Ferrexpo

Ferrexpo plc
Annual Report & 
Accounts 2021

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STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

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

76
78
80
81
83
94
100
106
128

133

Chair’s Statement
A Significant Heritage
Ferrexpo: Strategic Priorities
CEO’s Review
Response to Covid-19
Market Review
Business Model
Strategic Framework
Key Performance Indicators
Financial Review
Operational Review
HSEC Committee Chair’s Review
Health and Safety
Environment
TCFD Reporting
Workforce Development and Inclusion 
Community Engagement
Corporate Governance
Non-Financial Information Statement 
Stakeholder Engagement Activities
Section 172 Statement
Risk Management
Principal Risks
Viability Statement

02
04
06
08
11
12
16
18
20
22
26
30
32
35
38
40
42
44
45
46
50
54
56
73

148

135
147

Independent Auditor’s Report to the 
Members of Ferrexpo plc
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement
of Financial Position
149
Consolidated Statement of Cash Flows  150
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

202
206
207
210

200

201

152

151

Footnote: words with the symbol A are defined in the Alternative Performance Measures section of the Annual Report on pages 207 to 209. 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 206.

STANDING WITH UKRAINE 
Looking to the future

The Russian invasion of Ukraine, which began in the 
early hours of 24 February 2022, has changed everything 
for Ukraine. Having endured eight years of armed conflict 
along Ukraine’s eastern border, and the annexation 
of Crimea in 2014, in 2022 Russia brought its war to 
Ukrainian homes, schools, nurseries, hospitals and 
places of work, with millions forced to flee their homes. 
Russian military troops have killed thousands of civilians, 
and have destroyed cities, towns and villages across the 
country, with communities scattered. 

Despite all this, however, Ukraine remains united.

Ferrexpo is a major employer in central Ukraine and has 
a workforce of more than 10,000 people. To date, the 
Group has managed to continue to operate through the 
remarkable resilience of our people. Through the hard 
work, determination and collective spirit of the Group’s 
employees and contractors, Ferrexpo has been able 
to continue to contribute to the Ukrainian economy 
throughout the conflict to date. In addition, a dedicated 
Humanitarian Fund was established in the early stages 
of the invasion, with US$12.5 million of approved funding 
to date1. Details of this fund’s activities are provided 
on the Group’s website at the following location: 

www.ferrexpo.com/responsibility/humanitarian-projects/

Ferrexpo is grateful for the sacrifices that have been 
made during Russia’s invasion of Ukraine, and the Group 
is proud of the resilience and collective spirit shown 
by countless communities. Ferrexpo is a key part of 
Ukraine’s economy, and through further investment, 
the Group looks forward to a new future for the people 
of Ukraine. 

Slava Ukraini.

1. As of 21 April 2022.

Ferrexpo plc Annual Report & Accounts 2021

01

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSChair’s Statement
REFLECTING ON 
RECENT EVENTS
Events of 2022 will have a significant 
impact on the Ukrainian people, their 
communities and their future 
generations.

At Ferrexpo, we had expected the year 2022 
to be the year where we celebrated 15 years 
since the Group listed in 2007. Instead, we 
are focused on the safety and wellbeing of 
our Ukrainian workforce and communities 
across Ukraine, following Russia’s invasion, 
and look to a future of helping to rebuild 
a country. Our assets have more than 
50 years of operating history in Ukraine, 
through our workforce, local communities 
and suppliers located throughout Ukraine. 
We stand with Ukraine, and look forward to 
the future, whereby Ukraine remains united 
and can look towards a more positive future 
for the next generation. To help in the near 
term, we have established a Humanitarian 
Fund to help direct funding to humanitarian 
projects both in our local communities, as 
well as across Ukraine, with details of this 
fund available on our website.

Looking back at 2021 in my second annual 
review as Chair, this was a year of 
positioning our business for the future. 
Despite the lingering impact of the global 
Covid-19 pandemic, we retained our focus 
in 2021 on safety, growth and reducing 
carbon emissions. Through investing in high 
grade production, we can contribute more 
to the Ukrainian economy, growing our 
business to represent 4% of Ukraine’s 
export revenues in 2021 (2020: 3%). 
Through financial resilience, we have been 
able to provide additional support to our 
local communities throughout both the 
global Covid-19 pandemic and more 
recently during Russia’s invasion of Ukraine. 

We continue to evolve our management and 
Board to fit our next phase of development. 
In management changes announced in 
February 2022, we appointed Jim North as 
permanent CEO having successfully 
transitioned the Group into a new phase of 
its corporate culture and overall growth 
ambitions. In August 2021, we also 
appointed Nikolay Kladiev as CFO of the 
Group having worked as our CFO at our 
largest operation in Ukraine for over 
15 years.

As a Board, we continue to look to 
strengthen our corporate governance. 
In February 2022, we rotated the position 
of Senior Independent Director to 

Fiona MacAulay, and I would like to thank 
Vitalii Lisovenko for his efforts with 
stakeholder engagement, who continues to 
provide a strong presence in Ukraine as a 
Non-executive Director of the Group. During 
2021, we also appointed two additional 
Independent Non-executive Directors, 
taking the total number of independent 
Directors to five. These appointments 
comprised of Ann-Christin Andersen, who 
specialises in digital technologies and 
business transformation, and the 
appointment of Natalie Polischuk, who is an 
economist based in Kyiv, and who provides 
further balance to our Board in terms of 
regional expertise. Furthermore, as part of 
our initiative to increase our engagement 
with the market, I travelled to London in 
October 2021 to host a corporate 
governance roadshow and engage directly 
with our shareholders. 

We recognise the importance of climate 
change, and in October 2021, we 
announced our inaugural carbon targets, 
effectively moving to align ourselves to our 
peer group. To further develop this position, 
we announced our collaboration with 
environmental consultants Ricardo plc 
(“Ricardo”) to model and review our 
decarbonisation pathway for Ferrexpo and 
the role of iron ore pellets in a low carbon 
economy – see page 37 for more 
information. Having set our inaugural 
medium-term target in line with peers, we 
have now achieved a 30% reduction in our 
Scope 1 and 2 emissions combined against 
our baseline year, demonstrating the 
progress being made at our operations, and 
ahead of our peers. See page 36 for details 
of progress made, and page 34 for the 
external assurance process we are 
undertaking on our 2021 reporting for 
carbon emissions, as well as safety.

We also took steps in 2021 to formalise our 
approach to shareholder returns. We have 
maintained a consistent approach to 
shareholder returns since listing in 2007, but 
we felt it important to outline our approach 
to help engagement with shareholders. We 
have structured this policy on the basis of 
free cash flow to ensure that our 
investments in growth can continue, 
targeting a payout of 30% of the Group’s 

02

Ferrexpo plc Annual Report & Accounts 2021

GOVERNANCE

FIVE

Number of Independent Non-executive 
Directors increased to five out of eight 
Directors (31 December 2020: three of six).

CLIMATE CHANGE TARGETS

% REDUCTION

30 

Carbon targets set to reduce carbon 
emissions by 30% by 2030, with this level 
achieved in 2021, and a net zero goal 
for 2050.

 See Environment section on p35-39 for 
details of progress made.

DELIVERING VALUE TO UKRAINE

% EXPORTS 

4 

Ferrexpo’s role in Ukraine increased to 
represent 4% of exports in 2021 (2020: 3%).

free cash flow as dividends going forward, 
and to date the Group has distributed 37% 
of free cash flow in respect of 2021.

Looking ahead, Ukraine has shown 
resilience to date in 2022 and we have every 
confidence that this will continue in the 
years to come. The country now faces a 
significant task ahead to first defend itself, 
and then to rebuild and repair. As a key part 
of Ukraine’s economy, we will play our part 
in helping Ukrainians realise a brighter 
future, through continued investment and 
development, as we have done for the past 
15 years since Ferrexpo listed on the 
London Stock Exchange. With over 
US$3.0 billion of investment since listing, 
we now have a strong platform on which to 
launch our next phase of growth and details 
of our progress since 2007 are provided on 
pages 4 to 5, with future growth plans 
outlined on pages 28 to 29.

As a final note, on behalf of the Board, 
I would like to thank all of Ferrexpo’s 
stakeholders for their resilience and 
teamwork in exceptional circumstances to 
date in 2022, as well as thank the Group’s 
workforce for its collective effort in 
producing the Group’s result for 2021. 
I would also like to thank those that are 
involved in protecting Ukraine’s borders, 
with every community in Ukraine, including 
our own, suffering at this difficult time.

Lucio Genovese
Chair, Board of Directors

STRATEGIC REPORTImage: Lucio Genovese,  
Chair of Ferrexpo’s Board since 2020.

Image: Ferrexpo constructed a 
5MW solar power pilot plant at its 
operations in Ukraine in 2021.

CASE STUDY:

THE IMPORTANCE OF STEEL

Steel is crucial for modern life. Iron ore, the 
primary ingredient for steel, represents 94% 
of the total metals mined in the world today9 
and the average person uses more than ten 
times the amount of steel in a single year 
than any other single metal, as shown in 
the chart below.

METALS CONSUMED PER PERSON 
PER YEAR (GLOBAL)

Per capita usage (kg per person per year)

Steel1

228

Aluminium2

12

Copper3

Zinc4

Lead5

Titanium6

3

2

2

1

Nickel7

0.4

Lithium8

0.01

In terms of where steel is used in everyday 
life, it is widely used in the modern 
construction of homes, bridges and key 
infrastructure such as railways, electricity 
pylons and airports. Research shows that 
steel is critical for all forms of renewable 
power generation, representing up to 79% 
of the mass of a wind turbine10, and steel 
demand is expected to grow by 31% by 
2050 to meet the needs of the transition 
to a low carbon future11. Steel is used 
extensively in forms of transport such as 
trains, trams and shipping, in household 
domestic appliances, and in manufacturing 
equipment in factories. Steel is everywhere.

As part of the steel value chain, Ferrexpo 
understands the need for society to have 
high quality forms of steel for these uses. 
The Group is working with its customers to 
help deliver high grade forms of iron ore to 
facilitate the steel sector’s transition to 
a low carbon, more sustainable future.

1.  World Steel Association (link).
2.  USGS (link), Worldometer (link).
3.  USGS (link), Worldometer (link).
4.  USGS (link), Worldometer (link).
5.  USGS (link), Worldometer (link).
6.  www.european coatings.com (link).
7.  Henckens & Worrell (2020) (link).
8.  USGS (link), Worldometer (link).
9.  Visual Capitalist (link).
10.  National Renewable Energy Laboratory (link).
11.  International Renewable Energy Agency (link).

Ferrexpo plc Annual Report & Accounts 2021

03

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSA Significant Heritage
MARKING 15 YEARS OF 
INVESTING IN HIGH GRADE

KEY MILESTONES

2007
LISTING ON LONDON 
STOCK EXCHANGE
Ferrexpo lists in 2007 with 48% of revenues 
derived from steel mills in Eastern Europe, 
and a strategy to increase sales to premium 
global markets such as Japan, whereby 
sales to this market commenced in 2009.

2011
DEVELOPING A NEW 
MINE – YERISTOVO
In 2011, Ferrexpo’s second mine enters 
production, with the Yeristovo mine 
producing its first ore. This high grade mine 
is the first new mine developed in Ukraine 
since the country’s independence in 1991.

2015
DELIVERING  
HIGHER QUALITY
Following completion of the multi-year 
Quality Upgrade Programme (approved in 
2010), output of high grade pellets increased 
to 89% of production (from own ore) in 2015 
(up from 52% in 2014).

Capital investmentA since IPO

+US$3.0BN

  Iron ore price 
(62% Fe, US$/t)

$104m

$277m

$86m

$167m

$378m

$429m $278m

$235m

$65m

$48m

$103m

$135m

$247m $206m

$361m

$168/t

$160/t

$145/t

$146/t

$135/t

$128/t

$97/t

$97/t

$80/t

$109/t

$93/t

$71/t

$70/t

$56/t

$58/t

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

04

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT 
KEY MILESTONES

In 2007, Ferrexpo listed on the London Stock 
Exchange with the Poltava mine and processing 
complex – assets in operation since 1960. Through 
further investment, Ferrexpo aims to remain 
relevant for another 50 years of production.

2017
BELANOVO MINE 
COMMENCES
As the Group invests in its assets and looks 
to the future, Belanovo and its high grade 
ores represent the long-term future of 
Ferrexpo’s growth plans.

2019
ADDING MINE LIFE 
THROUGH DRILLING
In 2019 the Group announced a 26% 
increase in JORC-compliant Ore Reserves, 
taking the Group’s mine life to over 50 years 
at present mining rates.

2020
CONCENTRATOR 
EXPANSION PROJECTS
The Group successfully invested in two key 
development projects in 2020, expanding 
concentrate production and adding 
operational flexibility.

2021
PELLETISER 
EXPANSION PROJECT
Following the concentrator growth projects 
of 2020, the Group proceeded to upgrade 
capacity in its pelletiser in 2021.

ACHIEVEMENTS SINCE LISTING:

DEVELOPING A WORLD 
CLASS IRON ORE COMPANY

In 2022, the Group will mark 15 years since 
listing on the London Stock Exchange. 
Through investing over US$3.0 billion 
during this time, the Group has advanced 
itself to become not only the third largest 
exporter of iron ore pellets globally, but 
is also now beginning to supply global 
markets with higher grade (67% Fe) direct 
reduction pellets, which is the highest 
grade market for commercially available 
iron ore and represents one pathway to 
carbon-free Green Steel – the long-term 
future of steel production. Below are some 
examples of how Ferrexpo’s investment 
has provided returns:

Increasing product volumes
%
+27 

8.8Mt of production from own ore in 2007, 
growing to 11.2Mt in 2021.

Increasing product grades

+2pp 

Pivoting from a producer of medium grade 
(63% Fe) iron ore in 2007 to only high 
grade iron ore (65% Fe and above) in 2021.

Increasing product quality
%
100 

Moving to export 100% of production 
in 2021 (2007: 83% of revenues as 
exports), reflecting product quality.

Adding mine life

%
+46 

Despite 15 years of production, the Group 
has grown JORC-compliant Ore Reserves 
by 46% since listing in 2007.

Increased resilience

+22pp

Increasing Underlying EBITDA A margin per 
tonne produced, from 35% in 2007 to 57% 
in 2021.

Ferrexpo plc Annual Report & Accounts 2021

05

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFerrexpo: Strategic 
Priorities

The Group continues 
to invest and develop 
its assets, with the 
following representing a 
selection of the Group’s 
achievements in 2021.

SAFETY 

Safety remains the  
first priority.

 p32-33

MODERN 

Roll-out of autonomous 
trucks continues.

 p26-27

Injury frequency rate of 0.41, the third 
year of performance materially below 
Ferrexpo’s iron ore producing peers.

Automation completed on automation 
test work on six of the Group’s CAT 
793D haul trucks at the Yeristovo mine.

0.41 

LTIFR

trucks

6 

1

What we do

 1  Extraction: 

Ferrexpo’s iron ore mines in Central 
Ukraine have over 50 years of mine life 
remaining at present mining rates.

 2  Processing: 

Through significant investment the Group is 
able to produce some of the highest quality 
iron ore products commercially available.

 3  Export: 

Ferrexpo’s products are sold to a network 
of premium steel mills around the world.

06

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTSUSTAINABLE 

GROWTH 

PREMIUM 

Reducing emissions and 
setting carbon targets.

Wave 1 Expansion approved 
by the Board in 2021.

Higher grade products, 
for lower carbon steelmaking.

 p35-39

 p28-29

 p12-15

Sunflower husks are used as a biofuel, 
helping cut carbon emissions, representing 
18% of pelletiser energy in 2021.

The Group has launched an investment 
project to add 3 million tonnes of 
pellet capacity.

Higher grade (67% Fe) direct reduction 
pellets represented 4% of output in 2021 
(2020: 3%).

18%

energy

+25%

growth

production

4%

3

USING PREMIUM 
STEEL IN SOCIETY

Ferrexpo’s iron ore pellets are used by 
steelmakers to produce high quality steels that 
are essential for modern life, with the world 
using ten times more steel than other major 
metals combined – see Case Study on page 3 
for more information. The images below depict 
a number of key sectors in which steel is 
commonly used:

2

Automotive sector: 
steel represents up to 
60% of body structures 
of modern vehicles.

(Source: World Steel 
Association, link).

Precision 
engineering:  
on average, 75% 
of the weight 
of household 
appliances is steel. 

(Source: American Iron 
& Steel Institute, link).

Construction:  
steel is critical for high 
rise buildings and 
infrastructure in 
modern cities.

Electrification:  
steel is critical to all 
forms of renewable 
power generation.

(Source: World Steel 
Association, link).

Ferrexpo plc Annual Report & Accounts 2021

07

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
 
CEO’s Review
LOOKING TO THE FUTURE

Russia’s invasion in 2022 has placed 
communities throughout Ukraine under 
severe pressure, but we remain resilient 
and determined to look to the future.

A safety-first culture

REVENUE

Safety remains a key pillar of our business 
model, with another positive result in safety 
achieved in 2021, and without safety 
embedded throughout our operations, there 
can be no success. In respect of Russia’s 
invasion of Ukraine in 2022, we report further 
on the wellbeing of our workforce on page 
40. In respect of 2021, we are pleased to 
report on a fatality-free year, alongside an 
injury rate that continues materially below 
our trailing five-year average for the 
business. The lost time injury frequency rate 
recorded in 2021 of 0.41 was the lowest full 
year result reported by the Group since 
listing in 2007, and I would like to thank every 
employee and contractor that has helped 
deliver this result; see pages 32 to 33 for 
more on our progress in safety. In respect of 
Covid-19, we continue to be vigilant against 
this risk to our business, and details of our 
efforts to insulate our workforce and 
production from this virus are provided on 
pages 11, 42 and 71, with minimal disruption 
caused to operations to date.

+48%

2021: US$2.5BN
2020: US$1.7BN

UNDERLYING EBITDAA

+68%

2021: US$1,439M
2020: US$859M

CAPITAL INVESTMENTA

+75%

2021: US$361M
2020: US$206M

As we reflect on the events to date in 2022, 
with Russia’s invasion of Ukraine and 
unprecedented aggression towards 
communities throughout Ukraine, it is 
important to note the resilience of our 
workforce, as well as the people throughout 
the country. Russia has caused untold 
damage to parts of Ukraine, but the 
country’s economy and infrastructure will be 
rebuilt. At Ferrexpo, we understand the 
importance of our role in the Ukrainian 
economy, and we are proud of our team’s 
efforts to continue operating during this 
invasion, helping the Ukrainian economy to 
continue to operate. To date, we have 
continued to produce and are able to export 
our products to Europe via rail and barge. 
Our ability to export via the port of 
Pivdennyi remains closed however – please 
see the Group’s press releases for up to 
date information on the Group’s logistics 
capabilities and capacity. Our operations, 
which have a close link to the local 
communities surrounding our mines near 
Horishni Plavni, will play an important role in 
supporting the national and local economies 
as the reconstruction effort commences. 
Here, we present our results for 2021, but 
we are very much focused on the future 
ahead for Ukraine, and helping to rebuild. 

Looking back at 2021, we can report on 
another year of growth for the Ferrexpo 
business. From an operating standpoint, we 
are growing our production volumes through 
our investments, and we are also growing 
our product quality through our new higher 
grade direct reduction pellets. Through our 
investments in high grade production, we 
are also growing our profitability, with 
Underlying EBITDA A margins increasing to 
57% in 2021, during a peak in the iron ore 
market cycle. However, modern companies 
are much more than production numbers 
and cash flow generation, they are about 
developing safe and sustainable businesses 
with a purpose strongly linked to the 
communities in which we operate. Crucially, 
our work is about further developing a 
brand that all stakeholders can trust and 
believe in.

08

Ferrexpo plc Annual Report & Accounts 2021

Image: Sunset at Ferrexpo’s Yeristovo 
mine, September 2021.

STRATEGIC REPORTImage: Jim North, Chief Executive Officer 
and Executive Director.

Underlying EBITDAA margin

Consistent operating performance

57%

46%

39%

39%

50%

57%

2017

2018

2019

2020

2021

Carbon emissions per tonne (S1+S2)

-30%

130 kg/t

132 kg/t

131 kg/t

110 kg/t

92 kg/t

2017

2018

2019

2020

2021

  See our KPIs on p20-21

In 2021, we delivered production 
performance in line with 2020 in terms of 
total output, but with increased output of 
our higher grade products. This was 
achieved despite a total of over 60 days of 
planned expansion work on the Group’s 
pelletiser during 2021, and our operations 
are in a strong position going into the year 
ahead having completed this upgrade work. 

As an iron ore producer, the grade of our 
products is a key factor in the Group’s 
success, as evidenced by the increasing 
premiums being paid for high grade iron 
ores (see page 13 for more information). 
As shown in the investment timeline on 
pages 4 and 5, the Group has pursued 
several phases of quality upgrade 
programmes, which have culminated in the 
strong operational result seen in 2021, with 
100% of Ferrexpo’s output comprising of 
high grade iron ore products.

Growth programme

We are growing and modernising our 
business. However, given the conflict in 
Ukraine, we have elected to pause projects 
that are not expected to deliver near-term 
growth, with an intention to resume these 

projects once greater certainty on the 
outlook for Ukraine is available.

In our mines, growth projects are focused 
on embracing modern technology, such as 
automating our truck fleet, with six trucks 
now automated in the Yeristovo mine, and 
further phases of automation planned for 
the years ahead. We are modernising our 
production process and adapting our 
product mix for customers as they embark 
on the journey to green steel production. In 
2021, we signed our first long-term contract 
for direct reduction pellets, with this 
achievement only possible through our 
investments into our processing facilities. 

We have now finished our initial upgrade 
work on our pelletiser lines, and we are 
looking to pivot to our next phase of growth. 
The Wave 1 Expansion will deliver an 
additional three million tonnes of pellet 
capacity and we expect that this could be 
delivered in the space of three years. This is 
a significant undertaking and to put this into 
perspective, this is the same uplift in 
production volumes that we have achieved 
in the past 15 years since listing in 2007. For 
more information on our growth ambitions, 
please see page 28.

Following approval of the Group’s growth 
plans in October 2021, the decision has 
been made to focus our operations on 
processing of high grade ores to maximise 
production volumes, and to meet customer 
demands. As a result, currently it cannot be 
reliably predicted as to when the Group’s 
stockpiled low grade ore will be processed, 
which has resulted in an impairment 
amounting to US$231 million. Please see 
Note 17 Inventories to the Consolidated 
Financial Statements for more information.

Tangible progress in decarbonisation

We have made considerable steps in 2021 
to develop our thinking in respect of 
decarbonisation. In October 2021, we 
aligned ourselves with our peer group with 
our inaugural carbon targets, which set our 
goal of being net zero by 2050. 

Efforts to decarbonise our operations have 
begun well, with the Group delivering a 
second year of strong performance, and we 
have now registered a 30% decline in our 
combined Scope 1 and 2 emissions per 
tonne against our baseline year of 2019. 
This result matches our medium-term 
emissions reduction target and underscores 
where Ferrexpo is relative to its peers, who 
are predominantly seeking to reach this 
level of decarbonisation by 2030. We will 
now look to maintain this lower level of 
carbon emissions going forward as a 

Ferrexpo plc Annual Report & Accounts 2021

09

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCEO’s Review continued

minimum, and we are working with 
environmental consultants Ricardo to review 
our strategy, and to develop a bespoke 
understanding of our decarbonisation 
journey ahead – please see the Case Study 
on page 37 for more on this project. Finally, 
to develop trust on sustainability topics, we 
are undertaking an external assurance 
process on our carbon emissions and safety 
data, as we understand the significance of 
getting this reporting right – see page 34 for 
more information on this project.

Fostering inclusivity

We are also seeking to differentiate 
ourselves through our efforts in diversity, 
and we are extremely proud of the external 
recognition received in the fourth quarter of 
2021 for having highly-rated, family-friendly 
policies, whilst also winning awards for 
our “Fe_munity” women in leadership 
programme aimed at improving diversity 
by increasing the skill base of our female 
leaders. For more details on these 
initiatives, please see pages 40 to 41.

Technology and innovation

Through a commitment to modern 
technology and innovation, we are aiming to 
secure the long-term viability of our mines 
and products, to keep our business 
competitive on the world stage. A recent 
example of modernising production 
processes is the initiation of the new press 
filtration plant, which represents a modern 
form of technology that will reduce moisture 
in green pellet production, therefore 
improving pellet quality and increasing 
energy efficiency; see pages 26 to 29 for 
more information on these projects.

Supporting local communities

The Group has long held a close bond with 
its local communities in central Ukraine 
where the Group’s operations are located. 
Through working closely with our local 
communities, we aim to understand their 
needs, to deploy funding to where it is best 
invested. In March 2021, the Ferrexpo 
Charity Fund celebrated the tenth 
anniversary since its establishment, during 
which time the Group has provided direct 
support to over 90 educational projects, 
30 healthcare projects and direct aid to over 
4,000 individuals. This has been particularly 
relevant during the global Covid-19 
pandemic, where companies have needed 
to step up and provide support to protect 
their workforces and local communities, and 
details of this work are provided opposite.

Engagement with stakeholders

In 2021, we increased our focus on developing 
our relationships with our stakeholders. We 
have continued our regular activities such as 
our employee engagement survey and 
associated employee engagement forum with 
Board members, which is now in its fourth 
year. We have also moved to engage more 
broadly with institutional investors and the 
media through the appointment of Liberum 
Capital and Tavistock Communications in 
London, as well as BDO LLP as the Group’s 
Sponsor, with all three appointed in the 
first quarter of 2021. Furthermore, we 
launched our new corporate website 
in January 2022, bolstering our online 
presence for informing stakeholders.

In February 2022, we were pleased to receive 
an upgrade in our ESG rating from ratings 
agency MSCI Inc. to A, capping a five year 
journey that has seen our rating increase 
by four notches during this time. In further 
external recognition, we were also pleased to 
receive recognition of our efforts to protect 
our workforce and engage proactively with 
our suppliers, through the successful 
completion of a Sedex Members Ethical 
Trade Audit (“SMETA”), with this external 
audit completed in the first quarter of 2022.

Addressing cybersecurity

Given the increasing prevalence of 
cyberattacks, and war in Ukraine, we have 
undertaken a number of steps to address 
this rising risk. These efforts in 2021 have 
included the procurement of additional IT 
infrastructure to maintain our access to our 
data in the event of an attack, and regular 
audits of our IT security to maintain an 
up-to-date approach to combating threats; 
see page 70 for more information.

Looking to the future

The events of early 2022 have changed 
Ukraine significantly, but our business model 
and our resolve remains unchanged. We 
continue to produce high grade iron ore 
pellets, and we are continuing to invest in 
growing our business for the future, which will 
help further support the Ukrainian economy to 
rebuild. I would like to thank our workforce 
for their collective effort to continue our 
operations throughout the invasion in 2022, 
as well as achieving the strong financial result 
for 2021 that is presented here in this report. 
We have continued to show resilience as 
a business in 2022 and I look forward to 
working with all of our stakeholders in the 
years ahead to further develop our business.

Jim North
Chief Executive Officer & Executive Director

CASE STUDY:

THE IMPORTANCE OF IRON 
ORE PELLETS

Emissions saving for steelmakers

40% Blast furnace pellets 

(vs. sinter fines)

Iron ore pellets are a direct charge material 
and therefore do not require sintering prior 
to use in the blast furnace. Since sintering is 
a step that typically requires the use of coal, 
steelmakers can avoid generating emissions 
through using more iron ore pellets. Allied 
with the high grade nature of Ferrexpo’s 
pellets, steelmakers can reduce carbon 
emissions by 40%1 for each tonne of sinter 
fines replaced (hot metal basis).

Scope 3 emissions saving for Ferrexpo

49% Direct reduction  

pellets (vs. other pellets)

Direct reduction pellets offer a pathway 
to low emissions steel production. Blast 
furnace steelmaking represented 73% of the 
world’s steel production in 20211, but this 
process requires coal and therefore has 
inherent carbon emissions associated with it. 
Steelmaking via the electric arc furnace 
production route using direct reduction iron 
is not reliant on coal, however, and instead 
involves processes that typically utilise 
natural gas and electricity, resulting in 
a significantly lower carbon footprint. 
Compared to Ferrexpo’s blast furnace 
pellets, direct reduction pellets represent 
a further emissions saving of 49% for 
producing crude steel1, providing a material 
improvement to Ferrexpo’s Scope 3 footprint 
through producing this particular type of 
pellet. This saving is expected to further 
increase over time as steelmakers introduce 
hydrogen and renewable electricity to this 
method of steelmaking to pursue the 
production of carbon-free green steel. 

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

carbon capture.

10

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTFERREXPO’S
RESPONSE
TO COVID-19

CASE STUDY:

SHIELDING THE GROUP’S 
WORKFORCE FROM COVID-19 

Since the outset of the global Covid-19 
pandemic, Ferrexpo has moved to protect 
its workforce from the Covid-19 virus and 
the after-effects that the global pandemic 
is having on individuals and communities 
around the world. In early 2020, the Group 
established the Covid-19 Response Fund, 
with a total of US$3.5 million of approved 
funding provided to date.

Through measures initiated in 2020 and 
continued into 2021, including rigorous 
testing, social distancing measures and 
staggered shift patterns, the Group has 
limited the spread of the Covid-19 virus 
at its operational facilities and has 
successfully maintained production 
and capital investment activities to 
expand output. 

Medical equipment purchased in 2021 for 
the Group’s on-site medical centre included 
the installation of sample analysis machines 
to determine the severity of infection that an 
individual has developed, and equipment to 
measure an individual’s natural immunity to 
the virus following infection. 

Following the development of a vaccine for 
Covid-19 in late 2020, the Group has moved 
to promote vaccine uptake in its workforce 
and to facilitate local authorities in their 
efforts to administer vaccines to local 
communities and Ferrexpo’s workforce 
through the provision of its healthcare 
facility as a vaccination centre for anyone to 
attend. As of January 2022, the Group’s 
employee workforce had received over 
5,900 doses of Covid-19 vaccinations, with 
65% of the workforce being fully vaccinated, 
approximately double the national average 
of Ukraine1. 

Ferrexpo is also working with communities 
to directly counter the spread of the virus 
beyond its operations. Details of these 
activities are provided on pages 42 and 72.

65%

Double-vaccination rate in Ferrexpo’s 
employee workforce, approximately double 
the rate in Ukraine1.

Image: Ferrexpo’s health 
centre has been provided as 
a vaccination hub, helping to 
provide over 5,900 vaccinations 
to employees in 2021.

1. 

 www.ourworldindata.org

Ferrexpo plc Annual Report & Accounts 2021

11

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSinspections commencing in April 2021 to 
ensure that each province’s annual 
production did not exceed 2020 levels. 
Measures implemented included the 
removal of export tax rebates in China 
from August 2021. 

In terms of the supply-demand balance of 
the iron ore market, movements in iron ore 
pricing in 2021 were primarily driven by 
fluctuations in demand for iron ore, rather 
than changes in supply of iron ore, which 
remained relatively stable. Independent 
consultants CRU estimate that exports of 
iron ore grew by 38 million tonnes in 2021, 
representing an increase of 2%. The 
majority of this additional material came 
from Brazil and Australia, with the former 
relating to recovering supply, and the latter 
primarily relating to additional low grade 
supply from brownfield sites. 

