information given in the Strategic Report and the Directors’ Report for the nancial year for which the nancial statements are prepared

isconsistent with the nancial statements; and

– the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit,

we have not identied material misstatements in the Strategic Report or the Directors’ Report.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our

opinion:

– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from

branches not visited by us; or

– the Parent Company nancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

– certain disclosures of Directors’ Remuneration specied by law are not made; or

– we have not received all the information and explanations we require for our audit; or

– a Corporate Governance Statement has not been prepared by the Parent Company.

Corporate governance statement

We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance

Statement relating to the entity’s compliance with the provisions of the UK Corporate Governance Code specied for our review by the

ListingRules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance

Statement is materially consistent with the nancial statements or our knowledge obtained during the audit:

– Directors’ statement with regard to the appropriateness of adopting the going concern basis of accounting and any material uncertainties

identied set out on pages 135 and 136;

– Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why the period is appropriate set

out on pages 75 and 76;

– Directors’ statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities

set out on pages 75 and 76;

– Directors’ statement on fair, balanced and understandable set out on page 137;

– Board’s conrmation that it has carried out a robust assessment of the emerging and principal risks set out on page 75;

– section of the 2022 Annual Report and Accounts that describes the review of effectiveness of risk management and internal control systems

set out on page 103; and

– section describing the work of the Audit Committee set out on pages 98 and 99.

149Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Responsibilities of Directors

As explained more fully in the Directors’ Responsibilities Statement set out on page 137, the Directors are responsible for the preparation of

thenancial statements and for being satised that they give a true and fair view, and for such internal control as the Directors determine is

necessary to enable the preparation of nancial statements that are free from material misstatement, whether due to fraud or error. In preparing

the nancial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going

concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either

intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor responsibilities for the audit of the nancial statements

Our objectives are to obtain reasonable assurance about whether the nancial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but

isnot a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to

inuence the economic decisions of users taken on the basis of these nancial statements.

A further description of our responsibilities for the nancial statements is located on the FRC’s website at: www.frc.org.uk/

auditorsresponsibilities. This description forms part of our auditor’s report.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,

outlined above, to detect material misstatements in respect of irregularities, including fraud.

These audit procedures were designed to provide reasonable assurance that the nancial statements were free from fraud or error. The risk of

not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that

result from fraud is inherently more difcult than detecting those that result from error, as fraud may involve collusion, deliberate concealment,

forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions

reected in the nancial statements, the less likely we would become aware of it.

Identifying and assessing potential risks arising from irregularities, including fraud

The extent of the procedures undertaken to identify and assess the risks of material misstatement in respect of irregularities, including fraud,

included the following:

– We considered the nature of the mining industry and sector on the control environment, business performance including remuneration

policies and the Company’s own risk assessment that irregularities might occur as a result of fraud or error. From our sector experience and

through discussion with the Directors and legal advisors, we obtained an understanding of the legal and regulatory frameworks applicable to

the Company focusing on laws and regulations that could reasonably be expected to have a direct material effect on the nancial statements,

such as provisions of the Companies Act 2006, Listing Rules and tax legislation In addition, we considered compliance with the UK Bribery

Act, employee legislation, terms of the Group’s mining licences and environmental regulations as fundamental to the Group’s operations.

– We enquired of the Directors and management, including the in-house legal counsel and Audit Committee, concerning the Company’s

policies and procedures relating to:

– identifying, evaluating and complying with the laws and regulations and whether they were aware of any instances of non-compliance;

– detecting and responding to the risks of fraud and whether they had any knowledge of actual or suspected fraud; and

– the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.

– We assessed the susceptibility of the Company’s nancial statements to material misstatement, including how fraud might occur by

evaluating management’s incentives and opportunities for manipulation of the nancial statements. This included utilising the spectrum of

inherent risk and an evaluation of the risk of management override of controls. We determined that the principal risks were related to posting

inappropriate journal entries to increase revenue or reduce costs, creating ctitious transactions to hide losses or to improve nancial

performance, and management bias in accounting estimates, particularly in the value in use calculation for the Group’s assets and in

signicant accounting judgements in respect of the assessment of contingencies and legal claims and uncertain tax treatments. The Group

engagement team shared this risk assessment with the signicant subsidiaries auditors so that they could include appropriate audit

procedures in response to such risks in their work.

150 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Independent Auditor’s Report continued

To the members of Ferrexpo plc

Audit response to risks identied

In respect of the above procedures:

– We corroborated the results of our enquiries through our review of the minutes of the Company’s Board and Audit Committee meetings as

well as the minutes of the meetings of the Finance, Risk Management and Compliance Committee.

– Audit procedures performed by the engagement team in connection with the risks identied included:

– reviewing nancial statement disclosures and testing supporting documentation to assess compliance with applicable laws and

regulations expected to have a direct impact on the nancial statements;

– testing journal entries, including those processed late for nancial statements preparation and those posted by infrequent or unexpected

users and those posted to unusual account combinations;

– evaluating the business rationale of signicant transactions outside the normal course of business, and reviewing accounting estimates

forbias;

– enquiry of management and legal advisors around actual and potential litigation and claims;

– challenging the assumptions made by management in measuring signicant accounting estimates, in particular those included in the

Group’s value in use calculation and the going concern long-term model, as well as the judgments made in respect of contingencies and

legal claims and IFRIC 23 assessment of tax liabilities;

– obtaining conrmations from third parties to conrm existence of a sample of transactions and balances;

– the audit team in Ukraine visiting the mines in December 2022 and observing the progress of key capital projects, the mining operations,

and physical verication of the inventory; and

– the use of data analytics software to interrogate the journals posted in the year and to review areas where the incentive to override controls

may be greatest. We also used our data analytics tool to identify potential transactions with related parties.

– The Company operates in a specialised mining industry. As such, the Senior Statutory Auditor considered the experience and expertise of the

engagement team to ensure that the team had the appropriate competence and capabilities.

– We communicated relevant laws and regulations and potential fraud risks to all engagement team members, including experts, and remained

alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Other matters which we are required to address

Following the recommendation of the Audit Committee, we were appointed by the members of the Company by ordinary resolution at the Annual

General Meeting held on 15 June 2022 to audit the nancial statements for the year ending 31 December 2022. Our total uninterrupted

engagement is four years, covering the years ending 31 December 2019 to 31 December 2022.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain

independent of the Group and the Parent Company in conducting our audit.

Our audit opinion is consistent with the additional report to the Audit Committee.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an

auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than

the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (“FCA”) Disclosure Guidance and Transparency Rule (“DTR”) 4.1.14R, these nancial statements

form part of the European Single Electronic Format (“ESEF”) prepared Annual Financial Report led on the National Storage Mechanism of the

UK FCA in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This auditor’s report provides no assurance over whether

theannual nancial report has been prepared using the single electronic format specied in the ESEF RTS.

Rakesh Shaunak FCA

Senior Statutory Auditor

For and on behalf of MHA MacIntyre Hudson

Statutory Auditor

London, United Kingdom

14 March 2023

151Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Consolidated Income Statement

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Revenue 6 1, 2 4 8 ,4 9 0 2 , 51 8 , 2 3 0

Operating expenses

5/7 (1, 1 92,046) (1 , 4 11 , 9 11)

Other operating income

8 9, 23 3 9, 49 9

Operating foreign exchange gains/(losses)

9 339, 439 (3 7, 8 0 8)

Operating prot 4 0 5 ,11 6 1,0 78,01 0

Share of prot from associates

33 5 57 4,468

Prot before tax and nance 405,6 73 1 ,08 2,4 78

Finance income

10 92 9 6 37

Finance expense

10 (4 ,4 4 6) (8,94 0)

Non-operating foreign exchange losses

9 (6 3, 497) (3,20 0)

Prot before tax 33 8,6 59 1, 07 0 , 97 5

Income tax expense

11 (11 8 , 6 6 2) (19 9, 9 8 2)

Prot for the year 219 , 9 97 870 ,9 9 3

Prot attributable to:

Equity shareholders of Ferrexpo plc 219 , 9 9 5 870,9 87

Non-controlling interests 2 6

Prot for the year 219 , 9 97 870, 99 3

Earnings per share:

Basic (US cents)

12 3 7. 41 14 8 . 2

Diluted (US cents)

12 3 7. 3 5 14 7. 9

152 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Prot for the year 219 , 9 97 870, 99 3

Items that may subsequently be reclassied to prot or loss:

Exchange differences on translating foreign operations (664,296) 8 2 ,1 9 6

Income tax effect

11 13 ,0 3 6 (3 , 313)

Net other comprehensive (loss)/income that may be reclassied to prot or loss in

subsequent periods (6 51, 2 6 0) 78,883

Items that will not be reclassied subsequently to prot or loss:

Remeasurement gains on dened benet pension liability

22 5,336 9,8 82

Net other comprehensive income not being reclassied to prot or loss in subsequent

periods 5,336 9,8 82

Other comprehensive (loss)/income for the year, net of tax (645, 924) 8 8,7 6 5

Total comprehensive (loss)/income for the year, net of tax (4 25,927) 9 59 ,75 8

Total comprehensive (loss)/income attributable to:

Equity shareholders of Ferrexpo plc (4 2 5 , 919) 959,778

Non-controlling interests (8) (20)

(4 25,927) 9 59 ,75 8

153Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Consolidated Statement of Financial Position

US$000

Notes

As at

31.12.22

As at

31.12. 21

Assets

Property, plant and equipment

807 , 8 61 1,2 1 6,6 93

Right-of-use assets

14 6 ,3 42 7, 7 7 6

Goodwill and other intangible assets

8, 249 43, 586

Investments in associates

5 ,1 6 7

7,034

Inventories

6, 277 8 , 414

Other non-current assets

16 3 7, 4 5 1 96,484

Deferred tax assets

14 , 4 7 1 32, 94 6

Total non-current assets

8 8 5 , 818 1, 412 , 9 3 3

Inventories

224, 454 2 02, 3 99

Trade and other receivables

18 2 4,6 9 9 192 ,363

Prepayments and other current assets

13 , 3 5 2 6 8 ,1 6 2

Income taxes recoverable and prepaid

4 , 6 74 636

Other taxes recoverable and prepaid

20 8 8 ,76 2 48 ,040

Cash and cash equivalents

25 112 , 9 4 5 16 7, 2 9 1

Total current assets

468,886 678,8 91

Total assets

1,35 4,704 2, 0 9 1, 8 24

Equity and liabilities

Issued capital

31 12 1, 6 2 8 12 1, 6 2 8

Share premium 1 8 5 ,11 2 1 8 5 ,11 2

Other reserves

31 (2, 636,89 1) (1, 986, 1 3 1)

Retained earnings

3,580 ,329 3 , 51 0 ,7 9 3

Equity attributable to equity shareholders of Ferrexpo plc

1 , 2 5 0 ,17 8 1, 8 31, 4 0 2

Non-controlling interests

67 75

Total equity

1 ,250,245 1, 8 3 1, 47 7

Interest-bearing loans and borrowings

5/26 1, 3 5 4 2 ,1 4 3

Dened benet pension liability

1 6,456 26,0 7 4

Provision for site restoration

23 4, 28 4 3,873

Deferred tax liabilities

1, 3 47 141

Total non-current liabilities

2 3 , 4 41 3 2, 2 31

Interest-bearing loans and borrowings

5/26 5 ,1 9 4 48, 206

Trade and other payables

21 30,509 72, 8 24

Accrued and contract liabilities

24 19 , 5 9 3 5 2 , 613

Income taxes payable

11 20, 56 4 3 7,1 3 8

Other taxes payable

5 ,1 5 8 1 7 ,335

Total current liabilities

81, 0 18 2 2 8 ,11 6

Total liabilities

10 4 ,4 5 9 26 0 , 3 47

Total equity and liabilities

1, 3 5 4 ,70 4 2, 0 9 1, 8 24

The financial statements were approved by the Board of Directors and authorised for issue on 14 March 2023 and signed on behalf of the Board.

Lucio Genovese Jim North

Non-executive Chair Chief Executive Officer & Executive Director

154 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Prot before tax 338 ,659 1, 07 0 , 97 5

Adjustments for:

Depreciation of property, plant and equipment, right-of-use assets and amortisation of intangible assets 96,977 11 5 ,111

Finance expense

10 1, 67 5 5 ,7 29

Finance income

10 (929) (637)

Losses on disposal and liquidation of property, plant and equipment 1, 6 6 5 4,695

Write-offs and impairments

7 260,308 235,61 8

Share of prot from associates

33 (557) (4,46 8)

Movement in allowance for doubtful receivables

18 6,7 2 9 690

Movement in site restoration provision

23 1, 57 8 5 51

Employee benets

22 3 , 74 5 4,936

Share-based payments

28 490 856

Operating foreign exchange (gains)/losses

9 (339 ,439) 3 7, 8 0 8

Non-operating foreign exchange losses

9 6 3, 497 3, 20 0

Other adjustments – (4 , 9 14)

Operating cash ow before working capital changes 434,398 1 , 4 7 0 ,1 5 0

Changes in working capital:

Decrease/(increase) in trade and other receivables 210 , 2 6 7 (10 2 , 8 2 7)

Increase in inventories (9 0,38 5) (6 5 ,17 0)

(Decrease)/increase in trade and other payables (incl. accrued and contract liabilities) (55,52 9)

40,186

Increase in other taxes recoverable and payable (incl. VAT)

20 (84, 1 10) (11 , 0 7 3)

Cash generated from operating activities 414 , 6 41 1, 3 3 1, 2 6 6

Interest paid (918) ( 7, 0 3 1)

Income tax paid

11 (11 0 , 2 4 3) (22 7 ,930)

Post-employment benets paid (2 ,2 20) (2 ,47 5)

Net cash ows from operating activities 3 0 1, 2 6 0 1 ,093,830

Cash ows from investing activities

Purchase of property, plant and equipment and intangible assets

13/15 (161, 0 10) (36 0,86 9)

Proceeds from disposal of property, plant and equipment and intangible assets 10 3 1, 0 3 0

Interest received 894 583

Dividends from associates 7 11 3,9 67

Net cash ows used in investing activities (15 9 , 3 0 2) (35 5, 289)

Cash ows from nancing activities

Proceeds from loans and borrowings

26 – 4 2 ,1 4 6

Repayment of loans and borrowings

26 (42 , 2 0 9) (2 5 7, 4 3 0)

Principal elements of lease payments

26 (5,7 8 6) (5 , 5 17)

Dividends paid to equity shareholders of Ferrexpo plc

12 (15 5 , 0 9 5) (619, 377)

Net cash ows used in nancing activities (203,0 9 0) (8 4 0 ,17 8)

Net decrease in cash and cash equivalents (61 , 1 32) (10 1, 6 3 7)

Cash and cash equivalents at the beginning of the year 1 6 7, 2 9 1 270,0 0 6

Currency translation differences 6 ,78 6 (1, 07 8)

Cash and cash equivalents at the end of the year

25 11 2 , 9 4 5 16 7, 2 9 1

155Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Consolidated Statement of Changes in Equity

Attributable to equity shareholders of Ferrexpo plc

US$000

Issued capital

(Note 31)

Share premium

(Note 31)

Other reserves

(Note 31)

Retained

earnings

Total

capital and

reserves

Non-controlling

interests

(Note 32)

Total

equity

At 1 January 2021 12 1, 6 2 8 1 8 5 ,11 2 (2,0 6 5,8 9 6) 3, 25 0,5 34 1, 4 9 1, 3 7 8 95 1, 4 9 1, 4 7 3

Prot for the year – – – 870,9 87 870, 987 6 870, 99 3

Other comprehensive income/

(loss) – – 78,9 0 9 9, 88 2 8 8 ,7 91 (26) 8 8 ,76 5

Total comprehensive income/

(loss) for theyear – – 78,9 0 9 880,869 959,77 8 (20) 9 5 9 ,75 8

Share-based payments (Note 28) – – 856 – 856 – 856

Equity dividends to shareholders

of Ferrexpoplc − – – (620,610) (620,610) – (620,610)

At 31 December 2021 121, 6 2 8 1 8 5 ,11 2 (1 , 9 8 6 ,1 3 1) 3, 510 ,7 9 3 1, 8 3 1, 4 0 2 75 1, 8 3 1, 47 7

Prot for the year − − − 219 , 9 9 5 2 19, 9 9 5 2 219 , 9 9 7

Other comprehensive (loss)/

income − − (6 51, 2 5 0) 5,33 6 (645,91 4) (10) (64 5,924)

Total comprehensive (loss)/

income for theyear − − (6 51, 2 5 0) 225,33 1 (425,91 9) (8) (425,927)

Share-based payments (Note 28) − − 490 − 49 0 − 490

Equity dividends to shareholders

of Ferrexpoplc (Note 12) − − − (15 5 ,7 9 5) (15 5 ,7 9 5) − (15 5 ,7 9 5)

At 31 December 2022 12 1, 6 2 8 1 8 5 ,11 2 (2 , 6 3 6 , 8 9 1) 3,580 ,329 1 , 2 5 0 ,17 8 67 1 ,250,2 45

Although accounts are published in US dollars and dividends are declared in US dollars, the shares are denominated in UK pounds sterling and

dividends are therefore paid in UK pounds sterling. See Note 12 Earnings per share and dividends paid and proposed for dividends paid during

theyear.

156 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

Note 1: Corporate information

Ferrexpo plc (the “Company”) is incorporated and registered in England, which is considered to be the country of domicile, with its registered

office at 55 St James’s Street, London SW1A 1LA, UK. The Company is listed on the London Stock Exchange and is a member of the

FTSE 250 Index. Ferrexpo plc and its subsidiaries (the “Group”) operate two mines and a processing plant near Kremenchuk in Ukraine,

have an interest in a port in Odessa and sales and marketing activities around the world including offices in Switzerland, Dubai, Japan,

China, Singapore and Ukraine. The Group also owns logistics assets in Austria, which operate a fleet of vessels operating on the Rhine and

Danube waterways and an ocean-going vessel, which provides top-off services. The Group’s operations are vertically integrated from iron

ore mining through to iron ore concentrate and pellet production and subsequent logistics. The Group’s mineral properties lie within the

Kremenchuk Magnetic Anomaly and are currently being extracted at the Gorishne-Plavninske-Lavrykivske (“GPL”) and Yerystivske deposits.

Despite the ongoing war in Ukraine, the Group has managed to continue its operations, although on a significantly lower level. The Group had

first to redesign its mining and processing plans in order to align them to available logistics network for the sales to its customers in the different

markets. In the last quarter of the financial year 2022, after the intensified Russian attacks on the critical infrastructure in Ukraine, the Group’s

production was also dependent on the available power supply. The war continues to pose a threat to the Group’s mining, processing and logistics

operations within Ukraine. See Note 2 Basis of preparation, Note 6 Revenue and Note 13 Property, plant and equipment for further information.

The largest shareholder of the Group is Fevamotinico S.a.r.l. (“Fevamotinico”), a company incorporated in Luxembourg. Fevamotinico is ultimately

wholly owned by The Minco Trust, of which Kostyantin Zhevago and two other members of his family are the beneficiaries. At the time this report

was published, Fevamotinico held 49.5% (2021: 50.3%) of Ferrexpo plc’s issued voting share capital (excluding treasury shares).

Note 2: Basis of preparation

The consolidated financial statements of Ferrexpo plc and its subsidiaries have been prepared in accordance with International Financial

Reporting Standards adopted for use in the United Kingdom (“UK adopted IFRS”) and with the Companies Act 2006, as applicable to companies

reporting under international accounting standards. Entities are included in the consolidated financial statements from the date of obtaining

control and the inclusion in the consolidated financial statements is consequently ceased when the control over an entity is lost. For the definition

of control see Note 32 Consolidated subsidiaries.

The consolidated financial statements have been prepared on a historical cost basis, except for post-employment benefits measured in

accordance with IAS 19 revised Employee benefits. The consolidated financial statements are presented in thousands of US dollars and all

values are rounded to the nearest thousand except where otherwise indicated.

The detailed accounting policies are included in the disclosure notes to the specific financial statement accounts.

Going concern

As at the date of the approval of these consolidated financial statements, the war in Ukraine that commenced with the Russian invasion into

Ukraine on 24 February 2022 is still ongoing. Even though the Group managed to operate throughout the financial year 2022, albeit at a much

lower capacity, the situation in the country continues to pose a threat to the Group’s mining, processing and logistics operations and represents

a material uncertainty in terms of the Group’s ability to continue as a going concern.

The material uncertainty is predominantly related to the recent level of supply of power to the Group’s operations in Ukraine, compounded by

the risks to the health, safety and wellbeing of the Group’s workforce, the Group’s ability to operate its assets, the supply of key input materials

required for the production process and the provision and availability of logistics capacity required for the delivery of the Group’s products to

customers in its key markets, as indicated in the Viability Statement on pages 75 and 76, and outlined in more detail in the Principal Risks on

page 59. These risks might have an adverse impact on the Group’s cash generation during the period covered by the going concern

assessment. As announced on 11 October 2022, the Group had to temporarily suspend its production of iron ore pellets as a result of Russian

missile strikes on state-owned electrical infrastructure. Although the Group restarted production in December 2022, the level of the production

remains dependent on Russian attacks on critical infrastructure in Ukraine, which affects the level of supply of power. In addition to the supply

of power, the Group’s operation continues to be adversely affected by the fact that the Group’s seaborne sales through the port of Pivdennyi

are still suspended as Ukraine’s Black Sea ports are closed as a result of the Russian invasion. Therefore, the Group currently operates between

one and two of its four pelletiser lines based on the available guaranteed supply of power and in order to align production volumes to meet the

volume of sales that are currently accessible to the Group.

As at 31 December 2022, the Group had produced 6,053 thousand tonnes of iron ore pellets, representing a decrease of 46% compared to the

comparative year ended 31 December 2021, and sold 6,183 thousand tonnes of its products, compared to 11,350 thousand tonnes during the

comparative year.

Despite this unprecedented and challenging situation during the financial year 2022, the Group’s net cash position has only decreased from

US$116,942 thousand at the beginning of the year to US$106,397 thousand as of 31 December 2022, demonstrating that the Group managed

to adjust its business operation to the new environment in order to preserve the available liquidity as much as possible. As at the date of the

approval of these consolidated financial statements, the Group is in a net cash position of approximately US$114,600 thousand with an available

cash balance of approximately US$120,400 thousand. In addition to the available cash balance, the Group has an outstanding trade receivable

balance of approximately US$34,100 thousand from its pellet and concentrate sales in January and February 2023, which are expected to be

collected in the next few weeks.

In addition to the outstanding trade receivable balance and as a result of the congestions at the different border crossings relevant to the Group,

pellet volumes at a value of approximately US$21,300 thousand loaded on rail cars are waiting for the border crossing. The revenue for these

volumes will only be recognised upon the border crossing when control is passed to the customer. The Group’s finished goods inventory,

including the volumes subject to border crossing, is 555 thousand tonnes as of 31 December 2022, compared to 568 thousand tonnes as of

31 December 2021, and is expected to reduce over time once the logistics constraints within Ukraine ease.

157Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 2: Basis of preparation continued

As part of management’s going concern assessment, the Group continuously adjusts its long-term model in order to reflect the latest

developments in terms of possible production and sales volumes as well as latest market prices and production costs, which are adversely

affected by lower production volumes. This long-term model is also used for the impairment test of the Group’s non-current operating assets

and the key assumptions used when preparing this model are disclosed in Note 13 Property, plant and equipment on page 173.

The latest base case of the long-term model shows that the Group has sufficient liquidity to continue its operations at a reduced level for

the entire period of the management’s going concern assessment, covering a period of 18 months from the date of the approval of these

consolidated financial statements, even allowing for reasonably possible or plausible adverse changes in respect of realised prices, lower

production and sales volumes as well as higher production costs. This base case assumes a production and sales volume of 50% and 75% of

the pre-war level for the financial years 2023 and 2024, before recovering in 2025 to pre-war levels. However, as mentioned above, the

production and sales volumes are heavily dependent on the level of supply of power as well as the logistics network available to the Group. The

sensitivities prepared for reasonable adverse changes show tighter available liquidity under some scenarios, but sufficient available liquidity to

operate as planned for the next 18 months.

The Group also prepared reverse stress tests for more severe adverse changes, such as a combination of all reasonably possible or plausible

adverse changes in respect of realised prices and production costs, which is unlikely to happen in combination as a result of the natural hedge

of iron ore prices and prices for key input materials, as well as lower production and sales volumes, but also for a further delay of the full recovery

by another year. The stress test for the most severe adverse changes shows that the Group would have depleted all its liquidity by the end of the

financial year 2023, without making use of any available mitigating actions within its control, such as further reductions of uncommitted

development capital expenditures and operating costs. The use of these mitigating actions would allow the Group to be cash positive for almost

18 months after the approval of these consolidated financial statements.

The Group has assessed that, taking into account:

i) its available cash and cash equivalents;

ii) its cash flow projections, adjusted for the effects caused by the war in Ukraine, for the period of management’s going concern assessment

covering a period of 18 months from the date of the approval of these consolidated financial statements; and

iii) the feasibility and effectiveness of all available mitigating actions within the Group management’s control for identified uncertainties,

a material uncertainty still remains as some of the uncertainties remain outside of the Group management’s control, with the duration and the

impact of the war still unable to be predicted at this point of time.

As at the date of the approval of these consolidated financial statements, the Group’s operations, located adjacent to the city of Horishni Plavni,

have not been directly targeted by Russian missile strikes, but this remains a risk. Should the area surrounding the Group’s operations become

subject to the armed conflict, there would be a significant risk posed to the safety of the Group’s workforce and the local community, as well as

a significant risk to key assets and the infrastructure required for the Group to operate effectively. See the update on the Group’s Principal Risks

section on page 59 for further information.

Considering the current situation of the war in Ukraine, all identified available mitigating actions addressing the uncertainties caused by the

war, as outlined on page 59, and the results of the management’s going concern assessment, the Group continues to prepare its consolidated

financial statements on a going concern basis. However, many of the identified uncertainties are outside of the Group management’s control

and are of unpredictable duration and severity, which may cast significant doubt upon the Group’s ability to continue as a going concern.

In addition to the war-related uncertainties described above, the Group is also exposed to the risks associated with operating in a developing

economy, which may or may not be exacerbated by the war and/or the current circumstances facing the Group’s controlling shareholder (see

Ukraine country risk on pages 60 and 61). As a result, the Group is exposed to a number of risk areas that are heightened compared to those

expected in a developed economy, such as an environment of political, fiscal and legal uncertainties. Although the Group has operated

successfully in difficult circumstances in recent years, the war in Ukraine and other circumstances facing the Group have led to an escalation of

a number of risks, including risks relating to the political environment and the independence of the legal system, which could have a material

negative impact on the Group’s business and reputation. For more information on critical judgements made by management in preparing these

consolidated financial statements, see also Note 30 Commitments, contingencies and legal disputes. The critical judgements made are

predominantly in respect of the ongoing share dispute relating to Ferrexpo Poltava Mining and the imposed currency control measures in Ukraine

under the Martial Law.

If the Group is unable to continue to realise assets and discharge liabilities in the normal course of business, it would be necessary to adjust the

amounts in the statement of financial position in the future to reflect these circumstances, which may materially change the measurement and

classification of certain figures contained in these consolidated financial statements.

Basis of consolidation

The consolidated financial statements comprise the financial statements for Ferrexpo plc and its subsidiaries as at 31 December each year.

The financial statements of the subsidiaries are prepared as at the same reporting date as Ferrexpo plc’s, using consistent accounting policies.

Subsidiaries are fully consolidated from the date the Group obtains control, which exists from the point of time when the Group is exposed to,

or has rights to, variable returns from an entity and the Group has the ability to affect those returns through its power to direct the activities of

an entity. Similarly, subsidiaries disposed of are deconsolidated from the date on which the Group ceases to hold control. A change in the

ownership interest of an entity without obtaining or losing control is accounted for as an equity transaction.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.

