Ferrexpo Annual Report 2020

FY2020 Annual Report · Ferrexpo

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DELIVERING
SUSTAINABLE
GROWTH

Ferrexpo plc
Annual Report &
Accounts 2020

Ferrexpo plc is the third largest exporter of iron ore
pellets in the world, with high grade iron ore pellets
enabling Ferrexpo’s steel producing customers to
reduce carbon emissions by 40%1.

The Group is listed on the London Stock Exchange,
a member of the FTSE 250 and FTSE4Good Indices,
and has a BBB rating from ESG ratings agency MSCI,
placing Ferrexpo in the top 40% of companies
assessed in the steel sector.

The Group is a major contributor to the Ukrainian
economy, generating 3% of the country’s export
revenues in 2020. The Group is entering into a new
growth phase of its development, with increased
production and new high grade product offerings,
whilst simultaneously cutting the Group’s carbon
footprint per tonne.

SAFET Y FIRST

GROWING OUTPUT

Lost time injury frequency
rate of

0.79

2019: 0.58

Total iron ore
production of

11.2MT

7% increase on 2019

RESILIENT FINANCIAL PERFORMANCE

13% increase
in revenues to

US$1.7 BN

58% increase in diluted
earnings per shareA to

107.9

US cents per share

REINVESTING
FOR THE FUTURE

Capital investmentA

US$206M

increasing total investment since
IPO to over US$2.75 billion

46% increase in
underlying EBITDA A to

US$859M

26% growth in dividends
paid in 2020 to

US$195 M

(33.0 US cents per share)

BALANCE SHEET
STRENGTH

Net cash
position

From a net debt position of
US$281 million at the end
of the comparative year.

Footnote: Alternative performance measures: words with the symbol A are defined in the Alternative Performance
Measures section of the Annual Report on pages 186 to 188. In this report, the terms “Ferrexpo”, the “Company”,
the “Group”, our “business”, “organisation”, “we”, “us”, “our” and “ourselves” refer to Ferrexpo plc and, except
where the context otherwise requires, its subsidiaries as defined in on page 185.
1 Source: CRU.

SAFETY

Safety is at the heart of Ferrexpo’s
operations, with every worker entitled
to a safe working environment to carry
out their day-to-day activities.
P28-29•]

GROWTH

2020 represented the start of an exciting
new phase of growth for Ferrexpo. The
conclusion of an expansion in 2020 delivered
increased volumes, whilst the Group also
pivoted into its next phase of investments for
tomorrow’s growth.
P24-25

PREMIUM

New high grade products developed in
2020 are enabling the Company to
engage with additional premium
customers in new regions of the world.
P22-23

MODERN

Using modern technologies to
position for the future. In 2020,
Ferrexpo became the first mining
company in Europe to deploy large
scale autonomous haul trucks.
P8

SUSTAINABLE

Sustainability is essential for any
company in the modern era, including a
consideration of all stakeholders, with
companies expected to deliver much
more than just financial results.
P26-27

Ferrexpo plc Annual Report & Accounts 2020

Strategic Report

At a Glance
Chair’s Statement
CEO’s Review
Response to COVID-19
Market Review
Strategic Framework
Key Performance Indicators
Business Model
Financial Review
Operational Review
HSEC Committee Chair’s Review
Health and Safety
Environmental Stewardship
Social Engagement
Governance
Non-Financial Information Statement
Workforce and Workforce Engagement
Stakeholder Engagement Activities
Section 172 Statement
Risk Management
Principal Risks
Viability Statement

Corporate Governance

Chair’s Introduction
Board of Directors
Executive Committee
Corporate Governance Compliance
Corporate Governance Report
Audit Committee Report
Nominations Committee Report
Remuneration Report
Directors’ Report
Statement of Directors’
Responsibilities

Financial Statements

02
04
06
09
10
12
14
16
18
22
26
28
30
34
36
37
38
40
44
46
48
61

62
64
66
68
69
76
82
86
108

113

128

115
127

Independent Auditor’s Report to the
Members of Ferrexpo plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement
of Financial Position
129
Consolidated Statement of Cash Flows 130
Consolidated Statement of Changes
in Equity
Notes to the Consolidated
Financial Statements
Parent Company Statement of
Financial Position
Parent Company Statement of
Changes in Equity
Notes to the Parent Company
Financial Statements
Additional Disclosures
Alternative Performance Measures
Glossary

182
185
186
189

180

132

181

131

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

At a Glance

Ferrexpo is an iron ore pellet producer with mines
in Ukraine, as well as marketing and corporate offices
around the world. We have been mining, processing
and selling high quality iron ore pellets to the global
steel industry for over 40 years.

INVESTMENTS
YIELDING
SUSTAINABLE
GROWTH

The Company has invested over
US$2.75 billion since its IPO in 2007,
and as a result Ferrexpo has grown
to become the third largest exporter
of iron ore pellets in the world.

Find out more
P22-25

LONG LIFE ASSETS

Ferrexpo’s operations have supplied the
global steel industry for over 40 years. The
Group’s world class asset base will see a
further +50 years of production if current
output levels are maintained.

Find out more
P22-23

Mineral Resources at FPM and FYM
increased by 12% in 2020, with the
Company now having over 6.1 billion
tonnes of JORC-compliant Mineral
Resources across its three mines,
including 1.7 billion tonnes of
Ore Reserves.

12%

Increase in Mineral
Resources at FPM
and FYM in 2020.

Additionally, the
Group saw a 3%
increase in Ore
Reserves in 2020.

7 %

Growth in production in
2020

Increasing output following
successful expansion of
the Group’s concentrator
in 2020. Further growth in
volumes and pellet quality
are expected in 2021.

GENERATING VALUE
THROUGH HIGH
QUALITY PELLETS

Iron ore pellets are a premium
product for steelmakers, and command
a premium price as they enable steelmakers
to enhance mill productivity whilst also
offering the opportunity to reduce
carbon emissions.

Find out more
P18-21

Ferrexpo plc Annual Report & Accounts 2020

WORLD CLASS
STEELMAKERS

Ferrexpo’s marketing team has developed a
global network of customers that produce the
highest quality steel, including types of steel
used in renewable energy generation.

Find out more
P16-17

99%

Proportion of production represented
by Ferrexpo’s high grade pellets in
2020 (grading 65% Fe and above).

POSITIONED FOR A
LOW CARBON FUTURE

2020 represented a significant year in the
Group addressing its carbon footprint per
tonne, with a 16% reduction in CO2e
emissions per tonne in a single year.

Find out more
P26-39

67 % Fe

Direct reduction
(“DR”) pellets

Through investing
in its production
process, Ferrexpo
is now able to produce
higher grade DR pellets,
which represent the
pathway to carbon-free
steel production
(Green Steel).

40%

less CO2

Independent research by
CRU shows that steel mills
produce 40% less CO2
for each tonne of iron ore
pellets used in a blast
furnace, compared to the
more commonly used
sinter fines.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Chair’s Statement

2020
HIGHLIGHTS
AND LOOKING
FORWARD

2020 has been a significant year in the evolution of
the Ferrexpo business, ranging from resilience in our
response to the global COVID-19 pandemic, shifting
into a new phase in growth of the business, renewed
focus on our Responsible Business activities and
further efforts to strengthen corporate governance.

COVID-19 presented us with a unique set
of challenges in 2020 – from day-to-day
activities being restricted at our operations,
through to temporarily shifting global
demand for iron ore pellets away from the
status quo and towards China. But despite
all this, we grew production by 7% in 2020,
showing our flexibility and resilience as a
business. As a further demonstration of our
resilience, we increased our percentage of
Ukrainian exports to 3% of the country’s
total exports in 2020 (2019: 2%), delivering
consistent export revenues to the national
government throughout the pandemic.

Our workforce remains our strongest asset,
and it is their safety and wellbeing that is
key to all of our future plans. That is why
we have made every effort to insulate and
protect our workforce during the global
pandemic, and I would like to thank them
for their achievements this year. They
represent Ferrexpo’s DNA and their safety
and wellbeing is key to all of our future
plans, and I am proud to report that to
date, production at Ferrexpo’s operations
has continued largely unaffected
despite 3,000 employees, representing
nearly 40% of our workforce in Ukraine,
working remotely during the pandemic.

Our management team evolved in 2020,
with a renewed focus on our operations,
delivering on our growth and carbon
reduction strategies, whilst also increasing
stakeholder engagement. On engagement,
this is evidenced through our recent

View inside Ferrexpo’s concentrator
expansion project, referred to as Section 9,
which was completed in 2020.

Dividends paid

2020

2019

2018

US$195M

US$155M

US$97M

KPIs

P14

For further information, please see the
Responsible Business Section, pages 26–39.

appointment of Liberum as our corporate
broker and financial adviser, and also
through more regular and broader updates
on the business via our social media
channels, which collectively represent a
key opportunity for modern companies to
communicate with their stakeholders.

As we enter into the next phase of the
Group’s development, it is important that
we continue to communicate effectively
around our strategy, from our plans to
expand production volumes and pellet
quality, to cutting our carbon footprint
per tonne for our customers who are
actively targeting production of Green
Steel. Through continued investment in
our operating base, we have demonstrated
our ability to evolve and adapt for the
future, including the recent deployment
of large scale autonomous trucks at our
Yeristovo mine, making Ferrexpo the first
mine in Europe to utilise this technology.
Our strategy and purpose remain the same
however: we continue to invest in both our
assets and our people, produce the highest
quality iron ore products for the global
steel industry, and operate a business
model that provides both sustainable
growth and returns to shareholders.

Corporate governance
At Board level, in addition to my
appointment as Chair of the Company we
appointed Ann-Christin Andersen as an
additional Independent Non-executive
Director to the Board in March 2021, who
brings over 30 years of experience in the
oil and gas industry. The Ferrexpo Board
also conducted a process of shareholder
engagement following the 2020 Annual
General Meeting, and we are taking steps

Lucio Genovese,
Chair, Ferrexpo plc.

Ferrexpo plc Annual Report & Accounts 2020

to act on the feedback received as part of
this process, including increased levels of
shareholder engagement and greater levels
of disclosure with proxy advisory firms.

In March 2021, the Committee of
Independent Directors (“CID”) concluded
its previously disclosed review into the
Group’s sponsorship arrangements
with the football club FC Vorskla, with
arrangements having been made for the
repayment in full of the c.US$17 million
loaned by FC Vorskla to Collaton Limited.
For further information regarding the
conclusion of the CID’s review, please
see page 36 (Governance), page 76 (Audit
Committee Report) and Notes 30 and 34
to the Consolidated Financial Statements.

Responsible business
In January 2020 we reformed our CSR
Committee with a renewed focus on safety
and the environment, with Independent
Non-executive Director Fiona MacAulay
appointed as Chair. Details of the work
undertaken by the newly formed Health,
Safety, Environment and Community
(“HSEC”) Committee are detailed in the
Responsible Business section of this report
(pages 26 to 39).

Shareholder returns
Through strong operating performance,
prudent financial management, and
continued investment in our operations,
we have consistently returned profits to
shareholders in the form of dividends since
IPO. Dividends paid in the 2020 calendar
year grew by 26% to US$195 million,
reflecting the Group’s strong balance sheet
and growth in our operations. Furthermore,
the Board is pleased to announce a special
interim dividend of 39.6 US cents per share
(2019: 3.3 US cents per share), meaning that
the total dividend declared in respect of the
2020 financial year will be a record 72.6 US
cents per share (total dividend declared in
respect of 2019: 19.8 US cents per share).
This record dividend reflects the Group’s
strong operational and financial
performance, transition to net cash position
and continued healthy iron ore prices. The
Board will consider, as appropriate, whether
or not to propose a final dividend in respect
of 2020, which if proposed will be put to the
Group’s AGM in May 2021.

A final thank you to our workforce for the
hard work and dedication shown to achieve
the result for 2020 presented in this report,
which is a significant achievement in light
of the social difficulties faced across the
globe. The year ahead marks a new phase
for Ferrexpo, one which we are very much
looking forward to developing with all of
our stakeholders.

Lucio Genovese
Chair, Ferrexpo plc

Strategic ReportCorporate GovernanceFinancial Statements+7

Production growth
of 7% in 2020 to total
iron ore production
of 11.2 million tonnes.

50%

Growth in underlying
EBITDA A margins to
50% in 2020 through
investment and
new pellet types
(2019: 39%).

Ferrexpo plc Annual Report & Accounts 2020

CEO’s Review

TAKING A LOOK
AT KEY EVENTS
OF 2020

Despite the headwinds facing the world in 2020
due to the global COVID-19 pandemic, we are
pleased to be able to report today that our
business has shown strength in its ability to grow
and adapt to shifting market conditions. Ferrexpo
is a multi-faceted business that is focused on
providing stakeholder value beyond its financial
results in any given year, and the following review
aims to provide an overview of our key
achievements in 2020, as well as our goals for the
year ahead.

0.79

Group LTIFR of 0.79
recorded in 2020, a
level 22% below
five-year trailing
average rate.

16%

Reduction in the
Group’s combined
CO2e emissions
footprint (comprising
8% reduction in Scope
1 CO2e emissions
footprint and 21%
reduction in Scope 2
CO2e).

Jim North,
Acting Chief Executive Officer.

Ferrexpo plc Annual Report & Accounts 2020

Safety continues to be the number one
priority at our operations. We strive to
ensure that all employees and contractors
are able to return home safely at the end of
each shift, and it is our aim to provide clear
and transparent reporting around safety.
Whilst the Group has recorded a second
successive year with its lost time injury
frequency rate (“LTIFR”) materially below
the Group’s five-year trailing average, it
is with regret that we report the fatality
of a contractor at our operations in 2020,
whereby a maintenance contractor was
fatally injured during maintenance work
being conducted in the beneficiation plant.
We strive to learn from these terrible events
and further details of the investigation
and key learnings from this incident are
provided on page 28. We also continue
to benchmark our safety performance
against our peers and can report a LTIFR
in 2020 significantly lower than the major
iron ore miners in the Pilbara region of
Australia1. Given the difficulties facing
the world related to the global COVID-19
pandemic in 2020, we note the importance
of our role in keeping our workforce
safe, protecting local communities and
also increasing our efforts in terms of
workforce wellbeing. Further details of
these initiatives in relation to COVID-19
are provided on pages 9 and 34-35.

Growth through a well invested asset base
has been a cornerstone of our business
since IPO, and 2020 marks the culmination
of a multi-year expansion plan to grow
production volumes and product quality.
In 2020, we saw production volumes grow
by 7%, whilst we also added sales of a
new product – direct reduction (“DR”)
pellets – to our marketing offering. This
growth in volumes and product quality has
helped to deliver one of the best annual
financial results Ferrexpo has achieved
since listing in 2007, details of which are
provided in the Financial Review on pages
18 to 21. Furthermore, DR pellets are
particularly important as they position us
for the future of carbon-free Green Steel,
as well as enable us to reduce our Scope 3
carbon emissions footprint. Further details
of our expansion plans are available on
pages 22 to 25, Green Steel on page 31
and our Scope 3 footprint on page 32.

Producing high grade, premium iron ore
pellets enables us to generate higher
margins through selling to premium
customers. In 2020, we realised an
underlying EBITDA A margin of 50% on our
pellets, up from the five-year trailing
average of 39%. Through selling our
premium products to the world’s best
steelmakers, we also add resilience to our
business.

Viewing platform overlooking
Ferrexpo’s Poltava Mine.

KEY RECENT DEVELOPMENTS

Board changes:
Lucio Genovese appointed Chair,
leading Company into new phase of
development and growth. Jim North
appointed as an Executive Director.
Additional Independent Non-executive
Director Ann-Christin Andersen
appointed to the Board in March 2021.

Management changes:
Jim North appointed Acting CEO;
stepping into role after six years
as COO.

Sustainable growth:
Completion of concentrator expansion,
resulting in growth in production.
Advancing additional projects such
as concentrate stockyard to provide
operational flexibility.

New products:
Trial shipments of higher grade DR
pellets; growing into new markets,
new premium customers. DR pellets
represent future of pellet market and
Green Steel.

Resilience:
In the midst a of global pandemic;
increasing sales to China in response
to shifting markets.

Safety:
LTIFR of 0.79, second successive year of
rate being materially below the five-year
trailing average (1.01).

Net cash position:
Delivering a US$285 million reduction in
net debt in 2020, resulting in a net cash
position of US$4 million as at year end,
down from peak levels of net debt of over
US$850 million seen at the end of 2015.

US$859M

Strong cash generation with underlying
EBITDA A of US$859M, a 46% increase
on 2019.

Investments yielding growth

50%

Underlying EBITDA A margin of 50% in
2020 (five-year trailing average: 39%).

Shareholder returns

US$195M

Total of US$195 million paid in dividends
in 2020 (2019: US$155 million).

1 Latest available period: 12 months to June 2020. http://www.dmp.wa.gov.au/Documents/Safety/MSH_Stats_

Reports_SafetyPerfWA_2019-20.pdf

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

CEO’s Review
continued

Underlying EBITDA

2020

2019

2018

US$859M

US$586M

US$503M

KPIs

P14

1 Carrara, S., Alves Dias, P., Plazzotta, B. and Pavel, C.,

Raw materials demand for wind and solar PV
technologies in the transition towards a decarbonised
energy system, EUR 30095 EN, Publications Office
of the European Union, Luxembourg, 2020,
ISBN 978-92-76-16225-4 (online), doi:10.2760/160859
(online), JRC119941.

CASE STUDY

AUTONOMOUS LARGE SCALE
HAUL TRUCKS – A FIRST
FOR MINING IN EUROPE
Ferrexpo recorded a first in December
2020, becoming the first mine to deploy
a large scale autonomous haul truck in
both Ukraine and Europe.

Fleet autonomy represents state of the
art modern technology for modern
mining operations, and has been shown
to offer mining companies significant
improvements in both safety and
productivity, through removing
individuals from hazardous working
environments, whilst also enabling
trucks to operate 24/7.

Automation of the Group’s CAT 793
haul trucks at the Yeristovo mine is
under way, with additional trucks
expected to be deployed throughout
2021. Fleet automation represents
industry best practice and is an
important step in the Group’s long-term
growth ambitions.

This milestone represents the latest step
in the Group’s drive to modernise its
operations, with a similar project to
automate the Group’s drilling operations
successfully implemented back in 2017.

Our work over the years to develop a
customer presence in China enabled us to
efficiently pivot to this market in 2020 when
demand in the rest of the world declined as
a result of the global COVID-19 pandemic.
We are also proud to sell our pellets to
steelmakers that produce high end steels
for green sectors such as renewable power
generation, with steel representing up to
85% of the construction of a typical wind
turbine, as well as steel representing the
single largest component by weight in the
construction of solar PV technologies1.

Technology helps us to maintain our
profitability and resilience, as well as
offer safety benefits. In December 2020,
we successfully deployed autonomous
trucks in our Yeristovo mine, becoming
the first mine in Europe to successfully
invest in this modern technology. We have
seen significant safety improvements
through our investments in other areas of
technology, such as our autonomous drill
rigs and drone surveys, which have been in
use since 2017 and 2018 respectively. We
expect to see similar benefits throughout
our mining department as further
automation investments are realised.

High ESG standards are expected of all
mining companies, and we aim to be no
exception. We worked hard to reduce our
carbon emissions footprint per tonne in
2020, achieving an 8% reduction in Scope
1 and 21% reduction in Scope 2. We began
reporting our Scope 3 emissions in 2019
and have further developed our thinking
in terms of reporting and assurance in

this year’s report. We continue to work
in a range of assistance projects in our
neighbouring communities, which have
been particularly focused on helping
medical institutions during the global
pandemic in 2020, with US$2.5 million
of funding made available in March
2020 through our dedicated COVID-19
Response Fund, in addition to a further
US$1 million of funding approved in 1Q
2021. For further details of our ESG work,
please see the Responsible Business
section, pages 26 to 39, as well as our
Responsible Business Reports, which
are available on the Ferrexpo website.

Our strong operational performance,
delivery of investments and expertise in
marketing have enabled us to deliver a
46% increase in underlying EBITDA A to
US$859 million in 2020, which will enable
us to reinvest in our operations to further
develop the business, in addition to
delivering further shareholder value.

I would like to thank all of our stakeholders
in achieving the result presented in this
report, from our workforce’s collective
hard work and determination, to our local
communities in Ukraine, and the continued
support of our customers and shareholders
around the world. We have much to look
forward to at Ferrexpo in 2021, and I would
like to thank everyone for their support
going into the year ahead.

Jim North
Acting Chief Executive Officer

COVID-19

FERREXPO’S
RESPONSE TO
COVID-19

Throughout the global COVID-19
pandemic in 2020, Ferrexpo has taken
significant measures to protect its
workforce and local communities.

Throughout the year, the Group has
continued to operate with minimal
disruption due to COVID-19. In response
to the global pandemic, Ferrexpo has
implemented a range of measures at
various levels of its organisation to raise
awareness and change behaviours in
order to reduce the spread of COVID-19,
as well as clear messaging around the
effectiveness of the Group’s actions.
Across the business, Ferrexpo has enabled
remote working, with over 3,000 employees
working remotely during the peak of the
global pandemic in April and May 2020,
representing nearly 40% of the Group’s
workforce at its operations in Ukraine. For
those who cannot work remotely, social
distancing, face masks and staggered
shifts are all examples of the significant
measures that have been implemented,
along with the Group’s own in-house
testing equipment, with the capacity to
conduct over 1,000 tests a month.

However, no community has been
unaffected by COVID-19, and Ferrexpo’s
workforce is no exception. As of the end
of 2020, one Ferrexpo employee sadly
passed away having contracted COVID-19.
Where the Group registers a positive test
result in its testing, extensive measures
are implemented in each instance to both
look after the affected individual and to
minimise the risk of onward transmission
of the virus. The Group has its own
specialist teams in place to isolate and
support affected individuals, as well
as conduct contact tracing exercises.

Donated equipment for
local hospital during
global COVID-19
pandemic, July 2020.

Furthermore, the Group has periodically
implemented increased measures whereby
external visitors are prohibited from visiting
Ferrexpo’s operations, aimed at further
reducing the transmission risk at times of
heightened infection rates within Ukraine.

In addition to the efforts undertaken to
protect the Group’s workforce, Ferrexpo
has made significant efforts to protect
its local communities in 2020, including
the approval in March 2020 of a US$2.5
million dedicated COVID-19 Response
Fund for medical donations to support
local hospitals. In light of the ongoing
pandemic in 2021, the Group has approved
a further US$1 million of funding for this
initiative, to sustain its support efforts
into 2021. Further details of this work are
provided on pages 34 to 35 of this report.

Ferrexpo plc Annual Report & Accounts 2020

40%

Nearly 40%
of workforce
demobilised
from operations
at the peak of
the pandemic.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Market Review

2020 was a year of shifting supply and demand
within the markets, with the main factors being (1)
COVID-19 temporarily shifting relative demand for
iron ore towards China, and (2) disruptions in iron ore
supply from Brazil and Australia. Ferrexpo’s diverse
customer portfolio, central geographic location and
flexibility in its logistics capacity helped the Group to
adapt quickly to these changing conditions.

The following market review focuses
on the high grade fines index (65%
Fe), as this is the basis for pricing
Ferrexpo’s iron ore products, which are
predominantly grade 65% Fe or above.

Iron ore fines indices
Global iron ore fines prices showed
resilience in the first half of 2020, amid the
onset of the global pandemic, with the high
grade (65% Fe) iron ore fines index rising

9% through to the end of June 20201. This
upward trend reflected the speed and scale
of the Chinese government’s intervention in
its economy in the first half of the year, with
China ending the year as the only
developed economy in the world to report
overall growth in 20202. China alone
typically represents approximately 70% of
total global iron ore fines consumption3,
and therefore this acceleration is directly
attributable to the strength in iron ore fines
prices in the first half of 2020.

In the second half of the year, iron ore fines
prices continued their upward trajectory.
This was driven by strong demand in
China, particularly high grade ores, but
also by returning demand from steel mills
in the rest of the world. This increase in
pricing was further exacerbated by supply
side disruptions from Brazilian iron ore
exports, related to ongoing permitting
issues following two high profile breaches
of tailings dams in 2015 and 2019. Supply
constraints were also seen in Australia due
to short term shortages of benchmark
material. These factors led to a 53% rise in
iron ore prices in the second half of the
year, to close the year with an iron ore
price of US$174 per tonne1.

Expectations for the fines index in 2021 are
that fines supply from Brazil will begin to
return to previous levels, whilst overall
output from Australia will be maintained at
broadly similar levels to those seen in 2020.
It is, however, understood that the overall
chemistry of benchmark sinter fines
material produced from the Pilbara is
changing, and it is, therefore, expected
that demand for low alumina iron ore
products, such as those produced by
Ferrexpo, will increase as steelmakers seek
to balance the chemistry of material
entering each blast furnace.

Pellet premiums
Pellet premiums, which are applied to the
pricing for pellets in addition to the
benchmark iron ore fines price, are
primarily governed by global demand from
key markets in Europe and Asia. With these
destinations seeing a sharper impact from
the global pandemic in 2Q and 3Q 2020
compared to China, pellet premiums did
not experience the same level of support
as was seen with sinter fines. This decline
was seen despite significant disruption
in the supply of Brazilian pellets during
2020, which represents the single largest
source of iron ore pellets in the global
pellet export market.

Atlantic pellet premiums, as assessed by
Platts, which is the premium used in
pricing the majority of long term contracts,
fell from a multi-year high of US$57 per
tonne in 2019 to an average of US$29 per
tonne in 2020, with this decrease linked to
the impact of COVID-19 on key pellet
markets. Conversely, China saw increased
pellet buying activity in 2020, which was
the result of government stimulus and
increased steel demand. With global iron
ore demand pivoting towards China as the

Loading pellets at Ferrexpo’s
berth at the Port of Pivdennyi
(formerly known as Yuzhny)
in June 2020.

1 Source: S&P Platts.
2 Source: IMF World Economic Outlook Report.
3 Source: CRU.

Summary of industry key statistics for 2020 and 2019
(All figures US$/tonne, unless stated otherwise.)

Average Platts 62% Fe iron ore fines price CFR China4

Average Platts 65% Fe iron ore fines price CFR China4

65% Fe spread over 62% Fe

Average Atlantic pellet premium4

Average China pellet premium4

Average DR pellet premium4

C3 freight (Brazil – China)5

C2 freight (Brazil – Netherlands)5

2020

109

122

2019

104

Global steel production (million tonnes)6

1,829

1,846

Change

17%

18%

-49%

-18%

-41%

-21%

-19%

-1%

Iron ore

)

e
n
n
o
t
/
$
S
U

(

e
c

i
r
p

x
e
d
n

200

180

160

140

120

100

Jan 20

Feb 20

Mar 20 Apr 20 May 20

Jun 20

Jul 20 Aug 20 Sep 20 Oct 20 Nov 20

Dec 20

Jan 21

Fines price (65% Fe)

Chinese Spot PP

Atlantic PP

Source: Platts

pandemic developed, the global pellet
export market mirrored this shift, with over
50% of global pellet exports dispatched to
China at the peak of the pandemic in May
and June 2020 (2019 China average: 22%)7.
As a result of this increasing supply, spot
pellet premiums in China dropped to below
US$5 per tonne in August 2020, as
portside inventories of imported iron ore
pellets doubled in size. Following a return
to more normal market conditions in 4Q,
spot pellet premiums in China returned to
average US$23 per tonne in 4Q 2020.

With Chinese steel producers seeking to
increase the productivity of steel mills and
further reduce their environmental impact
in 2020, owners of these steel mills
increased buying of imported iron ore
pellets from approximately 28 million
tonnes of pellets in 2019 to 43 million
tonnes in 2020, representing a significant
shift in the global pellet export market7.
Ferrexpo, with its operating base in
Ukraine, was well situated to adapt to this
shift in the pellet market, whereas other
pellet producers in more remote locations

such as Sweden and Canada faced
additional shipping and logistics
challenges with their increased shipping
distances to China.

The second half of the year was
characterised by resurgent demand for iron
ore, including iron ore pellets. In particular,
a number of European, Japanese and
Korean steelmakers restarted blast
furnaces in 4Q 2020, and as a result, pellet
producers saw a return of sales to these
markets, replacing spot sales to China. As
of the end of 2020, the global pellet export
market had broadly returned to a balance
of sales in line with previous years.

The outlook for pellet premiums in 2021 is
positive, with continued supply disruption
of Brazilian pellet exports expected, as
Brazilian producers face continued
operational issues in the consistent supply
of pellet feed, as well as the apparent
prioritisation of the domestic steel sector in
Brazil. The return of Brazilian pellet
producer Samarco is not expected to
materially impact the market in 2021, with

Ferrexpo plc Annual Report & Accounts 2020

this operation ramping up towards a
reduced level of output compared to
previous levels. Global demand for pellets
continues to be robust, with steel
producers globally looking to increase the
productivity of blast furnaces and reduce
carbon emissions, both of which are
achieved through the increased usage of
iron ore pellets over sinter fines. In
December 2020, Brazilian pellet producer
Vale S.A. announced an agreed Atlantic
pellet premium of US$40 per tonne for 1Q
2021, representing an increase of over
US$10 per tonne on the level seen in late
2020, and this reflects tightness in pellet
supply relative to demand. It is expected
that demand for both iron ore fines and
pellets will continue to mirror global steel
demand throughout 2021, as economies
around the world recover from the
global pandemic.

Seaborne freight indices5
Ferrexpo exports all of its production,
with the majority shipped through the
Group’s berth at the port of Pivdennyi
(formerly Yuzhny) in south west Ukraine.
The C3 freight rate, which is the most
relevant index for Ferrexpo’s shipments to
Asia, averaged US$15 per tonne in 2020,
compared to US$19 per tonne in 2019.
The evolution of the C3 index throughout
the year was dominated by the global
COVID-19 pandemic, starting at US$19
per tonne in January, declining to a low
of less than US$7 per tonne in late May
(driven by declining global industrial
output and falling oil prices), before
recovering in the second half of the year.

Iron ore demand: steel sector
According to the World Steel Association,
global steel output fell by just 1% in 2020
to 1,829 million tonnes, despite the impact
of the global COVID-19 pandemic. Of
particular note is the global recovery in
steel output in the second half of the year,
which amounted to a 4% gain year on year
for this period. China, which represents
over 50% of global steel production,
drove global demand trends in 2020, with
a 5% increase in steel output in the full
year, whilst the EU, Japan and the rest of
the world saw full year steel output fall
by 12%, 16% and 5% respectively6. The
EU and Japan are key import markets for
iron ore pellets and therefore particularly
relevant for this review. December 2020
data for steel output6 indicates that both
the EU and Japan are producing at similar
rates to December 2019 (down 1% and 3%
respectively), suggesting that the recovery
of these markets is nearing a conclusion.

4 Source: S&P Platts.
5 Source: Baltic Exchange.
6 World Steel Association.
7 Management estimates.

Strategic ReportCorporate GovernanceFinancial Statements

Ferrexpo plc Annual Report & Accounts 2020

Strategic Framework

Ferrexpo’s strategic goal is to maximise value from its world class
iron ore deposit, by producing high quality iron ore products that
can be sold to the best steel producers in the world.

This is achieved through a well-invested asset base, an engaged
workforce and a low cost of production, which enables further
reinvestment in the Group’s assets.

Strategy as stated in last year’s report

Goals as communicated in last year’s report

PRODUCE HIGH
QUALITY PELLETS

BE A LOW COST
PRODUCER

SELL TO A WORLD CLASS
CUSTOMER PORTFOLIO

MAINTAIN A SOCIAL
LICENCE TO OPERATE

DISCIPLINED CAPITAL
ALLOCATION

– Maintain consistent quality in line

with customer expectations.

– Commence regular production of

67% Fe DR grade pellets for market
development amounting to c.2% to 3%
of total production.

– Complete new grinding section in

concentrator.

–

Increase production levels to improve
efficiencies and reduce C1 cash cost.

– Final consolidation of mining and mobile

maintenance activities into one
organisation.

– Continue to focus on servicing the
Group’s long-term customer base.

– Renew long-term contracts with key

customers as they expire.

– Maintain a geographically diversified

portfolio of crisis-resistant customers.

– 67% Fe DR pellet trial shipments for

market development.

– Continued delivery of high quality

– Concentrator expansion completed in

– Expand existing customer portfolio with

iron ore pellets to existing premium

2Q 2020 and ramped up in 2H 2020. For

additional high quality steelmakers.

customer portfolio.

further information, see pages 22 to 25.

– Continue to develop DR pellet offering

– Trial cargoes of DR pellets

–

Increased proportion of high grade

with trial cargoes shipped to additional

commenced in 2020, with two

shipments delivered, amounting to

339kt, or 3% of total production.

pellets (65% Fe or above) to 99%

DR pellet customers.

of total production in 2020.

– Further investments in both

concentrator and pelletiser

(see pages 22 to 25).

– C1 cash cost A reduced by 13% to

– Consolidation of mining and mobile

– Target further cost reduction initiatives

US$41.5 per tonne, as a result of a

maintenance into one organisation

through disciplined cost control and

7% production increase, and

commenced in December 2020, with

further dilution of fixed costs through

productivity increases. An example of

completion expected 1Q 2021.

production increases.

which is in the consumption of diesel,

which fell by 5% in 2020 whilst mining

activity rose by 1%.

– Market pattern adjusted in 2020 by

– Two trial cargoes of DR pellets shipped

– Develop relationships with new

global COVID-19 pandemic, meaning

in 2020 (combined total: 339kt).

customers for existing blast furnace

increased volumes to spot customers

– Diverse geographic mix of customers

pellet offering.

– Long term contracts renewed with key

– Sales to China and SE Asia increasing

maintained in 2020.

– Further work to establish DR pellet

offering with new customers.

in China.

customers.

to 56% in 2020 (2019: 30%), reflecting

– Establish presence in selling high grade

– Development of new relationships

iron ore market conditions in 2020.

concentrate, either through synergies

with potential new customers, with

particular focus on DR pellets.

with existing customers or through new

relationships.

– Eliminate fatal and serious accidents by
focusing on material operational risk
management.

– One fatality in 2020. For further

– Greenhouse gas emissions per tonne

– Target zero harm for workforce.

details, please see page 28.

(CO2e) reduced by 16% in 2020.

– LTIFR maintained materially below

– Continued community support

– Maintain LTIFR safety metric below

five-year trailing average and iron ore

– Support the community through various

five-year trailing average for second

throughout 2020 via Ferrexpo Charity

peer group.

initiatives.

successive year.

– Reduce consumption of key inputs such

as electricity and gas, and reduce
emissions per tonne.

–

If market conditions are appropriate,
look to extend the Group’s debt maturity
profile and increase available facilities.

– Subject to cash flows, continue to pay

dividends.

– Subject to cash flows, increase

development capex to expand the
Group’s concentrate and pelletising
capacity.

Fund, with specific focus on COVID-19

Response Fund, as well as ongoing

programme to refurbish local hospitals

and schools.

– Continue efforts to reduce Scope 1 and

2 emissions footprints per tonne.

– Continued capital investment in the

– US$195 million of dividends paid in

– Continued development of operations,

Group’s operations, amounting to

2020 (2019: US$155 million).

delivering volume growth and quality

US$206 million in 2020 (2019: US$247

– Further special interim dividend

improvements.

million).

announced of 39.6 US cents per share,

– Continue to pay dividends as

– The Group has continued to repay

(2019: 3.3 US cents). Total dividends

appropriate with cash flows in 2021.

existing debt facilities under the

existing maturity profile. Market

declared in respect of 2020 amount to

72.6 US cents per share (2019: 19.8 US

conditions have not necessitated any

cents per share), reflecting strong

extension of existing debt facilities.

operational and financial performance

of the Group.

Ferrexpo plc Annual Report & Accounts 2020

Goals as communicated in last year’s report

What was achieved in 2020

Strategic targets for 2021

– Continued delivery of high quality

– Concentrator expansion completed in

iron ore pellets to existing premium
customer portfolio.

2Q 2020 and ramped up in 2H 2020. For
further information, see pages 22 to 25.

