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Ferrexpo plc
Annual Report & Accounts 2022
Resilience &
commitment
STRATEGIC REPORT
Contents & At a Glance
Looking towards
alow emissions
future and the shift
toGreen Steel
1
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 Russias 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
MT
67
% Fe
US$106
M
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
BN
Committed to Ukraine with more than
15 years of investment since our IPO in
2007, amounting to over US$3.3 billion.
3
%
Generating 3% of Ukraine’s export
revenues in 2022 (2021: 4%), despite a
decline in production and iron ore prices.
70
+
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 Russias 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 Russias 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. Ukraines
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 Ukraines 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
1
.
The coming period will be difcult 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
1
, 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
1
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
1
– 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
2
, 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
3
.
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conict
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 Ukraines
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
M
STRATEGIC REPORT
Annual Report & Accounts 2022Ferrexpo plc06
CEO’s Review
The morning of 24 February 2022 will live long in the
memory. Russias invasion of Ukraine has dened our
year, but we are proud of the resilience shown by our
workforce in continuing to support Ukraines 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
difcult 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%
1
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 difcult time as a
stronger company, and this would not be
possible without this continued support.
Jim North
Chief Executive Ofcer, 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
BN
2021: US$2.5
BN
Underlying EBITDA
A
in 2022
US$765
M
2021: US$1,439
M
Underlying EBITDA
A
margin in 2022
61
%
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 Russias
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
1
.
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$91 per tonne in late October.
Iron ore prices did ultimately recover as
restrictions in China were eventually eased
Reduced levels of price volatility
were seen in 2022 compared to
2021. Whilst iron ore prices declined
by 25%, blast furnace pellet
premiums rose by 20%, which
reects shifting demand for high
quality products.
Yaroslavna Blonska,
Acting Chief Marketing
Ofcer
Customer sales in 2022
6.2
MT
Sales of 6.2 million tonnes (46%
reduction), despite conict-related
restrictions in 2022. Shipments to
Europe remained resilient, declining
by a lower degree (23%).
Five years of iron ore prices
(65% Fe Index)
US$ per tonne
US$139/t
US$186/t
US$122/t
US$104/t
US$90/t
2022
2020
2021
2019
2018
1. Source: S&P Global Commodity Insights.
Mar 22 Apr 22 May 22Feb 22 Jun 22 Jul 22 Aug 22 Sep 22 Oct 22 Nov 22 Dec 22Jan 22
250
200
150
100
50
S&P Platts’ Iron Ore Fines Index (65%)
Benchmark indices (US$/tonne)
Freight Rate (Baltic Capesize Index C3)
S&P Global Atlantic Blast Furnace Pellet Premium S&P Global Direct Reduction Pellet Premium
0
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
1
.
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
2
.
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
3
.
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
1
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
3
, compared
to global nes export trade of 1.1 billion
tonnes
4
. 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
3
, 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 Russias 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
3
.
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%)
4
, 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
5
in these two
regions collectively accounted for 60% of
dened pellet imports in 2022 (2021: 58%)
3
.
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
1
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
Russias 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
5
.
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)
6
. 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
7
, 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)
3
. 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 Russias 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
8
.
Looking ahead to 2023, the World Steel
Associations 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 Chinas 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
9
, 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
10
.
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
6
.
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)
1
120 160 (25%)
Iron ore nes price (65% Fe, CFR China)
1
139 186 (25%)
Average 65% Fe spread over 62% Fe
1
19 26 (28%)
Atlantic (blast furnace) pellet premium
1
72 60
4
+20%
Direct reduction pellet premium
1
87 73
4
+18%
C3 freight (Brazil – China)
2
24 27 (9%)
C2 freight (Brazil – Netherlands)
2
13 14
4
(11%)
Global steel production (million tonnes)
3
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Ukraines 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 Ukraines 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 Ferrexpos products
to European customers. Independent
research shows that transport via
inland waterway (barging) has a lower
total environmental cost than road or
rail transportation
1
.