Unrealised losses are eliminated unless costs cannot be recovered.

158 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 2: Basis of preparation continued

Business combinations

On the acquisition of a subsidiary, the business combination is accounted for using the acquisition method. The cost of an acquisition is

measured as the aggregated amount of the fair value of the consideration transferred, measured at the date of acquisition. The consideration

paid is allocated to the assets acquired and liabilities (including contingent liabilities) assumed on the basis of fair values at the date of acquisition.

Acquisition costs are expensed when incurred and included in general and administrative expenses.

Functional and presentational currencies

Based on the economic substance of the underlying business transactions and circumstances relevant to the parent, the functional currency of the

parent has been determined to be the US dollar, with each subsidiary determining its own functional currency based on its own circumstances. The

Group has chosen the US dollar as its presentational currency. The functional currency of Ukrainian subsidiaries, which is where the Group’s main

operations are based, is the Ukrainian hryvnia.

Foreign currency translation

For individual subsidiary company accounts, transactions in foreign currencies (i.e. other than the functional currency) are recorded at the rate

ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at

the rate of exchange ruling at the reporting date and non-monetary assets and liabilities at the historic rate. Foreign exchange differences arising

on translation are recognised in the consolidated income statement.

For presentation of the Group’s consolidated accounts, if the functional currency of a subsidiary is different to the presentational currency as

at the reporting date, the assets and liabilities of this entity are translated into the presentational currency at the rate ruling at the reporting date

and the consolidated income statement is translated using the average exchange rate for the year based on the officially published rates by the

National Bank of Ukraine (“NBU”). The foreign exchange differences arising are recognised in other comprehensive income and taken directly to

a separate component of equity. On disposal of a foreign entity the deferred cumulative amount of exchange differences recognised in equity

relating to the particular foreign operation is recognised in the consolidated income statement.

Note 3: New accounting policies

New standards and interpretations adopted

The accounting policies and methods of computation adopted in the preparation of the consolidated financial statements are consistent with

those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2021 except for the adoption of

new standards, interpretations and amendments to UK adopted IFRS effective as of 1 January 2022.

New standards, interpretations and amendments adopted without an impact on the Group’s consolidated financial statements

Amendments to IAS 16 Property, Plant and Equipment prohibit the deduction from the cost of an item of property, plant and equipment of any

proceeds from selling items produced while bringing that asset into operation and clarify that these proceeds (and the corresponding costs of

production) are recognised in profit or loss.

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets clarify that the cost of fulfilling a contract comprises the costs

that relate directly to the contract. These can either be incremental costs of fulfilling that contract or the allocation of other costs that relate

directly to fulfilling contracts.

New standards, interpretations and amendments not yet adopted

The Group has elected not to adopt early any revised and amended standards or interpretations that are not yet mandatory in the UK.

The standards and interpretations below could have an impact on the consolidated financial statements of the Group in future periods.

Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current were issued in January

2020 and are effective for the financial year beginning on 1 January 2024 subject to endorsement by the UK Endorsement Board. The

amendments clarify that the classification of liabilities as current or non-current should be based on the rights to defer the settlement of a liability

by at least 12 months in existence at the end of the reporting period and not on future expectations about whether these rights will be exercised.

Furthermore, the amendments clarify that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or

services. The Group does not expect a material impact in its consolidated financial statements as a consequence of these amendments.

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies were issued in

February 2021 and are effective for the financial year beginning on 1 January 2023. They require the disclosures of material accounting policies

rather than significant accounting policies. The amendments to IAS 1 clarify that accounting policy information may be material because of its

nature, even if it relates to immaterial amounts, that accounting policy information is material when it is needed by users of financial statements

to understand other material information in the financial statements and that the disclosure of immaterial accounting policy information shall not

obscure material accounting policy information. The amendments to IFRS Practice Statement 2 include guidance and examples to the amendments

to IAS 1 and illustrate, in particular, the “four-step materiality process” to accounting policy information. The Group does not expect that these

amendments will have a material impact on its consolidated financial statements.

Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates were issued

in February 2021 and are effective for the financial year beginning on 1 January 2023. The amendments replace the definition of change in

accounting estimates with the definition of accounting estimates as monetary amounts subject to measurement uncertainty following accounting

policies requirements. A change in accounting estimate resulting from new information or developments is not the correction of an error and

changes in an input or a measurement technique of an accounting estimate are changes in accounting estimates if they do not result from the

correction of prior period errors. The effect of the change relating to the current period is recognised as income or expense in the current period

while the effect, if any, on future periods is recognised as income or expense in those future periods. The Group does not expect that these

amendments will have a material impact on its consolidated financial statements.

159Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 3: New accounting policies continued

Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction were issued in May

2021 and are effective for the financial year beginning on 1 January 2023. The amendments clarify that the recognition exemption in paragraphs

15 and 24 of IAS 12 does not apply to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.

For these transactions, such as leases or decommissioning obligations, deferred tax has to be recognised upon accounting of both an asset and

a liability. The Group does not expect that these amendments will have a material impact on its consolidated financial statements.

Furthermore, the Group does not expect an impact on its consolidated financial statements from all other standards, interpretations and

amendments issued at the reporting date, but not yet to be adopted for these financial statements.

Note 4: Use of critical estimates and judgements

The preparation of consolidated financial statements in conformity with IFRSs requires management to make estimates and judgements that

affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and judgements are based on

information available as at the date of authorising the consolidated financial statements for issue. Actual results could therefore differ from those

estimates and judgements. The Group identified a number of areas involving the use of critical estimates and judgements made by management

in preparing the consolidated financial statements and supporting information is embedded within the following disclosure notes:

Critical estimates

– Note 13 Property, plant and equipment – impairment consideration as a result of Russian invasion into Ukraine

– Note 15 Goodwill and other intangible assets – impairment consideration as a result of Russian invasion into Ukraine

– Note 17 Inventories – net realisable value of stockpiled low-grade and weathered ore

Critical judgements

– Note 2 Basis of preparation – going concern assumption

– Note 11 Taxation – tax legislation in Ukraine and development in international tax environment

– Note 30 Commitments, contingencies and legal disputes – assessment of matters in an environment of political, fiscal and legal uncertainties

Note 5: Segment information

The Group is managed as a single segment, which produces, develops and markets its principal product, iron ore pellets, for sale to the

metallurgical industry. While the revenue generated by the Group is monitored at a more detailed level, there are no separate measures of profit

reported to the Group’s Chief Operating Decision-Maker (“CODM”). In accordance with IFRS 8 Operating segments, the Group presents its

results in a single segment, which are disclosed in the consolidated income statement for the Group.

Management monitors the operating result of the Group based on a number of measures, including underlying EBITDA, gross profit and net cash.

Underlying EBITDA and gross profit

The Group presents the underlying EBITDA as it is a useful measure for evaluating its ability to generate cash and its operating performance.

The Group’s full definition of underlying EBITDA is disclosed in the Glossary on page 212.

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Profit before tax and finance 405,673 1,082,478

Losses on disposal and liquidation of property, plant and equipment 1,665 4,695

Share-based payments

28 490 856

Write-offs and impairments

7 260,308 235,618

Depreciation and amortisation 96,977 115,112

Underlying EBITDA 765,113 1,438,759

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Revenue 6 1,248,490 2,518,230

Cost of sales

7 (582,445) (727,818 )

Gross profit 666,045 1,790,412

Net cash

Net cash as defined by the Group comprises cash and cash equivalents less interest-bearing loans and borrowings.

US$000

Notes

As at

31.12.22

As at

31.12. 21

Cash and cash equivalents 25 112,945 167, 291

Interest-bearing loans and borrowings – current

26 (5,194) (48,206)

Interest-bearing loans and borrowings – non-current

26 (1,354) (2,143)

Net cash 106,397 116,942

160 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 5: Segment information continued

Net cash is an Alternative Performance Measure (“APM”). Further information on the APMs used by the Group, including the definitions, is

provided on pages 212 and 213.

Disclosure of revenue and non-current assets

The Group does not generate significant revenues from external customers attributable to the UK, the Company’s country of domicile. The

information on the revenues from external customers attributed to the individual foreign countries is given in Note 6 Revenue. The Group does

not have any significant non-current assets that are located in the country of domicile of the Company. The vast majority of the non-current

assets are located in Ukraine.

Note 6: Revenue

Accounting policy

Revenue recognition

Revenue is recognised to the extent that it is probable that the Group will collect the consideration to which it expects to be entitled in exchange

for transferring promised goods or services to a customer. The following specific recognition criteria are to be met before revenue is recognised.

Sale of goods including sales of pellets and fuel from bunker business

Revenue is recognised when the control of the goods has passed to the buyer and can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the

normal course of business, net of discounts, customs duties and sales taxes. The Group does not have any material variable considerations,

such as retrospective volume rebates and rights of returns, in the contracts with its customers. Revenues related to provisionally priced sales are

initially recognised at the estimated fair value of the consideration receivable based on the forward price at each reporting date for the relevant

period outlined in the different contracts. In terms of the associated commodity risk, see Note 27 Financial instruments for further information.

The control of goods passes when title for the goods passes to the customer as determined by the contractual sales terms based on the

International Commercial Terms (“Incoterms”). The sales are typically made under CIF (“Cost Insurance and Freight”), CFR (“Cost and Freight”,

DAP (“Delivery At Place”) and FOB (“Free on Board”) terms.

Under DAP Incoterms, revenue is recognised when goods arrive at the agreed destination or at the border crossing, whereas under the other

above-mentioned terms the title passes on the date of the bill of lading. If the sales agreement allows for adjustment of the sales prices based on

survey of the goods by the customer (e.g. ore content) the revenue is recognised based on the most recent determined product specification.

The Group enters into long-term contracts with some of its customers, which become subject to either renewal or extension when about to

expire. As the performance obligations under the old contracts are not affected by the renewal or extension, the new modified contracts are

accounted for as separate contracts.

The Group has no unsatisfied or partially unsatisfied performance obligations relating to contracts with customers with original expected duration

of more than one year. The Group has therefore taken advantage of the practical expedient provided in IFRS 15 and needs not disclose the

transaction price allocated to the remaining performance obligations.

Freight services related to sales of pellets and concentrate

For CIF and CFR contracts the Group must contract for and pay the freight necessary to bring the goods to the named port of destination.

Consequently, the freight services under CIF and CFR Incoterms meet the criteria of a separate performance obligation and the corresponding

revenue is shown separate from the revenue from sales of iron ore pellets and concentrate.

Freight revenue is recognised over time, as the obligation to perform freight services is fulfilled, along with the associated costs.

For the separate presentation of the freight revenue as required under IFRS 15 Revenue from contracts with customers, the Group measures

freight revenue based on the average freight rates of the relevant pricing period for specific shipments as outlined in the contracts with its

customers. In case the relevant pricing period is after the end of the reporting period (normally within 60 days), revenue is measured based on

forward freight rates at the reporting date.

Actual freight costs recognised for specific shipments might differ from the presented freight revenue due to movements in market rates between

the timing of fixture of vessels and the relevant pricing periods outlined in the contracts with customers.

Logistic services

Revenue from logistic services rendered is measured at the transaction price contractually agreed between the parties based on applicable

market rates for the specific freight services to be provided. The timing of satisfaction of the performance obligation is over time as services are

completed. Where services are invoiced in advance of discharge, amounts attributable to the time between the end of the reporting period and

the discharge date are deferred as contract liabilities.

Other sales

Other sales and services provided include predominantly the revenue generated from the sale of other materials and repair and maintenance

works provided to third parties. The revenues are recognised when the title passes for material sold or services provided are completed.

161Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 6: Revenue continued

Revenue for the year ended 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Revenue from sales of iron ore pellets and concentrate 1,144,079 2,323,238

Freight revenue related to sales of iron ore pellets and concentrate 43,557 137,595

Total revenue from sales of iron ore pellets and concentrate 1,187,636 2,460,833

Revenue from logistics and bunker business 54,491 50,393

Revenue from other sales and services provided 6,363 7,0 0 4

Total revenue 1,248,490 2,518,230

Since February 2022, the Group’s seaborne sales through the port of Pivdennyi have been suspended as Ukraine’s Black Sea ports are closed due

to the war with Russia. Historically, the sales through the port of Pivdennyi have represented approximately half of the Group’s sales. As a result,

the Group has had to divert its iron ore pellet sales to the European market through the available railway network and its barging operations on the

Danube. The market in Europe was however not able to absorb all the volumes that would have been sold to other markets with ocean-going vessels.

Revenue for the year ended 31 December 2022 includes the effect from the derecognition of contract liabilities of US$7,648 thousand (2021:

US$8,487 thousand) deferred as revenue in the comparative year ended 31 December 2021. As at 31 December 2022, freight-related revenue

in the amount of US$75 thousand was deferred as the performance obligations were not fulfilled and included in the balance of the contract

liabilities. See Note 24 Accrued and contract liabilities for further information.

Export sales of iron ore pellets and concentrate by geographical destination showing separately countries that individually represented 10%

or more of export sales in either the current or prior year were as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Europe, including Turkey 944,859 1,354,048

Austria 460,492 527,20 0

Czech Republic 148,128 106,350

Slovakia 138,302 80,288

Turkey 86,640 270,514

Germany 38 ,195 291,235

Others 73,102 78,461

China & South East Asia 164,397 770,584

China 71,041 549,885

Others 93,356 220,699

North East Asia 47,496 223,409

Middle East & North Africa 29,982 23,928

North America 902 88,864

Total exports 1,187,636 2,460,833

The Group markets its products across various regions. The disclosure of the segmentation reflects how the Group makes its business decisions and

monitors its sales. Information about the composition of the regions is provided in the Glossary on pages 214 and 215. During the financial year 2022,

the Group’s sales of iron ore pellets and concentrate were significantly impacted by the ongoing war in Ukraine. Due to the ongoing war, the Group’s

seaborne sales through the port of Pivdennyi have been suspended and sales had to be diverted to the market in Europe.

During the year ended 31 December 2022, sales made to five customers accounted for 66% of the revenues from export sales of ore pellets and

concentrate (2021: 53%).

Sales to customers that individually represented more than 10% of total sales in either current or prior year are as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Customer A 461,394 616,064

Customer B 148,128 106,350

Customer C 138,302 80,288

Customer D 38,195 290,511

Customer E 2,492 211, 231

162 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 7: Operating expenses

Accounting policy

Operating expenses arise in the course of the ordinary activities of the Group and are recognised in the consolidated income statement when

a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

Expenses are recognised in the consolidated income statement on the basis of a direct association between costs incurred and specific items of

income. When economic benefits are expected to arise over several accounting periods and the association with income can only be broadly or

indirectly determined, expenses are systematically allocated to the accounting period in which the economic benefits are expected to arise.

Royalties are outflows of resources embodying economic benefits and imposed by governments on entities, in accordance with legislation.

The obligating event that gives rise to a liability to pay royalties is the activity, identified by the legislation, that triggers the payment of royalties.

The liability to pay royalties is recognised as the obligating event occurs. Mining royalties payable are presented within operating expenses.

Operating expenses for the year ended 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Cost of sales 582,445 727,818

Selling and distribution expenses 236,085 340,301

General and administrative expenses 63,847 72,163

Other operating expenses 309,669 271,629

Total operating expenses 1,192,046 1,411,911

Total operating expenses include:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Inventories recognised as an expense upon sale of goods 540,010 697,9 0 0

Employee costs (excl. logistics and bunker business) 92,144 104,018

Inventory movements (52,953) (51,603)

Depreciation of property, plant and equipment and right-of-use assets 95,127 113,429

Amortisation of intangible assets 1,851 1,682

Royalties 43,461 40,871

Costs of logistics and bunker business 55,916 47,254

Audit and non-audit services 2,073 1,694

Community support donations 14,536 6,449

Write-offs and impairments 260,308 235,618

Losses on disposal and liquidation of property, plant and equipment 1,665 4,695

US$000

Notes

As at

31.12.22

As at

31.12. 21

Write-off of inventories 269 247

Write-off of property, plant and equipment

13 5,562 3,233

Write-off of intangible assets

15 – 931

Write-off of receivables and prepayments – 96

Total write-offs 5,831 4,507

Impairment of property, plant and equipment

13 219,931 −

Impairment of goodwill and other intangible assets

15 29,103 −

Impairment of other non-current assets

16 5,443 −

Impairment of inventories

17 – 231,111

Total impairments 254,477 231,111

Total write-offs and impairments 260,308 235,618

163Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 7: Operating expenses continued

Impairment of property, plant and equipment, goodwill and other intangible assets as well as of other non-current assets are caused by the

Russian invasion into Ukraine in February 2022, which was considered as a non-adjusting post balance sheet event as at 31 December 2021

and became an adjusting event for the year ended 31 December 2022. See Note 13 Property, plant and equipment, Note 15 Goodwill and other

intangible assets and Note 16 Other non-current assets for further information.

Impairment of inventories for the comparative year ended 31 December 2021 is related to the stockpiled low-grade ore for which the start of the

processing and the volume expected to be utilised could not be reliably estimated. As at the date of the approval of the consolidated financial

statements as at 31 December 2022, the start of the processing and the volume expected to be utilised cannot be reliably estimated. Further

information is provided in Note 17 Inventories.

Write-offs of property, plant and equipment and intangible assets for the comparative year ended 31 December 2021 is primarily related to the

cancellation of the licence for the Galeschynske project, which is in the exploration phase. Whilst the Group is focused on returning this licence

to its previous state, all capitalised costs associated with this licence have been written off as the outcome is currently uncertain. For further

information see Note 30 Commitments, contingencies and legal disputes and the update on the Group’s Principal Risks on pages 60 and 61

in terms of the Ukraine country risk.

Auditor remuneration

US$000

Year ended

31.12.22

Year ended

31.12. 21

Audit services

Ferrexpo plc Annual Report and Accounts 1,631 1,269

Subsidiary entities 185 196

Total audit services 1,816 1,465

Audit-related assurance services 255 229

Total audit and audit-related assurance services 2,071 1,694

Non-audit services

Other services 2 –

Total non-audit services 2 –

Total auditor remuneration 2,073 1,694

Auditor remuneration paid is in respect of the audit of the financial statements of the Group and its subsidiary companies and, when applicable,

for the provision of other services not in connection with the audit. Audit services for the year ended 31 December 2022 include US$242 thousand

relating to year-end audit for the financial year 2021 incurred as a result of the war in Ukraine.

Note 8: Other income

Accounting policy

Other income mainly includes lease income generated from rail cars, mining equipment and premises, and the proceeds from the sale of spare

parts, scrap metal and fuel and compensations received from insurance companies. Lease income is recognised based on the underlying

contractual basis over the term of the lease. Other income from the sale of consumable materials is recognised as revenue when the title passes.

Other income for the year ended 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Lease income 704 916

Other income 8,529 8,583

Total other income 9,233 9,499

164 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 9: Foreign exchange gains and losses

Accounting policy

Foreign exchange gains and losses are reported on a net basis. Operating foreign exchange gains and losses are those resulting directly from

the Group’s operating activities. Non-operating gains and losses are predominantly those associated with the Group’s financing and treasury

activities, including the translation of interest-bearing loans and borrowings denominated in currencies different from the respective functional

currencies and transactional gains and losses from the conversion of cash balances in currencies different from the local functional currencies

at exchange rates different from those at the initial recognition date.

Foreign exchange gains and losses for the year ended 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Operating foreign exchange gains/(losses)

Conversion of trade receivables 340,189 (37,791)

Conversion of trade payables (623) 38

Other (127) (55)

Total operating foreign exchange gains/(losses) 339,439 (37,8 0 8)

Non-operating foreign exchange losses

Conversion of interest-bearing loans (77,678) (3,229)

Conversion of cash and cash equivalents 9,711 (181)

Other 4,470 210

Total non-operating foreign exchange losses (63,497) (3,200)

Total foreign exchange gains/(losses) 275,942 (41,008)

The translation differences and foreign exchange gains and losses are predominantly dependent on the fluctuation of the exchange rate of the

Ukrainian hryvnia against the US dollar and the outstanding US dollar denominated receivable balances in Ukraine. Following the Russian invasion

into Ukraine on 24 February 2022, the National Bank of Ukraine pegged the Ukrainian hryvnia at 29.255 to the US dollar in order to mitigate the

adverse impact from the war on the local financial system. On 21 July 2022, the National Bank of Ukraine devalued the local currency to 36.568

to the US dollar with immediate effect. This devaluation of the local currency had a positive effect on the Group’s production costs and resulted in

operating foreign exchange gains on the conversion of the Ukrainian subsidiaries’ trade receivables denominated in US dollar. The depreciation of

the Ukrainian hryvnia of c. 34% also reduces the Group’s net assets as assets and liabilities of the Ukrainian subsidiaries are denominated in the local

currency. The exchange differences arising on translation of non-US dollar functional currency operations (mainly in Ukrainian hryvnia) are included in

the translation reserve. See Note 31 Share capital and reserves for further details.

The table below shows the closing and average rates of the most relevant currencies of the Group compared to the US dollar.

Average exchange rates Closing exchange rates

Against US$

As at

31.12.22

As at

31.12. 21

Year ended

31.12.22

Year ended

31.12. 21

UAH 32.342 27. 28 6 36.569 27.278

EUR 0.951 0.845 0.934 0.882

Note 10: Net finance expense

Accounting policy

Finance expense

Finance expense is expensed as incurred with the exception of interest on loans and borrowings measured at amortised cost, which is

recognised in the consolidated income statement using the effective interest method. Finance expense includes interest on defined benefit plans.

Borrowing costs incurred in respect of the financing of construction or production of a qualifying asset are capitalised up to the date when the

asset is ready for its intended use. See also Note 13 Property, plant and equipment for further details.

Finance income

Finance income comprises interest income on funds invested and the effect of unwinding discounts recorded in previous years. Interest income

is recognised as it accrues using the effective interest method.

165Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 10: Net nance expense continued

Finance expense and income for the year ended 31 December 2022 consisted of the following:

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Finance expense

Interest expense on loans and borrowings (479) (9,567)

Less capitalised borrowing costs 479 5,343

Net interest on defined benefit plans

22 (2,678) (3,211)

Bank charges (871) (632)

Interest expense on lease liabilities (233) (474)

Other finance costs (664) (399)

Total finance expense (4,446) (8,940)

Finance income

Interest income 888 609

Other finance income 41 28

Total finance income 929 637

Net finance expense (3,517) (8,303)

Note 11: Taxation

Accounting policy

Current income tax

Current income taxes are computed based on enacted or substantively enacted local tax rates and laws at the reporting date and the expected

taxable income of the entities of the Group for the respective period.

Current income taxes are recognised as an expense or income in the consolidated income statement unless related to items directly recognised

in other comprehensive income or equity or if related to the initial accounting for a business combination.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are generally recognised for taxable temporary differences that will become taxable. Deferred income tax assets are

generally recognised for deductible temporary differences, carry forwards of available unused tax credits and tax losses, to the extent that it

is more likely than not that they will be recovered in a future period against taxable profit.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability

is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

No deferred assets or liabilities are recognised if the temporary differences arise from the initial recognition of assets and liabilities in a

transaction, other than in a business combination, which affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognised in respect of taxable temporary differences associated with investments in subsidiaries, associates

and interests in joint ventures, except where the Group is able to control the reversal of the temporary differences and it is probable that the

temporary difference will not reverse in the foreseeable future. Deferred tax assets in relation to temporary differences on such investments

and interests are recognised to the extent that it is probable that there are sufficient taxable profits available against which the benefits of the

temporary differences can be utilised and that they are expected to reverse in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that

sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilised. Additionally, unrecognised deferred

income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit

will allow the deferred tax assets to be recovered.

Income tax effects on items directly recognised in other comprehensive income or equity are also recognised in other comprehensive income

or equity, respectively.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax

liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

166 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 11: Taxation continued

Critical judgements

Tax legislation

The Group operates across a number of jurisdictions through its value chain and prices its sales between its subsidiaries using international

benchmark prices for comparable products covering product quality and applicable freight costs. The Group judges these to be on terms which

comply with applicable legislation in the jurisdictions in which the Group operates.

On 27 June 2022, the Supreme Court of Ukraine ruled partially in favour of the State Fiscal Service of Ukraine (“SFS”) in respect of a claim

made by the SFS, despite two favourable verdicts received by the Group’s subsidiary from lower court instances. The claim was in respect of

a tax audit performed for the period from 1 September 2013 to 31 December 2015 at the Group’s major subsidiary in Ukraine with a focus

on cross-border transactions. As a result of this court decision, an amount of UAH234 million (US$7,999 thousand) became a legally binding

obligation and was paid in July 2022. The partially negative verdict of the Supreme Court of Ukraine might have an adverse impact on the tax

audits described below as the STS might use the court verdict as a precedent.

On 18 February 2020, the State Tax Service of Ukraine (“STS”), formerly known as SFS, commenced two tax audits for cross-border

transactions between the Group’s major subsidiary in Ukraine and two subsidiaries of the Group outside of Ukraine in relation to the sale of

iron ore products during the financial years 2015 to 2017. The audits were halted in March 2020 due to a Covid-19 related quarantine imposed

in Ukraine and resumed on 10 February 2021. On 14 June 2021, the STS commenced another tax audit for the financial years 2015 to 2017 for

cross-border transactions of another Ukrainian subsidiary with the same two subsidiaries of the Group outside of Ukraine. Both audits have

been suspended when Ukraine declared Martial Law, but resumed again on 25 January 2023. Based on legislation in Ukraine, the results of

these audits are to be provided by the STS within 18 months after commencement. The period for both audits has been interrupted first by the

Covid-19 related quarantine imposed between March 2020 and February 2021 and then on 24 February 2022 due to the declaration of Martial

Law as a result of the Russian invasion into Ukraine. The deadlines to provide the reports for the audits have not expired as of 31 December

2022 and are 10 June 2023 and 15 November 2023, respectively.

Despite the verdict received from the Supreme Court of Ukraine, the Group still considers that it has complied with applicable legislation for

all cross-border transactions undertaken and is of the opinion that the court did not appropriately consider relevant technical grounds and the

applicable legislation when ruling on this case. In the case of new claims, the Group will continue to defend its methodology applied to determine

the prices between its subsidiaries, but is aware that there is a risk that the independence of the judicial system and its immunity from economic

and political influences in Ukraine is not upheld. As of the approval of these consolidated financial statements, no claims have been made by the

STS in respect of the audits commenced in 2020 and 2021. As a consequence, no provision has been recorded as at 31 December 2022 for

transactions and years subject to the audits commenced by the STS as it is impossible to reasonably quantify the potential exposure.

Separate from the cases mentioned above, on 23 June 2020 Ferrexpo Poltava Mining (“FPM”) received a court ruling, which grants access to

information and documents to the State Bureau of Investigation in Ukraine (“SBI”) in relation to the sale of iron ore products to two subsidiaries of the

Group outside of Ukraine during the years 2013 to 2019. The court ruling relates to pre-trial investigations carried out by the SBI in relation to

potential tax evasion by the Group in Ukraine. At the time of the approval of these consolidated financial statements, there is very little information

provided in the court ruling in respect of the alleged offences. There is no quantified claim made by the SBI and the ruling is primarily seeking

disclosure of information in order to allow the SBI to determine whether there have potentially been any offences. The Ukrainian subsidiaries

cooperated with the SBI and provided the requested information as per the court ruling in order to support these pre-trial investigations. As of the

date of approval of these consolidated financial statements, there have been no actions or any new requests received from the SBI.