Market Review
KEY MARKET DRIVERS

2021 was a year marked by volatility in global 
market prices for iron ore and rising demand for 
iron ore pellets in response to rising environmental 
measures to reduce steelmakers’ emissions.

Ferrexpo’s high grade iron ore pellets are 
priced using the benchmark 65% Fe fines 
price, with a pellet premium paid in addition 
to this index, and a freight rate is typically 
deducted according to the location and type 
of contract agreed with each customer. 
This section focuses on the factors affecting 
pellet pricing, in addition to global supply 
and demand factors affecting Ferrexpo’s 
end-market – steel. The Atlantic pellet 
premium, published on a monthly basis by 
S&P Platts (“Platts”), is presented in this 
section as an indicator of pellet premiums 
throughout the year. The Atlantic pellet 
premium is, however, based on the index for 
iron ore fines grading 62% Fe, as published 
by Platts, and therefore is not directly used 
by the Group in the typical pricing of its 
pellets, which are priced off the 65% 
Fe index. 

Iron ore fines prices

Volatility has been a key factor when looking 
back at global iron ore markets in 2021, 
affecting a range of key revenue drivers for 
iron ore producers like Ferrexpo, with the 
range of iron ore prices seen in 2021 
approximately three times the average 
range in prices seen in the past five years. 

Iron ore fines prices began 2021 at 
approximately US$180 per tonne, and rose 
by between US$40 and US$45 per tonne in 
both 1Q and 2Q of 2021, with this increase 
driven by government stimulus packages 

IRON ORE PELLETS: MARKET FACTORS

around the world in response to the global 
Covid-19 pandemic. This upward trajectory 
was then reversed in August 2021, with 
average prices declining by US$42 in 3Q 
2021 and US$62 per tonne in 4Q 2021, 
ending the year at a level last seen in August 
2020, back when prices originally began 
to rise.

The decline in fines pricing seen in the 
second half of 2021 was primarily related to 
government policies enacted in China to 
taper markets, and was therefore a 
controlled measure, which was widely 
anticipated by market participants. With 
China accounting for 73% of global iron ore 
imports in 20211, Chinese demand is the 
primary driver for iron ore fines prices. 
Reviewing the market in 2021, Chinese steel 
production averaged 94 million tonnes a 
month in the first half of 2021, representing 
12% growth year on year and a record level 
of steel production, with strong demand for 
iron ore during this period. Following 
measures enacted by the Chinese 
government from July 2021 onwards, 
Chinese steel output fell to 78 million tonnes 
a month in the second half of 2021, 
representing a 17% decline on the first half 
of 2021, and demand for iron ore softened 
as a result. Chinese steel production cuts 
enacted in the summer of 2021 were 
originally announced as early as 2020, as 
part of Beijing’s decarbonisation policy 
announced at the time, with environmental 

)

e
n
n
o
t
/
$
S
U

(

e
c

i
r
p

x
e
d
n

I

300

250

200

150

100

50

0

Jan 21

Feb 21

Mar 21 Apr 21 May 21

Jun 21

Jul 21 Aug 21 Sep 21 Oct 21 Nov 21

Dec 21

Jan 22

Iron ore (65% Fe) price

C3 freight rate

Atlantic pellet premium

Source: Platts

1.  Source: CRU.

12

Ferrexpo plc Annual Report & Accounts 2021

Image: All of Ferrexpo’s pellets leave 
the Group’s operations via rail, with 
these routes electrified in Ukraine.

STRATEGIC REPORT 
 
The near-term outlook for the iron ore fines 
market and prices in 2022 will depend on 
the level of activity seen in China in early 
2022, following production cuts imposed in 
2021, as well as the degree of stockpile 
drawdown that is seen with steel inventories 
that have accumulated. If a strong recovery 
in Chinese demand continues beyond 2Q 
2022, then it is expected that the iron ore 
fines market is likely to become constrained, 
which would potentially provide a tailwind to 
iron ore fines prices. 

High grade premiums

High grade premiums are the additional 
prices paid for material that is high grade 
(65% Fe or above), with this premium 
averaging US$26 per tonne in 2021 (2020: 
US$13 per tonne). As the world seeks to 
decarbonise, steelmakers are increasingly 
looking to source higher grade iron ores to 
reduce their emissions footprints. For more 
information on the environmental benefits of 
high grade iron ores, please see the Case 
Study on page 14. This trend is shown 
through the premiums paid for high grade 
iron ore fines, with quarterly average 
premiums climbing consistently throughout 
2021, as shown in the chart opposite. 

FULL YEAR MARKET INDICES 2021

(US$/tonne, unless stated otherwise, and represent full year averages)

Platts 62% Fe iron ore fines price CFR China

Platts 65% Fe iron ore fines price CFR China

65% Fe spread over 62% Fe

Atlantic pellet premium (BF pellet)

China pellet premium (BF pellet)

Direct reduction (“DR”) pellet premium

DR premium over Atlantic premium

C3 freight (Brazil – China)

C2 freight (Brazil – Netherlands)

2021

160

186

26

56

52

61

5

27

16

2020

109

122

13

29

22

36

7

15

7

Change

+47%

+53%

+96%

+92%

+139%

+67%

-28%

+81%

+135%

Global steel production (million tonnes)1

1,912

1,829

+4%

1.  Source: World Steel Association (64 producing countries, representing 98% total world crude steel production in 2021).
2.  Management estimate.

CHART: PREMIUMS PAID FOR HIGH 
GRADE IRON ORES (65% FE)

Premium paid for high grade (% of 62% Fe Index)

12%

15%

16%

17%

18%

2020

1Q21

2Q21

3Q21

4Q21

The outlook for the high grade premium is 
expected to remain positive going forward 
on the basis of steelmakers increasingly 
looking to reduce emissions, with specific 
markets – particularly Europe – expected to 
drive demand for these ore types faster than 
other regions, based on aggressive 
decarbonisation policies currently being 
adopted by key European governments and 
the European Commission. An example of 
such a policy change is the European 
Union’s Carbon Border Adjustment 
Mechanism (“CBAM”), which was 
announced in 2020 and will be gradually 
implemented between 2022 and 2025. The 
CBAM envisages a tariff applied to specific 
goods produced outside of the European 
Union (“EU”), to account for the cost of 
carbon. This legislation is designed to 
strengthen key industries in Europe, such as 
the steel industry, particularly as this 
industry faces rising costs associated with 
climate change. The Group believes that any 

measure designed to strengthen the 
European steel industry will improve the 
purchasing power of European steelmakers 
to purchase a greater degree of premium 
raw materials, such as high grade iron ore 
pellets, and will therefore drive greater 
demand for the Group’s products.

Pellet premiums

The pellet premium is a premium applied to 
all pellet sales, and is paid above the Platts 
65% Fe Index for Ferrexpo’s pellets. The 
Atlantic pellet premium in 2021 followed a 
similar trend to the iron ore fines indices 
during the year. In the first half of the year, 
this pellet premium rose as steelmakers 
worldwide looked to maximise steel output 
and take advantage of high steel prices. 
Subsequently, the Atlantic pellet premium 
fell in the second half of 2021, but did not 
fall to the same extent as iron ore fines 
prices, declining from the highs of US$78 
per tonne seen in the summer months of 
2021 to close the year at US$56 per tonne. 
This differing dynamic compared to the iron 
ore fines price is a reflection of the pellet 
market being governed by buying in 
different geographic regions – namely steel 
production in Europe and North East Asia, 
which collectively account for more than 
40% of the global trade in iron ore pellets2. 
Demand for iron ore pellets is therefore 
more aligned to the health of the steel 
sector in these two regions, as well as 
overall pace of decarbonisation 
seen globally.

Global iron ore pellet exports amounted to 
approximately 127 million tonnes in 2021, 
reflecting a contraction of 1 million tonnes 
versus 20202. The main driver for the 
decrease in supply seen in 2021 came from 

Ferrexpo plc Annual Report & Accounts 2021

13

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
Market Review continued

lower exports from producers in Brazil, 
India and the USA, balanced in part by 
a returning producer in Brazil1. Within 
this total, blast furnace pellet exports 
contracted by 6 million tonnes during 2021 
(representing a 7% reduction), with supply 
of direct reduction pellets growing by 
4 million tonnes (10% increase)1. This 
relative stability in the supply of iron ore 
pellets is a reflection of the difficulties faced 
by companies looking to introduce new 
supply of pellets into the market, since 
new supply requires significant capital 
investment to commence operations and 
the relative scarcity of deposits relevant 
for pelletising operations that have good 
access to existing infrastructure. 

Demand for iron ore pellets in 2022 has been 
strong in European markets following 
Russia’s invasion of Ukraine, with iron ore 
from Russia subject to trade restrictions. 
Furthermore, pellet demand is expected to 
increase globally in response to increasing 
environmental controls. As referenced on 
page 13, the introduction of the European 
Union’s CBAM regulations is expected to 
strengthen the European steel sector in the 
medium term, and as a result will increase 
the ability of EU steelmakers to purchase 
premium products for steelmaking such as 
iron ore pellets. The global supply of iron ore 
pellets today is relatively constrained, with 
the majority of existing suppliers operating at 
(or near to) full capacity, particularly following 
the recent completion of the ramp up of 
Samarco, a Brazilian pellet supplier, which 
had previously halted production following 
a tailings dam breach in 2015.

Freight rates

The Baltic Exchange’s C3 freight rate, which 
is indicative for the Group’s overall freight 
costs, increased significantly in 2021 to 
US$27 per tonne. This increase was due in 
part to the market imbalance seen in early 
2021 that was created by the global 
Covid-19 pandemic, with reduced dry bulk 
shipments from Brazil, resulting in fewer 
vessels entering the Atlantic basin to receive 
cargoes. Secondly, increasing fuel prices in 
the second half of the year resulted in a 
sharp increase in freight rates, peaking at 
an average of US$41 per tonne in October 
2021, before retreating back to US$26 per 
tonne by the end of the year. Freight rates 
are a further example of the volatility seen 
in 2021 and how this contrasts to previous 
years. In contrast, the average C3 freight 
rate for the past five years has varied by 
just1 US$4 between US$15 and US$19, 
whilst the average for 2021 rose by 
US$12 to U$27 per tonne. 

In terms of the near-term outlook for freight 
rates, the forward curve for C3 freight rates 
indicates that the index in 2022 will fall 
below the high levels seen in 2021, but will 
remain above the historical averages seen 
in previous years, reflecting increased 
energy costs.

Steel production

Global steel production, according to the 
World Steel Association, increased by 4% in 
2021 compared to 2020, which also reflects 
a rise above 2019 levels, indicating the strong 
return to growth as governments worldwide 
continue to respond to the global Covid-19 
pandemic. During 2021, the majority of this 
growth in global steel production occurred 
during the first half of the year, which was 
15% up year on year, whereas the second 
half of 2021 saw a 5% contraction year on 
year in global crude steel output. This trend 
was driven by Chinese output, where 
production increased by 13% year on year in 
the first half and then contracted by 15% 
year on year in the second half, ending the 
year below the total output for 2020. The 
European steel sector has continued its 
strong recovery in 2021, growing by 20% 
in the first half and a further 10% in the 
second half of the year. North East Asia, 
another key market for global iron ore pellet 
exports, exhibited a similar trend to Europe 
in 2021, growing by 11% in both halves 
of 2021.

Based on data presented by independent 
consultants CRU, it is expected that the 
global outlook for hot metal production is 
set to peak in 2021 (relevant data on this 
topic to be published in 2022), with global 
levels of output expected to remain above 
1,400 million tonnes between 2022 and 
2025. It is expected that the share of steel 
production from electric arc furnaces will 
grow from 27% of global crude steel 
production in 2021 to 31% in 2025.

Steel pricing

The Group closely monitors the margins 
being made by steelmakers as a lead 
indicator of possible future movements in 
the demand for iron ore, with the margin for 
hot rolled coil (“HRC”) used as an indicator 
of this. Margins for HRC remained positive 
throughout 2021, with steel prices remaining 
elevated despite the fall in raw materials 
costs seen in the second half of 2021. 

The Group expects global steel output to 
rise in 2022, on the basis of steel margins 
remaining at elevated levels at the present 
time, with steelmakers increasing output to 
meet rising global demand for steel.

CASE STUDY:

THE IMPORTANCE OF HIGH 
GRADE IRON ORES

In iron ore, grade is key. For commercially 
available iron ores, which are predominantly 
hematite, the maximum iron content is 70%, 
with the remaining 30% being oxygen (as 
part of the iron oxide that iron ores are 
predominantly comprised of). Benchmark 
iron ores grading 62% Fe are therefore 62% 
iron, the oxygen as part of the iron oxide 
molecule, and a component of waste that 
represents approximately 11% of this 
material. For low grade ores (58% Fe), the 
proportion of waste material contained is 
higher – approximately 17% of the total 
mass of material being sold. Ferrexpo’s 
products are high grade and therefore 
contain between 4% and 7% waste 
material, and as a result contain up to four 
times less waste than competitors’ iron 
ores. This is important, as it is the waste in 
the ore that steelmakers must supply energy 
to remove when making steel, with ores that 
contain more waste requiring more energy 
to process. In the blast furnace, this energy 
is typically provided by coal, whereas in the 
direct reduction process this energy comes 
from either natural gas or electricity. High 
grade ores are therefore a tool available to 
steelmakers to reduce emissions today.

Iron content (% Fe)

17%

11%

7%

4%

58%

62%

65%

67%

Low
grade

Medium
grade

High
grade

DR
grade

Iron content

Waste

Pure iron ore (70% Fe)

14

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT 
 
Future trends: Green Steel

A clear trend within the steel sector is 
decarbonisation, with many of the world’s 
governments pledging to achieve net zero 
carbon emissions by either 2050 or 2060. 
Governments are also setting medium-term 
targets to establish a trajectory for 
emissions reduction – typically a 30% 
reduction by 2030. The European Union is 
working towards its “Fit for 55” plan 
announced in July 2021, which is a 
legislative process aimed at delivering a 
55% reduction in carbon emissions by 2030 
against a baseline year of 1990. Given 
Ferrexpo’s close proximity to European 
steelmakers, this provides the Group with a 
significant opportunity, since iron ore pellets 
enable steelmakers to reduce emissions 
through greater use of direct charge 
material in their blast furnaces. For more 
information on the environmental benefits of 
pellets, please see the Case Study on page 
10. This shift towards iron ore pellets is 
mirrored in data presented by independent 
consultants CRU, who forecast that global 
iron ore pellet consumption will increase 
by 15% between 2021 and 2026, whilst 
consumption of iron ore fines is forecast to 
contract by 14% during this same period.

Over time, the Group also intends to 
increase production of its latest product – 
the higher grade (67% Fe) direct reduction 
pellets, which are typically converted to 
steel using natural gas and then electricity 
in electric arc furnaces. This is in contrast to 
the blast furnace method of steelmaking, 
which typically uses coal as the main fuel to 
produce steel. Through removing coal from 
the steel-production process, steelmakers 
can operate with a significantly lower 
carbon footprint. Direct reduction pellets 
represented 4% of the Group’s production 
in 2021 (2020: 3%), and the Group intends 
to utilise its expansion plans in the medium 
term to increase this proportion of 
production as steelmakers around the 
world decarbonise and demand for this 
pellet type increases.

1.  Management estimate.

CASE STUDY:

THE IMPORTANCE OF 
PROXIMITY TO KEY MARKETS

In a global world that is facing up to the 
journey of decarbonisation that lies ahead, 
consumers are looking increasingly for 
supplies of goods and services to come 
from local sources. With assets based in 
Ukraine, Ferrexpo is well positioned 
geographically to supply the steel sector in 
both Europe and the Middle East, with 
Ferrexpo’s peers in Brazil, Canada and 
South Africa located further away from 
these key markets. Ferrexpo is able to 
supply customers in Europe via rail, barge 
or ocean-going vessel. The Middle East 
represents the single biggest market for 
direct reduction pellets today, and with 
Europe rapidly decarbonising, this is 
expected to significantly increase pellet 
demand for this pellet type in the future 
as steelmakers seek to adapt their 
production processes.

In a world where ocean-going freight 
contributed as much to Ferrexpo’s total 
emissions as emissions from mining in 2021, 
the distance to markets matters.

to reach key European steel mills, 
representing an additional 
4,000km.

3X  The distance for Canadian iron ore 
5X  The distance for Brazilian iron ore 
6X  The distance for South African iron 

to reach key European steel mills, 
representing an additional 
8,000km.

ore to reach key European steel 
mills, representing an additional 
10,000km.

Image: Ferrexpo has operations 
for delivering pellets via the 
River Danube, providing flexibility 
in the Group’s logistics network.

Ferrexpo plc Annual Report & Accounts 2021

15

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSBusiness Model
GENERATING SUSTAINABLE VALUE

KEY STRENGTHS

COMMERCIAL AND OPERATING MODEL

Long life assets

The Group has 1.6 billion 
tonnes of Ore Reserves, 
representing over 50 years of 
production ahead at current 
processing rates.

Established production 
and logistics

The Group’s assets have 
been supplying the global 
steel industry with pellets 
for more than 50 years.

Ability to produce 
premium products 

Ferrexpo produces high 
grade iron ore pellets, a 
premium form of iron ore for 
steelmakers. The Group has 
commenced production of 
direct reduction pellets, the 
highest grade commercially 
available form of iron ore.

Premium  
customer service 

Ferrexpo has an established 
network of customers, 
spread across four 
continents, which use 
pellets to produce high 
grade forms of steel.

Ability to scale and  
grow operations

Ferrexpo has invested 
over US$3.0 billion in its 
operation since IPO, growing 
production by 25%. The 
Group’s Wave 1 Expansion 
plan will see production grow 
by a further 25% (see page 
28 for more information).

CORE ASSETS

Ferrexpo aims to deliver its business model 

through a safety-first operating model, 

instilling a culture of safety throughout its 

business to deliver successful operating 

and financial performance.

PEOPLE
Ferrexpo has a workforce of over 10,000 
people, and aims to continually train and 
develop those that work for the Group.

DEPOSITS
Ferrexpo mines and processes iron ore 
from the deposits along the Kremenchuk 
Magnetic Anomaly, a globally significant 
ore body in scale.

OPERATIONS

Ferrexpo has three mines, two of which 

were developed by the Group since IPO, 

and also operates a processing complex 

and logistics network.

HIGH GRADE PELLET 
PRODUCTION

PREMIUM 
CUSTOMER BASE

FINANCIAL 
RESILIENCE

PRUDENT CAPITAL 
ALLOCATION

Ferrexpo produces high grade iron ore 

pellets, which are a premium raw material 

used by steelmakers to increase 

productivity and reduce emissions. 

The Group’s products carry an iron 

ore grade of either 65% or 67% Fe.

Through developing increasingly high 

quality, high grade products, the Group 

is able to market its products to an 

increasing range of premium steelmakers.

By focusing on higher quality, higher 

grade forms of iron ore, and selling these 

products to premium steelmakers, the 

Group can realise higher margins on its 

products, providing financial resilience.

Through establishing a cash generative 

and cost competitive business model, the 

Group is able to deploy capital effectively 

for the benefit of all stakeholders, 

balancing investment in future growth 

and shareholder returns.

UNDERPINNED BY OUR VALUES

Responsibility

 See p30-44

Make it happen

 See p8-10

Integrity

 See p44-45

16

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTCOMMERCIAL AND OPERATING MODEL

STAKEHOLDER BENEFITS (US$)

CORE ASSETS

Ferrexpo aims to deliver its business model 
through a safety-first operating model, 
instilling a culture of safety throughout its 
business to deliver successful operating 
and financial performance.

PEOPLE

DEPOSITS

Ferrexpo has a workforce of over 10,000 

Ferrexpo mines and processes iron ore 

people, and aims to continually train and 

from the deposits along the Kremenchuk 

develop those that work for the Group.

Magnetic Anomaly, a globally significant 

ore body in scale.

OPERATIONS
Ferrexpo has three mines, two of which 
were developed by the Group since IPO, 
and also operates a processing complex 
and logistics network.

HIGH GRADE PELLET 

PRODUCTION

PREMIUM 

CUSTOMER BASE

FINANCIAL 

RESILIENCE

PRUDENT CAPITAL 

ALLOCATION

Ferrexpo produces high grade iron ore 
pellets, which are a premium raw material 
used by steelmakers to increase 
productivity and reduce emissions. 
The Group’s products carry an iron 
ore grade of either 65% or 67% Fe.

Through developing increasingly high 
quality, high grade products, the Group 
is able to market its products to an 
increasing range of premium steelmakers.

By focusing on higher quality, higher 
grade forms of iron ore, and selling these 
products to premium steelmakers, the 
Group can realise higher margins on its 
products, providing financial resilience.

Through establishing a cash generative 
and cost competitive business model, the 
Group is able to deploy capital effectively 
for the benefit of all stakeholders, 
balancing investment in future growth 
and shareholder returns.

Employees

Environment

US$113M

(2%)
Wages and salaries paid 
(2020: US$114M) 

US$19M

+10%
Money spent to safeguard  
the environment  
(2020: US$17M)

Customers

Government

US$2.5BN

+48%
Revenue generated 
(2020: US$1.7BN)

US$281M

+180%
Taxes and royalties paid 
(2020: US$100M)

Suppliers

Investors

US$1.2BN

+33%
Suppliers of goods  
and services 
(2020: US$876M)

US$619M

+217%
Shareholder returns  
(2020: US$195M) 

Communities

Capital providers

US$6M

+11%
Donations through  
Ferrexpo Charity Fund  
(2020: US$6M)

US$221M

+49%
Debt repayments  
and interest  
(2020: US$148M)

T
N
E
M
P
O
L
E
V
E
D

R
E
H
T
R
U
F

R
O
F

T
N
E
M
T
S
E
V
N
I
E
R

UNDERPINNED BY OUR VALUES

Diversity within one team

Continuous innovation

 See p40-41

 See p28-29

Ferrexpo plc Annual Report & Accounts 2021

17

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
 
Strategic Framework
GENERATING ATTRACTIVE 
SUSTAINABLE RETURNS

The Group’s purpose is to maximise the value it generates for stakeholders 
through its operations in Ukraine and global footprint, producing and 
marketing the highest quality iron ore pellets to the Group’s network of 
premium customers. This is achieved in tandem with the adoption of modern 
technologies to deliver production in a safe and sustainable manner.

STRATEGY

GOALS

WHAT WAS ACHIEVED IN 2021

STRATEGIC TARGETS FOR 2022

PRODUCE HIGH 
QUALITY 
PELLETS

LOW COST 
PRODUCTION

–  Expand existing customer 

portfolio with additional high 
quality steelmakers.

–  Develop direct reduction pellet 

offering with trial cargoes shipped 
to potential new customers for 
this product type.

–  Further investments in mining, 
concentrator and pelletiser.

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

SELL TO A WORLD 
CLASS CUSTOMER 
PORTFOLIO

–  Develop relationships with new 
customers for existing blast 
furnace pellet offering.

–  Further work to establish direct 
reduction pellet offering with 
new customers.

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

MAINTAIN 
SOCIAL LICENCE 
TO OPERATE

–  Target zero harm for workforce.
–  Maintain LTIFR safety metric 

below five-year trailing average 
and iron ore producing 
peer group.

–  Continue efforts to improve 

DISCIPLINED 
CAPITAL 
ALLOCATION

productivity and 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 and in line with 
shareholder returns policy.

–  Group’s position maintained as third 

–  Secured first long-term contract for 

–  Maintain production during Russian 

largest global exporter of iron ore 

DR pellets.

invasion of Ukraine, where possible.

pellets, producing 11.2Mt of pellets 

–  Commenced sales of commercial 

–  Further develop new product offering.

in 2021 (2020: 11.2Mt).

concentrate.

–  Maintain sales under long-term contract.

–  Enhance understanding of DR 

pellet markets.

– 

Increased proportion of high grade 

products to 100% (2020: 99%).

– 

Increasing grade: direct reduction pellets 

representing 4% of total production 

in 2021 (2020: 3%).

–  C1 cash cost of productionA increased 

–  Consumption rate of natural gas, a key 

–  Maintain position as a low cost iron ore 

by 34% to US$55.8 per tonne, reflecting 

consumable in the pelletiser operations, 

producer on global C1 cost curve.

commodity input costs.

increased by 16% in 2021, reflecting trials 

–  The Group maintains a low cost position 

of higher grade direct reduction pellets.

on the global cost curve of iron ore 

–  Consumption rate of electricity, 

producers, as assessed by independent 

predominantly applicable to processing, 

consultants CRU (see page 25).

–  Diesel consumption rate per tonne 

rose by 1% in 2021, reflecting 

increased processing to achieve 

mined fell by 7% in 2021, reflecting 

higher grade products.

improved productivity.

–  Pivot of sales back to Europe following 

–  Continue discussions with existing 

–  Effective and clear communication 

peak of global Covid-19 pandemic, 

returning to historic market balance.

customer network, to optimise pellet mix 

with customers during Russian invasion 

with customer requirements, particularly 

of Ukraine.

–  Secured first long-term contract for 

as customers seek to accelerate 

–  Maintain existing portfolio of premium 

direct reduction pellets.

decarbonisation plans.

customers.

–  Developed new relationships for new 

products (direct reduction pellets and 

commercial concentrate).

–  Maintain high proportion of sales under 

long-term contract.

–  Add additional premium customers in 

target markets (Europe and DR markets).

–  Maintained a safe operating environment 

–  Further 16% reduction in carbon footprint 

–  Protect workforce during Russian 

with zero fatalities, and LTIFR of 0.41 

at operations (direct and indirect) in 2021, 

invasion of Ukraine.

in 2021, representing performance 

matching reduction from 2020.

–  Maintain strong safety record.

materially below five-year trailing 

average for third successive year.

–  Emissions targets set in 2021, with the 

–  Continue to reduce carbon footprint 

Group achieving its 30% reduction 

(Scopes 1, 2 and 3).

–  UAH 153 million invested in communities 

against the baseline year (2019) and goal 

–  Promote diversity in the workplace.

through Ferrexpo Charity Fund in 2021, 

of net zero emissions by 2050.

–  Continue to deliver value to communities.

which celebrated its tenth anniversary 

–  “Fe_munity” women in leadership 

since inception in March 2021.

programme, for advancing careers 

of female employees. 

–  Maintained strong balance sheet, 

–  Published shareholder returns policy in 

– 

Invest in the Group’s assets for growth.

with net cash position as at 

November 2021, targeting returns based 

–  Continue the Group’s balanced approach 

31 December 2021 of US$117 million 

on free cash flow of the Group, to 

to stakeholders.

(2020: US$4 million).

maintain ability to invest in operations. 

–  Maintain a strong balance sheet.

–  Repaid pre-export finance debt facility, 

–  To date, the Group has paid dividends 

de-risking business.

amounting to the equivalent 37% of 

–  Balanced capital allocation in 2021, 

free cash flow in respect of 2021.

increasing capital investmentA by 75% 

to US$361 million (33% of operating 

cash flow) and shareholder returns 

(57% of operating cash flow).

18

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTUNDERPINNED BY OUR VALUES

Responsibility

Integrity

Continuous innovation

Safety first, environmental responsibility, 
accountable to communities. 

Delivering high ethical standards and 
delivering on commitments. Accountability. 

Embracing change. Courage to improve and 
accepting new thinking. 

 See p30-44

 See p44-45

 See p28-29

Make it happen

Diversity within one team

Focused efforts to deliver superior business 
results, achieved through an engaged 
workforce. 

Valuing difference in opinions and 
backgrounds. Building collective strength. 

 See p40-41

 See p8-10

STRATEGY

GOALS

WHAT WAS ACHIEVED IN 2021

STRATEGIC TARGETS FOR 2022

–  Group’s position maintained as third 
largest global exporter of iron ore 
pellets, producing 11.2Mt of pellets 
in 2021 (2020: 11.2Mt).
Increased proportion of high grade 
products to 100% (2020: 99%).
Increasing grade: direct reduction pellets 
representing 4% of total production 
in 2021 (2020: 3%).

– 

– 

–  Secured first long-term contract for 

DR pellets.

–  Commenced sales of commercial 

concentrate.

–  Maintain production during Russian 
invasion of Ukraine, where possible.
–  Further develop new product offering.
–  Maintain sales under long-term contract.
–  Enhance understanding of DR 

pellet markets.

–  C1 cash cost of productionA increased 

–  Consumption rate of natural gas, a key 

–  Maintain position as a low cost iron ore 

by 34% to US$55.8 per tonne, reflecting 
commodity input costs.

–  The Group maintains a low cost position 

on the global cost curve of iron ore 
producers, as assessed by independent 
consultants CRU (see page 25).
–  Diesel consumption rate per tonne 
mined fell by 7% in 2021, reflecting 
improved productivity.

–  Pivot of sales back to Europe following 
peak of global Covid-19 pandemic, 
returning to historic market balance.
–  Secured first long-term contract for 

direct reduction pellets.

–  Developed new relationships for new 
products (direct reduction pellets and 
commercial concentrate).

producer on global C1 cost curve.

consumable in the pelletiser operations, 
increased by 16% in 2021, reflecting trials 
of higher grade direct reduction pellets.

–  Consumption rate of electricity, 

predominantly applicable to processing, 
rose by 1% in 2021, reflecting 
increased processing to achieve 
higher grade products.

–  Continue discussions with existing 

–  Effective and clear communication 

customer network, to optimise pellet mix 
with customer requirements, particularly 
as customers seek to accelerate 
decarbonisation plans.

–  Maintained a safe operating environment 
with zero fatalities, and LTIFR of 0.41 
in 2021, representing performance 
materially below five-year trailing 
average for third successive year.

–  UAH 153 million invested in communities 
through Ferrexpo Charity Fund in 2021, 
which celebrated its tenth anniversary 
since inception in March 2021.

–  Further 16% reduction in carbon footprint 
at operations (direct and indirect) in 2021, 
matching reduction from 2020.

–  Emissions targets set in 2021, with the 
Group achieving its 30% reduction 
against the baseline year (2019) and goal 
of net zero emissions by 2050.
–  “Fe_munity” women in leadership 
programme, for advancing careers 
of female employees. 

–  Maintained strong balance sheet, 

–  Published shareholder returns policy in 

with net cash position as at 
31 December 2021 of US$117 million 
(2020: US$4 million).

–  Repaid pre-export finance debt facility, 

de-risking business.

–  Balanced capital allocation in 2021, 

increasing capital investmentA by 75% 
to US$361 million (33% of operating 
cash flow) and shareholder returns 
(57% of operating cash flow).

November 2021, targeting returns based 
on free cash flow of the Group, to 
maintain ability to invest in operations. 
–  To date, the Group has paid dividends 
amounting to the equivalent 37% of 
free cash flow in respect of 2021.

with customers during Russian invasion 
of Ukraine.

–  Maintain existing portfolio of premium 

customers.

–  Maintain high proportion of sales under 

long-term contract.

–  Add additional premium customers in 

target markets (Europe and DR markets).

–  Protect workforce during Russian 

invasion of Ukraine.

–  Maintain strong safety record.
–  Continue to reduce carbon footprint 

(Scopes 1, 2 and 3).