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
Ferrexpos 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
M
(35
%
)
Funding of environment initiatives
(2021: US$19M)
Government
US$164
M
(42
%
)
Taxes and royalties paid
(2021: US$281M)
Investors
US$155
M
(75
%
)
Shareholder returns (paid during year)
(2021: US$619M)
Capital providers
US$49
M
(78
%
)
Debt repayments and interest
(2021: US$221M)
Employees
US$98
M
(13
%
)
Wages and salaries paid
(2021: US$113M)
Customers
US$1.2
BN
(50
%
)
Revenue generated
(2021: US$2.5BN)
Suppliers
US$912
M
(22
%
)
Suppliers of goods and services
(2021: US$1.2BN)
Communities
US$15
M
+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)
1
.
Targeting a 50% reduction in Scope 1 and 2
emissions by 2030 (previously 30%)
3
.
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 Ukraines export
revenues in 2022 (2021: 4%)
2
.
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 Ukraines 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
M
3
%
0.51
2019
Where we are today
0
%
2022
31
%
2030
50
%
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
01
02
03
04
05
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
A
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
1
.
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
A
US$765
M
Denition
Underlying EBITDA
A
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
A
measures the Groups ability to
generate cash as well as providing a useful
measure of operating performance excluding
certain non-cash items.
Underlying EBITDA
A
is an Alternative
Performance Measure – please see page 212
for more details.
The remuneration packages of the Groups
executive management team, including the
Chief Executive Ofcer, include references to
the Group’s Underlying EBITDA
A
. Please see
page 124 for more details of the Group’s
incentive programme.
Our performance in 2022
Underlying EBITDA
A
declined by 47% to
US$765 million, in line with production
volumes, which declined by 46% as a result
of restrictions related to Russias 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
A
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 Russias invasion.
In addition to the factors discussed above in
the Underlying EBITDA
A
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
M
Financial KPIs
Link to strategy: 1, 2, 3, 4 and 5.
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
M
C1 cash cost of production
A
(“C1 costs
A
”)
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 Groups 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
A
for the key
drivers of the Group’s nancial performance.
Looking forward to 2023
The Groups 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
A
is the cost
ofproduction processes to the factory gate,
divided by production. This is an industry
standard measurement and assesses
Ferrexpos relative competitiveness compared
with other pellet producers.
C1 cash cost of production
A
is an Alternative
Performance Measure – please see page 212
for more details.
The remuneration packages of the Groups
executive management team, including the
Chief Executive Ofcer, include references
tothe Group’s C1 cash cost of production
A
.
Please see page 124 for more details of the
Groups incentive programme.
Our performance in 2022
The Group’s C1 cash cost of production
A
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
A
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.
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 Groups
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
1
(most recently published data).
Safety performance is also measured via the
number of fatalities at the Groups 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 Groups
executive management team, including the
Chief Executive Ofcer, include references to
the Groups 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 Groups 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
83
%
to Europe
3
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 Groups
executive management team, including the
Chief Executive Ofcer, include references
tothe Groups greenhouse gas emissions.
Please see page 124 for more details of the
Groups 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
1
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
1
by
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
2
. 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
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
A
margin
61
%
Growing our Underlying EBITDA
A
margin by a further 4 percentage
points in 2022 (2021:57%).
Capital investment
A
US$161
M
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 Groups
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
A
(“C1 costs
A
”) rose by 49%, resulted in a decline
in Underlying EBITDA
A
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
A
.
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 Groups
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
A
The Group’s average C1 costs
A
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
A
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
A
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
1
. 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
A
– see page 25 for
more information.
In more detail, the energy-related components
of the Group’s C1 costs
A
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
A
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
Russias 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
2
.
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)
3
. Given the level of monthly iron ore
pricing in 2022, the impact of the royalty rate
on C1 costs
A
was US$7 per tonne in 2022.
In line with previous years, the Group’s C1
costs
A
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
A
(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 Groups 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 Groups 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$/t)
3
139 186 (25%)
Revenue 1,248 2,518 (50%)
C1 cash cost of production
A
(US$/t) 83.3 55.8 +49%
Underlying EBITDA
A
765 1,439 (47%)
Underlying EBITDA
A
margin 61% 57% +4pp
Debt servicing 42 215 (80%)
Capital investment
A
161 361 (55%)
Closing net cash 106 117 (9%)
Ukrainian hryvnia vs. US dollar
4
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
A
Underlying EBITDA
A
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
A.