As required by IFRIC 23 Uncertainty over income tax treatments, the Group reviewed and reassessed its exposure in respect of all uncertain

tax positions, including the audits of cross-border transactions in Ukraine under the provisions of this interpretation. The Ukrainian legislation and

regulations on taxation are not always clearly written and are therefore subject to varying interpretations and inconsistent enforcement by local,

regional and national tax authorities. In case of any claims made by the STS and considering the uncertainties of the legal and tax framework in

Ukraine, the Group will defend its pricing methodology applied during these years in the courts in Ukraine. An unfavourable outcome of any

future court proceedings would have an adverse impact on the Group’s total income tax expense and effective tax rate in future periods. See

also the Principal Risks section on pages 60 and 61 for further information on the Ukraine country risk.

Except for the matters in Ukraine mentioned above, the Group is not aware of any significant challenges by local tax authorities in any

jurisdictions in which the Group operates. However, the application of international and local tax legislation and regulations can be complex and

requires judgement to assess possible associated risks, particularly in relation to the Group’s cross-border operations and transactions.

The income tax expense for the year ended 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Current income tax

Current income tax charge 100,064 202,335

Amounts related to previous years 6,389 (1,010)

Total current income tax 106,453 201,325

Deferred income tax

Origination and reversal of temporary differences 12,209 (1,343)

Total deferred income tax 12,209 (1,343)

Total income tax expense 118,662 199,982

167Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 11: Taxation continued

Tax effects on items recognised in other comprehensive income consisted of the following for the year ended 31 December 2022:

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Tax effect of exchange differences arising on translating foreign operations 31 (13,036) 3,313

Total income tax effects recognised in other comprehensive (credit)/charge (13,036) 3,313

The weighted average statutory corporate income tax rate is calculated as the average of the statutory tax rates applicable in the countries in which

the Group operates, weighted by the profits and losses before tax of the subsidiaries in the respective countries, as included in the consolidated

financial information. The weighted average statutory corporate income tax rate was 13.8% for the financial year 2022 (2021: 15.5%). A reconciliation

between the income tax charged in the accompanying financial information and income before taxes multiplied by the weighted average statutory tax

rate for the year ended 31 December 2022 is as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Profit before tax 338,659 1,070,975

Notional tax charge computed at the weighted average statutory tax rate of 13.8% (2021: 15.5%) 46,769 166,330

Derecognition of deferred tax assets

14,757 1,107

Expenses not deductible for local tax purposes

4,615 721

Income exempted for local tax purposes

(158) (238)

Effect from utilisation of non-recognised deferred taxes

– (5,852)

Effect from capitalised tax loss carry forwards on historic tax losses

– (1,578)

Effect from non-recognition of deferred taxes

34,882 41,442

Effect from non-recognition of deferred taxes on current year losses

2,884 –

Effect of different tax rates on local profit streams

(3,412) (1,131)

Withholding tax on dividends

11,540 –

Prior year adjustments to current tax

6,389 (1,010)

Effect from share of profit from associates

(100) (803)

Other (including translation differences) 496 994

Total income tax expense 118,662 199,982

1. The majority of the derecognition in 2022 is an allowance of US$10,749 thousand booked on deferred tax assets recognised by two of the Group’s subsidiaries in Ukraine as a result of

uncertainties as some of the temporary differences are not expected to unwind in the near future. Considering the material uncertainty in terms of the Group’s going concern, the relevant

period for the recovery of the recognised net balance of deferred tax assets has been aligned to the period of the going concern assessment. The remaining amount in 2022 is primarily related

to deferred tax assets recognised in 2019 in light of the change of the tax law in Switzerland and the derecognition of deferred taxes initially recognised at one of the Group’s subsidiaries in

Ukraine. As a result of the ongoing war in Ukraine, it is currently not expected that this specific subsidiary will have taxable profits in the near future. The amount derecognised in 2021 is related

to deferred tax assets recognised in Switzerland in light of the mentioned change of the tax law. These deferred tax assets recognised were in connection with available transitional measures

for companies losing the special tax status available under the old tax law. The derecognition is due to the fact that the taxable profits of the Swiss subsidiaries were lower than forecasted.

Whilst the initial recognition is considered of a non-recurring nature, the derecognition might recur depending on the taxable profits of the Swiss subsidiaries in the future.

2. The effects in 2022 and 2021 predominantly relate to expenses not deductible in Ukraine. This effect is expected to be of a recurring nature as a portion of operating expenses in Ukraine

is historically not deductible for tax purposes according to the enacted local tax legislation.

3. The effects in 2022 and 2021 relate to income expected to be tax exempted in the United Kingdom as primarily related to the adoption of IFRS 9. This effect is considered to be of a

recurring nature.

4. The effect relates to a subsidiary in Ukraine, for which no deferred tax asset was recognised for available tax losses at the end of the comparative year ended 31 December 2021. During

the financial year 2021, the subsidiary became profitable and available tax losses incurred in previous years were used to offset the profit. As all available losses are either used or

recognised as a deferred tax asset as at 31 December 2021, this effect is considered to be of a non-recurring nature.

5. The effect in 2022 predominantly relates to the impairment loss of US$254,477 thousand on the Group’s non-current operating assets as a result of the war in Ukraine, net of the effect

from the changed depreciation pattern for the impaired assets. In 2021, the effect relates to the impairment loss of US$231,111 thousand on stockpiled low-grade ore recorded in one of

the Group’s subsidiaries in Ukraine. Both impairment losses are not tax deductible in Ukraine. Whilst the effect in 2022 could be of a recurring nature, also depending on the situation in

Ukraine, the effect in 2021 is considered to be of a non-recurring nature. In the case that the situation in Ukraine will significantly improve, there is a chance that the recorded impairment

losses will reverse in a future period. Such potential positive effects are expected to be tax exempted. There are other expenses in Ukraine and the United Kingdom, which are historically

not deductible for tax purposes according to the enacted local tax legislation and considered to be of a recurring nature.

6. The effect relates mainly to a subsidiary in Ukraine. Due to the uncertainty in respect of the timing of the subsidiary becoming profitable for local tax purposes, no deferred tax asset has

been recognised. This effect was considered to be of a recurring nature until this subsidiary becomes operative and profitable.

7. The effects relate to the different tax rates applying to different income streams in Swiss subsidiaries as a result of their specific tax status. The effect is of a recurring nature.

8. The effect in 2022 relates to effects of dividends paid by one of the subsidiaries in Ukraine, which are subject to withholding tax, whereas the dividend income was not subject to income

taxes under the participation exemption regime in place in Switzerland. The effect in future years depends on the level of dividend payments made.

9. The effect in 2022 primarily relates to a negative decision received in respect of the transfer pricing claim for the financial year 2015, for which a final decision was received from the

relevant court instance in 2022. The effect in 2021 relates to final tax assessments received in Switzerland. Similar effects, irrespective of the jurisdiction, are likely to occur in the future. In

addition to the effect in Switzerland in 2021, included therein is the release and recognition of provisions, which are expected to be non-recurring.

10. Share of profit from associates is generally recognised net of taxes of the associates. This effect is of a recurring nature.

The Group operates across a number of jurisdictions and its effective tax rate is subject to various factors outside of the Group’s control. This

includes the volatility in the global iron ore pellet market and foreign exchange rate movements, primarily between the Ukrainian hryvnia and the

US dollar. The effective tax rate of the financial year 2022 was 35.0% as a result of the recorded impairment loss totalling US$254,477 thousand on

the Group’s non-current operating assets which is not tax deductible in Ukraine (see Note 13 Property, plant and equipment for further information)

168 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 11: Taxation continued

and due to the fact that no deferred tax asset was recognised for the resulting temporary differences. Further to that, the Group recorded an

allowance of US$10,749 thousand on deferred tax assets recognised by two of the Group’s subsidiaries in Ukraine. Without these two effects, the

effective tax rate would have been 18.2%.

The effective tax rate of 18.7% for the financial year 2021, was affected by the impairment loss on the stockpiled low-grade ore, which was also

not tax deductible in Ukraine, compared to the weighted average statutory corporate income tax rate of 15.5%.

The net balance of income tax payable changed as follows during the financial year 2022:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance (36,502) (57,132)

Charge in the consolidated income statement (106,453) (201,325)

Booked through other comprehensive income/(loss) 13,036 (3,313)

Tax paid 110,243 227,930

Translation differences 3,786 (2,662)

Closing balance (15,890) (36,502)

The net income tax payable as at 31 December 2022 consisted of the following:

US$000

As at

31.12.22

As at

31.12. 21

Income tax receivable balance 4,674 636

Income tax payable balance (20,564) (37,13 8)

Net income tax payable (15,890) (36,502)

Temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting

purposes and the recognition of available tax loss carry forwards result in the following deferred income tax assets and liabilities at

31 December 2022:

Consolidated statement

of financial position

Consolidated

income statement

US$000

As at

31.12.22

As at

31.12. 21

Year ended

31.12.22

Year ended

31.12. 21

Property, plant and equipment 13,474 23,757 (4,106) 895

Right-of-use assets 526 532 129 92

Intangible assets 3,956 5,942 (1,944) (1,456)

Inventories 205 478 (152) 123

Allowance for restricted cash and deposits – 3,837 (2,862) –

Defined benefit pension liability 459 537 (77) (560)

Other 1,325 1,679 177 450

Tax losses recognised 255 2,157 (1,901) 1,657

Total deferred tax assets/change 20,200 38,919 (10,736) 1,201

Thereof netted against deferred tax liabilities (5,729) (5,973)

Total deferred tax assets as per the statement of financial position 14,471 32,946

Property, plant and equipment (320) (559) 239 33

Intangible assets (384) (470) (33) (472)

Financial assets (4,076) (4,13 3) 56 289

Inventories (1,334) – (1,334) –

Lease obligations (503) (590) (305) (53)

Other (459) (362) (96) 345

Total deferred tax liabilities/change (7,076) (6,114) (1,473) 142

Thereof netted against deferred tax assets 5,729 5,973

Total deferred tax liabilities as per the statement of financial position (1,347) (141)

Net deferred tax assets/net change 13,124 32,805 (12,209) 1,343

169Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 11: Taxation continued

The movement in the deferred income tax balance is as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance 32,805 30,473

Charge in consolidated income statement (12,209) 1,343

Translation differences (7,472) 989

Closing balance 13,124 32,805

The net deferred tax asset balance of US$13,124 thousand includes deferred tax assets totalling US$14,448 thousand related to temporary

differences of the Group’s two major subsidiaries in Ukraine, with the remaining balance reflecting deferred tax liabilities of subsidiaries outside of

Ukraine. The recoverability of these deferred tax assets depends on the level of taxable profits realised by the two subsidiaries in future periods and

the duration of the unwind of the temporary differences. Considering the material uncertainty in terms of the Group’s going concern, the relevant

period for the recovery of the recognised net balance of deferred tax assets has been aligned to the period of the going concern assessment.

Despite the fact that the two Ukrainian subsidiaries realised taxable profits for the financial year 2022 and taxable profits are also expected for

the period covered by the going concern assessment, an allowance of US$10,749 thousand was booked as at 31 December 2022 as a result of

uncertainties in terms of the timing of the unwind of some of the temporary differences. The level of taxable profits in Ukraine depends on many

factors, such as the level of supply of power, the volatility in the global iron pellet market and foreign exchange rate changes, but also on the

implications of the ongoing war in Ukraine as a whole.

As at 31 December 2022, the Group had available tax loss carry forwards in the amount of US$68,691 thousand (2021: US$78,188 thousand) for

which no deferred tax assets were recognised. US$41,687 thousand (2021: US$44,591 thousand) are related to losses incurred in Ukraine and

Austria and those losses do not expire. The remaining balance totalling US$27,004 thousand (2021: US$33,598 thousand) relates to losses

incurred in Hungary, of which US$13,736 thousand (2021: US$19,545 thousand) expire after more than eight years.

No deferred tax liabilities have been recognised on temporary differences in the amount of US$663,536 thousand (2021: US$1,282,355

thousand) arising from undistributed profits from subsidiaries as no distributions are planned. Other temporary differences of US$270,939

thousand have not been recognised as of 31 December 2022 (2021: US$7,765 thousand), of which the vast majority relates to temporary

differences on property, plant and equipment in Ukraine. The increase compared to the comparative period is primarily due to non-recognised

deferred tax assets on the impairment loss of US$254,477 thousand during the financial year 2022.

Future developments

Following an agreement reached by the Finance Ministers from the G7 in July 2021 backing the creation of a global minimum corporate tax rate

of at least 15%, over 140 countries and jurisdictions have agreed to the OECD/G20 Inclusive Framework on BEPS, also referred to as BEPS 2.0,

including Ukraine, United Arab Emirates and Switzerland. The new framework aims to ensure that large multinational enterprises pay a fair share

of tax wherever they operate and to set a global minimum tax rate. Earliest possible implementation is in 2024 and it is expected that

implementation in key countries will commence soon. Whilst some details are still unknown, the United Arab Emirates and Switzerland

announced the adjustment of their local tax legislation by 1 June 2023 and 1 January 2024 respectively, resulting in an increase of the local

corporate tax rate.

Based on the current understanding of the anticipated changes to the global tax landscape, the Group expects an increase of its future effective

tax rate once adjustments are made to relevant local tax legislation. The Group’s future effective tax rate is expected to be in a range of 15.0% to

19.0%. As mentioned above, this effective tax rate is also dependent on the volatility in the global iron ore pellet market and on foreign exchange

rate movements, primarily between the Ukrainian hryvnia and the US dollar, and any one-off events, such as impairment losses that might not be

tax deductible in some jurisdictions.

Note 12: Earnings per share and dividends paid and proposed

Accounting policy

Basic number of Ordinary Shares outstanding

The basic number of Ordinary Shares is calculated by reducing the total number of Ordinary Shares in issue by the weighted average of shares

held in treasury and employee benefit trust reserve. The basic earnings per share (“EPS”) are calculated by dividing the net profit for the year

attributable to ordinary equity shareholders of Ferrexpo plc by the weighted average number of Ordinary Shares.

Dilutive potential Ordinary Shares

The dilutive potential Ordinary Shares outstanding are calculated by adjusting the weighted average number of Ordinary Shares in issue on the

assumption of conversion of all potentially dilutive Ordinary Shares. All share awards that are potentially dilutive are considered in the calculation

of diluted earnings per share.

Distributable reserves

Ferrexpo plc (the “Company”) is the Group’s holding company, with no direct operating business, so its ability to make distributions to its

shareholders is dependent on its ability to access profits held in the subsidiaries. The Group’s consolidated retained earnings shown in the

consolidated statement of changes in equity do not reflect the profits available for distribution in the Group as of 31 December 2022.

170 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 12: Earnings per share and dividends paid and proposed continued

Year ended

31.12.22

Year ended

31.12. 21

Earnings for the year attributable to equity shareholders – per share in US cents

Basic 37.41 148.2

Diluted 37.35 147. 9

Profit for the year attributable to equity shareholders – US$000

Basic and diluted earnings 219,997 870,993

Weighted average number of shares – thousands

Basic number of Ordinary Shares outstanding 588,017 587,699

Effect of dilutive potential Ordinary Shares 931 1,028

Diluted number of Ordinary Shares outstanding 588,948 588,727

Dividends proposed and paid

Considering the continued unpredictable situation in Ukraine, no further dividends are proposed for the financial year 2022 as at the date of the

approval of these consolidated financial statements. Taking into account the provisions of the Companies Act 2006 and relevant thin capitalisation

rules, the total available distributable reserves of Ferrexpo plc is US$118,624 thousand as of 31 December 2022 (2021: US$170,800 thousand).

Future distributable reserves at the Ferrexpo plc level are also dependent on the payment of dividends by the subsidiaries to the respective parent

companies within the Group and certain Group companies are currently restricted from paying dividends outside of Ukraine as a result of Ukrainian

currency control measures imposed under the Martial Law. The recorded impairment loss as of 31 December 2022 and the war-related uncertainties,

as well as the uncertainties related to the political environment and the independence of the legal system and other circumstances facing the Group

(see Note 30 Commitments, contingencies and legal disputes) could have a negative impact on the potential for future dividend payments.

US$000

Year ended

31.12.22

Dividends paid during the year

Final dividend for 2021: 6.6 US cents per Ordinary Share 38,679

Interim dividend for 2022: 13.2 US cents per Ordinary Share 76,899

Interim dividend for 2021: 6.6 US cents per Ordinary Share 39,517

Total dividends paid during the year

155,095

Although accounts are published in US dollars and dividends are declared in US dollars, the shares are denominated in UK pounds sterling and

dividends are therefore paid in UK pounds sterling.

Companies Act requirements in respect of dividend payments

During the financial year 2021, the Directors became aware of a technical issue in respect of the interim dividend declared on 4 August 2021

and, following investigations of the issue, of technical issues in respect of dividend payments made by the Company in 2010 and 2011. The

technical issues were ratified by a shareholders’ resolution passed at the general meeting of the shareholders of Ferrexpo Plc on 15 June 2022.

Further details are included in the Directors’ Report in the 2021 Annual Report & Accounts on page 128.

US$000

Year ended

31.12. 21

Dividends proposed

Interim dividend for 2021: 6.6 US cents per Ordinary Share 38,788

Total dividends proposed

38,788

The interim dividend for 2021 was declared on 22 December 2021 and paid on 28 January 2022.

US$000

Year ended

31.12. 21

Dividends paid during the year

Interim dividend for 2021: 39.6 US cents per Ordinary Share 231,011

Final dividend for 2020: 13.2 US cents per Ordinary Share 77,89 0

Special interim dividend for 2020: 39.6 US cents per Ordinary Share 233,097

Special interim dividend for 2020: 13.2 US cents per Ordinary Share 77, 379

Total dividends paid during the year 619,377

171Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 13: Property, plant and equipment

Accounting policy

Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses. Such cost includes the

cost of replacing part of the property, plant and equipment and borrowing costs for qualifying assets (see below) if the recognition criteria are

met. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

Major spare parts, stand-by and servicing equipment qualify as property, plant and equipment when they are expected to be used during more

than one period. Expenditure incurred after the assets have been put into operation, such as repairs and maintenance and overhaul costs, are

charged to the consolidated income statement in the period the costs are incurred unless it can be demonstrated that the expenditure results in

future economic benefits, when the expenditure is capitalised as an additional cost.

Upon recognition, items of property, plant and equipment are divided into components, which represent items with a significant value that have

different useful lives. Assets included in property, plant and equipment are depreciated over their estimated useful life taking into account their

own physical life limitations and the present assessment of economically recoverable reserves of the mine property at which the assets are

located. The remaining useful lives for major assets are reassessed on a regular basis. Mining assets are depreciated using the unit of production

method. Changes in expected resources, which affect the unit of production calculations, are accounted for prospectively.

Except for mining assets, which are depreciated using the unit of production method, depreciation is calculated on a straight-line basis over

the estimated useful life of the asset, as follows:

– Buildings: 20–50 years

– Vessels: 8–40 years

– Plant and equipment: 3–15 years

– Vehicles: 7–15 years

– Fixtures and fittings: 2.5–10 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from

the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal

proceeds and the carrying amount of the item) is included in the consolidated income statement in the period the item is derecognised.

Assets in the course of construction are initially recognised in assets under construction. Assets under construction are not depreciated. On

completion of the asset and when available for use, the cost of construction is transferred to the appropriate asset category in property, plant

and equipment and depreciation commences.

Freehold land is not depreciated.

Deferred stripping costs

Rock, soil and other waste materials are typically to be removed to access an ore body, which is known as stripping activity. Stripping work

comprises overburden removal at pre-production, mine extension and production stages.

Pre-production stripping costs incurred in the development of a component of a mine before commercial production commences are capitalised

as part of assets under construction. After the commencement of commercial production, the respective capitalised pre-production stripping

costs are transferred to mining assets and depreciated over the life of the respective component of the ore body on a unit of production

(“UOP”) basis.

Production stripping costs are generally charged to the consolidated income statement as variable production costs unless these costs are

related to gaining improved access to an identified component of the ore body to be mined in future periods. Such production stripping costs

are capitalised within mining assets provided all the following conditions are met:

– it is probable that the future economic benefit associated with the stripping activity will be realised;

– the component of the ore body for which access has been improved can be identified; and

– the costs relating to the stripping activity associated with the improved access can be reliably measured.

Once the commercial production of the specific component of the ore body commences, the capitalised production stripping costs are

depreciated on a UOP basis over the life of the respective identified component. No production stripping costs were capitalised as at

31 December 2022 and as at the end of the comparative year ended 31 December 2021.

Mining assets

Any capitalised stripping activities, either of a pre-production or production nature, are reclassified to mining assets at the point of time when

the extraction of the ore body of the specific component starts. Mining assets are depreciated using the UOP method based on the estimated

economically recoverable reserves to which they relate .

172 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 13: Property, plant and equipment continued

Exploration and evaluation assets

Costs incurred in relation to the exploration and evaluation of potential iron ore deposits are capitalised and classified as tangible or intangible

assets depending on the nature of the expenditures. Costs associated with exploratory drilling, researching and analysing of exploration data

and costs of pre-feasibility studies are included in tangible assets whereas those associated with the acquisition of licences are included

in intangible assets.

Capitalised exploration and evaluation expenditures are carried forward as an asset as long as these costs are expected to be recouped in full

through successful development and exploration in a future period.

Exploration and evaluation assets are measured at cost and are neither amortised nor depreciated, but monitored for indications of impairment.

To the extent that the capitalised expenditures are not expected to be recouped, the excess is fully provided for in the financial year in which this

is determined.

Upon reaching the development stage, exploration and evaluation assets are either transferred to assets under construction or other intangible

assets, if those costs were associated with the acquisition of licences.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time

to get ready for its intended use or sale (“qualifying asset”) are capitalised as part of the cost of the respective asset. All other borrowing costs

are expensed in the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of the

funds. In the case of general borrowings used to fund the acquisition or construction of a qualifying asset, the borrowing costs to be capitalised

are calculated based on a weighted average interest rate applicable to the relevant general borrowings of the Group during a specific period.

Impairment testing

Property, plant and equipment is considered to be part of a single cash-generating unit (“CGU”). The recoverable amount of the CGU is

determined to be the fair value less cost of disposal. The Group assesses at each reporting date whether there are indications that assets may

be impaired or previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group

estimates the assets’ recoverable amounts. If the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be

impaired and is written down to its recoverable amount. Impairment losses are recognised in the consolidated income statement.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable

amount since the last impairment loss was recognised. In this case, the carrying amount of the asset is increased to its recoverable amount, but

not exceeding the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset

in prior years. Such reversal is recognised in the consolidated income statement and the basis for future depreciation is adjusted accordingly.

Capitalised stripping costs

Stripping costs are deferred and capitalised if related to gaining improved access to an identified component of an ore body to be mined in

future periods. The capitalised amount is determined based on the volume of waste extracted, compared with expected ore volume in the

identified component of the ore body. As at 31 December 2022, deferred pre-production stripping costs totalling US$111,608 thousand relate to

components in operation and are included in mining assets (2021: US$159,141 thousand). Deferred pre-production stripping costs in relation to

components expected to be put into operation in a future period totalled US$111,621 thousand and are included in assets under construction

(2021: US$156,975 thousand). No production stripping costs are capitalised as of this point in time.

Critical estimates

As at the date of the approval of these consolidated financial statements, the war in Ukraine that commenced with the Russian invasion into

Ukraine on 24 February 2022 is still ongoing. Even though the Group managed to operate throughout the financial year 2022, the ongoing war

had an adverse impact on the Group’s cash flow generation and it is expected that this will continue to be the case until the war comes to an

end. During the financial year 2022, the Group’s cash flow generation was heavily affected by the fact that the Group’s seaborne sales through

the port of Pivdennyi have been suspended as a result of closed Black Sea ports in Ukraine since the beginning of the war and the level of

supply of power following severe Russian missile strikes on state-owned electrical infrastructure.

The beginning of the war on 24 February 2022 was treated as a non-adjusting post balance sheet event in the consolidated financial statements

for the year ended 31 December 2021, but became an adjusting event in the consolidated financial statements for the period ended 30 June 2022.

The Group’s impairment test is based on cash flow projections over the remaining estimated lives of the GPL and the Yerystivske deposits,

which are expected to expire in 2058 and 2048, respectively, according to the current approved mine plans. The cash flow projection is based

on a financial long-term model approved by senior management and the estimated production volumes do not take into account the effects of

expected future mine life extension programmes. A number of significant judgements and estimates are used when preparing the financial

long-term model of the Group, which are, together with the key assumptions used, reviewed by the Audit Committee with a specific

consideration given to the realistically plausible production volumes in light of the disrupted supply of power and the logistics network available

to the Group, sales price and production cost forecasts as well as the used discount rate.

Based on the base case of the Group’s updated long-term model prepared for 2022 interim accounts, the value in use of the Group’s single

cash generating unit’s operating non-current assets, including property, plant and equipment, goodwill and other intangibles as well as other

non-current assets, was US$254,477 thousand below the total carrying value of these assets, reflecting an impairment loss in this amount.

US$219,931 thousand of the total impairment loss was allocated to various asset categories within property, plant and equipment, US$27,340

thousand to goodwill, which was then fully impaired as of 30 June 2022 and US$1,763 thousand to various asset categories within intangible

assets. The remaining US$5,443 thousand reduced the carrying amount of assets included within other non-current assets.

173Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 13: Property, plant and equipment continued

The impairment test as of 31 December 2022 was prepared based on a long-term model updated in February 2023. Based on the cash flow

generation forecasted in the new model and a nominal pre-tax discount rate of 23.4%, compared to 20.4% as at 30 June 2022 and a pre-war

WACC of 13.8% as of 31 December 2021, no further impairment has to be recorded as of 31 December 2022. The carrying value as of

31 December 2022 reflects the impairment of US$254,477 thousand recorded as of 30 June 2022 and the devaluation of the Ukrainian hryvnia

from 29.255 to 36.569 compared to the US dollar in July 2022, which reduced the carrying value by US$201,375 thousand.

An average iron ore price of US$105 per tonne of 65% Fe fines CFR North China was used in the assumptions for the cash flow projection for the

next five years. In determining the future long-term selling price, the Group takes into account external and internal analysis of the longer-term and

shorter-term supply and demand dynamics throughout the world and considers local supply and demand balances affecting its major customers

and the effects this could have on the longer-term price. In light of the ongoing disruption of the supply of power due to the war, the production

capacity used for the cash flow projections is expected to be 50% and 75% of the pre-war level for the financial years 2023 and 2024, before

recovering in 2025 to the pre-war level. As mentioned above, the Group’s operation in 2022 was also affected by the absence of a significant portion

of seaborne sales due to the closed Black Sea ports in Ukraine. It is expected that currently available logistic networks will be sufficient to transport

the lower level of produced pellets to the Group’s international customers, predominantly in Europe for the time being, but also to customers in

Asia. The increase of the available production capacity assumed in the past for the years covered by the long-term model has been adversely

affected by the Russian invasion into Ukraine as the work on certain growth projects had to be halted or slowed down. There is no perpetual

growth rate applied for the cash flow projections beyond the last year covered by the Group’s long-term model. Cost of production and shipping is

considered taking into account local inflationary pressures, major exchange rate developments between the Ukrainian hryvnia and the US dollar,

the longer-term and shorter-term trends in energy supply and demand and the effect on costs along with the expected movements in steel-related

commodity prices, which affect the cost of certain production inputs. An average devaluation of the hryvnia of 9.7% per year was assumed over

the next 5 years in the Group’s cash flow projection. For the purpose of the impairment test, the future cash flows were discounted using a nominal

pre-tax discount rate of 23.4% (2021: 13.8%) per annum, reflecting the current situation in the country as underlying macro-economic data used

for the computation of the WACC was also adversely affected by the war in Ukraine resulting in a significant increase of Ukraine’s country risk

premium. The key assumptions in respect of production and sales volumes, and of production costs, are largely dependent on the easing of

conflict risks facing the Group business, and therefore a wide range of alternative outcomes are possible, reflecting a high level of uncertainty.