–  Promote diversity in the workplace.
–  Continue to deliver value to communities.

Invest in the Group’s assets for growth.
– 
–  Continue the Group’s balanced approach 

to stakeholders.

–  Maintain a strong balance sheet.

Ferrexpo plc Annual Report & Accounts 2021

19

PRODUCE HIGH 

–  Expand existing customer 

portfolio with additional high 

QUALITY 

PELLETS

LOW COST 

PRODUCTION

quality steelmakers.

–  Develop direct reduction pellet 

offering with trial cargoes shipped 

to potential new customers for 

this product type.

–  Further investments in mining, 

concentrator and pelletiser.

–  Target further cost reduction 

initiatives through disciplined 

cost control and further 

dilution of fixed costs through 

production increases.

SELL TO A WORLD 

CLASS CUSTOMER 

PORTFOLIO

MAINTAIN 

SOCIAL LICENCE 

TO OPERATE

DISCIPLINED 

CAPITAL 

ALLOCATION

–  Develop relationships with new 

customers for existing blast 

furnace pellet offering.

–  Further work to establish direct 

reduction pellet offering with 

new customers.

–  Establish presence in selling high 

grade concentrate, either through 

synergies with existing customers 

or through new relationships.

–  Target zero harm for workforce.

–  Maintain LTIFR safety metric 

below five-year trailing average 

and iron ore producing 

peer group.

–  Continue efforts to improve 

productivity and 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 and in line with 

shareholder returns policy.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSKey Performance Indicators
MEASURING OUR 
PERFORMANCE

 See pages 207 to 209 for 
a reconciliation of Alternative 
Performance Measures to the 
IFRS equivalent.

FINANCIAL KEY PERFORMANCE INDICATORS (“KPIs”)

Underlying EBITDAA

US$1,439M

Profit after tax

US$871M

2021

2020

2019

US$1,439m

US$859m

US$503m

2021

2020

2019

US$871m

US$635m

US$403m

Underlying EBITDA A represents 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 A 
measures the Group’s ability to generate cash as well as 
providing a useful measure of operating performance 
excluding certain non-cash items. In 2021, Underlying 
EBITDA A increased by 68% to US$1,439 million, 
reflecting increased commodity pricing.

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 2021, profit 
for the year was 37% higher at US$871 million, reflecting 
increased commodity pricing.

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

Net Cash/(Debt)A

US$117M

Net cash flow from operating activities

US$1,093M

2021

2020

2019

US$117m

US$4m

(US$281m)

2021

2020

2019

US$1,093m

US$687m

US$473m

Ferrexpo uses its net cash/(debt) position as an indicator 
of the relative level of indebtedness of the Group and 
therefore the overall strength of the Group’s balance. 
As of the end of 2021, the Group continues to be in a net 
cash position, reflecting the strong performance of the 
Group in recent years.

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

Net cash flow from operating activities represents the 
cash flow generation ability of the Group, and indicates 
the level of cash flow available for investments, returns 
to shareholders and debt reduction. In 2021, net cash 
flow from operating activities increased by 59% to 
US$1,093 million, reflecting higher realised pellet pricing 
and increased product quality.

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

20

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT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.

Production volumes

11.2MT

0.41

0.79

0.58

2021

2020

2019

11.2MT

11.2MT

10.5MT

NON-FINANCIAL KEY PERFORMANCE INDICATORS (“KPIs”)

Lost time injury frequency rate (“LTIFR”)

0.41

2021

2020

2019

It is the Group’s highest priority to ensure its workforce 
operates in a safe environment and is trained in safe 
working practices. The LTIFR is an industry standard 
measurement and an important indicator of how safe the 
work environment is. The Group’s LTIFR in 2021 was 
0.41, representing the third successive year that this 
metric is materially below the Group’s five-year trailing 
average (0.98).

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 2021, production 
was in line with 2020 as a result of the completion of 
several projects to upgrade capacity in the Group’s 
pelletiser in Ukraine.

Link to strategy: 1, 2, 3 & 5

C1 cash costs of productionA

US$55.8/T

Sales volume by region

2019

2020

2021

2021

2020

2019

US$55.8/T

US$41.5/T

US$47.8/T

The C1 cash cost of productionA is the cost of 
production processes to the factory gate, divided by 
production. This is an industry standard measurement 
and assesses Ferrexpo’s relative competitiveness 
compared to other pellet producers. In 2021, Ferrexpo’s 
C1 cash cost of productionA increased by 34% to 
US$55.8 per tonne, reflecting higher energy costs.

Link to strategy: 2 & 5

Region

2021 2020 2019

 Europe, including Turkey (BF pellet)

58% 36% 56%

 North East Asia (BF pellet market)

8% 5% 16%

 China & South East Asia (BF pellet market)

30% 56% 28%

  Middle East & North Africa 
(DR pellet market)

0.4% 0% 0%

 North America (DR pellet market)

3% 2% 0%

Ferrexpo believes it is important to have a diversified 
customer base to be able to withstand periods of 
volatility in specific regions. In 2021, the Group saw a 
gradual return to historic balance of market demand for 
its products, following the initial peak of the global 
Covid-19 pandemic, which resulted in a temporary pivot 
in sales towards China in 2020.

Link to strategy: 3 & 5

Ferrexpo plc Annual Report & Accounts 2021

21

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
Financial Review
DELIVERING VALUE 
THROUGH INVESTMENT
Through investment in high grade iron ore products, 
the Group has been able to maintain its position as 
a high margin business, further enabling the Group 
to continue its strategy of investing for future 
growth and returns.

REVENUE

+48%

Increase in revenues, reflecting strong 
demand for the Group’s high grade iron ore 
product portfolio.

UNDERLYING EBITDAA MARGIN

%
57 

Investing in high grade iron ore delivers 
strong Underlying EBITDA A margin 
(2020: 50%).

INVESTING FOR GROWTH

%
+75 

Investing for future growth with capital 
investmentA of US$361 million  
in 2021 (2020: US$206 million).

Summary

Through rising pellet quality and strong 
market demand for high grade, premium 
forms of iron ore such as pellets, the Group 
saw revenues in 2021 increase by 48% to 
US$2.5 billion and Underlying EBITDA A 
increase by 68% to US$1,439 million 
(2020: US$859 million), maintaining the 
Group’s position as a high margin business. 
The Group has maintained its balanced 
approach to capital allocation, with capital 
investmentA rising by 75% to US$361 
million. The Group realised a net operating 
profit after tax of US$871 million in 2021 
(2020: US$635 million) following the 
accounting of an impairment loss of 
US$231 million as at 31 December 2021.

Revenue

Group revenues increased in 2021 by 48%, 
relating to increases in commodity pricing 
seen during the year – principally iron ore 
prices, premiums for high grade materials 

Image: Nikolay Kladiev, appointed Group 
Chief Financial Officer in August 2021. 

and pellet premiums. Total sales for the 
period fell by 6%, reflecting the de-stocking 
process that was conducted in 2020 in 
response to the onset of the global Covid-19 
pandemic. Revenues also benefited from 
the increase to 100% high grade iron ore 
products (2020: 99%). For further 
information, please see the Operational 
Review section on pages 26 to 27.

Seaborne freight revenue arising from CFR 
sales increased revenue by US$12 million 
compared to 2020, reflecting the net effect 
from higher freight rates, partially offset by 
lower sales volumes to Asia. Finally, the 
revenues from the Group’s barging and 
bunker operations, First-DDSG Logistics 
Holding, increased by US$4 million in 2021 
compared with 2020 as a result of higher 
freight rates and bunker prices, partially 
offset by a lower volume shipped.

C1 cash cost of productionA 

The Group’s average C1 cash cost of 
productionA was US$55.8 per tonne in 2021, 
compared with US$41.5 per tonne in 2020, 
with this increase in the Group’s cost base 
relating to a global rise in commodity input 
prices, which applies to approximately 50% 
of the Group’s cost base.

In the first half of 2021, global commodity 
prices rose as global economies 
experienced a recovery from the financial 
effects of the global Covid-19 pandemic. 
Following this rise in the first half of 2021, 
global energy prices rose further due to a 
tightness in the supply of crude oil, following 
production cuts announced in late 2020 by 
OPEC nations. Consequently, oil prices rose 
from US$55 per barrel in January 2021 to a 
peak of US$84 per barrel in October 2021, 
representing a rise of more than 50%, 
before retreating during the fourth quarter1. 

22

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTKEY FINANCIAL PERFORMANCE INDICATORS

UKRAINIAN HRYVNIA VS. US DOLLAR2

US$ million (unless stated otherwise)

Total pellet production (kt)

Sales volumes (kt)

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

Revenue

C1 cash cost of productionA (US$/t)

Underlying EBITDA A

Underlying EBITDA A margin

Debt servicing

Capital investmentA

Closing net cash

2021

2020

Change

UAH per US$

11,220

11,350

186

2,518

55.8

1,439

57%

215

361

117

11,218

+0.02%

12,062

122

1,700

41.5

859

50%

146

206

-6%

+53%

+48%

+34%

+68%

+7pp

+47%

+75%

4

+3,215%

Spot 20.04.22
29.255 

Opening rate 01.01.21
28.275

Closing rate 31.12.21
27.278

Average 2021
27.286

Average 2020
26.958

The Group pays royalties on the extraction 
and sale of iron ore products to the 
Ukrainian government, with this royalty 
regime updated in late 2021. This new 
royalty regime, which came into force in 
January 2022, includes a royalty payment 
based on the spot iron ore (62% Fe) fines 
price, with no reference to pellet premiums 
or freight rates, which is structured as 
follows: (1) at monthly iron ore prices (62% 
Fe) less than or equal to US$100 per tonne, 
a royalty rate of 3.5% will apply to iron ore 
product sales, (2) at prices less than or 
equal to US$200 per tonne a royalty rate 
of 5% will apply and (3) at prices above 
US$200 per tonne a 10% royalty rate will 
apply. Royalties are not tiered and therefore 
the rate applied will apply to the full price 
of the iron ore product being sold. This 
compares to the previous iron ore royalty 
calculation whereby the Group paid a flat 
royalty rate of approximately US$3.5 per 
tonne of all tonnes sold.

In line with previous years, the Group’s C1 
cash cost of productionA 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 
Measures (“APM”). For further information, 
please see pages 207 to 209.

Selling and distribution costs

Total selling and distribution costs were 
US$340 million in 2021 (2020: US$309 
million), reflecting an increase in freight 
rates, offset by a decrease in sales to Asia. 
As a result, international freight costs 

arising from CFR sales increased by 
US$36 million compared to 2020.

General and administrative expenses

The general, administrative and other 
expense in 2021 was US$72 million 
(2020: US$62 million), with this increase 
mainly due to higher consulting fees related 
to the business improvement projects and 
personnel expenses in Ukraine linked to 
local inflation.

Currency

Ferrexpo prepares its accounts in US 
dollars. The functional currency of the 
Group’s operations in Ukraine is the 
Ukrainian hryvnia, which has historically 
represented approximately half of the 
Group’s operating costs. In 2021, the 
hryvnia appreciated by 4% from UAH 
28.275 per US dollar on 1 January 2021 
to UAH 27.278 per US dollar as of 
31 December 2021. For further information, 
please see section on C1 cash cost of 
productionA on page 22 and Case Study 
on page 25.

Local balances as of 31 December 2021 
are converted into the Group’s reporting 
currency at the prevailing exchange rate. 
The appreciation of the hryvnia resulted in 
a US$79 million increase in net assets in 
2021 (2020: decrease of US$301 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, an 
appreciation of the hryvnia against the 
US dollar results in foreign exchange loss 
on the Group’s Ukrainian subsidiaries’ 

US dollar denominated receivable balances 
(from the sale of pellets). The operating 
foreign exchange loss in 2021 was US$38 
million compared to a gain of US$61 million 
in 2020 when the hryvnia depreciated.

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 
denominated loans (at the Group’s barging 
facility) into the functional currency of the 
respective Group’s subsidiary. In 2021, the 
Group recorded a non-operating foreign 
exchange loss of US$3 million (2020: gain 
of US$5 million), which was driven by a 4% 
appreciation of the hryvnia during the year 
against the US dollar, as well as fluctuations 
in the euro/US dollar exchange rate. For 
further information, please see Note 9 
Foreign exchange gains and losses to the 
Consolidated Financial Statements. 

Underlying EBITDA A

Underlying EBITDA A in 2021 increased by 
68% to US$1,439 million, with this increase 
reflecting a balance of positive factors, 
including the 53% increase seen in iron ore 
fines prices, a 92% increase in the Platts 
Atlantic pellet premium, balanced by 
negative factors such as a 6% decrease in 
sales volumes, 34% increase in C1 cash 
costs of productionA and an 81% increase in 
the C3 freight rate. The Group’s Underlying 
EBITDA A for 2021 includes a non-cash 
operating forex loss of US$38 million in 
2021 (2020: non-cash operating forex gain 
of US$61 million).

1.  Source: EIA.
2.  Source: National Bank of Ukraine.

Ferrexpo plc Annual Report & Accounts 2021

23

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFinancial Review continued

Interest

Interest expense on loans and borrowings 
declined by 57% to US$10 million compared 
to US$22 million in 2020, due to a lower 
average outstanding debt balance. The 
average cost of debt was 4.7% for the 
period until the full repayment of the 
Group’s major debt facility in June 2021 
(average 31 December 2020: 5.2%). Further 
details on finance expense are disclosed in 
Note 10 Net finance expense to the 
Consolidated Financial Statements.

Tax

In 2021, the Group’s tax expense was 
US$200 million (2020: US$113 million). 
The effective tax rate for 2021 was 18.7% 
(2020: 15.1%). The increase in the effective 
tax rate was driven by a higher proportion 
of taxable profits in Ukraine and the 
impairment loss, which is not tax deductible. 
In 2021, the Group paid income taxes of 
US$228 million (2020: US$57 million), of 
which US$221 million were paid in Ukraine 
(2020: US$54 million). 

A total of US$29 million of income taxes 
related to 2021 are expected to be paid in 
2022, of which US$21 million in Ukraine. 
Further details on taxation are disclosed 
in Note 11 Taxation to the Consolidated 
Financial Statements.

Items excluded from underlying 
earnings

The Group has recognised an impairment 
charge of US$231 million as at 31 December 
2021, relating to stockpiled low grade ore as 
it cannot reliably predict when this material 
will be processed. Please see Note 17 
Inventories to the Consolidated Financial 
Statements for more information.

Profit for the period

Profit for the period increased 37% to 
US$871 million compared with US$635 
million in 2020, reflecting a 44% increase in 
operating profit (including operating foreign 
exchange effects) and US$3 million lower 
net financial expense and a foreign 
exchange loss of US$38 million compared 
to a foreign exchange gain of US$61 million 
in 2020, in addition to a higher income tax 
expense of US$200 million.

Cash flows

Operating cash flow before working capital 
increased 85% while the working capital 
outflow in 2021 was US$139 million 
compared to an outflow of US$24 million in 
2020. The increase in the working capital 

outflow largely reflects higher balances of 
trade and other receivables, prepayments 
made as of 31 December 2021 and higher 
inventories, which were mainly as a result of 
shipments that slipped into 2022 due to bad 
weather conditions at the Group’s loading 
port at year end.

Following repayment of the Group’s PXF 
Facility in June 2021, the Group no longer 
has a financial covenant restriction over the 
total available distributable profits of the 
Group (noting that any dividend payment 
must still comply with distributable reserve 
requirements under company law). 

As a result of the higher operating cash flow, 
the net cash flow from operating activities 
increased 59% to US$1,094 million in 2021 
(2020: US$687 million). Capital investment 
was US$361 million, an increase of 75% 
compared to 2020 (US$206 million), while 
dividends paid during the 2021 calendar 
year increased by 220% to 105.6 US cents 
compared to 33.0 US cents in 2020.

Capital investmentA

Capital expenditure in 2021 was US$361 
million compared to US$206 million in 2020. 
Of this amount for 2021, sustaining and 
modernisation capex was US$113 million 
(2020: US$103 million), covering activities at 
all of Ferrexpo’s major business units. In 
relation to growth capital investmentA, total 
investment in the Group’s concentrator and 
pelletiser, including the Wave 1 Expansion, 
amounted to US$111 million in 2021 
(2020: US$34.3 million). In addition, FPM 
invested US$34 million on the press filtration 
project, which is set for completion in 2022. 
Further areas of capital investmentA included 
mine stripping and development of US$69 
million in 2021 (2020: US$14 million) and 
US$6 million invested in the infrastructure, 
development and exploration of the 
Bilanivske (Belanovo mine), Galeschynske 
and Northern Deposits (2020: US$6 million). 
For further information on the Group’s 
growth plans, please see pages 28 to 29.

Shareholder returns

In view of Russia’s invasion of Ukraine and 
the ongoing hostilities, the Board has 
decided to defer any decision in relation to 
an interim dividend in conjunction with the 
Group’s full year results for 2021. The Board 
will continue to assess the situation and 
when appropriate make a decision in 
relation to shareholder returns.

Total dividends paid to date in respect of 
2021 are 46.2 US cents (2020 total: 85.8 US 
cents). In November 2021, the Group 
announced a shareholder returns policy 
outlining the Group’s intention to deliver 
30% of free cash flows as dividends in 
respect of a given year. To date, the Group 
has announced dividends in respect of the 
2021 financial year representing 37% of the 
Group’s free cash flow in 2021. 

The Group’s Board will consider, as 
appropriate, whether or not to propose a 
further interim dividend in respect of 2021.

Debt and maturity profile

Ferrexpo has a strong balance sheet, low 
levels of gross debt and had a net cash 
position as of 31 December 2021. As of 
31 December 2021, the Group’s net cash 
position was US$117 million (31 December 
2020: US$4 million net cash position). 
Gross debt as of 31 December 2021 was 
US$50 million compared with US$266 
million as of 31 December 2020. The 
Group’s gross debt relates to short-term 
trade finance facilities that typically have 
tenures of less than 12 months.

As of 31 December 2021, the credit ratings 
agency Moody’s has a long-term corporate 
and debt rating for Ferrexpo of B2, with a 
negative outlook. The credit ratings agency 
Fitch maintains a BB- rating on the Group, 
with a stable outlook. While the credit rating 
of Ferrexpo is capped by the sovereign 
credit rating of Ukraine, the ceiling for credit 
ratings ascribed to Ferrexpo by both Fitch 
and Moody’s are higher (one notch above 
sovereign for Moody’s and two notches 
above sovereign for Fitch). 

Following the start of the Russian invasion 
of Ukraine on 24 February 2022, the credit 
ratings agencies have taken steps to update 
their assessment on Ukrainian issuers. As of 
4 April 2022, with regards to Ferrexpo plc, 
Moody’s has a long-term corporate and 
debt rating for Ferrexpo of Caa2, with a 
negative outlook, while the credit ratings 
agency Fitch has a long-term corporate and 
debt rating for Ferrexpo plc of B-, with a 
negative outlook. While the credit rating of 
Ferrexpo is capped by the sovereign credit 
rating of Ukraine, the credit rating ascribed 
to Ferrexpo by Fitch is higher. The credit 
ratings agency Standard & Poor’s has 
temporarily suspended the credit rating for 
Ferrexpo plc.

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.

24

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTCHART: BREAKDOWN OF FERREXPO’S C1 CASH COST OF PRODUCTIONA

CASE STUDY:

US$55.8/t

(2020: US$41.5/t)

 Electricity

 Gas + Biofuel

 Fuel

  Materials

 Spare parts

 Personnel costs

 Repair service

 Grinding bodies

 Royalties

 Blasting

23%

16%

6%

8%

11%

8%

11%

8%

6%

2%

Note: above numbers are rounded.

CRU BREAKDOWN PELLET COST CURVE TO NATURAL MARKETS  
(US$ PER TONNE)

90

80

70

60

50

40

30

20

10

)

e
n
n
o
t

r
e
p
$
S
U

(

i

a
n
h
C
o
t

y
r
e
v

i
l

e
d
r
o

f

t
s
o
c
t
e

l
l

e
P

3rd Quartile

2nd Quartile

1st Quartile

0

0

30

O
P
X
E
R
R
E
F

60

90

Cumulative pellet exports, 2021, Mt (dry) 

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.

MAINTAINING A LOW CASH 
COST OF PRODUCTION 

The Group’s C1 cash cost of productionA 
is governed by a range of factors, with 
energy costs historically representing 
approximately half of the cost base 
through the Group’s exposure to diesel 
prices (mining), electricity prices 
(predominantly processing) and natural 
gas prices (pelletising). 

The Group’s full year C1 cash cost of 
productionA rose by 34% to US$55.8 per 
tonne, primarily reflecting a rise in the 
second half of the year due to high energy 
costs. Over the full year, increasing energy 
costs have accounted for a combined 
US$10 per tonne increase in the Group’s C1 
cash cost of productionA, with a further 
US$2 per tonne increase attributable to 
spare parts and maintenance costs per 
tonne combined. Elevated energy prices are 
expected to remain in place going into 2022, 
with a gradual decline to historic levels 
expected during the course of first half of 
the year.

Through its production of high grade iron 
ore pellets, the Group remains competitive 
for costs on a global scale, as shown in the 
pellet cost curve, presented by independent 
consultants CRU. With the increases in 
energy costs described above, the Group 
has moved from the first to the second 
quartile of costs for pellet producers, but 
the Group retains a cost advantage over 
more than 55 million tonnes of existing 
pellet production, representing 
approximately half of the current market of 
iron ore pellets. Given the long-term value 
proposition of high grade iron ore and pellet 
premiums, as outlined in the Case Studies 
provided in this report, the Group believes 
that it will continue to be globally 
competitive on its cost of production.

 For more details of the increasing 
premiums paid for high grade iron  
ore, please see page 13.

Ferrexpo plc Annual Report & Accounts 2021

25

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
 
 
 
 
 
 
 
Operational Review
PRODUCTION 
SUMMARY
2021 saw operations continue to develop and grow, 
with work already under way for the next phase of 
growth, with the Wave 1 Expansion set to add three 
million tonnes of additional capacity.

Russia-Ukraine conflict (2022)

To date, the Group has managed to 
continue production operations during 
Russia’s invasion of Ukraine in 2022, with 
the Group curtailing non-core activities. 
Shipments continue via rail and barge to 
Europe, but seaborne exports via the 
port of Pivdennyi have been temporarily 
suspended. Please see the Group’s press 
releases for up-to-date operational updates.

Mining (2021)

Total mining volumes increased by 21% in 
2021, with the Group preparing for the Wave 
1 Expansion, which will require an increase 
in supply of iron ore to the Group’s 
processing plant upon completion. At FPM, 
mining activities in 2021 remained in line 
with 2020, but the Group significantly 
increased total volume movements at FYM 
to over 60 million tonnes, representing a 
39% increase, underscoring FYM’s role for 
the Group’s near-term growth ambitions. 
FBM is the key project in the Group’s 
medium-term growth plans, and this project 
saw a seven-fold increase in material moved 
to 10 million tonnes in 2021, with this mine 
expected to continue its ramp up of 
activities over time.

Additional projects under way in the Group’s 
mines include the ongoing automation of the 
haul truck fleet at FYM (see Case Study on 
page 27), as well as ongoing discussions to 
electrify the Group’s mining fleet, which is 
likely to include trolley assist and battery 
technology (see Case Study on page 29). 
Both projects are expected to offer 
long-term benefits in safety performance, 
productivity and emissions reduction. 

Total mining volumes in 2022 across the 
Group’s two ore-producing mines – FPM 
and FYM – are expected to remain in line 
with 2021, reflecting the recent step up in 
waste stripping activities ahead of the Wave 
1 Expansion. For more information on the 
Group’s growth plans, please see page 28.

Processing (2021)

The Group’s processing plant has seen 
significant investment in recent years, and 
as a result, ore tonnes processed and 
concentrate tonnes produced both 
increased by 5% in 2021, with the Group 
expecting further growth in future years. 
The pelletiser was the focus of investments 
in processing in 2021, with upgrade work 
taking place in three distinct phases 
throughout the year. 

OPERATIONAL PERFORMANCE

(000’t unless otherwise stated)

2021

2020

Change

Production

Iron ore mined

Strip ratio

Iron ore processed

Concentrate production

Pellet production

– Direct reduction pellets (67% Fe)

33,764

29,842

+13%

3.5

31,111

14,655

11,220

431

3.2

29,723

14,007

+9%

+5%

+5%

11,218

+0.02%

339

– Premium blast furnace pellets (65% Fe)

10,790

10,780

– Basic blast furnace pellets (62% Fe)

Commercial concentrate production

Iron ore sales

– Pellets

– Concentrate

– Total products sold

–

234

98

183

11,115

11,878

234

183

11,349

12,062

26

Ferrexpo plc Annual Report & Accounts 2021

STRONG PRODUCTION PERFORMANCE

11.2MT

Pellet production in line with previous year, 
despite 60 days of planned downtime for 
pellet line upgrades in 2021.

QUALITY IMPROVEMENTS CONTINUE

%
+27 

Output of higher grade direct reduction 
pellets rose by 27% in 2021, and is 
expected to increase further in 2022.

PREPARING FOR FUTURE GROWTH

+21%

21% increase in mining volumes in 2021, 
in preparation for the Wave 1 Expansion.

Image: Inspecting one of the Group’s automated 
CAT 793D haul trucks during regular maintenance.

+27%

+0.1%

-100%

+28%

-6%

+28%

-6%

Image: Installation of new equipment at the new 
press filtration complex, one of the final 
processing stages in the Group’s concentrator. 

STRATEGIC REPORTJORC-COMPLIANT ORE RESERVES AND MINERAL RESOURCES1

JORC-compliant Ore Reserves

Gorishne-Plavninske-Lavrykivske (“GPL”)

Yerystivske

Total

Proven

Probable

Total

Fe  
total 
%

Fe  
magnetic 
%

33

30

32

26

25

26

Mt

829

290

1,119

Fe  
total 
%

Fe  
magnetic 
%

31

33

32

23

26

24

Mt

1,135

510

1,645

Fe  
total 
%

Fe  
magnetic 
%

32

32

32

24

26

25

Mt

300

220

526

Measured

Indicated

Inferred

Total

JORC-compliant Mineral Resources

Mt

Fe  
total 
%

Fe  
magnetic 
%

Gorishne-Plavninske-
Lavrykivske (“GPL”)

Yerystivske

Bilanivske

Total

472

269

336

1,077

35

35

31

34

29

29

24

27

Fe  
total 
%

Fe  
magnetic 
%

30

34

31

31

22

27

23

23

Mt

744

382

217

1,343

Fe  
total 
%

Fe  
magnetic 
%

32

33

30

32

24

27

21

24

Mt

2,843

1,222

1,702

5,767

Fe  
total 
%

Fe  
magnetic 
%

31

34

31

32

24

27

23

24

Mt

1,627

571

1,149

3,347

1.  The Group’s JORC-compliant Ore Reserves and Mineral Resources shown above are based on an independent review completed by Bara Consulting, and are shown on a depleted basis 
as of 1 January 2022. The Group previously reported a resource estimate of 326Mt for the Galeschynske deposit, which is the subject of a legal dispute and is therefore not shown above; 
please see page 59 for more information.

Following the approval of the Group’s Wave 
1 Expansion in October 2021, the Group has 
taken the decision to focus on the 
processing of high grade ores to maximise 
production, and has therefore realised an 
impairment on the value of the low grade 
ore stockpiled at site. Please see Note 17 
Inventories to the Consolidated Financial 
Statements for more information.

A key project completed in early 2022 is the 
Group’s press filtration complex, which will 
help improve product quality and reduce 
natural gas consumption through lowering 
the moisture content of pellets before 
entering the pelletisation process. The work 
completed to date represents the first phase 
of this project, which will help facilitate an 
increase in throughput of material through 
the Group’s processing facilities.

In terms of product quality, the Group has 
phased out production of medium grade 
products, transitioning to 100% high grade 
(65% Fe and above) production as of 
2021 (2020: 99%). This shift marks the 
culmination of 15 years of investment in high 
grade production since the Group’s IPO, 
and reflects a shift in preference by the 
Group’s premium customers, who use 
pellets to make premium types of steel. 
To understand the importance of high 
grade materials to steel companies, 
please see the Case Study on page 14.

Ferrexpo continues to use sunflower husks 
as a substitute for natural gas in the 
pelletiser, with 18% of pelletiser energy use 
sourced from sunflower husks in 2021 
(2020: 25%). The decrease seen in 2021 
correlates to commercial trials of producing 
direct reduction pellets, and the Group 
expects consumption rates of sunflower 
husks to increase as the Group’s 
understanding of the technical requirements 
of producing this pellet type increases. 

Logistics (2021)

Sales volumes fell 6% in 2021 as a result of 
the Group conducting a one-off de-stocking 
process in early 2020. Production and sales 
volumes in 2021 returned to a level broadly 
matching each other.

In December 2021, the Group also 
conducted a trial shipment to a German 
steel mill via rail, which has the potential 
to reduce the Group’s Scope 3 emissions 
footprint through use of the electrified rail 
network in Europe, as well as having the 
potential to cut delivery times in half to 
certain customers.

In 2021, the Group’s subsidiary First-DDSG 
transported 0.8 million tonnes of iron ore 
pellets via the River Danube (2020: 
0.8 million tonnes), providing additional 
logistics flexibility for the Group to supply 
customers in Europe.

CASE STUDY:

MINING FLEET AUTOMATION

In December 2020, the Group was proud 
to unveil the latest phase of autonomy in 
its business – Europe’s first large scale 
autonomous haul trucks. The Group has 
continued to progress this project, with 
the first phase of automation completed, 
representing the first six CAT 793D trucks 
at the Yeristovo mine. Over time, the Group 
plans to continue to introduce fleet 
automation throughout its mining operations 
in line with this equipment showing 
improvements in both safety and productivity.

Through automation, the Group expects 
to see significant benefits in safety, 
productivity and maintenance. The 
autonomous fleet continues to improve in 
its fleet utilisation levels, and in November 
2021 the Group’s automated fleet achieved 
the same rates of utilisation as the Group’s 
historic level.

Ferrexpo plc Annual Report & Accounts 2021

27

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOperational Review continued
GROWTH PLANS

The Group has now invested over US$3 billion in 
its operations since IPO, with over 85% of this 
investment at the Group’s operations in Ukraine.

Growth projects in 2021

WAVE 1 EXPANSION

Recent projects completed include the 
pelletiser upgrade work primarily completed 
in 2021, as well as the concentrator upgrade 
and concentrate stockyard that were both 
completed in 2020. Through this work, 
the Group aims to provide stability and 
consistency in pellet production, growth 
in production volumes, and growth in 
product quality.

Wave 1 Expansion

The Group’s Wave 1 Expansion is an 
ambitious project to add approximately 25% 
of the Group’s existing pellet capacity in the 
next three years. In light of the current 
conflict in Ukraine, the Group has 
temporarily paused investment in growth 
projects and will look to recommence 
growth activities once additional clarity on 
the outlook for Ukraine is known. Please see 
the Principal Risks section for more 
information (pages 56 to 72).