The Group’s Underlying EBITDA
A
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 Groups 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
A
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 Russias 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
A
, 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 Groups 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 Groups 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 Groups 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
A
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
A
C1 costs
A
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
A
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 Groups 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
MT
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
6
%
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 Groups 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 Ferrexpos
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 Russias 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)
(Quarterly Average)
2Q 2022
3Q 2022
1Q
2022
20
21
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
1
Proven Probable Total
JORC-compliant Ore Reserves Mt
Fe
total
%
Fe
magnetic
% Mt
Fe
total
%
Fe
magnetic
% Mt
Fe
total
%
Fe
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
Fe
total
%
Fe
magnetic
% Mt
Fe
total
%
Fe
magnetic
% Mt
Fe
total
%
Fe
magnetic
% Mt
Fe
total
%
Fe
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 Ukraines 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
difcult 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 efcient
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
1
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
A
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
3
%
Newly completed press ltration
complex expected to deliver a
3% reduction in natural gas
consumption
1
.
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 Russias
invasion in 2022, supporting workforces, their
families and local communities.
Understanding the
role of sustainability
during a war
01
Safety and
Our People
See page 32
03
TCFD
Disclosures
See page 37
02
Environmental
Stewardship
See page 34
04
Diversity, Equity
and Inclusion
See page 42
05
Supporting
Communities
See page 44
06
Corporate
Governance
See page 46
Scan to read our latest
Responsible Business Report
US$19
M
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).
1
% Reduction
Our greenhouse gas emissions footprint fell by
1%
1
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
1
. 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%)
1
and broaden our suite of
targets to include Scope 3 emissions – setting
reduction targets of 10% and 50% for 2030 and
2050 respectively
2
. 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).
4
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
1
. 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
2
and the Group’s
iron ore producing peers in Western
Australia
3
.
As demonstrated in the table above, the
Groups 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: Ferrexpos 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
4
0 0
Lost time injuries
4
10 9 +11%
Lost time injury frequency rate (“LTIFR”)
4
0.51 0.41 +24%
All injuries frequency rate (“AIFR”)
5,6
0.99 0.97 +2%
Near miss events
5
1 5 (80%)
Signicant incidents
5
8 12 (33%)
Restricted work days
5
934 497 +88%
Severity rate (average lost days per incident)
5
104 55 +88%
Safety indicators (leading)
5
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)
3
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.
50
%
Updated target for Scope 1 and 2
emissions reduction by 2030
1
.
10
%
Newly published target for Scope 3
(value chain) emissions reduction by
2030
2
. 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 Groups 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
2
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
A
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
3
.
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
4
. 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
2
SCOPE 2 (“S2”)
EMISSIONS
2
SUBTOTAL
(S1+S2)
2
SCOPE 3 (“S3”)
3
EMISSIONS
Our performance in 2022
(3
%
) +2
%
(1
%
) (1
%
)
Our performance since benchmark year (2019–2022 inclusive)
(1
%
) (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
1
.
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
Ferrexpos 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
2
e”) that also account for emissions of
both methane (CH
4
) and nitrogen oxide (N
2
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
2
, SO
2
, and CO),
with emissions from such sources declining
by 5060% 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
2
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
2
e)
Unit basis
(kg CO
2
e per
tonne)
Absolute basis
(kilotonnes CO
2
e)
Unit basis
(kg CO
2
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 (FCAs
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 organisations
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 Groups 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 Groups 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 organisations
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 Centres 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
2
/t) by 2050
MEDIUM
(1.1tCO
2
/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
2
/t) by 2050
MEDIUM
(1.1tCO
2
/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
CP
Carbon pricing/tax: Targets and
regulations on carbon emissions
#3
CPU Energy crisis in Ukraine
IIC
Increase in consumer and
investor climate consciousness
LCS
Demand for low carbon emissions
steelmaking
#1
SCE
Shipping: Targets and regulations
on carbon emissions
#2
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 Groups 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
1
.