– Trial cargoes of DR pellets

commenced in 2020, with two
shipments delivered, amounting to
339kt, or 3% of total production.

–

Increased proportion of high grade
pellets (65% Fe or above) to 99%
of total production in 2020.

– Expand existing customer portfolio with
additional high quality steelmakers.

– Continue to develop DR pellet offering
with trial cargoes shipped to additional
DR pellet customers.

– Further investments in both
concentrator and pelletiser
(see pages 22 to 25).

– C1 cash cost A reduced by 13% to
US$41.5 per tonne, as a result of a
7% production increase, and
productivity increases. An example of
which is in the consumption of diesel,
which fell by 5% in 2020 whilst mining
activity rose by 1%.

– Consolidation of mining and mobile
maintenance into one organisation
commenced in December 2020, with
completion expected 1Q 2021.

– Target further cost reduction initiatives
through disciplined cost control and
further dilution of fixed costs through
production increases.

– Market pattern adjusted in 2020 by

– Two trial cargoes of DR pellets shipped

– Develop relationships with new

global COVID-19 pandemic, meaning
increased volumes to spot customers
in China.

– Long term contracts renewed with key

customers.

– Development of new relationships
with potential new customers, with
particular focus on DR pellets.

in 2020 (combined total: 339kt).

– Diverse geographic mix of customers

maintained in 2020.

– Sales to China and SE Asia increasing
to 56% in 2020 (2019: 30%), reflecting
iron ore market conditions in 2020.

customers for existing blast furnace
pellet offering.

– Further work to establish DR pellet

offering with new customers.

– Establish presence in selling high grade
concentrate, either through synergies
with existing customers or through new
relationships.

– Eliminate fatal and serious accidents by

focusing on material operational risk

– One fatality in 2020. For further
details, please see page 28.

– Greenhouse gas emissions per tonne

– Target zero harm for workforce.

(CO2e) reduced by 16% in 2020.

– LTIFR maintained materially below

– Continued community support

five-year trailing average for second
successive year.

throughout 2020 via Ferrexpo Charity
Fund, with specific focus on COVID-19
Response Fund, as well as ongoing
programme to refurbish local hospitals
and schools.

– Continued capital investment in the
Group’s operations, amounting to
US$206 million in 2020 (2019: US$247
million).

– The Group has continued to repay
existing debt facilities under the
existing maturity profile. Market
conditions have not necessitated any
extension of existing debt facilities.

– US$195 million of dividends paid in

2020 (2019: US$155 million).

– Further special interim dividend

announced of 39.6 US cents per share,
(2019: 3.3 US cents). Total dividends
declared in respect of 2020 amount to
72.6 US cents per share (2019: 19.8 US
cents per share), reflecting strong
operational and financial performance
of the Group.

– Maintain LTIFR safety metric below

five-year trailing average and iron ore
peer group.

– Continue efforts to reduce Scope 1 and

2 emissions footprints per tonne.

– Continued development of operations,
delivering volume growth and quality
improvements.

– Continue to pay dividends as

appropriate with cash flows in 2021.

– Maintain consistent quality in line

with customer expectations.

– Commence regular production of

67% Fe DR grade pellets for market

development amounting to c.2% to 3%

of total production.

– Complete new grinding section in

concentrator.

–

Increase production levels to improve

efficiencies and reduce C1 cash cost.

– Final consolidation of mining and mobile

maintenance activities into one

organisation.

– Continue to focus on servicing the

Group’s long-term customer base.

– Renew long-term contracts with key

customers as they expire.

– Maintain a geographically diversified

portfolio of crisis-resistant customers.

– 67% Fe DR pellet trial shipments for

market development.

– Support the community through various

management.

initiatives.

– Reduce consumption of key inputs such

as electricity and gas, and reduce

emissions per tonne.

–

If market conditions are appropriate,

look to extend the Group’s debt maturity

profile and increase available facilities.

– Subject to cash flows, continue to pay

dividends.

– Subject to cash flows, increase

development capex to expand the

Group’s concentrate and pelletising

capacity.

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Key Performance Indicators
Measures to assess performance
across the business in 2020.

See pages 186 to 188 for a reconciliation of Alternative
Performance Measures to the IFRS equivalent.

FINANCIAL KEY PERFORMANCE INDICATORS (KPIs)

Underlying EBITDAA

Profit for the year

2020

2019

2018

US$859M

US$586M

US$503M

2020

2019

2018

US$635M

US$403M

US$335M

The Group calculates underlying EBITDA as profit before tax
and finance plus depreciation and amortisation, net gains
and losses from disposal of investments and property, plant
and equipment, share-based payments and write-offs and
impairment losses. Underlying EBITDA measures the Group’s
ability to generate cash as well as providing a useful measure
of operating performance excluding certain non-cash items.
In 2020, underlying EBITDA was US$859 million, reflecting
increased sales volumes and reduced cash operating costs.

Link to strategy: 1 2 3 4 5
Closest equivalent IFRS measure: profit before tax and finance

In addition to Alternative Performance Measures, Ferrexpo
considers the IFRS results of the Group to be an important
measurement of profitability. In 2020, profit for the year was
58% higher at US$635 million, reflecting an increase in
production and decrease in operating costs and capital
investment.

Link to strategy: 1 2 3 4 5

Net debt to underlying EBITDAA

Net cash flow from operating activities

2020

2019

2018

N/A

0.48

0.67

2020

2019

2018

US$687M

US$473M

US$292M

Ferrexpo uses net debt to underlying EBITDA to monitor
its debt levels relative to profitability. It is an industry
standard measurement used to determine relative levels
of indebtedness. As of the end of 2020, the Group entered
into a net cash position of US$4 million, reflecting the
strong cash flow generation of the Group during 2020.

Net cash flow from operating activities represents the cash
flow generation ability of the Group and indicates available
cash flow for investments, returns to shareholders and debt
reduction. In 2020, net cash flow from operating activities
increased 45% to US$687 million, reflecting higher production,
increased product quality and lower operating costs.

Link to strategy: 1 2 3 4 5

Ferrexpo plc Annual Report & Accounts 2020

Link to strategy

1. Produce high quality pellets.
2. Be a low cost producer.
3. Sell to a world class customer portfolio.
4. Maintain a social licence to operate.
5. Maintain appropriate capital allocation between a strong

balance sheet, returns to shareholders and investment for growth.

NON-FINANCIAL KEY PERFORMANCE INDICATORS (KPIs)

Lost time injury frequency rate (“LTIFR”)

Production volumes

2020

2019

2018

0.79

0.58

1.18

2020

2019

2018

11.2MT

10.5MT

It is the Group’s highest priority to ensure its workforce
operates in a safe environment. The LTIFR is an industry
standard measurement and an important indicator of how
safe the work environment is. The LTIFR in 2020 was 0.79
(2019: 0.58), representing the second successive year that
this metric is materially below the Group’s five-year trailing
average (1.01).

Link to strategy: 1 2 3 4 5

Production volumes measure the Group’s ability to meet
customer demand as well as provide an indication of the
Group’s operational performance. In 2020, production was
up 7% to 11.2 million tonnes as a result of the completion of
investments in the Group’s production process in Ukraine.

Link to strategy: 1 2 3 5

C1 cash costsA

Sales volume by region

2020

2019

2018

US$41.5/T

US$47.8/T

US$43.3/T

This is the cash cost of production of iron pellets from own ore
to the factory gate, divided by production. This is an industry
standard measurement and assesses Ferrexpo’s relative
competitiveness compared to other pellet producers. In 2020,
Ferrexpo’s C1 cash cost of production decreased by 13% to
US$41.5 per tonne, reflecting a 7% increase in production and
falling input costs for raw materials prices such as diesel and
electricity.

Link to strategy: 2 5

Turkey, MENA
and India

China & South
East Asia

North East Asia

2020

2019

2020

2019

56%

30%

2020

2019

2018

13%

2018

Western Europe

Central Europe

North America

2020

2019

2018

2020

23%

2020

13%

16%

2019

2018

36%

2019

47%

2018

16%

17%

Ferrexpo believes it is important to have a diversified customer
base to be able to withstand periods of volatility in specific
regions. In 2020, the global COVID-19 pandemic resulted in a
temporary pivot in sales towards China, in line with increasing
relative demand from this market.

Link to strategy: 3 5

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Business Model

Ferrexpo’s purpose is to produce and market premium quality iron ore
pellets and concentrate, in a socially responsible and sustainable manner.
Ferrexpo has achieved this for a number of years through building
constructive relationships with stakeholders and driving consistent and
sustainable returns from its asset base in mining, processing and logistics.

CORE COMPETENCIES

OUR COMMERCIAL AND OPERATING MODEL

1. Long life asset base
Tier one mining assets with over
40 years of production track record
and Ore Reserves for a further
+50 years of production.

2. Established mining,
processing and logistics
infrastructure
Reinvestment of profits over successive
years has developed Ferrexpo into the third
largest exporter of iron ore pellets globally.

3. Skilled workforce
Working safely, adapting to implement new
technology, to increase production in a
safe and sustainable manner.

4. Premium products
Consistent investment in assets providing
near-term growth in production volumes,
product quality and new product types.

5. Premium customers
Ferrexpo’s marketing team has developed
a network of established steel producers,
building resilient business relationships.

6. Prudent financial
management
Resilience, consistent profitability,
disciplined capital allocation, balance
sheet strength.

LONG LIFE ASSET BASE

The Group has a mine life of over 50 years at its two main
mines, with an additional mine (FBM) in development.

OPERATIONS & WORKFORCE

Experienced management team and well invested
business, transforming raw ore into high grade pellets.

PREMIUM PRODUCTS

Pellets are the highest quality form of iron ore that can
be used in the steelmaking process.

PREMIUM CUSTOMERS

Ferrexpo supplies its iron ore products to the world’s
best steelmakers to produce high quality steel types.

PRUDENT FINANCIAL MANAGEMENT

Delivering strong profitability to ensure a balance of
investment for future growth and shareholder returns.

OUR COMMERCIAL AND OPERATING MODEL

Ferrexpo plc Annual Report & Accounts 2020

UNDERPINNED BY OUR VALUES

Responsibility
Safety first,
environmental
responsibility,
accountable to
communities. P26

Make it happen
Focused efforts to
deliver superior business
results, achieved
through an engaged
workforce. P38-39

Integrity
Delivering high ethical
standards and delivering
on commitments.
Accountability. P36

Diversity within
one team
Valuing difference
in opinions and
backgrounds. Building
collective strength. P38

Continuous
innovation
Embracing change.
Courage to improve and
accepting new thinking.
P08

STAKEHOLDER BENEFITS

Employees
Wages and salaries paid
(2019: US$109M)

US$114M

Customers
Revenue generated
(2019: US$1.5BN)

US$1.7 BN

Suppliers
Suppliers of goods and services
(2019: US$944M)

US$876M

Communities
Donations through Ferrexpo
Charity Fund
(2019: US$6M)

Environment
Money spent to safeguard
the environment
(2019: US$16M)

US$6M

US$17 M

Government
Taxes and royalties paid
(2019: US$114M)

US$100M

Investors
Shareholder returns
(2019: US$155M)

US$195M

Capital providers
Debt repayments and interest
(2019: US$263M)

US$170M

REINVESTMENT

Reinvestment of over
US$2.75 billion since
IPO to deliver further
volume and quality
improvements for
stakeholders.

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Ferrexpo plc Annual Report & Accounts 2020

Financial Review

DELIVERING
GROWTH THROUGH
INVESTMENT

Through investment of over US$2.75 billion in
the Group’s production base since IPO, Ferrexpo
has been able to realise strong financial and
operational performance in 2020, as a result of
volume growth and quality enhancements.

Aerial view of Ferrexpo Yeristovo
Mine, July 2020.

Mine planning work for
Ferrexpo Yeristovo Mine,
July 2020.

Underlying EBITDA margin

(%)

50%

2020

2019 39%

KPIs

P14

Underlying EBITDA A of

US$859M

2019: US$586 million

Ferrexpo plc Annual Report & Accounts 2020

by 35%. Locally, reduced industrial activity
in Ukraine, which also related to the global
COVID-19 pandemic, resulted in electricity
costs falling by 9% in 2020. Local inflation
of 5% and a 14% depreciation of the
Ukrainian Hryvnia against the US Dollar
also contributed to the fall in C1 cash cost
seen in 2020. Over half of the Group’s
operating costs are in local currency and
are impacted by the Hryvnia exchange
rate and inflation. For further information,
please see Currency on page 20.

Lower electricity, gas and fuel costs
contributed US$4 to the total reduction of
the C1 cash cost per tonne in 2020 and the
remaining cost reduction was primarily
related to materials used in the production
of pellets. An improvement in consumption
rates for key consumables offset the
majority of commodity cost increases
during the year. Royalties increased in the
second half of 2020 by approximately US$1
per tonne due to a change in royalty tax
legislation in Ukraine.

The Group’s C1 cash cost represents 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 productionA (US$
per tonne) is regarded as an Alternative
Performance Measure (“APM”). For further
information, please see pages 186 to 188.

Selling and distribution costs
Total selling and distribution costs were
US$309 million (2019: US$294 million),
reflecting an increase in sales to Asia,
which was partly offset by lower freight
rates. As a result, international freight
costs arising from CFR sales increased
by US$17 million compared to 2019.

General, administrative and
other expenses
General and administrative and other
expenses was US$62 million compared
with US$66 million in 2019, mainly due
to US$3 million decrease in audit and
professional fees.

concentrate during 2020, giving a combined
sales figure of 12.1 million tonnes. For
further information, please see the
Operational Review section on pages 22-25.

The Group continues to sell its pellets
using the high grade, 65% Fe, fines index,
reflecting the high grade nature of Ferrexpo
pellets.

Iron ore pellets are priced using a pellet
premium, which is paid in addition to the
benchmark fines price. The Atlantic Pellet
Premium and China Spot Pellet Premium
are two pellet premiums that are published
regularly by third party providers, and
further discussion around the movements
in these two indices during 2020 is
provided in the Market Review section
(pages 10 to 11). The global COVID-19
pandemic and a shift in pellet demand
resulted in elevated global shipments to
China in the middle of 2020. The situation
for pellet demand subsequently stabilised
in the second half of 2020 and pellet
demand began to normalise in Europe and
North East Asia.

The geographic diversity of Ferrexpo’s
customer base results in a variety of
reference periods being used in contract
pricing. The net effect of this timing is not
considered to have had a material influence
on the Group’s financial performance
in 2020.

Seaborne freight revenue arising from CFR
sales increased revenue by US$20 million
compared to 2019, reflecting the net effect
from a higher proportion of sales to Asia,
partially offset by lower freight rates.

Lastly, the revenues from the Group’s
barging and bunker operations, First-DDSG
Logistics Holding, decreased by US$8
million in 2020 compared with 2019 as a
result of reduced volumes shipped, lower
freight rates and bunker prices.

C1 cash cost of productionA
The Group’s average C1 cash cost of
productionA was US$41.5 per tonne in 2020
compared with US$47.8 per tonne in 2019.

The decrease in costs in 2020 was primarily
due to a fall in input prices, notably oil
prices, reduced electricity prices and a
weakening local currency against the US
Dollar. Oil prices (Brent) began the year
at US$67 per barrel before falling to a
multi-year low of $9 per barrel in April 2020
in part as a result of the global COVID-19
pandemic. Whilst prices recovered to
US$51 per barrel by the end of the year,
the average oil price for the year declined

Roman Palyvoda
Acting Chief Financial Officer

Summary
In 2020, Group revenue increased by
13% to US$1.7 billion and profit before
tax increased by 63% to US$748 million.
Strong cash flow generation provided a
platform for dividend payments during
the 2020 calendar year of US$195 million
and capital investment of US$206 million,
whilst the Group reduced its net debt
position by US$285 million, entering into
a net cash position of US$4 million.

Revenue
Group revenue increased by 13% to US$1.7
billion in 2020 (2019: US$1.5 billion),
principally driven by a 17% increase in total
sales volumes. Average received DAP/FOB
pellet prices fell by 4% during the year as
a result of a decrease in pellet premiums,
negating the impact of a 17% increase in
the average iron ore fines price (65% Fe) to
US$122 per tonne and a US$2 per tonne
decrease in benchmark freight rates.

Total pellet sales volumes for the period
increased to 11.9 million tonnes (2019: 10.3
million tonnes), increasing revenue by
US$219 million. Furthermore, the Group
sold 183,000 tonnes of high grade

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Financial Review
continued

Ferrexpo utilises sunflower husks in its pelletiser
as a substitute for natural gas, increasing
consumption to 25% of pelletiser energy in 2020
(2019: 22%). Please see pages 22 to 23 for more
information.

Table 4:
Ukrainian Hryvnia
vs. US Dollar

UAH per US$

Spot 16.03.21
27.643

Opening rate 01.01.20
23.686

Closing rate 31.12.20
28.275

Average 2020
26.958

Average 2019
25.846

Source: National Bank of
Ukraine.

Currency
Ferrexpo prepares its accounts in US
Dollars. The functional currency of the
Group’s operations in Ukraine is the
Hryvnia, which has historically represented
approximately half of the Group’s
operating costs. In 2020, the Hryvnia
depreciated 19% from UAH23.686 per US
Dollar on 1 January 2020 to UAH28.275
per US Dollar as of 31 December 2020.
For further information, please see C1
Cash Cost of ProductionA on page 19.

denominated loans (at the Group’s barging
facility) into the functional currency of the
respective Group’s subsidiary. In 2020, the
Group recorded a non-operating foreign
exchange gain of US$5.3 million (2019: loss
of US$18.5 million), which was driven by
a 19% depreciation of the Hryvnia during
the year against the US Dollar, as well as
changes in the Euro/US Dollar exchange
rate. For further information, please see
Note 9 Foreign Exchange Gains and Losses
to the Consolidated Financial Statements.

Local balances as of 31 December 2020
are converted into the Group’s reporting
currency at the prevailing exchange rate.
The depreciation of the Hryvnia resulted in
a US$301 million decrease in net assets in
2020 (2019: increase of US$246 million), as
reflected in the translation reserve, net of
an associated tax effect.

Operating foreign exchange
gains/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 subsidiaries’ US Dollar denominated
receivable balances (from the sale of
pellets). The operating foreign exchange
gain in 2020 was US$61.0 million compared
to a loss of US$46.8 million in 2019.

Underlying EBITDA A
Underlying EBITDA A in 2020 increased
46% to US$859 million compared
to US$586 million in 2019.

This increase in 2020 reflects a 17%
increase in the Group’s total sales volumes
to 12.1 million tonnes, which contributed
an additional US$100 million, in addition
to a US$6 per tonne decrease in C1 cash
costs, which contributed a further US$71
million. This was partially offset by a 4%
decrease in realised DAP/FOB pellet
prices, which reduced underlying EBITDA A
by US$41 million. Selling and distribution
and other costs reduced by US$35
million. The 2020 Underlying EBITDA A
includes a noncash operating forex gain
of US$61 million in 2020 (2019: non cash
operating forex loss of US$47 million).

Non-operating foreign exchange
gains/losses
Non-operating foreign exchange gains are
mainly due to the conversion of the Hryvnia
denominated intercompany payable
balances and the conversion of Euro

Interest
Interest expense on loans and borrowings
declined 33% to US$22 million compared
to US$34 million in 2019 due to a lower
average outstanding debt balance. The
average cost of debt for the period ended
31 December 2020 was 5.2% (average

31 December 2019: 7.0%). The decrease
of the cost of debt was driven by the
repayment of US$173 million 10.375%
Eurobonds in April 2019. Further details
on finance expense are disclosed in
Note 10 Net Finance Expense to the
Consolidated Financial Statements.

Tax
In 2020, the Group’s tax expense was
US$113 million (2019: US$56 million). The
effective tax rate for 2020 was 15.1% (2019:
12.2%). The increase of the effective tax
rate is driven by a higher proportion of
taxable profits in Ukraine.

In 2020, the Group paid income taxes of
US$57 million (2019: US$84 million), of
which US$54 million were paid in Ukraine
(2019: US$73 million). US$48 million of
income taxes related to 2020 are expected
to be paid in 2021, of which US$42 million
in Ukraine. Further details on taxation are
disclosed in Note 11 Taxation to the
Consolidated Financial Statements.

Profit for the period
Profit for the period increased 58% to
US$635 million compared with US$403
million in 2019, reflecting a 51% increase
in operating profit (including operating
foreign exchange effects) and US$12
million lower net financial expense and a
foreign exchange gain of US$66 million
compared to foreign exchange losses of
US$65 million in 2019 as well as higher
income tax expense of US$56 million.

Ferrexpo plc Annual Report & Accounts 2020

Cash flows
Operating cash flow before working
capital increased 27% while the working
capital outflow in 2020 was US$26
million compared to an inflow of US$30
million in 2019. The increase in working
capital largely reflects an increase in
trade accounts receivable and other
receivables, such as prepayments.

As a result of the higher operating cash
flow, the net cash flow from operating
activities increased 45% to US$687 million
in 2020 (2019: US$473 million). Capital
investment was US$206 million, a decrease
of 17% compared to 2019 (US$244 million),
while dividends paid during the 2020
calendar year increased by 26% to US$195
million compared to US$155 million in 2019.

Capital investment A
Capital expenditure in 2020 was US$206
million compared to US$247 million in 2019.
Of this, US$103 million was sustaining and
modernisation capex (2019: US$102 million)
at FPM, FYM, FBM, First-DDSG and others.
Total investment in the Group’s
concentrator, including the concentrator
expansion project commissioned in 2H
2020, amounted to US$33 million in 2020
(2019: US$34 million), with these projects
expected to increase concentrate
production by 1.5 million tonnes per annum
in 2021. FPM also spent US$45 million on
its press filtration project during the year.
Ferrexpo also invested US$6 million (2019:
US$11 million) in the development and
exploration of the Belanovo, Galeschyno
and the Northern Deposits.

For further information regarding the
Group’s capital investment plans to expand
existing production above current levels,
please see the Operational Review section
(pages 22 to 25).

Dividends
A special interim dividend of 39.6 US
cents per share (2019: 3.3 US cents per
share) has been announced and will be
paid on 15 April 2021 to shareholders
on the register at the close of business
on 26 March 2021. The dividends paid in
respect of 2020 are now 72.6 US cents
(2019: 19.8 US cents), and this increase
reflects the Group’s continued strong
operational and financial performance,
transition to net cash position and
continued healthy iron ore prices. The
dividend will be paid in UK Pounds
Sterling with an election to receive
US Dollars. The Group’s Board will
consider, as appropriate, whether or not
to propose a final dividend in respect of

Capital investment since IPO
(US$M)

+US$2.75BN

Over US$2.75 billion invested since IPO

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

205.7

247.5

135.3

103.0

47.8

65.3

234.4

282.2

434.2

386.7

167.4

86.3

277.9

104.7

US$206M

Capital investment in Group’s assets in 2020

Capital investment since IPO
(By area)

14%

27%

59%

 FPM: modernisation & quality upgrade
 FYM: new mine & infrastructure
 Logistics & Other

435

2020, which if proposed will be put to the
Group’s AGM in May 2021. The total
available distributable reserves of the
Group are shown in Note 12 (Earnings Per
Share and Dividends Paid and Proposed).
Payment of further dividends during 2021
calendar year will require a waiver from
lenders, or full repayment of this facility.

Debt and debt maturity profile
Ferrexpo has a strong balance sheet,
low levels of gross debt and had a net
cash position as of 31 December 2020
(31 December 2019: net debt position
of US$281 million). At the end of the
comparative year ended 31 December
2019, the Group had a net debt to
underlying EBITDA A position of 0.48x.
The Group’s net cash position of US$4
million as of 31 December 2020 includes
a cash position of US$270 million
(31 December 2019: US$131 million).

Gross debt as of 31 December 2020 was
US$266 million compared with US$412
million as of 31 December 2019. The
Group’s gross debt relates to a Pre-Export
Finance (“PXF”) facility that was initially
drawn down in 2017. As of 31 December
2020, the total amount drawn was US$257

million and US$10 million is available for
future drawdown if required by the Group.
Amortisation of this facility commenced
in 1Q 2020 and it will amortise over a
total of 12 quarters until 4Q 2022.

The credit ratings agency Moody’s has
a long term corporate and debt rating
for Ferrexpo of B2, with a negative
outlook. Furthermore, during 2020, the
credit ratings agency Standard & Poor’s
downgraded Ferrexpo’s long term foreign
issuer credit rating by one notch to B-,
with a negative outlook. The credit ratings
agency Fitch maintains a BB- rating on
the Group, with a stable outlook. The
credit ratings ascribed by both Fitch and
Moody’s are capped at a maximum level
above Ukraine’s Sovereign rating (one
notch above sovereign for Moody’s and
two notches above sovereign for Fitch).

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 to the
Consolidated Financial Statements.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Operational Review

Operations

(000’t unless otherwise stated)

2020

2019

% change

Iron Ore Production

Iron ore mined

Strip ratio (waste:ore)

Iron ore processed

Concentrate produced

Pellets produced

Of which 67% Fe pellets (“DR pellets”)

29,842

3.2

29,723

14,007

11,218

339

Of which 65% Fe pellets (“Premium Pellets”)

10,780

Of which 62% Fe pellets (“Basic Pellets”)

Iron Ore Sales

Pellets sold

Concentrate sold

Total iron ore products sold

11,878

183

12,062

28,195

3.4

28,475

13,228

10,519

–

10,116

403

10,312

–

10,312

+6%

-6%

+4%

+6%

+7%

–

+7%

-76%

+15%

–

+17%

see the Future Growth Investment Plan
Programme section on pages 24 to 25).
Expectations for processing in 2021 are
for a further increase as operations realise
a full year at the plant’s newly expanded
processing capacity. The Group is also
progressing construction of its concentrate
stockyard, press filtration and medium-
and fine-crushing projects, which are
collectively expected to provide additional
operational flexibility in processing.

Maintenance is key to a successful
operation and further work was completed
in 2020 to ensure consistent and high
quality production. Work in this area
focused on embedding world class
maintenance planning processes and the
adoption of a management system for
preventative maintenance. An example of
the progress being made in maintenance
can be seen in the change in culture

and consistent increase in pelletiser
availability rates in 2017-2019, increasing
to 88% in 2020, up from 84% in 2017.

In 2020, the Group increased production
of high grade (65% Fe or above) iron ore
pellets to 99% of total output (2019: 96%).
Further to this increase, the Group has also
commenced production of direct reduction
(“DR”) pellets, which are higher grade (67%
Fe) and lower impurity than alternative forms
of iron ore pellets. DR pellets are expected
to represent the future of global steel
production, as steelmakers transition to
the production of carbon-free Green Steel,
with DR pellets the primary source of virgin
iron utilised in this process. The Group
continues to develop its offering of DR
pellets, production of which is possible
through the Group’s existing production
facilities, with two trial cargoes in 2020, and
a further four trial cargoes planned for 2021.

CRU breakdown pellet cost curve to China
(US$ per tonne)

a
n
h
C
R
F
C

m
d
/
$
S
U

1
2
0
2
h
c
r
a
M

,
s
t
r
o
p
x
e
t
e

l
l

e
p
r
o

s
t
s
o
c
s
s
e
n
s
u
B

120

100

4th Quartile

3rd Quartile

2nd Quartile

1st Quartile

O
P
X
E
R
R
E
F

60
Cumulative pellet exports, 2020, Mt (dry)

120

Definition: Business costs are the sum of realisation costs and site costs. Realisation costs include the cost of getting the
material to market, the marketing of the material and the financing cost of selling the material. The power of business costs
is that by adjusting all product qualities relative to the same benchmark (62% Fe fines product delivered to North China), it
allows all mines to be compared on a cost curve on a like-for-like basis. This also means that by subtracting the benchmark
price from the business costs for a mine an estimate of cash flow from that operation is obtained. Source: CRU Group

During the course of 2020, Ferrexpo’s
operations in Ukraine produced 11.2 million
tonnes of iron ore pellets, a 7% increase
on the previous year, and representing a
record for production of high grade pellets
since the Group’s IPO. This improvement in
production was delivered through a multi-
year investment programme throughout
the Group’s production process.

Mineral Resources and Ore
Reserves
Geological work completed during the
year focused on in-pit drilling and led to
a 12% increase in the Group’s JORC-
compliant Mineral Resources at FPM and
FYM combined, and a 3% increase in the
Group’s total Ore Reserves, with these
estimates shown in the table opposite. At
current processing rates, the Group has
sufficient Ore Reserves for over 50 years
of further production. The resource update
process in 2020 also identified 6.3 billion
tonnes of additional material at depth
below the Group’s existing mines with
exploration potential for exploitation via
underground means. This mineralisation
sits outside of the Group’s JORC
compliant Mineral Resource estimate.

Mining review
Mining activities at the Poltava mine
saw ore mined volumes maintained at
17 million tonnes for the second year
running, with waste stripping volumes
reduced by 7% as operations focused
on mining at depth in the main pit, with
additional pushbacks planned for 2021.

At the Yeristovo mine, total mining volumes
increased by 11% to 44 million tonnes
as this relatively new mine continues
to develop over time. The increase in
mining activity resulted in a greater
supply of high grade ore from Yeristovo
mine to the main processing plant.

The Belanovo mine is Ferrexpo’s newest
development project, with a focus on
pre-stripping activities in 2020 and
general preparatory work with existing
infrastructure and land acquisition. The
long-term development of the Belanovo
mine is a key investment in the Group’s
planned increase towards its strategic goal
of doubling existing production levels.

Processing review
Processing activities in the beneficiation
plant increased by 4% to 30 million tonnes
in 2020, following the implementation
of new processing capacity in the
second half of 2020 (for more detail,

Ferrexpo plc Annual Report & Accounts 2020

CASE STUDY

UTILISING TECHNOLOGY
TO ADAPT TO A PANDEMIC

In light of travel restrictions imposed as a
result of the global COVID-19 pandemic,
in August 2020 Ferrexpo conducted
a virtual site visit to host third party
consultants Bara Consulting Ltd (“Bara”),
to conclude the planned update to the
Group’s Mineral Resources and Ore
Reserves under the JORC Code.

+12%

12% increase in Mineral Resources for
FPM and FYM combined in 2020.

In the first site visit of its kind for
Ferrexpo, the Group’s site teams hosted
Bara’s engineers and geologists using
live stream video cameras on the crest
of each mining operation and drone
footage to assess the status of each
mine, with simultaneous presentation
of mine design software and discussion
with Ferrexpo’s specialists. This visit
was an integral part of the Group’s
resource and reserve update, which
is dated as of June 2020, and
completion of which would not have
been possible without the use of
modern technology to show Bara’s
specialists around our operations.

Chief Geologist Alexander Belous
hosting virtual site visit, August 2020.

The Group continues to utilise sunflower
husks as a biofuel in its pelletiser, as
a substitute for natural gas. Sunflower
husks are an abundant by-product of
the sunflower industry in Ukraine, which
was the world’s largest producer in the
2019-2020 crop year1. This project has
been in place since 2015, and usage has
steadily increased as the Group optimises
the usage of husks in its pelletisers. In
2020, the Group successfully increased
usage to 25% of the total energy
consumed in the pelletiser (2019: 22%).

the Group’s C1 cash costsA, please see
Financial Review section, pages 18 to 21.

Logistics review
The Group’s sales of 12.1 million tonnes
in 2020 is a record for Ferrexpo since
IPO in 2007, representing a significant
achievement for all those involved. Of
particular note was the loading of 47
capesize vessels in 2020, a 68% increase
on the prior year, and this reflects the
flexibility Ferrexpo has in its logistics
chain to meet changing global demand.

C1 cash costsA review
As shown in the graph opposite, Ferrexpo
continues to operate in the lowest quartile
for pellet exporters globally, as assessed
by CRU. The Group’s C1 cash cost A of
production was US$41.5 per tonne in 2020;
for more details on the key drivers behind

Outlook for 2021
The Group expects to deliver a further
increase in production from the level
seen in 2020. Pellet production is likely
to be higher in the second half of 2021
as pelletiser upgrade work is planned

Ore Reserves and Mineral Resources

for the first half of the year, which will
deliver approximately 0.5-1.0 million
tonnes per annum of additional full year
pelletiser capacity in the second half of
2021. The Group also expects to market
additional concentrate for sale during 2021
as a result of investments completed in
expanding processing capacity in 2020.

The Group’s ongoing growth projects
are shown on pages 24 to 25, which
represent the near term investment
being made to grow production
and increase product quality.

Ore Reserves

Gorishne-Plavninske-Lavrykivske (“GPL”)
Yerystivske

Total

Proven

Probable

Total

Fe
total
%

magnetic
%

33
30

26
25

841
290

1,131

total
%

magnetic
%

31
33

23
26

1,154
524

1,678

total
%

magnetic
%

32
32

24
26

313
234

547

Mineral Resources

Gorishne-Plavninske-
Lavrykivske (“GPL”)
Yerystivske
Bilanivske
Galeschynske

Total

Measured

Indicated

Inferred

Total

Fe
total
%

Fe
magnetic
%

35
35
31
–

29
29
24
–

1,639
571
1,149
268

3,627

Fe
total
%

Fe
magnetic
%

30
34
31
55

22
27
23
–

744
382
217
58

1,401

Fe
total
%

Fe
magnetic
%

32
33
30
55

24
27
21
–

2,862
1,255
1,702
326

6,126

total
%

magnetic
%

31
34
31
55

23
27
23
–

479
283
336
–

1,098

The Group’s JORC-compliant Ore Reserves and Mineral Resources shown above are based on an independent review completed by
Bara Consulting, and are dated as of 1 June 2020.

1 Source: www.statista.com/

Strategic ReportCorporate GovernanceFinancial Statements

Ferrexpo plc Annual Report & Accounts 2020

Operational Review
continued

FUTURE GROWTH
INVESTMENT
PROGRAMME

PELLETISER

LOGISTICS

CONCENTRATOR

MINING FLEET
AUTOMATION

TROLLEY ASSIST
(HAUL TRUCKS)

FERREXPO
BELANOVO MINE

CONCENTRATE
STOCKYARD

Location: Yeristovo Mine

Location: Poltava Mine

Location: Belanovo Mine

Location: Concentrator

Status/timeline: Successful
deployment December 2020

Status/timeline:
Scoping study

Status/timeline: Pre-stripping
works commenced

Status/timeline:
Commissioning 1H 2021

Capital outstanding:
US$2M for Phase 1

Capital outstanding: N/A
(subject to OEM selection)

Capital investment in 2020:
US$6M

Capital outstanding:
US$3M

Operational benefit: Phase 1
deployment of autonomous
trucks commenced in
December 2020, with an
expectation to deploy
additional autonomous
CAT793 haul trucks to
production areas throughout
2021 (Phase 1), delivering
gains in both safety and
productivity.

Operational benefit: Scoping
studies are under way to install
a pantograph network of
overhead cables in the Group’s
mines, which would enable
haul trucks to ascend the open
pit using electricity rather than
diesel. Benefits expected in C1
cost base and Scope 1 carbon
footprint.

Operational benefit: FBM,
located 4km north of the
Yeristovo Mine, has a
significant Mineral Resource of
1.7 billion tonnes of magnetite
ore. Ore production from FBM
is a prerequisite to the Group
achieving its long term goal of
increasing pellet production
above 20 million tonnes per
annum.

Operational benefit:
Increases operational flexibility
to operate the Group’s
concentrator and pelletiser
independently of each other
during periods of plant
maintenance. Enables phases
of excess concentrate
production if desired.

Ferrexpo plc Annual Report & Accounts 2020

Ferrexpo aims to grow its production base through
continual investment in the various sections of its
production process, for both volume growth and
quality enhancements. The completion of the Group’s
concentrator expansion in 2020 represents one phase
of growth to fully realise the Group’s pelletiser
capacity of 12 million tonnes per annum, and the
following showcases examples from the next phase
of growth.

FPM

MINE OPERATIONS

FYM

FBM

SECTION 9
EXPANSION

Location: Concentrator

Status/timeline:
Commissioned 2H 2020

Capital outstanding:
N/A (operational optimisation)

Operational benefit:
Provides additional 6MTPA
of raw ore processing
capacity, resulting in 1.5-2.0
million tonnes per annum of
additional high grade
concentrate capacity for
pelletising.