The key assumptions used for the preparation of the Group’s long-term model are:

Key assumptions Basis

Future production Proved and probable reserves and power expected to be available

Commodity prices Contract prices and longer-term price estimates

Capital expenditures Future sustaining capital expenditures

Cost of raw materials and other production/distribution costs Expected future cost of production

Exchange rates Longer-term predictions of market exchange rates

Nominal pre-tax discount rate Cost of capital risk adjusted for the resource concerned

The recorded impairment during the financial year 2022 will be re-assessed at the end of any future reporting periods. If there are positive

developments in the Group’s future cash flow generation and the relevant macro-economic data, a portion of the impairment loss might reverse in

future periods. Conversely, an adverse change in the above key assumptions would further reduce the value in use of the Group’s operating non-

current assets.

A delay of the recovery of the production and sales volumes to a pre-war level by another year, with all other assumptions remaining unchanged,

would reduce the value in use of the Group’s non-current operating assets by approximately another US$149,000 thousand. A reduction of the

realised price by US$5 per tonne for the entire period covered by the long-term model would increase the impairment loss by approximately

US$224,000 thousand and a decrease of the production and sales volume by 10%, combined with an increase of the production costs by 5%,

again for the entire period, would increase the impairment loss by approximately US$308,000 thousand. An increase of the pre-tax real discount

rate by 3.0% would result in an increase of US$164,000 thousand, with all other assumptions remaining unchanged.

174 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 13: Property, plant and equipment continued

As at 31 December 2022, property, plant and equipment comprised:

US$000

Exploration

and

evaluation Land

Mining

assets

Buildings

and tailings

dam Vessels

Plant and

equipment Vehicles

Fixtures

and fittings

Assets

under

construction Total

Cost:

At 1 January 2021 1,606 8,338 189,779 238,334 133,972 369,546 224,897 10,165 351,626 1,528,263

Additions – 1,827 587 1 1,044 764 447 169 312,059 316,898

Transfers – 56 76,620 26,256 4,005 66,330 33,188 1,909 (208,364) –

Disposals – 7 – (2,910) – (6,415) (1,245) (1,634) (6,918) (19,115)

Translation differences 59 302 9,574 8,219 ( 7, 520) 13,266 7, 5 3 5 272 9,683 41,390

At 31 December 2021 1,665 10,530 276,560 269,900 131,501 443,491 264,822 10,881 458,086 1,867,4 3 6

Additions 258 155 1,316 19 6,334 179 217 9 191,842 200,329

Transfers – 77 – 17,147 83 55,498 17,147 880 (90,832) –

Disposals – – – (635) (1) (778) (1,208) (679) (22,274) (25,575)

Translation differences (424) (2,694) (70,261) (69,225) (5,340) (111,360) (55,115) (2,223) (123,629) (440,271)

At 31 December 2022 1,499 8,068 207,615 217,20 6 132,577 387,030 225,863 8,868 413,193 1,601,919

Accumulated depreciation and impairment:

At 1 January 2021 – 15 68,732 84,067 75,858 168,230 117,34 0 6,065 3,571 523,878

Depreciation charge – 3 7,797 25,231 5,648 48,192 32,216 1,664 – 120,751

Disposals – – – (2,043) – (4,095) (924) (1,741) – (8,803)

(Write-backs)/write-offs and

impairments – – – 5 – (13) (4) 1 3,244 3,233

Translation differences – (1) 2,506 3,004 (3,791) 5,915 3,850 149 52 11,684

At 31 December 2021

– 17 79,035 110,264 77,715 218,229 152,478 6,138 6,867 650,743

Depreciation charge – 19 4,030 17,276 4,242 40,949 26,714 932 – 94,162

Disposals – – – (253) – (949) (986) (365) (223) (2,776)

(Write-backs)/write-offs and

impairments – – 34,320 26,418 9,881 47,316 22,059 49 87,102 2 27,145

Translation differences – – (27,8 07) (35,112) (2,708) (58,317) (32,10 9) (1,104) (18,059) (175,216)

At 31 December 2022

– 36 89,578 118,593 89,13 0 247, 22 8 168,156 5,650 75,687 794,058

Net book value:

At 31 December 2021 1,665 10,513 197,525 159,636 53,786 225,262 112,344 4,743 451,219 1,216,693

At 31 December 2022 1,499 8,032 118,037 98,613 43,447 139,802 57,707 3,218 337,506 807,861

Assets under construction consist of ongoing capital projects amounting to US$225,885 thousand (2021: US$294,244 thousand) and capitalised

pre-production stripping costs of US$111,621 thousand (2021: US$156,975 thousand). Once production commences, stripping costs are transferred

to mining assets.

Property, plant and equipment includes capitalised borrowing costs on qualifying assets of US$35,694 thousand (2021: US$55,768 thousand).

The capitalised borrowing costs on general borrowings were determined based on the capitalisation rate of 6.51% (2021: 6.51%), which is the

average effective interest rate on general borrowings for the comparative year ended 31 December 2021 until the full repayment of the Group’s

major debt facility in June 2021. The Group has no specific borrowings in relation to qualifying assets during either reporting period.

No property, plant and equipment have been pledged as security for liabilities as at 31 December 2022 (2021: US$2,620 thousand).

The gross value of fully depreciated property, plant and equipment that is still in use is US$103,553 thousand (2021: US$119,706 thousand).

175Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 14: Leases

Accounting policy

The Group leases buildings, equipment and land not used for the direct extraction of ore. The leases for land used for the extraction of ore are

not within the scope of IFRS 16 according to the scope exemptions set out in the standard.

The right-of-use assets and corresponding lease liabilities recognised as at 31 December 2022 primarily refer to long-term rental contracts for

several of the Group’s office premises with rental periods of five to ten years, leased equipment and land not used for the direct extraction of ore.

The lease agreements for land in Ukraine are with the Ukrainian government and have typically a duration of up to 49 years requiring land lease

payments in the form of rental taxes based on annually determined rates by the government. Consequently, related right-of-use assets and lease

liabilities are recognised over a lease term of 12 months only, reflecting the period over which substantially fixed lease payments are expected.

Beyond this period, payments are subject to non-market driven changes in either the normative value of land and/or in the rental tax rate and are

disclosed as commitments as they cannot be considered in-substance fixed payments or as variable lease payments that depend on an index

or a rate .

Right-of-use assets

The right-of-use asset is recognised at the commencement date of the lease (when the asset is ready for use) and initially measured at cost.

The cost includes the balance of the lease liability recognised, initial direct costs and lease payments made at or before the commencement

date.

In subsequent periods, the value of the right-of-use assets is adjusted for accumulated depreciation, impairment losses and remeasurement

of the lease liability, if any. The depreciation is on a straight-line basis over the shorter of the estimated useful life of the underlying asset and

the lease term.

Payments for short-term leases or leases for assets of a low value are recognised as an expense on a systematic basis over the lease term.

Lease liabilities

At the commencement date, lease liabilities are measured at the net present value of the remaining lease payments, discounted using the

interest rate implicit in the lease or, when not available, the incremental borrowing rate computed for a group of leases with similar characteristics

as regards to type of asset, lease term, contract currency and economic environment.

The carrying amount of the lease liabilities is subsequently increased to reflect the interest on the lease liability and decreased by the lease

payments made during the period. Lease payments are split between principal elements and interest and are allocated to net cash flows from

financing activities and operating activities, respectively. The carrying amount is subject to remeasurement in subsequent periods to reflect any

lease modifications.

Commitments

Future minimum rental payments

These commitments relate to leases under the scope of IFRS 16 to which the lessee is committed, but not commenced.

Future commitments for contingent rental payments

These commitments include future cash flows dependent on non-fixed rates related to the long-term portion of leases of land not used for the

direct extraction of ore and accounted for under IFRS 16, whereas the short-term portion is recognised as a lease liability in the statement of

financial position.

As at 31 December 2022, the net book value of the right-of-use assets included in the consolidated statement of financial position and the

associated depreciation charge included in the consolidated income statement comprised:

US$000

Exploration

and

evaluation Land

Mining

assets

Buildings

and tailings

dam Vessels

Plant and

equipment Vehicles

Fixtures

and fittings

Assets

under

construction Total

Net book value:

At 31 December 2021 − 3,830 − 3,072 − 872 – 2 − 7,776

At 31 December 2022 – 4,375 – 1,967 – – – – − 6,342

Depreciation charge:

Year ended 31 December 2021 − 2,890 − 990 − 1,299 11 6 − 5,196

Year ended 31 December 2022 – 3,633 – 1,093 – 708 – 2 − 5,436

During the year ended 31 December 2022, the additions to right-of-use assets totalled US$5,034 thousand (2021: US$4,504 thousand).

Leased assets and assets under hire purchase contracts are pledged as security for the related finance leases and hire purchase liabilities.

As at 31 December 2022, the carrying amount of the lease liabilities consisted of the following:

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Non-current 26 1,354 2,143

Current

26 5,194 6,060

176 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 14: Leases continued

The total cash outflow for leases falling under the scope of IFRS 16 Leases during the year ended 31 December 2022 was US$6,103 thousand

(2021: US$5,904 thousand). During the year ended 31 December 2022, US$576 thousand was recognised as an expense in the consolidated

income statement in respect of short-term leases with a corresponding impact on the net cash flows from operating activities (2021: US$746

thousand). Furthermore, interest expense on lease liabilities in the amount of US$233 thousand was recognised in the consolidated income

statement during the year ended 31 December 2022 (2021: US$474 thousand).

Lease related commitments for future contingent rental payments were US$88,910 thousand as at 31 December 2022 (2021: US$51,034

thousand).

Note 15: Goodwill and other intangible assets

Accounting policy

Goodwill

If the cost of acquisition in a business combination exceeds the identifiable net assets attributable to the Group, the difference is considered as

purchased goodwill, which is not amortised. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For

the detailed accounting policy on impairment testing see Note 13 Property, plant and equipment.

Impairment testing

The goodwill acquired through business combinations in previous periods has been allocated for impairment purposes to a single cash-

generating unit, as the Group only has one operating segment, being the production and sale of iron ore products. This represents the lowest

level within the Group at which goodwill is monitored for internal management purposes. See Note 13 Property, plant and equipment for

information on key assumptions used when preparing the Group’s long-term model used for the impairment test.

Goodwill is subject to an annual impairment review and a further review is made when indicators of impairment arise following the initial review.

An impairment loss recognised for goodwill is never reversed in a subsequent period. In the case that the identifiable net assets attributable to

the Group exceed the cost of acquisition, the difference is recognised in profit and loss as a gain on bargain purchase. For each business

combination, the Group measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s

identifiable net assets. If the initial accounting for a business combination cannot be completed by the end of the reporting period in which the

combination occurs, only provisional amounts are reported, which can be adjusted during the measurement period of 12 months after

acquisition date.

Exploration and evaluation assets

See the policy disclosed in Note 13 Property, plant and equipment.

Patents and licenses, computer software and other intangible assets

Patents and licenses, computer software and other intangible assets acquired separately are measured on initial recognition at cost and the

useful lives are assessed as either finite or indefinite. Following the initial recognition, the intangible assets are carried at cost less accumulated

amortisation and accumulated impairment losses. If amortised, the intangible assets are amortised on a straight-line basis over the estimated

useful life of the asset, ranging between one and three years. Capitalised mineral licences are amortised on a unit of production basis.

The cost of other intangible assets acquired in a business combination is its fair value as at the date of acquisition.

Critical estimates

The Russian invasion into Ukraine and the ongoing war resulted in an impairment loss of US$254,477 thousand on the Group’s operating

non-current assets, of which US$27,340 thousand were allocated to goodwill, which was then fully impaired as of 30 June 2022, and

US$1,763 thousand to various asset categories within intangible assets. See Note 13 Property, plant and equipment for further information

on the impairment test performed as at 31 December 2022.

177Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 15: Goodwill and other intangible assets continued

As at 31 December 2022, goodwill and other intangible assets comprised:

US$000

Goodwill

Exploration

and evaluation

Patents and

licences

Computer

software

Other

intangible assets Total

Cost:

At 1 January 2021 28,259 3,490 4,488 9,928 490 46,655

Additions – 1,269 – 19 2,697 3,985

Disposals – – (5) (107) (2) (114)

Transfers – (17) 202 2,528 (2,713) –

Translation differences 989 158 119 164 42 1,472

At 31 December 2021 29,248 4,900 4,804 12,532 514 51,998

Additions

– – – 6 542 548

Disposals

– – (6) (5) (11) (22)

Transfers

– –

352 56 (408) –

Translation differences (1,908) (1,266) (1,216) (2,906) (140) (7,436)

At 31 December 2022 27,340 3,634 3,934 9,683 497 45,088

Accumulated amortisation and impairment:

At 1 January 2021

– – 1,568 4,353

– 5,921

Amortisation charge

– – 242 1,427 12 1,681

Write-offs and impairments

– 931 – – – 931

Disposals

– – (5) (106) – (111)

Translation differences

– 1 16 (27) – (10)

At 31 December 2021

– 932 1,821 5,647 12

8,412

Amortisation charge

– – 308 1,543 – 1,851

Write-offs and impairments

27,340 709 – 1,054 – 29,103

Disposals

– – (6) (96) (11) (113)

Translation differences

– (399) (406) (1,608) (1) (2,414)

At 31 December 2022

27,340 1,242 1,717 6,540 –

36,839

Net book value:

At 31 December 2021 29,248 3,968 2,983 6,885 502 43,586

At 31 December 2022 – 2,392 2,217 3,143 497 8,249

Impairment testing

See Note 13 Property, plant and equipment for detailed information on the impairment test performed on goodwill and other intangible assets as

at 31 December 2022.

Sensitivity to changes in assumptions

The Group’s goodwill and other intangible assets were subject to an impairment loss totalling US$29,103 thousand as of 31 December 2022,

which was predominantly caused by the lower cash flow generation of the Group and a higher discount rate to be applied as a result of the war in

Ukraine. An adverse change of certain key assumptions would further reduce the value in use of the Group’s operating non-current assets. See

Note 13 Property, plant and equipment on page 173 in terms of the impact of changes in key assumptions on the impairment in future periods.

178 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 16: Other non-current assets

As at 31 December 2022, other non-current assets comprised:

US$000

As at

31.12.22

As at

31.12. 21

Prepayments for property, plant and equipment 32,184 91,132

Other non-current assets 5,267 5,352

Total other non-current assets 37,451 96,484

Prepayments for property, plant and equipment as at 31 December 2022 are presented net of a total impairment loss of US$5,443 thousand caused

by the Russian invasion into Ukraine in February 2022. See Note 13 Property, plant and equipment for further information.

Other non-current assets include a prepayment of US$5,000 thousand in relation to an investment in a joint venture with an expected closing

date of the transaction later in 2023, which is however also dependent on the situation in Ukraine.

Note 17: Inventories

Accounting policy

Inventories are stated at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

– Raw materials – at cost on a first-in, first-out basis.

– Finished goods and work in progress – at cost of direct materials and labour and a proportion of manufacturing overheads based on normal

operating capacity, but excluding borrowing costs.

– Low-grade and weathered ore – at cost, if lower than net realisable value.

The net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion (conversion into

pellets or concentrate) and the estimated costs necessary to sell the product or goods.

Major spare parts and servicing equipment that meet the definition of property, plant and equipment are, in accordance with IAS 16, included in

property, plant and equipment and not in inventory.

Critical estimates

Low-grade and weathered ore

Historically, inventories classified as non-current comprised low-grade and weathered ore that were, based on the Group’s processing plans, not

planned to be processed within the next 12 months. As at the date of the approval of the consolidated financial statements as at 31 December

2022, it cannot be reliably predicted when additional processing capabilities will be available to specifically process the stockpiled low-grade ore,

which was fully impaired as at the end of the comparative year ended 31 December 2021.

The stockpiled low-grade ore is still considered as an asset for the Group and some or all of the impairment loss of US$231,111 thousand might reverse

in the future, once changed facts and circumstances can be considered in the net realisable value test of this asset. As at 31 December 2022, there are

no changes in facts and circumstances to be considered. The ongoing war in Ukraine makes it currently difficult to accelerate the commenced

engineering studies for the exploration of possible options for new processing capabilities for the specific purpose of processing low-grade ore.

The remaining balance of non-current inventories as at 31 December 2022 relates to weathered ore, which is expected to be processed after

more than 12 months.

At 31 December 2022, inventories comprised:

US$000

As at

31.12.22

As at

31.12. 21

Raw materials and consumables 51,437 57,575

Spare parts 91,334 80,886

Finished ore pellets 52,625 48,058

Work in progress 25,832 13,496

Other 3,226 2,384

Total inventories – current 224,454 202,399

Weathered ore 6,277 8,414

Total inventories – non-current 6,277 8,414

Total inventories 230,731 210,813

Inventories classified as non-current comprise low-grade and weathered ore that are, based on the Group’s current processing plans, not planned

to be processed within the next 12 months. The processing of this stockpile will take more than 12 months and the beginning and duration of the

processing depend on the Group’s future mining activities, processing capabilities and anticipated market conditions.

Following the impairment loss recorded at the end of the financial year 2021, the volume of low-grade ore extracted during the year ended

31 December 2022 in the amount of US$9,690 thousand was fully recognised in the consolidated income statement and included in the cost of sales.

179Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 18: Trade and other receivables

Accounting policy

Trade receivables are non-derivative financial assets initially measured at fair value. Due to their short maturity, the fair value of trade receivables

approximates their carrying amount, which is stated at original invoice amount less an allowance for expected credit losses. The Group

measures the loss allowance at an amount equal to the lifetime expected credit losses of its customers based on publicly available default risk

ratings adjusted for current observable circumstances, forecast information and past history of credit losses. All of the Group’s receivable

balances are classified as current based on the agreed terms and conditions and the Group has no history of credit losses. Therefore, the Group

measures the lifetime expected credit losses of its customers as the 12-month expected credit losses . Individual balances are written off when

management deems that there is no possibility of recovery.

Trade receivables include provisionally priced sales, which are open at the end of the reporting period. Certain contracts have embedded

provisional pricing mechanisms, which have the character of commodity derivatives that are carried at fair value through profit and loss. For

further information on the Group’s contracts with customers see Note 6 Revenue. Revenues on these contracts are initially recognised at the

estimated fair value of consideration receivable, based on the contractual price, and adjusted at the end of each subsequent reporting period on

the basis of changes in iron ore prices and the specific underlying contract terms. Final prices based on the relevant index are normally known

within 60 days after the reporting period. Further information on the fair value of the embedded provisional pricing mechanism at 31 December

2022 is disclosed in Note 27 Financial instruments.

At 31 December 2022, trade and other receivables comprised:

US$000

As at

31.12.22

As at

31.12. 21

Trade receivables 28,838 189,664

Other receivables 4,559 5,730

Expected credit loss allowance (8,698) (3,031)

Total trade and other receivables 24,699 192,363

As trade receivables are non-interest bearing and final invoices are generally settled within 90 days after delivery, contracts with customers are not

deemed to contain a significant financing component.

Trade receivables at 31 December 2022 include US$3,284 thousand (2021: US$4,283 thousand) owed by related parties. The detailed related

party disclosures are made in Note 34 Related party disclosures.

The movement in the expected credit loss allowance for trade and other receivables during the year under review was:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance 3,031 2,313

Increase 7,205 1,201

Release (987) (511)

Translation differences (551) 28

Closing balance 8,698 3,031

During the financial year 2022 and the comparative year 2021, there was no movement in the expected credit loss allowance for trade and other

receivables relating to lifetime expected credit losses and credit impaired assets .

The following table shows the Group’s receivables at the reporting date that are subject to credit risk using a provision matrix:

Days past due

As at 31.12.22

US$000

Current

Less than

45 days

45 to 90

days

Over 90

days Total

Expected loss rate 2.5% 16.8% 25.3% 87.2% 26.0%

Trade receivables – gross carrying amount 17,05 6 2,541 1,359 7,882 28,838

Other receivables – gross carrying amount 3,943 1 1 614 4,559

Expected credit loss allowance 519 426 344 7,409 8,698

The expected loss rate as at 31 December 2022 was impacted by the heightened Ukraine country risk as a consequence of the ongoing armed

conflict.

180 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 18: Trade and other receivables continued

Days past due

As at 31.12.21

US$000

Current

Less than

45 days

45 to 90

days

Over 90

days Total

Expected loss rate 0.4% 3.8% 2.4% 53.3% 1.6%

Trade receivables – gross carrying amount 183,004 1,298 1,750 3,612 189,664

Other receivables – gross carrying amount 5,087 19 – 624 5,730

Expected credit loss allowance 679 50 42 2,260 3,031

The change of the balance of impairment losses on trade receivables recognised in the consolidated income statement as of 31 December 2022

and during the comparative year ended 31 December 2021 was not material and therefore not disclosed separately in the consolidated income

statement. For further information see the table above.

The Group’s exposures to credit, currency and commodity risks are disclosed in Note 27 Financial instruments.

Note 19: Prepayments and other current assets

As at 31 December 2022, prepayments and other current assets comprised:

US$000

As at

31.12.22

As at

31.12. 21

Prepayments to suppliers:

Electricity and gas 2,387 17,9 5 0

Materials and spare parts 939 9,600

Services 7,442 7,452

Other prepayments 211 220

Prepaid expenses 2,312 13,687

Deposits – 18,962

Other 61 291

Total prepayments and other current assets 13,352 6 8,162

Prepayments at 31 December 2022 include US$865 thousand (2021: US$2,076 thousand) made to related parties. The detailed related party

disclosures are made in Note 34 Related party disclosures.

Other current assets as at the end of the comparative period ended 31 December 2021 include cash deposits for letters of credit in the amount

of US$18,962 thousand available only after three months from the date of inception of the letters of credit, whereas those with a maturity within

three months were classified as cash equivalents. See Note 25 Cash and cash equivalents for further information.

Freight costs in the amount of US$7,443 thousand were included in the balance of prepaid expenses at the beginning of the year and recognised

in the consolidated income statement during the year ended 31 December 2022 (2021: US$7,097 thousand).

181Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 20: Other taxes recoverable and payable

Accounting policy

Value added tax

Revenues, expenses and assets are recognised net of the amount of value added tax (“VAT”), except:

– where VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case VAT is recognised as

part of the cost of acquisition of the asset or as part of the expense item as applicable; and

– receivables and payables are stated with the amount of VAT included.

VAT receivable balances are not discounted unless the overdue balances are expected to be received after more than 12 months following the

year end.

As at 31 December 2022, other taxes recoverable comprised:

US$000

As at

31.12.22

As at

31.12. 21

VAT receivable 79,064 47, 9 54

Other taxes prepaid 9,698 86

Total other taxes recoverable and prepaid – current 88,762 48,040

Total other taxes recoverable and prepaid 88,762 48,400

The table below provides a reconciliation of the VAT receivable balance in Ukraine:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance, gross 46,963 31,602

Net VAT incurred 121,369 194,488

VAT refunds received in cash (65,149) (179,959)

Translation differences (26,796) 832

Closing balance, gross 76,387 46,963

Allowance (499) (1,361)

Closing balance, net 75,888 45,602

Following the Russian invasion into Ukraine in February 2022, the tax code of Ukraine was amended and adopted by Ukrainian Parliament on

3 March 2022. As a result of this amendment, the VAT refunds were suspended and the Group’s outstanding VAT balance increased and peaked at

US$108,846 thousand as at 31 October 2022. The VAT refunds resumed again in October 2022 and the Group’s subsidiaries in Ukraine received

refunds also in November and December 2022 and January 2023.

VAT balances in the amount of US$47,149 thousand (2021: nil) were overdue as at 31 December 2022 and collected in full in January 2023. The

future refunds do however depend on the situation in Ukraine and how the country is going to cope with the state budget constraints as a result

of the ongoing war.

The recorded allowance of US$499 thousand (2021: US$1,361 thousand) is related to uncertainties in terms of the timing of the recovery of VAT

receivable balances for one of the Group’s Ukrainian subsidiary.

As at 31 December 2022, other taxes payable comprised:

US$000

As at

31.12.22

As at

31.12. 21

Environmental tax 269 1,954

Royalties 951 10,641

VAT payable 146 310

Other taxes 3,792 4,430

Total other taxes payable 5,158 17,335

182 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 21: Trade and other payables

Accounting policy

Trade and other payables are not interest-bearing, being generally short-term, and are stated at their original invoice amount.

As at 31 December 2022, trade and other payables comprised:

US$000

As at

31.12.22

As at

31.12. 21

Materials and services 18,856 59,488

Payables for equipment 11,441 13,036

Other 212 300

Total current trade and other payables 30,509 72,824

Trade and other payables at 31 December 2022 include US$2,301 thousand (2021: US$1,221 thousand) due to related parties (see Note 34

Related party disclosures).

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 27 Financial instruments.

Note 22: Pension and post-employment obligations

Accounting policy

The defined benefit costs relating to the plans operated by the Group in the different countries are determined and accrued in the consolidated

financial statements using the projected unit credit method for those employees entitled to such payments. The underlying assumptions are

defined by management and the defined benefit pension liability is calculated by independent actuaries at the end of each annual reporting

period.

Remeasurements, comprising actuarial gains and losses, are immediately reflected in the statement of financial position. The corresponding

charge or credit is recognised in the other comprehensive income of the period in which it occurred and immediately reflected in retained

earnings as not reclassified to the consolidated income statement in subsequent periods.

The costs of managing plan assets are deducted from the return on plan assets reflected in other comprehensive income. All other scheme

administration costs are charged to the consolidated income statement. The net interest is calculated by applying the discount rate to the net

defined benefit pension liability or plan assets. Any past service costs are recognised in the consolidated income statement at the earlier of

when the plan amendment occurs or when related restructuring costs are recognised.

The service costs (including current and past) are included in cost of sales, selling and distribution expenses and general and administrative

expenses in the consolidated income statement whereas the net finance expenses are included in finance expenses. The effects from

remeasurements are recognised in other comprehensive income.

The defined benefit pension liability is the aggregate of the defined benefit obligation less plan assets of funded schemes. The Group operates

funded and unfunded schemes.

The Group’s expenses in relation to defined contribution plans are charged directly to the consolidated income statement.

The Group mainly operates defined benefit plans for qualifying employees of its subsidiaries in Ukraine and Switzerland. All local defined benefit

pension liabilities are calculated by independent actuaries applying accepted actuarial techniques. In addition to the aforementioned schemes,

the Group operates a defined benefit scheme in Austria and contribution plans for qualifying employees in the UK and in Singapore.

Details of the major defined benefit schemes in Ukraine and Switzerland are provided below:

Ukraine

The Group’s subsidiaries in Ukraine make defined contributions to the Ukrainian State Pension Scheme at statutory rates based on the gross

salary payments made to the employees. PJSC Ferrexpo Poltava Mining (“FPM”) and LLC Ferrexpo Yeristovo Mining (“FYM”) also have a legal

obligation to compensate the Ukrainian State Pension Fund for additional pensions paid to certain categories of its current and former

employees. All pension schemes in Ukraine are unfunded.

At 31 December 2022, the pension schemes in Ukraine covered 2,820 current employees (2021: 2,847 people) and there are 707 former

employees currently in receipt of pensions (2021: 768 people).

Switzerland

The employees of the Group’s Swiss operations are covered under a collective pension plan (multi-employer plan), which is governed in

accordance with the requirements of Swiss law. The funding, of which two-thirds is contributed by the employer and one-third by the employees,

is based on the regulations of the pension scheme and Swiss law. The pension scheme in Switzerland is funded and the assets of the pension

scheme are held separately from those of the Group and are invested with an insurance company. The accumulated capital of the employees is

subject to interests determined by the local legislation and defined in the regulations of the pension scheme.

183Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 22: Pension and post-employment obligations continued

On retirement, employees are entitled to receive either a lump sum or an annual proportion of their accumulated capital as a pension

underpinned by certain guarantees. The Group and the employees make contributions to the pension scheme as a percentage of the

insured salaries depending on the age of the employees.

At 31 December 2022, the Swiss pension scheme covered 19 people (2021: 18 people).

The principal assumptions used in determining the defined benefit obligation are shown below:

Year ended 31.12.22 Year ended 31.12.21

Ukrainian

schemes

Swiss

scheme

Ukrainian

schemes

Swiss

scheme

Discount rate 18.0% 2.3% 12.9% 0.3%

Retail price inflation 8.7% 1.5% 5.2% 1.3%

Expected future salary increase 7.3% 2.0% 6.0% 1.25%

Expected future benefit increase 7.3% – 6.0% −

Female life expectancy (years) 79.8 89.5 81.2 89.4

Male life expectancy (years) 75.6 87.7 76.6 87.6

US$000

As at

31.12.22

As at

31.12. 21

Present value of funded defined benefit obligation 3,754 4,404

Fair value of plan assets (2,870) (3,045)

Funded status 884 1,359

Present value of unfunded defined benefit obligation 15,572 24,715

Defined benefit pension liability 16,456 26,074

Thereof for Ukrainian schemes 15,463 24,608

Thereof for Swiss scheme 884 1,359

Thereof for schemes in other jurisdictions 109 107

Amounts recognised in the consolidated income statement or in other comprehensive income are as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Defined benefit cost charged in the consolidated income statement:

Current service cost 1,098 1,810

Past service cost (40) (96)

Interest cost on defined benefit obligation 2,685 3,231

Interest income on plan assets (7) (20)

Administration cost 10 11

Total defined benefit costs charged in the consolidated income statement 3,746 4,936

Remeasurement (gains)/costs in consolidated statement of other comprehensive income:

Remeasurement effect from demographic assumptions (137) (361)

Remeasurement effect from financial assumptions (7,139) (4,055)

Experience adjustment 1,528 (5,230)

Return on plan assets 412 (236)

Total remeasurement gains in other comprehensive income (5,336) (9,882)

Total defined benefit gains (1,590) (4,946)

Thereof for Ukrainian schemes (1,397) (2,953)

Thereof for Swiss scheme (201) (2,013)

Thereof for schemes in other jurisdictions 8 20

184 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 22: Pension and post-employment obligations continued

The majority of the effects from remeasurement of financial assumptions relates to the changes of the discount rate and effective salary

increases in Ukraine. The remeasurement effect from financial assumptions as at 31 December 2022 is driven by the increase of the discount

rate from 12.9% to 18.0%, compared to an increase from 10.8% to 12.9% at the end of the comparative year ended 31 December 2021, resulting

in significant actuarial gains in both years. The negative effect from the experience adjustments as at 31 December 2022 is due to a higher

effective salary increase in Ukraine than expected as at the end of the comparative year ended 31 December 2021, with an opposite effect during

the financial year 2021.

Changes in the present value of the defined benefit obligation are as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening defined benefit obligation 29,119 38,416

Current service cost 1,098 1,810

Interest cost on defined benefit obligation 2,685 3,231

Remeasurement gains (5,748) (9,646)

Contributions paid by employer (1,874) (2,074)

Contributions paid by employees 102 114

Benefits paid and net transfers through pension assets (63) (3,341)

Plan amendments (40) (96)

Translation differences (5,953) 705

Closing defined benefit obligation 19,326 29,119

Thereof for Ukrainian schemes 15,463 24,608

Thereof for Swiss scheme 3,754 4,404

Thereof for schemes in other jurisdictions 109 107

Thereof for active employees 8,757 13,572

Thereof for vested terminations 6,10 5 9,485

Thereof for pensioners 4,464 6,062

The durations of the defined benefit obligation for the different schemes as at 31 December 2022 are 8.5 years in Ukraine (2021: 10.2 years) and

18.7 years in Switzerland (2021: 22.7 years).

Contributions to the defined benefit plans, including benefits paid by employer and employee contributions, are expected to be US$1,782

thousand for the schemes in Ukraine and US$174 thousand in Switzerland in the next financial year.

The expenses in relation to the defined contribution plan in the UK and Singapore totalled US$49 thousand (2021: US$23 thousand).

Changes in the fair values of the plan assets are as follows:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening fair value of plan assets 3,045 5,941

Interest income 7 20

Contributions paid by employer 244 287

Contributions paid by employees 102 114

Benefits paid and net transfers through pension assets (63) (3,341)

Return on plan assets (412) 236

Administration cost (10) (11)

Translation differences (43) (201)

Closing fair value of plan assets 2,870 3,045

Thereof for Swiss scheme 2,870 3,045

185Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 22: Pension and post-employment obligations continued

The asset allocation of the plan assets of the Swiss scheme is as follows:

%/US$000

As at

31.12.22

As at

31.12.22

As at

31.12. 21

As at

31.12. 21

Scheme assets at fair value

Equities 27.9 802 29.7 905

Bonds 30.1 863 29.7 905

Properties 17.7 508 15.3 466

Other 24.3 697 25.3 769

Fair value of scheme assets 100.0 2,870 100.0 3,045

The pension assets are included in a multi-employer plan and no information in respect of the split of the investments into quoted and

non-quoted assets is available. Taking into account the requirements of Swiss law, it is assumed that equities and bonds reflect investments

into quoted assets with a portion of the other assets in the portfolio assumed to be investments into non-quoted assets.

Changes to interest rates and future salary increases in Ukraine are considered to be the main pension-related risks for the Group, as such

changes are likely to affect the balance of the Group’s defined benefit obligation. The percentage used to calculate the sensitivities was set under

consideration of the volatility for these assumptions for the Ukrainian schemes and has also been applied for the Group’s less material schemes

in other jurisdictions.

Changes to the significant assumptions would have the following effects on the defined benefit obligation in the different jurisdictions:

Year ended 31.12.22

US$000

Ukrainian

schemes

Swiss

scheme

Other

jurisdictions

Ukrainian

schemes

Swiss

scheme

Other

jurisdictions

Increase by

Decrease by

Change

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

Discount rate (%) (995) (526) (5) 1,116 727 7

Future salary increases (%) 582 114 6 (531) (103) (5)

Local inflation (%) 11 – n/a (15) (1) n/a

Indexation of pension (%) n/a 264 n/a n/a n/a n/a

Life expectancy (years) 265 35 n/a (318) (35) n/a

Year ended 31.12.21

US$000

Ukrainian

schemes

Swiss

scheme

Other

jurisdictions

Ukrainian

schemes

Swiss

scheme

Other

jurisdictions

Increase by

Decrease by

Change

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

1.0% or

1 year

Discount rate (%) (1,876) (780) (7) 2,145 1,125 8

Future salary increases (%) 1,129 176 7 (1,029) (151) (7)

Local inflation (%) 61 5 n/a (87) − n/a

Indexation of pension (%) n/a 398 n/a n/a n/a n/a

Life expectancy (years) 394 69 n/a (468) (69) n/a

Based on the Ukrainian pension legislation, the pension indexation is defined by the future salary increases and the local inflation rate. As a result

of this, no sensitivity for the indexation of pension is calculated for the Ukrainian schemes, but the sensitivity for local inflation is used instead.

For the presentation of the effects of the changes of the significant assumptions shown in the table above, the present value of the defined

benefit obligation has been calculated based on the projected unit credit method at the end of the reporting period, which is the same as the

one applied for the calculation of the defined benefit obligation recognised in the statement of financial position as at the end of the respective

reporting period. The methods and assumptions used for the sensitivity analysis for the prior year are unchanged.

186 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 23: Provisions

Accounting policy

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an

outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount

of the obligation.

Site restoration

Site restoration provisions are made in respect of the estimated future costs of closure and restoration and for environmental rehabilitation costs

(determined by an independent expert) in the accounting period when the related environmental disturbance occurs. The provision is discounted,

if material, and the unwinding of the discount is included in finance costs. At the time of establishing the provision, a corresponding asset is

capitalised where it gives rise to a future benefit and depreciated over future production from the mine to which it relates. The provision is

reviewed on an annual basis for changes in cost estimates, discount rates or the life of operations.

The provision for site restoration changed as follows during the financial year 2022:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance 3,873 2,846

Unwind of the discount 382 370

Charge to the consolidated income statement 1,033 551

Translation differences (1,004) 106

Closing balance 4,284 3,873

The costs of restoration of the different deposits in the Group’s open pit mines are based on amounts determined by an independent and

credited institute taking into account the codes of practice and laws applicable in Ukraine. The useful lives of the different pits and mines are

determined by the same institute based on expected annual stripping and production volumes having taken into account the expected timing

and effect of future mine-life extension programmes. It is expected that the restoration works of the GPL mine will start after the years 2040,

2044 and 2061 for the different areas within the mine. The first minor restoration work of the Yerystivske mine is expected to start for some dump

areas after 2026, whereas the removal of equipment and the flooding of the pit will only begin at the end of the mine’s life in 2048.

The provision represents the discounted value of the estimated costs of decommissioning and restoring the mines at the dates when

the deposits are expected to be depleted in the relevant areas within the mine. The present value of the provision has been calculated

in Ukrainian hryvnia using nominal pre-tax discount rates taking into account the beginning of the restoration work in the different areas of the

mines, averaging at 18.24% (2021: 13.22%).

Uncertainties in estimating the provision include potential changes in regulatory requirements, decommissioning and reclamation alternatives

and the discount and inflation rates to be used in the calculations.

Note 24: Accrued and contract liabilities

Accounting policy

Accrued expenses are recognised for amounts to be paid in a future period for goods or services received, which have not been billed to the

Group as at the end of the reporting period.

Contract liabilities consist of the portion of freight revenues under CIF and CFR Incoterms, which is deferred and recognised over time as the

performance obligation is fulfilled, and released at the point of time when the freight services are completed. Contract liabilities are normally

derecognised within 60 days after the reporting period.

As at 31 December 2022, accrued and contract liabilities comprised:

US$000

As at

31.12.22

As at

31.12. 21

Accrued expenses 2,033 10,915

Accrued interest 18 28

Accrued employee costs 15,048 19,088

Advances from customers 56 13,184

Contract liabilities1 2,438 9,398

Total accrued and contract liabilities 19,593 52,613

1. For further information on the change in contract liabilities during the year ended 31 December 2022 see Note 6 Revenue.

187Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 25: Cash and cash equivalents

Accounting policy

Cash and cash equivalents include cash at bank and on hand and short-term deposits with original maturity of 90 days or less from inception.

Cash at bank and on hand and short-term deposits are recorded at their nominal amount as these present an insignificant risk of changes in value.

As at 31 December 2022, cash and cash equivalents comprised:

US$000

As at

31.12.22

As at

31.12. 21

Cash at bank and on hand 112 ,945 158,052

Cash equivalents – 9,239

Total cash and cash equivalents 112,945 167, 291

The debt repayments net of proceeds during the period ended 31 December 2022 totalled US$48,249 thousand (31 December 2021:

US$221,188 thousand) affecting the balance of cash and cash equivalents.

Further information on the Group’s gross debt is provided in Note 26 Interest-bearing loans and borrowings.

The balance of cash and cash equivalents held in Ukraine amounts to US$45,229 thousand as at 31 December 2022 (31 December 2021:

US$52,326 thousand). Despite the foreign exchange control measures imposed under Martial Law in Ukraine (see Note 30 Commitments,

contingencies and legal disputes), this balance is fully available to the Group for its operations in Ukraine and is therefore not considered restricted.

Cash equivalents as at the end of the comparative year ended 31 December 2021 relate to cash deposits for letters of credit available within

three months from the date of inception of the letters of credit while cash deposits available only after three months from the date of inception

totalling US$18,962 thousand were classified as other current assets.

Note 26: Interest-bearing loans and borrowings

Accounting policy

Interest-bearing loans and borrowings (excluding lease liabilities) are measured at amortised cost. All loans are in US dollars. See also Note 27

Financial instruments for more details in respect of the accounting policies applied. This note provides information about the contractual terms of

the Group’s major finance facilities.

US$000

Notes

As at

31.12.22

As at

31.12. 21

Current

Lease liabilities

14 5,194 6,060

Trade finance facilities – 42,146

Total current interest-bearing loans and borrowings 5,194 48,206

Non-current

Lease liabilities

14 1,354 2,14 3

Total non-current interest-bearing loans and borrowings 1,354 2,143

Total interest-bearing loans and borrowings

27 6,548 50,349

The Group has no uncommitted trade finance facilities available as at 31 December 2022, primarily due to the situation in Ukraine, compared to

US$140,000 as at the end of the comparative year ended 31 December 2021, of which US$42,146 were drawn.

Trade finance facilities were secured against receivable balances related to these specific trades.

188 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 26: Interest-bearing loans and borrowings continued

The table below shows the movements in the interest-bearing loans and borrowings:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance of interest-bearing loans and borrowings 50,349 266,478

Cash movements:

Repayments of syndicated bank loans – secured – (256,666)

Repayments of other bank loans – unsecured – (764)

Principal and interest elements of lease payments (6,103) (5,904)

Change of trade finance facilities, net (42,146) 42,146

Total cash movements (48,249) (221,188)

Non-cash movements:

Amortisation of prepaid arrangement fees – 4

Additions to lease liabilities 5,340 4,506

Others (incl. translation differences) (892) 549

Total non-cash movements 4,448 5,059

Closing balance of interest-bearing loans and borrowings 6,548 50,349

The outstanding amount of the Group’s syndicated revolving pre-export facility was fully repaid at the end of the comparative year ended

31 December 2021 and the facility was subsequently cancelled.

The interest elements of lease payments are included in the cash flows from operating activities and not in the cash flows used in financing

activities.

Further information on the Group’s exposure to interest rate, foreign currency and liquidity risk is provided in Note 27 Financial instruments.

Note 27: Financial instruments

Accounting policy

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities (e.g. promissory notes), trade and other receivables,

cash and cash equivalents, loans and borrowings (including lease liabilities) and trade and other payables.

Derivative financial instruments

Except for the provisionally priced receivables disclosed in Note 18 Trade and other receivables, the Group does not hold any derivative financial

instruments.

Initial measurement

Non-derivative financial instruments

Financial assets and financial liabilities (excluding lease liabilities) are initially measured at fair value. Any transaction costs that are directly

attributable to the acquisition or issue of financial assets or financial liabilities are added or deducted from its fair value except for financial assets

and financial liabilities at fair value through the consolidated income statement. For those financial assets and financial liabilities, the transaction

costs are recognised immediately in the consolidated income statement.

All regular way purchases and sales of financial assets are recognised on the trade date (i.e. the date that the Group commits to purchase or

sell the asset). Regular way purchases or sales are those that require delivery of assets within the period generally established by regulation or

convention in the marketplace.

The subsequent measurement is based on the classification of the financial instruments.

Subsequent measurement

Financial assets

Financial assets measured at amortised cost

Except for the provisionally priced receivables disclosed in Note 18 Trade and other receivables, the Group’s financial assets are non-derivative

with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective

interest method. Gains and losses are recognised in the consolidated income statement when the financial assets are derecognised or impaired

along with the amortisation process.

189Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 27: Financial instruments continued

Financial liabilities

Trade and other payables

Trade and other payables are subsequently measured at amortised cost using the effective interest method.

Interest-bearing loans and borrowings

Interest-bearing loans and borrowings (excluding lease liabilities) are subsequently measured at amortised cost using the effective interest

method. Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as through the

amortisation process. For the accounting policy of lease liabilities see Note 14 Leases.

Impairment of financial assets

In addition to the individual assessment at each reporting date whether a financial asset or group of financial assets is impaired, the Group

also assesses the expected credit losses on financial assets carried at amortised cost. As all of the Group’s financial assets carried at amortised

cost are classified as current based on the agreed terms and conditions, the loss allowance is measured at an amount equal to the 12-month

expected credit losses based on publicly available credit default ratings adjusted for current observable circumstances, forecast information and

past history of credit losses. This assessment is performed individually for all financial assets that are individually significant and collectively for

those that are not individually significant and have similar credit risk characteristics. The carrying amount of the financial assets is reduced by an

allowance account with the change of the allowance being recognised in the consolidated income statement.

Individual balances are written off when management deems that there is no possibility of recovery.

The accounting classification of each category of financial instruments and their carrying amounts are set out below:

As at 31.12.22

US$000

Notes

Financial

assets

measured at

amortised cost

Financial

liabilities

measured at

amortised cost

Lease

liabilities Total

Financial assets

Cash and cash equivalents

25 112 ,945 – – 112 ,945

Trade and other receivables

18 24,699 – – 24,699

Other financial assets 5,443 – – 5,443

Total financial assets 143,087 – – 143,087

Financial liabilities

Trade and other payables

21 – 30,509 – 30,509

Accrued liabilities

24 – 17,099 – 17,099

Interest-bearing loans and borrowings

26 – – 6,548 6,548

Total financial liabilities – 47,608 6,548 54,156

As at 31.12.21

US$000

Notes

Financial

assets

measured at

amortised cost

Financial

liabilities

measured at

amortised cost

Lease

liabilities Total

Financial assets

Cash and cash equivalents

25 167,291 – – 167, 291

Trade and other receivables

18 192,363 – – 192,363

Other financial assets 26,246 – – 26,246

Total financial assets 385,900 – – 385,900

Financial liabilities

Trade and other payables

21 – 72,824 – 72,824

Accrued liabilities

24 – 30,031 – 30,031

Interest-bearing loans and borrowings

26 – 42,146 8,203 50,349

Total financial liabilities – 145,001 8,203 153,204

190 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 27: Financial instruments continued

Fair values and impairment testing

Financial assets and other financial liabilities

The fair values of cash and cash equivalents, trade and other receivables and payables are approximately equal to their carrying amounts due

to their short maturity.

Interest-bearing loans and borrowings

The fair values of interest-bearing loans and borrowings are based on the discounted cash flows using market interest rates (Level 2) and are

approximately equal to their carrying amounts.

Fair value measurements recognised in the statement of financial position

Except for the provisionally priced trade receivables (Level 2) disclosed in Note 18 Trade and other receivables, the Group does not have any

financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3 based on the degree to

which the fair value is observable. There were no transfers between Level 1 and Level 2 during the financial year 2022 and the comparative year

ended 31 December 2021.

Financial risk management

Overview

The Group has exposure to the following risks from its use of financial instruments:

– credit risk;

– liquidity risk; and

– market risk – including currency and commodity risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring

and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial

statements. The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and

controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in

market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a

disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews

the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role

by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which

are reported to the Audit Committee and the CFO.

The Group operates a centralised financial risk management structure under the management of the Executive Committee, accountable to

the Board.

The Executive Committee delegates certain responsibilities to the CFO. The CFO’s responsibilities include authority for approving all new

physical, commercial or financial transactions that create a financial risk for the Group. Additionally, the CFO controls the management of

treasury risks within each of the business units in accordance with a Board-approved treasury policy.

Financial instrument risk exposure and management

Natural hedges that can be identified and their effectiveness quantified are used in preference to financial risk management instruments.

Derivative transactions may be executed for risk mitigation purposes only – speculation is not permitted under the approved treasury policy –

and are designed to have the effect of reducing risk on underlying market or credit exposures. Appropriate operational controls ensure

operational risks are not increased disproportionately to the reduction in market or credit risk.

The Group has not used any financial risk management instruments that are derivative in nature, or other hedging instruments, in this or the

comparative year.

Credit risk

Trade and other receivables

The Group, through its trading operations, enters into binding contracts, which contain obligations that create exposure to credit, counterparty

and country risks. It is the primary objective of the Group to manage such risks to reduce uncertainty of collection from buyers. A secondary

objective is to minimise the cost of reducing risks within acceptable parameters.

Credit risk is the risk associated with the possibility that a buyer will default, by failing to make required payments in a timely manner or to comply

with other conditions of an obligation or agreement. Where appropriate, the Group uses letters of credit to assist in mitigating such risks.

Counterparty risk crystallises when a party to an agreement defaults. Where letters of credit are used to minimise this risk, the Group uses a

confirming bank with a similar or higher credit rating to mitigate country and/or credit risk of the issuing bank.

191Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 27: Financial instruments continued

Country risk is the potential volatility of foreign assets, whether receivables or investments, that is due to political and/or financial events in a

given country.

Group Treasury monitors the concentration of all outstanding risks associated with any entity or country, and reports to the Group CFO on a

timely basis.

Investment securities

Outside Ukraine the Group limits its cash exposure to credit, counterparty and country risk by only investing in liquid securities and with

counterparties that are incorporated in an A+ or better “S&P” rated OECD country. A ratings approach is used to determine maximum exposure

to each counterparty. Cash not required for production, distribution and capital expenditures is invested with counterparties rated by S&P or

Moody’s at a level of long-term B “S&P” or short-term A3 “S&P” or better with any exceptions subject to approval by the Board.

Recognising that the principal activities of the Group are predominantly in Ukraine, special consideration is given to Ukrainian transactional

banking counterparties where the sector is small and constrained by the sovereign credit rating. Exceptions may be made under the following

conditions:

– the counterparty is resident in Ukraine; and

– the counterparty is included in the top 15 financial institutions in Ukraine based on the Group’s assessment of the financial institution.

Irrespective of the counterparty risk assessment above, the Group only uses subsidiaries of Western banks for transactional purposes unless

required differently by law.

The Group is currently working with three banks in Ukraine, two of which are subsidiaries of Western banks, and is therefore exposed to Ukraine

country and banking sector risk in this respect.

Guarantees

The Group’s policy is to provide financial guarantees under limited circumstances only for the benefit of wholly owned or substantially wholly

owned subsidiaries.

Exposure to credit risk

The carrying amount of financial assets at 31 December 2022 was US$143,087 thousand (2021: US$385,900 thousand) and represents the

maximum credit exposure. See page 189 for further information.

Of the total maximum exposure to credit risk, US$56,131 thousand (2021: US$85,457 thousand) related to Ukraine.

The total receivables balance relating to the Group’s top three customers was US$6,700 thousand (2021: US$130,684 thousand), making up

56% of the total amounts receivable (2021: 75%). The top three customers are considered to be crisis-resistant top-class steel mills and sales are

made under long-term contracts.

Whilst the global Covid-19 pandemic did not result in a significant increase in the Group’s credit risk in respect of its international customers, the

risks related to Covid-19 remain relevant. The credit risk related to suppliers of equipment and services in Ukraine has been however impacted

by the heightened Ukrainian country risk as a consequence of the ongoing war. See the Principal Risks section on pages 62 and 74 for additional

information on the counterparty risks and risks relating to the global Covid-19 pandemic .

Impairment profile

The Group’s exposure to credit risk relating to trade and other receivables is disclosed in Note 18 Trade and other receivables.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach is to ensure that it

will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable

losses or risking damage to the Group’s reputation by holding surplus cash or undrawn committed credit facilities. However, the ongoing war in

Ukraine has had a significant impact on the cash flow generation of the Group during the financial year 2022 and the war is expected to continue

to affect the Group’s cash flow generation during the financial year 2023. For further information see also the Group’s Going Concern Statement

in Note 2 Basis of preparation.

The Group prepares detailed rolling cash flow forecasts, which assist it in monitoring cash flow requirements and optimising its cash return on

investments. Typically, the Group intends to ensure that it has sufficient cash on demand and/or lines of credit to meet expected operational

expenses, including the servicing of financial obligations. In normal times, the Group also makes use of uncommitted trade finance facilities to

manage its short-term liquidity requirements. Trade finance generally refers to the financing of individual transactions or a series of revolving

transactions and is often self-liquidating, whereby the lending bank stipulates that all sales proceeds to be collected are applied to settle the loan,

with the remainder returned to the Group. Trade finance transactions are approved by the Group Treasurer and Group CFO. As at 31 December

2022, no trade finance facilities are available to the Group as a result of the ongoing war in Ukraine.

For further information see Note 26 Interest-bearing loans and borrowings and the Group’s Viability Statement on pages 75 and 76.

192 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 27: Financial instruments continued

The following are the contractual maturities of financial liabilities:

As at 31.12.22

US$000

Less than

1 year

Between

1 to 2 years

Between

2 to 3 years

Between

3 to 4 years

Between

4 to 5 years

More than

5 years Total

Interest-bearing

Lease liabilities 5,355 880 579 9 6 – 6,829

Total interest-bearing 5,355 880 579 9 6 – 6,829

Non-interest-bearing

Trade and other payables 30,509 – – – – – 30,509

Accrued liabilities 17,092 – – – – – 17,0 92

Future interest payable 18 – – – – – 18

Total non-interest-bearing 47,619 – – – – – 47,619

Total financial liabilities 52,974 880 579 9 6 – 54,448

As at 31.12.21

US$000

Less than

1 year

Between

1 to 2 years

Between

2 to 3 years

Between

3 to 4 years

Between

4 to 5 years

More than

5 years Total

Interest-bearing

Floating rate loans and borrowings 42,146 − − − − − 42,146

Lease liabilities 6,182 963 881 577 7 7 8,617

Total interest-bearing 48,328 963 881 577 7 7 50,763

Non-interest-bearing

Trade and other payables 72,824 − − − − − 72,824

Accrued liabilities 30,031 − − − − − 30,031

Future interest payable 51 – – – – – 51

Total non-interest-bearing 102,906 – – – – – 102,906

Total financial liabilities 151,234 963 881 577 7 7 153,669

Currency risk

The Group is exposed to currency risk on financial assets and financial liabilities resulting from sales, purchases and borrowings that are

denominated in a currency other than the respective functional currencies of the Group’s subsidiaries. The functional currencies of the Group’s

subsidiaries are primarily the Ukrainian hryvnia, US dollars, euro and Swiss francs. The Group’s functional currency and reporting currency is the

US dollar.

The Group’s major lines of borrowings and the majority of its sales are denominated in US dollars, with costs of local Ukrainian production mainly

in hryvnia. The value of the hryvnia is published by the NBU. Following the Russian invasion into Ukraine on 24 February 2022, the National Bank

of Ukraine pegged the Ukrainian hryvnia at 29.255 to the US dollar in order to mitigate the adverse impact from the war on the local financial

system. On 21 July 2022, the National Bank of Ukraine devalued the local currency to 36.568 to the US dollar with immediate effect

A depreciation of the Ukrainian hryvnia decreases the operating costs of the production unit in US dollar terms and the value of hryvnia payables

recorded in the statement of financial position at the year end in US dollars, with the opposite effect in case of an appreciation of the Ukrainian

hryvnia. As the majority of sales and receivables are denominated in US dollars, a change in the local currency will result in operating exchange

differences recorded in the consolidated income statement. See Note 9 Foreign exchange gains and losses for further information.

In case of a change of the local currency compared to the US dollar, US dollar-denominated loans held by the Ukrainian subsidiaries result in

non-operating exchange differences to the extent these are not matched by US dollar-denominated assets. Fixed assets are held in local

currency amounts and a change in the functional currencies different to the US dollar results in a change of the Group’s net assets as recorded

in the translation reserve.

As mentioned above, the NBU manages and determines the official exchange rates. An interbank market for the exchange of currencies exists in

Ukraine and is monitored by the NBU. The Group, through financial institutions, exchanges currencies at bank offered market rates.

193Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 27: Financial instruments continued

Trade receivables are predominantly in US dollars and are not hedged. Trade payables denominated in US dollars are also not hedged on the

market but are matched against US dollar currency receipts. This includes the interest expense, which is principally payable in US dollars. Trade

receivables and trade payables in Ukrainian hryvnia are not hedged as a forward market for the currency is generally not available.

Other Group monetary assets and liabilities denominated in foreign currencies are considered immaterial as the exposure to currency risk mainly

relates to corporate costs within Switzerland and the UK.