(Note: Bubble size denotes the scale of the potential impact on the Ferrexpo business.)
LCS
SI
CPU
CC
SCE
SR
CP
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 Groups 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 Groups products, Ferrexpo is seeking to research and
implement new technologies that will lower the Scope 1 and 2 emissions
footprint of the Groups 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
A
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
A
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
A
), 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 Groups 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 Groups
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 Groups 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 Groups 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
Ferrexpos 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 Groups 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
Groups 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%)
1
.
20.9
%
Women in management roles across
the Group increased to 20.9% in
2022 (2021: 20.1%)
2
.
25
%
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 Groups 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
Groups 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
1
.
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
Ferrexpos 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 Russias
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 ofcial
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
M
Total funding of humanitarian support,
including support provided via Ferrexpo
Humanitarian Fund.
70
+
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 Russias 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 childrens 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
difcult 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 Russias 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
20
%
Female representation on the Groups
Executive Committee (one out of ve
members).
43
%
Female representation on the
Group’s Board of Directors (three
outof seven Directors).
33
%
Target for gender diversity at Board
level, as set by the Hampton-
Alexander Review.
5
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, Ferrexpos 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
Ofcer 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 Britains 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 Groups 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 Groups 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
95
%
More than 95% of our workforce is based
incentral Ukraine.
50
%
Ferrexpos inaugural Climate Change
Report, published in December 2022,
announced a 50% emissions reduction
target by 2030 (previously 30%).
10
+
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.
3
%
Ferrexpo continues to represent a
signicant proportion of Ukraine’s
exportrevenues, accounting for 3%
in2022(2021:4%).
US$912
M
Total paid to suppliers of US$912 million
in2022 (2021: US$1.2 billion), reecting
value generation through our production
processes.
55
%
Shareholder returns in 2022 representing
55% of the Group’s free cash ow,
meetingthe target set under the Group’s
Shareholder Returns Policy.
70
+
The Ferrexpo Humanitarian Fund has
approved support for more than 70
initiatives across Ukraine, with approved
funding of US$15 million.
US$106
M
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 Companys 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 Groups
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
04
32
42
43
Suppliers and
customers
Market Review
Strategic Framework
08
16
Local communities
Responsible Business: Communities
Case Study: Humanitarian efforts
44
45
Environment
Responsible Business: Environmental Stewardship
Case Studies: Net zero pathway developed in 2022
Scenario analysis selection and TCFD disclosures
34
34
37
High standards of business
Responsible Business Review
Responsible Business: Governance
Risk Management
Our Business Model
30
46
54
12
Investors
Chair’s Statement
CEO’s Review
Our Business Model
02
06
12
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 Ferrexpos business, which
we continue to rely upon following Russias
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 Groups 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 Russias 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 Groups 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 Groups 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 Russias 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 Groups 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 Groups 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 Ukraines 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 Groups 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 Groups 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 Groups 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 Groups 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
Groups 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 Groups 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 Groups 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Groups 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 Boards 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 Groups
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 Groups
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 Groups
suppliers, and their potential to impact the
Groups operations in the future, but ultimately
needed to prioritise the Groups 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 Groups 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 Groups
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
register, which records the risks with the most
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 Groups
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 Groups management
team, however, understands that it cannot
eliminate risk. The Group’s approach to risk
mitigation for each of the Groups 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 Groups 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 Groups 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 Groups 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 Groups 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
2.
5.
6.
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 Groups ability to operate
in its normal course of business, and may be
internal, in the form of risks derived through
the Groups 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
Groups 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 Groups 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
Groupsactivities.
Risk currently considered to
beneither materially increasing
nor materially decreasing
insignicance to the
Groupsactivities.
Risk currently considered
tobematerially decreasing
insignicance to the
Groups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 Groups
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 Groups
costs, assets and shareholders’ equity. For
more information, please see page 22.