MEDIUM
AND FINE
CRUSHING 2

Location: Concentrator

Status/timeline:
Construction/Q4 2021

Capital outstanding: US$8M

Operational benefit: Second
phase of upgrades to plant
crushing capacity, adding 800
tonnes per hour of raw ore
capacity over two additional
crushing lines. Subset of next
phase of expansion beyond 12
million tonnes per annum.

PELLETISER
UPGRADES

SOLAR POWER
(PILOT PLANT)

Location: Pelletiser

Location: Concentrator

Status/timeline:
1H 2021 (all four lines)

Status/timeline:
Procurement /2H 2021

Capital outstanding: US$10M

Capital outstanding: US$4M

Operational benefit: Work to
reconfigure initial heating
stage within the pelletiser and
improved heat recirculation,
which will result in enhanced
pellet quality through reduced
fragmentation of pellets, as
well as increases to the
productivity of the pelletiser
and improved natural gas
consumption rates.

Operational benefit: First
stage in investigating potential
for industrial-scale generation
of solar power at Ferrexpo’s
operations, commencing with
a 5MW pilot plant. Electricity
consumption accounted for
55% of the Group’s Scope 1
and 2 carbon emissions in
2020, with solar power offering
significant potential for cutting
the Group’s carbon footprint.

Strategic ReportCorporate GovernanceFinancial Statements

Ferrexpo plc Annual Report & Accounts 2020

HSEC Committee Chair’s
Review

PROGRESS IN
RESPONSIBLE
BUSINESS

In 2020, the CSR committee was reformed into
the HSEC committee with an increased focus
on all aspects of safety and climate change.
As Chair of this new committee, our goal is to
deliver sustainable improvements throughout the
organisation. Furthermore, the global pandemic has
also highlighted the need for companies to take a
proactive role in the wellbeing of workforces, with
this work coordinated via the HSEC Committee.

22
%

reduction

LTIFR for 2020 of 0.79, 22% below
Group’s five-year trailing average,
and below the Group’s peers.

BBB

MSCI ESG Rating, placing
Ferrexpo in top 40th percentile
of steel companies assessed by
MSCI, which was upgraded by one
notch to BBB in December 20202.

12 months

LTI free at barging subsidiary
First-DDSG, reduction in LTIFR at
this entity from 5 year trailing
average of 3.06 to zero.

16%

reduction

in Ferrexpo’s CO2e footprint per
tonne in 2020, comprising of an
8% reduction in Scope 1 CO2e
emissions and a 21% reduction
in Scope 2 CO2e emissions
(both per tonne of production).

A number of Ferrexpo’s
customers, including those
in Germany and Japan, use iron
ore pellets to produce high end
steels for wind turbines and
solar wind farms, with as much
as 85% of a wind turbine being
made from steel1.

Fiona MacAulay,
Chair, HSEC Committee

1 World Steel Association.
2 For further information on MSCI ESG Ratings please

see www.ferrexpo.com/disclaimer

Ferrexpo plc Annual Report & Accounts 2020

Safety
Safety remains central to the success
of our operations, and we continue to
operate with a lost time injury frequency
rate below that of the major iron ore
producers in Australia. However, it is with
deep regret that we report a fatality at our
operations in 2020, whereby a maintenance
contractor was injured during routine
maintenance on heavy equipment in our
beneficiation plant. As with any safety
event, we endeavour to investigate, learn
and improve our practices to ensure this
type of accident cannot happen again, with
details of the key learning points described
in the Safety section on page 28. Across
the Ferrexpo Group, we recorded a LTIFR
of 0.79 in 2020, which represents a level
22% below our five-year trailing average
for safety performance, and which we
see as an indication of a culture of safety
being embedded throughout the Group.

One area of safety improvement that
we are particularly pleased to report on
is with our barging subsidiary, DDSG,
which has implemented a number of
safety initiatives at its operations and
operated injury-free for the entirety
of 2020. For more information, please
see the Responsible Business – Health
and Safety section, pages 28 to 29.

Carbon footprint
The world is on a pathway to a carbon-
free future, with many countries making
pledges to be carbon neutral by 2050,
and the global steel industry is no
exception to this trend. As part of the
network of suppliers that feeds the steel
industry, we at Ferrexpo acknowledge
the importance of climate change and
remaining relevant as economies transition
to a carbon neutral future. Longer
term, we are developing our DR pellet
offering, which are pellets that can be
used in the production of Green Steel.

In the more immediate future, we are
striving to reduce our carbon footprint
on a per tonne basis, with a 16% reduction
realised in 2020 alone. This excellent result
has been achieved through improving
productivities in our operations (Scope 1)
and commencing a project to source low-
to zero-carbon forms of electricity (Scope
2). We are also continuing to use sunflower
husks in our pelletisers, and successfully
increased consumption of this biofuel to
25% of the pelletiser’s total energy in 2020

(2019: 22%). We are reviewing further
increases to our biofuel consumption,
having steadily increased this figure
since this project’s inception in 2015.

Our next major project is the development
of a 5MW solar farm at our operations,
to trial the effectiveness of solar power
in our geographic location. Should
this trial be successful, we will look to
significantly expand this particular project.

Workforce wellbeing
In other areas, we continue to invest in
our workforce, with over 6,500 individuals
trained in 2020, despite restrictive
measures associated with the global
pandemic. In such uncertain times, it
is important that we also look after the
wellbeing of our workforce, and have
offered a range of initiatives, including
dedicated mental health support sessions
and training in financial planning, as
measures to help those who may be
struggling through the pressures of
working during the pandemic.

ESG ratings upgrade
As a consequence of our efforts to bring
our Responsible Business efforts and
reporting in line with industry best practice,
we can also report that Ferrexpo’s ESG
rating provided by MSCI was upgraded
one notch to BBB in December 20202.
This puts Ferrexpo into the top 40%
of companies covered by MSCI in the
steel sector, and we are extremely proud
of this recognition for our efforts.

In February 2021, we also joined the
ResponsibleSteel initiative, which is a
certification initiative designed to maximise
steel’s contribution to a sustainable society.

In conclusion, we have seen an
unprecedented year in 2020 with the
global pandemic. However, with the
HSEC Committee and our various local
community support projects, I am
confident that Ferrexpo is well placed to
provide vital support to our workforce,
environment and communities during
these difficult times, aiming to make
Ferrexpo a good corporate citizen for
all stakeholders, whilst also addressing
climate change as a key priority.

Fiona MacAulay
Chair, HSEC Committee

Ferrexpo Square, Horishni Plavni,
July 2020.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Responsible Business

HEALTH AND SAFETY

Creating a safe working environment is paramount to a
successful modern mining business and an engaged
workforce. Ferrexpo uses a number of leading indicators
to help measure progress in implementing safety initiatives,
as well as lagging indicators to measure the effectiveness
of these efforts.

Safety performance
It is with regret that the Company reports
a fatality amongst its workforce in 2020.
In August, a maintenance contractor
working in the crushing plant was struck
when using equipment to lift a cone
crusher from its protective housing
during regular maintenance. Whilst this
individual was wearing the required PPE
for this task, the exclusion zone applied
around the heavy equipment as it was
extracted was not sufficient in size.
Ferrexpo endeavours to support any
family affected by such a tragic accident
and measures are taken to address the
specific risks raised by any such incident
where an injury occurs. Corrective actions
taken in respect of this incident include
efforts to strengthen the quality controls
in place for inspecting equipment prior
to lifting activities, and to extend the
relevant hazard zones applied when this
type of maintenance is conducted.

Ferrexpo’s LTIFR was 0.79 in 2020
(2019: 0.58), which represents a second
successive year where our overall safety
performance was recorded at a level
significantly below the Group’s five-year
trailing average LTIFR of 1.01. This result is
also significantly ahead of the major iron ore
producers in the Pilbara region of Western
Australia, which averaged an LTIFR of 1.60
in the most recently published information1.
Furthermore, a review of the leading and
lagging safety indicators that the Group
uses to assess its full safety performance is
presented below and in the table opposite.

Looking beyond lost time injuries, which
are the traditional indicator of safety
performance, leading indicators, such

as safety inductions and training hours
are important tools for assessing the
prospect of safety incidents before they
occur. These factors, such as safety
inductions, were generally affected by
measures implemented in response to the
global COVID-19 pandemic, with reduced
recruitment and an increase in those
working remotely. Despite this however,
safety inspections were maintained at
broadly the same level in 2020. The number
of near miss events, significant incidents
and road traffic incidents fell in 2020,
reflecting the increase in remote working
during the global COVID-19 pandemic.
A study of Significant Incident Reports
(“SIRs”) in 2020 indicated that working
at heights and road traffic incidents
ought to be priority focus areas for our
safety initiatives in 2021, but the number
of incidents involving the delivery of
cargo have decreased significantly in
2020 (50% reduction in 2020 to four
working at height related SIRs).

Effective occupational health and safety
management systems are an important
tool in establishing a safe working culture,
with Ferrexpo successfully gaining ISO
accreditation (ISO 45001) at FPM in
December 2020.

Workforce wellbeing
The global pandemic in 2020 drastically
changed the working environment, with
Ferrexpo’s operations implementing social
distancing, staggered shifts and rotating
team working patterns, all to reduce the
risk of transmission of COVID-19.
Ferrexpo’s operations are, however,
sociable places to work, with many groups
meeting outside of work for formal and

1 Latest available period: 12 months to June 2020. http://www.dmp.wa.gov.au/Documents/Safety/MSH_Stats_

Reports_SafetyPerfWA_2019-20.pdf

T B C

First-DDSG crewman
wearing season specific
PPE, December 2020.

informal gatherings for sport, hobbies and
other activities. In the summer of 2020,
Ferrexpo began an offering of remote
counselling sessions to support the
Group’s workforce throughout the
pandemic. This support was not limited to
counselling, but also personal financial
planning, as family’s incomes were often
negatively affected with family members
facing uncertainty around their employment
outside of Ferrexpo. The Group considers
that these initiatives are critical for Ferrexpo
to retain its talented workforce and maintain
a level of stability that would otherwise have
been missing during the pandemic, and the
Group has approved additional funding to
continue these efforts into 2021.

Ferrexpo plc Annual Report & Accounts 2020

CASE STUDY

FIRST-DDSG – SAFETY ACROSS
THE FERREXPO GROUP

Ferrexpo’s barging subsidiary on the
River Danube – First-DDSG – helps
transport pellets to its customers in
Central Europe. It is the Group’s
third largest entity in terms of hours
worked, but historically has
operated with the highest LTIFR
within the Group. Recent actions
taken to address this issue have
had significant results, however,
with barging operations operating
LTI-free for the entirety of 2020.

Efforts in safety to achieve this
great result have focused on the
following:

(1) Additional training requirements for

safety qualifications.

(2) Adoption of season-specific personal

protective equipment (“PPE”),
ensuring First-DDSG’s workforce
have the correct PPE for the
conditions faced.

(3) Inclusion of safety related clauses in
contracts of employment, providing
for both bonuses and penalties.

(4) Mentoring scheme for senior officers
and cadet interns, to ensure safe
working practices are passed on.

DDSG LTIFR

(5 year progression)

2016

2017

2018

2019

2020

3.70

4.32

1.83

0.91

KPIs

P14

First-DDSG barge carrying Ferrexpo pellets along
the Danube River.

Health and Safety Performance Statistics

2020

2019

Change

Lagging indicators
Fatalities
Lost time injuries
LTIFR
TRIFR
Near miss events
Significant incidents
Road traffic incidents
Lost work days

Leading indicators
HSE inspections
HSE meetings
HSE inductions
Training hours
Hazard reports
Management high visibility hours

1
17
0.79
1.25
7
17
31
1,046

3,305
1,528
7,335
14,755
51
131

0
10
0.58
0.86
26
30
35
1,336

3,349
1,347
10,147
36,167
37
231

–
+70%
+35%
+45%
-73%
-43%
-11%
-22%

-1%
+13%
-28%
-59%
+38%
-43%

Strategic ReportCorporate GovernanceFinancial Statements

Ferrexpo plc

Annual Report & Accounts 2020

Responsible Business
continued

ENVIRONMENTAL
STEWARDSHIP

Ferrexpo’s operations cover over 5,000 hectares and are closely linked to
the environment through the air, water, land use and biodiversity around
the Group’s operations. This section focuses primarily on greenhouse gas
emissions reporting and climate change, but additional environment-related
disclosures and commentaries are available in the Company’s Responsible
Business Reports (“RBR”), which are available on the Company’s website.

Greenhouse gas emissions
During 2020, Ferrexpo’s management
increased its efforts to reduce the
Group’s carbon footprint1, and in doing
so delivering an 8% reduction in the
Group’s Scope 1 CO2e emissions
footprint per tonne and a 21% reduction
in Scope 2 CO2e footprint per tonne, as
shown in the table opposite. Ferrexpo’s
Scope 1 CO2e emissions, which relate
to the Group’s controlled operations, are
primarily driven by diesel consumption
in the mining fleet and natural gas
consumption in the pelletiser. Ferrexpo
has a competitive advantage over its
pellet producing peers in that Ferrexpo
uses natural gas for pelletisation,
whereas the Group’s peers commonly
use more carbon-intensive sources of
energy, such as coal and heavy fuel oil.

Ferrexpo’s improved Scope 1 CO2e
performance relates to a number of
productivity gains throughout the business,
including a 5% reduction in diesel volumes
used in the Group’s mining activities,
despite a 1% increase in the total tonnage
mined. Furthermore, Scope 1 emissions
were reduced through an increase in
sunflower husk usage, which represented
25% of the input energy in the pelletiser,
an increase from 22% in 2019, which acts
as a substitute for natural gas. Ukraine was
the largest producer of sunflower oil in the
world in the 2019-2020 crop season2, and,
therefore, the Group is well placed to take
advantage of this by-product as a biofuel in
its processing operations.

The greatest area of improvement in
the Group’s carbon footprint however has

been in its Scope 2 CO2e emissions, which
have benefitted from the Group now being
able to selectively buy low- to zero-carbon
forms of electricity in Ukraine thanks to
recent deregulation of the local electricity
market. Through these purchases, which
began in July 2020, the Group has
managed to purchase up to 49% of its
electricity from either hydroelectric or
nuclear power sources in any given month,
and in doing so has reduced the full year
Scope 2 CO2e carbon footprint per tonne
by 21%. This proportion of greener
electricity purchases is expected to grow
as Ukraine’s electricity market matures
over time.

With a full year ahead of greener electricity
purchases, as well as productivity
improvements and efficiency savings
across the Group’s operations, the Group
is confident of delivering a similar level of
improvement in 2021.

Ferrexpo is also committed to its role
in the low carbon future of the global
economy, and is investigating low carbon
solutions throughout its business. Projects
to achieve these goals include near-term
projects, such as continued purchasing
of greener forms of electricity and the
proposed installation of a pantograph
network in the Group’s mines (see pages
24 to 25), through to longer-term projects
such as the development of solar power
at the Group’s mines and trials of using
green hydrogen in the Group’s pelletisers.
To further help deliver the Group’s carbon
targets, future large scale investment
decisions at Ferrexpo’s operations
will now include a carbon price in the

1 Note Ferrexpo’s reported on the basis of carbon-equivalent emissions, and include the impact of other greenhouse

gases (CH4 and N2O).

2 Source: https://www.statista.com/

Ferrexpo plc Annual Report & Accounts 2020

Autumn view of River
Dnieper, located adjacent
to Ferrexpo’s operations.

GHG emissions and energy consumption

2020

2019

% Change

CO2e emissions (tonnes)
– Scope 1 (direct, tonnes)
– Scope 2 (indirect, tonnes)

Pellets produced (tonnes, 000s)
Intensity ratio (kg per tonne pellets)
– of which Scope 1
– of which Scope 2

1,262,614
565,552
697,062

11,218
113
50
62

1,404,878
579,415
825,462

10,519
134
55
78

Emissions from biofuels (tonnes)

125,360

104,313

Energy consumption (kWh)

5,203,263,593

5,036,590,365

-10%
-2%
-16%

+7%
-16%
-8%
-21%

+20%

+3%

Note table above shows carbon-equivalent emissions, with the following gases included in calculations: CO2, CH4 and
N2O. During 2020, the Group consulted with external consultants regarding its carbon footprint in 2020 and as a result
the Group has updated the carbon emissions factor from emissions factors estimated by the EBRD in 2010 to the
latest factors published by the IEA (published September 2020). Scope 2 emissions are therefore restated for 2019.
Ferrexpo uses coefficients provided by the Greenhouse Gas Protocol to calculate its emissions.

CASE STUDY

WHAT IS GREEN
STEEL AND WHY
IS IT RELEVANT?

A huge shift is under way in the steel
industry, with steel producers under
significant pressure to reduce their
carbon footprint and produce steel
without any carbon emissions (known
as Green Steel). Whilst Ferrexpo’s
pellets are not directly related to the
emissions of steelmakers, Ferrexpo’s
pellets contribute to a steelmaker’s
Scope 3 emissions, and the Group
understands the need for its pellets
to have a reduced carbon footprint.
This movement presents a significant
opportunity for both Ferrexpo and iron
ore pellets in general, as the process to
produce steel without carbon emissions
is through the path of Direct Reduced

Iron (“DRI”), whereby high quality DR
pellets are processed using carbon-free
electricity to create high end steels.
Since this process requires iron ore
pellets, rather than the more common
sinter fines, the Group expects demand
for DR pellets to grow significantly in the
medium term. The Company began trial
shipments of DR pellets in 2020 and
additional trial shipments are planned
for 2021.

Further to the Group’s move towards
Scope 3 emissions reporting and DR
pellet production, Ferrexpo has also
joined the ResponsibleSteel initiative,
which aims to maximise steel’s
contribution to a sustainable society.
ResponsibleSteel provides a platform
for a multi-stakeholder approach
to sustainability, to establish an
independent certification standard
and programme for steel production.

Hydroelectric dam near the local city
of Kremenchuk, located 35km from
the Group’s operations.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Responsible Business
ENVIRONMENTAL STEWARDSHIP
continued

the Group’s Scope 3 emissions in 2020
were 12.1 million tonnes of CO2, or 1,082
kilogrammes of CO2 per tonne of product
produced (2019: 1,020 kg/t, using updated
Scope 3 calculation). The conversion
of the Group’s iron ore products into
steel accounted for 94% of the Group’s
Scope 3 emissions in 2020 (2019: 92%).

Energy consumption
Ferrexpo’s energy consumption in
2020 was 5,203,263,593kWh (2019:
5,036,590,365kWh), representing the
equivalent of 464kWh per tonne of pellets
produced (2019: 479kWh per tonne).
Energy consumption data is presented
here in kilowatt-hours on the basis of new
regulatory requirements for London-listed
entities. For continuity with last year’s
energy reporting, the Group confirms its
energy consumption was the equivalent
of 18.7PJ in 2020 (2019: 18.1PJ).

Task Force on Climate-Related
Financial Disclosures (“TCFD”)
The following sections of this report are
aimed at addressing the various
requirements for reporting under TCFD.

– Board oversight of climate change risks
and opportunities: pages 30 to 33 and
Principal Risks section 48 to 60.

– Management’s role in assessing climate
change related risks and opportunities:
pages 30 to 33 and Principal Risks
section 48 to 60.

– Organisational processes to identify,
assess and manage climate change
related risk: pages 30 to 33 and
2019 Responsible Business Report
(www.ferrexpo.com/responsibility).

– TCFD-specific metrics and targets:

pages 30 to 33.

Climate change: risks and
opportunities
Climate change presents a number of risks
and opportunities for Ferrexpo and its
operations in Ukraine and logistics business
beyond Ukraine. These are presented in
detail in the Company’s latest Responsible
Business Report (available at www.ferrexpo.
com), which was released in August 2020,
with the main factors summarised as follows:

– Climate change related risk (policy)
– carbon pricing. Ukraine currently
operates a carbon tax of UAH15 per
tonne CO2, escalating by UAH5 per year
until 2024. This is significantly below the
CO2 price per tonne for companies
operating under the EU’s Emissions
Trading System. The Company is
looking to address this risk by reducing
its carbon footprint – please see pages
30-33.

Dragon boats used for racing
on Dnieper River, Horishni Plavni.

In addition, the Group successfully
implemented a number of ISO
certificates at its operations in Ukraine
in 2020. The accreditation of Ferrexpo’s
energy management system at FPM
(ISO 50001:2018) was achieved in
December 2020, along with the Group’s
continuing certificate for its environmental
management system (ISO 14001:2015).
Finally, the Group’s barging subsidiary
First-DDSG completed its certification
process for its quality management
system (ISO 9001:2015) in January 2020.

Scope 3 emissions
As well as reducing the Company’s
footprint per tonne in terms of its Scope
1 and Scope 2 CO2e emissions, the
Company is also committed to increasing
its disclosures around its Scope 3
emissions, which relate to the upstream
and downstream activities beyond the
production of iron ore pellets. In 2019,
Ferrexpo started reporting its Scope 3
emissions in relation to the conversion of
iron ore pellets to steel by steelmakers, on
the basis that this represents the majority
of Ferrexpo’s Scope 3 emissions. This
year, Ferrexpo is proud to report that it
has worked with external consultants
to establish a calculation for Scope
3 emissions that includes a range of
upstream and downstream activities, such
as employee commuting, tyre usage and
third party distribution of pellets via rail
and oceangoing freight. On this basis,

associated financial modelling. The
first such example will be in assessing
the long term replacement options for
the Group’s mining fleet, modelling for
which is being considered in 2021 and
will include a carbon price of US$17 per
tonne, which reflects the five year trailing
average price of carbon in the EU.

The Group has also now become a
full member of the ResponsibleSteel
initiative, which is the steel industry’s
first global multi-stakeholder standard
and certification initiative, which aims
to maximise steel’s contribution to a
sustainable society. This initiative aims
to develop a certification standard
for participants throughout the steel
supply chain. Ferrexpo has now begun
consultations regarding independent
certification of its carbon emissions
reporting and reduction targets.

Further reading

Further information
regarding climate change
scenario planning is
available in the Company’s
latest Responsible Business
Report (www.ferrexpo.com).

Ferrexpo plc Annual Report & Accounts 2020

Climate Change: Scenario Modelling and Impacts

Characteristics

Impacts

2oC scenario

Increased
government
regulation to curb
the potential
impacts of climate
change in the
medium to long
term.

+3oC scenario

Increased physical
effects of climate
change in the
medium to long
term.

Carbon pricing: application of the same level of
carbon pricing in Ukraine as currently envisaged as
required under the Paris Agreement (US$50-100 per
tonne CO2) would equate to an additional cost of
US$3 to US$5 per tonne of pellet production.

Electricity pricing: phase out in Ukraine of thermal
power plants and increased demand for low-carbon
forms of electricity is likely to increase overall
electricity prices in Ukraine in the short term, before
additional supply of low-carbon electricity is brought
online in the medium term.

Water stress: US Aid projections for Eastern Europe
forecast prolonged periods of drought in the event
of a +3oC scenario, which would potentially limit the
Group’s ability to source and utilise water in its
operations. Water is currently used in processing to
remove waste material, such as silica, and increase
the iron content of the Group’s ores, as well as in
mining operations to limit dust emissions. Any
restriction on the availability of water usage could
have an adverse effect on the Group’s ability to
mine and process its ores to the same extent as it
does today.

View looking west across
local woodland, towards
Ferrexpo’s processing plant.

– Climate change related risk (technology)
– many of the world’s steelmakers are
currently focused on reducing their
Scope 1 and 2 carbon footprints,
including a number of Ferrexpo’s
customers, with steelmakers targeting
a switch to Green Steel as a result.
Ferrexpo is likely to have to switch
production of its pellets to direct
reduction pellets over blast furnace
pellets in the long term to satisfy this
change in demand, and the Group is
currently in the process of forging
customer relationships with DR pellet
customers to further future proof the
business – see pages 26-27, 30-33
and 40-43 for more information.

– Climate change related opportunity
(technology/customer behaviour) –
iron ore pellets represent a product that
steelmakers can utilise to lower their
carbon footprint by up to 40% for every
tonne of pellets used instead of the
more commonly used sinter fines1. This
presents an opportunity for the business
as steelmakers look to increase pellet
usage in blast furnaces, particularly in
China, where pellet usage is currently
only 10-15%1 of the burden mix in blast
furnaces. For more information on the
opportunities around increasing pellet
usage, please see Market Overview,
pages 10 to 11.

A more extensive listing of the climate
change related risks and opportunities
facing the business is provided on pages
61-64 of the Company’s 2019 Responsible
Business Report (available at www.
ferrexpo.com). Further details on the
Principal Risks facing the Group are also
provided on pages 48 to 60.

Climate change:
scenario modelling
Ferrexpo has considered two climate
change scenarios in its review of the future
impact of climate change on its business:

– A 2oC scenario, as envisaged by the
Paris Agreement, with an associated
increase in government regulation
compared to today.

– A +3oC scenario, whereby governments
do not address climate change, and the
business faces increased physical
effects as a result of climate change.

Details of these two scenarios are provided
in the table above.

1 Source: CRU.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Responsible Business
continued

SOCIAL
ENGAGEMENT

Working with local communities through the
Ferrexpo Charity Fund to develop local initiatives
and provide support where it is needed.

COVID-19 Response Fund
2020 has been an extraordinary year, with
communities around the world affected by
the global COVID-19 pandemic. In March
2020, the Group responded to rising
concerns with a standalone fund for
assisting local hospitals and schools to
acquire necessary medical equipment and
PPE to respond to the pandemic, with an
initial US$2.5 million of funding approved
for this dedicated fund to assist local
hospitals. In light of the continuing
pandemic in early 2021 and in recognition
of the continuing need for community
support, the Group has approved a further
US$1.0 million of support through the
COVID-19 Response Fund. Through
discussions with hospital management,
funds have been utilised in a range of
areas, including the provision of PPE and
specialist medical equipment, such as
respirators, that would be necessary to
assist treatment of COVID-19 patients.

Specific donations have included the
following:

– Remote monitoring equipment and
lighting for intensive care patients,
Kremenchug hospital;

– Ventilators for hospitals in Horishni

Plavni, Kremenchug and Poltava City;

– Ambulance purchase for Horishni Plavni

hospital; and

– Numerous purchases of PPE equipment

for local schools and hospitals.

Further details of the Group’s response to
COVID-19 are provided on page 9.

Local communities play an integral role in
Ferrexpo’s social licence to operate, and
the Group understands the need to play
a constructive and proactive role in the
communities located close to the Group’s
operations. Ferrexpo coordinates its
community activities through its own
Charity Fund, which was established in
2011, and through direct sponsorship of
projects by Ferrexpo’s operating entities
FYM and FBM. The primary focus areas of
the Group’s work in local communities are
as follows:

(1) Social partnership projects

(for example, the refurbishment
of hospitals and schools);

(2) Local community development

(for example, supporting the local
Palace of Culture);

(3) Direct aid for local individuals (funding
medical procedures for example); and

(4) Administrative support for local council

budgets (road repairs and safety
bollards for example).

Ferrexpo’s Charity Fund and local
operating entities FYM and FBM focus their
efforts on supporting communities
immediately surrounding each of the
Group’s three mines, in order to develop
close ties with each community, working
with community leaders to ensure work
carried out is both relevant and targeted.
Total community support expenditures in
2020, including funds dedicated to the
COVID-19 Response Fund (see section
below), amounted to UAH158 million
(equivalent of approximately US$5.9
million). This figure represents an 11%
increase of such expenditures, which
reflects the increased level of support for
Ferrexpo’s local communities affected by
the global pandemic. Further details of the
Company’s response to COVID-19 are
provided below, as well as on page 9.

Art installation, Ferrexpo Square,
Horishni Plavni, October 2020.

Ferrexpo plc Annual Report & Accounts 2020

Nova Galeschina school
refurbishment, September 2020.

CASE STUDY

REFURBISHING
HOSPITALS AND
SCHOOLS

Ferrexpo’s Charity Fund not only moved
to acquire essential medical equipment
in response to the global COVID-19
pandemic in 2020, but the fund has also
a long-standing initiative to refurbish and
modernise local schools and hospitals. In
2020, these efforts continued with work
carried out on hospitals in Horishni Plavni
and Nova Galeschina, along with
refurbishment work at schools in
Solonitsa and Nova Galeschina (pictured
here).

Online

Please see the Ferrexpo
website for five years of
dedicated Responsible
Business Reports.

Further reading

www.ferrexpo.com/
responsibility

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Responsible Business
continued

GOVERNANCE

Strong corporate governance is a requirement for
modern businesses to succeed and maintain a
sustainable business model. Corporate governance
enables companies to operate effectively, with
transparency in decision-making and fairness for all
stakeholders. Whilst Ferrexpo’s Board of Directors
is responsible for setting the Group’s overall
governance strategy and framework, governance
is applied as a culture throughout the workforce.

Board structure
Ferrexpo’s Board of Directors (the “Board”)
is comprised of a Chair and six Directors,
four of whom are Independent Non-
executive Directors. Ferrexpo’s Board.
The Board understands the need for high
standards of corporate governance and the
direct impact this can have on the Group
for all stakeholders. The Board announced
an additional appointment of Ann-Christin
Andersen as an Independent Non-
executive Director in March 2021
and is seeking to appoint an additional
Independent Non-executive Director.

Shareholder engagement
The Group’s Annual General Meeting
(“AGM”), which is typically held in May of
each year, is an opportunity for the Board
to receive shareholder feedback on a
number of subject areas, including
corporate governance. Following the 2020
AGM, the Board conducted a shareholder
feedback process to establish the reasons
behind shareholder voting at the 2020
AGM. This process resulted in feedback
from a number of the Group’s largest
shareholders, and the Group is currently
seeking to implement measures in
response to this feedback.

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, 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 disclosed in the Group’s 2019 Annual
Report and Accounts and 2020 Interim
Results, the Board acting through the
Committee of Independent Directors
(“CID”) has been conducting a review into
its sponsorship arrangements with FC
Vorskla, with specific reference to
payments totalling c.US$17 million made by
FC Vorskla to Collaton Limited, an entity
controlled by Kostyantin Zhevago, in
connection with the renovation and
construction of certain FC Vorskla
stadiums and training grounds in Ukraine
(the “Loan”). The CID, with assistance from
third party advisers, has now concluded its
review and arrangements have been made
for the Loan to be repaid in full. As
disclosed in the 2020 Interim Results, the
CID had been informed that the Loan is
expected to be repaid via the sale and
leaseback of certain capital projects of FC
Vorskla in Ukraine, although with the
ongoing COVID-19 pandemic and general
market conditions in Ukraine, the CID has
since been informed that this may not be
possible in the near term. Therefore
additional arrangements have been put in
place by Kostyantin Zhevago and his
associated entities for full repayment of the
Loan to take place by 31 July 2022. These

Separator Operator Kira Abaza
in Ferrexpo’s beneficiation plant,
June 2020.

arrangements have been reviewed by the
CID, and having put in place appropriate
monitoring controls, the CID is satisfied
with the arrangements.

The current sponsorship agreement with
FC Vorskla Ukraine, as agreed in 1Q 2021,
includes enhanced reporting requirements
by the football club to the Group and
additional provisions around the use of
sponsorship funds. Further details are
provided in the Audit Committee report on
page 76, in addition to Notes 30 and 34 to
the Consolidated Financial Statements.

Ferrexpo plc Annual Report & Accounts 2020

Non-financial information statement
The Ferrexpo Group complies with the non-financial 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-financial matters. This builds on existing reporting that
the Company already does under the following frameworks: CDP, 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 2019 available on the Company’s website and the report for 2020 expected to be released in 3Q 2021.

Reporting requirements

Policies and standards

Additional information

Environmental

– Tailings Management

Employees

– Ethics and Responsible Business Policy
– Code of Conduct
– Health and Safety Policy

Greenhouse Gas emissions (pages 30-33)
Energy consumption (page 32)
www.ferrexpo.com/responsibility/environment

Health and safety (pages 28-29)
Learning and development (pages 38-39)
Diversity (pages 38-39)
www.ferrexpo.com/responsibility/people
www.ferrexpo.com/responsibility/health-and-safety

Human Rights

– Human Rights Policy statement
– Data Privacy Policy
– Anti-Slavery and Trafficking Statement
Information and Cyber Security Policy
–

Health and safety (pages 28-29)
Diversity (pages 38-39)
www.ferrexpo.com/responsibility
Ferrexpo Code of Conduct (www.ferrexpo.com)

Social Matters

– Donations Policy
– Community Policy

Anti-corruption
and Anti-Bribery

– Anti-bribery Policy
– Anti-money Laundering and

Counter Terrorist Financing Policy

– Fraud Risk Management
– Policy Whistleblowing

Chair’s Statement (page 4)
Social Engagement (pages 34-35)
www.ferrexpo.com/responsibility/community
www.ferrexpo.com/responsibility/stakeholder-engagement

Chair’s Statement (page 4)
Governance (pages 36-37)
www.ferrexpo.com/responsibility/governance
www.ferrexpo.com/whistleblowing

Business Model (pages 16-17)
Risk Management (pages 46-47)
Viability Statement (page 61)
Going Concern Statement (page 111)

Key Performance Indicators (pages 14-15)

Risks

Principal risks,
pages 52-60

Principal Risks and
impact on business
activities

Non-Financial KPIs

CASE STUDY

COMPLIANCE
EFFORTS IN
2020

Online

Ferrexpo’s Code of Conduct
is available online: www.ferrexpo.com/
responsibility/governance

Compliance is a key element to a
company’s corporate governance,
ensuring that the business is effective
and balanced in its day-to-day
operations. Best practice in compliance
is achieved through a variety of work
streams, including (a) dedicated
compliance training courses, both
in-person and online, (b) compliance
events to raise awareness, and (c)
Ferrexpo’s Integrity Line, which is used
to report compliance-related concerns
that anyone in the business may report
anonymously.

are maintained throughout the Ferrexpo
business. In 2020, a total of 16 concerns
were raised via the Integrity Line,
compared to 26 in 2019. The main areas
of concern were employee relations and
conflicts of interest.

Compliance Week
To raise awareness around compliance-
related topics, Ferrexpo hosts its annual
Compliance Week, bringing together
various groups within the business for
training courses in compliance and
ethical leadership. The third such
iteration of this event, which was a
virtual conference held in May 2020,
was attended by 616 employees, and
had speakers from a number of external
organisations covering topics such as
Ferrexpo’s values, ethical leadership,
modern slavery, anti-corruption and
creating a speak-up culture.

Dedicated training
The Group launched an online training
course in February 2020 focused on
reinforcing knowledge of existing
compliance-related topics, with 632
participants during the month. Additional
compliance-related events were held in the
form of a Compliance Championship,
knowledge days and a Compliance Forum,
whereby external speakers presented to
senior leaders on recent developments in
compliance.

Code of Conduct
Ferrexpo’s Code of Conduct and Code of
Conduct for Business Partners are the
main documents by which the Group
engages with its workforce and suppliers
respectively. As of 2020, a total of 1,955
contracts were signed with compliance
clauses included in them, representing 87%
of the total number of contracts signed by
Ferrexpo’s operating entities.

Integrity Line
Ferrexpo’s Integrity Line is available at
www.ferrexpo.com/IntegrityLine. Users
can anonymously report compliance
concerns regarding the business by
telephone or email, with this function
an important safeguard for ensuring
that best practice industry standards

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Responsible Business
continued

WORKFORCE
AND WORKFORCE
ENGAGEMENT

Investing in the Group’s workforce

Workforce engagement
Ferrexpo has a global workforce of nearly
11,000 employees and contractors, all of
whom contribute to the success of the
Ferrexpo business. In 2020, the Company
held its third Workforce Engagement
Survey, which has provided an important
mechanism for employees to provide
feedback. With the disruption experienced
in relation to the global pandemic, it has
been harder to reach out to the number
of employees for participation in the 2020
survey, but the Group still managed to
receive responses from 1,660 employees in
4Q 2020, across all three operating entities
and the Group corporate and marketing
functions. Following a review of the
responses received, results of the survey
will be communicated back to Ferrexpo’s
employees throughout 2021 via town hall
meetings, sharing and discussion of results
by line managers, briefings for individual
work groups and employee conferences.