The Group’s exposure to foreign currency risk was as follows as of 31 December 2022:

US$000

As at

31.12.22

As at

31.12. 21

Total financial assets 143,087 385,900

Thereof exposed to Ukrainian hryvnia – –

Thereof exposed to US dollar 1,742 32,120

Thereof exposed to euro 1,846 7,025

Thereof exposed to Swiss franc 921 1,014

Thereof exposed to other currencies 416 549

Total exposures to currencies other than local functional currencies 4,925 40,708

Total financial liabilities (54,149) (153,204)

Thereof exposed to Ukrainian hryvnia – –

Thereof exposed to US dollar (815) (4,482)

Thereof exposed to euro (7,0 94) (4,058)

Thereof exposed to Swiss franc (192) (225)

Thereof exposed to other currencies (145) (445)

Total exposures to currencies other than local functional currencies (8,246) (9,210)

No other subsidiaries of the Group, apart from the Ukrainian subsidiaries, have financial assets and liabilities denominated in the Ukrainian

hryvnia. The functional currency of the Ukrainian subsidiaries is the Ukrainian hryvnia and the translation of financial assets and financial liabilities

denominated in the Ukrainian hryvnia does therefore not pose a foreign currency risk exposure in the consolidated income statement of the

Group as translation differences are reflected in the translation reserve (see Note 31 Share capital and reserves).

Interest rate risk

Historically, the Group predominantly has borrowed bank funds that were predominantly at floating interest rates and was therefore exposed to

interest rate movements. As at 31 December 2022, the Group does not have any significant balances of interest bearing loans and borrowings.

No interest rate swaps have been entered into in this or prior years.

Commodity risk

Revenues related to provisionally priced sales are initially recognised at the estimated fair value of the consideration receivable based on the

forward price at each reporting date for the relevant period outlined in the different contracts. As a consequence, the receivable balance may

change in a future period when final invoices can be issued based on final iron ore prices to be applied according to the specific underlying

contract terms. There were no provisionally priced sales as at 31 December 2022. The provisionally priced iron ore exposure as at the end of the

comparative year ended 31 December 2021 was 342,916 tonnes and gave rise to a fair value gain of US$4,455 thousand as at 31 December

2021. Final iron ore prices based on the relevant index are normally known within 60 days after the reporting period. The difference between the

provisionally priced receivable balance recognised as at the end of the comparative period 31 December 2021 and the receivable balance taking

into account known final and latest forward prices was US$13,550 thousand and would have increased the consolidated result and the

shareholders’ equity by this amount.

Where pricing terms deviate from the index-based pricing model, derivative commodity contracts may be used to swap the pricing terms to the

iron ore index price .

Finished goods are held at cost without revaluation to a spot price for iron ore pellets at the end of the reporting period, as long as the

recoverable amount exceeds the cost basis.

Sensitivity analysis

A 20% strengthening of the US dollar against the following currencies at 31 December would have (decreased)/increased the consolidated result

and equity by the amounts shown below. The percentage applied to the sensitivity analysis of the Group’s foreign currency exposure is based on

the average change of the Ukrainian hryvnia, the Group’s most relevant foreign currency, compared to the US dollar in past years, which might

repeat again in the near future. This percentage was also applied for the Group’s less relevant foreign currencies and does not have a significant

effect on the total effect of this sensitivity analysis. This assumes that all other variables, in particular interest rates, remain constant.

194 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 27: Financial instruments continued

US$000

Year ended

31.12.22

Income

statement/

equity

Year ended

31.12. 21

Income

statement/

equity

Ukrainian hryvnia 154 4,606

Euro (875) 495

Swiss franc 122 131

Other 45 17

Total (554) 5,249

A 20% weakening of the US dollar against the above currencies would have an equal but opposite effect to the amounts shown above, on the

basis that all the other variables remain constant.

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss and the Group does not hold any

derivatives (e.g. interest rate swaps). Therefore, a change in interest rates at the reporting date would not affect the consolidated income

statement.

Cash flow sensitivity for variable rate instruments

An increase of 100 basis points (“bps”) in interest rates would have increased equity and the consolidated result by the amounts shown below.

The possible change applied to the cash flow sensitivity represents a plausible scenario taking into account the average movement of variable

interest rates in the last years and possible changes in the near future. This analysis assumes that all other variables, in particular foreign

currency rates, remain constant.

US$000

Year ended

31.12.22

Year ended

31.12. 21

Net finance charge 1,129 1,251

A decrease of 100bps would decrease equity and profit by US$328 thousand for the year ended 31 December 2022 (2021: US$984 thousand).

This is on the basis that all the other variables remain constant.

Capital management

The Board’s policy is to maintain a strong capital base. The Board of Directors monitors both the demographic spread of shareholders, as well

as the return on capital, which the Group defines as total shareholders’ equity, excluding non-controlling interests, and the level of dividends to

ordinary shareholders. Please refer to the statement of changes in equity for details of the capital position of the Group.

A key measure in respect of the Group’s capital management is the level of net cash/(debt). The net cash position has decreased

from US$116,942 thousand at the beginning of the year to US$106,397 thousand as at 31 December 2022. The slightly lower net cash position

is a reflection of the Group’s resilience through unprecedented and challenging times, with the Group’s management focussing on adequately

balancing the available liquidity, working capital and overall business operation.

The capital base of the Group can be adversely affected by falls in the price of iron ore reducing reported revenues and profitability. The price

that the industry earns for iron ore products is cyclical in nature and the Board of Directors continues to review its capital base in line with

industry trends. The Board seeks to maintain a balance between the higher net returns that might be achievable through leverage and

advantages and security provided by a low gearing and strong capital position.

Growth projects are approved under consideration of potential future market constraints, liabilities management across the Group’s balance

sheet and expected returns to shareholders.

The Board maintains a dividend policy consistent with the Group’s profile, reflecting the investment activities the Group has made supporting

current and future production growth and the cash generated by existing operations, while maintaining a prudent level of dividend distributions

after an appropriate level of liquidity is ensured on an ongoing basis.

The Group has since 24 February 2022 been subject to the currency control measures implemented by the National Bank of Ukraine (“NBU”)

under the Martial Law, which limits the ability of the local Group companies to convert local currency into US dollars and settle cash flows

between onshore and offshore accounts of the Group. The Group has implemented various measures to reduce the risk of fines that may arise

from the currency control measures, but there exists legal uncertainty in the application of the currency control regulations during the Martial

Law in Ukraine. See Note 30 Commitments, contingencies and legal disputes for further information.

The Company is the Group’s holding company, with no direct operating business, so its ability to make distributions to its shareholders is

dependent on its ability to access profits held in the subsidiaries and on the available liquidity above the minimum ongoing buffer requirements

determined by management and the Board. The Group’s consolidated retained earnings shown in the consolidated statement of changes in

equity do not reflect the profits available for distribution in the Group as of 31 December 2022. See Note 12 Earnings per share and dividends

paid and proposed for further information.

For more information about the Group’s interest-bearing loans and borrowings see Note 26 Interest-bearing loans and borrowings.

195Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 28: Share-based payments

Accounting policy

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value of the award at the grant date using modelling

techniques consistent with the mathematics underlying the Black-Scholes option pricing model extended to allow for the performance

conditions. The fair value is determined by reference to the quoted closing share price on the grant date. The cost is recognised as an expense

over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. In valuing equity-settled

transactions, no account is taken of any vesting conditions, except for market conditions, such as the relative Total Shareholder Return (“TSR”).

Where the vesting of awards is subject to the satisfaction of certain market conditions, a vesting charge is recognised irrespective of whether

or not the market condition is satisfied, provided that all other performance conditions are satisfied. Where awards terminate before the

performance period is complete, any unamortised expense is recognised immediately.

At each reporting date, the cumulative expense of outstanding awards is calculated, representing the extent to which the vesting period has

expired and management’s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments

that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the consolidated income

statement, with a corresponding entry in the employee benefit trust reserve in equity.

Long-term incentive plan (“LTIP”)

The LTIP is a share-based scheme whereby certain senior management and executives receive rewards based on the relative TSR. The LTIP

is subject to a performance condition based on the TSR compared to a comparator group, which operates in a similar environment, measured

over the vesting period. Further description is provided in the Remuneration Report. The cost of equity-settled awards is measured as described

above together with an estimate of future social security contributions payable in respect of this value.

The following number of share awards were granted under the LTIP in the previous financial years. The LTIP vesting period is three years.

Thousand

20 22 LTIP 2021 LTIP 2020 LTIP Total

Year ended 31.12.22 453 – – 453

Year ended 31.12.21 – 295 – 295

Year ended 31.12.20 – – 793 793

The following expenses have been recognised in 2022 and 2021 in respect of the LTIP:

US$000

20 22 LTIP 2021 LTIP 2020 LTIP 2019 LTIP Total

Year ended 31.12.22 129 282 55 24 490

Year ended 31.12.21 – 352 131 380 863

The expenses recognised in 2022 and in the comparative year 2021 include the effect of lapsed awards resulting from the departure of one

(2021: two) members of the key management.

Year ended

31.12.22

WAFV (US$)

Year ended

31.12. 21

WAFV (US$)

Year ended

31.12.22

No. (000)

Year ended

31.12. 21

No. (000)

LTIP

Beginning of the year 2.22 1.57 1,046 1,034

Awards granted during the year 1.54 3.83 453 376

Awards vested during the year 2.40 2.22 (347) –

Awards lapsed during the year 2.22 2.05 (112) (364)

Outstanding unvested awards at 31 December 1.98 2.22 1,040 1,046

The main inputs to the valuation of the 2022 LTIP awards were the share price at date of grant of US$2.33 (2021 LTIP awards: US$4.81), the

volatility of the share price of 65% p.a. (2021 LTIP awards: 60% p.a.) and a risk-free interest rate of 2.7% p.a. (2021 LTIP awards: 0.2% p.a.). The

assumptions have been based on historical volatility and correlation of the relevant stocks over a period based on the expected term of the

awards.

As at 31 December 2021, 100% of the 2019 awards under the LTIP vested as the vesting conditions were met. As a result, the beneficiaries of

this plan at the date of exercise received 347,529 shares for the 2019 awards during the financial year 2022 (2021: no shares for the 2018 awards

as the vesting conditions were not met). The share price at the date of exercise of these awards was US$3.29 (2021: nil). As at the date of

authorising the consolidated financial statements for issue, all awards from previous years have been exercised.

19 6 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 29: Employees

Employee benefits expenses for the year ended 31 December 2022 consisted of the following:

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

Wages and salaries 77,830 88,960

Social security costs 14, 211 18,002

Post-employment benefits

22 1,098 1,810

Other employee costs 4,391 3,006

Share-based payments

28 490 856

Total employee benefits expenses 98,020 112,634

The table above includes compensation for Non-executive Directors, Executive Directors and other key management personnel as outlined

below:

Year ended 31.12.22 Year ended 31.12.21

US$000

Non-executive

and Executive

Directors

Other key

management Total

Non-executive

and Executive

Directors

Other key

management Total

Wages and salaries 3,438 2,455 5,893 3,217 2,917 6,134

Social security costs 94 57 151 73 81 154

Post-employment benefits 80 64 144 111 63 174

Other employee costs 315 32 347 290 82 372

Share-based payments 225 370 595 215 424 639

Total compensation for key management 4,152 2,978 7,130 3,906 3,567 7,473

The totals of shared-based payments for employees and for key management recognised in 2022 and in the comparative year 2021 include the

effect of lapsed awards resulting from the departure of one (2021: two) members of the key management.

The average number of employees during the financial year 2022 is detailed in the table below:

Average number of employees

Year ended

31.12.22

Year ended

31.12. 21

Production 5,873 6,156

Marketing and distribution 439 442

Administration 1,303 1,283

Other 363 386

Total average number of employees 7,978 8,267

Note 30: Commitments, contingencies and legal disputes

Accounting policy

Contingencies

Contingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless the possibility of an outflow of

resources embodying economic benefits is remote. A contingent asset is not recognised in the consolidated financial statements but disclosed

when an inflow of economic benefits is probable.

Commitments for the lease of mining land

These commitments relate to the agreements for the use of mining land, which fall out of the scope of IFRS 16 Leas es.

197Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 30: Commitments, contingencies and legal disputes continued

Commitments

Commitments as at 31 December 2022 consisted of the following:

US$000

Year ended

31.12.22

Year ended

31.12. 21

Total commitments for the lease of mining land (out of the scope of IFRS 16) 50,963 57,6 65

Total capital commitments on purchase of property, plant and equipment 134,842 191,412

Commitments for investment in a joint venture 6,064 6,064

For further information on lease-related commitments see Note 14 Leases.

Contingencies

As disclosed in the 2021 Annual Report and Accounts, the Board, acting through the Committee of Independent Directors (the “CID”), conducted

during the financial year 2020 a review in connection with the Group’s sponsorship arrangements with FC Vorskla and concluded its enquiry in

March 2021. In accordance with arrangements put in place for the full repayment of a loan granted by FC Vorskla Cyprus Ltd. to a related party

entity of the Group’s controlling shareholder outside of the Group, the Group understands that the loan was repaid in full in August 2022.

Legal

In the ordinary course of business, the Group is subject to various legal actions and ongoing court proceedings. There is a risk that the

independence of the judicial system and its immunity from economic and political influences in Ukraine is not upheld, consequently Ukrainian

legislation might be inconsistently applied to resolve the same or similar disputes. See also the Principal Risks section on pages 60 and 61 for

further information on the Ukraine country risk and Note 35 Events after the reporting period in terms of another court order received.

Critical judgements

The Group is exposed to the risks associated with operating in a developing economy, which may or may not be exacerbated by the war and/or

the current circumstances facing the Group’s controlling shareholder (see Ukraine country risk on pages 60 and 61). As a result, the Group is

exposed to a number of risk areas that are heightened compared to those expected in a developed economy, such as an environment of

political, fiscal and legal uncertainties, which require a significant portion of critical judgements to be made by the management.

Share dispute

On 23 November 2020, the Kyiv Commercial Court opened court proceedings in relation to an old shareholder litigation. In 2005, a former

shareholder in PJSC Ferrexpo Poltava Mining (“FPM”) brought proceedings in the Ukrainian courts seeking to invalidate the share sale and

purchase agreement pursuant to which a 40.19% stake in FPM was sold to nominee companies that were previously ultimately controlled

by Kostyantin Zhevago, amongst other parties. After a long period of litigations, all old claims were fully dismissed in 2015 by the Higher

Commercial Court of Ukraine. In January 2021, Ferrexpo AG (“FAG”) received a claim from a former shareholder in FPM to invalidate the share

sale and purchase agreement concluded in 2002.

In February 2021, FAG became aware that three new claims had been filed by three other former shareholders in FPM. Taken together, four

claimants seek to invalidate the share sale and purchase agreement concluded in 2002 pursuant to which a 40.19% stake in FPM was sold,

similar to the previous claims made back in 2005. The Kyiv Commercial Court ruled on 27 May 2021 in favour of FAG and the opposing parties

filed their appeals in June 2021. The Northern Commercial Court of Appeal has opened the appeal proceedings and after several hearings the

Group received in September 2022 a judgement from the appeal court in respect of the aforementioned claim, which states that the share sale

and purchase agreement concluded in 2002 is invalid and orders that 40.19% of the current share capital in FPM should be transferred to the

claimants. The shares in FPM claimed by the claimants, which in 2002 amounted to 40.19% of FPM, now represents 8.5% of FPM’s share capital

as at 31 December 2022, taking into account the dilutive effect from the numerous share capital increases made by FAG since 2002.

Following the identification of numerous errors in the application of the Ukrainian law in the judgement of the Northern Commercial Court of

Appeal by the Group’s legal advisors, FAG filed a cassation appeal and requested the Supreme Court of Ukraine to review the ruling made

by the Northern Commercial Court of Appeal. The hearing at the Supreme Court of Ukraine took place on 17 November 2022. After this first

hearing and before the Supreme Court of Ukraine concluded on the legal merits of the parties involved in this dispute, the parties filed a motion

requesting the case to be heard by the Grand Chamber of the Supreme Court. During the court hearing held on 1 December 2022, the Supreme

Court decided to refer the case for consideration to the Grand Chamber of the Supreme Court. The first hearing by the Grand Chamber of the

Supreme Court is scheduled for 15 March 2023.

Based on legal advice obtained, management remain of the view that FAG has compelling arguments to defend its position in the Grand

Chamber of the Supreme Court. However, there is a risk that the independence of the judicial system and its immunity from economic and

political influences in Ukraine is not upheld. A negative decision from the Grand Chamber of the Supreme Court of Ukraine would result in the

loss of a significant proportion of the Group’s main operating subsidiary in Ukraine and have a material adverse impact on the shareholders’

equity attributable to the shareholders of Ferrexpo plc. Due to legal uncertainties, including the percentage of FPM’s share capital at the

year-end subject to the claims, it is currently impracticable to reasonably estimate the financial impact, but it could be material. A negative

decision could also have an impact on potential future dividends from FPM to FAG and, as result, on the distributable reserves of Ferrexpo plc

(see Note 12 Earnings per share and dividends paid and proposed for further details). No non-controlling interest has been recognised as of

31 December 2022 because the transfer of shares in FPM has not legally happened and FPM remains, as a consequence, wholly owned by FAG

as at the date of the approval of these consolidated financial statements. It is management’s view that such a decision will not cast significant

doubt on the Group’s ability to continue as a going concern. However, such a decision might complicate the daily business of the Group’s major

subsidiary in Ukraine, as the intentions of the opposing parties are not clear at this point of time.

198 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 30: Commitments, contingencies and legal disputes continued

Currency control measures imposed in Ukraine

With the start of the Russian invasion into Ukraine on 24 February 2022, the Ukrainian government introduced Martial Law affecting, among

others, aspects relating to lending agreements, foreign exchange and currency controls and banking activities.

As a result of the introduced Martial Law, the National Bank of Ukraine (“NBU”) has introduced significant currency and capital control

restrictions in Ukraine. These measures are affecting the Group in terms of its cross-border payments to be made, which are restricted and may

be carried out only in exceptional cases. The maximum period for settlements of invoices under export and import contracts was decreased as

of 1 April 2022 from previously 360 days to 180 days.

These measures put additional pressure on the Group’s liquidity management as the Ukrainian subsidiaries are currently not in the position to

make cash transfers outside of Ukraine. As it is essential to the Group that sufficient liquidity is held outside of Ukraine in order to ensure that

the Group’s liabilities can be settled when falling due, intercompany receivable balances due to the Ukrainian subsidiaries have historically been

paid when falling due and after considering the local cash requirements for the operating activities and the capital expenditure programmes.

The currently lower operating activities and the reduced capital expenditure programmes due to the ongoing war has reduced the local cash

requirements and consequently increased the imbalance between payments to be made into Ukraine and local cash requirements. As a result

of the imposed currency control measures, the Group has to carefully manage the payments to be made into Ukraine, as the local subsidiaries

cannot transfer any surplus funds back to the Group entities outside of Ukraine, if required.

Failure to comply with the currency control regulations can result in financial fines. The offence against the currency control regulations would

result in fines of 0.3% per day computed on the cumulative overdue receivable balances. The Group has implemented various measures to

mitigate the impact of the currency control regulations and reduce the risk of material fines, but there exists legal uncertainty in the application

of the currency control regulations during the Martial Law in Ukraine. The currency control regulations may also be subject to change in the

future (including with retrospective effect). Therefore, there is a risk that the Group may become subject to challenges from regulatory authorities

in connection with the application of the regulations. Considering the amount of outstanding receivable balances between Group companies,

there is a risk of material fines becoming payable in the future. However, as a result of different interpretations of the currency control regulations

during the Martial Law and the measures initiated by the Group to mitigate the risk of potential fines, it is currently not possible to reliably

estimate the amount of a potential exposure.

Other ongoing legal proceedings and disputes

Royalty-related investigation and claim

On 3 February 2022, PJSC Ferrexpo Poltava Mining (“FPM”) and Ferrexpo Yeristovo Mining LLC (“FYM”) received letters from the Office of

Prosecutor General notifying them about ongoing investigation on potential underpayment of iron ore royalty payments during the years 2018 to

2021. The amount of underpayment was not specified in the letters. As part of the investigation, the Office of Prosecutor General requested

documents related to iron ore royalty payments and requested four representatives of the Group’s subsidiaries to appear as witnesses for

investigations.

On 8 February 2022, FPM received a tax audit report, which claims the underpayment of iron ore royalty payments during the period from April

2017 to June 2021 in the amount of approximately UAH1,042 million (approximately US$28,424 thousand as at 31 December 2022). The Group

provided its objections to the claims made in the tax audit report and it was expected that this case will ultimately be heard by the courts in

Ukraine. However, due to the current situation in Ukraine, it is unknown if and when the tax office will provide the final tax audit report

considering or refusing FPM’s objections as well as if and when a first hearing will take place in respect of a final claim received and how the

aforementioned investigation is going to further develop.

On 16 November 2022, the detectives from the Bureau of Economic Security of Ukraine conducted searches at FYM and FPM in connection

with the royalty-related investigation. On 3 February 2023, a notice of suspicion was delivered to a senior manager of FPM, which claimed

underpayment of royalty payments in the amount of approximately UAH2,000 million (approximately US$54,557 thousand as at 31 December

2022) and bail UAH20 million (US$546 thousand as at 31 December 2022) was approved by the court on 9 February 2023. An appeal was

subsequently filed by FPM on the amount of the bail. On 6 February 2023, the court arrested the bank accounts of FPM. Following a motion to

change the scope of the arrest filed by FPM, the court on 8 February 2023 and on 16 February 2023 added exceptions to the original court order

to arrest the bank account of FPM in order to allow FPM to make payments for salaries, local taxes, social security charges, payments for utilities

as well as payments to state and municipal companies. Other motions to change the scope of the arrest and an appeal to cancel the arrest are

expected to be considered by the courts in March 2023.

Based on legal advice obtained, it is management’s view that each of FPM and FYM have compelling arguments to defend their positions in the

court and, as a consequence, no associated liabilities have been recognised in relation to the claim in the consolidated statement of financial

position as at 31 December 2022. However, as with other ongoing legal proceedings, there is a risk that the independence of the judicial system

and its immunity from economic and political influences in Ukraine is not upheld and in that case there could be a material adverse impact on

the Group.

Contested sureties claim

On 7 December 2022, FPM received a claim in the amount of UAH4,727 million (US$128,945 thousand) in respect of contested sureties. These

contested sureties relate to Bank F&C, a Ukrainian bank owned by the Group’s controlling shareholder and which the Group previously used as

its main transactional bank in Ukraine. Bank F&C is still going through the liquidation process after having been declared insolvent by the

National Bank of Ukraine and put under temporary administration on 18 September 2015. Following the loss of funds held at Bank F&C of

approximately US$177,000 thousand, the Group, through its major subsidiaries in Ukraine, initiated various court proceedings with the aim to

maximise the Group’s recovery in the liquidation process of Bank F&C.

199Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 30: Commitments, contingencies and legal disputes continued

The counterparty in this claim alleges that it acquired rights under certain loan agreements originally concluded between the Bank F&C and

various borrowers, some of which are associated entities of the Group’s controlling shareholder, by entering into the assignment agreement with

the State Guarantee Fund on 6 November 2020. The counterparty further claims that Ferrexpo Poltava Mining (“FPM”) provided sureties to Bank

F&C to ensure the performance of obligations under these loan agreements. It is FPM’s position that no such sureties have been signed. Based

on a favourable court decision in respect of the afore-mentioned court proceedings to maximise its recovery, it is management’s view that FPM

has compelling arguments to defend its position in the court and, as a consequence, no associated liabilities have been recognised in relation to

this claim in the consolidated statement of financial position as at 31 December 2022. The date of the court hearing is currently unknown.

Ecological claims

In September 2021, the State Ecological Inspection carried out an inspection of Ferrexpo Yeristovo Mining LLC (“FYM”) and on 1 October 2021

issued an order to remove a number of alleged violations of environmental rules. On 19 October 2021, FYM received two ecological claims from

the State Ecological Inspection. One of the claims was related to an allegation of violation of rules regarding removal of soil on a particular land

plot and the State Ecological Inspection requested payment for damages of approximately UAH768 million (US$21,000 thousand as at

31 December 2022). The other claim was related to an allegation of absence of documents for disposal of waste on a particular land plot and the

State Ecological Inspection requested payment for damages in the amount of approximately UAH18 million (US$492 thousand as at

31 December 2022). Each claim states that if FYM does not voluntarily pay the damages, the State Ecological Inspection will start court

proceedings. In November 2021, FYM sent written objections to these claims to the State Ecological Inspection. The State Ecological Inspection

has neither responded to FYM’s objections nor filed the claims to the court within a reasonable period by February 2022. In February 2022, FYM

has therefore filed a lawsuit to the court to challenge the claims of the State Ecological Inspection. The Kremenchuk District Prosecutor’s Office

is conducting the investigation in connection with alleged violations of environmental rules. The hearing on 19 July 2022 ruled in favour of FYM.

On 17 January 2023, the court of appeal returned the appeal claim to the State Ecological Inspection due to procedural mistakes when filing the

claim and there have been no further legal actions since then.

Based on legal advice obtained, it is management’s view that FYM has compelling arguments to defend its position in the court and, as a

consequence, no associated liabilities have been recognised in relation to these matters in the consolidated statement of financial position as at

31 December 2022, similar to the position as at 31 December 2021.

Cancellation of licence for Galeschynske deposit

On 24 June 2021, an Order of the President of Ukraine was published on the official website of the President (the “Order”), which enacted the

Decision of the National Security and Defence Council of Ukraine on the application of personal special economic and other restrictive measures

and sanctions (the “Decision”). Ferrexpo Belanovo Mining (“FBM”) is included in the list of legal entities which are subject to sanctions pursuant

to the Decision. The Order and the Decision do not provide any legal ground for the application of sanctions. The sanction imposed on FBM is

the cancellation of the mining licence for the Galeschynske deposit, which is one of two licences held by FBM.

The Galeschynske deposit is a project in the exploration phase that is situated to the north of the Group’s active mining operations. Following the

cancellation of this license and considering the fact that the outcome of the proceedings is currently uncertain, all capitalised costs associated

with this licence totalling US$3,439 thousand were written off in the comparative year ended 31 December 2021. See Note 7 Operating

expenses for further information. The next court hearing is scheduled for 3 April 2023.

Taxation

Tax legislation

As disclosed in Note 11 Taxation, the Group is involved in ongoing tax audits in respect of its cross-border transactions and an unfavourable

outcome would have an adverse impact on the Group’s cash flow generation, profitability and liquidity. These tax audits are currently on hold

due to the ongoing war in Ukraine and it is unknown when these will resume again. See Note 11 Taxation and also the update on the Group’s

Principal Risks on pages 60 and 61 in terms of the Ukraine country risk .

Note 31: Share capital and reserves

Accounting policy

Ordinary Shares

Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary Shares and share options are recognised

as a deduction from equity, net of any tax effects.

Employee benefit trust reserve

Ferrexpo plc shares held by the Group are recognised at cost and classified in reserves. Consideration received for the sale of such shares is

also recognised in equity, with any difference between the proceeds from the sale and the original cost to be recorded in reserves. No gain or

loss is recognised in the consolidated income statement on the purchase, issue or cancellation of equity shares.

Treasury shares

Own equity instruments, which are reacquired (treasury shares), are recognised at cost and deducted from equity and represent a reduction in

distributable reserves. No gain or loss is recognised in the consolidated income statement on the purchase, sale, issue or cancellation of the

Group’s own equity instruments. Any difference between the carrying amount and the consideration is recognised in reserves.

Translation reserve

The translation reserve represents exchange differences arising on the translation of non-US dollar functional currency operations, mainly those

in Ukrainian hryvnia, within the Group into US dollars.