As a result of the war, a proportion of the
Groups 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Ofcer
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 Russias 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
1
. Ukraine is a country that
placed 77th in the United Nations’ Development
Programmes (“UNDP”) Human Development
Index
2
, 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”)
3
. 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 Groups 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 Groups main operating asset
in Ukraine.
As referenced in the Group’s previous public
reporting, including in the Groups Interim
Results published in August 2022, there are
outstanding allegations relating to the Groups
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 Groups 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 Groups 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 Groups relationships
bothupstream and downstream may also be
negatively impacted by events related to the
Groups 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
Groups controlling shareholder (and/or negative
perceptions of the Groups controlling
shareholder) may potentially adversely impact
the Group within Ukraine, with a restriction on
Responsibility
Board of Directors and ChiefExecutiveOfcer
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 Groups 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 Groups 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 Groups 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 difcult 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 Groups 2021
Annual Report and Accounts, a number of the
Groups 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).
4
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
difcult 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
Groups 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
A
(to maintain
production or expansion), capital investment
A
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
Groups operations. Ferrexpo has
implemented policies and procedures
throughout the Group including regular
training. Ferrexpo prioritises sufcient total
liquidity
A
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 Groups 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
Groups 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Ofcer
Risk appetite
Low
Link to strategy
4
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
A
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Ofcer
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
Groups 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 Groups 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
Groups 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Groups 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)
1
.
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 Groups products,
which averaged US$139 per tonne in 2022
(high grade iron ore nes index
1
, 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
2
.
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 Groups 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 Groups 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 Groups 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 Groups 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, Ferrexpos 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 Groups products includes a
component referred to as the pellet premium,
which references the pelletised nature of
Ferrexpos 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
A
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 sufciently
sized to be a price setting company when
itcomes to iron ore pellet premiums and
therefore the Groups 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)
1
.
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 Groups 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 Groups 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
Groups 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 Russias 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 sufcient 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
o
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 Groups 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 Ferrexpos 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 Groups
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 Groups recent
collaboration with environmental consultants
Ricardo Plc.
The Group is also aware of potential risks that
relate to recent events with the Groups 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
Ofcer and Chief Marketing Ofcer
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 Groups 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
Groups 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 Groups
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 Groups 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
Ofcer and Chief Marketing Ofcer
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 Russias
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
Ofcer and Chief Human Resources Ofcer
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 Groups 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
Groups 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
Groups overall protability. Examples of such
would be the movement of natural gas prices
in 2022, which rose as a consequence of
Russias 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 Groups
input costs at its operations, with the Group
potentially not able to effectively counter such
pressures due to the benchmark pricing of
the Groups products.
A primary cause of cost ination has been the
Groups 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%
1
(2021: 9.4%
2
), 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 Groups 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 Groups 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 Groups
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 Groups 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, efcient and cost
effective production of its products. With
ITsystems becoming increasingly more
important to the Groups 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 difcult 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 companys 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 Russias 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 Groups 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 Groups 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 Groups
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 companys
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Ofcer
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 Groups 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 Groups
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 Groups
activities. The main source of the Groups
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 Groups 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
Groups 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
Groups Climate Change Report for 2022 on
the Groups 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, Russias
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Ofcer
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 Groups
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 Groups 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 Groups 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 Groups 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 Groups 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
A
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 Groups
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Groups
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 Groups 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
Groups 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 Groups modelling has
also considered the risks surrounding a
further interruption to the Groups 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 Groups 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 Groups 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 Groups 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 Groups 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
Groups Underlying EBITDA
A
by US$15.3 per
tonne. Modelling also indicates that a general
production cost increase of 10% would
decrease Group Underlying EBITDA
A
by
US$7.2 per tonne, whilst a 10% decrease in
production volumes, and an associated 5%
increase inproduction costs, would decrease
Underlying EBITDA
A
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 Groups 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 Groups ability to
continued shipment of products in 2022,
despite the war in Ukraine. As a result of the
Groups 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 Groups 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 Groups 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 Groups currently
available logistics network or make use
ofalternative options, if needed.