Ferrexpo also engages with its workforce
in Ukraine, representing 93% of the
Group’s people, through several printed
media publications and newsletters,
which give Ferrexpo’s management
team the ability to reach operators that
would not normally use a computer in
their day-to-day activities. Ferrexpo
also has its social media channels on
Facebook, LinkedIn and Instagram, which
are used to issue regular updates on its
business in both Ukrainian and English.

1,660

1,660 employees
provided their views
as part of 2020 the
Employee Engagement
Survey.

Diversity
Gender balance in each department of
Ferrexpo is important, as this leads to
diversity of thought leadership and a more
balanced decision-making process. At its
operations, Ferrexpo has historically had
a more balanced workforce in its
administrative functions, compared to
production and maintenance roles. The
Group is attempting to address this by
several new initiatives to promote the role
of women in these departments through
training programmes. An example of this
work can be seen in the Group’s project
to promote future female leaders of the
business, “Fe_munity”, which is an
initiative commenced in 2020 that involves
bringing together 70 women identified as
future leaders, to create a high
performance community, who will all
receive leadership training and mentoring
to help advance their careers.

In 2020, women represented 29.2%
of Ferrexpo’s employees (2019: 29.3%),
with women in management positions
representing 18.2% of the total (2019:
17.5%). The Group is targeting a figure
of at least 25% of managerial roles
to be held by women by 2030.

Training
Ferrexpo takes every step to ensure a
high level of training is provided to its
workforce through its own training and
development centre, as well as external
courses that are facilitated to help invest
in the future of the Group’s workforce.
The Group’s workforce completed over
6,800 training courses at its operations in
Ukraine in 2020, despite a sharp reduction
in the number of individuals at site due
to social distancing and training largely
switching to online formats. In line with
2019, the majority of this training was
safety related, as the Group continues
to embed a safety first culture.

Social media
Ferrexpo uses LinkedIn, Facebook
and Instagram to communicate with
stakeholders – please see links below
for more regular updates on Ferrexpo.

www.linkedin.com/company/
ferrexpo-plc/

www.facebook.com/Ferrexpoplc/

www.instagram.com/ferrexpo/

25%

Targeting an increase
to 25% of management
roles held by women
by 2030 (2020: 18.2%).

6,800

Over 6,800 training
courses completed at
the Group’s operations
in Ukraine in 2020.

FERREXPO’S PIONEERS OF 1970

Ferrexpo has a rich history of operating
as an iron ore pellet producer since
1970, and in recognition of this
history, throughout 2020 the Group
released over 30 interviews through its
social media channels documenting
the memories of the pioneers who
helped build the original mine and
processing facilities, as well as key
members of the management team
past and present. Ferrexpo would
like to extend its thanks to all those
involved in the creation of this series,
which has served as an important
record of the Group’s heritage.

Night time view over western
waste dump at Ferrexpo
Poltava Mine.

CASE STUDY

EMPLOYEE
ENGAGEMENT
SURVEY 2020

Online

https://www.
ferrexpo.com/
responsibility/
people

Ferrexpo plc Annual Report & Accounts 2020

Responses received in the 2020 survey
highlighted that the level of the Group’s
response to COVID-19 has received
high levels of approval from its workforce,
with employees averaging an approval
rate of 94% for the questions asked in
this section. Other sections to receive
high levels of approval in the 2020 survey
were in the teamwork and accountability
sections. Sections whereby feedback
suggests further consideration is required
were: (a) reward and recognition, and
(b) development.

In 4Q 2020, Ferrexpo completed its third
Employee Engagement Survey, having
conducted previous surveys in 2017 and
2019. Despite the global pandemic limiting
workforce numbers at site, the Group
managed to receive feedback from 1,660
employees, representing 20% of the
employees at the subsidiaries surveyed.

Ferrexpo’s Employee Engagement Surveys
focus on each respondent’s views on broad
topics such as alignment with corporate
goals, leadership, teamwork, accountability
and performance, and reward and
recognition, with a number of questions
within each section. The survey uses the
same questions and enables Ferrexpo’s
Human Resources department to assess
positive and negative trends in the
responses received from each business
unit and department between surveys. An
additional section in the 2020 survey also
focused on the perceived effectiveness of
the Group’s COVID-19 measures.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Review of Stakeholder
Engagement Activities

Engaging with all stakeholder groups
for an effective, successful business.

Employees and contractors

Customers

Suppliers

Communities

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

– 2020 Employee Engagement

Survey.

– Annual performance and
development reviews.

– Compliance efforts and
Integrity Line for raising
concerns.

– To understand issues that are
important to the workforce,
to address concerns and
build future relationships.

– To enhance the relationship
between the individual and
the business through training
and development.

– Relationship management.

– Feedback provided following

each shipment.

– To develop mutually
beneficial business
relationships.

– Contract negotiations for

long-term contracts.

– To promote sustainability

throughout the value chain.

– Relationship management.

– To develop mutually

– Regular initiatives through its

– Communities grant

– Regular feedback.

– Contract negotiations.

beneficial business

relationships.

2011.

Charity Fund, active since

Ferrexpo’s operations a

– To promote sustainability

– COVID-19 Response Fund.

throughout the value chain.

social licence to operate and,

specifically for 2020, the

health of local communities

is directly linked to the future

success of the business.

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

– Strong health and safety

– LTIFR of 0.79, ahead of iron

– Product quality.

standards.

– Training and development

opportunities.

– Collective bargaining.

– Workforce development.

ore producing peers in
Australia.

– 6,863 individual training

courses undertaken in 2020
(2019: 15,586).

– Latest collective bargaining

agreement agreed in
February 2020.

– Consistent pellet supply.

– Ensuring sustainability

throughout the value chain.

– Regular briefings between
marketing and operations,
providing customer
feedback.

– Work to improve consistency
of pellet production, such as
pellet line refurbishment
process, completed in 2019.

– Quality of supply.

– Where possible, goods and

– Projects relevant to individual

– Medical donations via

– Effective and timely supply of

materials.

local suppliers.

– Promote good business and

– As of 2020, 87% of contacts

services are sourced from

communities, established

through consistent and

effective community

engagement.

employment in local

communities.

– Ensuring sustainability

throughout the value chain.

signed by operations

included reference to

Ferrexpo’s Code of Conduct

for Suppliers (94% of

contracts with value in

excess of UAH 500,000).

COVID-19 Response Fund,

with US$2.5 million funding

approved March 2020, and

further US$1 million

approved early 2021.

– Ferrexpo Charity Fund

working to refurbish hospitals

and schools in local towns

and villages.

How quality of engagement is
assessed

Plans for engaging in 2021

How quality of engagement is
assessed

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

assessed

– Safety metrics either in line

with or ahead of peers.

– Employee Engagement
Survey and feedback
sessions in 2021.

– Good working relationship

– Continued workforce

with unions at operations in
Ukraine.

development programme.

– Longevity of customer

quality and pricing.

– Adoption of, and adherence

Ferrexpo’s Code of Conduct

– Direct feedback through

87 million in 2021, excluding

– Further engagement on pellet

– Further adoption of

– Charity Fund budget of UAH

relationships.

– Multiple long term contracts
in place for over ten years.

– Additional focus on

Responsible Business
activities, specifically carbon
emissions within the value
chain.

with, Ferrexpo’s Code of

Conduct for Suppliers.

– Longevity of supplier

relationships.

for Suppliers.

community support officers.

COVID-19 Response Fund.

– Quarterly town hall meetings

with General Directors.

This figure represents a level

in line with 2020 (2020: UAH

92 million).

– Main projects in 2021 will be

focused on refurbishment of

local hospitals, schools and

sports facilities, representing

40% of the budget for 2021.

Ferrexpo plc Annual Report & Accounts 2020

Employees and contractors

Customers

Suppliers

Communities

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

– 2020 Employee Engagement

– To understand issues that are

– Relationship management.

– To develop mutually

Survey.

– Annual performance and

development reviews.

– Compliance efforts and

Integrity Line for raising

concerns.

important to the workforce,

to address concerns and

build future relationships.

– To enhance the relationship

between the individual and

the business through training

and development.

– Feedback provided following

each shipment.

– Contract negotiations for

long-term contracts.

beneficial business

relationships.

– To promote sustainability

throughout the value chain.

– Relationship management.

– Regular feedback.

– Contract negotiations.

– To develop mutually
beneficial business
relationships.

– Regular initiatives through its
Charity Fund, active since
2011.

– To promote sustainability

– COVID-19 Response Fund.

throughout the value chain.

– Communities grant

Ferrexpo’s operations a
social licence to operate and,
specifically for 2020, the
health of local communities
is directly linked to the future
success of the business.

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

– Strong health and safety

– LTIFR of 0.79, ahead of iron

– Product quality.

standards.

– Training and development

opportunities.

– Collective bargaining.

– Workforce development.

ore producing peers in

Australia.

– 6,863 individual training

courses undertaken in 2020

(2019: 15,586).

– Latest collective bargaining

agreement agreed in

February 2020.

– Consistent pellet supply.

– Ensuring sustainability

throughout the value chain.

– Regular briefings between

marketing and operations,

providing customer

feedback.

– Work to improve consistency

of pellet production, such as

pellet line refurbishment

process, completed in 2019.

– Quality of supply.

– Effective and timely supply of

materials.

– Promote good business and

employment in local
communities.

– Ensuring sustainability

throughout the value chain.

– Where possible, goods and
services are sourced from
local suppliers.

– As of 2020, 87% of contacts

signed by operations
included reference to
Ferrexpo’s Code of Conduct
for Suppliers (94% of
contracts with value in
excess of UAH 500,000).

– Projects relevant to individual
communities, established
through consistent and
effective community
engagement.

– Medical donations via

COVID-19 Response Fund,
with US$2.5 million funding
approved March 2020, and
further US$1 million
approved early 2021.

– Ferrexpo Charity Fund

working to refurbish hospitals
and schools in local towns
and villages.

How quality of engagement is

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

assessed

How quality of engagement is
assessed

Plans for engaging in 2021

How quality of engagement is
assessed

Plans for engaging in 2021

– Employee Engagement

– Further engagement on pellet

– Further adoption of

– Safety metrics either in line

Survey and feedback

– Longevity of customer

quality and pricing.

with or ahead of peers.

sessions in 2021.

relationships.

– Additional focus on

– Good working relationship

– Continued workforce

– Multiple long term contracts

Responsible Business

with unions at operations in

development programme.

in place for over ten years.

activities, specifically carbon

Ukraine.

emissions within the value

chain.

– Adoption of, and adherence
with, Ferrexpo’s Code of
Conduct for Suppliers.

– Longevity of supplier

relationships.

Ferrexpo’s Code of Conduct
for Suppliers.

– Direct feedback through

community support officers.

– Quarterly town hall meetings

with General Directors.

– Charity Fund budget of UAH
87 million in 2021, excluding
COVID-19 Response Fund.
This figure represents a level
in line with 2020 (2020: UAH
92 million).

– Main projects in 2021 will be
focused on refurbishment of
local hospitals, schools and
sports facilities, representing
40% of the budget for 2021.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Review of Stakeholder
Engagement Activities
continued

Environment

Government

Investors

Capital providers

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

– Greenhouse gas reductions.

– Local environmental

– Enhanced emissions

monitoring equipment.

– Biodiversity.

conditions, whether directly
or indirectly affected by
Ferrexpo’s operations, are
key to the Group’s social
licence to operate.

– Meetings, calls and emails
with government officials
across jurisdictions in which
the Group operates.

– Governments are central to

– Annual Report, investor

– To report activities in a clear

– Regular dialogue with banks,

– To maintain a successful

operating a successful
business, for example,
through providing operating
licences, whilst also
providing a platform for
effective community
engagement.

meetings, calls, conferences,

and orderly manner, to

ratings agencies and other

and email communications.

deliver value to all

lenders.

– Online (press releases,

shareholders.

website updates and social

– Compliance with stock

– Provision of information,

including both internal

working relationship for

existing and future debt

facilities, and other sources

of capital.

media channels).

exchange listing regulations.

updates and market updates

– To enable future investment

such as analyst research on

in the business.

Company and commodities.

– Direct communications with

analysts.

– Post-AGM engagement with

shareholders.

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

– Key focus on climate change

– 8% reduction in Scope 1

across domestic and
international stakeholder
groups.

– Trend within Ukraine for

benchmarking air and water
quality between industrial
towns.

CO2e emissions footprint per
tonne and 21% reduction in
absolute Scope 2 CO2e
emissions per tonne.

– Biodiversity projects include

river restocking project.

How quality of engagement is
assessed

– Dialogue with stakeholder

groups, both domestic and
international regarding
carbon footprint.

– ESG-related research and

appraisal of Group’s
activities.

– Regular community

engagement activities.

Plans for engaging in 2021

– Further reporting around
greenhouse gases and
emissions targets.

– Green projects, including
electricity purchasing and
generation (solar farm).

– Responsible Business

Reports.

– Companies operating within
a consistent and understood
financial and legal
framework.

– Regular payment of taxes
and royalties, in line with
licence terms.

– Companies providing

employment and support to
local communities, as well as
export revenues.

How quality of engagement is
assessed

– Continued government

support at local and national
level in Ukraine.

– Continued government

– Taxes and royalties of

US$100 million paid in 2020
(2019: US$114 million).

– Total taxes and royalties over

US$1.0 billion since IPO.

– Workforce of 10,911 in 2020

(2019: 11,476).

– Clear, consistent and

– 24 press releases and four

– Clear, consistent and

– Meetings and calls with each

transparent reporting of

presentations on Group’s

transparent reporting of

of the banks syndicated

Group’s operations, financial

website in 2020, and issued

Group’s operations, financial

within Group’s Pre-Export

results and Responsible

to the London Stock

results and Responsible

Finance (“PXF”) facility.

Business activities.

Exchange.

Business activities.

– Provision of market research

– Providing information that is

– Annual Report and Accounts

– Providing information that is

and credit ratings research

directly comparable to peer

(issued April 2020).

directly comparable to peer

on the Group, commodity

group reporting.

– Responsible Business Report

group reporting.

– Long term value creation.

(issued August 2020).

research and country

research.

– Appointed broker and

financial adviser (Liberum).

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

– Working with local

government to ensure health
and wellbeing of local
communities during
COVID-19 pandemic.

support in all corporate and
marketing office locations for
the Group.

– Continued investments in
operations, workforce and
communities in 2021.

assessed

– Shareholder feedback.

investor community,

– Successful repayment of

capital provider space.

– Continued dialogue with

including regular company

US$148 million in debt in

updates.

2020 (2019: US$224 million).

– Continued repayment of

existing debt facilities.

– Broadening analyst coverage.

– Continuation of existing

– Analyst research.

– Market valuation of the

Company relative to its peer

group.

– Increasing social media

channels and topics/content

covered.

relationships with domestic

and international banks.

– Availability and future

provision of additional debt

facilities (if required).

Ferrexpo plc Annual Report & Accounts 2020

Environment

Government

Investors

Capital providers

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

Engagement activity in 2020

Reasons behind engagement

– Greenhouse gas reductions.

– Local environmental

– Meetings, calls and emails

– Governments are central to

– Annual Report, investor

– To report activities in a clear

– Enhanced emissions

monitoring equipment.

– Biodiversity.

conditions, whether directly

with government officials

or indirectly affected by

across jurisdictions in which

operating a successful

business, for example,

Ferrexpo’s operations, are

the Group operates.

through providing operating

key to the Group’s social

licence to operate.

licences, whilst also

providing a platform for

effective community

engagement.

meetings, calls, conferences,
and email communications.

– Online (press releases,

and orderly manner, to
deliver value to all
shareholders.

website updates and social
media channels).

– Compliance with stock

exchange listing regulations.

– Direct communications with

analysts.

– Post-AGM engagement with

shareholders.

– Regular dialogue with banks,
ratings agencies and other
lenders.

– Provision of information,
including both internal
updates and market updates
such as analyst research on
Company and commodities.

– To maintain a successful
working relationship for
existing and future debt
facilities, and other sources
of capital.

– To enable future investment

in the business.

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

What matters most

The Company’s response

– Key focus on climate change

– 8% reduction in Scope 1

– Companies operating within

– Taxes and royalties of

across domestic and

international stakeholder

groups.

– Trend within Ukraine for

CO2e emissions footprint per

tonne and 21% reduction in

absolute Scope 2 CO2e

emissions per tonne.

a consistent and understood

US$100 million paid in 2020

financial and legal

framework.

(2019: US$114 million).

– Total taxes and royalties over

– Regular payment of taxes

US$1.0 billion since IPO.

benchmarking air and water

– Biodiversity projects include

and royalties, in line with

quality between industrial

river restocking project.

licence terms.

– Workforce of 10,911 in 2020

(2019: 11,476).

towns.

– Companies providing

employment and support to

local communities, as well as

export revenues.

– Clear, consistent and

– Meetings and calls with each

– Clear, consistent and

transparent reporting of
Group’s operations, financial
results and Responsible
Business activities.

– 24 press releases and four
presentations on Group’s
website in 2020, and issued
to the London Stock
Exchange.

transparent reporting of
Group’s operations, financial
results and Responsible
Business activities.

– Providing information that is
directly comparable to peer
group reporting.

– Annual Report and Accounts

(issued April 2020).

– Responsible Business Report

– Providing information that is
directly comparable to peer
group reporting.

– Long term value creation.

(issued August 2020).

– Appointed broker and

financial adviser (Liberum).

of the banks syndicated
within Group’s Pre-Export
Finance (“PXF”) facility.

– Provision of market research
and credit ratings research
on the Group, commodity
research and country
research.

How quality of engagement is

Plans for engaging in 2021

How quality of engagement is

Plans for engaging in 2021

assessed

– Further reporting around

– Working with local

– Dialogue with stakeholder

greenhouse gases and

– Continued government

government to ensure health

groups, both domestic and

emissions targets.

support at local and national

and wellbeing of local

international regarding

carbon footprint.

– Green projects, including

level in Ukraine.

electricity purchasing and

– Continued government

communities during

COVID-19 pandemic.

– ESG-related research and

generation (solar farm).

support in all corporate and

– Continued investments in

– Responsible Business

Reports.

marketing office locations for

operations, workforce and

the Group.

communities in 2021.

appraisal of Group’s

activities.

– Regular community

engagement activities.

How quality of engagement is
assessed

– Shareholder feedback.

– Analyst research.

– Market valuation of the

Company relative to its peer
group.

Plans for engaging in 2021

– Continued dialogue with
investor community,
including regular company
updates.

How quality of engagement is
assessed

Plans for engaging in 2021

– Successful repayment of
US$148 million in debt in
2020 (2019: US$224 million).

– Continued dialogue with
capital provider space.

– Continued repayment of
existing debt facilities.

– Broadening analyst coverage.

– Continuation of existing

– Increasing social media

channels and topics/content
covered.

relationships with domestic
and international banks.

– Availability and future

provision of additional debt
facilities (if required).

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc

Annual Report & Accounts 2020

Section 172
Statement

CONSIDERING
STAKEHOLDERS
IN DECISION-
MAKING

The Board of Directors acts
to promote the long-term
success of the Company for
the benefit of shareholders
as a whole, and in doing so
recognises the importance
of having due regard to the
matters set out in section
172(1)(a) to (f) of the
Companies Act 2006, being:

–

the likely consequences of any decision
in the long term;

the interests of the Company’s
employees;

the need to foster the Company’s
business relationships with suppliers,
customers and others;

the impact of the Company’s operations
on the community and the environment;

the desirability of the Company
maintaining a reputation for high
standards of business conduct; and

–

the need to act fairly as between
members of the Company.

The Board receives regular training on
directors’ duties, including refresher
training on the duty under section 172
during the year, and new directors
appointed to the Board receive tailored,
individual briefings on their duties.

How considering stakeholders
in decision-making works
in practice
The Group engages regularly with its
stakeholders. This engagement is largely
conducted by the Group’s management
team, as part of the day-to-day
management of the Group delegated by the
Board to the management team, although
the Board will also engage directly with
stakeholders as appropriate. Where
stakeholder engagement has been
conducted by management, the
stakeholder issues are considered at Board
level through regular updates from the
Acting CEO and senior management. This
will include presentations by members of
the senior management team to the Board
on particular stakeholder considerations,
and the Board will discuss feedback
received from stakeholders directly with
the management team. Considerations
relating to stakeholder matters are also
included in management papers prepared
for the Board, as appropriate.

As part of its discussions and decision-
making process, the Board will take
into account relevant stakeholder
considerations and the potential impacts
of their decisions on such stakeholders

and the environment. This will include
considering the impact of competing
stakeholder interests, and the Board is
cognisant of the fact that some of its
decisions may have an adverse impact
on certain stakeholders or affect different
stakeholder groups in different ways.

The stakeholder groups which the Board
has identified as being fundamental for an
effective, successful business, together
with the engagement activities carried
out by the Group in 2020, are outlined
on pages 40 to 43.

In addition to these stakeholder groups,
the Board considers the likely
consequences of decisions in the long
term, the impact of the Group’s operations
on the community and the environment and
the importance of maintaining a reputation
for high standards of business conduct.
The Board will also be guided in its
decision-making by the Group’s purpose
and values and its strategic framework as
outlined on pages 16 to 17 and 12 to 13,
respectively.

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

Workforce

– Case Study: Autonomous large scale haul trucks
– Case Study: Ferrexpo’s response to COVID-19
– HSEC Committee Chair’s Review
– Responsible Business: Health and Safety
– Case Study: First-DDSG – Safety across the

Ferrexpo Group

Page

p.8
p.9
pp.26-27
p.28
p.29

Suppliers and
customers

Community

Environment

High standards
of conduct
Investors

– Responsible Business: Workforce and Workforce

p.38

Engagement

– Case Study: Employee Engagement Survey 2020
– Case Study: Utilising technology to adapt

p.39
p.23

to a pandemic

– Case Study: Compliance efforts in 2020
– Responsible Business: Social Engagement
– Case Study: Refurbishing hospitals and schools
– HSEC Committee Chair’s Review
– Responsible Business: Environmental Stewardship
– Case Study: What is Green Steel and why

p.37
p.34
p.35
pp.26-27
p.30
p.31

is it relevant?

– Responsible Business: Governance
– Case Study: Compliance efforts in 2020
– Shareholder returns
– Shareholder engagement

p.36
p.37
p.5
p.36

Key decisions made in 2020
The Board and its Committees took a
broad range of factors and stakeholder
considerations into account when
making decisions in the year. Details
on how the Board and its Committees
operate and the way in which they
reach decisions, including the matters
discussed and debated during the
year, can be found in the Corporate
Governance Report on pages 68 to 75.

The following are some examples of
how the Directors have had regard to
the matters set out in section 172(1)
(a) to (f), and the need to foster the
Company’s business relationship
with customers, suppliers and other
stakeholders, when making principal
decisions and the effect of that on
certain of the decisions taken by them.

CASE STUDY

FERREXPO MINING
CONSOLIDATION PLAN
Our Mining Consolidation Plan is a key
operational development milestone for
the Group. It is a new mining system, which
is part of the One Ferrexpo Strategy to
consolidate functions and accountabilities
across the Group’s three mines into
centralised single units, for example, ‘One
electrical service’, ‘One dewatering service’
and ‘One drilling service’. The new mining
system is in the long-term interests of the
Group, as it will create operational
efficiency through the optimisation of
resources, elimination of duplicitous
functions and accountabilities, and promote
more efficient ways of working through
the re-allocation and transferability of
resources to where they are needed
the most.

The decisions taken to implement the Mining
Consolidation Plan spanned many of the
section 172 factors. Management and the
Board identified the key stakeholders as the
employees, contractors, service providers and
local community. A stakeholder consultation
exercise was undertaken by the management
team, with the aim of enhancing the
understanding of the impact of the new mining
system on the stakeholders. The findings were
reported back to the Board through
presentations and discussions between the
management team and the Board.

The process identified a number of benefits
for stakeholders. These included the ability
to create multifunctional roles among the
workforce, thereby creating development
opportunities, facilitating the move to
in-sourced labour, centralised services
covering all three mines, and safety benefits
through the use of autonomous vehicles and
operational efficiencies. It was also

Ferrexpo plc Annual Report & Accounts 2020

acknowledged that there would be adverse
impacts for some stakeholders, including
redundancies and reducing the need for
outsourced contractors and some service
providers. These factors were carefully
considered by the management team with
the Board exercising full oversight and
challenge, with particular regard to the
long-term consequences of the decisions.

A key outcome of the consultation process
and stakeholder considerations was the
need to embed a change in cultural
mind-set, to operate and think as ‘One
business’ with aligned leadership and
effective decision-making. This is being
progressed by the management team,
which will report to the Board in due course.

CASE STUDY

COVID-19 PANDEMIC
RESPONSE
When COVID-19 emerged as a global
pandemic, the management team together
with the Board took immediate steps to
protect our employees, contractors and the
local communities. Safety was our number
one priority. Action was also taken to
safeguard the business through the
implementation of our business continuity
plans. In addition to regular engagement
with the workforce, management engaged
with a broad range of stakeholders to
understand the impacts that COVID-19 was
having on them, including our customers,
suppliers and other local stakeholders.

Following engagement with local stakeholders,
in March 2020, the Board approved a US$2.5
million dedicated COVID-19 Response Fund, to
be used for medical equipment to support local
hospitals and communities. A further US$1
million was approved by the Board in February
2021. Supporting the local community is
important to the Company as this aligns with
our strategy to maintain a social licence to
operate, and also our desire to positively
contribute to the economy in all countries in
which we operate. Supporting the local
community through the COVID-19 Response
Fund is also important for protecting the
Group’s workforce, and therefore is in the
long-term interests of the Company, as many
members of the workforce are part of the local
community in Poltava region.

Another key impact of the COVID-19
response has been regular engagement
with the Group’s customers. The Group’s
marketing team initially contacted
customers to understand the impacts that
COVID-19 was having on their business and
operational practices, and also to provide
details of the actions which the Group was
taking to protect its own business. In many
countries it was not possible to conduct
face-to-face meetings with customers and
therefore the Group had to adapt its way of
working and moved to virtual meetings with
its existing and new customers. The Chief
Marketing Officer met all customers virtually
and maintains regular contact with them.
Key learnings from this engagement are
reported regularly to the Board through
presentations from the Chief Marketing
Officer.

CASE STUDY

DIVIDEND PAYMENTS
Following the onset of the coronavirus
pandemic, and given the general market
uncertainty caused by the spread of
COVID-19, at the time of publication of
the 2019 annual results in March 2020 the
Board decided to defer consideration of
a potential final ordinary and/or special
dividend. This deferral was to allow the
Board more time to assess the effect of
the COVID-19 pandemic on the Group’s
workforce, customers and suppliers.

The Board continued to carefully monitor
developments relating to COVID-19

in relation to the Group’s business, and
that of its customers and impacts on other
stakeholders. Actions taken by the Group to
protect its business, together with the trading
position of the Group and strong balance
sheet, gave the Board confidence to declare
a final special and ordinary dividend for 2019
on 21 April 2020. The Board was also able to
declare further dividends throughout 2020.

Prior to each decision to declare a dividend,
the Board took various factors into account
with particular focus on the impacts of the
COVID-19 pandemic. Other factors considered
included the Group’s cash balance, the cash
flow impact payment would have on capital
investment projects and payments to
employees, suppliers and governments

(taxes and royalties). Payments to lenders
and covenants under loan agreements were
also considered, and during the year the
Board made a voluntary prepayment of
US$10 million under its pre-export finance
facility to further reduce its debt position.
The Board also considered the expectations
of investors in light of the Group’s existing
regular dividends and any longer-term
implications on growth projects.

Overall, the Board determined that the
dividend payments were in the best
interests of all shareholders. The interests
of employees, customers, suppliers and
other stakeholders were also considered,
and the decision to pay the dividends
was not thought to adversely impact
their interests.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Risk Management

ASSESSING AND
MANAGING RISK

The Group has developed a system for identifying risks,
with a focus on risk management and mitigation to
protect the Ferrexpo business. Risk management is a
process overseen by the Ferrexpo Board of Directors.

Approach
The Group’s risk management processes
provide a framework to support
the identification, prioritisation and
management of both emerging and
principal risks involved in the Group’s
activities. It is not, and cannot be,
designed to eliminate risk, particularly
in an emerging market economy.
Ferrexpo’s risk management policies
and procedures have been established
to identify and analyse the risks faced
by the Group, to set appropriate
limits and controls and take relevant
mitigating actions where considered
by the Board of Ferrexpo and its
executive management to be beneficial.

Risk assessment
The Group’s risk matrix is regularly
reviewed and monitored by the Executive
Committee and its sub-committee,
the Finance, Risk Management and
Compliance Committee (“FRMC”), as
well as the Audit Committee and the
Board. This review process includes
ensuring that any new risks are
identified, their potential impact on
the Group assessed and appropriate
controls established. The risks
identified are ranked based on the
potential impact and the probability
of occurrence in order to assess their
impact on the Group’s operation and
viability. The impact and the probability
are reassessed on a regular basis
based on latest developments in the
Group’s macro and micro environment.
This includes assessing whether any
emerging risks may have become

principal risks. Ferrexpo considers an
emerging risk to be newly developing or
changing risks that are difficult to quantify.
It is the responsibility of the Group’s
Executive Committee to define appropriate
actions to adequately monitor those
risks and establish an effective control
environment. The controls are generally
conducted by the Group’s internal audit
function or members of the Executive
Committee and updates are provided to
the Executive Committee and the Board.

Risk governance
The Board of Ferrexpo is ultimately
responsible for defining the Group’s
attitude to risk and ensuring that
appropriate systems of risk management
and internal controls are established and
embedded across the Group, in conformity
with its desired risk management culture.
Its responsibility extends to ensuring that
the emerging and principal risks faced
by the Group are robustly assessed and
that the Group’s exposure to such risks
is aligned with its strategic objectives.
The Audit Committee assists the Board
in its regular monitoring of risk exposures
and the Group’s risk matrix, and is
responsible for evaluating the adequacy
and effectiveness of the established risk
management and internal control systems.
It also oversees how management monitors
compliance with risk management
policies and procedures, with assistance
from the Group internal audit function
which conducts ad hoc reviews of risk
management controls and procedures
as part of its annual programme of work.
For more information relating to 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 76.

The FRMCC oversees the centralised
financial risk management structures
and monitors compliance risks, while
the HSEC Committee monitors safety,
environment and community risks.
These two committees assist the Audit
Committee and Board in the identification
and analysis of both emerging and
principal risks. Assurance on the internal
control and risk management systems
is provided in the form of management
information, reports and updates from
the Group internal audit function, external
audits and oversight by the Executive
Committee, Audit Committee and Board.

2020 risk assessment
The risks set out in the matrix were
assessed by the FRMCC and Audit
Committee, as appropriate, and the risks
identified as posing the biggest threat to
the Group’s operations (based on their
potential impact and taking account
of the mitigating measures in place)
were analysed in order to identify the
principal risks faced by the Group for
assessment by the Board. At each Board
meeting throughout the year, the Board
reviewed the risk register and assessed
the emerging and principal risks facing
the Group over both the short and long
term. For more information, please see
the Viability Statement on page 61.

Ferrexpo plc Annual Report & Accounts 2020

RISK MANAGEMENT PROCESS

Ferrexpo Board
– Takes overall responsibility for maintaining sound risk management and internal control systems.
– Sets strategic objectives and defines 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.

Executive Committee
– Assesses and mitigates Group-

wide risk.

– Reviews effectiveness of risk

– Monitors internal controls.

management and control systems.

HSEC Committee
– Oversees corporate social

responsibility-related matters and
performance.

– Has specific focus on safety and
climate change related risks.

FRMCC
– Monitors centralised financial risk

management structures.
– Monitors Group compliance.

Internal audit function
– Supports the Audit Committee in reviewing the effectiveness of risk management.
– Maintains and develops internal control systems.

Operational level
– Risk management processes and internal controls embedded across all Ferrexpo operations.

RISK MATRIX HEAT MAP

The principal risks identified
in the heat map to the right
highlight which could have the
greatest impact (shaded red)
on the Group’s operations
and viability.

Please see pages 48 to 60 of
this report for a full summary
of principal risks.

Key
1.1

1.2

Ukraine country risk
(external risk)
Counterparty risk
(external risk)
Global demand for steel

2
3.1 Changes in pricing methodology
3.2

Lower iron ore prices
(external risk)

3.3

3.4

4.1

4.2

4.3

Pellet premiums and pellet
supply (external risk)
Seaborne freight rates
(external risk)
Operating risks related
to mining, processing,
pelletising and logistics
(Company-specific risks)
Operating risks related
to health and safety
(Company-specific risk)
Operating risks related
to operating costs
(external and Company risk)
Operating risks related
to climate change
Risks related to COVID-19

e
r
e
v
e
S

t
c
a
p
m

w
o

y
r
e
V

1.1

3.2

3.3

3.1

4.1

4.2

4.3

1.2

3.4

Unlikely

Likelihood

Almost certain

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Principal Risks

The principal risks and uncertainties facing
Ferrexpo’s business as assessed by the
Board of Ferrexpo are shown in this section.

A number of the risks described in this section have
the ability to directly affect the Group’s strategy, which
for reference is as follows:

1. Produce high quality pellets.

2. Be a low cost producer.

3. Sell to a world class customer portfolio.

4. Maintain a social licence to operate.

5. Maintain appropriate capital allocation

between a strong balance sheet, returns to
shareholders and investment for growth.

Increase in expected risk in 2021

Decrease in expected risk in 2021

Risk balance for 2021

Risk assessment and risk
mitigation
Principal risks are defined as factors
that may negatively affect the Group’s
ability to operate in its normal course
of business, and may be internal, in
the form of risks derived through the
Group’s own operations and activities,
or external, such as political risks,
market risks or climate change related
risks. Principal risks include, but are
not necessarily limited to, those that
could result in events or circumstances
that might threaten the Group’s
business model, future performance,
solvency or liquidity and reputation.

Further reading

For more
information on the
Group’s strategy,
please see pages
12-13

Risks are inherently unpredictable and
can be uncontrollable, 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 and/or
likelihood, 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 30 different risk
areas 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 Committee (“FRMCC”), which
ultimately reports into the Company’s
Board of Directors for further review
and approval of the risk register. The
Group’s 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, which is a
committee that includes the Acting Chief
Executive Officer, Acting Chief Financial
Officer and Chief Marketing Officer.

Newly encountered risks that were
specific to 2020 were principally related
to the global COVID-19 pandemic. In
addition, the Group faced similar risks
that have faced the business in previous
years, including risks associated with
operating in an emerging market, and
market risk related to commodity pricing.

The Group has updated its principal
risks as shown on pages 48 to 60 of this
report, in accordance with the known
risks facing the business. Further updates
to the Group’s Principal Risks will be
provided in the Group’s Interim Results
statement, which is due for publication
in August 2021. Where the Group has
identified a principal risk, details of the
Group’s efforts to mitigate each risk are
also provided. It should be noted that the
Group’s Audit Committee has reviewed
the risks associated with the exit of the
United Kingdom from the European Union
(“Brexit”), and whilst significant uncertainty
exists in relation to this event and the
future trading relationship between the
UK and the EU post-Brexit, the Audit
Committee has determined that this is not
a principal risk on the basis of the Group’s
reduced exposure to the UK market.

Ferrexpo plc Annual Report & Accounts 2020

Responsibility

Board of Directors and
Chief Executive Officer

Risk appetite

Medium

Link to strategy

1, 2, 3, 4 and 5

1. COUNTRY RISK

1.1 UKRAINE COUNTRY RISK (EXTERNAL RISK)

Risk overview

Transparency International e.V. has
published an annual Corruption
Perceptions Index since 1995 and is a
leading global indicator of public sector
corruption. Ukraine is currently placed
117th out of 180 countries on the Corruption
Perceptions Index1, up from 126th position
in the 2019 iteration of the same survey.
Whilst Ukraine is continuing to reform,
most recently under the guidance of the
International Monetary Fund, its position
on the Corruption Perceptions Index has
only marginally improved over the past
five years from being ranked 130th.2 There
continues to be a number of principal risks
relating to the Group’s operating assets
being located in Ukraine and exposure to
Ukraine’s geopolitical environment, judicial
system and macro-economic conditions.
These factors, either individually or in
combination, have the ability to adversely
impact the Group’s ability to operate
its pellet production facilities, ability to
export its iron ore products, ability to
repay existing debt or gain access to new
debt facilities, ability to reinvest in the
Group’s asset base, either in the form of
sustaining capex to maintain production or
expansion capex for future growth, as well
as the Group’s ability to pay dividends.