Expansion plans in the processing of 
magnetite iron ore are modular in nature, 
whereby processing increased volumes 
uses larger and more advanced pieces of 
equipment, largely replicating the existing 
process flow sheet. The Group’s 
investments to date have been a reflection 
of this, and the Group’s Wave 1 Expansion 
will be a continuation of this strategy.

Each key aspect of the production process 
required to deliver the Wave 1 Expansion 
are shown in the diagram opposite, with 
pre-stripping activities commencing in 2021, 
and reflected in a 21% increase in the total 
tonnes mined during the year. The all-in 
capital intensity of the Wave 1 Expansion at 
the Group’s operations is expected to be 
approximately US$200 per tonne of 
additional pellet capacity.

The Group also expects to see additional 
benefits and flexibility in processing 
different ore types as a result of the Wave 1 
Expansion. Through adding modern 
equipment, such as the planned high-
pressure grinding rolls in the beneficiation 
plant, the Group expects to see efficiency 
savings for key consumables such as 
electricity, which will have a positive effect 
on the Group’s cost structure and 
environmental footprint.

28

Ferrexpo plc Annual Report & Accounts 2021

1. MINING
– Scale: increasing total volumes mined 
from 125Mt in 2020 to approximately 
265Mt.

– Equipment required: additional 

excavators and haul trucks.

– Phasing: gradual increase.

– Total investment: US$180 million, 

excluding trolley-assist.

2. CRUSHING & 
BENEFICIATION
– Scale: increasing crushing capacity 

to more than 45Mt.

– Equipment required: minor upgrades to 
primary crushing, additional secondary 
and tertiary crushing capacity. Contracts 
signed with Metso and Weir Minerals.

– Total investment: US$240 million.

3. PELLETISING
– Scale: increasing capacity of one 

pelletiser line (out of four) by three million 
tonnes.

– Equipment required: pelletiser kilns to 

remain as is, with modifications to 
pre-heating stages to add capacity.

– Phasing: timing to be after concentrate 

capacity completed.

– Total investment: US$181 million.

4. LOGISTICS
– Scale: capacity to transfer three 

million tonnes of additional products 
to customers.

– Equipment required: additional rail cars, 

upgraded port capacity.

– Phasing: gradual implementation.

– Total investment: US$28 million.

STRATEGIC REPORTVOLUME & 
QUALITY
GROWTH

CASE STUDY:

DECARBONISATION 
OF MINING FLEETS

With 40% of Scope 1 (direct) emissions in 
2021 relating to diesel consumption in the 
Group’s mining fleet, projects to address 
this area will have a clear impact on the 
overall carbon footprint. 

In the short term, diesel consumption rates 
declined by 7% in 2021 as productivity 
measures continue to be implemented, and 
the Group is working towards continuing 
this progress in future years. 

For over ten years, Ferrexpo has operated 
electric excavators, taking advantage of the 
fact that Ferrexpo’s mines are located with 
good access to the Ukrainian electricity 
grid, a key advantage of Ferrexpo’s mines 
over the majority of iron ore mines operated 
by the Group’s peers in Australia. With this 
in mind, the Group continues to review the 
installation of trolley-assist infrastructure 
along the upward section of the haul ramps 
of its mines, as 50% of diesel consumption 

occurs when fully-loaded trucks ascend out 
of the Group’s mines, making this a clear 
area to target in decarbonisation efforts. 
The Group is continuing discussions with 
suppliers of this technology, and in 2021, 
representatives of the Group visited a 
mining operation with trolley-assist 
equipment already in operation. It is 
expected that the installation of such 
equipment would take two to three years to 
implement. Aside from the benefits of 
decarbonisation, trolley-assist technologies 
also allow trucks to ascend pit ramps using 
100% of each truck’s engine capacity, 
leading to shorter cycle times, therefore 
reducing the requirement for the number of 
trucks operating, as well as more efficient 
mining practices.

The longer-term solution is however to 
completely remove diesel consumption from 
the Group’s haul trucks. This is possible 
through a range of technologies and the 
Group believes that, as of today, the best 
opportunity to implement diesel-free fuelling 
of trucks is through battery technology, 

Image: An autonomous truck undergoing trial 
mining activities at FYM in 2021.

which represents a technology that is 
rapidly developing. The Group considers 
itself to be a fast follower for new 
technologies, and is looking to implement 
a fleet-replacement strategy with battery 
technology trucks once this becomes a 
widespread solution in the mining industry. 
The Group expects this to be a gradual 
phasing out of diesel trucks over time, with 
this becoming a viable pathway in the 
medium to long term. 

Diesel efficiency improvement (2021)

%
7 

Reduction in diesel consumption rate in 
2021, reflecting increases in productivity 
and electric excavator usage.

Ferrexpo plc Annual Report & Accounts 2021

29

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSHSEC Committee Chair’s Review
POSITIONED TO LEAD 
ON SUSTAINABILITY
The events in the first quarter of 2022 have 
highlighted the importance of sustainability, 
particularly Ferrexpo’s community support 
initiatives, at this difficult time. The Group’s 
newly established Humanitarian Fund is 
designed to help address the needs of 
communities across the country.

DELIVERING RESULTS: SAFETY

0.41

Key safety lost time injury frequency 
rate remains materially below the 
Group’s trailing five year average (0.98).

DELIVERING RESULTS: CARBON

%
-16 

Combined Scope 1 and 2 emissions 
per tonne reduced by 16% in 2021, 
achieving a cumulative 30% reduction 
against the Group’s benchmark 
year (2019).

DELIVERING RESULTS: DIVERSITY

20.1%

Women in management roles across the 
Group increases to 20.1% in 2021  
(2020: 18.2%).

New Chair appointed

In February 2022, I assumed the role of 
HSEC Committee Chair, with Fiona 
MacAulay moving to become the Senior 
Independent Director. In this section, we 
look back at progress made in a number of 
sustainability topics, with further details 
available in our Responsible Business 
Reports, which are available on the Group’s 
website (www.ferrexpo.com).

Prioritising safety and wellbeing

Safety and wellbeing have never been more 
prominent in our activities than during 
Russia’s invasion of Ukraine in early 2022. 
Further details of our humanitarian efforts 
are provided in our community support 
section on page 42, with US$12.5 million of 

Image: New HSEC Committee Chair 
Ann-Christin Andersen visiting the 
Group’s operations in September 2021.

approved funding for the Group’s 
Humanitarian Fund1. 

Looking back at 2021, we can report a 
fatality-free year, alongside the Group’s 
lowest recorded full-year lost time injury 
frequency rate (“LTIFR”) since its listing in 
2007. Our safety performance in 2021 was 
once again materially below our five-year 
trailing average for LTIFR, and also 
continues below the same metric as 
recorded by Ferrexpo’s iron ore producing 
peers in Western Australia2, with further 
details provided on page 32. 

1.  As at 21 April 2022.
2.  Source: Government of Western Australia (link). 

Accessed April 2022. 

Workforce wellbeing is a key area of focus 
to ensure that people are well looked after 
during the conflict, including the free 
provision of psychological support and 
on-site childcare facilities. In external 
recognition of our efforts in 2021, we were 
pleased to be recognised as one of the top 
four companies in Ukraine for family-friendly 
policies in a country-wide survey sponsored 
by the United Nations Population Fund. 
Further details are provided on page 41.

Addressing climate change

On carbon emissions, we are continuing to 
deliver reductions, with a 16% reduction in 
combined Scope 1 and 2 carbon emissions 
per tonne for a second successive year, with 
this decrease in 2021 driven by our clean 

30

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTHSEC Committee Chair’s Review

power purchasing strategy, which helped to 
reduce Scope 2 emissions by 40% in 2021 
on a per tonne basis. We did, however, 
record an 11% increase in Scope 1 
emissions per tonne, which was driven by 
increased mining activity as we ramp up our 
Wave 1 Expansion activities, and reduced 
sunflower husk consumption in our 
pelletiser as we trial the production of our 
latest product, direct reduction pellets. This 
emphasises the need for us to advance our 
plans to electrify our mining activities – see 
page 29 on this work stream – and the 
importance of biofuels today, which will 
facilitate the transition away from natural 
gas in the future.

Through the result presented here for 2021, 
we have nominally achieved a 30% 
reduction in carbon emissions against our 
baseline year, which was the medium-term 
target set by the Group in 2021. This 30% 
target is the benchmark level set in the 
mining industry, and by achieving this goal, 
we can demonstrate where Ferrexpo is 
relative to its peer group in reducing 
emissions. From here, we intend to continue 
to reduce our emissions, and through 
our ongoing work with environmental 
consultants Ricardo plc (“Ricardo”), we 
plan to establish a bespoke pathway for 
Ferrexpo’s net-zero ambitions. The Group’s 
long-term emissions reduction target 
remains to be carbon neutral by 2050, and 
we look forward to reporting further on this 
when our work with Ricardo concludes later 
this year; further details of this project are 
provided on page 37. Further to our work 
with Ricardo, we understand the importance 
of external assurance of sustainability data, 
particularly given the prominence of these 
topics in stakeholder discussions. As a 
result, we are currently conducting an 
external assurance process with an 
independent consultant on our reporting of 
carbon emissions and safety data, with 
details of this project provided on page 34.

Promoting diversity and inclusion

Diversity, equity and inclusion (“DEI”) is an 
area where we have recently increased our 
focus. In 2021, we appointed a dedicated 
DEI officer to further our understanding of 
our own workforce, and we also conducted 
our inaugural DEI survey. Gender diversity is 
a focus of a range of training programmes at 
our operations, from attracting women into 
atypical roles, to providing management 
training to women identified as high 
potential future leaders of our business 
as part of our “Fe_munity” women in 
leadership programme. We are proud of the 
progress made to date, with the proportion 

of women in management roles advancing 
to 20.1% in 2021 (2020: 18.2%).

Strong links to local communities

Since the development of Horishni Plavni in 
the 1960s for the original construction of the 
iron ore mining and processing operations, 
there has been a close association between 
the mine and the town. In 2022, we are set 
to celebrate 15 years since Ferrexpo’s listing 
and we are proud of the support that we 
have been able to provide during this time. 
In March 2021, the Ferrexpo Charity Fund 
celebrated its tenth year, during which time 
the Group has directly assisted over 90 
schools and other educational facilities, 
over 30 hospitals and related facilities, and 
direct aid to over 4,000 individuals requiring 
assistance, such as regular support 
packages or expensive medical operations. 
See pages 42 to 43 for more on our work 
with local communities.

Sustainable environments

At Ferrexpo, we understand the need for 
sustainable working practices. The Dnieper 
River runs close to our operations, and we 
have a number of projects to promote both 
biodiversity in the river and local community 
use on the river (see Case Study opposite). 
Furthermore, in 2021, we undertook a new 
phase of biodiversity mapping – looking at 
the species of plants, fungi and animals in 
our local ecosystems, and we expect to 
compile our first biodiversity monograph 
in 2022 following this project’s work.

Sustainability is a broad topic however, 
and we regularly report our performance 
across more than 30 standards under 
the framework published by the Global 
Reporting Initiative, as part of our 
Responsible Business Reports 
(available at www.ferrexpo.com). 

In conclusion, our efforts to mitigate the 
detrimental humanitarian effects of Russia’s 
invasion of Ukraine are ongoing and have 
highlighted the need for a close and effective 
relationship with local communities to quickly 
deliver relevant support where it is needed. 
Despite the war, we are continuing to work 
on our Responsible Business activities, 
and I would like to thank our workforce 
for embracing the fundamental values of 
sustainability to help deliver this progress. 
Ferrexpo has strong credentials in 
sustainability and we look forward to 
updating the market on our progress 
in the year ahead.

Ann-Christin Andersen
Chair, HSEC Committee

CASE STUDY:

SUPPORTING LIFE ON AND 
IN THE DNIEPER RIVER

Ferrexpo and the Group’s local communities 
are fortunate to be situated close to one of 
Europe’s great rivers, the Dnieper River, 
which flows through Ukraine to the Black 
Sea and is more than two kilometres wide 
as it passes Ferrexpo’s operations. 

Whilst the Group does not operate in a 
region considered to be high risk for water 
stress (in accordance with the Water 
Resources Institute), the Group aims to 
reduce its water consumption regardless, 
and the Group is pleased to report a third 
consecutive year of materially lower water 
withdrawal from the local water supply 
network. Furthermore, the Group’s 
processing plant regularly recycles 98% 
of water used in processing operations, 
minimising the impact of processing on 
the local water system.

To promote biodiversity, the Group is 
continuing its initiative to reintroduce native 
fish species to the Dnieper River, with this 
project winning a sustainability award at an 
award ceremony in Kyiv in December 2021 
for helping implement the UN’s Sustainable 
Development Goal 14 (Life Below Water). 
Further details of this project are available in 
the Group’s Responsible Business Report.

With a healthy Dnieper River, local 
communities are able to utilise the river for 
sport and leisure. The Group is proud to 
support the local sailing club, which had 
four Olympians travel to the Tokyo Olympics 
in the summer of 2021 (with local canoeist 
Liudmyla Luzan, pictured above, winning 
two silver medals). The Group also regularly 
sponsors local and national dragon boat 
racing competitions on the river in 
Horishni Plavni, which is a popular sport 
within Ukraine.

Ferrexpo plc Annual Report & Accounts 2021

31

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business
HEALTH AND SAFETY 
REVIEW
A successful mining company is one that delivers value 
for all stakeholders in a safe and sustainable manner. 
Following Russia’s invasion of Ukraine in 2022, the Group’s 
primary focus is the safety and wellbeing of its workforce, 
with the following a review of safety in 2021.

In recent years, the Group has seen 
significant progress in safety, with zero 
fatalities in 2021 (2020: 1) and a lost time 
injury frequency rate – a key benchmark of 
safety in the mining industry – continuing to 
remain below the Group’s trailing five-year 
average. The Group also records a range of 
leading and lagging indicators of safety, 
aiming to encourage a culture of safety that 
requires an employer to identify risks before 
safety incidents occur, monitor near miss 
events and analyse incidents when they 
have occurred, to learn and improve.

Reviewing the safety indicators for 2021 
shows an improvement in the majority of 
lagging indicators, demonstrating that 
progress is being made in instilling a 
safety-first culture throughout the Ferrexpo 
business. Of particular note is the ten-fold 
increase in hazard reporting in 2021, which 
is a reflection of the recent adoption of ISO 
45001:2019. A number of leading indicators 
are, however, down against the level set in 
2020, which is an area to monitor in the year 
ahead to ensure that the standards being 
set today are maintained. In recognition of 
the recent trend in road traffic incidents, the 
Group has commenced a process to test 
visitors’ driving safety awareness before 
being permitted to drive between areas 
of plant and administrative buildings 
(mining areas being already subject 
to strict controls).

As part of the Group’s newly announced 
‘Vision Zero’ programme to reduce 
operational injuries and instances of 
occupational disease, the Group has 
introduced a range of new measures such 
as the installation of a new aspiration 
system to reduce particulate emissions 
in the pelletiser in 2021, which will have 
benefits for both improving working 
conditions as well as the environment.

As part of the Group’s efforts to further 
develop its position on sustainability, an 
independent assurance process is being 
undertaken on the Group’s safety data 
(LTIFR and TRIFR) for 2021 by an external 
consultant, which is expected to be 
completed later in 2022. Details of this 
assurance process are provided in the Case 
Study on page 34.

SAFETY INDICATORS 2020/21

2021

2020

Change

Lagging indicators

Fatalities1

Lost time injuries1

LTIFR1

TRIFR2

Near miss events2

Significant incidents2

Road traffic accidents2

Lost work days2

Leading indicators2

HSE inspections

HSE meetings

HSE inductions

Training hours

Hazard reports

Management high visibility tours

1.  Group-level indicators.
2.  Ferrexpo’s operations in Ukraine only.

0

9

0.41

0.97

5

12

43

1

17

0.79

1.25

7

17

31

497

1,046

3,305

1,528

7,335

14,755

3,293

1,165

11,602

11,786

595

124

-100%

-47%

-48%

-22%

-29%

-29%

+39%

-52%

-0.4%

-24%

+58%

-20%

51

+1,067%

131

-5%

Image: Training the next generation of 
operators through Ferrexpo’s Dual Education 
programme, which has trained 61 students 
since 2019.

32

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTImage: Natalia Storozh,  
Head of Safety at Ferrexpo’s 
main operating entity, FPM.

CASE STUDY:

INTERVIEW WITH NATALIA 
STOROZH, HEAD OF SAFETY 
AT FPM

Q: Health and safety is clearly an 
important department at Ferrexpo; 
how many people work in the safety 
department?

A: In total we have 72 people working in the 
safety department at Ferrexpo’s operations 
in Ukraine, the equivalent of approximately 
1 for every 100 employees across 
our operations.

Q: Since starting the role of Head of 
Safety at FPM in March 2021, what were 
the main safety projects implemented 
in 2021?

A: Safety projects often go hand in hand 
with modernisation of equipment, which 
comes with additional benefits such as 
improved productivity. Good examples 
of projects implemented include the 

installation of a stationary jib at the primary 
crusher, removing the need for operators to 
enter the crusher hoppers to break 
oversized ore, and the installation of a fully 
automated lathe in our workshops, both of 
which are projects that help to remove 
operators from hazardous areas. Safety 
projects range from improving signage 
– such as clearer demarcation of container 
storage areas – to the installation of six 
speed bumps on the main road entering our 
production facilities.

Q: Were there any particular 
departments that required a specific 
approach for establishing safety 
protocols?

A: Every area of our operations has a 
tailored approach to safety. A good example 
would be our maintenance workshops of the 
processing plant, where work is carried out 
at height and where a large number of 
contractors are involved. Here, we have a 
strong focus on risk assessments and 

safety training, given the higher 
concentration of contractors, to familiarise 
those working in maintenance with the 
identified risks.

Q: How often does the Safety Committee 
meet at site?

A: At FPM, Ferrexpo’s main operating entity, 
we have a committee for labour protection, 
industrial safety and the environment, 
as well as a council board for labour 
protection, industrial safety and the 
environment of the plant. Meetings are held 
to help draw up measures aimed at 
improving working conditions, organising 
the safe performance of work, to eliminate 
inconsistencies and manage hazards and 
risks. During 2021, FPM’s Safety Committee 
met four times at site.

Q: Which safety projects are planned for 
the coming year?

A: We have a number of projects that we are 
continuing to roll out from previous years, 
such as the tag-out lock-out system for 
isolating machinery during maintenance, 
as well as safety training programmes 
specifically for those working at height. 
In 2021, we obtained certification for our 
occupational health and safety management 
system under ISO 45001:2019 and we 
continue to update practices and introduce 
standards as part of this project. New 
projects for 2022 include the installation of 
additional traffic calming measures and the 
installation of a training simulator to help 
train operatives for working at height. 
Ultimately we are aiming to develop our own 
safety standard across the Group for 
operatives working at height.

To help further deliver safety improvements 
in the year ahead, we have developed the 
concept of “Vision Zero” to eliminate 
workplace injuries and occupational 
diseases, with efforts under way to raise 
awareness of this programme, such as the 
installation of 12 large billboards around our 
operational areas, as well as notices on 
internal communications channels.

Lost time injury frequency rate (2021)

0.41

Record-low full-year lost time injury 
frequency rate recorded since the Group’s 
IPO in 2007 (2020: 0.79).

Ferrexpo plc Annual Report & Accounts 2021

33

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued

CASE STUDY:

EXTERNAL ASSURANCE – 
PROVIDING TRUST IN 
SUSTAINABILITY PROGRESS

Ferrexpo recognises that a company’s 
reporting around climate change is an 
important pillar on which stakeholders base 
their trust in a company. In order to build 
trust in Ferrexpo’s performance on climate 
change reporting, the Group is in the 
process of undertaking an external 
assurance process (ISAE 3000) with an 
independent consultant, with the first year 
of this project looking at both reporting of 
data for carbon emissions and safety.

In terms of carbon reporting, the process 
will provide external assurance on the 
Group’s Scope 1 (direct) and Scope 2 
(indirect) emissions, as these are directly 
associated with the Group’s pellet 
production facilities. Over time, the Group 
intends to provide assurance on a broader 
range of topics within sustainability.

The assurance process to date for the 
Group’s carbon footprint has highlighted 
a number of minor amendments to the 
Group’s calculation of its carbon footprint, 
amounting to an overall decrease in the 
Group’s carbon footprint of 1% in absolute 
terms for 2020 and a 2% reduction on a unit 
basis for 2020. The full list of amendments 
raised through this process will be provided 
on the Group’s website once this assurance 
process is completed, including the 
following amendments for the Group’s 
2020 data:

–  Removal of steam from Scope 2 

– 

calculation, as this is generated from 
purchased natural gas and therefore 
previously double counted. (Net impact 
on 2020 data: -24kt CO2e.)
Increase carbon factor for nuclear power 
purchases from 5g to 12g per kilowatt-
hour, aligning with World Nuclear 
Association1 data. (Net impact on 2020 
data: +2kt CO2e.)

–  Correction of factor for sunflower husks 
from 0.73kg/t to 0.073kg/t, bringing into 
line with other biofuels. (Net impact on 
2021 data: -113kt CO2e.)
Inclusion of the Group’s commercial 
concentrate sales of 183kt in calculating 
per tonne emissions.

– 

Image: Sample testing at 
Ferrexpo’s laboratory, to confirm 
the geological model ahead 
of ore mining activities.

E
C
N
A
R
U
S
S
A

L
A
N
R
E
T
X
E

34

Ferrexpo plc Annual Report & Accounts 2021

1.  www.world-nuclear.org/information-library/energy-and-the-environment/carbon-dioxide-emissions-from-electricity.aspx

STRATEGIC REPORT 
the river’s natural ecosystem. The Group is 
working with the Poltava Fish Conservation 
Patrol on this multi-year project, with the 
second phase of this project introducing 
two tonnes of local species (carp) into the 
river in November 2021.

Responsible waste management

The Group primarily produces waste 
through overburden removal in mining 
operations, and waste separated from iron 
ores during processing. In 2021, the Group’s 
three mines stripped a combined 118 million 
tonnes of waste rock and sand (2020: 95 
million tonnes), with this material stored 
locally in waste facilities designed by the 
Group’s mining engineers and reviewed by 
local authorities. Waste mining activities 
increased in 2021, ahead of the Group’s 
Wave 1 Expansion, with details of this 
project provided on page 28. Waste material 
from processing, referred to as tailings, 
increased by 6% to approximately 16 million 
tonnes, with approximately 40% of this 
waste subsequently recycled by the Group 
as other materials such as gravel for 
road construction.

ENVIRONMENTAL REVIEW

Ferrexpo works closely with the natural 
environment, to minimise any impact and strive to 
improve as new technology becomes available.

The Group’s interaction with the 
environment is encapsulated not just 
through carbon emissions, but also through 
other forms of emissions, energy use, water 
withdrawal and recycling, waste generation 
and biodiversity. These topics are covered 
in detail in the Group’s Responsible 
Business Reports, which are published 
annually and available on the Group’s 
website (www.ferrexpo.com).

and tailings facility acts as a closed loop, 
with water used to pump waste material to 
the tailings facility reclaimed and pumped 
back to the processing plant, resulting in 
98% of process water being recycled by the 
Group’s processing plant. The remaining 
2% of water is lost through processes such 
as evaporation when green pellets are 
heated in the pelletiser or surface 
evaporation at the tailings facility.

Delivering progress on carbon

Supporting local biodiversity

A key natural habitat located close to the 
Group’s operations in Ukraine is the Dnieper 
River, one of Europe’s largest rivers. As a 
consequence of domestic detergent use 
and fertiliser use in agriculture1, this river 
faces frequent blooms of blue-green algae 
in the summer months, which are harmful to 
the river’s ecosystem, as well as limiting 
local communities from using the river for 
recreation. Through an initiative launched in 
2020, which was proposed internally by an 
employee, the Group is aiming to improve 
local conditions in the Dnieper River through 
the introduction of native species of fish that 
live off these algae and will help to balance 

Image: Ferrexpo supports biodiversity 
to help local communities to enjoy the 
river, with events such as dragon boat 
racing competitions.

In 2021, the Group not only announced 
decarbonisation targets to frame its 
net-zero ambitions, but also engaged with 
environmental consultants Ricardo plc 
(“Ricardo”) to further develop the Group’s 
understanding and reporting around climate 
change. Further details of the Group’s 
engagement with Ricardo are provided in 
the Case Study on page 37.

The Group continues to make progress in 
cutting its carbon footprint, delivering a 
16% reduction in its Scope 1 and Scope 2 
carbon emissions (CO2e) per tonne in 2021. 
Details of this progress, as well as the 
Group’s reporting under the TCFD, are 
provided on page 38.

Cutting water consumption

The Group typically interacts with water in 
two areas of its operations: (1) in mining, 
water ingress into the Group’s open pits 
(groundwater and precipitation) is pumped 
out of mining areas and back into the 
natural environment (“dewatering”), and (2) 
in processing, water that is used to facilitate 
the processing of iron ore. Dewatering 
represented 95% of the Group’s total water 
withdrawal in 2021, and the Group’s 
activities in mining areas do not 
predominantly utilise this water (aside from 
dust suppression activities, which utilises 
the equivalent of 4% of dewatering 
volumes). Ferrexpo, however, maintains 
regular inspections of the quality of this 
water, monitoring 13 chemical elements at 
each operation and other attributes, to 
maintain standards, to ensure compliance 
with local laws and to ensure a minimal 
impact on the environment that this water 
is returned to. With water that is used in 
processing, the Group’s processing plant 

1.  Source: NASA (link).

Ferrexpo plc Annual Report & Accounts 2021

35

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued
CLIMATE CHANGE

Scope 1 and Scope 2 emissions

The Group’s Scope 1 (direct) and Scope 2 
(indirect) emissions relate to the Group’s 
controlled activities to produce and 
transport products to customers, and are 
shown in the table below. The Group has 
made significant progress in its efforts 
relating to climate change in 2021, with a 
combined 16% reduction in Scope 1 and 2 
carbon emissions1 in 2021.

The Group has therefore reduced its 
emissions by 30%1 in the space of two 
years, and whilst this meets the Group’s 
medium-term target of reducing emissions 
by 30% by 20301, Ferrexpo understands 
that progress in sustainability is only 
achieved through improvements that are 
maintained over a period of time. The Group 
therefore commits to continuing to sustain 
this level of reduction, and will look to 
publish more on its decarbonisation 
pathway once its work with Ricardo is 
completed – with this project designed to 
outline a bespoke, emissions reduction 
journey for the Group. See Case Study 
opposite for more information on this 
work stream.

The reduction in carbon emissions in 20211 
has primarily been achieved through the 
Group’s targeted power purchasing 
programme, driving the improvement in 
Scope 2 emissions, which has delivered a 
40% reduction in this category1. Conversely, 
with increased mining volumes and reduced 
biofuel consumption in 2021, Scope 1 
emissions per tonne rose by 11%1. The 
Group intends to continue to improve 
efficiencies in the consumption of diesel 
and natural gas, as well as increase biofuel 
consumption, along with the various 
decarbonisation projects outlined in the 
Case Study on page 29.

The Group calculates its carbon footprint 
via the application of carbon factors 
supplied by the Greenhouse Gas Protocol 
(https://ghgprotocol.org/), in line with 
guidance provided by the Global Reporting 
Initiative, which is the framework that the 
Group uses to publish its annual 
Responsible Business Reports. The carbon 
factors supplied by this initiative are 
combined with consumption data for the 
Group’s activities at its mining, processing 
and logistics subsidiaries, including the 
Group’s consumption of diesel, natural gas, 
gasoil and electricity, which collectively 
accounted for 98% of the Group’s Scope 1 
and 2 emissions in 2021 (2020: 98%). Using 
the factors provided by the Greenhouse Gas 
Protocol, the Group is able to incorporate a 
range of greenhouse gases into its 
calculation to generate a carbon-equivalent 
figure. Gases included in this calculation are 
as follows: carbon dioxide, methane and 
nitrous oxide.

Scope 3 emissions

The Group’s Scope 3 (value chain) 
emissions relate to the upstream and 
downstream emissions related to the 
Group’s activities, and over 90% of which 
are related to the conversion of iron ore to 
steel. The Group’s understanding of its 
Scope 3 emissions continues to develop 
through the Group’s ongoing engagement 
with Ricardo. Furthermore, following the 
Group’s increased focus on direct reduction 
pellets, the Group has engaged 
independent consultants CRU to provide an 
emissions factor specific to this pellet type, 
with this work summarised in the Case 
Study on page 10. As a result of this work, 
the Group can disclose that its Scope 3 
emissions footprint was 1.28tCO2/t in 2021 
(20202: 1.29tCO2/t), with this 1% reduction 

2021

20203

Change

Emissions (CO2e, kilotonnes)

– Scope 1

– Scope 2

– Combined

Footprint (CO2e kg/t)

– Scope 1

– Scope 2

– Combined

Biofuels (tonnes CO2)

649

404

1,053

57

35

92

10

580

675

1,255

51

59

110

13

Energy consumption (kWh)

5,489,232,550

5,142,974,2533

+12%

-40%

-16%

+11%

-40%

-16%

-24%

+7%

1.  Scope 1 and 2 emissions on a per tonne basis, carbon dioxide equivalent basis. 
2.  Adjusted versus 2020 Annual Report as a result of the review by Ricardo, see page 37 for more details. 
3.  Adjusted versus 2020 Annual Report as a result of the ongoing external assurance process, see page 34 for more details.

36

Ferrexpo plc Annual Report & Accounts 2021

related to the Group’s increasing production 
of direct reduction pellets.

Cutting carbon: targets

The Group understands the importance of 
climate change, and for stakeholders to 
understand a company’s long-term 
ambitions in respect of climate change. In 
recognition of this, the Group announced its 
inaugural carbon reduction targets for 
Scope 1 and Scope 2 emissions in October 
2021, primarily designed to show a clear 
ambition of achieving net zero carbon 
emissions by 2050 and to align the Group 
with its peer group in terms of the trajectory 
to achieve this net zero goal, through a 30% 
reduction in carbon emissions by 2030 on a 
per tonne basis. Through announcing 
inaugural targets, the Group is aligned with 
its peer group, but the Group also 
understands the importance of setting goals 
that are specific to a company’s operations; 
for more on this work stream, please see the 
Case Study on Ricardo opposite. 

The capital investment required to 
decarbonise the Group’s activities is a key 
aspect of the Group’s ongoing collaboration 
with Ricardo, and the results of this work 
stream are expected to be published later 
in 2022.

The Group is also developing its 
understanding of Scope 3 emissions and as 
outlined in the Case Study on page 10, the 
Group can reduce its Scope 3 emissions 
through the gradual increase in output of its 
higher grade direct reduction pellets. Since 
direct reduction pellets are processed by 
steelmakers using a combination of natural 
gas and electricity to produce steel, these 
pellets have a 49% lower carbon footprint 
than the Group’s blast furnace pellets. The 
Group intends to develop its forward 
thinking around reducing Scope 3 emissions 
as the Group’s understanding of producing 
this pellet type increases over time.

Improving energy efficiency

The Group understands the importance of 
reducing its energy consumption over time, 
and is implementing a series of energy 
efficiency projects across its operations. 
The Group’s energy consumption mirrors 
the Group’s carbon emissions, with natural 
gas, electricity and diesel the key drivers for 
energy consumption. As a result of a 21% 
increase in mining activities and a 5% 
increase in ore tonnes processed, total 
energy consumption increased by 7% 
in 2021, as shown in the table opposite.