200 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 31: Share capital and reserves continued

Share capital

Share capital represents the nominal value on issue of the Company’s equity share capital, comprising £0.10 Ordinary Shares. The fully paid

share capital of Ferrexpo plc at 31 December 2022 was 613,967,956 Ordinary Shares (2021: 613,967,956) at a par value of £0.10 paid for in cash,

resulting in share capital of US$121,628 thousand (2021: US$121,628 thousand) per the statement of financial position.

As at 31 December 2022, other reserves attributable to equity shareholders of Ferrexpo plc comprised:

US$000

Uniting of interest

reserve

Treasury share

reserve

Employee benefit

trust reserve

Translation

reserve

Total other

reserves

At 1 January 2021 31,780 (7 7, 26 0) (2,535) (2,017,881) (2,065,896)

Foreign currency translation differences – – – 82,222 82,222

Tax ef fect – – – (3,313) (3,313)

Total other comprehensive loss for the year – – – 78,909 78,909

Share-based payments – – 856 – 856

At 31 December 2021 31,780 (7 7, 260) (1,679) (1,938,972) (1,9 86,131)

Foreign currency translation differences – – – (664,286) (664,286)

Tax ef fect – – – 13,036 13,036

Total other comprehensive income for the year – – – (651,250) (651,250)

Share-based payments – – 490 – 490

At 31 December 2022 31,780 (77, 26 0) (1,189) (2,590,222) 2,636,891

Uniting of interest reserve

The uniting of interest reserve represents the difference between the initial investment by Ferrexpo AG in FPM to gain control of the subsidiary in

2005 and the net assets acquired, which under the pooling of interests method of accounting are consolidated at their historic cost, less

non-controlling interests.

Treasury share reserve

In September 2008, Ferrexpo plc completed a buy-back of 25,343,814 shares for a total cost of US$77,260 thousand. These shares are currently

held as treasury shares by the Group. The Companies Act 2006 forbids the exercise of any rights (including voting rights) and the payment of

dividends in respect of treasury shares.

Employee benefit trust reserve

This reserve represents the treasury shares held by Ferrexpo AG setting up an employee benefit trust reserve. The reserve is used to satisfy

future grants for senior management incentive schemes. Information on the Group’s share-based payments is provided in Note 28 Share-based

payments. As at 31 December 2022, the employee benefit trust reserve includes 577,370 shares (2021: 924,899 shares).

Note 32: Consolidated subsidiaries

Translation reserve

During the financial year 2022, the Ukrainian hryvnia depreciated from 27.278 as at the beginning of the year to 36.569 as at 31 December 2022

and the exchange differences arising on translation of the Group’s foreign operations are initially recognised in the consolidated statement of

comprehensive income. See also page 200.

Accounting policy

Entities are included in the consolidated financial statements from the date of obtaining control and the inclusion in the consolidated financial

statements is consequently ceased when the control over an entity is lost. Control is obtained when the Group is exposed, or has the rights, to

variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee that gives the

current ability to direct the relevant activities. Control can be obtained through voting rights, but also through agreements, statutes, contracts,

trust deeds or other schemes.

Non-controlling interests in the net assets of consolidated subsidiaries are shown separately in the Group’s consolidated statement of financial

position and consolidated statement of changes in equity. The share of the profit attributable to non-controlling interests is shown in the

consolidated income statement and the consolidated statement of comprehensive income. The carrying amount of the non-controlling interests

is adjusted for any change in ownership interest to reflect the relative controlling and non-controlling interests in the subsidiary. Any difference

between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in the equity attributable

to equity shareholders of Ferrexpo plc.

The Group comprises Ferrexpo plc and its consolidated subsidiaries. The Group’s interests in the entities are held indirectly by the Company,

with the exception of Ferrexpo AG, which is directly held. All of the Group’s major subsidiaries are wholly owned. The interests that non-

controlling interests have in the Group’s operations are not material and no significant judgements and assumptions were required to determine

that the Group has control over these entities. The Group’s consolidated subsidiaries are listed on page 211.

The Group does not have any other interests of 20% or more in undertakings that are not disclosed on page 211, except for the investment in the

associate mentioned in Note 33 Investments in associates.

201Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 33: Investments in associates

Accounting policy

The Group’s investments in associates are accounted for using the equity method of accounting. An associate is an entity in which the Group

has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus any post-acquisition

changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the

investment and is not amortised nor individually tested for impairment. After application of the equity method, the Group determines whether

it is necessary to recognise any additional impairment loss with respect to the Group’s investment in the associate.

The share of profit from an associate is shown on the face of the consolidated income statement. This is the profit attributable to the Group and

is therefore the profit after tax and non-controlling interests in the subsidiaries of the associate. The reporting dates of the associates and the

Group are identical and the associates’ accounting policies are generally in conformity with those applied by the Group.

The Group holds an interest of 49.9% (2020: 49.9%) in TIS Ruda LLC, operating a port on the Black Sea, which the Group uses as part of its

distribution channel.

US$000

Year ended

31.12.22

Year ended

31.12. 21

Opening balance 7,03 4 5,873

Share of profit

557 4,468

Dividends declared (881) (3,536)

Translation adjustments (1,543) 229

Closing balance 5,167 7,0 3 4

For the year ended 31 December 2022 the summarised financial information for the associate was as follows:

Revenue Net profit

US$000

Year ended

31.12.22

Year ended

31.12. 21

Year ended

31.12.22

Year ended

31.12. 21

TIS Ruda LLC

4,077 21,619 1,116 8,947

1. Based on preliminary and unaudited financial information.

Since February 2022, the operations at the port of Pivdennyi have been suspended due to the war in Ukraine, which has an adverse impact on

the business and financial position of TIS Ruda LLC.

The figures in the table above represent 100% of the associate’s revenue and net profit and not the Group’s share based on its ownership. As at

31 December 2022, the associate’s total assets were US$15,237 thousand (2021: US$20,106 thousand) and the total liabilities were US$4,883

thousand (2021: US$6,009 thousand) based on preliminary and unaudited statutory accounts. Any deviations from the Group’s associate’s

equity based on the audited financial statements is adjusted subsequent to the year end once the audited financial statements are available.

Note 34: Related party disclosures

During the years presented, the Group entered into arm’s length transactions with entities under the common control of Kostyantin Zhevago,

a controlling shareholder of Ferrexpo plc, with associated companies and with other related parties. Management considers that the Group has

appropriate procedures in place to identify, control, properly disclose and obtain independent confirmation, when relevant, for transactions with

the related parties.

Entities under common control are those under the control of Kostyantin Zhevago. Associated companies refer to TIS Ruda LLC, in which the

Group holds an interest of 49.9% (2021: 49.9%). This is the only associated company of the Group. Information on the Directors’ fee payments

made to the Non-executive Directors and Executive Directors is provided in the Remuneration Report on pages 122 and 123.

Related party transactions entered into by the Group during the years presented are summarised in the following tables:

202 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 34: Related party disclosures continued

Revenue, expenses, finance income and expense

Year ended 31.12.22 Year ended 31.12.21

US$000

Entities

under

common

control

Associated

companies

Other

parties

Entities

under

common

control

Associated

companies

Other

parties

Other sales

560 – 2 657 – 9

Total related party transactions within revenue 560 – 2 657 – 9

Materials and services

6,784 – – 8,334 – –

Spare parts and consumables

7,056 – – 6,350 – –

Other expenses

1,948 – – 2,172 – –

Total related party transactions within cost of sales 15,788 – – 16,856 – –

Selling and distribution expenses

6,542 3,819 – 4,876 18,139 –

General and administration expenses

398 – 567 371 – 524

Other operating expenses

2,019 – – 1,391 – –

Finance expense 8 – – 20 – –

Total related party transactions within expenses 24,755 3,819 567 23,514 18,139 524

Other income – – – 2 – –

Total related party transactions 25,315 3,819 569 24,173 18,139 533

A description of the most material transactions, which are in aggregate over US$200 thousand in the current or comparative year, is given below.

Entities under common control

The Group entered into various related party transactions with entities under common control. All transactions were carried out on an arm’s length basis in the normal course of business.

a Sales of scrap metal to OJSC Uzhgorodsky Turbogas totalling US$361 thousand (2021: US$437 thousand); and

a Sales of electricity to Kislorod PPC for US$194 thousand (2021: US$209 thousand).

b Purchases of oxygen, scrap metal and services from Kislorod PCC for US$1,437 thousand (2021: US$1,533 thousand);

b Purchases of cast iron balls from OJSC Uzhgorodsky Turbogas for US$4,258 thousand (2021: US$5,700 thousand); and

b Purchase of maintenance and construction services from FZ Solutions LLC (formerly OJSC Berdychiv Machine-Building Plant Progress) for US$997 thousand (2021: US$1,024).

c Purchases of spare parts from OJSC AvtoKraz Holding in the amount of US$1,799 thousand (2021: US$1,983 thousand);

c Purchases of spare parts from CJSC Kyiv Shipbuilding and Ship Repair Plant (“KSRSSZ”) in the amount of US$902 thousand (2021: US$837 thousand);

c Purchases of spare parts from OJSC Uzhgorodsky Turbogas in the amount of US$1,460 thousand (2021: US$1,032 thousand);

c Purchases of spare parts from FZ Solutions LLC (formerly OJSC Berdychiv Machine-Building Plant Progress) of US$1,125 thousand (2021: US$719 thousand);

c Purchases of spare parts from Kislorod PCC in the amount of US$410 thousand (2021: nil); and

c Purchases of spare parts from Valsa GTV of US$1,231 thousand (2021: US$1,735 thousand).

d Insurance premiums of US$1,948 thousand (2021: US$2,172 thousand) paid to ASK Omega for insurance cover in respect of mining equipment and machinery.

e Purchases of advertisement, marketing and general public relations services from FC Vorskla of US$6,541 thousand (2021: US$4,875 thousand). See page 197 in respect of a loan

relationship between FC Vorskla and another related party.

g Insurance premiums of US$1,085 thousand (2021: US$1,341 thousand) paid to ASK Omega for workmen’s insurance and other insurances;

g Purchase of marketing services from TV & Radio Company of US$212 thousand (2021: US$243 thousand); and

g Purchase of food under the Ferrexpo Humanitarian Fund from JSC Kremenchukmyaso of US$798 thousand (2021: nil). See page 44 for further information on the Ferrexpo Humanitarian

Fund.

Associated companies

The Group entered into related party transactions with its associated company, TIS Ruda LLC, which were carried out on an arm’s length basis in the normal course of business for the

members of the Group (see Note 33 Investments in associates).

e Purchases of logistics services in the amount of US$3,819 thousand (2021: US$18,139 thousand) relating to port operations, including port charges, handling costs, agent commissions

and storage costs. The scope of the services procured from TIS Ruda is heavily affected by the ongoing war in Ukraine as the Group’s seaborne sales through the port of Pivdennyi have

been suspended as a result of the closure of the port.

Other related parties

The Group entered into various transactions with related parties other than those under the control of a controlling shareholder of Ferrexpo plc. All transactions were carried out on an arm’s

length basis in the normal course of business.

f Legal and administrative services in the amount of US$387 thousand (2021: US$506 thousand) provided by Kuoni Attorneys at Law Ltd., which is controlled by a member of the Board of

Directors of one of the subsidiaries of the Group. The Directors’ fees paid totalled US$100 thousand for the financial year 2022 (2021: US$100 thousand).

203Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 34: Related party disclosures continued

Purchases of property, plant and equipment

The table below details the transactions of a capital nature, which were undertaken between Group companies and entities under common

control, associated companies and other related parties during the years presented.

Year ended 31.12.22 Year ended 31.12.21

US$000

Entities

under

common

control

Associated

companies

Other

parties

Entities

under

common

control

Associated

companies

Other

parties

Purchases in the ordinary course of business 11,634 – – 552 – –

Total purchases of property, plant and equipment 11,634 – – 552 – –

During the year ended 31 December 2022, the Group purchased major spare parts and equipment from FZ Solutions LLC (formerly OJSC

Berdychiv Machine-Building Plant Progress) totalling US$ 11,598 thousand (2021: US$283 thousand) in respect of the Wave 1 expansion project

of its processing plant. During the comparative year ended 31 December 2021, the Group procured equipment and materials from CJSC Kyiv

Shipbuilding and Ship Repair Plant (“KSRSSZ”) totalling US$235 thousand for maintenance and repairs of its processing plant.

The FPM Charity Fund owns 75% of the Sport & Recreation Centre (“SRC”) in Horishni Plavni and made contributions totalling US$154 thousand

during the year ended 31 December 2022 (2021: US$120 thousand) for the construction and maintenance of the building, including costs related

to electricity, gas and water consumption. The remaining stake of 25% is owned by JSC F&C Realty, which is under the control of Kostyantin

Zhevago.

Balances with related parties

The outstanding balances, as a result of transactions with related parties, for the years presented are shown in the table below:

As at 31.12.22 As at 31.12.21

US$000

Entities

under

common

control

Associated

companies

Other

parties

Entities

under

common

control

Associated

companies

Other

parties

Prepayments for property, plant and equipment

3,847 – – 8,463 – –

Total non-current assets 3,847 – – 8,463 – –

Trade and other receivables

38 3,245 1 101 4,181 1

Prepayments and other current assets

745 120 – 2,076 – –

Total current assets 783 3,365 1 2,177 4,181 1

Trade and other payables

2,057 244 – 732 489 –

Accrued and contract liabilities – – – – – –

Total current liabilities 2,057 244 – 732 489 –

A description of the balances over US$200 thousand in the current or comparative year is given below.

Entities under common control

g Prepayments for property, plant and equipment totalling US$3,787 thousand (31 December 2021: US$8,422 thousand) were made to FZ Solutions LLC (formerly OJSC Berdychiv

Machine-Building Plant Progress) mainly in relation to the Wave 1 expansion project of the processing plant.

i Prepayments and other current assets totalling US$233 thousand to ASK Omega for insurance premiums (31 December 2021: US$1,123 thousand),

j Trade and other payables of US$107 thousand (31 December 2021: US$221 thousand) related to the purchase of oxygen, metal scrap and services from Kislorod PCC, and

j Trade and other payables of US$1,603 thousand (31 December 2021: US$295 thousand) related to the purchase of spare parts and services from FZ Solutions LLC (formerly OJSC

Berdichev Machine-Building Plant Progress), and

Associated companies

h Trade and other receivables included US$3,245 thousand (2021: US$4,181 thousand) related to dividends declared by TIS Ruda LLC.

i Prepayments and other current assets included US$120 thousand (2021: nil) related to cargo storage services from TIS Ruda LLC.

j Trade and other payables included US$244 thousand (2021: US$489 thousand) related to purchases of logistics services from TIS Ruda LLC.

The Ferrexpo Humanitarian Fund

Following the Russian invasion into Ukraine in February 2022, the Group has established the Ferrexpo Humanitarian Fund with total approved

funding of US$15,000 thousand in order to support local communities in Ukraine. As at 31 December 2022, the Group procured medicine

totalling US$404 thousand from Arterium LLC and food totalling US$798 thousand from JSC Kremenchukmyaso, both under common control of

Kostyantin Zhevago, a controlling shareholder of Ferrexpo plc. Whilst the procurements from Arterium LLC have been made directly by the fund,

the procurements from JSC Kremenchukmyaso have been made through one of the Group’s subsidiaries in Ukraine. See page 44 for further

information on the Ferrexpo Humanitarian Fund.

204 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements continued

Note 35: Events after the reporting period

As announced on 7 March 2023 on the Regulatory News Service of the London Stock Exchange, the Group became aware of a press release by

the Ukrainian Deposit Guarantee Fund suggesting that a restriction has been placed on shares held by Ferrexpo AG (“FAG”), the Group’s Swiss

subsidiary, in three main operating subsidiaries of the Group in Ukraine, covering 50.3% of the shares held in each subsidiary. Based on the

subsequently published court order in the Ukrainian official register of court decisions, the Kyiv Commercial Court ordered the arrest (freeze) of

50.3% of FAG’s shareholding in each of Ferrexpo Poltava Mining (“FPM”), Ferrexpo Yeristovo Mining (“FYM”) and Ferrexpo Belanovo Mining

(“FBM”). The court order also prohibits each of FPM, FYM and FBM from making changes to the amount of its authorised capital. The court

order does not affect ownership of the shares in these three subsidiaries of the Group in Ukraine, but prohibits the disposal by FAG of 50.3% of

its shareholding in each named subsidiary.

This court order was issued by the Kyiv Commercial Court during a hearing in the commercial litigation between the Deposit Guarantee Fund

and Mr. Zhevago, the Group’s controlling shareholder, in relation to the liquidation of Bank F&C in 2015.

As disclosed in detail in Note 30 Commitments, contingencies and legal disputes in the Group’s 2020 Annual Report and Accounts, similar

orders to freeze 50.3% of FAG’s shareholding in FPM were received by the Group in November 2019 and in June 2020, which were subsequently

successfully appealed and cancelled by FAG in the Ukrainian courts.

In addition to the restriction covering 50.3% of FAG’s shareholding in each of FPM, FYM and FBM, the court order also contains a prohibition on

Ferrexpo plc disposing of any of its shares in FAG. Based on legal advice received by the Group, such prohibition on Ferrexpo plc disposing of

its shares in FAG is not enforceable in the UK and in Switzerland within a short period of time.

The court order also prohibits the disposal by Fevamotinico S.a.r.l. of its shares in Ferrexpo plc.

The Group has no intention, and never has had any intention, of transferring the shares in FPM, FYM, FBM or FAG. In addition, no impact on the

operations of the Group is expected as a result of this court order.

The Group intends to take actions in Ukraine to appeal the court order.

Taking into account that the Group has previously successfully appealed similar court orders, it is management’s view that the Group will be

again successful cancelling such restrictions. However, as with other ongoing legal proceedings in Ukraine, there is a risk that the independence

of the judicial system and its immunity from economic and political influences in Ukraine is not upheld and in that case there could be a material

adverse impact on the Group and its shareholders. The next court hearing is scheduled for 20 March 2023.

As announced on 10 March 2023 on the Regulatory News Service of the London Stock Exchange, the Group transferred 9,513,000 shares from

the treasury share reserves (see Note 31 Share capital and reserves for further information) to the Group’s employee benefit trust reserve. The

shares were transferred on 9 March 2023, at a price of 140.3 pence per share, being the closing share price of the Company’s ordinary shares

on the London Stock Exchange on 8 March 2023. Please see the announcement for further information.

Following the transfer of the shares, the issued share capital of Ferrexpo plc consists of 613,967,956 ordinary shares of 10 pence each, of which

15,830,814 ordinary shares are held in treasury. As a result of this transfer, the interest of the Group’s largest shareholder, Fevamotinico S.a.r.l

(see Note 1 Corporate information for further information), in the voting rights of Ferrexpo plc is now 49.5%.

Other than the events disclosed above, there are no material adjusting or non-adjusting events that have occurred subsequent to the year end.

205Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Parent Company Statement of Financial Position

Ferrexpo plc (the “Company”) is required to present its separate Parent Company statement of nancial position and certain notes to the

statement of nancial position on a standalone basis as at 31 December 2022 and 2021, which have been prepared in accordance with Financial

Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). Information on the principal accounting policies is outlined in Note3

Signicant accounting policies.

Ferrexpo plc is exempt from presenting a standalone Parent Company prot and loss account and statement of comprehensive income in

accordance with Section 408 of the UK Companies Act 2006.

US$000

Notes

As at

31.12.22

As at

31.12. 21

Fixed assets

Investment in subsidiary undertakings

4 147,496 147,4 9 6

Total xed assets 147,496 147,49 6

Current assets

Debtors: amounts falling due within one year

5 131,264 176,391

Debtors: amounts falling due after more than one year

5 148,437 156,971

Cash at bank and in hand 12 199

Total current assets 279,713 333,561

Creditors: amounts falling due within one year 3,034 3,503

Net current assets 276,679 330,058

Total assets less current liabilities 424,175 477,55 4

Net assets 424,175 477,5 5 4

Capital and reserves

Called up share capital

6 121,628 121,628

Share premium account 185,112 185,112

Treasury share reserve

6 (77,260) (77, 2 6 0)

Employee benet trust reserve

6 (1,189) (1,679)

Retained earnings

6 195,884 249,753

Total capital and reserves 424,175 47 7,554

The prot after taxation for the Company, registration number 05432915, was US$101,926 thousand for the nancial year ended 31 December 2022

(2021: US$293,484 thousand).

The nancial statements were approved by the Board of Directors and authorised for issue on 14 March 2023 and signed on behalf of the Board.

Lucio Genovese Jim North

Non-executive Chair Chief Executive Ofcer & Executive Director

206 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Parent Company Statement of Changes in Equity

US$000

Issued

capital

premium

Treasury

share reserve

Employee benet

trust reserve

Retained

earnings

Total capital

and reserves

At 1 January 2021 121,628 18 5,112 ( 77, 26 0 ) (2,535) 576,879 803,824

Prot for the year − − − − 293,484 293,484

Total comprehensive income for the year − − − − 293,484 293,484

Equity dividends paid to shareholders − − − − (620,610) (620,610)

Share-based payments − − − 856 − 856

At 31 December 2021 121,628 185,112 (77, 2 6 0) (1,679) 249,753 477, 554

Prot for the year – – – – 101,926 101,926

Total comprehensive income for the year – – – – 101,926 101,926

Equity dividends paid to shareholders – – – – (155,795) (155,795)

Share-based payments – – – 490 – 490

At 31 December 2022 121,628 185,112 (77,260) (1,189) 195,884 424,175

207Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Notes to the Parent Company Financial Statements

Note 1: Corporate information

The Company is incorporated and registered in England, which is considered to be the country of domicile, with its registered ofce at

55StJames’s Street, London SW1A 1LA, UK. The Company’s Ordinary Shares are traded on the London Stock Exchange.

The majority shareholder of the Company is Fevamotinico S.a.r.l. (“Fevamotinico”), a company incorporated in Luxembourg and ultimately owned

byTheMinco Trust, of which Kostyantin Zhevago and two other members of his family are the beneciaries. At the time this report was

published, Fevamotinico held 49.5% (2020: 50.3%) of the Company’s issued voting share capital (excluding treasury shares).

Note 2: Basis of preparation

The nancial statements are prepared under the historical cost convention and in accordance with Financial Reporting Standard 101 Reduced

Disclosure Framework (“FRS 101”).

The nancial statements are presented in US dollars (US$), the Company’s functional currency, and all values are rounded to the nearest

thousand, except where otherwise indicated. The functional currency is determined as the currency of the primary economic environment in

which the Company operates. The majority of the Company’s operating activities are conducted in US dollars.

The Company has taken advantage of the following disclosure exemptions under FRS 101 as the Company is included in publicly available

consolidated nancial statements, which include disclosures that comply with the standards listed below:

– the requirements of paragraphs 45(b) and 46–52 of IFRS 2 Share-based payments;

– the requirements of IFRS 7 Financial instruments: Disclosures;

– the requirements of paragraphs 91–99 of IFRS 13 Fair value measurements;

– the following paragraphs of IAS 1 Presentation of nancial statements:

– 10 (d) (statement of cash ows);

– 16 (statement of compliance with all IFRSs);

– 38A (requirement for minimum of two primary statements, including cash ow statements);

– 38B-D (additional comparative information);

– 111 (cash ow statement information); and

– 134–136 (capital management disclosures).

– the requirements of IAS 7 Statement of cash ows;

– the requirements of paragraphs 30 and 31 of IAS 8 Accounting policies, changes in accounting estimates and errors; and

– the requirements of paragraph 17 of IAS 24 Related party disclosures and the requirements to disclose related party transactions entered into

between two or more members of a group, provided that any subsidiary, which is a party to the transaction, is wholly owned by such

amember of the same standard.

The Company does not have any employees other than the Directors. The requirement to give employee numbers and costs information under

Section 411 of the Companies Act 2006 is addressed in the Directors’ Remuneration Report of the Group on pages 122 and 123.

Going concern

As at the date of the approval of these nancial statements, the war in Ukraine that commenced with the Russian invasion into Ukraine on

24 February 2022 is still ongoing. Even though the Group managed to operate throughout the nancial year 2022, albeit at a much lower

capacity, the situation in the country continues to pose a threat to the Group’s mining, processing and logistics operations and represents

amaterial uncertainty in terms of the Group’s ability to continue as a going concern. Considering the current situation of the war in Ukraine,

allidentied available mitigating actions addressing the uncertainties caused by the war and the results of the management’s going concern

assessment, the Company continues to prepare its nancial statements on a going concern basis. However, many of the identied uncertainties

are outside of the Group management’s control and are of unpredictable duration and severity, which may cast signicant doubt upon the

Company’s ability to continue as a going concern. If the Company is unable to continue to realise assets and discharge liabilities in the normal

course of business, it would be necessary to adjust the amounts in the statement of nancial position in the future to reect these circumstances,

which may materially change the measurement and classication of certain gures contained in these nancial statements. For further details see

Note 2 Basis of preparation of the Group’s consolidated nancial statements.

208 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Parent Company Financial Statements continued

Note 3: Signicant accounting policies

Foreign currencies

The accounting policy is consistent with the Group’s policy set out in Note 2 Basis of preparation to the Group’s consolidated nancial

statements.

Investments in subsidiary undertakings

Equity investments in subsidiaries are carried at cost less any provision for impairments. Investments are reviewed for impairment at each

reporting date. If indication exists that investments may be impaired, the investments’ recoverable amounts are estimated. If the carrying amount

of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount, which is

the higher of its fair value less costs of disposal and its value-in-use. Impairment losses are recognised in the income statement.

Amounts owed by subsidiary undertakings

Amounts owed by subsidiary undertaking are interest-bearing loans provided to entities of the Group. These loans are recognised at cost,

beingthe fair value of the consideration transferred. After initial recognition, interest-bearing loans are subsequently measured at amortised

costusing the effective interest method. In addition to the individual assessment at each reporting date whether a nancial asset or group of

nancial assets is impaired, the Company also assesses the expected credit losses on nancial assets carried at amortised cost. The loss

allowance is measured at an amount equal to the lifetime expected credit losses. On consideration of the fact that the Group has a fully

integrated organisational structure with no history of default of its subsidiaries, the calculation of the allowance for amounts owed by subsidiary

undertakings is based on the default risk and recovery ratings of the Group adjusted for current observable circumstances and forecast

information. This assessment is performed individually for all nancial assets that are individually signicant and collectively for those that are

notindividually signicant and have similar credit risk characteristics. The carrying amount of the nancial assets is reduced by an allowance

account with the change of the allowance being recognised as a component of the prot after taxation. Individual balances are written off when

management deems that there is no possibility of recovery.

Financial guarantees

Financial guarantee liabilities issued by the Company, including guarantees issued in favour of subsidiary undertakings, are those contracts that

require a payment to be made to reimburse the holder for a loss, which is incurred because the specied debtor fails to make a payment when

due in accordance with the terms of a debt instrument.

Financial guarantees provided are initially recognised at fair value and subsequently measured at the higher of the loss allowances determined

under IFRS 9 Financial instruments and the amount initially recognised less, when appropriate, cumulative fees recognised as revenue under

IFRS 15 Contracts with customers.

Treasury share reserve

Own equity instruments, which are reacquired (treasury shares), are recognised at cost and deducted from equity shown in the treasury share

reserve. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group’s own equity

instruments. Any difference between the carrying amount and the consideration is recognised in reserves.

Share-based payments

The accounting policy is consistent with the Group’s policy set out in Note 28 Share-based payments to the Group’s consolidated nancial

statements.

Employee benet trust reserve

Ferrexpo plc shares held by the Company are classied in capital and reserves as employee benet trust reserves and recognised at cost.

Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the

original cost taken to revenue reserves. No gain or loss is recognised on the purchase, sale issue or cancellation of equity shares.