The independence of the judicial system,
and its immunity from economic and
political influences in Ukraine, remains
questionable, and the stability of
existing legal frameworks may weaken
further with future political changes in
Ukraine. Because Ukraine is a civil law
jurisdiction, judicial decisions generally
have no precedential effect on subsequent
decisions, and courts are generally not
bound by earlier decisions taken under
the same or similar circumstances, which
can result in the inconsistent application
of Ukrainian legislation to resolve the
same or similar disputes. In addition,
court claims are often used in the
furtherance of political aims. The Group
may be subject to such claims and may
not be able to receive a fair hearing.

In January 2020, the Company advised that
it had lodged an appeal against a court
order in Ukraine, whereby a district court
had placed a restriction on the transfer on
50.3% of the shares in Ferrexpo Poltava
Mining (“FPM”), which are held through
Ferrexpo AG, the Company’s Swiss
subsidiary. Ferrexpo AG was subsequently
successful in this appeal and the Company
announced that this restriction had been
removed on 3 June 2020. On 19 June
2020, the Company announced that a
similar restriction was placed on the same
shareholding by a district court in Kyiv.
An appeal was also lodged against this
restriction, and whilst it was similar to the
first restriction, which was successfully
appealed, the appeal against this
second restriction was not successful. In
November 2020, Ferrexpo AG was however
successful in a motion to dismiss this
restriction, as announced on 30 November
2020. The Group understands that the
new ruling of the court to cancel the
restriction on 50.3% of the shares in FPM
cannot be appealed. The Group cannot
however rule out similar cases being
raised against the Group in the future.

In October 2019, Kostyantin Zhevago
stepped down as CEO of the Group in
order to focus on resolving certain matters
in Ukraine relating to one of the businesses
he owned until 2015 (Bank Finance &
Credit). The Company understands that
these matters remain unresolved. Given
Mr Zhevago’s connection to Ferrexpo,
and Ferrexpo’s previous commercial
relationship with Bank Finance & Credit,
there is a risk that these matters may
affect the Group, including adverse media
attention and reputational damage for
the Group and a reluctance on the part
of some customers, suppliers or other
stakeholders to deal with the Group whilst
such matters concerning Mr Zhevago
remain unresolved. The Group understands
that the restriction on 50.3% of the
shares in FPM which was cancelled in
November 2020 was in connection with

1 https://www.transparency.org/en/countries/ukraine#
2 https://www.transparency.org/en/cpi/2015/results/ukr

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

1. COUNTRY RISK CONTINUED

1.1 UKRAINE COUNTRY RISK (EXTERNAL RISK)

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. These
claims were fully dismissed in 2015.
According to recent claims made in the
Ukrainian courts, 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.

Responsibility

Board of Directors and
Chief Executive Officer

Risk appetite

Medium

Link to strategy

1, 2, 3, 4 and 5

Risk overview continued

ongoing matters in Ukraine involving
Kostyantin Zhevago and Bank Finance &
Credit. There is a risk that assets owned
or controlled (or alleged to be owned or
controlled) by Kostyantin Zhevago may
be subject to restrictions in connection
with such unresolved ongoing matters, in
Ukraine or elsewhere, or that the Group
may be impacted by or become involved
in further legal proceedings relating to
these matters in Ukraine or elsewhere.

In January 2021, Ferrexpo AG received
a claim in relation to previous litigation
regarding the shares in FPM. In 2005,
a former shareholder in FPM brought
proceedings in the Ukrainian courts
seeking to invalidate the share sale and

Change

Risk mitigation

Ferrexpo operates in accordance with
relevant laws and utilises internal and
external legal advisers as required
to monitor and adapt to legislative
changes or challenges. The Company
maintains a premium listing on the
London Stock Exchange and as a
result is subject to high standards,
including the UK Corporate Governance
Code and 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. Ferrexpo prioritises a strong
internal control framework including high
standards of compliance and ethics. The
Group operates a centralised compliance
structure that is supported and resourced
locally at the Group’s operations. Ferrexpo
has implemented policies and procedures
throughout the Group including training.
Ferrexpo prioritises sufficient total
liquidityA levels and strong credit metrics
to ensure smooth operations should
geopolitical or economic weakness
disrupt the financial system of Ukraine.

Ferrexpo looks to maintain a talented
workforce through skills training and
by offering competitive wages, taking
into account movements of the Hryvnia
against the US Dollar and local inflation
levels. Ferrexpo has a high profile given
its international client base, its London
listing and bank lending from Western
financial institutions. Ferrexpo’s Board of
Directors and relevant senior management
are tasked with stakeholder engagement
and government relations to communicate
the economic contribution that Ferrexpo
makes to Ukraine and to show that it
operates to high international standards.

Ferrexpo plc Annual Report & Accounts 2020

1.2 COUNTERPARTY RISK (EXTERNAL RISK)

Risk overview

Ferrexpo is exposed to counterparty risk
through its interactions with government
agencies, customers, suppliers,
contractors and external parties that the
Group interacts with, including through its
CSR programmes. Risks relating to
government agencies both in Ukraine and
other jurisdictions in which the Group
operates throughout the globe include
levels or taxation, the repayment of VAT,
and licences required for Ferrexpo’s
operations to operate. In Ukraine, a number
of monopolies exist, including the supply of
natural gas that is required for the
pelletisation of the Group’s products, and
this presents the Group with a risk should
these monopoly companies fail to function
correctly. The Group is also exposed to
counterparty risk through its business
interactions with customers, suppliers of
goods and services, and any charitable
donations to third parties, as these
interactions may result in financial loss for
the Group if the counterparty in question
fails to fulfil its duties correctly.

Change

Risk mitigation

Ferrexpo sells its iron ore products to
well-established steel producers that
have sound credit profiles. Ferrexpo’s
counterparties are subject to regular
and thorough review. The results of
these reviews are used to determine
appropriate levels of exposure, and
available alternatives, in order to reduce
the potential risk of financial loss.

The Group develops its supplier base in
order to avoid excessive dependence
on any supplier, actively encouraging
a diversity of supply where reasonable
and practical. Companies that would
like to work with Ferrexpo are required
to undergo an Accreditation Procedure,
where their documents, licences and
financial stability are checked. In 2020,
in line with previous years, Ferrexpo
screened and monitored third party
entities for sanctions and other risks,
with suppliers that pass accreditation
able to participate in tenders.

The advent of the global COVID-19
pandemic in 2020 also introduced
additional risk to Ferrexpo in the form of
heightened risk of counterparty failure, as
third parties struggled to adapt to the
effects of the pandemic. This is a risk
facing the Group in terms of timely
payment and/or delivery of goods and
services.

Responsibility

Ferrexpo Board of Directors

Risk appetite

Low

Link to strategy

For entities deemed to be “high risk”,
additional checks and further monitoring
are required by the Group’s compliance
function. All supplier contracts must
contain the defined set of compliance
clauses (related to anti-bribery,
sanctions, tax compliance, modern
slavery, etc). These requirements were
consolidated into the Business Partners’
Code of Conduct in 2019, which is
referenced in 87% of contracts signed
in 2020. The Finance, Risk Management
and Compliance Committee (“FRMCC”),
an executive sub-committee of the
Board, met ten times in 2020, and is
charged with ensuring that systems
and procedures are in place for the
Group to comply with laws, regulations
and ethical standards. The FRMCC is
attended by the Group Compliance
Officer and, as necessary, by the local
compliance officers from the operations,
who present regular reports and
ensure that the FRMCC is given prior
warning of regulatory changes and their

implications for the Group. The FRMCC
enquires into the ownership of potential
suppliers deemed to be “high risk”, and
oversees the management of conflicts 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 sufficient
cash reserves and liquidity, as well as
maintaining alternative suppliers should
one counterparty fail. The Board’s current
policy regarding charitable donations
is not to donate on a nationwide basis,
and the Group does not have any plans
to conduct any such activity in the
future. However, should the Company
resume any national CSR programme in
Ukraine, the Board will ensure adherence
to the highest standards of diligence,
oversight, governance and reporting.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

2. GLOBAL DEMAND FOR STEEL

China, which recovered to produce above
2019 levels sooner than other regions.
The impact of this shifting dynamic in the
industry resulted in significant inflows
of iron ore pellets into China during the
middle of 2020 and a material decrease in
the Chinese pellet premium, which dropped
from US$25 per tonne in early January
2020 to less than US$5 per tonne in August
2020. This decrease in pellet premiums
affected the Group’s financial performance,
with over 50% of the Group’s sales in 2020
going to China. In addition, the Company
faced increased risk around the transport
of increased volumes of products to
Asia by oceangoing vessel, compared to
the Group’s train shipments to Europe.
The global steel industry is recovering,
however, back to 2019 levels, according
to data from the World Steel Association,
which shows steel production in China in
December 2020 above the level seen a year
earlier. Ferrexpo remains vigilant, however,
to further effects from the global COVID-19
pandemic and any potential impacts on
global steel output in 2021 as a result.

Responsibility

n/a (Ferrexpo is not large enough to
influence global market dynamics)

Risk appetite

Medium

Link to strategy

3 and 5

Further reading

For further information
on the global market for
steel demand in 2020,
please see the Market
Review section on
P10-11

Risk overview

Ferrexpo operates within the global steel
industry as a raw material to feed steel
mills, and therefore the global demand for
the Group’s products is directly correlated
to global demand for steel. Demand for
steel can affect both the underlying price
for iron ore, as well as the premium paid
for high grade iron ore, whereby steel
mills deliberately reduce the productivity
of blast furnaces during times of reduced
profitability by purchasing lower grade
iron ore products. Scrap steel prices also
have an impact on iron ore pricing as this
material can be substituted for iron ore in
certain types of steelmaking. There is also
a trend in the global steel industry towards
the production of Green Steel, which
involves the production of steel without
carbon emissions, and the risks presented
to the Ferrexpo business by this factor are
covered in a separate risk on page 59.

Global steel production in 2020 was
significantly impacted by the global
COVID-19 pandemic, with a significant
decrease in steel production seen across
the globe. The impact of the pandemic
on the steel sector was more severe and
longer lasting in Europe and Far Asia
(Japan, Korea and Taiwan), which are all
important regional destinations for iron ore
pellets, compared to the steel industry in

Change

Risk mitigation

Ferrexpo is a low cost producer relative
to the majority of its peers, positioned
on the lowest quartile of the pellet
cost curve, which is provided in the
Market Review section on pages 10
and 11. Ferrexpo’s operating costs

are partly correlated with commodity
prices. When the commodities cycle
is in a downward phase, and Ferrexpo
typically receives a lower selling price,
its cost base in general also reduces.
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 Hryvnia
against the US Dollar can also be
influenced by short-term political factors.

Ferrexpo plc Annual Report & Accounts 2020

3. RISKS RELATED TO REALISED PRICING

3.1 CHANGES IN PRICING METHODOLOGY

Risk overview

Pricing formulas for iron ore pellets are
governed by a number of factors, including
the iron ore fines 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 influence 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 specific
characteristics may change and adversely
impact the Group’s ability to market
specific products.

Responsibility

Chief Executive Officer and
Chief Marketing Officer

Risk appetite

Medium

Link to strategy

1, 3 and 5

Change

Risk mitigation

Ferrexpo endeavours to achieve the
prevailing market price at all times,
and is a low cost producer that aims
to be cash flow positive throughout
the commodities cycle. For more

information on its position on the cost
curve, please see Operational Review
section on pages 22 to 23. The Group
also has the logistics capability to
divert sales to other markets to offset

any regional weakness, as was seen
during 2020 when the Group was
able to redirect additional tonnages
to Asia to meet increased relative
demand for pellets in China.

3.2 LOWER IRON ORE PRICES

Risk overview

Ferrexpo’s iron ore products are priced
using the iron ore fines index, and as such,
lower iron ore fines pricing would
negatively impact the Group’s ability to
generate cash, potentially affecting
shareholder returns, the Group’s ability to
repay existing debt facilities and capital
investment plans for future production. In
2020, the high grade iron ore fines price
(65% Fe), which is the most applicable
index for Ferrexpo’s iron ore products,
averaged US$122 per tonne, compared to
an average of US$104 per tonne in 2019.

The price for medium grade iron ore fines
(62% Fe) as of 1 March 2021 was US$174
per tonne, whereas the analyst consensus,
as of early March 2021, for iron ore fines
(62% Fe) pricing in 2021 was US$131 per
tonne and the forward curve for delivery of
62% Fe iron ore fines material in December
2021 was US$135 per tonne, with both,
therefore, indicating an expected decline in
pricing in the year ahead. For further
information on the iron ore market in 2020,
please see the Market Review section on
pages 10 to 11.

Responsibility

n/a (Ferrexpo not large enough to influence
global iron ore pricing)

Risk appetite

Medium

Link to strategy

1, 3 and 5

Change

Risk mitigation

Ferrexpo is a low cost producer relative
to the majority of its peers, positioned
on the lowest quartile of the pellet
cost curve. Ferrexpo’s operating costs
are partly correlated with commodity
prices. When the commodities cycle
is in a downward phase, and 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 influenced by
short-term political factors. Ferrexpo
regularly reviews options to hedge the
price of its output; however, its current
strategy is not to enter into hedging
agreements. Ferrexpo has maintained
positive profit and cash generation
throughout the iron ore price cycle.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

3.3 PELLET PREMIUMS AND PELLET SUPPLY

Risk overview

Iron ore pellets are utilised by steel mills to
improve productivity through their inherent
characteristics as a pellet and the higher
grade nature of Ferrexpo’s iron ore pellets.
At times of lower steel mill profitability,
steel producers are known to reduce
demand for higher cost inputs such as iron
ore pellets, in order to reduce the cost of
steel production and to protect steel
margins. This has the potential to
negatively affect the pellet premium, and
by extension, the profitability of Ferrexpo,
since the majority of Ferrexpo’s profit
margin has come from its ability to receive
the pellet premium. Risks to the pellet
premium also exist in replacement of
pellets in the blast furnaces operated by
Ferrexpo’s customers with alternatives,
such as lump ores, and a significant
increase in this substitution would have the
potential to reduce pellet premiums.
Further supply of pellets into the global

Change

Risk mitigation

export market would also have the
potential to reduce pellet premiums and a
pellet producer in Brazil, which was offline
since 2015, returned to production in late
2020. Recent trends in the global steel
industry have led steel producers towards
targeting lower carbon emissions, and iron
ore pellets are a method for achieving such
a reduction, since iron ore pellets do not
require sintering prior to conversion into
steel. If, however, this trend towards an
environmentally friendlier method of steel
production were to reverse in the future,
this could also negatively affect demand
for iron ore pellets, and by extension, lower
pellet premiums. Lower pellet premiums
could impact the Group’s ability to pay
dividends to shareholders, repay debt
amortisation and could result in lower
levels of capital investment (including
sustaining capex).

Responsibility

Chief Executive Officer and
Chief Marketing Officer

Risk appetite

Medium

Link to strategy

1, 3 and 5

Ferrexpo primarily sells high quality
pellets, which underpin demand for
its product throughout the commodity
cycle. Should the pellet premium
decline, Ferrexpo has one of the
lowest pellet conversion costs in the
industry, which should ensure that
it is able to remain a competitive

producer. Ferrexpo also has the
ability to produce iron ore concentrate
should market conditions make this
product more economically viable.

Ferrexpo’s pelletising costs in 2020 were
approximately US$11 per tonne and,
therefore, lower than the pellet premium

seen in 2020 in both the Atlantic and
China spot markets. Please see the
Market Review section on pages 10-11 for
more details. Should, however, the pellet
premium fall below the cost of pelletising
material, the Group has the option to
halt pelletising operations and produce
concentrate instead for a period of time.

Further reading

For further information on the global
market for steel demand in 2020,
please see the Market Review
section on P10-11

Ferrexpo plc Annual Report & Accounts 2020

Responsibility

Chief Marketing Officer and
Group Freight Manager

Risk appetite

Medium

Link to strategy

2, 3 and 5

3.4 SEABORNE FREIGHT RATES

Risk overview

As iron ore is a bulk commodity, seaborne
freight rates are an important component
of the cost to deliver product to a
customer. An increase in freight rates will
reduce the net price received from a
customer, and reduce profitability, while a
reduction in freight rates will increase the
net price received from a customer.
Seaborne freight rates, such as the C3
freight index, are published by the Baltic
Exchange. The C3 freight index represents
the cost for ocean transportation for iron
ore from the Brazilian port of Tubarão
(where the largest seaborne pellet supplier
is based) to Qingdao, China (the world’s
largest steel producer). Ferrexpo’s received
price is referenced to transparent freight
indices such as the Baltic Exchange C3
freight index. In 2020, the C3 freight index
fell to an average of US$15 per tonne,

down from US$19 per tonne in 2019, with
this decrease coming as a result of the
global COVID-19 pandemic and lower
global demand for oil as a result. Freight
rates are largely influenced by the price of
oil and demand for oceangoing vessels
from bulk commodity producers. As of
1 January 2020, the International Maritime
Organization enforced a new 0.5% global
sulphur cap on fuel content in the shipping
industry from the previous 3.5% limit.
Subject to supply and demand dynamics,
including steel mill profitability, the
introduction of IMO 2020 could have the
potential to increase freight costs in future,
due to the installation cost of scrubbers or
the higher cost of compliant fuel, for iron
ore suppliers across the industry and
reduce net prices and thus impact
profitability.

Change

Risk mitigation

Ferrexpo has its own in-house
freight and distribution specialists
who procure freight competitively
on behalf of the Group. Ferrexpo’s

geographic proximity to its European
customers is a competitive advantage
compared to other iron ore producers.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

4. OPERATING RISKS

4.1 OPERATING RISKS RELATED TO MINING, PROCESSING, PELLETISING AND LOGISTICS

Risk overview

Ferrexpo operates three open pit mining
operations, a large scale beneficiation
plant and four pelletising lines, which all
involve the processing of significant
volumes of material, and, therefore, have
inherent significant associated risks due to
their size and complexity of operations. In
mining, there are inherent risks associated
with open pit mining, including
geotechnical risks, risks related to
groundwater and surface water ingress,
risks surrounding mine planning decisions,
and risks related to critical equipment
failure. In the Company’s beneficiation and
pelletising operations, there are risks
associated with critical equipment failure,
as well as risks specific to the potential
failure of the Group’s tailings dam facilities.

Logistics risks relate to the business’s
reliance on the ease of transport of its iron
ore products to customers, in addition to
the consistent supply to the Group’s
operations of key consumables such as
fuel for mining and natural gas for
pelletising. Lower volumes, higher costs
and financial penalties due to poor quality
and late delivery can impact the Group’s
cash generation ability, reducing liquidity
levels and impacting capital investment A
levels as well as its ability to repay debt
and pay dividends to shareholders. Poor
pellet quality or late delivery of product can
also affect the Group’s ability to perform
according to customer contracts and its
ability to maintain and renew contracts in
the future.

Responsibility

Chief Executive Officer,
Chief Marketing Officer and
Chief Operating Officer

Risk appetite

Medium

Link to strategy

2, 3 and 5

Change

Risk mitigation

The Group aims to continually
reinvest its profits into its business to
simultaneously sustain and expand its
production and logistics capabilities.
Extensive monitoring by in-house
planning departments, in addition to
external certification by third party
consultants, help to mitigate risks
around the Group’s mining, processing,
pelletising and logistics operations,
including the Group’s tailings dam. To

mitigate risk in relation to the Group’s
logistics business and delivery of iron
ore products to customers, the Group
strives to operate its own equipment
and facilities where possible, and as a
result the Group owns a fleet of 2,850
railcars within Ukraine, a fleet of 154
barges on the River Danube, and has a
49.9% interest in a berth at the port of
Pivdennyi (formerly known as Yuzhny).
The Group also operates a talent

management and leadership programme
to ensure management coverage of
business-critical roles. This involves
the annual assessment of all managers
across the Group of approximately 300
people. The results are presented to the
Operations Management Committee, the
Executive Committee and the Board.

Ferrexpo plc Annual Report & Accounts 2020

4.2 OPERATING RISKS RELATED TO HEALTH AND SAFETY

Risk overview

The mining and processing of iron ore is
often associated with a hazardous working
environment as it includes the use of
explosives and the operation and repair of
large mining machinery, amongst other
things. Failure to provide a safe work
environment for the Group’s workforce and
failure to ensure the right safety culture and
subsequent safe behaviours can impact
the Group’s social licence to operate.
Fatalities and lost time injuries negatively
impact the workforce, their families and the
communities in which we operate, and it
can result in production stoppages due to
regulatory interventions. The Group had
one fatality in 2020 (2019: zero fatalities)
and the Group’s lost time injury frequency
rate (“LTIFR”) was 0.79 (2019: 0.58). Whilst
the LTIFR result for 2020 represents an
increase on the prior year, it should be

noted that this figure is 22% below the
Group’s five-year trailing average LTIFR
and is also significantly ahead of a number
of the world’s largest iron ore miners,
located in the Pilbara region of Western
Australia, which collectively achieved a
LTIFR result of 1.6 in the most recently
published data (2019-20), as published by
the government of Western Australia1.

COVID-19 has presented the Group with an
additional group of risks in 2020 that have
otherwise not been experienced previously.
Ferrexpo has a workforce of nearly 11,000
employees and contractors, the majority of
whom work in close proximity with other
individuals, and transmission of the
COVID-19 virus in the workplace represents
a significant risk to the health and
wellbeing of Ferrexpo’s workforce.

Responsibility

Chief Executive Officer,
Chief Marketing Officer and
Chief Operating Officer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

Change

Risk mitigation

The Group seeks to address the risks
around the overall health and safety
of its operations through a number of
leading and lagging indicators. Leading
indicators focus on measuring progress
on efforts to reduce the incidence of
safety-related events and these include
health and safety training programmes,
health and safety-specific audits of
working areas and working practices,
hazard reports and the number of
high visibility safety tours by senior
managers. Lagging indicators measure
progress made through a reduction in
the number of safety events that occur
at the Group’s operations, including
the number of fatalities in a reporting
period, the number and frequency of
lost time injuries, near miss events
and road traffic accidents. It is the
Group’s intention to instil a safety first

ethic within its workforce, and as a result
promote a culture of safety reporting
incidents, regardless of whether an
injury was incurred. As a result, it is
the goal of the Group’s management
to increase the volume of reporting of
leading indicators (for example, safety
training courses and the number of
emergency drills), as well as increase
the number of lagging indicators,
such as near miss events, in order to
learn from these events and avoid any
reoccurrences happening. A portion
of all employees’ total remuneration,
especially the bonus structure, is also
linked to team and individual safety
performance. Further details of the
Group’s safety performance are provided
in the Responsible Business section of
this report; please see pages 26 to 39.

In relation to the specific risks posed
by COVID-19, the Group has taken
significant steps to reduce the risk of
transmission in Ferrexpo workplaces,
from demobilising up to a third of the
Group’s employees to work remotely,
through to the provision of training
and materials to raise awareness on
the virus for those who cannot work
remotely, as well as enhanced cleaning
protocols in Ferrexpo work areas.

Further details of the Group’s efforts
to stem the risk of transmission of the
COVID-19 virus are detailed on page 9
as well as an overview on page 60 of
the risks posed by COVID-19 and risk
mitigations that the Group has taken.

1 Latest available period: 12 months to June 2020. http://www.dmp.wa.gov.au/Documents/Safety/MSH_Stats_Reports_SafetyPerfWA_2019-20.pdf

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

4.3 OPERATING RISKS RELATED TO OPERATING COSTS

Responsibility

Chief Financial Officer and
Chief Operating Officer

Risk appetite

Low

Link to strategy

2 & 5

affected approximately 50% of the Group’s
total C1 cash costsA. 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 influenced by short-term
political factors.

In 2020, the Group’s C1 cash costsA of
production decreased by 13% to US$41.5
per tonne from US$47.8 per tonne. See the
Financial Review section of this report
(pages 18 to 21) for a description of the
factors impacting operating costs.

Risk overview

Ferrexpo’s overall ability to generate cash
is predicated on its ability to maintain a low
cash cost of production across its
business, including the Group’s mining,
processing, pelletising and logistics
businesses. A number of factors affect the
Group’s ability to remain cost effective
relative to its iron ore producing peers,
including the component of the Group’s
cost base that relates to global commodity
prices, such as fuel, gas, explosives, tyres
and steel grinding media.

The commodity-linked component of the
Group’s cost base has historically
represented approximately 50% of the total
C1 cash costsA. In times of relatively high
iron ore prices the cost of production tends
to increase due to commodity cost
inflation; however, during periods of low
commodity prices the cash cost is typically
reduced. A second important driver of C1
cash costsA is local currency, the Ukrainian
Hryvnia, and this has historically directly

Change

Risk mitigation

Ferrexpo sits in the bottom half of
the pellet cost curve, and as such
maintains a degree of competitiveness
over its pellet producing peers in
countries such as Brazil, Canada and
Sweden. Many of the Group’s costs
which relate to commodity prices
will also impact Ferrexpo’s peers
to a similar extent, and as such, in
times of higher commodity prices, the
Group should be able to maintain its
cost competitiveness relative to its
competitors. In 2021, Ferrexpo expects
to increase production volumes, which
will aid production costs through

the dilution of fixed costs, and will
potentially enable the Group to offset
(to some extent) external cost inflation.

A number of the Group’s peer group
have in the past switched between
production of iron ore pellets and iron
ore concentrate, according to pellet
premiums and the profitability of
producing pellets. Ferrexpo’s pelletising
costs in 2020 were approximately
US$11 per tonne and therefore lower
than both the pellet premium seen in
2020 in both the Atlantic and China
spot markets (please see the Market

Review section on pages 10 to 11 for
more details). However, should the pellet
premium fall below the cost of pelletising
material, the Group has the option to
halt pelletising operations and produce
concentrate instead for a period of time.

The Group also has a Business
Improvement Programme aimed at
increasing efficiencies and reducing
costs by 1% to 2% per annum. Ferrexpo
has established several sources of
suppliers for key products as well as
several supply routes to ensure cost
effective supplies of all key consumables.

Ferrexpo plc Annual Report & Accounts 2020

Responsibility

Ferrexpo Board of Directors and
Chief Executive Officer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

5. OPERATING RISKS RELATED TO CLIMATE CHANGE

in steel production would necessitate a
move away from the blast furnace method
of steel production, which utilises coal to
fuel the steelmaking process, to the direct
reduced iron (“DRI”) pathway of producing
steel, which typically utilises either
electricity or natural gas as its source of
energy. This change in the global steel
industry will potentially reduce demand for
the Company’s main pellet type – the blast
furnace pellet, and as a result poses a risk
to pellet premiums paid for blast furnace
pellets. Conversely, this will increase
demand for direct reduction (“DR”) pellets
that are used in the DRI steelmaking
process and will therefore potentially
increase pellet premiums for DR pellets
instead. Reputational risks that relate to
climate change are whereby stakeholders
view the Group as having an excessive
carbon footprint, or as engaging in
activities that are not sufficiently beneficial
to the environment, and could lead to the
Group losing its social licence to operate,
creating difficulties in accessing sources of
external funding, a decrease in the Group’s
share price relative to its peers, or limiting
the Group’s ability to attract top managers
to work for its business.

Risk overview

Climate change poses potential risk to
Ferrexpo in both the near term and long
term, through a variety of factors that range
from physical risks of climate change that
have the potential to directly affect
operations, market risks related to the
transition towards iron ore products that
enable a pathway to a carbon free future of
steel production, financial risks in the form
of lenders preferentially lending to projects
and assets that are considered to be
environmentally friendly, and reputational
risks related to stakeholder perceptions of
the Group. Physical risks include the
potential scarcity of water for mining
operations (dust suppression) and
processing activities, for example the water
in the Group’s flotation tanks that is used
to remove silica from the Group’s products.
Additional risks relating to climate change
are the potential for an increase in the
frequency and severity of storm events that
may impact the Group’s ability to access
sections of its open pit mines, or the
potential to interrupt logistics networks.
Market risks relate to trends that are
evident today in the global steel industry
whereby steel producers are targeting
carbon free steel production in the long
term (typically by 2050), in line with targets
set by national governments. Such a switch

Change

Risk mitigation

The Company aims to be proactive
and transparent in its activities, to
inform stakeholders of its carbon
footprint and to provide details of
the work carried out to reduce the
Group’s carbon footprint in the short-,
medium- and long-term. Initiatives in
2020 have included the planning of a
5MW solar power plant, to be installed
at the Group’s main operating facility,
FPM, as a pilot plant. The Group has
also commenced a project to purchase

electricity generated by low-carbon
(nuclear) or carbon-free (hydroelectric)
sources, so as to reduce the Company’s
Scope 2 emissions footprint, and to
simultaneously promote the use of
these power sources locally in Ukraine.
Ferrexpo also utilises sunflower husks
as a substitute for natural gas in its
pelletiser, which increased in 2020
to 25% of the total energy consumed
in the Group’s pelletiser (2019: 22%).
Through improved efficiencies throughout

its operations, and increased biofuel
substitution of natural gas, the Group
reduced its Scope 1 footprint per tonne
by 8% in 2020. Through purchasing
greener forms of electricity, the
Company reduced its Scope 2 carbon
footprint per tonne by 21% in 2020.
Through a full year of greener energy
purchases, further productivity gains
and an expected increase in production,
the Group expects to deliver a further
reduction in its overall carbon footprint
on a per tonne basis in 2021.

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Principal Risks
continued

6. RISKS RELATED TO COVID-19

Responsibility

Ferrexpo Board of Directors and
Chief Executive Officer

Risk appetite

Low

Link to strategy

1, 2, 3, 4 and 5

Risk overview

The global COVID-19 pandemic had a
significant impact on the world in 2020,
affecting economies, communities,
governments, businesses and individuals
on an unprecedented scale. Examples of
the effect of COVID-19 on a global level
include an increase in mortality rates
worldwide, a halt to international travel,
distorted trade patterns, and a significant
strain put on both national governments
and health care systems around the world.
On a local level, COVID-19 has isolated
communities, reduced the ability of
workers to attend their places of work and
for businesses to function, and has
therefore put individuals under increased
physiological, psychological, emotional
and financial strain as a result. The limiting
nature of the global pandemic, which has
resulted in the erection of significant
barriers to day to day life in 2020, has both
heightened existing risks facing the Group
as well as introduced new risks that the
business has not encountered previously.

Change

Risk mitigation

Risks posed to the Group as a result of
COVID-19 can broadly be categorised into
the effect of COVID-19 on the iron ore
market, the Group’s ability to produce and
its impact on the health and wellbeing of its
workforce. Please see commentary in this
section around the iron ore market (page
10 to 11) and the Group’s operations (page
22 to 23) for additional information.
Examples of specific risks relating to the
health and wellbeing of the Group’s
workforce include the health implications
of individuals contracting the COVID-19
virus, and the subsequent risk on the
business of their absence and potential
onward transmission to others, the inability
of the Group’s workforce to attend their
place of work and/or travel to Ferrexpo
offices and the subsequent impact of this
on the Group’s ability to produce and
distribute its pellets, and a heightened risk
of a deterioration in existing business
relationships as a result of contact with
both customers and providers of finance
being limited.

Risk mitigation activities to ensure iron
ore pellet production was not affected
by, and continues to be unaffected
by, COVID-19 include the measures
implemented to protect individuals in the
Group’s workforce, as detailed below,
in addition to contingency planning
around potential business interruptions,
including events that may affect either
the supplies of key consumables or key
aspects of the Group’s logistics used
to supply customers with pellets. The
Group is confident that the measures
undertaken to insulate operations
against the effects of COVID-19 in
2020 were effective, as shown by the
7% increase in production seen during
the year, and the Group continues
to implement these measures as the
pandemic continues into 2021.

in a significant adjustment of demand
towards China, and the Group reacted
by shipping significantly greater volumes
of pellets to China as a result. This was
achieved through an increase in the
number of capesize vessels shipped from
the Group’s berth at the port of Pivdennyi
(formerly Yuzhny) from 28 in 2019 to
47 in 2020. The Group has additional
flexibility in its rail and barge operations
to adapt to further movements in global
pellet demand should they arise. Initial
indications have shown an acceleration
in pellet buying from steel mills in Europe
in the fourth quarter of 2020, resulting
in a normalisation of the pellet market in
this region as of the end of 2020. Global
demand for pellets remains strong,
with other geographic regions seeing a
resumption in buying activity in early 2021.

In relation to mitigating risks posed by
COVID-19 to the iron ore export market,
the Group maintains a global network
of marketing offices and an established
logistics network, enabling it to redirect
sales to markets according to global
demand. In 2020, COVID-19 resulted

In relation to protecting its workforce
and local communities, the Group has
taken extensive measures throughout its
business in 2020. Steps taken to protect
the Group’s workforce include remote
working measures for those who can
conduct their activities remotely and

measures at workplaces for those who
are unable to work remotely, such as
social distancing of operating teams,
staggered shift patterns, the distribution
of canteen food to places of work, the
provision of sanitiser for handwashing
and COVID-19 specific training and
awareness initiatives. The Group also
regularly tests its workforce and conducts
contact tracing activities to limit the
potential spread of the COVID-19 virus
in Ferrexpo’s places of work. Further
details of the efforts made to protect
the Group’s workforce are provided
on page 9. In addition, the Group has
made extensive efforts to protect the
local communities that surround the
Group’s operations in Ukraine, through
a dedicated COVID-19 Response
Fund, which has approved funding of
US$2.5 million to be used in supporting
local hospitals in acquiring medical
equipment and supplies, in addition to a
further US$1 million of available funding
approved in early 2021. Further details
of Ferrexpo’s efforts to support local
communities during the global pandemic
are provided on pages 34 to 35.

Viability Statement

The Board monitors the
Group’s risk management and
internal control systems on an
ongoing basis, and confirms
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 46 to 60.

Time horizon
The Board has reviewed the long-term
prospects of the business, which remain
aligned with Ferrexpo’s life of mine
assumptions. For the purposes of
assessing the Group’s viability in the
medium term, the Directors have chosen a
five-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 flows
generated by those assets, as well as the
cyclical nature of the commodities industry.
As such, a five-year time period was
considered an appropriate length for the
Board’s strategic planning period.

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 business. The Group is
primarily exposed to changes in the iron
ore fines price, pellet premiums and
cost inflation. Based on 2021 expected
production volumes of 12.2 million tonnes,
and 13.1 million tonnes for years 2022 to
2024, a US$5.0 per tonne fall in the Group’s
received price would, if not mitigated,
reduce the Group’s underlying EBITDA A
by US$5.0 per tonne. Modelling indicates
that a general production cost increase
of 10% would decrease Group underlying
EBITDA A by US$3.7 per tonne, whilst a
10% decrease in production volumes, and
an associated 5% increase in production
costs, would decrease underlying EBITDA
by US$8.8 per tonne. Other stress
test scenarios included operational
incidents that have a significant impact
on production volumes, a deterioration
in the Group’s long-term cost position on
the industry cost curve or other operating
constraints due to Ukrainian country risk.
The scenario analysis includes severe
situations outside the normal course of

business, such as a breakdown in the
linkage between the movements of the
iron ore price with other commodity
prices, notably the oil price which forms a
significant component of the Group’s cost
base or an appreciation of the Ukrainian
Hryvnia when the iron ore price is weak.

Mitigating actions include 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
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. Since 1 January 2016,
the Group has reduced its net financial
indebtedness by over US$870 million and
it currently has a strong financial profile.

Although the Group navigated successfully
through the unprecedented period of
the COVID-19 pandemic in 2020, reverse
stress tests have been performed in
order to understand the impact of more
significant changes in circumstances
in terms of the resilience of the Group’s
business model and its cash balance.
The reverse stress test addressed
significant adverse changes of sales
prices, production costs and volumes.