In performing this assessment, the Directors
have also considered the Groups resilience
toclimate change risks (covering a range of
physical risks and transition risks).
As disclosed in Note 2 Basis of preparation
in the Groups 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
Chairs 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 Groups
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 Boards 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 Groups 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
ANDCOMMUNITY (“HSEC”) COMMITTEE
Responsibilities include:
Formulating and monitoring the
implementation of the Groups 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
1
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
2022
2022
2022
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, 19961999
and chief executive ofcer, 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,
20172022; chief executive ofcer 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
Ofcer 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
C
Committee membership
C
Fiona was the Chair of the HSEC
Committee until February 2022.
Committee membership
C
Committee membership
C
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),
20062010; an executive director
of Alfa Bank Ukraine, 2010–2014; a
non-executive director of Amsterdam
Trade Bank, 20132014; 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
C
Graeme is the Chair of the Audit
Committee, where he acts as its
Financial Expert.
Committee membership
C
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 Ofcer 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 Ofcer 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 Ofcer
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 ofce 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 Ofcer;
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 Companys 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 Companys 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
1
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 Ofcer 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
4
Scheduled Ad hoc Scheduled Scheduled Ad hoc Scheduled Ad hoc Scheduled Ad hoc Scheduled Ad hoc
AC Andersen
1
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
2
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
3
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 Groups 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 Groups
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 sufcient 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 Ofcer 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 Ofcer relating to updates on the
Groups marketing strategy, product
development and relationships with the
Groups 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 Ofcer on the
Groups 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 Companys 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 Companys 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 Groups Head of Information
Technology outlining the Groups 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 Groups 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 Groups 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
Groups 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 Groups 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
Ferrexpos 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,
Committees 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 Groups
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 Groups
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 Groups 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 Groups 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 Groups 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 Committees objectives and
responsibilities are set out in its terms of
reference which are available to view online.
The Committees 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 Groups relations with the
external auditor, including an assessment
of their independence, effectiveness and
objectivity.
Overseeing completion of the Groups
going concern and viability assessment
and statements thereon.
Reviewing and monitoring the Groups
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 Groups 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
Groups 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 Ukraines 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 Groups 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 Groups 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 sufcient 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 Groups 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 difcult
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 managements 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 Groups cash ow generation was heavily affected by the Groups 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 Groups long-term model
and the impairment test for the Groups 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 Groups 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 Groups 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 difcult 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 managements 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 Groups 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 Groups 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 Groups 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 Groups 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
register and third party risks. The FRMCC
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 Audits
assessment of the operation and
effectiveness of relevant elements of the
Company’s internal control systems, and
formed part of the Committees 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 Companys
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
auditors 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
auditors 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 Companys
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 Committees 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 Ofcer 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 Ofcer.
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 Womens
Empowering Principles (“WEPs”), an initiative
by UN Women and the UN Global Compact
Ofce. WEPs are a set of principles providing
guidance on the promotion of gender equality
and womens 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
womens empowerment.