STRATEGIC REPORTImage: Since 2015 Ferrexpo has taken 
advantage of Ukraine’s sizeable sunflower 
oil industry to use sunflower husks as 
a biofuel in the Group’s pelletiser.

CASE STUDY:

RICARDO: A NEW PHASE 
OF CLIMATE CHANGE 
REPORTING FOR FERREXPO

In October 2021, alongside inaugural 
decarbonisation targets, Ferrexpo 
announced its collaboration with Ricardo 
plc (“Ricardo”) to produce the next phase 
of climate change reporting for the Group. 
Through working with Ricardo, Ferrexpo 
aims to further develop its forward-looking 
understanding around climate change, 
to develop a bespoke understanding of the 
Group’s pathway to net-zero emissions and 
a clear picture on the role of iron ore pellets 
in the decarbonisation of the global steel 
industry. This project is specifically looking 
at the modules shown opposite.

–  Module 1: Government legislation – 
risks and opportunities. Looking 
primarily at the jurisdictions into which 
Ferrexpo sells its pellets, this module 
focuses on the changing regulatory 
framework. Through this work stream 
the Group intends to gain a better 
understanding of the likely decarbonisation 
pathways ahead in each of the jurisdictions 
into which the Group sells its products.
–  Module 2: TCFD reporting. The group 
has disclosed under TCFD since 2019 
and with the help of Ricardo the Group 
will present more detailed climate 
change scenario analysis. This will 
provide more in-depth insight to 
understand the risks and opportunities 
for the group and inform future strategy.
–  Module 3: Pathway to net-zero carbon 
emissions. The Group has established 
a net-zero ambition with its inaugural 
targets announced in October 2021, 
and with the help of Ricardo, the Group 
hopes to advance this process and 
identify a bespoke pathway for the 
Group’s emissions.

–  Module 4: Life cycle analysis. Looking 

at Ferrexpo’s role in the circular 
economy, this module aims to outline 
how pellets have a lower environmental 
impact beyond Ferrexpo’s own 
operations than other forms of iron ore. 
For example, Ferrexpo’s higher grade 
iron ore pellets are typically used to 
make higher grade forms of steel, which 
in turn are more likely to be recycled, 
lowering the environmental footprint of 
this type of steel.

Through a clear understanding of Ferrexpo’s 
future pathway, the Group expects to be 
able to present a further level of detail on 
climate change than has been previously 
published by the Group. It is expected that 
the Group will be in a position to present the 
results of its collaboration with Ricardo in its 
next Responsible Business Report, to be 
published later in 2022.

Ferrexpo plc Annual Report & Accounts 2021

37

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued
TCFD REPORTING

The Group is proud to support the Task Force on 
Climate-Related Financial Disclosures (“TCFD”), which 
is designed to help companies provide clear reporting 
for stakeholders on climate change. 

Topics reported by the Group in accordance 
with TCFD are provided in the table 
opposite. 

Ferrexpo understands that climate change 
presents the Group with a range of risks and 
opportunities, and these are presented in 
detail in the Group’s Responsible Business 
Report for 2020 (pages 48 to 52). 
In addition, Principal Risks relating to 
climate change are outlined on page 71 
of this report.

In respect of climate change scenario 
planning, the Group is working with Ricardo 
to conduct a detailed modelling exercise 
of a range of climate change scenarios – 
further details of this work stream are 
provided in the Case Study on page 37. 
Ahead of the conclusion of this process with 
Ricardo, the Group has completed a 
qualitative review of two potential climate 
scenarios, which are as follows:

–  2oC scenario (Paris Agreement), with 

an associated increase in government 
regulation compared to today. Under 
this scenario, the Group expects carbon 
pricing in Ukraine to increase to align 
with pricing envisaged under the Paris 
Agreement (US$50-100/t). Based on the 
Group’s Scope 1 and 2 emissions, this 
would equate to an additional C1 cash 
cost of productionA of between US$5 
and US$9 per tonne directly relating to 
carbon costs. In addition, the Group 
expects that the cost of electricity in 
Ukraine will increase during the transition 
to renewables.

–  +3oC scenario, whereby a lack of 

legislative action results in increased 
physical effects of climate change, such 
as increased water stress, as forecast by 
US Aid’s projections for Eastern Europe, 
which envisages prolonged periods 
of drought. The Group uses water 
throughout its operations, in the form of 
dust suppression in mining operations 
and in the wet processing of ores to 
separate contained iron from waste 
material. Any restriction on water use 
would potentially require additional 
capital investment to adjust existing 
mining practices and reconfigure the 
Group’s ore processing flow sheet. 

The Group is currently conducting a 
process with environmental consultants 
Ricardo that is reviewing three different 
climate change scenarios and the Group will 
publish the results of this climate change 
modelling following the conclusion of this 
process later in 2022.

Climate change risks

In respect of climate change, the Group 
considers this to be a Principal Risk, and 
details of this are provided on page 71 of 
this report. The Group also considers that 
climate change poses opportunities to the 
Group as well as risks, since the Group 
produces a form of iron ore that is known 
to reduce emissions for steelmakers when 
used instead of more commonly traded 
forms of iron ore. A full breakdown of the 
Group’s approach to climate change risks 
and opportunities is presented on pages 48 
to 52 of the Group’s Responsible Business 
Report for 2020, which is available on the 
Group’s website (www.ferrexpo.com).

Climate change represents both a material 
risk and opportunity to the Group in how it 
is shaping the global steel industry, as 
described in the Market Review section 
(Green Steel) on page 15. In response to this 
global trend towards lower emissions 
steelmaking, the Group has commenced 
production of higher grade (67% Fe) direct 
reduction iron ore pellets, which are used in 
lower carbon forms of steelmaking – see the 
Case Study on page 10 of this report for 
more information. The transition to 
producing direct reduction pellets will be 
led by market factors as the Group’s 
customers pivot to production processes 
that will require the use of this pellet type. 
In order to produce greater volumes of 
direct reduction pellets, the Group is 
investing in its operations to increase 
capacity and operational flexibility, as 
described in the Growth Plans section 
of this report (page 28).

The Group is investing in reducing its 
greenhouse gas emissions throughout its 
business. The Group is undertaking a range 
of projects to decarbonise its mining 
operations, with diesel consumption from 
mining representing 40% of the Group’s 

Scope 1 emissions in 2021 (2020: 40%), and 
an overview of these projects is provided on 
page 29 of this report. 

The Group has been utilising biofuels 
(sunflower husks) as a partial substitute for 
natural gas consumption in its pelletiser 
since 2015, with this activity having the 
benefit of reducing the Group’s Scope 1 
emissions as well as reducing the Group’s 
exposure to the availability and pricing of 
natural gas. In 2021, the Group substituted 
18% of the pelletiser’s energy requirements 
with sunflower husks (2020: 25%), with this 
level of consumption expected to increase 
in future years as the Group’s understanding 
of producing direct reduction pellets 
increases.

In 2020, the Group commenced a clean 
power purchasing programme, aimed at 
utilising new legislation in Ukraine that 
enabled the purchase of electricity from 
selected producers. As a result of this 
programme, the Group reduced its Scope 2 
emissions footprint on a per tonne basis by 
40% in 2021 (see page 36 for more details). 

Compliance Statement (FCA’s 
Listing Rule 9.8.6(8)R)

In line with the current UK listing Rules 
requirements, we have included climate 
related financial disclosures consistent with 
the four TCFD pillars and 11 recommended 
disclosures. The table opposite provides a 
summary of the Group’s climate-related 
financial disclosures, with these disclosures 
intended to be in accordance with the 
recommendations by the TCFD. The 
location of further information regarding the 
Group’s climate change disclosures is 
presented in the table opposite as well as in 
the Group’s Responsible Business Reports, 
which are available at the Group’s website 
(www.ferrexpo.com). 

Throughout the year, Ferrexpo has made a 
number of steps to progress its reporting 
of climate change topics in order to fully 
comply with TCFD recommended 
disclosures. Where full compliance is yet 
possible, disclosure is included as to the 
various work streams that are underway 
to facilitate full compliance.

38

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTSummary disclosure against TCFD recommendations

Strategy

Climate-related risks 
and opportunities over the 
short, medium and long term

Impact on the Ferrexpo 
business, strategy and 
financial planning

Climate change is considered to be a Principal Risk to the Group, and this risk is detailed on page 71 of this 
report, alongside risk mitigation actions. The risks and opportunities relating to climate change and their 
effect on the Group’s operations are outlined in detail in the Group’s Responsible Business Report, which 
is available on the Group’s website. These include transition risks and physical risks associated with the 
transition to a lower carbon economy. The time horizon for these risks and opportunities to emerge are 
also described being short-term (less than 2 years), medium-term or long-term (greater than 10 years). 
The Group’s Risk Management Process is outlined on page 54 of this report.

The Group has incorporated climate change into its strategic planning and is currently pivoting its production 
base towards direct reduction pellets as a consequence of this process, as discussed on page 10 (Case 
Study: The Importance of Iron Ore Pellets) and page 15 (Market Review, Future Trends: Green Steel). The 
Group has incorporated climate change into its financial modelling through the establishment of an internal 
cost of carbon, which has been used when evaluating capital investment projects during the year. Please see 
the Corporate Governance Report (page 88) and Principal Risks Section (pages 56 to 72) for more 
information on the Group’s approach to evaluating the impact of climate change on its business.

Resilience based on 
climate change scenarios

The Group is conducting a detailed climate change modelling exercise with environmental consultants 
Ricardo, which is a process that is expected to complete later in 2022. The Group has conducted scenario 
analysis as presented in this report based on two climate change scenarios – see page 38 for more details.

Governance

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

Management’s role 
in assessing risks 
and opportunities

Risk management

Processes for identifying, 
assessing and managing 
climate-related risks

The Board of Directors has ultimate oversight of the Group’s strategy, including its approach to the effect 
of climate change on the Group’s business model. Climate change was a standing agenda item at all five 
scheduled Board meetings throughout the year. Further details of the Board’s consideration of climate 
change and its oversight of the Group’s goals and targets for addressing climate change are on page 88. 
The HSEC Committee has been delegated management of climate change risk, which includes three 
members of the executive management team, and reports the Group’s progress on climate change related 
matters to the Board of Directors. Independent Non-executive Director Ann-Christin Andersen is Chair of 
the HSEC Committee, which met four times during the year and climate change has been a standing agenda 
item at all scheduled HSEC Committee meetings throughout the year. 

The Board is accountable for the long-term stewardship of the group. The Board has delegated oversight of 
climate change related activities to the HSEC Committee. The Group’s executive management team monitors 
and assesses climate-related risks through its risk monitoring activities as part of the Group’s Finance, Risk 
Management and Compliance Committee, which typically meets ten times a year. Risks relating to climate 
change are determined in the same way as other principal and emerging risks, and the relative significance  
of climate risks is assessed based on monetary impact, probability, maximum foreseeable loss, trend and 
mitigating actions. A summary of the Group’s approach to risk identification and risk mitigation activities 
is provided on pages 54 to 55 of this report. 

The Group regularly assesses risks applicable to the Group through its Finance, Risk Management and 
Compliance Committee, which assesses risks based on the probability of occurrence and severity of impact 
should an event occur. An overview of the Principal Risks facing the Group, and the risk mitigation measures 
that the Group has put in place in relation to these, is provided on pages 56 to 72, with climate change 
identified as a Principal Risk and detailed on page 71 of this report. Within the topic of climate change, 
the Group’s management has identified specific risks and opportunities relating to climate change, 
ranging from policy and legal topics, physical effects, emerging technologies, market factors and 
reputational differentiators.

How Ferrexpo integrates 
these risks into the Group’s 
overall risk management

Ferrexpo’s governance relating to climate change risks has been designed to ensure that the management of 
the financial risks from climate change are integrated across the whole governance system and embedded 
into the existing risk management framework. The Group’s approach to assessing and managing risk, 
including climate-related risks, is described on page 54.

Metrics and targets

Metrics used to assess 
climate-related risks and 
opportunities 

Ferrexpo’s approach to managing its performance with respect to climate change is to fully integrate climate 
change into the Group’s overarching strategy to grow production of direct reduction pellets, which have a 
lower Scope 3 footprint for the Group, as well as decarbonise the key elements of the Group’s production 
process, with consumption of diesel, electricity and natural gas collectively accounting for 90% of the 
Group’s Scope 1 and 2 emissions. Details of projects to reduce consumption of each of these consumables 
are provided on pages 29 and 38.

Greenhouse gas emissions

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

Targets

Details of the Group’s targets for reducing Scope 1 and 2 emissions are provided on page 36 of this report. 
Approximately 90% of the Group’s Scope 3 emissions relate to the conversion of the Group’s products to 
steel, with the emissions from this process primarily governed by the type of iron ore pellet that the Group 
produced – see the Case Study on page 10 for more information. The Group will be in a position to establish 
Scope 3 emissions targets once its technical understanding of producing direct reduction pellets has been 
further established.

Ferrexpo plc Annual Report & Accounts 2021

39

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued
WORKFORCE DEVELOPMENT 
AND INCLUSION
Ferrexpo’s workforce comprises over 10,000 
employees and contractors, making it one of the 
largest employers in the region. 

Image: Ferrexpo strives to 
promote female participation in 
atypical roles. Pictured here 
is welder Oksana Kisilyova, who 
works at Ferrexpo Poltava Mining.

Through the Group’s employee engagement 
initiatives, and through providing training 
and development, the Group aims to foster 
a positive and inclusive culture within 
its organisation.

Training and development

With an employee workforce of over 5,000 
men and over 2,000 women, the Group is a 
substantial employer in central Ukraine, with 
the Group accounting for 4% of Ukraine’s 
export revenues in 2021 (2020: 3%). The 
Group has a long-held belief that it can only 
deliver strong financial results through a 
close relationship with its workforce, which 
can only be fostered through a strong 
programme for workforce development. 
During the year, the Group held 6,442 
training courses for employees (2020: 
6,863), with a further 931 training courses 
provided to contractors (2020: 490). The 
focus of this training remains primarily 
safety and skills training, with 99% of 
Ferrexpo’s employees having an annual 
training and development review in 2021 
(2020: 86%).

Employee wellbeing

Over the course of the past year the Group 
has increased its focus on the health and 
wellbeing of its workforce with the 
continuation of the global Covid-19 

pandemic in 2021. Ferrexpo understands 
that as a responsible employer, the Group’s 
interaction with its workforce goes beyond 
basic safety, and through this approach, the 
Group intends to foster a constructive and 
positive working environment. 

A positive culture is achieved through 
projects such as the Employee Wellbeing 
Programme, which provides training on soft 
skills such as courses to help people identify 
the signs of burnout as well as training in 
financial literacy, to provide people with the 
tools required for managing the stresses of 
modern life, which have been magnified by 
the global pandemic. As an example of the 
work carried out in this area, the Group has 
recently worked to instil a culture at its 
operations of not contacting colleagues for 
work reasons after hours or at weekends, to 
establish a strong work-life balance for the 
Group’s workforce in Ukraine. 

Diversity, equity and inclusion

The development of the initiatives outlined 
here has been the product of the Group 
appointing a Diversity, Equity and Inclusion 
(“DEI”) Officer in 2021, and the Group’s 
inaugural DEI survey, gathering responses 
from over 600 employees to help establish 
a 360-degree DEI strategy and promote 
equal opportunities for all employees 
going forward.

40

Ferrexpo plc Annual Report & Accounts 2021

A new programme to promote inclusivity 
amongst different age groups was launched 
in May 2021 with the Group’s “STEM 
Streamers” programme, which attracted 
90 local students aged 14-18 from local 
schools. Children were invited to participate 
in a one-day workshop event consisting of 
interactive talks and activities to promote 
inclusivity, gender equality, and tackling 
stereotypes within society. Other events 
in the same month included Ferrexpo 
representatives participating in a panel 
discussion on diversity and inclusion at the 
People Management Conference, held in 
Kyiv in May 2021, as well as events held at 
schools in Ferrexpo’s local communities.

It is a legal requirement in Ukraine for 
companies of Ferrexpo’s size to ensure 
that 4% of their workforces in Ukraine are 
registered as disabled, with this regulation 
deliberately designed to aid those with 
disabilities. Ferrexpo is proud to adhere 
to this legislation, with 4.4% of employees 
in Ukraine having a registered disability 
in 2021 (2020: 4.3%).

Local recruitment for sustainable 
communities

Ferrexpo benefits from having a location 
close to well-established communities, with 
strong educational facilities for providing 
high calibre individuals to work at its 
operations. In 2021, the Group was able 
to source 96% of new recruits from local 
communities (2020: 85%). In management 
roles, the same trend is also evident, with 
84% of newly recruited managers coming 
from local communities (2020: 60%).

The Group regularly recruits apprentices 
and provides bursaries to students to plan 
for the future, with a total of 98 sponsored 
learners in 2021 (2020: 135). Through the 
“Dual Education” programme, the Group 
offers opportunities to students wishing to 
learn practical, on-the-job skills, whilst 
continuing their educational studies. This 
programme alone has helped 62 local 
students begin their careers with Ferrexpo 
since 2019.

STRATEGIC REPORTImage: Ferrexpo representatives collect 
the award for Diversity and Inclusion at the 
HR Pro Awards in Kyiv (November 2021).

CASE STUDY:

PROMOTING DIVERSITY 
THROUGH LEADERSHIP

Given Ferrexpo’s heritage and location in 
Ukraine, the Group is able to call upon a 
highly skilled female population for roles 
throughout its business. As of 31 December 
2021, three of the Group’s eight directors 
were female (37%), and the Group’s 
Executive Committee (“Exco”) consists of 
five males. Of the 43 individuals reporting to 
the Exco, the number of females in this group 
rose to nine in 2021 (representing 20.9%) 
from seven in 2020 (representing 17.9%).

Workforce diversity

%
29.2 

Gender diversity in Ferrexpo’s employee 
workforce in 2021 (2020: 29.2%).

Diversity in management roles
%
20.1 

Women account for 20.1% of Ferrexpo’s 
management roles in 2021 (2020: 18.2%).

“Fe_munity” women in leadership 
programme

Started in 2020, the “Fe_munity” 
programme is a series of training modules 
for high performing female employees within 
Ferrexpo to receive training on a range of 
topics, from business topics such as 
leadership and negotiation, to soft skills for 
developing business networks. The goal 
of this programme is to help identify and 
fast track the careers of high potential 
individuals, to help improve gender diversity 
throughout the management structure of the 
Ferrexpo business. 

Launched in 2020 with an intake of 72 
women, the Group welcomed its second 
intake of 86 participants in 2021, with 
Non-executive Directors Ann-Christin 
Andersen and Fiona MacAulay hosting the 
opening session in Horishni Plavni in 
September 2021.

The Group is already seeing the benefits 
of this programme, with women in 
management roles across the Ferrexpo 
Group increasing by 11% in 2021, rising 
to represent 20.1% of the Group’s total 
management roles (2020: 18.2%), which 
underscores the role of dedicated diversity 
projects such as Fe_munity.

External recognition in 2021

Further to the gains being witnessed 
internally within Ferrexpo’s workforce, 
the Group has received external recognition 
for its efforts in promoting diversity and 
inclusion within its workforce. In November 
2021, the Group won the award for Diversity 
and Inclusion at the HR Pro Awards in Kyiv 
(see picture above), which is an award 
ceremony that promotes the achievements 
of the companies that are contributing to 
raising the level of professional practices in 
Ukraine. In the diversity category, Ferrexpo 
received recognition of its diversity efforts 
from a panel of 30 leading representatives 
of the human resources community in 
Ukraine from across 15 industries.

In addition, the Group was recognised 
in 2021 by a study initiated by the United 
Nations Population Fund, which surveyed 
50 companies across 16 sectors within 
Ukraine. Reviewing family-friendly policies, 
such as the Group’s approach to offering 
parental benefits equally between men 
and women, this study placed Ferrexpo 
in the top four for family-friendly companies 
in Ukraine. 

Ferrexpo plc Annual Report & Accounts 2021

41

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued
COMMUNITY SUPPORT 
AND ENGAGEMENT
Russia’s invasion of Ukraine in 2022 has 
emphasised the importance of working 
with local communities, to help communities 
during this humanitarian crisis.

Russia-Ukraine war (2022)

Following Russia’s invasion of Ukraine in 
February 2022, the Group has moved to 
support both its local communities and 
communities across Ukraine, through a 
dedicated Humanitarian Fund with an 
approved US$12.5 million of funding. 
Through this fund, the Group is able to 
coordinate its response to the humanitarian 
needs of Ukraine both quickly and 
effectively. Numerous projects have been 
approved through this fund, with details 
available on the Group’s website (www.
ferrexpo.com/responsibility/humanitarian-
projects) and recent press releases.

Community support in 2021

In March 2021, the Ferrexpo Charity Fund, 
through which the Group conducts its 
engagement activities in its local 
communities surrounding its operations, 
celebrated its tenth anniversary. The Group 
aims to support local schools, hospitals, 
cultural centres and other public 
institutions, as well as providing direct 
support to individuals in the form of care 
packages for the vulnerable and funding for 
medical procedures that are not available in 
local facilities. The Group also sees sports 
and recreation as a key aspect of both its 
community engagement activities as well as 
employee wellbeing initiatives. As a result, 
the Group has a strong focus on supporting 
local teams and local sports facilities, 
helping to facilitate local sporting events 
and sponsoring local sports men and 
women to compete at national and 
international competitions – see the Case 
Study opposite for more information on this 
area of engagement. The Group is proud of 
the five local athletes that participated in the 
Tokyo Olympics in the summer of 2021 – 
quite an achievement for a city of only 
50,000 people!

Funding of community projects increased 
by 63% to UAH153 million in 2021 
(equivalent of US$6 million), reflecting the 
strong operating performance of the Group, 
and therefore the Group’s ability to reach 
a broader range of local stakeholders. In 
addition, the Group financed UAH24 million 
(equivalent to approximately US$1 million) of 
expenditures through the Group’s Covid-19 

Response Fund, which primarily focused on 
meeting the needs of local hospitals with 
equipment for the treatment of conditions 
that are more prevalent as a consequence 
of Covid-19 infections, such as respirators 
and x-ray equipment for diagnosing 
respiratory conditions, as well as continuing 
the supply of personal protective equipment 
for hospital workers.

As part of its community engagement 
strategy, Ferrexpo aims to support 
Ukrainian cultural events, to preserve 
Ukrainian culture in local communities as 
well as to promote Ukrainian culture 
overseas. Locally, the Group continues to 
assist the Palace of Culture in Horishni 
Plavni, which is a significant resource in 
recording local history and culture in 
Ferrexpo’s local communities. The Group 
also sponsored the exhibition of art by local 
artist Ivan Dryapachenko, along with the 
installation of a statue in commemoration of 
the artist in his home village of Vasylivka. In 
September 2021, Ferrexpo had the honour 
of being able to sponsor the Ukrainian Ballet 
Gala in its performance of “Innovation” at 
the Sadleres Wells Theatre, London, which 
was an event attended by over 1,400 
people, including the Ukrainian Ambassador 
to the UK and guests invited through the 
Ukrainian Embassy in London. Ferrexpo 
also sponsored the Ukrainian Investment 
Roadshow in London in December 2021, 
an event aimed at highlighting Ukraine’s 
investment potential. In December 2021, 
Ferrexpo celebrated the 50th anniversary of 
the twinning of the Japanese city of Kyoto 
and Kyiv with a tree-planting ceremony 
in Kyoto.

Additional local community support projects 
completed in 2021 included the purchase 
of a car for the family doctor covering local 
communities in the Pryshyb region, the 
supply of medical equipment to the 
outpatient clinic in Pyrogy village, 
sponsorship of local football team 
“Geologiya” and refurbishment work of 
community and cultural centres in 
Nova Galeschyna. 

To understand more about Ferrexpo’s 
community support work, please see the 
Group’s website (www.ferrexpo.com/
what-we-do/projects-map/). 

42

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTCASE STUDY:

PROMOTING SPORT FOR THE 
HEALTH AND WELLBEING OF 
LOCAL COMMUNITIES

The Group continued to support a number 
of sporting activities in 2021, to promote 
healthy and balanced lifestyles amongst 
local community members, with well-
documented benefits to both individuals 
and communities alike.

Ferrexpo has long supported the local 
football club “Girnyk-Sport” in the city of 
Horishni Plavni, and, in 2021, the Group was 
pleased to help the club in establishing its 
first women’s teams within its structure, in 
accordance with recent efforts made on a 
national level to promote women’s sports 
in Ukraine, and the club is now recruiting 
female players born between 2011 and 2017 
for these newly established teams. 
Furthermore, Girnyk-Sport has already 
established mixed-gender teams that 
compete in local and national competitions.

The Group is also proud to sponsor the 
local football team “Geologiya Sport Club”, 
who were successful in winning a number 
of regional and national competitions in 
Ukraine – including the Dnipro Cup, Odessa 
Open Cup and Energy Cup championships.

Away from football, the Group promotes 
a range of activities in local communities, 
including the Group’s support for the local 
rowing club, which hosts a number of local 
athletes that have represented Ukraine 
at Olympic, World and European 
championships. The Group is also proud to 
help Horishni Plavni host local and national 
dragon boat competitions on the River 
Dnieper, which is a popular sport in Ukraine.

The Group has long held a close association 
with the local summer camp “Horyzont”, 
pictured opposite, which hosts local 
schoolchildren during the summer months 
and aims to promote healthy lifestyles. The 
Group provided UAH1 million (approximately 
US$35,000) of funding for this project in 
2021 and this represents a relationship that 
has existed for over ten years.

Ferrexpo also helps support the local chess 
club in the local community of Horishni 
Plavni, which was recently renovated with 
assistance from Ferrexpo. 

Image: Children at the local youth Camp 
‘Horyzont’, which Ferrexpo has supported 
for more than ten years.

Ferrexpo plc Annual Report & Accounts 2021

43

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSResponsible Business continued
CORPORATE GOVERNANCE 

Ferrexpo understands the importance of good 
corporate governance for transparency and building 
trust with stakeholders. In 2021, the Group has 
continued to strengthen its approach to corporate 
governance throughout its organisation, from its 
Board of Directors to training programmes for 
operators in Ukraine.

Board structure and appointments

The Board understands the need for a 
balanced and effective Board and senior 
leadership team, in order to operate a 
successful business model. As the Group 
develops as a business, and aligns itself 
towards a new phase of growth, changes 
have been made within the Board and 
senior leadership team to reflect this 
changing environment.

As of early 2022, the Group appointed Jim 
North as CEO on a permanent basis, 
reflecting Mr North’s successful period as 
Interim CEO, with Mr North already 
appointed as an Executive Director. In 
February 2022, Fiona MacAulay was 
appointed as Senior Independent Director, 
meeting a target outlined by the FCA’s 
recent consultation on Board Diversity and 
Inclusion. In March 2021, a further 
Independent Non-executive Director –  
Ann-Christin Andersen – was added to the 
Board. In December 2021, Natalie Polischuk 
was appointed as an Independent Non-
executive Director, who is an economist 
based in Kyiv, Ukraine. 

The above appointments have served to 
increase the number of Independent 
Non-executive Directors to five out of eight 
Board positions. Further details of the steps 
made to enhance corporate governance 
procedures in 2021 can be found in the 
Corporate Governance Report on pages 76 
to 93.

Hampton-Alexander Review

The Hampton-Alexander Review is an 
independent review that was established to 
ensure that talented women at the top of 
business are recognised, promoted and 
rewarded, with a particular focus on female 
representation on FTSE Boards and women 
in senior leadership roles. As a result of this 
work, the Hampton-Alexander Review 
recommends that companies listed within 
the FTSE 350 have at least 33% female 
representation at the Board level, as well as 

33% representation at the senior leadership 
level and those reporting directly into senior 
leaders. As a result of the appointments of 
Ms Andersen and Ms Polischuk in 2021, the 
Group now has 38% female representation 
on its Board, meeting this requirement. The 
same review also recommends that women 
are promoted into senior roles such as the 
Chair, Senior Independent Director and 
Executive Director, and the Group now has 
a female in one of these roles. The Group is 
also focusing on increasing diversity further 
down its organisational structure; further 
details of this work can be found on pages 
40 to 41, and in the Corporate Governance 
Report on pages 100 to 105.

Corporate governance controls

The Group continues to strengthen its 
internal corporate governance controls 
and adapt its processes, further details 
of which are presented in the Corporate 
Governance Report (pages 76 to 133). 
Furthermore, the Group bolstered its 
advisory set-up in January 2021 through 
the appointment of financial advisors 
Liberum, who act to advise both the Board 
and executive management team on 
corporate matters. In addition, BDO LLP 
was appointed in early 2021 as the Group’s 
Sponsor in accordance with the Listing 
Rules to provide advice and guidance on 
certain corporate matters as required.

Stakeholder engagement

The Group’s engagement with its 
stakeholders is summarised in the Business 
Model (pages 16 to 17, and in more detail on 
pages 46 to 49). Highlights of stakeholder 
engagement activities during 2021 include 
the hosting of a number of shareholder and 
analyst events in London with the 
assistance of the Group’s advisors Liberum 
Capital, the employee engagement forum 
held at site in September 2021, and the 
Group’s Family Day in July 2021 for 
engaging directly with local communities in 
Ukraine. The Group is actively working to 

44

Ferrexpo plc Annual Report & Accounts 2021

increase its engagement with a broader 
range of stakeholder groups, in order 
to understand stakeholder needs and 
communicate effectively on a range of 
topics. The Group intends to further 
broaden its engagement with its 
stakeholders in the year ahead, working 
with its advisors in London and Kyiv to 
achieve this goal.

Related party matters

The Group has a controlling shareholder 
that also has a number of different 
businesses with which the Group has a 
commercial relationship. In order to maintain 
strong levels of corporate governance, and 
to ensure that these business relationships 
are conducted on an arm’s length basis, 
the Group has both the Committee of 
Independent Directors at the Board level 
and the Executive Related Party Matters 
Committee at the management level.

As discussed in the Group’s 2020 Annual 
Report and Accounts, the Committee of 
Independent Directors (“CID”) has 
previously conducted a review in connection 
with the Group’s sponsorship arrangements 
with FC Vorskla and concluded its enquiry 
in March 2021. Arrangements were put in 
place by Kostyantin Zhevago and his 
associated entities, which are required to be 
executed by 31 July 2022. As of the date of 
this Annual Report and Accounts, the CID 
understands that these arrangements have 
not yet been completed.

STRATEGIC REPORT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: 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 2020 available on the Group’s website and the report for 2021 expected to be released in the coming months.

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 35-36)
Energy consumption (page 36) 
www.ferrexpo.com/responsibility/protecting-environments/

Health and safety (pages 32-33)
Learning and development (pages 40-41)
Diversity, equity and inclusion (pages 40-41)
www.ferrexpo.com/responsibility/workforce-development/
www.ferrexpo.com/responsibility/safety-performance/

Risks

Principal risks, 
pages 56-72

Principal risks, 
pages 56-72

Human rights

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

Diversity, equity and inclusion (pages 40-41)
Ferrexpo Code of Conduct 
www.ferrexpo.com/about-ferrexpo/corporate-governance/
policies-and-standards

Principal risks, 
pages 56-72

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 
–  Whistleblowing Policy

Principal risks and 
impact on business 
activities

Non-financial KPIs

Image: Ferrexpo is proud of its 20 years of 
collaboration with local partner Zeppelin, 
which has trained over 200 local engineers 
and maintainers to provide maintenance of the 
Group’s Caterpillar mining equipment.