Viability Statement
Based on the results of this analysis,
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
five-year period of this assessment.

Prospects
The Directors, having assessed the
Group’s current position and the principal
and emerging risks related to the Group’s
business model, believe the long-term
prospects of the Group remain sound.
Principally, this is due to Ferrexpo’s
competitive cost position on the iron ore
cost curve, its high quality product that
commands a price premium in a niche
market with high barriers to entry, a first-
class customer portfolio, a well-invested
asset base and favourable long-term
industry dynamics supporting pellet
consumption. The Directors also note
the resilience shown during the global
COVID-19 pandemic in 2020, whereby
production volumes increased by 7%,

Ferrexpo plc Annual Report & Accounts 2020

despite significant measures implemented
to mitigate the impact of the COVID-19
virus on operations. Furthermore, the
Group showed adaptability in light of the
global COVID-19 pandemic, which shifted
global pellet demand away from traditional
pellet export markets in Europe, and
increased pellet demand in China. The
Group was able to quickly respond to this
shift, increasing shipments via the Group’s
berth at the port of Pivdennyi (formerly
Yuzhny) and increasing the number of
capesize vessels from 28 in 2019 to 45 in
2020. The Directors also note the potential
impacts of climate change on the Group,
including environmental and social factors
related to climate change, as well as the
recent shift towards Green Steel (carbon
free steel). Ferrexpo is well positioned in
this regard through its production of iron
ore pellets, which are currently the main
identified pathway to producing Green
Steel, via direct reduction pellets. As
such, the Group commenced production
of direct reduction pellets in 2020, with
further trial cargoes planned for 2021.

The Strategic Report was approved by
the Board and signed on its behalf by:

Lucio Genovese
Chair

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Corporate Governance Report
Chair’s Introduction

Dear Shareholder
I am delighted to present my first
Corporate Governance Report since my
appointment as Chair, which sets out our
governance structure and highlights the
governance activity 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. The
structure, policies and procedures we
have adopted, which are described in
this report, the Directors’ Report and
the reports of the various committees,
reflect this commitment, but we recognise
the need to keep them under review and
to make changes where necessary to
ensure that standards are maintained
and to reflect evolving best practice. This
report also explains how we have applied
the principles of the 2018 Corporate
Governance Code during the year.

As I reflect on the challenges,
achievements and developments over
the last year, it is clear that the COVID-19
pandemic presented unprecedented
circumstances. The pandemic tested
every aspect of the business, the
resilience of our people and our system
of governance and internal control.

The Board’s role includes managing the
risks facing the business. This includes
taking into account the risks associated
with the country of operation,
counterparties, operational and financial
risks including health, safety,
environmental and climate change risks,
together with market volatility, pricing,
financing and refinancing exposures. As
new risks emerge our approach to
evaluating risk appetite is reassessed.

COVID-19 response and
governance framework
As a responsible Board, our priority over
the past year has been the safety and
wellbeing of our employees globally. We
responded and adapted quickly to the
challenges which COVID-19 presented to
ensure business continuity and safeguard
our operations, whilst maintaining good
corporate governance practices and our
system of internal control. Our prompt
response to implement effective measures
meant that, despite the global disruption,
the Board and its Committees continued to
function effectively and without disruption.
With the exception of meetings held earlier
in the year, all scheduled Board and Board
Committee meetings were held virtually.

Adapting to new ways of working during the
pandemic, the Board and its Committees
regularly met via video conferencing
due to the stay at home measures and
social distancing requirements. This was
an effective way of maintaining good
corporate governance, the corporate
agenda, the flow of information across the
Group and delivery of the Group’s strategy.

Despite the challenges of remote working
we continued to enhance our shareholder
and stakeholder engagement and place
their interests at the centre of our
considerations for key decisions. Our
section 172 Statement set out on pages 44
to 45 provides further details on how the
Board complied throughout the year.

Supporting local communities
during COVID-19
In 2020, in addition to our continued
support for communities locally, COVID-19
special funding in the amount of US$2.5
million was provided to support the local
community in Horishni Plavni for the
purchase of Personal Protective Equipment
and equipment for local hospitals (see
Responsible Business section of the
Strategic Report on pages 26 to 39).
Community support activities took place
exclusively in Ukraine and donations were
made within a Board-approved framework
agreed annually at the time of setting the
budget; they are subject to the 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 local
charitable spending via its Health, Safety,
Environment and Community (“HSEC”)
Committee, which oversees and directs
these activities and receives reports
detailing the spend.

The Audit Committee reviewed reporting
from the external auditors in relation to
their procedures on HSEC Committee as
part of their audit of the Group.

Board changes
There were a number of key Board changes
during the year. Steve Lucas, former Chair,
announced his intention to retire for
personal reasons after the 2020 AGM once
an orderly succession process had been
put in place. Following an extensive search
and benchmarking process led by the
Nominations Committee together with
external consultants, on 24 August 2020,
the Board appointed me as Chair of the
Company. On 28 May 2020, Jim North was
appointed as Acting CEO in place of Chris

Lucio Genovese
Chair

“Improving Board diversity

Ferrexpo plc Annual Report & Accounts 2020

Diversity in action: in 2017, Soviet-era legislation that
banned women from working in specific professions
was abolished in Ukraine, enabling Ferrexpo to hire
women as truck drivers at its latest mine – Belanovo.

Post AGM engagement
During the year, we consulted with
shareholders on a number of important
corporate governance issues, four
of which following significant votes
against Resolutions 2, 9, 10 and 12 at
the 2020 AGM (approval of Directors’
Remuneration Report, re-election of Vitalii
Lisovenko, Steve Lucas and Kostyantin
Zhevago) and one following significant
votes against Resolution 1 at the 2020
General Meeting (re-election of Vitalii
Lisovenko). Based on the feedback
received, the Board understands that
the votes against arose as a result of
concerns over corporate governance.
Actions taken in response included:

–

the appointment of Lucio Genovese as
Chair;

– alignment of all Non-executive Director

fees;

– enhanced procedures and internal
controls as part of the process of
improving the overall corporate
governance framework; and

– enhanced shareholder engagement.

The Company has continued its
search for diverse independent
candidates to strengthen the profile
of the Board. This work remains
ongoing (please see Nominations
Committee Report on page 82).

Lucio Genovese
Chair
16 March 2021

Mawe who returned to his role as CFO and,
it was subsequently announced that
Mr Mawe would leave his position as CFO
once an orderly transition process had
been established. On 30 July 2020, Roman
Palyvoda was appointed as Acting CFO.
On 5 July 2020, Jim North was appointed
an Executive Director of the Company.

Throughout the year, the Board continued
its search for Independent Non-executive
Director candidates led by the Nominations
Committee and supported by external
consultants. I am pleased that Ann-Christin
Andersen has recently agreed to join the
Company as an Independent Non-
executive Director. The Board is committed
to appointing another independent
Non-executive Director to further
strengthen the Board and its Committees.
This process is being led by the
Nominations Committee supported by
international search consultants.

FC Vorskla
As previously disclosed, the Committee of
Independent Directors (“CID”) has been
conducting a review into FC Vorskla
sponsorship arrangements. Significant
progress has been made and the review
has now been completed. See page 78 for
further details.

Key highlights in 2020:
– proactive response to COVID-19;

–

focus on climate change;

– enhance procedures and internal
controls improving the Corporate
Governance framework;

–

third Employee Engagement Survey;

– appointment of Chair;

– appointment of Executive Director;

– appointment of Acting CEO;

– appointment of Acting CFO;

–

focus on shareholder and key
stakeholder engagement; and

– Remuneration Policy review.

Key priorities for 2021:
– continued management of COVID-19;

– Health & Safety and employee

wellbeing;

– climate change;

– appointment of an independent

Non-executive Director;

– Board diversity;

– succession planning at Board and

management level; and

– cyber security.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Board of Directors
A refreshed Board with the right
mix of skills and experience

Raffaele (Lucio)
Genovese
Non-executive Chair

Vitalii Lisovenko
Senior Independent
Non-executive Director

Jim North
Acting Chief Executive
Officer and Executive
Director

Fiona MacAulay
Independent
Non-executive Director

Graeme Dacomb

Independent

Kostyantin Zhevago

Ann-Christin Andersen

Non-independent

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 chief
executive officer of Nage Capital
Management AG, a Swiss based
investment and advisory firm,
since 2004; non-executive
director of Mantos Copper SA
since September 2015; and
Nevada Copper Inc since 2016.

Previous appointments
Previously, he was chair of
Firestone Diamonds Plc, 2012-
2020; an Independent Non-
executive Director of Ferrexpo
plc, 2007–2014; independent
non-executive director of Ferrous
Resources Limited, 2014–2019;
senior executive officer, Copper
Division, Glencore International,
1996–1999 and chief executive
officer, CIS Operations, Glencore
International, 1992–1998.

Skills, expertise and
contribution
Lucio contributes to Ferrexpo
plc over 30 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, specifically
in Russia and 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.

Committee membership
Lucio is the Chair of the
Nominations Committee.

Date of appointment
28 November 2016

Date of appointment
5 July 2020 Executive Director

Date of appointment
12 August 2019

Date of appointment

10 June 2019

14 June 2007 as Non-executive

1 March 2021

Current external
appointments
Currently, he serves as a non-
executive adviser 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 and a non-
executive alternate director, Black
Sea Trade and Development
Bank (Greece) since 2014.

Previous appointments
Previously, he was an executive
director of Ukreximbank
(Ukraine), 2006–2010; an
executive director of Alfa Bank
Ukraine, 2010–2014; a non-
executive director of Amsterdam
Trade Bank, 2013–2014; and
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 20 years’ experience
in government finance. 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 field
of Ukrainian government
finance together with a deep
understanding of geopolitical
developments in Ukraine which
is valuable to the Group.

Committee membership
Vitalii is the Chair of the
Committee of Independent
Directors and a member of
the Audit, Nominations and
Remuneration Committees.

Non-executive Director
designate for workforce
engagement

28 May 2020 as Acting
Chief Executive Officer

1 November 2014 as Chief
Operating Officer

Current external
appointments
None.

Previous appointments
Previously, he was Chief
Operating Officer 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 Rio Tinto,
BHP Billiton 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
efficiency by introducing world-
class operating practices.
Over the past five years, Jim
has developed the strategic
organic growth programme to
expand and increase production
through incremental brownfield
expansions to FPM processing
facilities significantly reducing
the capital intensity required.

Jim is a capable Executive
Director. He brings multiple
commodity experience across
the resources value chain and
extensive experience to bear
managing the Company.

Committee membership
Jim is a member of the
HSEC Committee (formerly
CSR Committee).

Current external
appointments
Currently, she serves as non-
executive director of Chemring
Group plc since 2020; and non-
executive director of AIM listed
Coro Energy since 2017; and non-
executive director of AIM listed
Independent Oil & Gas plc since
2018 where she serves as chair.

Previous appointments
Previously, she was chief
executive officer of Echo
Energy plc 2017–2018 and
a non-executive director
2018–2019 and chief operating
officer 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 firms
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
influencing the management for
safe, efficient and commercial
operations which is crucial to
her role as Chair of the HSEC
Committee. Fiona brings
extensive operational experience
in emerging energy which enables
her to bring positive insight on a
broad range of issues to Board
and Committee discussions.

Committee membership
Fiona is the Chair of the
Remuneration Committee and
a member of the Audit and
Nominations Committee and
Committee of Independent
Directors. Fiona was appointed
the Chair of the HSEC Committee
formerly CSR Committee)
on 13 February 2020.

Current external

appointments

Currently, he serves as non-

executive director of Anglo

Pacific Plc since 2019.

Previous appointments

Previously, he was a Member

of the Financial Reporting

Review Panel from 2011–2018

and an audit partner of Ernst

& Young LLP for 26 years.

Skills, expertise and

contribution

Graeme contributes to Ferrexpo

plc over 42 years’ experience of

which he was a partner at Ernst

& Young (“E&Y”) for 26 years

where, for his last 12 years,

he was a lead 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,

acquisitions, disposals and

financial systems and controls.

Graeme brings extensive

knowledge of the extractive

industry and his financial

expertise gained as lead

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.

Committee membership

Graeme is the Chair of the Audit

Committee, where he acts

as its Financial Expert and a

member of the Remuneration

Committee and the Committee

of Independent Directors.

Director

1 November 2008–25 October

2019 as Chief Executive Officer

25 October 2019 as Non-

independent Non-executive

Director

Current external

appointments

None.

Previous appointments

Kostyantin has substantial

management and investment

experience gained over a 30-year

business career in Ukraine.

Skills, expertise and

contribution

Kostyantin contributes to

Ferrexpo plc over 30 years’

substantial management

and investment experience

gained during his business

career in Ukraine.

Kostyantin brings significant

experience in areas such as

mining operations, sales and

marketing and government

relations, and has a detailed

understanding of the Ukrainian

business, economic and

political landscape, which is

very valuable to the Group. He

has a deep working knowledge

of the Group, having previously

acted as Chief Executive Officer

for 11 years, which he is able to

contribute to Board decision-

making. Kostyantin also has

strong relationships with a

number of key stakeholders

of the Group, developed

during his time at Ferrexpo.

Committee membership

Kostyantin was a member

of the HSEC Committee

(formerly CSR Committee)

until 13 February 2020.

Current external

appointments

Since 2020, Ann-Christin has

served as chair of the board of

Glitre Energi AS, having been

appointed as a director in 2015.

She is a non-executive director

of Maersk Drilling since 2020

and has been a non-executive

director of Rotork Plc since 2018.

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 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 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

Ann-Christin was appointed

a member of the Nominations

Committee, Remuneration

Committee, Committee of

Independent Directors and

HSEC Committee (formerly

CSR Committee) with

effect from May 2021.

Ferrexpo plc Annual Report & Accounts 2020

Raffaele (Lucio)

Genovese

Non-executive Chair

Vitalii Lisovenko

Senior Independent

Jim North

Fiona MacAulay

Acting Chief Executive

Independent

Non-executive Director

Officer and Executive

Non-executive Director

Graeme Dacomb
Independent
Non-executive Director

Kostyantin Zhevago
Non-independent
Non-executive Director

Ann-Christin Andersen
Independent
Non-executive Director

Date of appointment

28 November 2016

Date of appointment

5 July 2020 Executive Director

12 August 2019

Date of appointment

24 August 2020 as Chair

13 February 2019 as

Non-independent Non-

executive Director

Current external

appointments

Currently, he serves as chief

executive officer of Nage Capital

Management AG, a Swiss based

investment and advisory firm,

since 2004; non-executive

director of Mantos Copper SA

since September 2015; and

Nevada Copper Inc since 2016.

Previous appointments

Previously, he was chair of

Firestone Diamonds Plc, 2012-

2020; an Independent Non-

executive Director of Ferrexpo

plc, 2007–2014; independent

non-executive director of Ferrous

Resources Limited, 2014–2019;

senior executive officer, Copper

Division, Glencore International,

1996–1999 and chief executive

officer, CIS Operations, Glencore

International, 1992–1998.

Skills, expertise and

contribution

Lucio contributes to Ferrexpo

plc over 30 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, specifically

in Russia and 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.

Committee membership

Lucio is the Chair of the

Nominations Committee.

Current external

appointments

Currently, he serves as a non-

executive adviser 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 and a non-

executive alternate director, Black

Sea Trade and Development

Bank (Greece) since 2014.

Previous appointments

Previously, he was an executive

director of Ukreximbank

(Ukraine), 2006–2010; an

executive director of Alfa Bank

Ukraine, 2010–2014; a non-

executive director of Amsterdam

Trade Bank, 2013–2014; and

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 20 years’ experience

in government finance. 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 field

of Ukrainian government

finance together with a deep

understanding of geopolitical

developments in Ukraine which

is valuable to the Group.

Committee membership

Vitalii is the Chair of the

Committee of Independent

Directors and a member of

the Audit, Nominations and

Remuneration Committees.

Non-executive Director

designate for workforce

engagement

Director

28 May 2020 as Acting

Chief Executive Officer

1 November 2014 as Chief

Operating Officer

Current external

appointments

None.

Previous appointments

Previously, he was Chief

Operating Officer 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 Rio Tinto,

BHP Billiton 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

efficiency by introducing world-

class operating practices.

Over the past five years, Jim

has developed the strategic

organic growth programme to

expand and increase production

through incremental brownfield

expansions to FPM processing

facilities significantly reducing

the capital intensity required.

Jim is a capable Executive

Director. He brings multiple

commodity experience across

the resources value chain and

extensive experience to bear

managing the Company.

Committee membership

Jim is a member of the

HSEC Committee (formerly

CSR Committee).

Current external

appointments

Currently, she serves as non-

executive director of Chemring

Group plc since 2020; and non-

executive director of AIM listed

Coro Energy since 2017; and non-

executive director of AIM listed

Independent Oil & Gas plc since

2018 where she serves as chair.

Previous appointments

Previously, she was chief

executive officer of Echo

Energy plc 2017–2018 and

a non-executive director

2018–2019 and chief operating

officer 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 firms

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

influencing the management for

safe, efficient and commercial

operations which is crucial to

her role as Chair of the HSEC

Committee. Fiona brings

extensive operational experience

in emerging energy which enables

her to bring positive insight on a

broad range of issues to Board

and Committee discussions.

Committee membership

Fiona is the Chair of the

Remuneration Committee and

a member of the Audit and

Nominations Committee and

Committee of Independent

Directors. Fiona was appointed

the Chair of the HSEC Committee

formerly CSR Committee)

on 13 February 2020.

Date of appointment
10 June 2019

Current external
appointments
Currently, he serves as non-
executive director of Anglo
Pacific Plc since 2019.

Previous appointments
Previously, he was a Member
of the Financial Reporting
Review Panel from 2011–2018
and an audit partner of Ernst
& Young LLP for 26 years.

Skills, expertise and
contribution
Graeme contributes to Ferrexpo
plc over 42 years’ experience of
which he was a partner at Ernst
& Young (“E&Y”) for 26 years
where, for his last 12 years,
he was a lead 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,
acquisitions, disposals and
financial systems and controls.

Graeme brings extensive
knowledge of the extractive
industry and his financial
expertise gained as lead
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.

Committee membership
Graeme is the Chair of the Audit
Committee, where he acts
as its Financial Expert and a
member of the Remuneration
Committee and the Committee
of Independent Directors.

Date of appointment
14 June 2007 as Non-executive
Director

1 November 2008–25 October
2019 as Chief Executive Officer

25 October 2019 as Non-
independent Non-executive
Director

Current external
appointments
None.

Previous appointments
Kostyantin has substantial
management and investment
experience gained over a 30-year
business career in Ukraine.

Skills, expertise and
contribution
Kostyantin contributes to
Ferrexpo plc over 30 years’
substantial management
and investment experience
gained during his business
career in Ukraine.

Kostyantin brings significant
experience in areas such as
mining operations, sales and
marketing and government
relations, and has a detailed
understanding of the Ukrainian
business, economic and
political landscape, which is
very valuable to the Group. He
has a deep working knowledge
of the Group, having previously
acted as Chief Executive Officer
for 11 years, which he is able to
contribute to Board decision-
making. Kostyantin also has
strong relationships with a
number of key stakeholders
of the Group, developed
during his time at Ferrexpo.

Committee membership
Kostyantin was a member
of the HSEC Committee
(formerly CSR Committee)
until 13 February 2020.

Date of appointment
1 March 2021

Current external
appointments
Since 2020, Ann-Christin has
served as chair of the board of
Glitre Energi AS, having been
appointed as a director in 2015.
She is a non-executive director
of Maersk Drilling since 2020
and has been a non-executive
director of Rotork Plc since 2018.

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 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 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
Ann-Christin was appointed
a member of the Nominations
Committee, Remuneration
Committee, Committee of
Independent Directors and
HSEC Committee (formerly
CSR Committee) with
effect from May 2021.

Strategic ReportCorporate GovernanceFinancial StatementsBrett Salt
Chief Marketing Officer

Nikolay Kladiev
Chief Financial Officer, FPM

Viktor Lotous

Chief Operating Officer

and Head of Managing

Board, FPM

Greg Nortje

Chief Human

Resources Officer

Roman Palyvoda

Acting Chief Financial Officer

On 1 July 2020, Brett joined Ferrexpo from
Rio Tinto where, over a 23-year career, he
held a variety of senior leadership roles in
Asia, North America, Europe, the Middle East,
Africa and the former Soviet Union. His
commercial experience covers sales and
marketing, mergers and acquisitions,
corporate development, finance, shipping and
logistics across multiple commodities to
include iron ore, coal, copper and freight.

Skills and experience
He holds a Bachelor of Commerce, majoring
in Economics and Commercial Law from
Curtin University of Technology and a diploma
in Investment and Risk Management in
Shipping from the IMD Business School.

Nikolay spent several years as an audit
manager with Ernst & Young and as CFO
of a large Russian factory.

Viktor became Chief Engineer in 1997 and

Greg joined Ferrexpo in January 2014. He

Roman was appointed as Acting Chief

General Director and Chief Operating Officer

previously held a variety of international

in April 2007.

human resource leadership positions with

Anglo American and BHP Billiton.

Skills and experience
He is a Chartered Accountant (UK) and has a
Masters in International Economic Relations
from the Kyiv National Economic University.

Skills and experience

He is a graduate of Kryvyi Rih Mining and

Ore Institute, and of the Kyiv National

Economic University, specialising in Finance.

He has Advanced Management qualifications

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.

Financial Officer on 14 November 2019 until

28 May 2020 and reappointed on 30 July

2020. He joined Ferrexpo in September 2008

as the Group Management Accountant.

Previously, he worked at Renault Group, most

recently as the Financial Controller for Russia,

Ukraine and the CIS.

He studied International Relations in Finance

at the National University of Lviv, graduating

with honours, and Business Management

at the Institut d’etudes politiques de Paris.

As Roman’s appointment as Acting Chief

Financial Officer is temporary he has

not joined the Board of Directors.

Ferrexpo plc Annual Report & Accounts 2020

Executive Committee

Jim North
Acting Chief Executive Officer
and Chief Operating Officer –
combined role

For more information see page 64 for details.

Ferrexpo plc Annual Report & Accounts 2020

Jim North

Acting Chief Executive Officer

and Chief Operating Officer –

combined role

Brett Salt

Nikolay Kladiev

Chief Marketing Officer

Chief Financial Officer, FPM

Viktor Lotous
Chief Operating Officer
and Head of Managing
Board, FPM

Greg Nortje
Chief Human
Resources Officer

For more information see page 64 for details.

On 1 July 2020, Brett joined Ferrexpo from

Nikolay spent several years as an audit

manager with Ernst & Young and as CFO

of a large Russian factory.

Viktor became Chief Engineer in 1997 and
General Director and Chief Operating Officer
in April 2007.

Greg joined Ferrexpo in January 2014. He
previously held a variety of international
human resource leadership positions with
Anglo American and BHP Billiton.

Rio Tinto where, over a 23-year career, he

held a variety of senior leadership roles in

Asia, North America, Europe, the Middle East,

Africa and the former Soviet Union. His

commercial experience covers sales and

marketing, mergers and acquisitions,

corporate development, finance, shipping and

logistics across multiple commodities to

include iron ore, coal, copper and freight.

Roman Palyvoda
Acting Chief Financial Officer

Roman was appointed as Acting Chief
Financial Officer on 14 November 2019 until
28 May 2020 and reappointed on 30 July
2020. He joined Ferrexpo in September 2008
as the Group Management Accountant.
Previously, he worked at Renault Group, most
recently as the Financial Controller for Russia,
Ukraine and the CIS.

Skills and experience

He holds a Bachelor of Commerce, majoring

in Economics and Commercial Law from

He is a Chartered Accountant (UK) and has a

Masters in International Economic Relations

Curtin University of Technology and a diploma

from the Kyiv National Economic University.

Skills and experience
He is a graduate of Kryvyi Rih Mining and
Ore Institute, and of the Kyiv National
Economic University, specialising in Finance.

in Investment and Risk Management in

Shipping from the IMD Business School.

Skills and experience
He has Advanced Management qualifications
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.

Skills and experience
He studied International Relations in Finance
at the National University of Lviv, graduating
with honours, and Business Management
at the Institut d’etudes politiques de Paris.

As Roman’s appointment as Acting Chief
Financial Officer is temporary he has
not joined the Board of Directors.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

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 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 2020 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 17: From 1 January 2020 to 15 January 2020, the Nominations Committee was not comprised of a majority of independent

Non-executive Directors. This was remedied on 15 January 2020 when Fiona MacAulay joined the Nominations Committee.

– Provision 19: The Chair has remained in post for more than nine years since his first 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 significant 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 are provided in the Nominations Committee report on page 82.

The Board confirms that at the date of this report, unless otherwise explained above, the Company fully complied with all relevant
provisions of the Corporate Governance Code. Further information on the Company’s compliance with the Principles of the Corporate
Governance Code can be found on the following pages:

Board leadership and
Company purpose

Principle A: Section 172 Statement page 44, Chair’s Statement page 4, Skills Matrix page 71
Principle B: Chair’s Statement, Purpose, Values and Strategy pages 12 to 13 and pages 16 to 17
Principle C: Audit Committee Report page 76
Principle D: Our Stakeholders page 40
Principle E:

Employee Engagement page 38, Non-Financial Information Statement page 37,
Whistleblowing Policy page 81

Division of responsibilities Principle F: Role Descriptions page 72, Board Evaluation page 74
Principle G: Role Descriptions page 72
Principle H: Time Commitment page 71, Corporate Governance At a Glance page 69
Principle I:

The Board page 70, Skills Matrix page 71

Composition, succession,
evaluation

Principle J: Appointment Process and Succession Planning page 83, Board Diversity Policy page 84
Principle K:

Skills Matrix page 71, Appointment Process and Succession Planning page 83,
Board Composition page 70

Audit, risk, internal control Principle M: External Audit page 80, Internal Audit page 80

Principle L: Board Evaluation page 74

Remuneration

Principle N: Audit Committee Report page 76
Principle O:

Internal Control and Risk Management page 79, Risk Management page 46, Principal Risks
page 48

Principle P: Remuneration policy page 91
Principle Q: Procedure for developing policy on remuneration, page 86
Principle R:

Directors should exercise independent judgement when authorising remuneration outcomes
page 98

Disclosure Guidance and Transparency Rules
By virtue of the information included in this Corporate Governance Report and the Directors’ Report, we comply with the corporate
governance statement requirements of the FCA’s Disclosure Guidance and Transparency Rules.

Ferrexpo plc Annual Report & Accounts 2020

Corporate Governance Report
At a glance

Shareholders

The Board

Audit
Committee

Remuneration
Committee

Nominations
Committee

Responsibilities
include:
– Monitoring integrity

of financial
statements.

– Reviewing internal
control and risk
management
systems.

– Relationship with
external auditor.

FOR MORE
INFORMATION:
AUDIT
COMMITTEE
REPORT
SEE PAGE 76

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.

FOR MORE
INFORMATION:
DIRECTORS’
REMUNERATION
REPORT
SEE PAGE 86

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 fill
Board vacancies,
having due regard
to the need to
satisfy the Board’s
skills requirements.

FOR MORE
INFORMATION:
NOMINATIONS
COMMITTEE
REPORT
SEE PAGE 82

Health, Safety,
Environment and
Community (“HSEC”)
Committee (formerly
CSR Committee)
Responsibilities
include:
– Formulating and
monitoring the
implementation of
the Group’s policy
on CSR issues as
they affect
operations.

– Specific focus on
safety and climate
change impacts.

Chief Executive
Officer and
Executive
Committee1

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.

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.

– Conflicts of interest
procedure under
the 2006
Companies Act.

FOR MORE
INFORMATION:
SEE PAGE 72

FOR MORE
INFORMATION:
RESPONSIBLE
BUSINESS
SECTION
SEE PAGE 26

FOR MORE
INFORMATION:
SEE PAGES
66–67

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

Controlling shareholder – Relationship Agreement
The Company’s majority shareholder is Fevamotinico S.a.r.l., which owns 50.3% of the issued share capital of Ferrexpo plc.
Fevamotinico S.a.r.l. is wholly owned by The Minco Trust. The Minco Trust is a discretionary trust that has three beneficiaries, 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 2020.

– 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 2020.

– 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 beneficiaries 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 2020.

Strategic ReportCorporate GovernanceFinancial Statements

Ferrexpo plc Annual Report & Accounts 2020

Corporate Governance Report
continued

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 specifically 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 financial 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 below to ensure compliance with
the Companies Act 2006, FCA Listing Rules and Disclosure Guidance and Transparency Rules and the 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-us/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 2020, the Board (excluding the Chair) comprised one Executive Director, one Non-independent Non-executive
Director, and three Independent Non-executive Directors who are considered by the Board to be independent in accordance with the
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 influence decision-making.

Composition of the Board and Committees as of 31 December 2020 is presented in the table below:

Board member

Role

Audit Remuneration

Nominations

CID

HSEC1

R L Genovese

Non-executive Chair

V Lisovenko

Senior Independent Non-executive Director

J North

G Dacomb

F MacAulay

K Zhevago

Acting Chief Executive Officer

Independent Non-executive Director

Non-independent Non-executive Director

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

•

••

•

••

•

••

•

••

The Board considers that it is of a sufficient 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 64 and 65.

Board balance

Gender diversity

Tenure

Nationality

 Independent
 Non-independent
 Chair
 Executive

 Male
 Female

 0–5 years
 9 years+

 Ukraine
 Switzerland
 UK
 Australia
 Norway

Ferrexpo plc Annual Report & Accounts 2020

Skills matrix

Mining
operations
experience

A Andersen

G Dacomb

R L Genovese

V Lisovenko

F MacAulay

J North

K Zhevago

1 Not previously.

Financial risk
management

Board
governance

Leadership
and strategy

Ukrainian
experience

UK market

Government
relations

Investor
relations

Sustainability

Executive
compensation

NP1

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 confirm at least annually that they are able to commit sufficient time to the affairs of the
Company, and all of our Non-executive Directors have given this confirmation in respect of 2020.

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 2020 is shown in the table below.

During 2020, Fiona MacAulay was appointed as a Non-executive Director of Chemring Group plc and Vitalii Lisovenko was appointed as
a Non-executive Director of the Supervisory Board of National Depositary of Ukraine. These appointments were considered a significant
appointment for Ms MacAulay and Mr Lisovenko for the purposes of the Corporate Governance Code, and in advance of the
appointment both Ms MacAulay and Mr Lisovenko sought the prior approval of the Board. As part of approving these additional
appointments the Board considered a range of factors, including the existing appointments of Ms MacAulay and Mr Lisovenko, the time
commitment expected in the role as a Ferrexpo director, attendance records at Ferrexpo Board and committee meetings, institutional
investor guidance on number of board roles in respect of overboarding and the additional time commitments from the new roles. The
Board was satisfied having regard to these matters that the additional roles would not adversely impact the ability of Ms MacAulay or
Mr Lisovenko to perform their existing roles on the Ferrexpo Board and its committees.

Board and Committee meeting attendance in 2020

Board

Audit

Remuneration

Nominations

CID

HSEC

Scheduled

Ad hoc

Scheduled

Ad hoc

Scheduled

Attended/Eligible to attend

Director

G Dacomb

R L Genovese

V Lisovenko

S Lucas (until 24 August 2020)

F MacAulay

C Mawe (until 5 July 2020)

J North (from 5 July 2020)1

K Zhevago

5/5

4/4

1/1

5/5

4/4

5/5

4/4

5/5

8/9

9/9

5/6

9/9

5/5

4/4

5/5

3/3

2/2

5/5

12/12

10/10

12/12

8/9

2/2

11/12

1 Mr North was a member of HSEC Committee prior to being appointed to the Board.

During the year, there were a number of ad hoc Board meetings which dealt with COVID-19 response, Board appointments and the
declaration of dividends.

4/4

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

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 CID. 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 26, and the role of the Remuneration Committee in the Remuneration Report on page 91.

Role

Chair

CEO

Description

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 64. There has been no increase in those commitments during the reporting period.

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 Mawe as Acting CEO to 28 May 2020 had no
other directorships of quoted companies. Mr North as Acting CEO has no other directorships of quoted companies.

Senior
Independent
Director

Vitalii Lisovenko is the Senior Independent Director. In conjunction with the other Independent Non-executive Directors, the Senior
Independent Director assists in communications and meetings with shareholders and other stakeholders concerning corporate
governance matters. He also chairs the Committee of Independent Directors. 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 financial 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 86); and monitor executive succession planning (for Board
succession planning, see the Nominations Committee Report on page 82). 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

Executive
Committee

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 governance issues 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 reflect on them
properly before deciding how to address them. All Directors have access to the advice and services of the Company Secretary.

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 three other Independent Non-executive Directors. The Committee
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 conflict 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 satisfies itself that, as required under the Relationship Agreement,
related party transactions are conducted on an arm’s length basis on normal commercial terms.

Mr Zhevago and his role
Given the expected time commitment of Mr Zhevago’s role, which continues to be broader than that of other Non-executive Directors,
the Company has entered into a consultancy arrangement with Mr Zhevago. Further details can be found in the Remuneration Report on
pages 104.

Ferrexpo plc Annual Report & Accounts 2020

BOARD LEADERSHIP

Board activity in 2020
Five scheduled Board meetings were held in 2020 (supplemented by other ad hoc meetings, telephone conferences and written
resolutions as required from time to time). Regular matters discussed at these meetings included:

– Non-executive Director recruitment and appointments;

–

interactions with auditors;

– oral reports from the Chair of the Committees meeting before the Board meeting, and minutes of earlier meetings of the Committees;

– Chief Executive Officer’s report including production and operations, iron ore market conditions, and updates on COVID-19 and the

position in Ukraine;

– Chief Financial Officer’s report including status vs. budget, forecasts, cash flow position, and funding update;

– related party matters (including Directors’ interests/conflicts);

–

investor relations report (including shareholder feedback);

– strategy, business plan and budget;

–

formal risk review;

– compliance matters;

– HSEC Committee (formerly CSR Committee) matters, including health and safety, and community spending; and

– Board refreshment, succession planning, Director independence and Committee composition.

Matters reviewed as required included:

–

the Group’s response to COVID-19 pandemic 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;

– evaluation of the performance of the Board, Chair and each Director;

– review of the AGM statement, and proxy agency comments and recommendations;

– annual review of bank relationships with the Company within and outside Ukraine;

– approval of terms of reference of the HSEC Committee (formerly CSR Committee);

– annual review of the Treasury Policy;

– approval of the Related Party Transaction Policy and Procedures;

– approval of the Insider Dealing Policy and procedures;

– approval of the Share Dealing Policy and procedures;

– approval of a new Director Conflicts Policy;

– approval of the Code of Conduct;

– carbon reduction strategy;

– delegated authorities;

– growth projects; and

–

the CSR budget.

In 2020, the Board also held sessions at which the relevant executive heads of department led detailed presentations on operations,
finance, HR and management succession planning, sales and marketing, and communications. This included a presentation by the Chief
Human Resources Officer to members of the Remuneration Committee to consider and approve the remuneration policy for 2021.

Board virtual site visit and Strategy Day
Due to travel restrictions imposed by COVID-19, the Board was unable to conduct the planned visit of the Group’s operations in Horishni
Plavni (formerly known as Komsomolsk), Ukraine. The alternative arrangement was a Board virtual site visit and Strategy Day. The
General Managers FPM, FYM and FBM used drones to record video footage for each mine including footage inside the processing
plant. The Board received presentations from executive management on operations, safety and strategy. Matters discussed included
health, safety and environment, COVID-19, technology and innovation, market strategy, growth projects and licence to operate covering
carbon reduction, people development, productivity and culture.

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.

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.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Corporate Governance Report
continued

BOARD EVALUATION

Performance evaluation
The annual performance evaluation of the Board and its Committees was carried out internally in 2020 by the Chair of these bodies. The
evaluation process involved the completion of questionnaires by Board and Committee members, with responses collated anonymously
and analysed by the Chair together with the Company Secretary. The Chair of the Board then held meetings with each of the Directors
individually to discuss the feedback from the questionnaires, and the comments made, before relaying the conclusions to the Board.