Aligned with the goals of the Parker Review,
the Committee is committed to ensuring
that the Boards composition reects the
Groups 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 Groups 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 Groups
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 Groups
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 Womens
Empowering Principles (“WEPs”), an initiative
by UN Women and the UN Global Compact
Ofce. 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 Groups 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 Companys 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 Groups 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Groups 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
1
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 Committees 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 Committees 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 Ofcer (“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 Ofcer (“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 Committees 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 Companys 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 Committees 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
Committees 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
0
100
200
300
31 Dec
2019
31 Dec
2020
31 Dec
2022
31 Dec
2021
Value (£)
0%
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 Groups 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 Companys 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 Committees 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 Companys 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
Companys 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
1
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)
0
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 ofce, 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 ofce 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
1
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 Ofcer (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 Ferrys 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
1
Benets
2
STIP
3
LTIP
4
Pension
5
Total
(single gure)
6
Total xed
remuneration
(single gure)
6
Total variable
remuneration
(single gure)
6
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)
1
500 500 500 500
V Lisovenko (Senior Independent Director)
2
190 190 190 190
F MacAulay (Senior Independent Director)
2,3
188 188 175 175
AC Andersen
3
153 153 113 113
G Dacomb
4
161 161 155 155
N Polischuk 136 136
K Zhevago
5
135 135
6
135 135
6
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
A
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%
0%
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
shares
Award share
price
1
Value awarded
based on grant
price
Vesting
percentage
Number of
shares
vesting
Value vesting
based on
grant price
Share price at
date of
vesting
2
Value based
on vesting
price
3
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 Committees 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
1
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
1
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 Companys 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 ofce (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
1
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
1
Current
shareholding
2
(% 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)
1
End of
performance
period
J North 2020 Award
2
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
1
3.0% 0% -16.8% 13.4% 0% 37.1% 24.0% 0% 2.9%
J North (CEO)
2
0% 9.8% -25.5% 0% 1,703.4% -0.5% 11.6% 0% 12.8%
L Genovese (Chair)
3
0% 0% 0% 0% 0% 0% 400.0% 0% 0%
V Lisovenko (EED/SID)
4
0% 0% 0% 0% 0% 0% 0% 0% 0%
AC Andersen
5
0% 0% 0%
G Dacomb
6
9.7% 0% 0% 0% 0% 0% 35.0% 0% 0%
F MacAulay
7
(SID) 0% 0% 0% 0% 0% 0% 35.0% 0% 0%
N Polischuk
8
0% 0% 0%
K Zhevago
9
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
1
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
0
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)
1
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
Shares
(millions) %
Shares
(millions) %
Shares
(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
Ofcers.
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 Companys 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 ofce 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 managements 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 Groups 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
difcult 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 Groups 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 Groups
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 Companys
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 Groups and Companys 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 Groups 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 auditors 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 Groups further mitigating actions are reasonable and within the Groups 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 managements 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 Groups 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 Groups 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 Groups 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 Groups 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 difcult 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 Ofcer and Acting Chief
Marketing Ofcer, 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 Groups Parent entity and nance companies are in the UK, while the head ofce
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).
95
4
1
11
98
91
5
4
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 interofce 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)
0
10
20
30
40
50
2022 2021
35.7 42.0
Parent Company materiality
(US$ Million)
0
4
6
9
12
15
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 Companys 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 Groups 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
auditors 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 Groups 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 auditors 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 Companys
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
13
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
15
8, 249 43, 586
Investments in associates
33
5 ,1 6 7
7,034
Inventories
17
6, 277 8 , 414
Other non-current assets
16 3 7, 4 5 1 96,484
Deferred tax assets
11
14 , 4 7 1 32, 94 6
Total non-current assets
8 8 5 , 818 1, 412 , 9 3 3
Inventories
17
224, 454 2 02, 3 99
Trade and other receivables
18 2 4,6 9 9 192 ,363
Prepayments and other current assets
19
13 , 3 5 2 6 8 ,1 6 2
Income taxes recoverable and prepaid
11
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
22
1 6,456 26,0 7 4
Provision for site restoration
23 4, 28 4 3,873
Deferred tax liabilities
11
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
20
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 Groups 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 Groups
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 Groups 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 Groups 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 Groups 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 managements 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 Groups 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 Groups 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 Groups 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 Groups
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 Groups operating activities. Non-operating gains and losses are predominantly those associated with the Groups 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 Groups 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 Groups 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
1
14,757 1,107
Expenses not deductible for local tax purposes
2
4,615 721
Income exempted for local tax purposes
3
(158) (238)
Effect from utilisation of non-recognised deferred taxes
4
(5,852)
Effect from capitalised tax loss carry forwards on historic tax losses
4
(1,578)
Effect from non-recognition of deferred taxes
5
34,882 41,442
Effect from non-recognition of deferred taxes on current year losses
6
2,884
Effect of different tax rates on local profit streams
7
(3,412) (1,131)
Withholding tax on dividends
8
11,540
Prior year adjustments to current tax
9
6,389 (1,010)
Effect from share of profit from associates
10
(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 Groups 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 Groups 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 Groups 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: 2050 years
Vessels: 840 years
Plant and equipment: 3–15 years
Vehicles: 715 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups subsidiaries. The functional currencies of the Groups
subsidiaries are primarily the Ukrainian hryvnia, US dollars, euro and Swiss francs. The Groups functional currency and reporting currency is the
US dollar.