Chair’s Statement (pages 2-3)
Social engagement (pages 42-43)
www.ferrexpo.com/responsibility/supporting-communities/
www.ferrexpo.com/responsibility/stakeholder-engagement/

Principal risks, 
pages 56-72

Chair’s Statement (pages 2-3)
Governance (page 44)
Governance Report (pages 76 to 133)
www.ferrexpo.com/about-ferrexpo/corporate-governance/
policies-and-standards/
www.ferrexpo.com/whistleblowing/

Business model (pages 16-17)
Risk management (pages 54-55) 
Viability Statement (pages 73-75) 
Going Concern Statement (page 131)

Key Performance Indicators (pages 20-21)

Principal risks, 
pages 56-72

Principal risks, 
pages 56-72

Ferrexpo plc Annual Report & Accounts 2021

45

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSReview of Stakeholder    
Engagement Activities

EMPLOYEES AND CONTRACTORS

CUSTOMERS

SUPPLIERS

COMMUNITIES

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

–  2021 employee engagement 

–  To foster a strong corporate 

survey.

culture.

–  Training and development.

–  To promote workforce 

–  Annual performance reviews.

–  Engagement via Labour 

Council.

–  Compliance efforts and 

Integrity Line.

–  Board workforce 

engagement session.

development and alignment 
with corporate values.

–  To promote good corporate 

governance.

–  Relationship management, 
adapting in an environment 
whereby Covid-19 limits 
face-to-face interactions.

–  Continuous dialogue with 
customers around each 
shipment, particularly for 
new relationships and new 
products.

–  Contract negotiations for 
long-term contracts.

–  To develop strong, long-term 

–  Relationship management.

–  To develop mutually 

–  Regular and consistent 

–  A strong and healthy link 

relationships that are 
mutually beneficial.

–  To promote sustainability 

throughout the value chain.

–  Regular feedback.

–  Contract negotiations.

beneficial, long-term 

relationships, supporting 

the Group’s operations.

–  To promote sustainability 

engagement provided 

with local communities is 

directly through the Group’s 

essential for sustainable 

operating entities or Ferrexpo 

production and executing 

Charity Fund.

future growth plans.

throughout the value chain.

–  The Group’s Covid-19 

Response Fund, with 

US$3.5 million of 

approved funding.

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

–  Safe production.

–  Fatality-free operations 

–  High quality products.

–  Employee wellbeing.

–  Workforce development.

–  A diverse and inclusive 
working environment.

–  Fair pay.

in 2021.

– 

Injury rates of 0.41 per million 
hours, materially below the 
Group’s historical average.

–  Training department 

providing 6,442 courses 
in 2021.

–  Consistent product quality.

–  Sustainability throughout the 

value chain.

–  Regular discussions between 
the Group’s representatives 
and customers.

–  Effective communication 
between Ferrexpo’s 
marketing and operations 
teams.

–  High quality goods and 

–  Where possible, goods and 

–  High levels of local 

services.

–  High standards of employee 

welfare throughout the 

Group’s supply chain.

–  Sustainability throughout the 

value chain.

–  Good corporate governance.

services are sourced from 

local providers. The Group 

typically sources over 85% 

of goods and services from 

providers within Ukraine.

–  95% of contracts signed 

refer to Code of Conduct 

for Suppliers (2020: 87%).

employment.

–  High level of engagement 

–  Over 98% of employees from 

Ukraine, with majority based 

in local communities.

with local businesses.

–  The Group typically sources 

–  Engagement with local 

authorities and local groups 

to provide direct support 

over 85% of goods and 

services from Ukrainian 

companies.

where it is needed.

– 

Including Covid-19 support, 

UAH177 million of funding for 

local communities (2020: 

UAH158 million).

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 

Further plans for engaging 

How quality of engagement 

Further plans for engaging 

is assessed

in 2022

is assessed

in 2022

–  Performance of safety 

metrics relative to peers 
and Ferrexpo’s historical 
performance.

–  Strong working relationship 
with unions at operations 
in Ukraine.

– 

Increasing levels of diversity 
within all levels of workforce.

–  Maintain safety and support 
individuals’ wellbeing during 
Russia’s war with Ukraine.

–  Employee engagement 

survey.

–  Continued workforce 

development.

–  Programmes to further 

increase workforce diversity.

–  Longevity of customer 

–  Continue relationships with 

–  Adoption of Code of Conduct 

–  Maintain supplier 

–  Direct feedback through 

–  Humanitarian Fund with 

relationships.

long-term customers.

–  High proportion of sales 

–  Continue to maintain 

under long-term contracts 
(2021: 97%).

consistent and high quality 
supply of products.

–  Continue to publish clear and 
comprehensive sustainability 
information in Responsible 
Business Reports.

for Suppliers.

–  Reports to the Group’s 

relationships during the 

Russian invasion of Ukraine.

community support officers.

US$12.5 million of approved 

–  Quarterly town hall meetings 

funding (as of 21 April 2022).

Integrity Line, maintaining 

–  Maintain high level of goods 

with General Directors.

–  Focus on humanitarian 

good corporate governance 

and services from local 

standards.

providers.

–  Further adoption of 

Ferrexpo’s Code of Conduct 

for Suppliers.

assistance in 2022 in 

response to the Russian 

invasion of Ukraine.

–  Employee engagement 

survey.

46

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTEMPLOYEES AND CONTRACTORS

CUSTOMERS

SUPPLIERS

COMMUNITIES

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

–  2021 employee engagement 

–  To foster a strong corporate 

–  Relationship management, 

–  To develop strong, long-term 

–  Relationship management.

–  Regular feedback.

–  Contract negotiations.

survey.

culture.

–  Training and development.

–  To promote workforce 

adapting in an environment 

whereby Covid-19 limits 

face-to-face interactions.

relationships that are 

mutually beneficial.

–  To promote sustainability 

with corporate values.

–  Continuous dialogue with 

throughout the value chain.

–  Annual performance reviews.

–  Engagement via Labour 

Council.

–  Compliance efforts and 

Integrity Line.

–  Board workforce 

engagement session.

development and alignment 

–  To promote good corporate 

governance.

customers around each 

shipment, particularly for 

new relationships and new 

products.

–  Contract negotiations for 

long-term contracts.

–  To develop mutually 
beneficial, long-term 
relationships, supporting 
the Group’s operations.

–  To promote sustainability 

throughout the value chain.

–  Regular and consistent 
engagement provided 
directly through the Group’s 
operating entities or Ferrexpo 
Charity Fund.

–  A strong and healthy link 
with local communities is 
essential for sustainable 
production and executing 
future growth plans.

–  The Group’s Covid-19 
Response Fund, with 
US$3.5 million of 
approved funding.

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

–  Safe production.

–  Fatality-free operations 

–  High quality products.

–  Regular discussions between 

–  High quality goods and 

–  Employee wellbeing.

–  Workforce development.

–  A diverse and inclusive 

working environment.

–  Fair pay.

in 2021.

– 

Injury rates of 0.41 per million 

hours, materially below the 

Group’s historical average.

–  Training department 

providing 6,442 courses 

in 2021.

–  Consistent product quality.

–  Sustainability throughout the 

value chain.

the Group’s representatives 

and customers.

–  Effective communication 

between Ferrexpo’s 

marketing and operations 

teams.

services.

–  High standards of employee 

welfare throughout the 
Group’s supply chain.

–  Sustainability throughout the 

value chain.

–  Good corporate governance.

–  Where possible, goods and 
services are sourced from 
local providers. The Group 
typically sources over 85% 
of goods and services from 
providers within Ukraine.

–  95% of contracts signed 
refer to Code of Conduct 
for Suppliers (2020: 87%).

–  High levels of local 

employment.

–  High level of engagement 
with local businesses.

–  Engagement with local 

authorities and local groups 
to provide direct support 
where it is needed.

–  Over 98% of employees from 
Ukraine, with majority based 
in local communities.

–  The Group typically sources 
over 85% of goods and 
services from Ukrainian 
companies.

– 

Including Covid-19 support, 
UAH177 million of funding for 
local communities (2020: 
UAH158 million).

How quality of engagement 

Further plans for engaging 

How quality of engagement 

Further plans for engaging 

is assessed

in 2022

is assessed

in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

–  Performance of safety 

–  Maintain safety and support 

–  Longevity of customer 

–  Continue relationships with 

–  Adoption of Code of Conduct 

–  Maintain supplier 

–  Direct feedback through 

–  Humanitarian Fund with 

metrics relative to peers 

and Ferrexpo’s historical 

performance.

individuals’ wellbeing during 

relationships.

long-term customers.

Russia’s war with Ukraine.

–  High proportion of sales 

–  Continue to maintain 

–  Employee engagement 

under long-term contracts 

consistent and high quality 

–  Strong working relationship 

survey.

(2021: 97%).

supply of products.

with unions at operations 

in Ukraine.

–  Continued workforce 

development.

– 

Increasing levels of diversity 

within all levels of workforce.

–  Programmes to further 

increase workforce diversity.

–  Continue to publish clear and 

comprehensive sustainability 

information in Responsible 

Business Reports.

for Suppliers.

–  Reports to the Group’s 

relationships during the 
Russian invasion of Ukraine.

Integrity Line, maintaining 
good corporate governance 
standards.

–  Maintain high level of goods 
and services from local 
providers.

community support officers.

–  Quarterly town hall meetings 

with General Directors.

–  Further adoption of 

Ferrexpo’s Code of Conduct 
for Suppliers.

US$12.5 million of approved 
funding (as of 21 April 2022).

–  Focus on humanitarian 
assistance in 2022 in 
response to the Russian 
invasion of Ukraine.

–  Employee engagement 

survey.

Ferrexpo plc Annual Report & Accounts 2021

47

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSReview of Stakeholder    
Engagement Activities continued

ENVIRONMENT

GOVERNMENT

INVESTORS

CAPITAL PROVIDERS

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

–  Emissions reduction 

programme.

–  Water recycling and 

initiatives to reduce water 
consumption.

–  Biodiversity baseline studies.

–  Waste recycling programme.

–  A healthy natural ecosystem 
is essential for sustainable 
production.

–  Strong environmental 
credentials positively 
influence all stakeholder 
groups, with the opposite 
also applicable.

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

–  Governments are central to 
operating a successful 
business, for example: 
through providing operating 
licences, whilst also 
providing a platform for 
effective community 
engagement.

–  Yearly reporting suite.

–  To foster a strong 

–  Regular dialogue with banks, 

–  To maintain a successful 

–  AGM (May) and post-AGM 

engagement.

– 

Investor roadshows for both 

financial results and 

corporate governance.

–  Analyst round table event 

in November 2021.

understanding between the 

ratings agencies and other 

Group and its investors, with 

lenders.

–  Provision of information, 

including both internal 

investors understanding the 

Group’s business model and 

the Group understanding 

investor concerns and 

priorities.

updates and market updates 

–  To enable future investment 

such as analyst research on 

in the business.

Ferrexpo and commodities.

working relationship for 

existing and future debt 

facilities, and other sources 

of capital.

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

–  Producing iron ore products 

–  16% reduction in carbon 

that facilitates overall 
emissions reductions in the 
global steel value chain.

–  Emissions reductions at 
operations (direct and 
indirect emissions).

–  Reduced environmental 

footprint.

emissions per tonne in 2021 
(Scope 1 and 2 basis).

–  Maintain high level of water 
recycling within plant (2021: 
95%).

–  Second year of biodiversity 
project for reintroducing 
native species of fish in the 
Dnieper River.

–  Operating within a consistent 
and understood financial and 
legal framework.

–  Taxes and royalties of 

US$281 million paid in 2021 
(2020: US$100 million).

–  Payment of taxes and 

royalties.

–  Companies providing 

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

–  Sustainability in the 

value chain.

–  Total taxes and royalties 
since IPO of more than 
US$1.3 billion.

–  Workforce of over 10,422 
in 2021 (2020: 10,911).

–  Clear and transparent 

–  Financial advisors Liberum 

–  Clear, consistent and 

–  Provision of market research 

reporting of the Group’s 

appointed in January 2021.

transparent reporting of the 

and credit ratings research 

activities.

–  Reporting that is 

–  Corporate and financial 

communications advisors 

independently assured and 

Tavistock Communications 

Group’s operations, financial 

on the Group, commodity 

results and Responsible 

research and country 

Business activities.

research.

comparable to peers.

appointed in March 2021.

–  Providing information that is 

–  Generating long-term, 

–  First analyst round table 

sustainable value.

directly comparable to peer 

group reporting.

event held since changes in 

Group’s management (event 

held in November 2021).

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 

Further plans for engaging 

How quality of engagement 

Further plans for engaging 

is assessed

in 2022

is assessed

in 2022

–  Continued strong 

–  Maintain Horishni Plavni’s 

–  Continued government 

support at local and national 
level in Ukraine.

–  Working with government to 
disperse funds through 
Ferrexpo Humanitarian Fund.

–  Feedback received from 

–  Clear communication with 

–  Successful repayment of 

–  Continued dialogue with 

shareholders, analysts and 

investors throughout the 

US$221 million of debt in 

capital provider space.

other external parties.

Russian invasion of Ukraine.

2021 (2020: US$148 million).

performance in assessments 
of air quality in Ferrexpo’s 
local community of Horishni 
Plavni, placing first in 
2021 study.

–  Continued reduction in 

withdrawal of water from 
local water supply network.

–  Reduction in blue-green 

algae in Dnieper River as a 
result of biodiversity project 
reintroducing native fish.

place as having the cleanest 
air of all 39 industrial cities 
in Ukraine.

–  Further reduce carbon 
emissions, continuing 
trajectory towards carbon 
neutral pellet production.

–  Third year of biodiversity 

project with Dnieper River, 
contingent on resolution of 
Russia-Ukraine conflict.

48

Ferrexpo plc Annual Report & Accounts 2021

–  Continued government 

–  Working with local 

–  Market valuation of the 

– 

Institutional investor 

–  Full repayment and 

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

government to ensure the 
health and wellbeing of local 
communities.

Group relative to its 

peer group.

roadshows.

–  Broadening of investor 

groups reached.

–  Continued support during 

pandemic through dedicated 
Covid-19 Response Fund.

–  Continued investments in 
operations, workforce and 
communities.

cancellation of the Group’s 

Pre-Export Finance (“PXF”) 

Facility.

–  Continuation of existing 

relationships with domestic 

and international banks.

STRATEGIC REPORTENVIRONMENT

GOVERNMENT

INVESTORS

CAPITAL PROVIDERS

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

Engagement activity in 2021

Reasons behind engagement

–  Emissions reduction 

–  A healthy natural ecosystem 

–  Meetings, calls and emails 

–  Governments are central to 

–  Yearly reporting suite.

–  To foster a strong 

programme.

–  Water recycling and 

is essential for sustainable 

with government officials 

production.

across jurisdictions in which 

operating a successful 

business, for example: 

initiatives to reduce water 

–  Strong environmental 

the Group operates.

through providing operating 

consumption.

–  Biodiversity baseline studies.

–  Waste recycling programme.

credentials positively 

influence all stakeholder 

groups, with the opposite 

also applicable.

licences, whilst also 

providing a platform for 

effective community 

engagement.

–  AGM (May) and post-AGM 

engagement.

– 

Investor roadshows for both 
financial results and 
corporate governance.

–  Analyst round table event 

in November 2021.

understanding between the 
Group and its investors, with 
investors understanding the 
Group’s business model and 
the Group understanding 
investor concerns and 
priorities.

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

–  Provision of information, 
including both internal 
updates and market updates 
such as analyst research on 
Ferrexpo 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 Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

What matters most

The Group’s response

–  Producing iron ore products 

–  16% reduction in carbon 

–  Operating within a consistent 

–  Taxes and royalties of 

that facilitates overall 

emissions per tonne in 2021 

and understood financial and 

US$281 million paid in 2021 

emissions reductions in the 

(Scope 1 and 2 basis).

legal framework.

(2020: US$100 million).

global steel value chain.

–  Maintain high level of water 

–  Payment of taxes and 

–  Total taxes and royalties 

–  Emissions reductions at 

recycling within plant (2021: 

royalties.

–  Companies providing 

since IPO of more than 

US$1.3 billion.

operations (direct and 

indirect emissions).

95%).

–  Reduced environmental 

project for reintroducing 

local communities, as well as 

in 2021 (2020: 10,911).

–  Second year of biodiversity 

employment and support to 

–  Workforce of over 10,422 

footprint.

native species of fish in the 

export revenues.

Dnieper River.

–  Sustainability in the 

value chain.

–  Clear and transparent 

reporting of the Group’s 
activities.

–  Reporting that is 

independently assured and 
comparable to peers.

–  Generating long-term, 
sustainable value.

–  Financial advisors Liberum 
appointed in January 2021.

–  Corporate and financial 

communications advisors 
Tavistock Communications 
appointed in March 2021.

–  First analyst round table 

event held since changes in 
Group’s management (event 
held in November 2021).

–  Clear, consistent and 

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

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

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

How quality of engagement 

Further plans for engaging 

How quality of engagement 

Further plans for engaging 

is assessed

in 2022

is assessed

in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

How quality of engagement 
is assessed

Further plans for engaging 
in 2022

–  Continued strong 

–  Maintain Horishni Plavni’s 

–  Continued government 

–  Working with government to 

performance in assessments 

place as having the cleanest 

support at local and national 

disperse funds through 

of air quality in Ferrexpo’s 

air of all 39 industrial cities 

level in Ukraine.

Ferrexpo Humanitarian Fund.

–  Feedback received from 

shareholders, analysts and 
other external parties.

–  Clear communication with 
investors throughout the 
Russian invasion of Ukraine.

–  Successful repayment of 
US$221 million of debt in 
2021 (2020: US$148 million).

–  Continued dialogue with 
capital provider space.

local community of Horishni 

in Ukraine.

Plavni, placing first in 

2021 study.

–  Continued reduction in 

withdrawal of water from 

local water supply network.

–  Reduction in blue-green 

algae in Dnieper River as a 

–  Further reduce carbon 

emissions, continuing 

trajectory towards carbon 

neutral pellet production.

–  Third year of biodiversity 

project with Dnieper River, 

contingent on resolution of 

result of biodiversity project 

Russia-Ukraine conflict.

reintroducing native fish.

–  Continued government 

–  Working with local 

support in all corporate and 

government to ensure the 

marketing office locations for 

health and wellbeing of local 

the Group.

communities.

–  Market valuation of the 
Group relative to its 
peer group.

– 

Institutional investor 
roadshows.

–  Broadening of investor 

groups reached.

–  Full repayment and 

cancellation of the Group’s 
Pre-Export Finance (“PXF”) 
Facility.

–  Continuation of existing 

relationships with domestic 
and international banks.

–  Continued support during 

pandemic through dedicated 

Covid-19 Response Fund.

–  Continued investments in 

operations, workforce and 

communities.

Ferrexpo plc Annual Report & Accounts 2021

49

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS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 and briefings in relation to 
corporate governance developments and 
stakeholder engagement. 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 Chief 
Executive Officer 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 2021, are outlined on pages 46 
to 49.

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 18 to 19.

Key decisions made in 2021

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 88 to 90.

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.

50

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT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

Workforce

Suppliers and 
customers

Community

Environment

High standards of conduct

Key examples

–  Case Study: Shielding the Group’s workforce from Covid-19
–  Responsible Business: Health and Safety Review
–  Responsible Business: Workforce Development and Inclusion

–  Case Study: The importance of steel
–  Case Study: The importance of proximity to key markets

–  CEO’s Review – Supporting Local Communities
–  Responsible Business: Community Support and Engagement

–  Case Studies: The importance of iron ore pellets and high grade iron ores
–  Case Study: Decarbonisation of mining fleets
–  Case Study: External assurance – providing trust in sustainability progress
–  Environmental Review, Climate Change and TCFD Reporting

–  HSEC Committee Chair’s Review
–  Responsible Business: Health and Safety Review
–  Case Study: External assurance – providing trust in sustainability progress
–  Case Study: Promoting diversity through leadership
–  Responsible Business: Corporate Governance

Investors

–  Financial Review – Delivering Value Through Investment
–  Case Study: Maintaining a Low Cash Cost of Production
–  Case Study: Mining Fleet Automation

Image: a CAT 793D being loaded at Ferrexpo’s 
Yeristovo mine in 2021. 

Page

11

32-33

40-31

3

15

10

42-43

10 and 14

29

34

35-39

30-31

32-33

34

41

44

22-24

25

27

Ferrexpo plc Annual Report & Accounts 2021

51

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSection 172 Statement continued

CASE STUDY:

SHAREHOLDER  
RETURNS POLICY

Ferrexpo has always been, and remains, a 
company focused on growth, both in the form of 
production volumes and product quality, 
and recognises the importance of delivering 
shareholder returns throughout the commodity 
cycle, as established through the Group’s track 
record since listing. 

Following discussions with investors and other 
market participants, it was identified that the 
Company could benefit by adopting a 
sustainable, predictable, consistent and 
measurable dividend policy. The adoption 
of such a policy would benefit all of the 
shareholders of the Company and would also put 
the Company in alignment with its industry peers.

The Board therefore embarked on a process 
to design and implement a new shareholder 
returns policy. As part of the process, an industry 
analysis was undertaken and the Board reviewed 
a variety of potential metrics to be adopted in the 
policy, including Free Cash Flow, EBITDA and 
Earnings. Input from the Group’s financial 
advisers was also obtained as to the most 
appropriate financial metric for the Group, 
taking into account the policies adopted by 
other metals and mining companies and general 
investor expectations.

As part of designing the shareholder returns 
policy, the Board considered the interests of 
investors but also had regard to other matters as 
set out in Section 172, including ensuring that 
there was an appropriate balance between 
shareholder returns and retaining capital for 
future growth of the Group – which is in the 
long term interests of the Group. It was also 
important to ensure that the level of returns as set 
out in the policy would not impact the Group’s 
ability to meet its commitments towards 
suppliers, customers, employees and others, 
and maintaining sufficient flexibility in the policy.

The Board concluded that free cash flow was the 
most appropriate financial metric for the Group to 
use in its shareholder returns policy given that it 
is net of capital investment and financing 
activities, and therefore does not restrict the 
Group from continuing its focus on investing in its 
operations in Ukraine and its wider logistic 
network. Investors are one of the Group’s key 
stakeholders and the Board determined that 
adopting a formal policy is a clear demonstration 
of the Group’s strong commitment to shareholder 
returns throughout the commodity cycle. 

CASE STUDY:

EARLY REPAYMENT  
OF DEBT FACILITY

On 30 June 2021, the Board was pleased to 
announce that it had approved the early repayment 
and cancellation of its outstanding pre-export 
finance facility (PXF facility). The PXF facility 
agreement was signed in 2018 and repayment was 
scheduled to take place quarterly between 2020 
and 2022. As at 31 December 2020, the Group had 
US$257m of debt drawn on its PXF facility. 

The Board’s decision to repay the PXF early was 
largely driven by the additional liquidity available to 
the Company due to favourable iron ore market 
conditions. As part of its decision making process 
the Board was required to balance a number of 
different factors, including the need to maintain 
sufficient liquidity, future operational and capital 
expenditure, and also the desire to deliver 
increased levels of shareholder returns at 
a time of strong performance by the Group. 

Overall the Board determined that through 
previous investments, and the Group’s ongoing 
growth program, the Group has been able to take 
advantage of the strong iron ore market in 2021, 
with particular demand for high-grade ores such 
as the Group’s 65% Fe iron ore pellets. The 
repayment of the PXF brought an end to the 
deleveraging program and leaves the Group well 
positioned to continue to invest in our assets, 
delivering further growth in pellet volumes and 
pellet quality, whilst also continuing to deliver 
returns to shareholders – each of which will 
promote the long term sustainable success 
of the Group. 

The decision to repay the PXF involved 
considering the interests of a number of different 
stakeholders, including the Group’s lending 
banks and investors, and more broadly the 
customers and suppliers of the Group and the 
local community who benefit from the operations 
and investments made by the Group. Ultimately, 
the Board concluded that it was in the best 
interests of the Company and its shareholders 
as a whole to repay the PXF, and that the early 
repayment would not have an adverse impact 
on the interests of other stakeholders.

52

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTCASE STUDY:

ANNOUNCEMENT OF 
DECARBONISATION 
TARGETS

The Board recognises the importance of climate 
change, including acknowledging its impacts on 
the environment and the local communities that 
are a key stakeholder for the Company. This has 
been a long-term focus for the Group, and the 
Group’s iron ore pellets offer our customers the 
opportunity to significantly reduce their 
own carbon emissions.

The Board has appointed environmental 
consultants Ricardo Plc to work with the Group 
to develop science-based decarbonisation targets 
as a second-phase of publishing carbon 
commitments. Ricardo Plc are experts that have 
been helping organisations around the world to 
develop robust and science-based pathways to 
achieving net zero carbon emissions. Through this 
collaboration, the Group expects to advance our 
targets and develop a clear roadmap of reducing 
Scope 1, 2 and 3 emissions, whilst also identifying 
market and regulatory risks and opportunities, 
modelling of climate change scenarios and looking 
at the environmental footprint of a Ferrexpo pellet 
beyond the steelmaking process. As part of this, 
the Group intends to engage with stakeholders in 
2022 with a clear, science-based understanding of 
our carbon journey that lies ahead.

Given the increased focus on climate change, 
including as part of the COP26 conference 
in November 2021 and the decarbonisation targets 
made by the Group’s peers, the Board recognised it 
was important for the Company to provide a clear 
public commitment around its intention to 
decarbonise the Group’s operations. Many of the 
Group’s investors and institutional investor bodies 
also want to see clear commitments from the Group 
to reduce its environmental impact.

After due consideration, the Board agreed that the 
Group undertakes a commitment to achieve 
net-zero carbon emissions from its operations by 
the year 2050. In addition, the Group has made an 
initial commitment to achieve a minimum of a 30% 
reduction in combined Scope 1 and 2 emissions by 
2030, against the Group’s baseline year for 
emissions (2019), in line with our peer group. 
Reducing the Group’s carbon emissions, whilst 
itself being important to reducing the impact of the 
Group’s operations on the environment and the 
local communities surrounding our mines, is also 
important in terms of the Group’s relationships with 
its suppliers, customers and employees many of 
whom are focused on their own environmental 
impacts and expect the Group to do the same 
as part of being a responsible business.

Image: July 2021: Installation of 
5MW solar farm completed. 

Ferrexpo plc Annual Report & Accounts 2021

53

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRisk Management
ASSESSING AND 
MANAGING RISK
Ferrexpo identifies and assesses risks based 
on each risk’s probability of occurrence and the 
potential severity of any event. The Group aims to 
mitigate the potential impact of each risk through 
its management of day-to-day activities, 
taking a prudent approach to risk where possible.

Risk identification 

The process to identify risk areas is 
conducted through each business function 
within the Ferrexpo Group, with senior 
management responsible for conducting 
regular assessments to identify risk in each 
aspect of the Group’s activities. Risks are 
managed locally through the implementation 
of policies and procedures, which are 
maintained by local risk owners that have 
individual responsibilities for specific 
business functions. Risks are reported 
internally through the Group’s risk register 
and assessed against risks identified 
throughout the business on the basis of 
probability of occurrence and the potential 
severity of an event. Through the 
identification of principal risks facing the 
Group, management are able to optimise 
the risk management process through the 
dedication of increased resources to these 
risks, whilst also monitoring other risks for 
increases either in probability or severity. 
The Group considers emerging risks to be 
risks that are newly developing, increasing 
in potential severity of impact or changing 
risks that are difficult to quantify. The risks 
that have been assessed by the Group’s 
management to be the Principal Risks 
facing the Ferrexpo Group are presented 
on pages 54 to 72. 

Risk mitigation

The Group’s management understands that 
risk is an inherent aspect of operating a 
business, and the Group’s executive 
management team and the Board aim to 
mitigate the risks faced by the business 
through prudent decision-making to limit 
the Group’s exposure to risk where 
possible. The Group’s approach to risk 
mitigation for each of the Group’s Principal 
Risks is presented opposite.

Risk governance framework

Risks are reported internally on a monthly 
basis, as part of the Finance, Risk 
Management and Compliance Committee 
(“FRMCC”), with the Group’s senior 
leadership team reviewing the Group-level 
risk matrix, which plots probability against 

Image: inspection of an automated 
CAT 793D in Ferrexpo’s modern 
maintenance facilities at Yeristovo. 

the potential severity of impact, and 
identifying material changes in either 
variable to all of the risks listed. Over 30 
risks are reported to the FRMCC on a 
monthly basis, with each risk attributed a 
potential monetary impact should an event 
occur. The FRMCC reports to the Group’s 
Executive Committee, which in turn reports 
to the Board, which has the ultimate 
responsibility for the Group’s approach to 
risk management. The Audit Committee, 
a sub-committee of the Board, assists the 
Board in its regular monitoring of the risks 
faced by the Group. The Group’s internal 
audit function assists with the process of 
risk review, and conducts ad hoc reviews of 
risk management controls and procedures. 
For more information in relation 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 98.

Risk assessment for 2022

The Principal Risks faced by the Group, as 
assessed by the Group’s management, are 
shown in the risk matrix opposite. The 
overall profile of the risks faced by the 
Group in 2022 has increased relative to 
2021, principally related to risks relating 

to geopolitical tensions between Russia and 
Ukraine. The primary focus of the Group’s 
Principal Risks, as outlined on pages 54 to 
72, are on the ongoing Russia-Ukraine war, 
global market prices for iron ore pellets, 
costs impacting the Group’s profitability 
and climate change.

The ongoing global Covid-19 pandemic 
remains a Principal Risk, with continuing 
infections of this virus both within Ukraine 
and around the world, but the Group notes 
that the severity of recent strains of this 
virus do not appear to be as harmful to 
human health as previous strains. The 
Group continues to monitor the risk profile 
related to Covid-19 for any potential impact 
on operations in Ukraine or any loss 
of ability to distribute and market the 
Group’s products.

Cybersecurity is a risk that has been added 
as a Principal Risk given Russia’s invasion 
of Ukraine in early 2022. Further details of 
the considerations relating to this risk are 
provided on page 70.

54

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT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

Executive Committee

HSEC Committee

–  Supports the Board in monitoring risk  

exposure and risk appetites.

–  Reviews effectiveness of risk management  

and control systems.

 Assesses and mitigates Group-wide risk.

– 
–  Monitors internal controls.

–  Oversees corporate social responsibility 

related matters and performance.

–  Has specific focus on safety and climate 

change related risks.

Finance, Risk Management 
and Compliance Committee

–  Monitors centralised financial 
risk  management structures.
 Monitors Group compliance.

– 

Internal audit function

Operational level

– 

– 

– 

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

 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 
risks could have the greatest severity 
of impact on the Group’s operations 
and viability.