The 2020 evaluation concluded that the Board and its Committees as reconstituted were well equipped to work effectively and to
deal with challenges faced by the business; and that there is an open culture which responds very well to constructive challenge.
Contentious issues are discussed and debated and the CEO and Chair encourage full and frank discussion. The process identified
further development areas for focus in 2021:

Board/Committee

Development
areas and focus

Board constitution and Committee

Improve Board diversity

Board leadership

Improve frequency of site visits to better understand operations

Efficiency of Board processes

Allocate additional time for Growth projects

Board’s role

Stakeholders

Reviewing past performance and influencing future performance

Chair and Senior Independent Director to bolster shareholder engagement

Remuneration Committee

More time to be allocated

The Senior Independent Director and the other Non-executive Directors have evaluated, and will continue to monitor the performance of
the Chair.

Ferrexpo plc Annual Report & Accounts 2020

BOARD TRAINING AND DEVELOPMENT

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. In December 2020, the
Board had a training session with its legal advisers Herbert Smith Freehills. This training covered key areas such as directors’ duties,
market announcements, director share dealing procedures, related party transactions and developments in corporate governance
best practice.

Usually, site visits are held for the whole Board annually, so as to ensure that all Directors are familiar with the Group’s operations, and
Directors may visit the operations of the Group independently to the extent they feel this is necessary. Due to COVID-19 the physical
Board site visit was cancelled and replaced with a Board virtual site visit as set out on page 73. In addition, training may be provided
by the Group’s advisers in respect of specific 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 Group in the furtherance of their duties.

Induction
On 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
qualifications and experience of the Director.

Induction training includes meeting senior executives of the Executive Committee, a detailed and structured site visit, meeting
the Company Secretary, necessary training on corporate governance aspects, and receiving various key Company documentation
and reports.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Audit Committee Report

Dear Shareholder
I am pleased to present to you the Report
of the Audit Committee for 2020.

This report sets out the following
information:

– The composition of the Committee.

– The Committee’s activities in 2020.

– Key issues and judgements considered

by the Committee.

– Ferrexpo’s system of internal control

and risk management.

– Review of the internal audit function.

– The assessment of the external auditor’s

independence and effectiveness.

– The “fair, balanced and understandable”
assessment of the Annual Report and
Accounts.

The Viability Statement is set out in
the Strategic Report on page 61.

During the year, the Committee had five
scheduled meetings (see page 71).

The COVID-19 related travel restrictions
and quarantine regimes in the United
Kingdom, Switzerland and Ukraine had to
be taken into consideration in the course of
the auditors’ review of Ferrexpo’s 2020
interim accounts. Through using
appropriate technology by both the

auditors and Ferrexpo, the review
procedures in July 2020 were successfully
performed remotely. As the COVID-19
situation did not improve towards the year
end, remote audit procedures for the
preliminary and final audits were
considered and planned early in the
process to ensure efficient and effective
audits at the Group’s different locations for
the audit of the consolidated accounts. The
experience gained during the review of
Ferrexpo’s 2020 interim accounts provided
comfort to MHA and Ferrexpo that the
preliminary audits in November and the
final audits in February and March 2021
could be successfully completed within the
planned timeline.

The Committee reviewed the Annual
Report, associated preliminary year-end
results and interim results, focusing on key
areas of judgement, complexity and
accounting policies.

The internal control and risk management
procedures at Ferrexpo are set out later
in this report and the principal risks to
the Group are set out on pages 48 to
60 of the Strategic Report. Throughout
the year, the Committee has robustly
assessed the principal risks and
emerging risks facing the business.

Activity during 2020
Key activities of the Audit Committee during 2020 are set out below.

February
– Reviewed a presentation on the ongoing tax

cases in Ukraine.

– Reviewed the FRC’s letter to all Chairs of audit
committees and their recommended areas of
focus.

– Considered assumptions used for going concern

and the long-term viability assessment and
impairment test.

– Received an update on the progress of the 2019

audit and analysed further work required.
– Considered the draft Annual Report and

March
– 2019 year-end review.
– Reviewed significant risks disclosed in the Annual

Report and Accounts for 2019.

– Assessed FRC’s recommended areas of focus.
– Reviewed and discussed the status of key areas

of focus and audit matters and disclosure
provisions.

– Reviewed auditor’s responsibilities statement.
– Reviewed auditor’s independence statement.
– Considered the draft of the auditor’s opinion.
– Final review of the Annual Report and Accounts

Accounts for 2019.

for 2019.

– Considered business continuity plans and related

internal controls for FPM.

– Reviewed the Viability Statement.
– Reviewed the disclosures around FC Vorskla

– Reviewed the questionnaire to be used to assess

matters.

the external auditor’s performance.
– Reviewed compliance report including

whistleblowing cases.

– Reviewed the risk matrix and register.
– Reviewed an update on the Directors’ Interests

list and transactions with Related Parties.

– Reviewed the Audit Committee Report.
– Reviewed draft Letters of Representation.
– Held private meeting with the auditors.

Graeme Dacomb
Chair of the
Audit Committee

“

Maintaining accountability
through the COVID-19
pandemic

Membership and attendance

Meetings

Eligible

Committee member

to attend Attended

Graeme Dacomb

Vitalii Lisovenko

Fiona MacAulay

At the end of this process, the Committee
was satisfied with the accounting
treatment and disclosure of each issue
and with management’s exercises of
critical estimates and judgements used as
disclosed in Note 4 to the Consolidated
Financial Statements on page 134.

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 Company’s position, and
performance, business model and strategy.

Graeme Dacomb
Chair of the Audit Committee
16 March 2021

The significant issues and judgements
considered by the Committee in respect
of the 2020 Annual Report are set out on
page 78. In considering these matters,
the Committee took into account the
regular financial and internal audit reports
made to the Board throughout the year,
as well as discussing the issues with
management and the external auditors
at intervals throughout the year.

Detailed disclosure of the significant
areas in which critical estimates and
judgements had to be made is given in
Note 4 to the Consolidated Financial
Statements from page 134. To satisfy
itself that the accounting for these issues
was reasonable and appropriate, and
that disclosure in the financial statements
was suitable and clear, the Committee
reviewed the papers setting out the
procedures followed by the auditors
and the responses of management, and
questioned and debated them with the
CFO, Acting CFO, the Group Financial
Controller and, if relevant, operational
management, and with the auditors at the
Committee’s meetings. These discussions
were also informed by the Committee
members’ own expertise, particularly
with regard to the economic and financial
situation in Ukraine and operating
practice in other large mining companies.

Ferrexpo plc Annual Report & Accounts 2020

Membership and meetings
As at the year end, the Committee
comprised three Independent Non-
executive Directors:

– Graeme Dacomb (Chair of the

Committee);

– Vitalii Lisovenko; and

– Fiona MacAulay.

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 financial
experience, including accounting and
auditing, due to his career as an audit
partner with Ernst & Young LLP.

The Committee met five times for
scheduled meetings during 2020. The
attendance record of the Committee
members is shown in the table on page 71.

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 Acting
CFO, Group Financial Controller, Company
Secretary and the 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.

May
– Received an update on FC Vorskla related

matters.

July
– Presentation of half-year accounts.
– Going concern assessment, including COVID-19

– Reviewed auditors 2019 performance (Statutory

reporting and considerations.

December
– Received a report on the outcome of the 2019

Internal Audit plan and progress update on 2020.

– Reviewed the preliminary Internal Audit plan for

– Auditor’s Review Report to the Audit Committee.
– Reviewed a compliance report, including

whistleblowing cases.

– Reviewed the risk matrix and register.
– Reviewed the Directors’ Interests list and

transactions with Related Parties.

Audit Service Order) – analysis of scores.
– Reviewed 2020 audit planning, key dates,

preliminary audit plan and FRC guidance on
COVID-19 disclosures.

– Reviewed an update on 2019 recommendations

from Internal Audit.

– Reviewed the Internal Audit plan for 2020.
– Reviewed Internal Audit quality survey results.
– Reviewed a compliance report including

whistleblowing cases.

– Reviewed the risk matrix and register.
– Reviewed an update on Directors’ Interests list

and transactions with Related Parties.

2021.

– Considered a risk analysis of the Internal Audit

plan.

– Considered a report from the external auditors on

progress of the preliminary audit for 2020.

– Considered the work plan for the 2020 year end.
– Reviewed an external audit planning report.
– Received an update on the planned process for
the viability and going concern assessment,
COVID-19 impact on audit fieldwork and the
impairment test at year end.

– Reviewed a compliance report including

whistleblowing cases.

– Reviewed the Directors’ Interests list and

transactions with Related Parties.
– Reviewed the risk matrix and register.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Audit Committee Report
continued

Significant issues and judgements
The significant issues and judgements considered by the Committee in respect of the 2020 Annual Report are set out below:

Issues

Judgements/actions taken

COVID-19 related
considerations for the
Group’s going concern and
viability assessment

Taxation: tax legislation in
Ukraine (Note 11 to the
Consolidated Financial
Statements)

Inventories: lean and
weathered ore (Note 17 to
the Consolidated Financial
Statements)

Commitments,
contingencies and legal
disputes (Note 30 to the
Consolidated Financial
Statements)

Loan relationship between
related parties of the Group
(Note 34 to the
Consolidated Financial
Statements)

The global COVID-19 pandemic had a significant impact on the world in 2020, affecting economies,
communities, governments, businesses and individuals on an unprecedented scale. The Group
implemented measures at its main operations in Ukraine to ensure iron ore pellet production was not
affected by, and continues to be unaffected by, the COVID-19 pandemic. The Group also successfully
managed to redirect its iron ore pellet sales from Europe and North East Asia to the Chinese spot market.
The Group benefitted from high demand for its products on the Chinese market and high prices. As a
result, the Group was highly cash generative in 2020 and closed the year in a net cashA position of US$4
million, after debt repayments totalling US$148 million and dividend payments totalling US$195 million. As
the Group successfully navigated through the COVID-19 pandemic in 2020, there are no specific COVID-19
related critical judgements and estimates to be considered in assessing the Group’s going concern and
viability statements and the Group expects to be able to rely on the experience gained (e.g. redirection of
sales to other markets) and to be able to react again to any adverse changes on the global pellet market.
COVID-19 related disclosures have been made in the Group’s Principal Risks section on page 60 providing
further information on key actions that management has taken.

Having considered the background of a recent claim made in Ukraine in respect of a tax audit with a focus
on the Group’s cross-border transactions, the Committee shares management’s confidence that Ferrexpo
will successfully defend its methodology applied to determine the prices between its subsidiaries in the
courts in Ukraine. The court hearings and tax audits commenced earlier in 2020 were put on hold due to a
COVID-19 related quarantine imposed in Ukraine but these are expected to resume once the court system
in Ukraine returns to normality.

The processing of the stockpiled ore in the past has been dependent on the availability of additional
processing capabilities and it was the Group’s intention to ramp up the processing of the stockpiled ore
during the financial year 2021. While the additional processing capacities are fully operational and some
volumes of the stockpiled ore were processed in the second half of the financial year 2020, the Committee
notes that management has now decided to postpone further processing of the lean ore until 2022 in order
to maximise the financial benefits in the current high price environment for iron ore pellets. This has had no
impact on the carrying value of the stockpiled ore.

As disclosed in the 2019 Annual Report & Accounts, the Board, acting through the Committee of
Independent Directors (the “CID”), has been conducting a review into its sponsorship arrangements with
FC Vorskla. Following careful consideration of the information received from FC Vorskla, and the work of
the CID’s third party advisers, the CID has now concluded its enquiries. As detailed in the Group’s 2020
half-year report, the CID has received written confirmations from FC Vorskla and Kostyantin Zhevago, who
also controls FC Vorskla, confirming the use of the funds under a related party loan made by a FC Vorskla
entity in connection with the construction and renovation of certain FC Vorskla stadiums and training
grounds in Ukraine.

Based on the unaudited management accounts of FC Vorskla Cyprus Limited for the financial year 2019,
the loan to Collaton Limited was US$16,978 thousand. FC Vorskla is considered to be a related party of the
Group as Kostyantin Zhevago also controls FC Vorskla. As the loan does not involve any of the Group’s
subsidiaries, the loan is not a transaction between the Group (or any of its subsidiaries) and a related party
and therefore does not fall under Chapter 11 of the Listing Rules.

As disclosed in the 2020 half-year report, the CID had been informed that it was intended that the related
party loan would be fully repaid using the proceeds of a sale and leaseback of certain capital projects of
FC Vorskla in Ukraine. The CID has since been informed that it is possible that the sale and leaseback may
not occur in the near term given the COVID-19 pandemic and current market conditions in Ukraine.
Kostyantin Zhevago and his associated entities have therefore now put in place additional arrangements for
the related party loan to be fully repaid by 31 July 2022. These arrangements have been reviewed by the
CID, and having put in place the appropriate monitoring controls, the CID is satisfied with the arrangements
which it considers will ensure that the related party loan will be repaid in full. The Group has put in place a
new sponsorship agreement with FC Vorskla Ukraine. The new sponsorship agreement includes enhanced
reporting requirements by FC Vorskla Ukraine to the Group and additional provisions around the use of
sponsorship funds.

Ferrexpo plc Annual Report & Accounts 2020

Internal control and risk management
The Board has overall responsibility for the Company’s system of internal control, which includes risk management, and monitoring and
reviewing its effectiveness. The system of internal control is designed to identify, evaluate and manage significant risks associated with
the achievement of the Company’s objectives, and to meet the Company’s particular needs and the risks to which it is exposed, rather
than eliminate risk altogether. Consequently, it can only provide reasonable, and not absolute, assurance against material misstatement
or loss.

In July 2020, the Board approved a reorganisation of the management committees. The Compliance matters addressed at the Executive
Compliance Committee (“ECC”) were transferred to the Finance and Risk Management Committee (“FRMC”) which was renamed the
Finance, Risk Management and Compliance Committee (“FRMCC”) and the ECC was disbanded.

The day-to-day responsibility for managing risk and the maintenance of the Company’s system of internal control is collectively
assumed by the Executive Committee. Key risk and control issues are reviewed regularly by the Executive Committee, Finance, FRMCC,
HSEC Committee and Audit Committee. On behalf of the Board, the Executive Committee and FRMCC have established a process for
identifying, evaluating and managing the significant risks faced by the Company. This process was followed throughout 2020 and up to
the date of approval of this Annual Report. The Group has also adopted a risk-based approach in establishing the Company’s system of
internal control and in reviewing its effectiveness. To assist in managing key internal risks, it has established a number of Company-wide
procedures, policies and standards and has set up a framework for reporting matters of significance.

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 significant matters reported by the Executive Committee. The risk register, which includes details of
the controls in place to manage and mitigate identified risks, is considered at every scheduled Board and Audit Committee meeting, with
specific 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
specific 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 financial reporting and consolidation process,
which are designed to address key financial 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 identification of key risks at the Executive Committee which are reviewed by the Audit Committee and by

the Board.

– Prior to the transfer of Compliance matters to FRMCC, the ECC met six times in 2020, after which the FRMCC met four times. 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 Officer attends the FRMCC meetings, and, as necessary, local compliance officers from the 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 conflicts 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 financial information, management
accounts, taxation, cash management, risk including counterparty risk, risk register and third party risks.

– Clearly defined organisational and reporting structure and limits of authority for transaction and investment decisions, including any

with related parties.

– Clearly defined 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, such as
background checks and tender processes.

– Clearly defined information and financial reporting systems, including regular forecasts and an annual budgeting process with

–

reporting against key financial and operational milestones.
Investment appraisal underpinned by the budgetary process, where capital expenditure limits are applied to delegated authority
limits.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Audit Committee Report
continued

– The Investment Committee (an executive

sub-committee) which meets as
required in order to consider and
approve capital expenditures within
limits delegated by the Executive
Committee and the Board.

– A budgetary process and authorisation
levels to regulate capital expenditure.
For expenditure beyond specified levels,
detailed written proposals are submitted
to the Investment Committee and
Executive Committee and then, if
necessary, to the Board for approval.
– Clearly defined treasury policy (details
of which are given in Note 27 to the
Consolidated Financial Statements on
pages 163 to 171), 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 finance teams throughout the
Company, 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 confidence, via an
independent, secure website, raise
concerns about financial or other
impropriety, which are followed up by
Internal Audit and reported on to the
Board.

The Committee and the Board continued
to review ongoing litigation affecting
the Company throughout the year (see
Note 30 to the Consolidated Financial
Statements on pages 172 to 174 and
received regular update reports and
presentations from legal counsel.

Full details of the Group’s policy on
risk and uncertainties are set out in
Note 27 to the Consolidated Financial
Statements on pages 163 to 171. See
also the Principal Risks section of the
Strategic Report from page 48.

Internal audit
The internal audit function has a Company-
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.

none impacted on the effectiveness of the
audit and were mostly a consequence of
2019 being MHA MacIntyre Hudson’s first
year. The outcome of the 2020 review in
respect of the 2019 Annual Report and
Accounts were discussed with the relevant
partners of MHA MacIntyre Hudson.

The Committee reviews at least annually
the effectiveness of the internal audit
function by assessing outcomes against
plan targets, and is satisfied, following its
2020 assessment, with the rigour of the
internal audits and with management’s
response to the audit findings and
recommendations. An Internal Audit plan
for 2021 was approved by the Audit
Committee in December 2020.

The Internal Audit plan for 2020, approved
by the Audit Committee, focused on the
operational risks relating to sales and
marketing, FYM Procurement process,
FPM Inventory management, Group
Compliance audit, DP-Ferrotrans and
Health & Safety risk register review. The
Committee received a report from the Head
of Internal Audit twice during the year, and
reviewed the progress of the Internal Audit
plan with the external auditors and the
Head of Internal Audit. The reports include
the Head of Internal Audit’s assessment of
the operation and effectiveness of relevant
elements of the Company’s internal control
systems, and formed part of the
Committee’s ongoing monitoring and
assessment of such systems.

External audit
Auditor independence and assessment
of audit process effectiveness
The Audit Committee and the Board place
great emphasis on the independence and
objectivity of the Company’s external
auditors when performing their role in the
Company’s reporting to shareholders.

The effectiveness of the audit process and
the overall performance, independence
and objectivity of the external auditors are
reviewed annually at the end of the annual
reporting cycle by the Audit Committee,
taking into account the views of
management. This review takes the form of
a survey (using a questionnaire) of the
auditor’s performance under various
headings: the robustness of the audit, the
quality of delivery, the calibre of the audit
team and value added advice. The results
of the survey indicated that, overall, the
external auditor’s performance was
considered very good by the respondees.
Areas for improvement were noted but

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, the level of fees that the Company
pays in proportion to the overall fee income
of the firm. 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
as external auditor and authorising the
Directors to set the Auditor’s remuneration
will be proposed at the 2021 AGM.
The Company has complied with the
Statutory Audit Services Order issued by
the UK Competition and Markets Authority
for the financial year ended 31 December
2020.

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 financial
statement amounts. Any assignment
that is proposed to be given to the
auditors above a value of US$20,000
must first be approved by the Audit
Committee or its Chair (who are routinely
notified of all non-audit services).

Fees for audit-related and non-audit related
services performed by the external auditors
during 2020 are shown in Note 7 to the
Consolidated Financial Statements on page
137. For 2020, MHA MacIntyre Hudson
did not perform any non-audit services.

Whistleblowing policy
In accordance with the Corporate
Governance Code, the Board is responsible
for reviewing the Company’s
whistleblowing arrangements, and receives
regular reports from the Audit Committee
and the Head of Internal Audit which detail
any new whistleblowing incidents and,
where appropriate, steps taken to
investigate such incidents.

Graeme Dacomb
Chair of the Audit Committee
16 March 2021

Financial reporting
The Board has asked the Audit Committee
to advise whether it considers the 2020
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, and
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 satisfied that, taken
as a whole, the 2020 Annual Report
and Accounts is fair, balanced and
understandable and that it provides the
information necessary for shareholders
to assess the Company’s position, and
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
Corporate Governance Code. The Viability
Statement is set out in the Strategic
Report on page 61 and a statement
setting out the Board’s assessment
of the Company as a going concern is
contained in the Directors’ Report on
page 111 and Note 2 to the Consolidated
Financial Statements on page 132.

Ferrexpo plc Annual Report & Accounts 2020

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Nominations Committee Report

Lucio Genovese
Chair of the
Nominations Committee

“

Renewed focus on
refreshing the Board

Membership and attendance

Committee member

to attend Attended

Meetings

Eligible

Lucio Genovese1

Vitalii Lisovenko

Fiona MacAulay2

Steve Lucas3

The Chief Executive Officer and the Chief
Human Resources Officer also attend
meetings by invitation of the Committee.

1 Appointed on 3 December 2020.
2 Appointed on 15 January 2020.
3 Retired on 24 August 2020.

Dear Shareholder
I am pleased to present the Nominations
Committee Report for 2020, and the first
following my appointment as Board Chair
and Chair of the Nominations Committee
following Steve Lucas’s retirement from the
Board in August 2020. I would like to thank
Steve and the rest of the Committee for
their work during the year.

In 2020, the Committee was formally
convened five times (2019: three). Informal
meetings also occurred. At the formal
meetings of the Committee, it considered:

–

the composition and refreshment of the
Board;

– 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;

the engagement of executive search
agencies to assist with such
appointments;

– deciding upon a shortlist of candidates
for interview. Committee members
interviewed shortlisted candidates and
made recommendations to the Board;

–

formalising search processes and
making recommendations to the Board
for the appointment of Brett Salt as
Chief Marketing Officer, Lucio Genovese
as Board Chair, Jim North as Acting
CEO and Executive Director, and Roman
Palyvoda as Acting CFO;

– approving actions to be taken in 2020 in
support of the achievement the Group’s
diversity and inclusion goals;

– reviewing the results of the Group’s
annual talent review and succession
plans for business-critical roles; and

–

the time commitment expected from
each of the Non-executive Directors to
meet the expectations of their role.

The Committee also agreed to
undertake an internally facilitated
Board performance evaluation for the
year to 31 December 2020 (for further
information see Performance Evaluation
on page 74). The Company will conduct
an external Board evaluation in 2021.

During the year, members of the
Committee (and the Board as a whole)
were very active in supporting a number
of management changes relating to Group

leadership, provide for Board diversity
and strengthen the overall governance
agenda of the Board. These included
the appointment of Brett Salt as Chief
Marketing Officer following the departure
of Jason Keys, the appointment of Jim
North as Acting CEO and the subsequent
appointment of Mr North as an Executive
Director and the appointment of Roman
Palyvoda as Acting CFO. The Committee
also led search processes to appoint
a new Board Chair following Steve
Lucas’s decision to retire from the Board,
announced following the AGM in May
2020, which resulted in the appointment
of myself as Chair in August 2020.

The search for an additional independent
Non-executive Director to improve the
balance between independent and non-
independent Directors on the Board as
well as to advance diversity on the Board,
taking into account the targets of the
Hampton-Alexander and Parker reviews,
was also continued. This work continued
into 2021 and resulted in the appointment
of Ann-Christin Andersen who joined the
Board on 1 March 2021. Ms. Andersen’s
appointment means that the Board is
now comprised of four independent
Non-executive Directors, which exceeds
the requirement of the UK Corporate
Governance Code to ensure that at least
half of the Board (excluding the Chair) are
independent Non-executive Directors.

The Board remains committed to
promoting behaviours that support an
inclusive and diverse workplace, and
which reflects the Company’s values.
This commitment is set out in Ferrexpo’s
Equality, Diversity and Inclusion policy,
approved by the Board in 2019, which aims
to address gender diversity imbalances
in the workforce, while also delivering
sustainable talent pipelines for succession
to senior leadership roles. In 2020,
women represented 29.2% of Ferrexpo’s
employees (2019: 29.3%), with women
in management positions representing
18.2% of the total (2019: 17.5%). The
Company is targeting a figure of at least
25% of managerial roles to be held by
women by 2030. To achieve this target, the
Board recognises that it has an important
role to play in creating an environment
in which all contributions are valued,
different perspectives are embraced, and
biases are acknowledged and mitigated.
In the course of the year, the Committee
approved plans which focus on achieving
the diversity targets set by the Board
in 2019 for the period to 2030. Fiona

MacAulay also attended and presented
at a women in leadership event for senior
female managers held at the close of
a two-month leadership development
programme held at the Group’s operations.

As of 31 December 2020, the Nominations
Committee was composed of Vitalii
Lisovenko, the Senior Independent
Director, and Fiona MacAulay, an
Independent Non-executive Director who
joined the Committee in January 2020.
I joined and took over the chairmanship
of the Committee in December 2020,
following my appointment as Board Chair
in August 2020. At the date of this report,
the Committee is continuing to progress
recruitment to make a further appointment
of a suitable independent Non-executive
Director to strengthen the Board and allow
for the appointment of a second Executive
Director. As part of its recruitment
process, the Committee will be focusing,
in particular, on identifying diverse
candidates with knowledge and experience
of the Ukrainian business environment.

Lucio Genovese
Chair of the Nominations Committee
16 March 2021

Ferrexpo plc Annual Report & Accounts 2020

Membership and meetings
The Nominations Committee is chaired by
Lucio Genovese and its other members
are Vitalii Lisovenko and Fiona MacAulay.
Steve Lucas served as Chair of the
Committee until he retired in July 2020,
following which the Committee remained
quorate with two members up until the
appointment of Mr Genovese as Chair of
the Committee on 3 December 2020.

The Nominations Committee meets at
least once a year, as required by its terms
of reference, and met on five scheduled
occasions in 2020. Other informal meetings
also occurred to consider management
changes, Board Chair succession and to
progress the recruitment of an additional
independent Non-executive Director
to advance diversity on the Board.

Appointment process and
succession planning
Succession planning and Board transition
were a priority for the Committee in 2020,
and will continue to be in 2021. During
the year, the Committee discussed
and interviewed candidates for various
positions on the Board. Following Steve
Lucas’s announcement of his intended
retirement from the Board following the
2020 AGM, Savannah Group was retained
to conduct a market benchmarking
exercise to find a new Board Chair. Based
on a role specification approved by the
Committee, Savannah Group shortlisted
a number of high calibre candidates
with the relevant skills and leadership
qualities requisite for the role of Chair. In
accordance with a skills and leadership
matrix, the candidates were then ranked
by Savannah Group and the Group’s
Chief Human Resources Officer, and such
rankings were reviewed and discussed by
the Committee. Mr Genovese ranked the
highest and most suitable candidate based
on this assessment. The Committee also
carefully considered the dynamics of the
Board. The members of the Committee
were confident with the process conducted
and their recommendation to the Board
to appoint Mr Genovese as Board
Chair. This appointment was confirmed
by the Board on 24 August 2020.

It was carefully considered at the time that
Mr Genovese would not be independent
on appointment as Board Chair, and
that his tenure had exceeded nine years
from the date of his first appointment
to the Board. This meant that his
appointment as Board Chair would not
be in compliance with the Corporate
Governance Code. Notwithstanding

this, the Committee and the Board
considered he was the best candidate
given his experience, leadership qualities
and detailed knowledge of the Group.

The appointment process for a new Board
Chair was initially led by members of the
Committee, other than Steve Lucas who
recused himself from discussions during
meetings in respect of his successor. The
Committee did, however, seek input from
Steve Lucas where appropriate.

Following a tender process involving three
search firms, Caldwell and Partners was
selected by the Committee to assist with
the search for a new independent Non-
Executive Director. The firm is accredited
under the UK Government’s Enhanced
Code of Conduct for Executive Search
Firms and the Voluntary Code of Conduct
on diversity best practice. Caldwell and
Partners has no other connection with the
Company.

Prior to the search commencing, the
Nominations Committee agreed the skills
and experience it considered necessary for
the role and the skills mix required to
enhance the balance of skills on the Board.
Lists of potential candidates were then
identified by Caldwell and Partners and
discussed with Committee members to
agree shortlists to be interviewed. In each
case, the initial list of potential candidates
included gender-diverse candidates.
Shortlisted candidates were interviewed by
members of the Committee and, where
practical, other members of the Board
before being formally recommended to the
Board for consideration and appointment
as a Director.

Following the above processes, the
Nominations Committee recommended the
appointment of Ann-Christin Andersen,
who joined the Board on 1 March 2021.

The Nominations Committee and the Board
also progressed a number of management
changes during the year, including the
appointment of Brett Salt as Group Chief
Marketing Officer replacing Jason Keys
and Jim North as Acting CEO, replacing
Chris Mawe. Mr North was subsequently
appointed an Executive Director to the
Board following Mr Mawe vacating his
position as a Director in July 2020, after
which Roman Palyvoda was appointed
Acting CFO.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Nominations Committee Report
continued

In the course of the year, the Committee
also reviewed the Group’s talent pipeline
and succession plans for business-critical
roles at Group level, and confirmed
development plans for identified high
potentials which included actions to
mitigate identified knowledge and skills
gaps over the short to medium term.

Independence and tenure of the
Board Chair
The Nominations Committee and the
Board were conscious of and carefully
considered that Mr Genovese would
not be considered independent on
appointment as Board Chair and his tenure
had exceeded nine years, which is not in
compliance with the Corporate Governance
Code. Notwithstanding this, as further
detailed above he was considered the best
candidate to fulfil the role of Board Chair
and to lead the Board during the next stage
of the Group’s development. The Board
is satisfied that he is fully independent
from all the Company’s shareholders
and has been during his entire tenure as
a Non-executive Director. Additionally,
the members of the 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 satisfied that
Mr Genovese’s continuance as Board Chair
adds considerable value to the business.

Election and re-election
Jim North who was appointed an
Executive Director in 2020 and Ann-
Christin Andersen who joined the Board
in March 2021 will stand for election by
shareholders at the Company’s AGM
in May 2021. In accordance with the
Corporate Governance Code, all other
Directors will stand for re-election by
shareholders at the same meeting.

Board diversity policy
The Nominations Committee and the Board
recognise the importance of diversity
in terms of cultural and professional
background, expertise and gender, and
believe that the present composition of
the Board is broadly satisfactory, although
as noted above it is seeking to appoint
a further independent Non-executive
Director and as part of this process will be
focused on identifying diverse candidates.

Board diversity policy update

Board objective

Progress in 2020

Foster a diverse and inclusive
workplace culture aligned with the
Company’s Values, Purpose and
Strategy through an organisational
structure that is fit for purpose,
resourcing this structure with the
right capabilities and empowered
leadership able to deliver required
business outcomes.

– Operational human resources policies reviewed to
identify, eliminate or mitigate any disadvantage or
actual or potential discrimination to under-
represented groups.

– Operational facilities audit conducted to ensure

accommodation of people with disabilities.

– Women in leadership programme held to foster the
advancement of women into senior leadership roles.

– Integrated mining operating model developed and in

Increase Board gender diversity
and women in management below
the Board.

execution.

– Skills matrices developed to enhance the

assessment of workforce technical skills and
training by the FPM Training Centre to ensure
workforce capability supports business
requirements.

– Board skills matrix reviewed, including diversity
requirements and communicated to recruitment
partners; only firms adhering to the Voluntary Code of
Conduct on diversity best practice used.

– The Committee’s search for a Non-executive Director

during the year resulted in the appointment of
Ann-Christin Andersen to the Board on 1 March 2021.
This increased the Board’s gender diversity to 29%.

– Initiatives in progress to enhance gender diversity

across the Group, from 18.2% women in management
in December 2020 (2019: 17.5%) to a target of 18.4%
by end 2021.

– Total female representation as percentage of the

workforce currently at 29.2% (2019: 29.3%).

– Board review conducted of the Group’s talent pipeline

and succession plans for senior business-critical
leadership roles, including identification of female
candidates for accelerated development.

– Undergraduate bursary programme targeting women

approved for launch in 2021.

Monitor diversity programme
outcomes and make adjustments to
ensure overall objectives are met

– Plans developed in 2019 are in execution over the next
five years. These include diversity and elimination of
unconscious bias training for middle and senior
management; Science, Technology, Engineering and
Mathematics (“STEM”) ambassador visits to local
schools and colleges; roll-out of flexible and remote
working policy for mothers of small children; and
“bring a daughter to work” days.

Following approval in 2019 of an Equality,
Diversity and Inclusion policy (“Diversity
Policy”), the Committee reviewed
and approved plans in support of the
Company’s diversity targets. The Diversity
Policy seeks to ensure that a broad range
of suitable candidates are taken into
account when drawing up shortlists of
candidates for appointment to the Board,
and seeks only to engage executive search
consultants who have signed up to the
Voluntary Code of Conduct for executive
search firms. The final decisions to make
appointments to the Board are, however,
made on merit against objective criteria,
so as to ensure that the strongest possible
candidate for the role is recruited.

The Committee will continue to ensure
that the Diversity 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. The Board is committed to
promoting behaviours that support an
inclusive and diverse workplace, and
which reflect the Company’s values. This
commitment is set out in the Diversity
Policy, which recognises the important
leadership role 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. The
Diversity Policy aims to 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 Diversity
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. In the
course of 2020, the Committee approved
plans and Ms MacAulay personally
participated in a women in leadership
programme aimed at supporting the
career progression of senior women
managers at the Group’s operations.

Management and staff 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.

Gender diversity
Currently, 29.2% of the workforce is
female of which 18.2% hold management
positions and the aim of the Board is to
increase this figure to 25% by 2030. The
percentage of women in management has
increased from 2019 (17.5%) but progress
was lower than planned due to an overall
moratorium on recruitment as part of a
broad range of measures taken to manage
the global COVID-19 pandemic in respect
of the Group’s workforce, particularly at
operations. Diversity targets in respect of
2021 have been included in the Company’s
strategic business scorecard for the
first time to provide for additional focus
and attention on the achievement of this
strategic imperative. The target set for
2021 at 18.4% represents the appointment
of an additional five women in leadership
positions by the end of the year.

This ambition poses a challenge in the face
of the limited number of women pursuing
technical careers in the mining industry,
which is made more acute in Ukraine
where women are still legally prohibited
from pursuing certain professions
requiring night shift work and working in
hazardous environments. To support the
achievement of the target for women in
management, steps are planned to lobby
government for changes in the law and a
variety of programmes have been launched
to recruit, retain, develop and promote
women within the workforce. Externally,
these programmes include the introduction
of an undergraduate bursary scheme in
2021 specifically targeting women pursuing
STEM studies, sponsorship of local science
expositions and robotics competitions,
as well as continued support for local
secondary schools offering maths and
science studies. Internally, initiatives are
focused on retaining and growing internal
talent, including individual mentorship
and coaching of identified successors.

In taking this into account, the Committee
notes that the Group’s operations are
primarily based in Ukraine which is
partially reflected in the Board and
senior management. The diversity of
the Board and senior management
reflects the broader societal aspects
of Ukraine, where the majority of the
Group’s workforce is based. The Group
is undertaking certain actions to promote
diversity as set out in this report.

Ferrexpo plc Annual Report & Accounts 2020

Long-term strategies to improve female
diversity in senior management of the
organisation and their direct reports
include:
– a graduate bursary scheme to

–

encourage female applicants to specific
sectors;
lobbying the Ukrainian government to
relax legislation to allow female workers
greater access to working in mining
areas and in carrying out previously
male-orientated roles;

– expanding the awareness of school

programmes detailing the opportunities
open to females of STEM careers in
mining;
female support/mentorship scheme for
career development; and

–

– continued leadership development for

women in mining.

Disability
Ferrexpo is proud to employ registered
disabled staff representing more than 4%
of our Ukrainian workforce. This helps us to
reflect the diversity in wider society as well
as deliver on our legal obligations.

The Corporate Governance Report was
approved by the Board on 16 March 2021.

Lucio Genovese
Chair of the Nominations Committee
16 March 2021

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Remuneration Report

Fiona MacAulay
Chair of the
Remuneration Committee

The Committee is chaired by Fiona
MacAulay. The Committee consists of
three independent Non-executive
Directors as required by the Code and
is also attended by the Chair of
the Board and, by invitation, the Acting
Group Chief Executive Officer and the
Group Chief Human Resources Officer.

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 2018
Code. 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 share-
based incentives and ownership in
relation to variable and fixed pay.