The Groups 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 Groups 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 managements 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 Groups 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 Groups 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 Groups 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 Groups ability to continue as a going concern. However, such a decision might complicate the daily business of the Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups 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 Groups operations are not material and no significant judgements and assumptions were required to determine
that the Group has control over these entities. The Groups 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
1
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
1
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
related
parties
Entities
under
common
control
Associated
companies
Other
related
parties
Other sales
a
560 2 657 9
Total related party transactions within revenue 560 2 657 9
Materials and services
b
6,784 8,334
Spare parts and consumables
c
7,056 6,350
Other expenses
d
1,948 2,172
Total related party transactions within cost of sales 15,788 16,856
Selling and distribution expenses
e
6,542 3,819 4,876 18,139
General and administration expenses
f
398 567 371 524
Other operating expenses
g
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$000
Entities
under
common
control
Associated
companies
Other
related
parties
Entities
under
common
control
Associated
companies
Other
related
parties
Purchases in the ordinary course of business 11,634 552
Total purchases of property, plant and equipment 11,634 552
During the year ended 31 December 2022, the Group purchased major spare parts and equipment from FZ Solutions LLC (formerly OJSC
Berdychiv Machine-Building Plant Progress) totalling US$ 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
related
parties
Entities
under
common
control
Associated
companies
Other
related
parties
Prepayments for property, plant and equipment
g
3,847 8,463
Total non-current assets 3,847 8,463
Trade and other receivables
h
38 3,245 1 101 4,181 1
Prepayments and other current assets
i
745 120 2,076
Total current assets 783 3,365 1 2,177 4,181 1
Trade and other payables
j
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$000
Issued
capital
Share
premium
Treasury
share reserve
Employee benet
trust reserve
Retained
earnings
Total capital
and reserves
At 1 January 2021 121,628 18 5,112 ( 77, 26 0 ) (2,535) 576,879 803,824
Prot for the year 293,484 293,484
Total comprehensive income for the year 293,484 293,484
Equity dividends paid to shareholders (620,610) (620,610)
Share-based payments 856 856
At 31 December 2021 121,628 185,112 (77, 2 6 0) (1,679) 249,753 477, 554
Prot for the year 101,926 101,926
Total comprehensive income for the year 101,926 101,926
Equity dividends paid to shareholders (155,795) (155,795)
Share-based payments 490 490
At 31 December 2022 121,628 185,112 (77,260) (1,189) 195,884 424,175
207Ferrexpo plc Annual Report & Accounts 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Notes to the Parent Company Financial Statements
Note 1: Corporate information
The Company is incorporated and registered in England, which is considered to be the country of domicile, with its registered ofce at
55StJames’s Street, London SW1A 1LA, UK. The Company’s Ordinary Shares are traded on the London Stock Exchange.
The majority shareholder of the Company is Fevamotinico S.a.r.l. (“Fevamotinico”), a company incorporated in Luxembourg and ultimately owned
byTheMinco Trust, of which Kostyantin Zhevago and two other members of his family are the beneciaries. At the time this report was
published, Fevamotinico held 49.5% (2020: 50.3%) of the Company’s issued voting share capital (excluding treasury shares).
Note 2: Basis of preparation
The nancial statements are prepared under the historical cost convention and in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (“FRS 101).
The nancial statements are presented in US dollars (US$), 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 4652 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 Groups 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 Groups 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 Groups 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
1
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
2
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 Groups 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 Groups 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 efciency 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
BT
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 Groups 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 Groups 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 Groups 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
Fe
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
KT
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
m
3
Cubic metre
Middle East & North Africa
This segmentation for the Groups sales
includes Algeria and the United Arab Emirates
mm
Millimetre
MT
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 Groups sales
includes the United States
North East Asia
This segmentation for the Groups 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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