Dividend income

Dividend income is recognised to the extent that the Company has the right to receive payment, typically upon declaration by the subsidiary.

Taxation

The accounting policy is consistent with the Group’s policy set out in Note 11 Taxation to the Group’s consolidated nancial statements.

Changes in accounting policies

The accounting policies adopted and applied in the preparation of the nancial statements are consistent with those of the previous year, except

for the adoption of new and amended IFRSs and IFRIC interpretations effective as of 1 January 2022. The new and amended IFRSs and IFRIC

interpretations adopted are consistent with the Group’s new accounting policies set out in Note 3 New accounting policies to the Group’s

consolidated nancial statements and have not had a signicant impact on these nancial statements.

Use of critical estimates and judgements

Critical judgements made by management in preparing the separate Parent Company nancial statements predominantly relate to the basis of

preparation of these nancial statements in respect of the going concern assumption (see previous page).

The Company has not identied any area involving the use of critical estimates.

209Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Note 4: Investment in subsidiary undertakings

Investment in subsidiary undertakings at 31 December 2022 relates to the Company’s investment in Ferrexpo AG, which is domiciled in

Switzerland and wholly owned by the Company. The subsidiary’s registered ofce is at Bahnhofstrasse 13, 6340 Baar, Switzerland.

US$000

At 31.12.22 At 31.12.21

Investment in subsidiary undertakings 147,496 147,49 6

Total investment in subsidiary undertakings 147,496 147,49 6

See Note 32 Consolidated subsidiaries to the Group’s consolidated nancial statements for further information on subsidiaries indirectly held by theCompany.

Note 5: Debtors

Debtors as at 31 December 2022 related to the following:

US$000

At 31.12.22 At 31.12.21

Amounts falling due within one year

Amounts owed by subsidiary undertakings 127,037 175,034

Prepaid expenses 600 600

Income tax receivable 139 613

Accrued interest owed by subsidiary undertakings 3,488 144

Total amounts falling due within one year 131,264 176,391

Amounts falling due after more than one year

Amounts owed by subsidiary undertakings 148,437 15 5,119

Deferred tax assets – 1,852

Total amounts falling due after more than one year 148,437 156,971

Total debtors 279,701 333,362

Amounts owed by subsidiary undertakings falling due after more than one year are loans contractually payable on demand but having assessed the

expected repayment prole, this balance is presented as falling due after more than one year. Furthermore, taking into account the expected repayment

prole, receivables owed by subsidiary undertakings relating to nancial guarantee fees in the amount of US$21,928 thousand are presented as falling

due after more than one year as at 31 December 2022 (2021: US$21,928 thousand).

The table above includes the impact from the application of the expected credit loss impairment model under IFRS 9 Financial instruments.

Thebalance of impairment losses on debtors included in the prot after taxation is US$1,027 thousand as of 31 December 2022 (2021: gains

ofUS$2,788 thousand).

Note 6: Share capital and reserves

Share capital

Share capital represents the nominal value on issue of the Company’s equity share capital, comprising £0.10 Ordinary Shares. The fully paid

share capital of the Company at 31 December 2022 was 613,967,956 Ordinary Shares (2021: 613,967,956 Ordinary Shares) at a par value of

£0.10 paid for in cash, resulting in share capital of US$121,628 thousand (2021: US$121,628 thousand) per the statement of nancial position.

Treasury share reserve

In September 2008, the Company completed a buy-back of 25,343,814 shares for a total cost of US$77,260 thousand. These shares are

currently held as treasury shares by the Group. The Companies Act 2006 forbids the exercise of any rights (including voting rights) and the

payment of dividends in respect of treasury shares.

Employee benet trust reserve

This reserve represents the treasury shares used to satisfy future grants for senior management incentive schemes. As at 31 December 2022,

the employee benet trust reserve included 577,370 shares (2021: 924,899 shares).

Distributable reserves

The Company is the Group’s holding company, with no direct operating business, so its ability to make distributions to its shareholders is

dependent on its ability to access prots held in the subsidiaries. The Company’s retained earnings shown in the statement of changes in equity

as of 31 December 2022 do not reect the prots that are available for distribution by the Company as of this date. Taking into account relevant

thin capitalisation rules and provisions of the Companies Act 2006, the total available distributable reserves of Ferrexpo plc was US$118,624

thousand as of 31 December 2022 (2021: US$170,800 thousand). Details on dividends are disclosed in Note 12 Earnings per share and

dividends paid and proposed of the Group’s consolidated nancial statements.

Companies Act requirements in respect of dividend payments

During the nancial year 2021, the Directors became aware of a technical issue in respect of the interim dividend declared on 4 August 2021

and, following investigations of the issue, of technical issues in respect of dividend payments made by the Company in 2010 and 2011. The

technical issues were ratied by a shareholders’ resolution passed at the general meeting of the shareholders of Ferrexpo plc on 15 June 2022.

Further details are included in the Directors’ Report in the 2021 Annual Report and Accounts on page 128.

210 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Notes to the Parent Company Financial Statements continued

Note 7: Events after the reporting period

On 9 March 2023, the Group received conrmation that the Kyiv Commercial Court had ordered the arrest (freeze) of 50.3% of Ferrexpo AG’s

(“FAG”) shareholding in each of Ferrexpo Poltava Mining (“FPM”), Ferrexpo Yeristovo Mining (“FYM”) and Ferrexpo Belanovo Mining (“FBM”). The

court order also prohibits each of FPM, FYM and FBM making changes to the amount of its authorised capital and does not affect ownership of

the shares in these three subsidiaries of the Group in Ukraine, but prohibits the disposal by FAG of 50.3% of its shareholding in each named

subsidiary.

This court order was issued by the Kyiv Commercial Court during a hearing in the commercial litigation between the Deposit Guarantee Fund

and Mr. Zhevago, the Group’s controlling shareholder, in relation to the liquidation of Bank F&C in 2015.

The Group has no intention, and never has had any intention, of transferring the shares in FPM, FYM, FBM or FAG. In addition, no impact on

theoperations of the Group is expected as a result of this court order. The next court hearing is scheduled for 20 March 2023.

As announced on 10 March 2023 on the Regulatory News Service of the London Stock Exchange, the Group transferred 9,513,000 shares

fromthe treasury share reserves to the Group’s employee benet trust reserve. Following the transfer of the shares, the issued share capital

ofFerrexpo plc consists of 613,967,956 ordinary shares of 10 pence each, of which 15,830,814 ordinary shares are held in treasury. As a

resultof this transfer, the interest of the Group’s largest shareholder, Fevamotinico S.a.r.l, in the voting rights of Ferrexpo plc is now 49.5%.

For further details on these two events, see Note 35 Events after the reporting period to the Group’s consolidated nancial statements.

Other than the events disclosed above, there are no material adjusting or non-adjusting events have occurred subsequent to the year end.

211Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Additional Disclosures

See Note 32 Consolidated subsidiaries for further information on the Group.

Unless otherwise stated, the equity interest disclosed includes ordinary or common shares, which are owned by subsidiaries of the Group.

Equity interest owned

Name Address of consolidated subsidiary’s registered ofce

Principal activity

31.12.22

31.12. 21

Consolidated subsidiaries

Ferrexpo AG Bahnhofstrasse 13, 6340 Baar, Switzerland Holding company and

sale of iron ore pellets and

concentrate

100.0 100.0

PJSC Ferrexpo Poltava Mining

Budivelnykiv Street 16, 39802 Horishni Plavni, Poltava Region, Ukraine Iron ore mining and

processing

100.0 100.0

LLC Ferrexpo Yeristovo Mining Budivelnykiv Street 15, 39802 Horishni Plavni, Poltava Region, Ukraine Iron ore mining 100.0 100.0

LLC Ferrexpo Belanovo Mining Budivelnykiv Street 16, 39802 Horishni Plavni, Poltava Region, Ukraine Iron ore mining 100.0 100.0

Ferrexpo Middle East FZE Office A2207, Jafza One, Jebel Ali Free Zone, Dubai, U.A.E., P.O. Box 18341 Sale of iron ore pellets

and concentrate

100.0 100.0

Ferrexpo Finance plc 55 St James’s Street, London SW1A 1LA, United Kingdom Finance 100.0 100.0

Ferrexpo Services Limited Patris Lumumba Street 4/6, 01042 Kyiv, Ukraine Management services

and procurement

100.0 100.0

Universal Services Group Ltd. Naberezna Street 2, 39800 Horishni Plavni, Poltava Region, Ukraine Asset holding company 100.0 100.0

DP Ferrotrans Portova Street 65, 39802 Horishni Plavni, Poltava Region, Ukraine Trade, transportation

services

100.0 100.0

LLC FerroLocoTrans Portova Street 65, 39802 Horishni Plavni, Poltava Region, Ukraine Trade, transportation

services

100.0 100.0

United Energy Company LLC Budivelnykiv Street 16, 39802 Horishni Plavni, Poltava Region, Ukraine Holding company 100.0 100.0

Nova Logistics Limited Budivelnykiv Street 16, 39802 Horishni Plavni, Poltava Region, Ukraine Service company 51.0 51.0

Ferrexpo Singapore PTE Ltd. 1 Fullerton Road, One Fullerton #02-01, Singapore 049213, Singapore Marketing services 100.0 100.0

Ferrexpo Shipping International Ltd. Ajeltake Road, MH-96960 Ajeltake Island – Majuro, Marshall Islands Holding company 100.0 100.0

Iron Destiny Ltd. Ajeltake Road, MH-96960 Ajeltake Island – Majuro, Marshall Islands Shipping company 100.0 100.0

First-DDSG Logistics Holding GmbH Handelskai 348, 1020 Wien, Austria Holding company 100.0 100.0

Erste Donau-Dampfschiffahrt

Gesellschaft GmbH in Liqu.

Handelskai 348, 1020 Wien, Austria Barging company 100.0 100.0

DDSG Tankschiffahrt GmbH in Liqu. Handelskai 348, 1020 Wien, Austria Barging company 100.0 100.0

DDSG Services GmbH Handelskai 348, 1020 Wien, Austria Service company 100.0 100.0

DDSG Mahart Kft. Sukorói út 1., 8097 Nadap, Hungary Barging company 100.0 100.0

Pancar Kft. Sukorói út 1., 8097 Nadap, Hungary Barging company 100.0 100.0

Ferrexpo Port Services GmbH Handelskai 348, 1020 Wien, Austria Bunker business 100.0 100.0

Transcanal SRL Ecluzei Street 1, Agigea, Constanta, Romania Port services 77.6 77.6

Helogistics Asset Leasing Kft. Sukorói út 1., 8097 Nadap, Hungary Asset holding company 100.0 100.0

LLC DDSG Ukraine Holding Patris Lumumba Street 4/6, 01042 Kyiv, Ukraine Holding company 100.0 100.0

LLC DDSG Invest Building 4/6, Ioanna Pavla II Street, 01042 Kyiv, Ukraine Asset holding company 100.0 100.0

LLC DDSG Ukraine Shipping

Management

Patris Lumumba Street 4/6, 01042 Kyiv, Ukraine Barging company 100.0 100.0

LLC DDSG Ukraine Shipping Radhospna Street 18, 39763 Kamiani Potoky, Kremenchuk District, Poltava Region, Ukraine Asset holding company 100.0 100.0

Ferrexpo Poltava Mining Charity Fund

Heroiv Dnipra Street 23-a, 39802 Horishni Plavni, Poltava Region, Ukraine Charity fund 100.0 100.0

Associate

TIS Ruda LLC Oleksiya Stavnitzera Street 50, 67543 Vizirka Village, Odesa Region, Ukraine Port development 49.9 49.9

Fair value through OCI

PJSC Stakhanov Railcar Company Rail car producer 1.1 1.1

Vostok Ruda LLC Iron ore mining 1.1 1.1

LLC Atol Gas 9.9 9.9

CJSC AMA Gas 9.0 9.0

CJSC Amtek Gas 9.0 9.0

1. Charity fund controlled by the Group through its HSEC Committee.

2. All investments relate to companies incorporated in Ukraine and are fully impaired.

212 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Alternative Performance Measures

When assessing and discussing the Group’s reported nancial performance, nancial position and cash ows, management may make reference

to Alternative Performance Measures (“APMs”) that are not dened or specied under International Financial Reporting Standards (“IFRSs”).

APMs are not uniformly dened by all companies, including those in the Group’s industry. Accordingly, the APMs used by the Group may not

becomparable with similarly titled measures and disclosures made by other companies. APMs should be considered in addition to, and not

asasubstitute for or as superior to, measures of nancial performance, nancial position or cash ows reported in accordance with IFRSs.

Ferrexpo makes reference to the following APMs in the 2022 Annual Report.

C1 cash cost of production

Denition: Non-nancial measure, which represents the cash cost of production of iron pellets from own ore divided by production volume of

own production ore. Non-C1 cost components include non-cash costs such as depreciation, inventory movements and costs of purchased ore

and concentrate. The Group presents the C1 cash cost of production because it believes it is a useful operational measure of its cost

competitiveness compared to its peer group.

US$000

Notes

Year ended

31.12.22

Year ended

31.12. 21

C1 cash costs 503,975 626,561

Non-C1 cost components 36,035 71,339

Inventories recognised as an expense upon sale of goods

7 540,010 697,9 0 0

Own ore produced (tonnes) 6,053,397 11,220,260

C1 cash cost per tonne (US$) 83.3 55.8

Underlying EBITDA

Denition: The Group calculates the underlying EBITDA as prot before tax and nance plus depreciation and amortisation, net gains and

losses from disposal of investments and property, plant and equipment, share-based payments and write-offs and impairment losses. The

underlying EBITDA is presented because it is a useful measure for evaluating the Group’s ability to generate cash and its operating performance.

See Note 5 Segment information to the consolidated nancial statements for further details.

Closest equivalent IFRSs measure: Prot before tax and nance.

Rationale for adjustment: The Group presents the underlying EBITDA as it is a useful measure for evaluating its ability to generate cash and

its operating performance. Also it aids comparability across peer groups as it is a measurement that is often used.

Reconciliation to closest IFRSs equivalent:

US$000 Notes

Year ended

31.12.22

Year ended

31.12. 21

Underlying EBITDA 765,113 1,438,759

Losses on disposal and liquidation of property, plant and equipment

7 (1,665) (4,695)

Share-based payments

28 (490) (856)

Write-offs and impairments

7 (260,308) (235,618)

Depreciation and amortisation (96,977) (115,112)

Prot before tax and nance 405,673 1,082,478

Diluted earnings per share

Denition: Earnings per share calculated using the diluted number of Ordinary Shares outstanding.

Closest equivalent IFRSs measure: Diluted earnings per share.

Rationale for adjustment: Excludes the impact of special items that can mask underlying changes in performance.

Reconciliation to closest IFRSs equivalent:

Year ended

31.12.22

Year ended

31.12. 21

Earnings for the year attributable to equity shareholders – per share in US cents

Basic 37.41 148.2

Diluted 37.35 147. 9

213Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

Net cash/(debt)

Denition: Cash and cash equivalents net of interest-bearing loans and borrowings.

Closest equivalent IFRSs measure: Cash and cash equivalents.

Rationale for adjustment: Net cash/(debt) is a measurement of the strength of the Group’s balance sheet. It is presented as it is a useful

measure to evaluate the Group’s nancial liquidity.

Reconciliation to closest IFRS equivalent:

US$000

Notes

As at

31.12.22

As at

31.12. 21

Cash and cash equivalents 25 112,945 167, 291

Interest-bearing loans and borrowings – current

26 (5,194) (48,206)

Interest-bearing loans and borrowings – non-current

26 (1,354) (2,143)

Net cash 106,397 116,942

Capital investment

Denition: Capital expenditure for the purchase of property, plant and equipment and intangible assets.

Closest equivalent IFRSs measure: Purchase of property, plant and equipment and intangible assets (net cash ows used in investing

activities).

Rationale for adjustment: The Group presents the capital investment as it is a useful measure for evaluating the degree of capital invested in

its business operations.

Reconciliation to closest IFRSs equivalent:

US$000

Notes

As at

31.12.22

As at

31.12. 21

Purchase of property, plant and equipment and intangible assets (net cash ows used in

investingactivities) 13/15 161,010 360,869

Total liquidity

Denition: Sum of cash and cash equivalents, available committed facilities and undrawn uncommitted facilities. No committed facilities

outstanding as at 31 December 2022 and the end of the comparative year ended 31 December 2021. Uncommitted facilities include trade

nance facilities secured against receivable balances related to these specic trades. See Note 26 Interest-bearing loans and borrowings and

Note 27 Financial instruments for further information.

Closest equivalent IFRSs measure: Cash and cash equivalents.

Rationale for adjustment: The Group presents total liquidity as it is a useful measure for evaluating its ability to meet short-term

businessrequirements.

Reconciliation to closest IFRSs equivalent:

US$000

Notes

As at

31.12.22

As at

31.12. 21

Cash and cash equivalents 25 112,945 167, 291

Undrawn uncommitted facilities − 97,854

Total liquidity 112,94 5 265,145

214 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Glossary

Act

The Companies Act 2006

AGM

The Annual General Meeting of the Company

Articles

The Articles of Association of the Company

Audit Committee

The Audit Committee of the Company’s

Board

Bank F&C

Bank Finance & Credit

Belanovo or Bilanivske

An iron ore deposit located immediately to the

north of Yeristovo

Benchmark price

International seaborne traded iron ore pricing

mechanism understood to be offered to the

market by major iron ore producers under

long-term contracts

Beneciation process

A number of processes whereby the mineral

is extracted from the crudeore

BIP

Business Improvement Programme, a

programme of projects to increase production

output and efciency atFPM

Blast furnace pellets

Used in Basic Oxygen Furnace (“BOF”)

steelmaking and constitute about 70% of the

traded pellet market

Board

The Board of Directors of the Company

Billion tonnes

C1 costs

Represents the cash costs of production of

iron pellets from own ore, divided by

production volume from own ore, and

excludes non-cash costs such as

depreciation, pension costs and inventory

movements, costs ofpurchased ore,

concentrate and production cost of gravel

Capesize

Capesize vessels are typically above 150,000

tonnes deadweight. Ships in this class include

oil tankers, supertankers and bulk carriers

transporting coal, ore and other commodity

raw materials. Standard capesize vessels are

able to transit through the Suez Canal

Capex

Capital expenditure for the purchase of

property, plant and equipment andintangible

assets

Capital employed

The aggregate of equity attributable to

shareholders, non-controlling interests

andborrowings

CFR

Delivery including cost and freight

CHF

Swiss franc, the currency of Switzerland

China & South East Asia

This segmentation for the Group’s sales

includes China and Vietnam

CID

Committee of Independent Directors

CIF

Delivery including cost, insurance and freight

CIS

The Commonwealth of Independent States

CODM

The Executive Committee is considered to be

the Group’s Chief Operating Decision-Maker

Company

Ferrexpo plc, a public company incorporated

in England and Wales withlimited liability

Controlling shareholder

Fevamotinico S.a.r.l. holds 49.5% of the voting

rights in Ferrexpo plc as at the date of this

report. The Minco Trust is a discretionary trust

that has three beneciaries, consisting of

Mr Zhevago and two other members of his

family. Each of the beneciaries of The Minco

Trust is considered a controlling shareholder

of Ferrexpo plc

Corporate Governance Code

2018 UK Corporate Governance Code

CPI

Consumer Price Index

CRU

The CRU Group provides market analysis and

consulting advice intheglobal mining industry

(see www.crugroup.com)

CSR

Corporate Social Responsibility

DAP

Delivery at place

DFS

Detailed feasibility study

Directors

The Directors of the Company

Direct reduction

Used in Direct Reduction Iron (“DRI”)

production

“DR” pellets

In regions where natural gas is cheap and

plentiful, such as the Middle East, DR pellets

are mixed with natural gas to produce DRI, an

alternative source of metallic to scrap in

Electric Arc Furnace (“EAF”) steelmaking. DR

pellets are a niche, higher quality product with

Fe content greater than 67% and a combined

level of silica and alumina of<2%

EBT

Employee benet trust

EPS

Earnings per share

ERPMC

Executive Related Party Matters Committee

Europe (including Turkey)

This segmentation for the Group’s sales

includes Austria, Czech Republic, Germany,

Hungary, Romania, Serbia, Slovakia and

Turkey

Executive Committee

The Executive Committee of management

appointed by theBoard

Executive Directors

The Executive Directors of the Company

FBM

LLC Ferrexpo Belanovo Mining, a company

incorporated under thelawsofUkraine

Iron

Ferrexpo

The Company and its subsidiaries

Ferrexpo AG Group

Ferrexpo AG and its subsidiaries, including

FPM

Fevamotinico

Fevamotinico S.a.r.l., a company incorporated

with limited liability inLuxembourg

First-DDSG

First-DDSG Logistics Holding GmbH (formerly

Helogistics Holding GmbH) and its

subsidiaries, an inland waterway transport

group operating on the Danube/Rhine river

corridor

FOB

Delivered free on board, which means that the

seller’s obligation to deliver has been fullled

when the goods have passed over the ship’s

rail at the named port of shipment, and all

future obligations in terms ofcosts and risks

of loss or damage transfer to the buyer from

that point onwards

215Ferrexpo plc Annual Report & Accounts 2022

STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS

FPM

Ferrexpo Poltava Mining, also known as

PJSCFerrexpo Poltava Mining, acompany

incorporated under the laws of Ukraine

FRMCC

Finance, Risk Management and Compliance

Committee, a sub-committee of the Executive

Committee

FTSE 250

Financial Times Stock Exchange top 250

companies

FYM

LLC Ferrexpo Yeristovo Mining, a company

incorporated under the laws ofUkraine

GPL

Gorishne-Plavninske-Lavrykivske, the iron ore

deposit being mined byFPM

Group

The Company and its subsidiaries

HSE

Health, safety and environment

HSEC Committee

The Health, Safety, Environment and

Community Committee

IAS

International Accounting Standards

IASB

International Accounting Standards Board

IFRIC interpretations

IFRS interpretations as issued by the IFRS

Interpretations Committee

IPO

Initial public offering

Iron ore concentrate

Product of the beneciation process with

enriched iron content

Iron ore pellets

Balled and red agglomerate of iron ore

concentrate, whose physical properties are

well suited for transportation to and reduction

within a blast furnace

Iron ore sinter nes

Fine iron ore screened to -6.3mm

IRR

Internal Rate of Return

JORC

Australasian Joint Ore Reserves Committee

– the internationally accepted code for ore

classication

K22

GPL ore has been classied as either K22

orK23 quality, of which K22 oreis of higher

quality (richer)

KPI

Key Performance Indicator

Thousand tonnes

LIBOR

The London Inter Bank Offered Rate

LLC

Limited Liability Company (in Ukraine)

LSE

London Stock Exchange

LTI

Lost time injury

LTIFR

Lost time injury frequency rate

LTIP

Long-term incentive plan

Cubic metre

Middle East & North Africa

This segmentation for the Group’s sales

includes Algeria and the United Arab Emirates

Millimetre

Million tonnes

mtpa

Million tonnes per annum

NBU

National Bank of Ukraine

Nominations Committee

The Nominations Committee of the Board

Non-executive Directors

Non-executive Directors of the Company

NOPAT

Net operating prot after tax

North America

This segmentation for the Group’s sales

includes the United States

North East Asia

This segmentation for the Group’s sales

includes Japan and Korea

OHSAS 18001

International safety standard “Occupational

Health & Safety Management System

Specication”

Ordinary Shares

Ordinary Shares of 10 pence each in the

Company

Ore

A mineral or mineral aggregate containing

precious or useful minerals insuch quantities,

grade and chemical combination as to make

extractioneconomic

Panamax

Modern panamax ships typically carry a

weight of between 65,000 and 90,000 tonnes

of cargo and can transit both the Panama and

Suezcanals

PPE

Personal protective equipment

PPI

Ukrainian producer price index

Probable reserves

Those measured and/or indicated mineral

resources which are not yet “proved”, but

ofwhich detailed technical and economic

studies have demonstrated that extraction

can be justied at the time of determination

and under specic economic conditions

Proved reserves

Measured mineral resources of which

detailed technical and economic studies

havedemonstrated that extraction can be

justied at the time ofdetermination and

under specic economic conditions

PXF

Pre-export nance

Rail car

Railway wagon used for the transport of iron

ore concentrate or pellets

Relationship Agreement

The relationship agreement entered into

among Fevamotinico S.a.r.l., Kostyantin

Zhevago, The Minco Trust and the Company

Remuneration Committee

The Remuneration Committee of the Board

Reserves

Those parts of mineral resources for which

sufcient information is available to enable

detailed or conceptual mine planning and for

which such planning has been undertaken.

Reserves are classied as either proved

orprobable

Resources

Concentration or occurrence of material of

intrinsic economic interest inor on the earth’s

crust in such form, quality and quantity that

there arereasonable prospects for eventual

economic extraction

216 Ferrexpo plc Annual Report & Accounts 2022

FINANCIAL STATEMENTS

Sinter

A porous aggregate charged directly to the

blast furnace which is normally produced by

ring ne iron ore and/or iron ore concentrate,

other binding materials and coke breeze as

the heat source

Spot price

The current price of a product for immediate

delivery

Sterling/£

Pounds sterling, the currency of the United

Kingdom

STIP

Short-Term Incentive Plan

Tailings

The waste material produced from ore after

economically recoverable metals or minerals

have been extracted. Changes in metal

pricesand improvements in technology can

sometimes make the tailings economic to

process at a later date

Tolling

The process by which a customer supplies

concentrate to a smelter and the smelter

invoices the customer with the smelting

charge, and possibly arening charge, and

then returns the metal to the customer

Ton

US short ton, equal to 0.9072 metric tonnes

Tonne or t

Metric tonne

Treasury shares

A company’s own issued shares that it has

purchased but notcancelled

TSF

Tailings storage facility

TSR

Total Shareholder Return. The total return

earned on a share over a period of time,

measured as the dividend per share plus

capital gain, divided byinitial share price

UAH

Ukrainian hryvnia, the currency of Ukraine

UK adopted IFRS

International Financial Reporting Standards

adopted for use in the United Kingdom

Ukr SEPRO

The quality certication system in Ukraine,

regulated by law to ensure conformity with

safety and environmental standards

Underlying EBITDA

The Group calculates the underlying EBITDA as

prot before tax andnance plus depreciation

and amortisation, net gains and losses from

disposal of investments and property, plant

andequipment, share-based payments and

write-offs and impairment losses

Underlying EBITDA margin

Underlying EBITDA (see denition above) as

apercentage of revenue

US$/t

US dollars per tonne

Value-in-use

The implied value of a material to an end

userrelative to other options, e.g.evaluating,

in nancial terms, the productivity in the

steelmaking process of a particular quality

ofiron ore pellets versus the productivity

ofalternative qualities of iron ore pellets

VAT

Value added tax

WACC

Weighted average cost of capital

WAFV

Weighted average fair value

WMS

Wet magnetic separation

Yeristovo or Yerystivske

The deposit being developed by FYM

Glossary continued

Useful contact information

Registered ofce

55 St James’s Street

London SW1A 1LA

Company Secretary’s ofce

Company Secretary

Ferrexpo Plc

55 St James’s Street

London SW1A 1LA

Tel: +44 (0) 207 389 8300

Email: info@ferrexpo.com

Share registrar

Equiniti Group Limited

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

Tel: 0371 384 2030 (+44 121 415 7047 from outside UK)

https://equiniti.com/uk/

Advisers

Auditor

MHA Macintyre Hudson

2 London Wall Place

London EC2Y 5AU

Solicitors

Herbert Smith Freehills

Exchange House

Primrose Street

London EC2A 2EG

Corporate broker

Liberum Capital

25 Ropemaker Street

London EC2Y 9LY

Sponsor

BDO LLP

55 Baker Street

London W1U 7EU

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