Membership and attendance

Committee member

Fiona MacAulay

Graeme Dacomb

Vitalii Lisovenko

Meetings

Eligible
to attend

Attended

A statement to shareholders
from the Chair of the
Remuneration Committee1
As Chair of the Remuneration
Committee, I am pleased to present
the Directors’ Remuneration Report for
the year ended 31 December 2020.

In line with the regulations requiring a vote
at least every three years, the Directors’
remuneration policy was presented to
shareholders at the 2020 AGM and was
approved by 89% of our shareholders.

The policy brought to the AGM was,
however, substantially unchanged from
the 2017 policy due primarily to the
timings of both my appointment to the
Board and the Committee taking place
in the second half of 2019 in addition to
other Board changes during the year. The
approval sought in 2019 was therefore for
a period of 12 months. During the course
of 2020, the Committee has worked with
both internal and external stakeholders
to develop a policy that reflects our
evolving strategy and the views of our
major shareholders and of course reflects
developments in institutional investor
expectations for approval at the 2021 AGM.

This report is split into the following
sections:
1. the 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,
to be approved by shareholders at the
2021 AGM;

4. the Annual Report on Remuneration,
setting out how we have paid Directors
in 2020 and how we intend to operate
the new policy in 2021.

Our approach to remuneration
It is the policy of the Board to align
executive and shareholder interests
by linking a substantial proportion of
executive remuneration to performance,
basing rewards on a balanced portfolio
of performance measures, and assessing
remuneration packages against the
relevant market to ensure that Ferrexpo
can attract, motivate and retain talented
executives. This approach applies
across the executive leadership team
and has resulted in a robust link between
pay and performance to date.

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) (Amendment) Regulations 2008 (as amended in
2013, 2018 and 2019) and the UK Corporate Governance Code. The elements subject to audit are highlighted
throughout.

Key activities of the Committee in 2020
The Committee’s key activities during the 2020 financial year were:

February

March

– Determining the 2019 bonus

– Determining the size of 2020

outturn.

– Determining vesting of the 2017
long-term incentive awards.

– Setting 2020 annual bonus

targets.

long-term incentive awards and
the performance targets.

– Approving awards under the
Company’s share plans.

– Signing off the 2019

Remuneration Report.

Ferrexpo plc Annual Report & Accounts 2020

Remuneration Policy
Over the past year, the Committee has
reviewed the Directors’ Remuneration
Policy to ensure it supports our evolving
strategy, is aligned with shareholders
and takes into account the latest views
on corporate governance. Whilst we
considered alternative pay models and
recognised their merits, we ultimately
concluded that the executives should
continue to be paid through the operation
of our current pay model that includes
a salary, annual bonus and a long-term
incentive. The Committee has, however,
agreed the following changes with respect
to how these elements of pay operate:

Pension: The overall pension maximum
in our policy will be reduced to 10% of
salary from 15% of salary unless there is
a higher local statutory requirement in the
location in which the executive is based.
None of our executives currently receive
a pension in excess of 10% of salary and
this, additionally, is the maximum rate
for all employees across our workforce
through pension or alternative statutory
schemes. The Committee considered
it appropriate to realign our policy with
current market practice. Our Acting
Chief Executive does not currently receive
a pension benefit per se but is eligible for
an equivalent statutory gratuity benefit
payable post-employment that accrues at
a rate of approximately 8.33% per annum
in his location of employment, Dubai.

Any new Executive Director appointments
will be eligible to receive a pension (or
equivalent) benefit in line with the
workforce in the relevant location that they
are employed within the Company.

Short-Term Incentive Plan (“STIP”):
No change is being made to the current
maximum bonus opportunity at 150% of
salary. Part deferral of the annual bonus
into shares will be introduced for the first
time from 2021 financial year. 25% of any
bonus earned will be the deferral amount
which, at the discretion of the Committee,
may be awarded as a right to receive the
shares in two years’ time or the after tax
amount will need to be used to acquire and
hold the shares for the two-year deferral
period. This approach ensures immediate
alignment between the executive and
shareholders. These deferred shares will
count towards the executive’s in
employment shareholding requirements
(on an after tax basis).

Additionally, the target bonus is to
be reduced from its current 67% of
maximum to 50% of maximum in line with
current market practice expectations.

Long-Term Incentive Plan (“LTIP”):
No change is being made to the current
maximum annual award limit (which is
200% of salary and 300% of salary in
exceptional circumstances). In practice,
however, awards are limited to a

substantially lower face value and for 2021
the Committee intends to grant an award
over 87,800 shares (which, based on a
share price of c.340 pence, would result in
an award value at grant to the Acting Chief
Executive of c.43% of salary).

There will be a continuation of the current
three-year performance monitoring
and vesting and an additional two-
year holding period on vested shares.
We have clarified that whilst performance
will primarily be measured against
relative TSR, other performance metrics
will also be introduced to support
delivery against our long-term strategy
and, specifically, ESG aspirations.

Share ownership guidelines: The 200%
of salary ‘in service’ share ownership
guideline (introduced at the 2020 AGM) will
be retained with the expectation being that
all shares deferred under the annual bonus
(from 2022 onwards on an after tax basis)
and all shares which vest under existing
and future LTIP awards (after tax) must be
retained towards satisfying the guideline.

In addition, a post-employment share
ownership guideline will also be introduced
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.

July

December

– Engaging with shareholders and
advisory bodies in relation to the
operation of the remuneration
policy.

– Considering AGM feedback.

– Reviewing the remuneration

policy.

– Determining the remuneration of
the Acting Chief Executive and
Company Chair.

– Reviewing 2021 annual bonus

targets.

Key activities of the Committee
in 2021
The Committee’s anticipated key activities
in 2021 are to:

– consider AGM feedback;

–

implement the revised remuneration
policy (subject to shareholder approval
at the 2021 AGM);

– consider the evolution of performance
conditions in line with the business
strategy within the context of the
COVID-19 pandemic;

– monitor senior management

remuneration in line with the Code.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Remuneration Report
continued

As with the ‘in service’ share ownership
guideline, the guideline relates to
shares that are deferred under the
annual bonus from payments under
the 2021 bonus onwards and shares
which vest under existing and
future LTIP awards (after tax).

Board changes
During 2020, there were changes to both
the Executive and Non-executive members
of the Board.

Jim North was appointed as Acting CEO
on 28 May and an Executive Director with
effect from 5 July 2020. In connection
with his appointment, and in recognition
of his additional responsibilities above
those of his role as Chief Operating
Officer, his base salary was increased by
US$100,000 to US$959,050. As Mr North
is employed out of the Dubai office, in line
with local practice, he does not receive
any pension benefit from the Company.
However, under local legislation he is
entitled to a lump-sum gratuity payment
on leaving employment equivalent to
c.8.33% of salary per year of his service.
Should his employment be relocated
elsewhere within the Company he would
be eligible to participate in the pension
arrangements in the relevant location in
line with the workforce. He will also be
eligible to participate in the annual bonus
plan and long-term incentive plan as
detailed above under the new policy. Full
details of how we intend to operate the
policy in 2021 are set out on pages 91 to
97. As an expatriate employee, Mr North
is also eligible for housing and schooling
allowances (which would be capped at
a maximum of US$200,000), but he has
not used these allowances during 2020.

Chris Mawe, who held the position of
Acting CEO until 28 May 2020, and then
returned to his previous role as CFO and
proceeded on notice on 4 July 2020,
stepping down from the Board with
immediate effect. Mr Mawe commenced a
period of gardening leave on 29 July 2020
and, under his contract of employment, is
expected to cease employment with the
Group on 31 July 2021. Mr Mawe continues
to receive his basic pay and benefits during
this period and any other payments made
in connection with his termination will be
disclosed by the Company in due course.

As detailed in last year’s Directors’
Remuneration Report, Kostyantin Zhevago
stepped down as CEO in October 2019
and was appointed a Non-independent

Non-executive Director, in accordance with
the terms of his Relationship Agreement
with the Company. Given that his base
salary as CEO had historically been set
significantly below the market in light of his
level of share ownership in the Company
(being greater than 50% of the issued
share capital) he continued to receive
the same rate of remuneration during the
period he was a Non-executive Director
in 2019 (US$240,000 plus benefits).

From engagement with the Company’s
major institutional shareholders following
the 2020 AGM, it was understood that the
reason for the less than 80% vote in favour
of the Directors’ Remuneration Report
at the 2020 AGM was due to Mr Zhevago
receiving remuneration at the same rate
following his change in role to reflect his
broader responsibilities and time spent in
providing ongoing support to the Acting
CEO as compared to the other Non-
executive Directors. In response to this
feedback, the remuneration arrangements
for Mr Zhevago have been revised and
with effect from 1 December 2020 he
receives the same remuneration as other
Non-executive Directors of US$135,000,
in addition to a limited consultancy fee
set at US$90,000 per year. This additional
consultancy fee reflects the expected time
commitment of his role, which continues
to be broader than that of the other Non-
executive Directors given the important
role he plays in stakeholder engagement
in Ukraine, providing support to the
Chief Marketing Officer in relation to the
Company’s marketing strategy and sales
portfolio and providing guidance to the
Acting CEO in respect of the Company’s
organic growth plans. The need for this
consultancy fee, and the rate at which it
is set, will be kept under review. He will
not receive any wider Company benefits in
connection with his role and Mr Zhevago
has no executive responsibilities as
part of this consultancy arrangement.

Steve Lucas, having announced his
decision to retire from the Board at the
2020 AGM, stepped down from the Board
following a detailed independent search
for a successor and was succeeded by
Lucio Genovese as Board Chair with
effect from 24 August 2020, who was
evaluated against a number of external
candidates as having the most relevant
skill sets despite not fulfilling the criteria for
independence (given his previous tenure
on the Board from June 2007 until August
2014). In recognition of the expected time
commitment of the role as Board Chair,
his fee was set at a rate of US$500,000

for services to the Company. The fee
reflects the fact that the role significantly
exceeds the one and a half to two days
per week of a typical FTSE 250 Board
resulting from (i) the jurisdictions in which
the Company operates (ii) the need to
engage proactively with the broad range
of Company stakeholders and (iii) the
objective of enhancing the governance
structures within the Company.

During 2020, the Board (excluding the
Non-executive Directors) reviewed
the Non-executive Directors’ fees and
determined that all Non-executive
Directors should receive a consistent
base fee of US$135,000 (replacing the
existing practice of some Non-executive
Directors receiving US$135,000 and others
US$100,000, depending on the timing
of appointment). Given the significant
time commitment involved, the Board
(excluding the Non-executive Directors)
was comfortable this was an appropriate
base fee for all Non-executive Directors.

Performance and reward in 2020
As detailed in the Strategic Report,
2020 was a year of progress with strong
operational and financial performance
delivered against the challenging backdrop
of the COVID-19 pandemic. The Board,
Executive Committee and all employees
responded quickly to the impact of
COVID-19 implementing controls to keep
our people safe and well, maintain safe
and reliable operations, and support
our communities. The early response to
protect the Company’s financial position,
including reprioritising capital expenditure,
maintaining control of operating costs
and optimising production enabled the
Group to deliver strong operating results
and ensure that the business remained
resilient while facing a period of economic
uncertainty. Responding to the impact on
the market environment in the first half
of 2020, sales to China were increased
where demand remained robust and the
Group also benefitted from the successful
ramp up of the Group’s concentrator
and pellet line expansion projects which
resulted in a 7% year-on-year growth in
iron ore pellet production, an increase
in the proportion of our production that
is of the highest grade quality at 65% Fe
and 67% Fe (from 96% to 99%) and total
full-year sales volume increased by 17%.

Ferrexpo has also not applied for or
received a government-funded wage
subsidy programme in any jurisdiction in
which the Group operates, nor have there
been any redundancies as a result of the
COVID-19 pandemic.

Ferrexpo plc Annual Report & Accounts 2020

While policies are understood and are
generally considered to be working
effectively, further work to align
remuneration with individual performance
outcomes is needed, particularly within
some of our operations. This will be an
area of key focus in 2021 for the Chief
Human Resources Officer to review the
policies and address the concerns raised,
overseen by the Senior Independent
Director, who has been designated by the
Board to lead workforce engagement.

Fiona MacAulay
Chair of the Remuneration Committee
16 March 2021

In line with historic practice, long-term
performance in respect of the LTIP will
primarily (75%) be based on Ferrexpo’s
relative total shareholder return
performance measured against an Index
comprising of Iron Ore and Composite
Miners. However, for the first time in
2021 financial year, 12.5% of the award
will also be subject to three-year
production targets that directly align
with our core strategic objective of
improving our 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
2023 financial year. This grade of pellet
improves the productivity of blast
furnaces and reduces their carbon
footprint by 40% for every tonne of
sinter fines replaced (Source: CRU). In
addition to driving production in greener
steel, a separate target, which also
contributes 12.5% of the total, is also to
be introduced to align with our long-
term objective of reducing carbon
emissions. This will also operate for the
first time in 2021 financial year with the
target set to align executives with
reduced carbon emissions of between
3% and 5% p.a. across the period to
2023 financial year. Any shares vesting
under this award will be subject to a
two-year post vesting holding period.
Full details are set out on page 104.

Consideration of shareholders
and employees
We consulted with shareholders in 2020
in relation to the one-year rollover of our
existing remuneration policy and received
over 89% support for that resolution
and are bringing to the AGM this year a
suite of fully considered amendments
to the remuneration policy which
brings the Company in line with market
practice. In relation to the 2019 Directors’
Remuneration Report, we received just
over 76% support. As noted above, the
key reason we understood that votes
were cast against the resolution related
to Kostyantin Zhevago’s remuneration
which has subsequently been reduced
and restructured during the year
under review. Full details of his revised
arrangements are set out on page 104.

The Committee also noted feedback
from employees, elicited through
the Company-wide annual Employee
Engagement Survey. The survey tested
a range of employee engagement
elements including the effectiveness
of remuneration and benefits policies.

–

This robust performance resulted in
a 2020 annual bonus under the STIP
payable at 67% of maximum for Jim
North. Full details of the financial targets
and actual performance against them
are set out on page 101 along with
details of the non-financial targets and
the level of performance achieved.

In determining the 2020 STIP outcome
for Jim North, the Committee applied
downward discretion to scorecard
outcomes achieved in the year to reflect
the higher than expected iron ore prices
and lower than budgeted input costs.
Bonus payments were also made to the
broader workforce using similar principles.

With regard to the 2018 LTIP, as in prior
years, our three-year total shareholder
return performance was measured
relative to the performance of a bespoke
Index of comparable Iron Ore and
Composite Miners. Since we under-
performed the Index by an average of
19.6% p.a. over the three-year period,
0% of the award is eligible to vest.

The Committee considered the
remuneration earned in relation to 2020
financial year to be appropriate in the
context of strong Company performance
in the year and continued progress against
our medium-term strategy of expanding
production in a cost effective manner.

Applying the remuneration
policy in 2021
In addition to the policy changes noted
above, the Committee has agreed a
number of modifications to how it applied
policy in 2020 financial year to further align
the Directors’ pay arrangements with
Company strategy from 2021 financial year.
The key points to note include:

– The annual bonus performance targets
will continue to be assessed against a
balanced scorecard of financial,
operational and personal targets set
with reference to the Company’s
financial plans and the individual’s
responsibilities. Minor changes are to
be made to the current scorecard with
the inclusion of additional ESG targets
to improve our gender balance at
leadership levels and to reduce carbon
emissions in production. The choice of
metrics reflects Ferrexpo’s portfolio of
financial, operational, health and safety,
personal and strategic targets. Full
retrospective disclosure will continue to
be provided in relation to performance
against targets in the Remuneration
Report each year.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Remuneration Report
continued

AT A GLANCE (NOT SUBJECT TO AUDIT)

payment/
accrual

performance
period

holding
period

Element

Operation

Time-horizon

2021

2022

2023

2024

2025

Salary:
To attract and retain talent by
ensuring base salaries are
competitive in the market in which
the individual is employed

Pension & benefits:
To provide market
competitive benefits

– Annual review by Committee

–

Increases typically in line
with wider workforce

– Aligned with pension and benefits

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 measures based on a

scorecard of financial, operational and
personal 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

Business scorecard

Total Shareholder Return

90%

80%

60%

40%

20%

)
y
r
a
a
s

o
%

(

t
n
e
m
y
a
p
s
u
n
o
B

Group
EBITDA

Net
Debt

Safety –
LTIFR

FPM
Production
volume

FPM Full
cash
costs (C1)

FPM Total
movement
costs

Realised
DAP/FOB
proce

Zero
harm

Total

Actual
Seaborne
freight
per wmt
compared
to C3

300

200

100

31 Dec
2017

— Ferrexpo
— 2020 LTIP Index
— FTSE 250 Index
— FTSE All-Share Index

Ferrexpo

LTIP

FTSE

All-Share

31 Dec
2018

31 Dec
2019

31 Dec
2020

Ferrexpo plc Annual Report & Accounts 2020

PART A: POLICY SECTION (NOT SUBJECT TO AUDIT)

As detailed in the Statement to Shareholders from the Chair of the Remuneration Committee, having rolled over the policy at the 2020
AGM in light of the changing make-up of the Board, the Committee has undertaken a full review over the past year and has set out a
revised remuneration policy that takes account of our evolving strategy and acknowledges recent changes to the governance landscape.

Overview of changes to the policy
The changes to the policy are summarised below:

Pension

STIP

LTIP

SOGs

Confirming alignment of pension rates in line with the local workforce, and reducing the
maximum rate to 10% of salary (unless there is a higher local statutory rate).

In line with investor expectation, the target STIP payout has been reduced from 67% of
maximum to 50% of maximum (delivering 75% of salary).

A requirement to defer 25% of any STIP payment into shares for two years has also been
included to provide further alignment with shareholders.

No significant changes although clarified that additional metrics may be used in
conjunction with relative TSR.

Formalised the requirement for a shareholding of 200% of salary to be built and maintained
by Executive Directors and introduced a requirement for the shareholding requirement to
apply for two years post-cessation of employment also at 200% of salary (or the
shareholding on cessation, if lower). Newly acquired shares count towards this guideline.

NED & Chair

No change.

Service contracts and leaver provisions

No change.

Committee
The terms of reference for the Committee were updated during the year 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 specific 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 Corporate Governance Code and are
available for inspection on the Group’s website at www.ferrexpo.com.

Key principles of the remuneration policy
Ferrexpo’s remuneration policy is designed to help attract, motivate and retain talented executives to help drive the future growth and
performance of the business. The policy aims to:

– align executive and shareholder interests;

–

link an appropriate proportion of remuneration to performance;

– reward based on a balanced portfolio of performance measures (e.g. Total Shareholder Return (“TSR”) relative to sector peers,

annual business priorities, financial and operational targets and individual performance); and

– provide rewards that are competitive in the relevant markets to help attract, motivate and retain talented executives.

In determining the Company’s remuneration policy, the Committee takes into account the particular business context of the Group, the
industry segment, the geography of its operations, the relevant talent market for each executive, the location of the executive and
remuneration in that local market and best practice guidelines set by institutional shareholder bodies. The Committee will continue to
give full consideration to the principles set out in the UK Corporate Governance Code in relation to Directors’ remuneration and to the
guidance of investor relations bodies.

From the policy review undertaken, the Committee is satisfied 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 Officer’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.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Remuneration Report
continued

Key principles of the remuneration policy continued

– Simplicity – the Committee is very mindful of the need to avoid overly complex remuneration structures which can be misunderstood
and deliver unintended outcomes. Therefore, one of the Committee’s objectives is to ensure that our executive remuneration policies
and practices are as simple to communicate and operate as possible, while also supporting our strategy.

– Risk – our remuneration policy is designed to ensure that inappropriate risk-taking is not encouraged and will not be rewarded via:

(i) the use of a balanced scorecard in the short-term incentive plan which employs a blend of financial, operational and non-financial
metrics; (ii) the use of equity in our long-term incentive plan (together with shareholding requirements); and (iii) malus/clawback
provisions.

– 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 95 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 significant 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 reflected in its incentives with safety at the heart of its

activities and this is supported through the use of a specific safety measure in the annual bonus and the ability to reduce the formula-
based outcomes based on safety performance.

Executive Director policy table
This section of our report summarises the policy for each component of Executive Director remuneration which will be effective from
the 2021 AGM subject to shareholder approval. The principles below also apply where appropriate to the members of the Executive
Committee.

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Business and, where
relevant for current
Executive Directors,
individual performance
are considerations in
setting base salary.

Not performance related.

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 inflation; and
the range of salary increases applying across
the Group.

Pension
To provide retirement
benefits.

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.

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
inflation rate) on an annualised
basis over the period over which
this policy applies. Increases
above this level may be applied
where appropriate to reflect
changes in the scale, scope and
responsibility attaching to the role
and market comparability.

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 benefits
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 reflect
actual practice in the Company.

Benefits
Competitive in the market
in which the individual
is employed.

Benefits 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 benefits may be offered,
including, but not limited to, accommodation
allowances, travel, enhanced sick pay, relocation/
expatriate relocation benefits, tax and legal
advice.

Benefits’ values vary by role and
eligibility and costs are reviewed
periodically. Increases to the
existing benefits will not normally
exceed applicable inflation.
Increases above this level may
be applied, where appropriate,
to reflect changes in role, scope,
location and responsibility.

Not performance related.

Ferrexpo plc Annual Report & Accounts 2020

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Maximum opportunity of 150%
of salary.

Performance related.

The target opportunity is up
to 50% of maximum and the
threshold opportunity is up
to one-third of maximum.

Performance measures
can include financial,
non-financial and
personal achievement
criteria measured over
one financial year.

The Committee has
discretion to make
changes in future years
to reflect the evolving
nature of the strategic
imperatives that may
be facing 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
measure. Other
performance measures
may, however, be used
in combination with
relative TSR.

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 profile of
the business, expanding
the customer portfolio, and
expanding geographically.

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.

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 reflective 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.

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 satisfied that the outcome is a fair
reflection of Ferrexpo’s underlying business
performance.

For LTIP awards from 2018 onwards a two-year
holding period applies to shares vesting under
the LTIP.

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.

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

Remuneration Report
continued

Key principles of the remuneration policy continued

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Not performance related.

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.

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).

Rationale for performance measures
The STIP is based on performance categories that are key to delivering on our long-term strategy. Performance measures are set at the
beginning of the financial year to reflect business priorities and other corporate objectives, and can include financial, non-financial and
personal achievement criteria.

Performance targets are set at such a level as to be stretching but achievable, with regard to the particular strategic priorities and
economic environment in a given performance period. The STIP target is set with reference to the annual budget approved by the Board.
Where appropriate, the Committee sets a performance zone (threshold to stretch) around the target, which it considers provides an
appropriate degree of “stretch” challenge and an incentive to outperform. The Committee believes that using multiple targets for the
purposes of the STIP provides for a balanced assessment of performance over the year.

For the LTIP, the Committee believes that relative TSR is the most objective external measure of the Company’s success over the longer
term. Relative TSR helps align the interests of Executive Directors with shareholders by incentivising share price growth and, in the
Committee’s view, provides an objective measure of long-term success. The Committee has discretion to review the comparator index
if any of the constituent companies are affected by corporate events such as mergers and acquisitions. The Committee also reviews
the constituents and their weightings prior to the start of each LTIP cycle in order to ensure that they remain appropriate. Details of the
comparator group will be set out in Part B of the Remuneration Report for the year immediately following the year in which the grant
is made. Part of the LTIP will normally also include other performance metrics (e.g. production or sustainability metrics) for a minority of
the award to ensure that the long-term targets are appropriately balanced in light of the Company’s strategic objectives.

Remuneration of senior executives below the Board
The policy and practice with regard to the remuneration of senior executives below the Board is broadly aligned with that of the
Executive Directors.

Senior executives participate in the LTIP with the same performance measures applied as for the Acting 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.

Ferrexpo plc Annual Report & Accounts 2020

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

Not performance related.

Fees
To attract and retain talent
by ensuring fees are market
competitive and reflect 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 reflect
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 profile.

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 fulfilling
the Company’s business (e.g. any
expenses incurred fulfilling Company
business may be reimbursed
including any associated tax).

The maximum aggregate fees,
per annum, for all Non-executive
Directors allowed by the Company’s
Articles of Association is £5,000,000.

Pay-for-performance: scenario analysis
For the Acting 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”. The scenario has been prepared using his
base salary as allowing for the current premium for being Acting CEO as detailed on page 99. In illustrating potential reward
opportunities, the following assumptions have been made:

Scenario

Fixed pay

STIP

LTIP

Below threshold

On-target

Maximum

No STIP (0% of salary)

No LTIP vesting (0% of maximum)

On-target STIP (75% of salary)

On-target vesting of LTIP (40% of maximum)

Base salary, pension
and benefits as
applicable for 2021
financial year1

Maximum STIP (150% of salary)

Maximum, assuming
50% share price growth

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 significantly lower

As for Maximum, but modelling the impact of
a 50% increase to share price

1 Benefits have been included at c.US$190,000 based on the annualised historic benefit provision to Executive Directors.

Acting CEO US$ (‘000)

Minimum

100%

1,150

Target

51%

32%

17%

2,253

Maximum

21%

Maximum
with 50%
share price
growth

32%

26%

43%

35%

4,507

18%

5,466

1,000

2,000

3,000

4,000

5,000

6,000

Fixed Pay

Annual Bonus

LTIP

LTIP value with 50% share price growth

Strategic ReportCorporate GovernanceFinancial Statements
Ferrexpo plc Annual Report & Accounts 2020

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
benefit arrangements, which may include the continuation of benefits 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 measures may be set initially for the STIP and LTIP awards, taking into account
the responsibilities of the individual, and the point in the financial 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 measures 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 Directors’ service contracts
The Executive Director is employed under a contract of employment with Ferrexpo Middle East FZE, a Group company (the “employer”).
The Committee sets notice periods for the Executive Directors at six months, which reduces the likelihood of having to pay excessive
compensation in the event of poor performance.

The principal terms of the Executive Director’s service contract (which has no fixed term) not otherwise set out in this report is as
follows: save in circumstances justifying summary termination, Mr North’s service contract with the employer is terminable on not less
than six months’ notice to be given by the employer or not less than six months’ notice to be given by Mr North and has no special
provisions in the event of a change of control.

Executive Director

Position

J North

Acting CEO

Date of contract

30 September 2015

Notice period

From employer

6 months

From employee

6 months

Under his service contract, the Executive Director 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 office, 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 office the
Executive Director is entitled to a one-way economy class ticket to his country of origin and the service gratuity payment referred to on
page 88.

Policy for loss of office payments
The following principles apply when determining payments for loss of office 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/benefits 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;

Ferrexpo plc Annual Report & Accounts 2020

–

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).

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 Directors’ service contract is available to view at the Company’s registered office.

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 notified to the Board. No external directorships of
quoted companies are currently held by Executive Directors.

Details of Non-executive Directors’ letters of appointment
The Chairman 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

L Genovese

G Dacomb

V Lisovenko

F MacAulay

K Zhevago

Date of first appointment

Date of re-election

Position

Chair

Non-executive Director

12 February 2019

10 June 2019

Non-executive Director

28 November 2016

Non-executive Director

12 August 2019

1 December 2020

2021 AGM

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.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

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,
uninfluenced by exchange rate fluctuations.

Committee membership in 2020
The Committee comprises three Independent Non-executive Directors. Fiona MacAulay was appointed Chair of the Remuneration Committee
with effect from 12 August 2019. The other members of the Committee during the year were Graeme Dacomb and Vitalii Lisovenko. The
Committee met four times during the year. Attendance at meetings by individual members is detailed in the Corporate Governance Report on
page 71. A summary of the topics discussed at meetings in 2020 is set out in the Chair’s Introductory Statement on pages 86 to 87.

The CEO (or Acting CEO) and the Chief Human Resources Officer (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.

Advisers
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 adhere to its code of conduct.

Korn Ferry’s fees for services provided to the Committee in 2020 totalled £115,816 which were charged on the basis of a fixed fee for
specified services and on a time and materials basis for any work outside of this scope. 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
advisers periodically and is satisfied that advice received is independent and objective and that the advisers 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 figure of remuneration – audited
The table below sets out in a single figure for each currency of payment the total remuneration received by each Executive Director for
the year ending 31 December 2020 and the prior year.

K Zhevago held the role of CEO until 25 October 2019 when he stepped aside with Chris Mawe, the Chief Financial Officer, being
appointed Acting CEO until the 2020 AGM on 28 May 2020. Mr Mawe ceased to be a Director of the Company on 5 July 2020 and
subsequently was put on notice by the Company. Jim North, the Chief Operating Officer, assumed the role of Acting CEO from the 2020
AGM and was appointed to the Board on 5 July 2020.

Salary1

Benefits2

STIP3

LTIP4

Pension5

Total
(single figure)6

Total fixed
remuneration
(single figure)6

Total variable
remuneration
(single figure)6

Executive Directors

C Mawe
(until 5 July 2020)8

CHF435,702 CHF100,291

–

– CHF21,785 CHF557,778 CHF557,778

–

C Mawe (2019)

CHF698,417 CHF195,411 CHF865,000

£250,705 CHF69,848 CHF2,146,746 CHF963,676 CHF1,183,070

J North
(from 28 May 2020)7

US$567,180

US$6,459 US$573,656

J North (2019)

–

– US$1,147,295 US$573,639

US$573,656

–

The figures have been calculated as follows:
1 Base salary: amount earned for the year.
2 Benefits: the taxable value of benefits received in the year (accommodation allowance/provision and healthcare).
3 STIP: this is the total bonus earned on performance during the year. Further details are provided on pages 100 to 101. As at the date of this report, no decision has been made in

respect of the treatment of Mr Mawe’s STIP for the financial year ending 31 December 2020 and details will be disclosed in due course.

4 LTIP: the market value of shares that vested on performance to 31 December of the relevant year (2020: 0% vested on performance; 2019: 97.32% vested on performance). The
market value is based on the share price on the normal date of vesting: 31 December 2020 of 282.60 pence; 31 December 2019 of 158.95 pence. Mr Mawe does not hold a 2018
LTIP award. Further details are provided on page 102 in respect of shareholding by the Directors. The impact of share price appreciation on the value of the LTIP is reflected in
the LTIP Award Vesting table on page 102. The 2019 LTIP figure for Mr Mawe includes the value of 11,746 shares in lieu of dividends and has been converted using the average
exchange rate for 2019 for the purposes of the total single figure column.

5 Pension: Mr Mawe’s pension is valued in accordance with Sections 230 to 232 of the Finance Act 2004 for cash balance arrangement schemes. Other formulae (such as 20 times
the increase in the value of accrued benefit over the year) are not considered appropriate since this is not a classic defined benefit scheme (see Pensions and Other Benefits
below), and for expatriate staff the pension is repaid as a lump sum on leaving the country. 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$24,457 was accrued towards the statutory gratuity.

6 Average exchange rates: 2020 – US$1=CHF1.0663, CHF1=£0.8308, £1=US$1.2843; 2019 – US$1=CHF1.0066, CHF1=£0.7882, £1=US$1.2770.
7 Mr North assumed the role of Acting CEO from the 2020 AGM on 28 May 2020 and was appointed to the Board on 5 July 2020. Remuneration disclosed is in respect of the

period as Acting CEO i.e. from 28 May to 31 December 2020.

8 Mr Mawe was appointed Acting CEO on 25 October 2019 until 28 May 2020 and received a temporary additional annualised salary of CHF200,000 to reflect his additional

responsibilities. Mr Mawe ceased to be a Director of Company on 5 July 2020. Remuneration disclosed is in respect of the period as a Director i.e. until 5 July 2020.

Ferrexpo plc Annual Report & Accounts 2020

The table below sets out in a single figure for each currency of payment the total remuneration received by each Non-executive Director
for the year ending 31 December 2020 and the prior year.

Non-executive Directors

L Genovese (Chair)1

V Lisovenko (Senior Independent
Director)3

G Dacomb2

F MacAulay4

K Zhevago5

Former Non-executive Directors

S Lucas (Former Chair)

All figures shown in currency of payment, US$000

2020

2019

Fees

Benefits

Pension

Total

Fees

Benefits

Pension

Total

282

190

120

138

240

494

–

282

190

120

138

240

227

494

440

–

227

440

1 Mr Genovese retired from the Ferrexpo plc Board on 1 August 2014 and was subsequently re-appointed on 12 February 2019. He was appointed Chair on 25 August 2020.
2 Mr Dacomb was appointed to the Board with effect from 10 June 2019.
3 Mr Lisovenko was appointed Senior Independent Director with effect from 19 August 2019.
4 Ms MacAulay was appointed to the Board with effect from 12 August 2019.
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 1 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). In addition, and to reflect his wider role at the Company in providing strategic advice and managing key relationships with stakeholders, he will receive a
consultancy fee set at US$90,000 per year. This fee reflects the expected time commitment of the role and will be kept under review. He will not receive any wider Company
benefits in connection with his role. Prior to Mr Zhevago’s revised arrangements being agreed, he was entitled to furnished accommodation in Switzerland (and elsewhere in
Europe if necessary for the performance of his duties), and up to US$5,000 for professional tax advice. In 2019, the value of accommodation provided was US$90,837.

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. Mr North was appointed to the role of
Acting CEO in May 2020 on a salary of US$959,050, which includes an “acting up” allowance of US$100,000 per annum to reflect his
responsibilities as acting CEO in addition to his role as Chief Operating Officer. There will be no increase to salary awarded in 2021.

Executive Director

J North

1 This includes the “acting up” allowance of US$100,000 referred to above.

Base salary at:

Position

1 January 2021

1 January 2020

Acting CEO

US$959,0501

US$859,050

Mr Mawe received a salary of CHF861,320 during the period he undertook the role of Acting CEO which included an “acting up”
allowance of CHF200,000 per annum to reflect the additional responsibilities.

Pensions and other benefits – 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 period, an amount of US$24,457 was accrued towards the statutory gratuity.

Mr North is eligible for other benefits whilst he is an Executive Director as set out in the Executive Director remuneration policy earlier in the
report. This includes an unclaimed (to date) allowance toward the cost of accommodation and schooling for dependent children in Dubai.

Mr Mawe was a member of the Ferrexpo AG pension plan, which is a mandatory insurance scheme under Swiss law, provided for all
employees of Ferrexpo AG, to which the Company contributes an average of 6% of their annual base salaries. Contributions for all Swiss
employees operate according to a sliding scale, increasing on an age-related basis to a maximum of 10%. No additional benefit is
receivable on early retirement.

Executive Director

C Mawe

Normal retirement date

Increase in value
for 2020 less
Director’s
contribution

31.01.27

CHF56,905

Ferrexpo AG provides Mr Mawe with CHF170,316 of accommodation allowance and CHF24,931 of health insurance per annum which is
subject to annual adjustment in light of the insurer’s changes to premium rates.

Strategic ReportCorporate GovernanceFinancial StatementsFerrexpo plc Annual Report & Accounts 2020

Remuneration Report
continued

2020 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 the Directors 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 for 2020 were set for the Directors and senior executives and were weighted to reflect the
contribution of the individual to the achievement of that target. Targets during the year related to financial performance, safety and
operational performance, and sales and product marketing performance, as well as personal targets relating to operational, financial
and people management objectives. Safety (behavioural safety initiatives and improvements in risk management) was included as a
modifier, decreasing the total result in the event of a fatality.

The Company does not disclose its financial and operational targets pre-emptively for the forthcoming year as these are considered
commercially sensitive. We do, however, provide retrospective disclosure of the targets. The data for 2020 is 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 fulfil
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 confirm, increase, reduce or cancel bonus payments to
reflect current market conditions and affordability. No payment is made under the STIP if performance is below threshold.

In 2020, the threshold performance equated to a bonus potential of 50% of salary, on-target performance 100% of salary and stretch
performance 150% of salary. It is noted that under the 2021 scheme, the bonus earned for on-target performance will be reduced to
50% of maximum bonus opportunity (75% of salary).

The level of achievement against each of the targets for 2020, as determined by the Committee for Mr North as Acting CEO, is
summarised below.

Business scorecard (60% of STIP)

KPI

Measure/target

Financial

Group EBITDA (US$, million)

Net debt (US$, million)

Safety

LTIFR