 Please see pages 54 to 72 of 
this report for a full summary 
of Principal Risks 

Key

1.1  Conflict risk

1.2 

 Ukraine country risk

1.3 

 Counterparty risk

2.   Global demand for steel

3.1    Changes in pricing methodology

3.2    Lower iron ore prices

3.3    Pellet premiums and pellet supply

3.4    Seaborne freight rates

4.1    Operating risks related 

to mining, processing, pelletising 
and logistics

4.2    Operating risks related to health 

and safety

4.3    Operating risks related 
to operating costs

4.4    Risks relating to information 
technology and cybersecurity

5.  

6.  

 Risks related to climate change

 Risks related to Covid-19

e
r
e
v
e
S

t
c
a
p
m

I

w
o

l

y
r
e
V

1.1

5.

4.4

1.2

6.

1.3

3.4

2.

3.2

3.3

3.1

4.1

4.2

4.3

Unlikely

Likelihood

Almost certain

Ferrexpo plc Annual Report & Accounts 2021

55

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
Principal Risks
PRINCIPAL RISK FACTORS 
& MITIGATION MEASURES
Principal Risks are those considered to have the 
greatest potential impact on the Ferrexpo business, 
assessed on the basis of impact and probability. 

Introduction

Principal Risks are considered to be the 
main risks that have the potential to 
negatively affect the Group’s strategy and 
business model, which are outlined on 
pages 54 to 72 and summarised through the 
items shown below. 

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. 

Each Principal Risk is linked to the 
aspects of the Group’s strategy that 
could be potentially impacted if an 
event were to occur.

1.  Produce high quality pellets.

2.  Achieve low cost production.

3.   Maintain strong relationships with 
a network of premium customers.

4.   Conduct business in a safe and 

sustainable manner.

5.   Retain a balanced approach to 

capital allocation.

Risk currently considered 
to be materially increasing 
in significance to the 
Group’s activities.

Risk currently considered to 
be neither materially increasing 
nor materially decreasing 
in significance to the 
Group’s activities.

Risk currently considered 
to be materially decreasing 
in significance to the 
Group’s activities.

Principal Risks include, but are not 
necessarily limited to, those that could 
result in events or circumstances that 
might threaten the Group’s business model, 
future performance, solvency or liquidity 
and reputation.

Risks are inherently unpredictable, and, 
therefore, the risks outlined in this report are 
considered the main risks facing the Group. 
New risks may emerge during the course of 
the coming year, and existing risks may also 
increase or decrease in severity 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 FRMCC, which 
ultimately reports into the Board 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 Chief Executive Officer, 
Chief Financial Officer and Chief 
Marketing Officer.

The Group has updated its Principal Risks 
as shown in this section, 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 
announcement, which is due for publication 
in August 2022. Where the Group has 
identified a Principal Risk, details of the 
Group’s efforts to mitigate each risk are 
also provided.

Russian invasion of Ukraine

On 24 February 2022, Russia commenced 
an invasion of Ukraine. This action has 
resulted in significant loss of life within 
Ukraine, the destruction of key 
infrastructure across Ukraine and poses a 
threat to the Group’s mining, processing 
and logistics operations in Ukraine. This 
risk is discussed in detail on page 57.

56

Ferrexpo plc Annual Report & Accounts 2021

Covid-19

The Group continues to consider the global 
Covid-19 pandemic as a Principal Risk given 
the scale and impact that this global event 
demonstrated in 2020 and 2021. As noted, 
however, on page 52, the global outbreak of 
this virus has continued to evolve into 
different strains, which appear to be 
increasing in the transmissibility of the virus 
with each new strain, but also reducing the 
severity and death rate for those contracting 
the virus. The Group therefore notes that 
with this trend, in addition to increasing 
vaccination rates both locally in Ukraine and 
globally, that the risks to the Group 
associated with Covid-19 appear to be 
decreasing in 2022. The Group however 
notes that the Russian invasion of Ukraine in 
2022 has resulted in reduced testing and 
vaccination rates, and therefore this risk 
may increase as a result. The Group will 
maintain its protective measures to curb the 
spread of Covid-19, however, noting that 
further waves of infection and/or more 
severe new strains of the Covid-19 virus 
may emerge. 

Cybersecurity

As the Group seeks to increasingly 
modernise and digitise its operations and 
business activities, the Group notes the 
rising importance of cybersecurity, and 
threats that may emerge via electronic 
means. Since the NotPetya cyberattack in 
2017, which was a cyberattack that affected 
systems on a global basis, however, 
primarily targeted at Ukraine, the Group has 
sought to significantly increase its 
understanding and to bolster its protocols 
and defence relating to its digital presence. 
Given the Russian invasion of Ukraine in 
early 2022, the Group notes the rising 
significance of cyber-threats to its business, 
and has therefore elevated this topic to 
become a Principal Risk, as discussed on 
page 70.

STRATEGIC REPORTResponsibility
Board of Directors and 
Chief Executive Officer

Risk appetite
Low

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

Change

1. COUNTRY RISK

1.1 Conflict risk (external risk)

Ukraine is currently at war with Russia. On 
24 February 2022, Russia commenced an 
invasion of Ukraine using significant and 
widespread military force. To date, the 
invasion of Ukraine has resulted in the 
temporary occupation of south eastern 
territory within the sovereign nation of 
Ukraine, loss of life for citizens of Ukraine 
and damage to infrastructure within Ukraine. 

The situation in Ukraine remains uncertain 
and unpredictable. As of early April 2022, 
the Group’s operations, located adjacent to 
the city of Horishni Plavni, has not been a 
centre of armed conflict, but this remains a 
risk should the current conflict continue to 
escalate and grow in terms of the areas 
directly affected. The Group has however 
temporarily lost the ability to export its 
products via the Black Sea, as the port 
operator has closed the Group’s normal 
port of operations (Pivdennyi). Should the 
area surrounding the Group’s operations 
and local communities be the setting for 
armed conflict, there will be a significant risk 
posed to the safety of the Group’s 
workforce, as well as a significant risk to key 
assets and infrastructure required for the 
Group to operate effectively. The Group’s 
workforce of more than 10,000 people is 
predominantly based in local communities 
surrounding the Group’s operations and 
therefore the Group does not have the 
ability to effectively evacuate its workforce 
from the conflict zone. The Group will 
always prioritise the safety and wellbeing of 
its workforce and therefore may partially 
halt, or fully halt, its operations to protect 
its workforce.

Further consequences of the ongoing 
invasion relate to a number of aspects of the 
Group’s business. Ukraine’s government 
has declared a state of martial law, and a 
number of the Group’s employees have 
been enlisted into the armed forces of 
Ukraine. The Group relies on key 
consumables, such as (but not limited to) 
diesel, natural gas and electricity, to 
produce the Group’s products, and the 
ongoing invasion may limit the supply of 
these items. Should the Group not receive 
one or more of its key consumables, the 
Group’s ability to effectively produce may 
be impaired. 

The Group relies on continuous and reliable 
access to key infrastructure – principally 
Ukraine’s railway network and the port of 
Pivdennyi, to rail and ship its products to 
customers, and both have been the subject 
of significant disruption, including the full 
stoppage of all port operations in Ukraine. 
On 24 February 2022, the Group announced 
that it had received notification of a 
suspension of Ukraine’s railway network, 
which was subsequently partially lifted (see 
release 28 February 2022). On 25 February 
2022, the Group announced that it had 
received formal notification from the port 
authorities at Pivdennyi that all operations 
were being halted and the Group has served 
force majeure notices to customers affected 
by this suspension. Given the nature of the 
situation, the Group may not be able to 
accurately forecast the likely availability and 
scale of its access to infrastructure or key 
consumables until the conclusion of 
Russia’s warfare towards Ukraine. 

Ferrexpo plc Annual Report & Accounts 2021

57

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

1. COUNTRY RISK (CONTINUED)

1.1 Conflict risk (external risk) (continued)

On 2 April 2022, a Russian missile strike 
on Kremenchuk oil refinery, located 
approximately 15-20 kilometres from the 
Group’s operations, resulted in damage 
to this facility. This facility is one of the 
sources of fuel for the Group and this 
incident has resulted in the suspension of 
regular deliveries of diesel, with supplies 
now being provided periodically. The Group 
has existing arrangements in place to 
source alternative supplies of diesel from 
Europe, with these supplies arriving via both 
rail and road delivery routes.

To date, the situation within the Group’s 
operations and in the local communities 
surrounding the Group’s operations, has 
remained orderly, with local authorities 
remaining in control. In the event of a 
prolonged and/or escalated conflict in the 
area where the Group operates, there is a 
risk that the local authorities may no longer 

be able to maintain civil order and there may 
be a risk posed to either the safety of the 
Group’s workforce, or threat to the integrity 
of the Group’s assets and/or key supplies. 
Furthermore, any conflict in the local area 
may reduce the local authorities’ ability to 
provide basic emergency services, such as 
medical services and fire protection, with 
potential effects on the Group’s workforce, 
communities and production facilities.

Following the outbreak of hostilities, it is 
expected that the business and operating 
environment in Ukraine will be materially 
worse than previously, and these conditions 
may not completely recover to previous 
levels for a period of time beyond the 
cessation of hostilities.

It is also expected that cyber-warfare will be 
a tool used against Ukraine and corporate 
companies based in Ukraine, with Ukrainian 
corporates being the subject of 

cyberattacks in the recent past. Any 
disruption to the digital infrastructure 
belonging to either the state of Ukraine, 
operators of key infrastructure or Ferrexpo 
would likely result in a significant 
interruption to the Group’s ability to operate.

With regards to international lending 
activities, it is unclear as to whether the 
Group will have access to external financing 
following the cessation of hostilities. For the 
duration of the ongoing conflict, the Group 
does not expect to have any access to debt 
markets, domestic or international.

The current war between Russia and 
Ukraine is a threat to regional stability and 
may impact international relations in the 
longer term beyond the region in which 
Ferrexpo operates. As a consequence, 
trading relationships between sovereign 
nations may be amended, or cut, and the 
availability of key goods and services may 
become restricted and/or limited.

RISK MITIGATION

The risks posed to Ferrexpo, its workforce 
and operations as a result of the invasion 
are difficult to predict in scale and nature, 
and therefore difficult to mitigate as a 
result. The Group has prepared itself, and 
continues to prepare, in a number of 
areas, such as enacting safety measures, 
practising orderly shutdowns of 
equipment, implementing asset protection 
measures and planning to operate with 
multiple logistics pathways for sourcing 
key consumables for delivery to site, as 
well as delivering the Group’s products to 
its customers. In the event of any 
hostilities happening close to the Group’s 

operations, the Group’s first priority will be 
the protection of its workforce, and the 
Group will enact measures to protect its 
workforce that are proportional to the 
extent, severity and location of any 
hostilities occurring. This will include, 
where appropriate, the demobilisation of 
the Group’s workforce from operational 
sites and actions to distance individuals 
from any areas affected by armed conflict 
and/or a breakdown in civil order.

In mining, the Group has implemented 
measures to increase the volume of 
blasted ore available for mining and has 
increased stockpiles of raw ore available 

for processing should access to the 
Group’s mines become restricted. In 
logistics, the Group has investigated 
alternative options for accessing 
customers, either by different rail routes, 
different methods of transport, or different 
loading ports for ocean-going vessels. 

In addition to the above measures, the 
Group has also established a dedicated 
humanitarian fund to direct assistance to 
the people of Ukraine affected by the 
conflict. More details of this fund’s work 
are provided on page 42 and in the 
Group’s recent press releases.

58

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTResponsibility
Board of Directors and 
Chief Executive Officer

Risk appetite
Medium

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

Change

1. COUNTRY RISK

1.2 Ukraine country risk (external risk)

Ferrexpo’s operating base is in Ukraine, 
where all of the Group’s iron ore production 
is generated, and therefore the Group is 
materially exposed to the business 
environment within Ukraine, which 
continues to be defined as an emerging 
market by Western governments and 
institutions. As such, the Group is subject to 
heightened risks, relative to developed 
economies, relating to the stability of the 
environment in which the Group operates, 
including risks relating to the local economy, 
currency, labour market, infrastructure and 
other key resources essential for operating. 
This exposure to an emerging market can 
directly and indirectly affect the Group 
through a range of factors, including 
changes in government legislation, 
decision-making related to changes in 
political policy at a local or national level, 
access to key operating licences and 
infrastructure essential for producing and 
distributing the Group’s products, access to 
financial services and the Group’s ability to 
transact with external parties either within 
Ukraine or abroad, in addition to other 
factors. Ukraine also continues to receive a 
relatively low score in Transparency 
International’s Corruption Perceptions 
Index, placing 122nd out of 179 countries 
(2020 Index: 117th place) in the latest survey 
published in January 2022. 

In recent years, Ukraine has been the 
subject of armed conflict with Russia and 
this is identified as a separate Principal Risk 
on page 57. Russia’s invasion of Ukraine, in 
addition to the annexation of Crimea and 
temporary occupation of sections of eastern 
Ukraine since 2014, has caused a significant 
strain on the Ukrainian economy and the 
budget of the Ukrainian government, which 
in turn has resulted in changes to the 
business environment within Ukraine. In 
addition, these factors will likely continue to 
negatively affect Ukraine’s economy for a 
period of time beyond the cessation of 
hostilities in Ukraine. In recent years, the 
government of Ukraine has been reliant on 
external funding through overseas 
governments and agencies, principally the 
International Monetary Fund (“IMF”), for 
funding. Through this reliance on external 
funding, there is increased risk around the 

short- to medium-term stability of the 
Ukrainian economy, local currency, and 
local operating environment for businesses, 
amongst other factors, particularly if the 
availability of this external funding were 
to change unexpectedly. 

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.

The risk factors discussed here, 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, access to new debt facilities and 
ability to repay debt, ability to reinvest in the 
Group’s asset base, either in the form of 
sustaining capital investmentA to maintain 
production or expansion capital investmentA 
for future growth, as well as the Group’s 
ability to pay dividends.

As at the date of approval of this report, the 
share dispute lodged by four claimants to 
invalidate a share sale and purchase 
agreement concluded in 2002 remains 
ongoing. Following a statement of defence 
filed by Ferrexpo AG (Ferrexpo’s Swiss 
subsidiary), earlier in 2021, the relevant 
court in Ukraine ruled on 27 May 2021 in 
favour of Ferrexpo AG. The opposing parties 
filed their appeals in June 2021 and the next 
hearing is expected to take place later this 
year. The court of appeal has opened the 
appeal proceedings, and several hearings 
have now been held, but without a court 
decision being made as of the date of 
this report.

Ferrexpo plc Annual Report & Accounts 2021

59

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

1. COUNTRY RISK (CONTINUED)

1.2 Ukraine country risk (external risk) (continued)

owned or controlled) by the Group’s 
controlling shareholder may be subject to 
restrictions, in Ukraine or elsewhere, or that 
the Group may be impacted by, or become 
involved in, legal proceedings relating to 
these matters, in Ukraine or elsewhere. 

Despite the recent cancellation of the share 
freeze action in Ukraine regarding the 
Group’s shareholding in FPM, held via the 
Group’s Swiss subsidiary Ferrexpo AG, 
there continues to be a risk that this action 
may be resumed, despite several court 
decisions to dismiss this action.

Following the cancellation of the licence for 
Galeschynske deposit, which is a project in 
the exploration phase that is situated to the 
north of the Group’s active mining 
operations, Ferrexpo Belanovo Mining has 
commenced a legal action in the Ukrainian 
courts system. For further information on 
ongoing legal disputes, please see Note 30 
Commitments, contingencies and 
legal disputes to the Consolidated Financial 
Statements. 

As referenced in the Group’s Interim Results 
published in August 2021, there are 
outstanding matters in Ukraine relating to 
the Group’s controlling shareholder that 
remain unresolved, and there is a risk that 
assets owned or controlled (or alleged to be 

RISK MITIGATION

Ferrexpo operates in accordance with 
relevant laws and utilises internal and 
external legal advisors as required to 
monitor and adapt to legislative changes 
or challenges. 

The Group maintains a premium listing on 
the London Stock Exchange and as a 
result is subject to high standards of 
corporate governance, including the UK 
Corporate Governance Code and 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 Ukrainian hryvnia 
against the US dollar and local 
inflation levels. 

Ferrexpo has a high profile given its 
international client base and London 
listing. It is therefore important that 
Ferrexpo’s Board of Directors and relevant 
senior management engage with the 
Group’s stakeholders to effectively 
communicate the economic contribution 
that Ferrexpo makes to Ukraine and 
to show that it operates to high 
international standards.

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STRATEGIC REPORT1. COUNTRY RISK

1.3 Counterparty risk (external risk)

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 of taxation, the repayment of 
VAT and licences required for Ferrexpo’s 
operations to operate. In Ukraine, a number 
of monopolies exist, including the 
transmission of electricity and natural gas 
that is required for the creation of the 
Group’s products, as well as the railway 
network in Ukraine, 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 and suppliers of goods and 
services, as these interactions may result 
in financial loss for the Group if the 
counterparty in question fails to fulfil its 
duties correctly. This risk is heightened by 

the ongoing conflict with Russia, which 
may result in damage to key infrastructure 
required for either the production or 
shipment of the Group’s products. The 
invasion of Ukraine has also put an increased 
level of financial stress on the counterparties 
with which Ferrexpo does business in 
Ukraine, and therefore has heightened 
the risk of counterparty failure.

The advent of the global Covid-19 pandemic 
in 2020, which has continued into 2021, has 
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, and Covid-19 is 
also covered as a Principal Risk on page 72. 
As noted on page 54, however, the risks 
associated with recent variants of the 
Covid-19 virus appear to be diminishing 
in severity, compared to the original 
variant of this virus.

Responsibility
Board of Directors, Chief Executive Officer 
and Chief Financial Officer

Risk appetite
Low

Link to strategy
4

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 has developed 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 2021, 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. 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 (including, but not 
limited to, topics such as anti-bribery, 
sanctions, tax compliance and modern 
slavery). These requirements were 
consolidated into the Business Partners’ 
Code of Conduct in 2019, which is 
referenced in 95% of all contracts signed 
as of 2021 (98% of contracts with a value 
in excess of UAH 500,000). 

The Finance, Risk Management and 
Compliance Committee (“FRMCC”), an 
executive sub-committee of the Board, 
met ten times in 2021 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 aims to ensure adherence to 
the highest standards of diligence, 
oversight, governance and reporting with 
all charitable donations, with the HSEC 
Committee required to provide approval 
for community support expenditures.

Ferrexpo plc Annual Report & Accounts 2021

61

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

2. MARKET RELATED RISKS

2.1 Risks relating to the global demand for steel

The Group is a supplier to the global steel 
industry, with customers located in several 
continents around the world. The global 
steel industry produces steel for a wide 
range of end uses and is exposed to a wide 
range of factors that may affect each 
customer’s ability to produce steel and 
supply end users of steel. Therefore, as part 
of the global steel value chain, Ferrexpo is in 
turn also exposed to the same risks as 
steelmakers. The Group does not, however, 
supply its products to steelmakers in 
Russia, and is therefore not exposed to 
risks related to recent restrictions in trading 
with this group of steelmakers that relate to 
Russia’s invasion of Ukraine in early 2022.

On the input side, steel production requires 
raw material inputs such as iron ore and 
coking coal, as well as significant numbers 
of employees, all of which represent a 
significant proportion of steelmakers’ cost 
bases and therefore have the potential to 
negatively affect the profitability of a steel 
mill. In the event of reduced profitability, 
steel mills often reduce steel output in order 
to preserve the balance sheet of the 
operating company, which in turn reduces 
demand for iron ore. Steel producers are 
also reliant on the consistent supply of raw 
materials, which requires access to global 
markets, which can often be disrupted by 
natural events, geopolitical events or 
otherwise. These same distribution 
networks are required for the transfer of 
steel products to customers and end users, 
and therefore any disruption can have 

a significant impact on the overall steel 
value chain. One high profile example of 
such an event was seen in 2021 with the 
six-day blockage of the Suez Canal by the 
vessel Ever Given in March 2021. 

Steel mill profitability can also influence the 
demand for different grades and forms of 
iron ore, with demand for high grade iron 
ore pellets typically lower at times of lower 
steel prices, when steelmakers typically 
move to reduce mill productivity and overall 
output. Global demand for steel is also 
linked to global productivity and levels of 
investment, and therefore during periods of 
reduced economic activity, steel demand 
(and therefore steel production) is often 
reduced as a consequence. The steel 
industry is also regionally fragmented, with 
factors relevant for certain geographic or 
political regions, not applicable for other 
regions. It is therefore important to have a 
strong understanding of regional factors 
that may affect specific steel producers 
more than others.

The global steel industry is also under 
significant pressure to decarbonise its 
operations, with the global steel industry 
responsible for 7% of global carbon 
emissions1. Steelmakers are currently 
seeking technological solutions for 
producing commercial quantities of low 
to zero carbon steel, which will require 
significant investment in both research 
and development, as well as likely require 
significant investment to deploy 
new technologies.

Responsibility
n/a  
(Ferrexpo not large enough to influence 
global demand)

Risk appetite
Medium

Link to strategy
3 and 5

Change

1.  Source: IEA.

RISK MITIGATION

The Group aims to mitigate risks relating 
to the global steel prices and global 
demand for steel through having a network 
of premium customers located in a variety 
of geographic regions. Ferrexpo has also 
commenced a process to develop a 
network of additional customers for its 
higher grade (67% Fe) direct reduction 
pellets, which currently represents 
approximately a third of the global pellet 
export market, and historically has not 
been a market that Ferrexpo has served. 
Through direct reduction pellets, as well 
as the ability to produce and market new 
products such as high grade concentrate, 

the Group aims to have the ability to serve 
a broader range of customers, if required. 
The Group also aims to develop long-term 
relationships with customers, whereby 
there is a strong level of engagement and 
understanding between both parties. 
Through the Group selling the majority of 
its production via long-term contracts, the 
Group aims to secure the stable and 
consistent offtake of its production, 
enabling the Group to be able to adapt and 
adjust to meet changing business 
conditions, if required, rather than relying 
on short-term relationships and spot sales.

Ferrexpo operates in a country whereby 
the local currency, the Ukrainian hryvnia, 
is a currency that is linked to the 
performance of commodity prices, and 
historically the Group has experienced 
depreciation in the hryvnia at times of 
lower commodity prices, which in turn 
reduces the Group’s dollar-denominated 
cost base. Movements in the hryvnia-
dollar exchange rate can, however, be 
influenced by other factors and may not 
necessarily reduce costs at times of low 
iron ore prices.

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STRATEGIC REPORT3. RISKS RELATED TO REALISED PRICING

3.1 Changes in pricing methodology

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.

RISK MITIGATION

Responsibility
Chief Executive Officer and 
Chief Marketing Officer

Risk appetite
Medium

Link to strategy
1, 3 and 5

Change

The Group aims to price its products 
through clear and consistent engagement 
with customers, with the Group seeking to 
develop mutually beneficial long-term 
relationships. Through consistent supply 
and consistent high quality of the Group’s 
products, Ferrexpo aims to maintain 
strong relationships with its customers. 

Ferrexpo endeavours to achieve the 
prevailing market price at all times, and the 

Group aims to be a low cost producer and 
therefore cash flow positive throughout the 
commodities cycle. For more information 
on its position on the cost curve, please 
see the Case Study provided on page 25. 
The Group also has the logistics capability 
to divert sales to other markets to offset 
any regional weakness, as was seen 
during the initial peak of the global 
Covid-19 pandemic in 2020, when the 
Group was able to redirect sales volumes 

away from Europe and towards China, to 
meet temporary shifts in demand patterns. 
The Group has since seen global demand 
patterns for iron return to historical 
distribution levels in 2021. The Group has 
retained this flexibility to divert sales to 
alternative markets should future shifts 
in demand occur.

Ferrexpo plc Annual Report & Accounts 2021

63

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

3. RISKS RELATED TO REALISED PRICING (CONTINUED)

3.2 Lower iron ore prices

As a single commodity producer, the Group 
is inherently exposed to performance of the 
iron ore price, in addition to other market 
prices. The Group is a producer of high 
grade iron ore products, which are widely 
considered to be products with an iron 
content in excess of 65%, and this is a 
subset of the wider global trade in iron ore 
that is affected by additional factors. The 
iron ore industry as a whole is primarily 
governed by steel demand and demand for 
iron ore as a consequence. During periods 
of low steel demand, iron ore prices trend 
lower as steel mills look to actively reduce 
steel output. The majority of the world’s 
exported iron ore is traded on the 62% Fe 
fines index, which in the past five years has 
varied between periods of being less than 
US$50 per tonne to over US$200 per tonne. 
Ferrexpo is not sufficiently large enough a 
producer to be able to directly affect the 
globally quoted price of iron ore, and 
therefore, like other companies that produce 
and sell iron ore, must accept the prevailing 
iron ore price. Factors governing steel 
demand are discussed in this section (Risks 
relating to global demand for steel, page 
62). Factors specifically governing the price 

RISK MITIGATION

Responsibility
n/a  
(Ferrexpo not large enough to influence 
global demand)

Risk appetite
Medium

Link to strategy
1, 3 and 5

Change

of iron ore also include the global supply of 
iron ore, as stable pricing requires that the 
available supply of iron ore broadly matches 
the global demand for iron ore, and any 
imbalance can result in significant 
movements in iron ore pricing. There are a 
number of large greenfield and brownfield 
projects that have the potential to 
significantly impact the global price of 
iron ore should these projects come 
into production. 

The global demand for high grade iron ore is 
a further subset of the global iron ore trade, 
with the supply of high grade iron ore 
typically sourced from iron ore mines in 
Northern Brazil, and fluctuations in output 
from these particular mines can have a 
direct impact on the prices paid for high 
grade iron ores. Ferrexpo’s iron ore 
products are priced using the high grade 
index (65% Fe) and the Group is therefore 
impacted by these fluctuations.

Ferrexpo is a low to medium cost producer 
relative to the majority of its peers, and is 
positioned in the lower half of the global 
cost curve of iron ore pellet producers. 
Ferrexpo’s operating costs are partly 
correlated with commodity prices. When 
the commodities cycle is in a downward 
phase, Ferrexpo typically receives a lower 
selling price, but the Group’s cost base 

also tends to decline as a result of local 
currency devaluation. The Ukrainian 
hryvnia is a commodity-related currency 
and historically over the long term it has 
depreciated during periods of low 
commodity prices, although movements of 
the Ukrainian hryvnia against the US dollar 
can also be influenced by short-term 
political factors, in addition to other 

factors. Ferrexpo regularly reviews options 
to hedge the price of its output; however, 
its current strategy is not to enter into 
hedging agreements, due to the relatively 
low liquidity of this market and high cost of 
entering into such arrangements. Ferrexpo 
has maintained positive profit and cash 
generation throughout the iron ore 
price cycle.

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STRATEGIC REPORT3. RISKS RELATED TO REALISED PRICING

3.3 Pellet premiums and pellet supply

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 
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 
and has now reached its published 
nameplate capacity for production. 

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

Change

RISK MITIGATION

Ferrexpo primarily sells high quality 
pellets, which underpin demand for its 
product throughout the commodity cycle. 
Should the pellet premium decline, 
Ferrexpo has historically one of the lowest 
pellet conversion costs in the industry 
depending to different periods of 
commodity prices, which helps the Group 
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 2021 were approximately US$19 
per tonne (2020: US$11 per tonne) and, 
therefore, lower than the pellet premium 
seen in 2021, aiding the Group to deliver 
firm margins during the year. Please see 

the Market Review section on pages 12 to 
15 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.

Ferrexpo plc Annual Report & Accounts 2021

65

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

3. RISKS RELATED TO REALISED PRICING (CONTINUED)

3.4 Seaborne freight rates

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 (with China being the world’s largest 
steel producer). 

RISK MITIGATION

Ferrexpo’s received price is referenced 
to transparent freight indices such as 
the Baltic Exchange C3 freight index. 
In 2021, the C3 freight index increased 
to an average of US$27 per tonne 
(2020: US$15 per tonne).

Russia’s invasion of Ukraine in early 2022, 
and the related military activity in the Black 
Sea, has resulted in increased freight 
charges (principally additional insurance 
premiums) for companies looking to 
charter vessels to receive cargoes 
at Ukrainian ports.

Responsibility
Chief Executive Officer and 
Chief Marketing Officer

Risk appetite
Low

Link to strategy
2, 3 and 5

Change

Ferrexpo understands the need to have its 
own in-house specialists within the 
Group’s marketing team that are capable 
of ensuring the Group pays a competitive 
rate for seaborne freight rates. Through 
effective internal planning procedures and 
engagement with stakeholders in the 
Group’s freight business, the Group is able 
to effectively charter vessels at 
competitive freight rates relative to the 
prevailing index. The Group also has 
sufficient flexibility in its customer and 
logistics network to consider differences in 
freight rates when budgeting for future 
periods, considering freight rates in 
broader decisions around allocating 
tonnages to each geographic market into 
which the Group sells its products. 

Through the Group’s close proximity to the 
key markets of Europe and the Middle 
East, the Group has a natural advantage 
over alternative suppliers of iron ore 
pellets that are located in more distant 
locations, such as Canada and Brazil. This 
reduced distance to certain markets 
results in shorter travel times for the Group 
as well as a reduction in the carbon 
emissions associated with the freight for 
deliveries into these markets. For more 
information, see the Case Study on page 
15. The Group may decide to enter into the 
forward hedging of its freight related costs 
in light of the market volatility witnessed in 
2021, with derivatives trading in freight 
markets more liquid than similar markets 
for iron ore pellets, and therefore 

potentially making such activities 
economically advantageous to the Group.

The additional insurance premiums 
associated with Russia’s invasion of 
Ukraine are expected to be temporary in 
nature, and a requirement for such 
premiums will likely be removed following 
the cessation in hostilities. The Group is 
also reviewing the possibility of shipping 
its products either via (a) Black Sea ports 
outside of Ukraine, or (b) ports that the 
Group could utilise outside of the Black 
Sea. However, it should be noted that 
utilising such ports will likely result in 
increased freight charges to the Group 
relative to the logistics pathway utilised 
via Pivdennyi.

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STRATEGIC REPORT4. OPERATING RISKS

4.1 Risks relating to producing and delivering the Group’s iron ore products to customers

Responsibility
Chief Executive Officer, Chief Operating 
Officer and Chief Marketing Officer

Risk appetite
Medium

Link to strategy
2, 3 and 5

Change

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. 

Russia’s invasion of Ukraine poses 
numerous operational risks to the Group’s 
operations, which are detailed on page 57 
of this report.

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 addition to other factors. 

In the Group’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 levels of total 
liquidityA and impacting capital investmentA 
levels as well as affecting the Group’s 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.

The global steel industry is under increasing 
pressure to adapt its production processes 
to reduce emissions of greenhouse gases, 
and as a result the Group is seeing 
increasing market demand for higher grade 
forms of iron ore. The Group is able to 
produce high grade forms of iron ore, 
namely iron ore pellets grading 65% Fe 
(blast furnace pellets) or 67% Fe (direct 
reduction pellets), but these forms of 
product require additional processing and 
therefore are produced at an additional 
cost. In certain circumstances, it may not 
be economically viable to produce higher 
grade forms of iron ore pellets from specific 
lower grade ore types from the Group’s 
mines, and therefore it may be necessary to 
adjust mine planning activities and impair 
existing investments in stockpiles of these 
particular ore types.

RISK MITIGATION

The Group aims to continually reinvest its 
profits into its business to expand its 
production, improve product quality and 
enhance 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 facility. 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 218 
vessels for delivering products to 
customers via the Danube River, 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 350 people, and the results 
of this process are presented to the 
Operations Management Committee, 
the Executive Committee and the Board.

Ferrexpo plc Annual Report & Accounts 2021

67

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

4. OPERATING RISKS (CONTINUED)

4.2 Risks relating to health and safety

Russia’s invasion of Ukraine in early 2022 
has created a significant risk related to the 
health and safety of the Group’s workforce 
in Ukraine, with details of this risk and 
mitigation measures, presented on page 57. 

The extraction and processing of large 
volumes of rock has historically been 
associated with hazardous working 
environments. Hazards in open pit mining 
include hazards relating to drilling and 
blasting of rock, the presence of operators 
on and around large pieces of equipment 
such as excavators and haul trucks, and the 
creation of deep open pit mines with steep 
inclines. In processing, operators are in 
close proximity to large pieces of equipment 
such as crushers and ball mills, all of which 
carry significant electrical currents, weigh 
a significant number of tonnes and are 
constantly moving when under operation. 
Maintainers are often required to place 
themselves within equipment to access and 
repair equipment, and are often required to 
use lifting equipment to raise machinery 
weighing several tonnes. The risks to 
operators conducting these activities, 
or in close proximity to those conducting 

RISK MITIGATION

these activities, can be high if the correct 
risk mitigation measures are not enforced. 
There are inherent risks with materials 
handling throughout the Group’s operations 
– from hazardous chemicals, flammable 
liquids and gases, and other dangerous 
goods. In logistics, the Group oversees the 
transfer of significant volumes of iron ore 
pellets loaded onto trains, dry bulk vessels 
and inland vessels, all of which carry 
inherent risks. The Group’s logistics 
subsidiary, First-DDSG, transports pellets 
along the Danube River in all seasons, with 
specific safety hazards applicable to river 
transport throughout the year, including 
operating in freezing conditions and river 
safety around other vessels.

In addition, the Group and its workforce 
have faced significant health and safety 
risks relating to the global Covid-19 
pandemic. Details of the risks relating to this 
are provided on page 72 of the Principal 
Risks section, with risk mitigation measures 
also provided in the Case Study on page 11.

Responsibility
Chief Executive Officer, Chief Operating 
Officer and Chief Marketing Officer

Risk appetite
Low

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

Change

Risk mitigation in the Group’s approach 
to health and safety begins with 
understanding the risks faced by operators 
when entering a place of work. This is 
achieved through risk assessments for 
each area and activity in which an operator 
is active, aiming to ensure that potential 
risks are understood before work takes 
place. Extensive safety training is provided 
to both operators and management, 
to provide the necessary level of 
understanding of the risks faced and the 
high level of safety standards expected by 
the Group. Training is provided to both 
employees and contractors, since safety 
hazards do not distinguish between 
an individual’s contract status. 

The Group uses leading and lagging safety 
indicators to better understand where 
safety risks may exist. An example of a 
leading indicator of safety is the number of 
safety audits conducted by the Group’s 
safety department, which correlates to the 
degree of safety improvements made in 
each working area, and therefore reducing 
the potential for future incidents to occur. 
Lagging indicators of safety relate to 
safety incidents that have already 
occurred, such as near miss events, and 
the Group monitors these closely to learn 
and improve for the future, to reduce 
the number of these events occurring. 
Increases in a lagging indicator are often 
an aspect of encouraging employees to 

register incidents correctly and to promote 
an open and understanding culture when it 
comes to safety. 

In relation to the safety and wellbeing 
measures implemented in response to the 
global Covid-19 pandemic, the Group has 
sought to protect both its workforce and 
its local communities, with details of these 
measures provided on pages 11 and 42 of 
this report.

In 2021, through implementation of the 
above safety measures, the Group was 
able to report on a fatality-free year and 
a record-low full year lost time injury 
frequency rate since IPO of 0.41 
(2020: 0.79).

68

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT4. OPERATING RISKS

4.3 Risks relating to operating costs

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 cost of productionA. 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 cost of 
productionA is local currency, which for 
Ferrexpo is the Ukrainian hryvnia, and this 
has historically directly affected 
approximately 50% of the Group’s total C1 
cash cost of productionA. 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 2021, the Group’s C1 cash cost of 
productionA increased by 34% to US$55.8 
per tonne (2020: US$41.5 per tonne). See 
the Financial Review section (pages 22 to 
25) for a description of the factors impacting 
operating costs.

The Group has seen significant inflationary 
pressure relating to energy costs in the 
second half of 2021 and into 2022, with 
prices for key consumables such as natural 
gas, electricity and diesel all increasing. 
See Case Study on page 25 for 
more information.

The Russian invasion of Ukraine in early 
2022 has resulted in inflationary cost 
pressures on a number of the Group’s key 
consumables, with the Group conducting 
measures to reduce the risks associated 
with the conflict, such as increased 
stockpiling of key consumables to reduce 
the risks around potential supply disruption.

Responsibility
Chief Executive Officer and 
Chief Financial Officer

Risk appetite
Low

Link to strategy
2 and 5

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 relate to commodity 
prices, which will in turn 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 2022, 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 companies in 
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 2021 were approximately US$19 
per tonne and therefore lower than the 
pellet premium seen in 2021 (please see 
the Market Review section on pages 12 to 
15 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 of pellets 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.

The Group expects the inflationary cost 
pressures related to Russia’s invasion of 
Ukraine to be temporary in nature and that 
the Group will retain the cost advantages 
outlined above in the medium term to 
remain competitive on costs on a 
global scale.

Ferrexpo plc Annual Report & Accounts 2021

69

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

4. OPERATING RISKS (CONTINUED)

4.4 Risks relating to information technology and cybersecurity

Russia’s invasion of Ukraine in early 2022 
has created a significant risk related to 
cybersecurity at the Group’s operations 
in Ukraine, with details of this risk and 
mitigation measures, presented on page 57. 

The Group is continually looking to 
modernise and digitise its operations, and is 
increasingly looking towards information 
technology (“IT”) to operate its business 
model. The move towards increasing 
digitalisation presents an increasing 
exposure to parties that may wish to disrupt 
the Group’s operations for financial gain, 
competitive advantage over the Group or to 
inflict other negative consequences on the 
Group for other reasons. Cybersecurity 
threats may take the form of, but not limited 
to, the following: malware, ransomware, 
phishing, denial-of-service attacks, and 
password attacks. 

Cyberattacks have been noted on a global 
scale in recent years, as well as similar 
attacks that have been specifically targeted 
against sovereign nations, such as the 
NotPetya ransomware first noted in 2017 
that is believed to have been targeted at 
entities in Ukraine, or the Colonial Pipeline 

cyberattack in May 2021 that shut down 
45% of the United States’ East Coast fuel 
supply.1 Such events appear to be becoming 
increasingly frequent, with increasing 
impact on the entities subjected to such 
attacks. Events such as cyberattacks are 
not necessarily targeted at specific 
companies or sovereign states, but often 
inflict additional damage to companies and 
governments not directly connected to the 
original targeted entity, and therefore such 
attacks may appear random in nature and 
difficult to predict as a consequence.

Cyberattacks, such as malware and 
ransomware, are often unreported in the 
mainstream media by companies and 
governments to avoid the negative publicity 
associated with such events. It is therefore 
difficult to ascertain the full extent to which 
the Group is facing risks relating to 
cybersecurity. Published cyberattacks 
affecting companies and governments in 
the past have closed or limited a company’s 
ability to produce, have withheld or 
disclosed confidential information, and have 
withheld access to key operational 
infrastructure, in addition to other attributes 
of such events.

Responsibility
Chief Executive Officer

Risk appetite
Low

Link to strategy
1, 2 and 3

Change

1.  Source: Forbes (link). Accessed April 2022.

RISK MITIGATION

Ferrexpo conducts regular reviews of 
the different information systems and 
technologies in use across its business, 
to ensure that information systems and 
technologies are regularly maintained and 
up-to-date in terms of security protocols. 

The Group’s IT department conducts 
regular reviews of the general IT landscape 
and provides regular cyber awareness 
training for employees as well as ad hoc 
notification when new threats are 

identified. The Group also regularly 
reviews requirements on data protection, 
with email security bulletins circulated to 
ensure internal users of IT are provided 
with up-to-date information on 
cybersecurity. The Group has also 
implemented a dynamic approach to 
anti-malware policies, to ensure an 
adaptive approach for new threats as they 
emerge. Efforts in 2021 have centred 
around the procurement and installation 
of a dedicated on-site data centre at 

Ferrexpo’s operations with backup power, 
with elevated security protocols to 
ensure the Group’s continued access to 
its data and IT systems in the event of 
a cyberattack.

Further to existing practices and 
protocols, the Group regularly updates the 
software and hardware in use throughout 
its business, to remove the Group’s 
exposure to known weaknesses 
in cybersecurity. 

70

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORT5. RISKS RELATING TO CLIMATE CHANGE

As a contributor to the global steel value 
chain, the Group is aware of the risks posed 
to it by climate change. The risks posed by 
climate change are diverse in scale and can 
be either local, affecting the Group’s 
stakeholders in the jurisdictions in which it 
operates, or global whereby there are 
impacts to factors such as demand for iron 
ore pellets. Climate change risks can also 
be further classified into risks that affect the 
Group’s physical environment – such as 
flooding, drought conditions and extremes 
of temperature, or risks could be regulatory 
in nature whereby governments seek to 
impose restrictions to limit emissions of 
carbon dioxide through measures such as 
environmental levies or carbon taxes. 

Climate change risks can also affect the 
Group through its suppliers and customers, 
with suppliers facing the same risks as 
Ferrexpo, and as a result may not be able to 
continue to supply the Group with the same 
goods and services as currently provided. 
Customers of Ferrexpo, comprising the 
global steel industry, are significantly 
affected businesses by climate change risk 
given the relatively high proportion of global 
emissions produced by steelmakers (7% of 
total emissions1). As an example, the EU has 
selected the European steel industry as one 

specifically targeted under carbon reduction 
regulations, such as a gradual reduction in 
carbon credits as part of the EU’s “Fit for 
55” initiative to achieve a 55% reduction in 
carbon emissions by 20302. As steelmakers 
around the world face increasing regulation 
to curb emissions, as well as the direct 
effects of climate change and changing end 
user demand, these changes will filter 
through to Ferrexpo as a supplier to these 
producers, with a portion of these changes 
likely to be negative.

Ferrexpo also faces acute physical risk as a 
result of climate change outside of Ukraine 
in its logistics network, particularly its 
barging operations along the Danube River, 
which are prone to freezing weather 
conditions in European winters and both 
flooding and low water events in summer.

Additionally, the Group faces reputational 
risk both in Ukraine and across the globe 
with stakeholders such as investors, 
suppliers and customers, if it is not seen 
to have strong environmental credentials, 
or does not comply with government 
regulation. This particular risk can apply to 
the Group’s activities in Ukraine and barging 
operations in Europe, but also perceptions 
around the environmental footprint of the 
Group’s products.

Responsibility
Board of Directors and 
Chief Executive Officer

Risk appetite
Low

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

Change

1.  Source: IEA, 2020 (link). Accessed April 2022.
2.  Source: European Commission (link). Accessed April ‘22.
3.  Source: Forbes (link), accessed April 2022.

RISK MITIGATION

The Group has sought to mitigate risks 
around climate change in a number of 
areas in 2021. Locally in Ukraine, the 
Group has implemented a significant 
number of operational projects targeting 
productivity improvements to reduce 
diesel and natural gas consumption, 
including construction of a 5MW trial solar 
power plant and the Group’s clean power 
purchasing programme. Through various 
initiatives, the Group has reduced its 
carbon footprint per tonne (Scope 1 and 
Scope 2 basis) by 30% since the Group’s 
baseline year of 2019. Further to this 
progress, in October 2021 the Group 
announced medium- and long-term 
carbon reduction targets (see page 36). To 
further reinforce the Group’s existing 
position on climate change and progress 
in carbon emissions, the Group is 

undertaking an external assurance 
process, whereby an external consultant is 
reviewing and providing assurance on the 
validity of the Group’s calculations for its 
carbon footprint. Further details of this 
project are available on page 34. Looking 
forward, the Group is seeking to further 
establish its understanding of the role of 
iron ore pellets in a low carbon future 
through its ongoing work with independent 
climate change consultants Ricardo plc; 
see page 37 for more details.

The Group understands the need to take 
action in addressing climate change today, 
and positioning for the future. For 
Ferrexpo, the future is Green Steel, which 
is the production of steel without 
associated carbon emissions. The first 
Green Steel was created in Sweden in the 
summer of 2021 using direct reduction iron 

ore pellets3 and the Group has 
commenced a process to align itself 
towards Green Steel by starting to 
produce direct reduction pellets, which 
represent a known pathway to Green 
Steel. The Group intends to build its 
presence in marketing direct reduction 
pellets in new regions, as well as maintain 
a dialogue with existing customers as 
they modernise their production facilities 
and switch to direct reduction pellets 
over time. 

The Group’s management believe that 
through a multi-layered approach to 
addressing climate change through 
implementing projects today, as well as 
the implementation of longer-term 
projects, the Group will be well positioned 
for a low carbon future.

Ferrexpo plc Annual Report & Accounts 2021

71

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSPrincipal Risks continued

6. RISKS RELATING TO THE GLOBAL COVID-19 PANDEMIC

In 2021 the world has seen a continuation of 
the disruption caused by the Covid-19 
pandemic, similar in nature to the effects 
seen in 2020 but with periodic and regional 
easing of restrictions followed by increases 
in infection rates and the reintroduction of 
restrictive measures. Measures introduced 
in response to the global Covid-19 
pandemic have varied between different 
jurisdictions and have also varied in 2021 
according to an individual’s vaccination 
status, adding an additional dimension to 
Covid-19 restrictions. 

Overall, Covid-19 continues to affect the 
health and wellbeing of individuals, as well 
as continuing to divide and isolate 
communities as governments and 
businesses seek to find measures to slow 
the spread of the virus each time infection 
rates increase. Risks relating to the 
individual continue to be significant – from 
the threat to the long-term health of an 
individual and their families and friends, to 
the impact on wellbeing through social 
distancing measures. Businesses are at risk 
of seeing significant numbers of employees 
and contractors of their own business be 
forced to isolate due to infection, as well as 

suppliers and customers experiencing 
similar restrictions, resulting in a general 
slowdown in companies’ ability to do 
business with each other. Governments face 
the risk of the additional strain on public 
services and resources as a result of 
measures taken to combat the causes and 
the effects of the pandemic, which are costs 
that may be passed on to businesses and 
individuals in the form of additional taxes 
and royalties, as well as cuts to existing 
services. More broadly, the global steel 
value chain relies on a steady transfer of 
goods and services to operate efficiently, 
and market prices such as iron ore prices 
and pellet premiums could be negatively 
impacted by a decrease in steel output or a 
decrease in the ability of steelmakers to 
produce steel. The global steel value chain 
also relies heavily on international travel for 
global businesses to conduct business with 
each other effectively, and the global travel 
industry has been significantly affected by 
travel restrictions. International travel was 
also a frequent requirement for the Group’s 
senior leadership team, which is an activity 
that has also been significantly curtailed 
during the pandemic.

Responsibility
Board of Directors and 
Chief Executive Officer

Risk appetite
Low

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

Change

The Russian invasion of Ukraine in early 
2022 has also elevated the risk associated 
with Covid-19 due to a reduced focus on 
testing for the virus and therefore higher risk 
of transmission in local communities.

1.  Source: www.ourworldindata.org, accessed 

1 February 2022.

RISK MITIGATION

The Group has sought to mitigate the 
impact of the global Covid-19 pandemic on 
its workforce, communities and business 
activities through a variety of measures. 
In relation to the Group’s workforce, the 
Group moved quickly to implement 
measures in early 2020 as the pandemic 
commenced and these measures, such 
as mask-wearing, social distancing, 
staggered shift patterns, Covid-19 testing 
and temperature screening, have all been 
perpetuated into 2021. The Covid-19 virus 
has affected every community around 
the world and Ferrexpo is acutely aware 
of the impact of Covid-19, having had 14 
employees pass away as a direct result 
of Covid-19, or complications related to 
Covid-19, as of December 2021. The 
Group is therefore making every effort to 
prevent the virus causing further harm to 
its workforce and as a result, the Group is 
encouraging its workforce in Ukraine to 
take up the government’s offer of Covid-19 

vaccinations and has provided local 
authorities with the use of the Group’s 
on-site medical facility as a vaccination 
centre. As of January 2022, over 5,900 of 
the Group’s employees have had at least 
one dose of a Covid-19 vaccine and 65% 
of employees were fully vaccinated, 
approximately double the rate for the 
general population of Ukraine1. The 
Group’s management is also aware of the 
significant impact that Covid-19 has had 
on the wellbeing of its employees, and as a 
result the Group has offered psychological 
support services and training to help 
employees and contractors to cope with 
the various forms of stress that have 
emerged as a result of the pandemic.

On a broader scale, the Group has noted a 
return in the global balance of steel 
production, and therefore iron ore 
demand, in 2021 as the world returns to a 
more normal balance of trade as Covid-19 

restrictions ease. In the iron ore industry, 
the shift seen during the peak of the 
pandemic during 2020 was towards China, 
and in 2021, global markets have gradually 
returned to a similar balance of demand 
as has been seen in years prior to 2020. 
Whilst the Group is prepared for further 
shifts in iron ore demand, and has 
capacity in its logistics network to manage 
such events, the Group does not expect 
a similar scale of market shift as observed 
in 2020. 

In relation to the Group’s local 
communities, the Group’s Covid-19 
Response Fund continues to work to 
assist local hospitals and medical 
institutions in their work combating the 
pandemic, with a total approved funding 
amount of US$3.5 million. Details of the 
work conducted through this project are 
provided in the Case Study on page 11.

72

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTViability Statement
APPRAISAL OF THE GROUP’S OUTLOOK 
IN A STRESSED SITUATION
Reviewing the Group’s assessment of 
principal risks, to consider the long-term 
viability of Ferrexpo’s business model.

Emerging and existing risks are reported on 
during these calls, with risk mitigation 
procedures discussed, and the results of 
each meeting being reported to the Group’s 
Board of Directors. Risks to Ferrexpo that 
have been identified as a consequence of 
the war in Ukraine include risks to the 
health, safety and wellbeing of the Group’s 
workforce, the Group’s ability to operate its 
assets, the supply of key input materials 
required for the production process and 
the provision and availability of logistics 
capacity required for the delivery of the 
Group’s products to customers in its 
key markets. 

For more information, please see the 
Principal Risks disclosed on pages 54 to 72 
of this report.

Business planning process

In response to the Russian invasion of 
Ukraine on 24 February 2022, the Group has 
temporarily revised its approach to its 
business activities and investments from its 
Business Model shown on pages 16 to 17. 
This approach has been implemented to 
concentrate on the Group’s ability to 
generate cash in the revised market 
environment, which will enable the Group 
to sustain its business. As a result, 
investments are currently focused on 
sustaining capital expenditure, with limited 
expenditure on growth capital projects, 
modernisation of existing equipment and 
other development projects. 

Prior to the beginning of the war, in order 
to maintain a clear strategic direction, 
the Group’s management team regularly 
assessed the risks faced by the Group 
against the ability of the Group to 
conduct business in accordance with 
its Business Model. 

This review is conducted regularly in order 
to maintain a clear understanding of the 
risks faced by the business and how 
these factors are influencing the business. 
Following the start of the war in Ukraine on 
24 February 2022, the Group’s management 
team has also focused on constantly 
assessing the risks that may directly, or 
indirectly, impair the Group’s ability to 
manage the Ferrexpo business in light of 
the impact of the war on the business and 
operating environment in Ukraine. 

Modelling process

In the normal course of business, the Group 
operates a detailed financial model of its 
business. Recently, this work stream has 
focused on the potential impacts arising 
from the ongoing war in Ukraine, in addition 
to the more traditional input factors such 
as the market factors that influence the 
price of the Group’s products, and 
operational factors that influence the 
Group’s ability to produce the required 
volume and quality of iron ore pellets 
demanded by the market, as determined 
in the Group’s forward-looking sales plan. 

In assessing the inputs into this model, the 
Group’s management team has assessed 
the risks associated with the potential 
disruption of the supply of key 
consumables, which includes natural gas, 
electricity and diesel fuel, in addition to the 
supply of key pieces of equipment. The 
Group’s modelling has also considered the 
risks surrounding a further interruption to 
the Group’s logistics network, in addition 
to the existing disruption faced through the 
closure of Ukraine’s Black Sea ports. In 
addition to the assessed risk associated 
with continued production and shipment of 
the Group’s products, the Group has also 
assessed market factors that represent the 
principal factors governing the pricing of 
Group’s iron ore products. 

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 54 to 72.

Time horizon

The Board has reviewed the long-term 
prospects of the business, which remain 
aligned with Ferrexpo’s life of mine 
assumptions. For the purposes of assessing 
the Group’s viability, the Board has elected 
to look at the Ferrexpo business on a five 
year time horizon, with a particular focus on 
the short term (12-18 month) time horizon in 
light of the current war in Ukraine, and the 
material uncertainties that this poses to the 
Group in terms of its going concern and 
long-term viability. The Group has 
historically reviewed the viability of its 
business model over a 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, with a heightened focus on 
additional risks in the coming 12-18 months. 

Factors associated with the war 
in Ukraine 

Due to the significance, scale and 
unpredictable nature of the war in Ukraine, 
specific attention has been applied in the 
Group’s approach to assessing its viability. 
The war in Ukraine, has represented, and 
will continue to represent, a significant risk 
to the Group’s ability to continue its 
operations in future periods. Following the 
Russian invasion of Ukraine on 24 February 
2022, the Group’s executive management 
team has held regular meetings since the 
outset of this armed conflict in order to 
assess the various risks that the business 
faces, including daily meetings during the 
initial weeks of the war. 

Ferrexpo plc Annual Report & Accounts 2021

73

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSViability Statement continued

Stress testing

In determining the viability of the business, 
the Directors have stress tested the 
individual risks and combination of risks 
that could materially impact the future 
viability of the Ferrexpo business. At the 
present time, the risk that the Group is 
primarily exposed to is Russia’s invasion of 
Ukraine in 2022 (see Principal Risk section, 
pages 54 to 72). In addition, Ferrexpo’s 
business model has historically also faced 
risks relating to changes in the iron ore fines 
price, pellet premiums and cost inflation, 
which are factors that continue to govern 
the Group’s profitability. 

The Group’s ability to produce at full 
capacity in 2022 will be contingent on the 
war in Ukraine, and its impacts on the 
Group’s ability to operate its assets in 
Ukraine, and deliver its products to the 
Group’s customers. 

The Group has adjusted its long-term 
financial model to reflect the lower sales 
volume caused by the unavailable seaborne 
sales to the Group’s customers, with 
forecasted production volumes being varied 
accordingly. The financial model anticipates 
that production and sales volumes will 
return to normal by 2024. 

The Group’s financial modelling indicates 
that a 10% reduction in the Group’s 
received price in 2022 would, if not 
mitigated, reduce the Group’s Underlying 
EBITDA A by US$8.4 per tonne. Modelling 
also indicates that a general production 
cost increase of 10% would decrease Group 
Underlying EBITDA A by US$4.9 per tonne, 
whilst a 10% decrease in production 
volumes, and an associated 5% increase 
in production costs, would decrease 
Underlying EBITDA A by US$7.0 per tonne. 
It should be noted that the impact of the 
factors discussed above in this paragraph 
apply for 2022 in isolation. Any impact on 
additional years beyond 2022 will depend 
on the underlying sales and production 
volumes and the level of realised prices and 
production costs in each period.

As a result of the remaining material 
uncertainty outside of the Group’s control, 
the Group has also prepared stress tests 
with more severe adverse changes, such 
as the cessation of production for 3, 6 and 
18 months, which could be caused by 
a disruption of the supplies for key 
consumables, equipment and/or a further 
interruption of the Group’s currently 
available logistics network, in the event 
of an escalation in the armed conflict 
in Ukraine.

In addition to stress testing associated 
with the ongoing conflict in Ukraine, the 
additional stress test scenarios performed 
include the following: 

–  Operational incidents that could have 
a significant impact on production 
volumes.

–  A deterioration in the Group’s long-term 
cost position on the industry cost curve.
–  Operating constraints due to Ukrainian 

country risk. 

In respect of mitigating actions in response 
to the conflict in Ukraine, please see page 
57 for more detail on this topic. In more 
general areas, mitigating actions 
implemented by the Group may include, 
but are not limited to, a reduction or 
cancellation of discretionary expenditure 
such as dividends, non-essential capital 
investment and repairs and maintenance, 
or other operating costs, adjusting capital 
allocation, reducing working capital 
requirements, altering mining schedules 
and accessing additional funding. 

74

Ferrexpo plc Annual Report & Accounts 2021

STRATEGIC REPORTAs disclosed in Note 2 Basis of preparation 
in the Group’s Consolidated Financial 
Statements on page 152, although the 
Group has managed to continue its 
operations since the beginning of the war, 
this continues to pose a significant threat to 
the Group’s mining, processing and 
logistics operations within Ukraine. Having 
assessed the current situation of the war in 
Ukraine, all identified available mitigating 
actions and the results of management’s 
assessment of the Group’s going concern 
and long-term viability, a material 
uncertainty still remains as some of the 
uncertainties are outside of the Group 
management’s control as the duration and 
the impact of the war cannot be predicted 
at this point of time.

The Strategic Report was approved by the 
Board on 21 April 2022 and signed on 
behalf of the Board by:

Lucio Genovese
Chair

The Directors take comfort in both the 
Group’s historical cash generation ability, 
particularly in 2015 and 2016 at a time when 
the iron ore price was trading at a cyclical 
low and the Group’s ability to repay its debt 
facilities, with the early repayment of the 
Group’s principal debt facility in June 2021. 
Since the end of 2020, the Group has 
moved into a net cash position, and has 
announced a net cash position of US$117 
million as of 31 December 2021. As at the 
date of the approval of these Consolidated 
Financial Statements, the Group is in net 
cash position of approximately US$192 
million and an available cash balance 
of approximately US$209 million. In addition 
to the available cash balance, the Group has 
an outstanding receivable balance of 
approximately US$156 million from its sales 
in March and April 2022, which are expected 
to be collected in the coming weeks. 

Based on the assessment performed, the 
Directors have a reasonable expectation 
that the Group will be able to continue to 
operate and meet its liabilities as they fall 
due over the period of their assessment. 
This is, however, dependent on significant 
factors that are outside of the Group’s 
control, and the Directors have assumed the 
following when assessing the Group’s 
resilience to the potential threat from the 
war in Ukraine and its viability:

–  The Group will continue to have the 

ability to operate in Ukraine;

–  The Group will continue to be able to 

redesign its mining and processing plans 
in order to align them to changing 
circumstances;

–  The Group will continue to be in the 

position to secure the supplies of key 
consumables and equipment; and
–  The Group will continue to be in the 
position to use its currently available 
logistics network or make use of 
alternative options, if needed.

Ferrexpo plc Annual Report & Accounts 2021

75

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Report
CHAIR’S INTRODUCTION

Lucio Genovese
Chair

Delivering on  
our promises  
and re-shaping  
the Board

Dear Shareholder

Before reflecting on the improvements made 
during 2021, it is important to note the 
devastating impacts which the Russian 
invasion of Ukraine is having on Ukraine and 
the people, communities and businesses 
within the country. Now more than ever 
strong governance is essential to help see 
Ferrexpo through this very challenging time. 
As you would expect, the Board has been 
meeting regularly to discuss the on-going 
situation in Ukraine, receiving daily updates 
from the management team as to the 
Group’s response and scenario planning for 
different eventualities. Protecting the 
Group’s workforce is a key priority, as well 
as taking steps to protect the business and 
thereby the stakeholders of the business. 
This will remain a key priority during 2022 
and the Board will continue to focus on 
exercising strong governance during these 
difficult times.

I am pleased to present the Corporate 
Governance Report, which sets out an 
overview of the means by which the 
Company is directed and controlled, our 
governance structure and highlights the 
governance activities of the Board and its 
principal committees during the course of 
the year.

The Board remains fully committed to 
maintaining good corporate governance 
practices throughout the Group which 
underpins all of its actions. The structure, 
policies and procedures we have adopted, 
which are described in this report, the 
Directors’ Report and reports from each 
of the Board committees, reflect our 
commitment. We recognise the need to 
keep them under review and make changes 
where necessary to ensure that standards 
are maintained and reflect ever-evolving 
best practice. This report also explains how 
we have complied with the principles of the 
2018 Corporate Governance Code during  
the year.

The Board’s role includes managing the 
risks facing the business. This includes 
taking into account the risks associated 
with the country of operation, 
counterparties, operational and 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. The Board’s role is also to 
support and challenge management and to 
ensure that the way we operate promotes 
the long term success of Ferrexpo Plc.

Operation of the Board during 
Covid-19 and governance framework

Against the backdrop of the continuing 
Covid-19 pandemic, we remained focused 
on the health, safety and well-being of our 
people globally, who have continued to 
deliver for the Group and our stakeholders 
through the testing times over the last 
couple of years, and ensuring business 
continuity and safeguard our operations, 
whilst maintaining good corporate 
governance practices and our system of 
internal control.

During the year, the Board has continued to 
operate effectively and without disruption 
notwithstanding the ongoing challenges 
presented by the pandemic. The majority of 
Board meetings were held virtually and 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.

We have also ensured new directors’ 
onboarding programmes continued as 
planned, albeit in a virtual environment. The 
virtual format of meetings provided the 
Board greater opportunities to engage with 
each other, management and employees. 
During 2021, for the second consecutive 
year, the Board site visit to our operations in 
Horishni Plavni was cancelled due to the 
pandemic and was replaced with a virtual 
site visit.

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 50 
to 53 provides further details on how the 
Board complied throughout the year.

The Russian invasion to Ukraine has not 
adversely impacted the operation of the 
Board or its Committees. 

Supporting local communities 
during Covid-19

During the year, in addition to our continued 
support for communities locally, Covid-19 
special fund in the amount of US$1.0 million 
(2020: 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 32 
to 45). 

76

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCECommunity support activities took place 
largely in Ukraine and donations were made 
within a Board-approved framework agreed 
annually at the time of setting the budget; 
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

The issue of diversity, both in the 
boardroom and throughout the entire 
Group, is taken very seriously by the Board 
as we believe this improves effectiveness, 
encourages constructive debate, delivers 
strong performance and enhances the 
success of the business. Ensuring that we 
have a culture which promotes and values 
diversity, and one which is maintained 
throughout the business, is a continual 
prime focus and is underpinned by our 
Equality, Diversity and Inclusion Policy, 
which sets our objectives.

Further to commitments made last year, 
we announced a number of changes to the 
Board during the year. In accordance with 
best practice requirements of the Corporate 
Governance Code 2018, the Board keeps its 
balance of skills, knowledge, experience, 
independence and diversity under review 
which is beneficial in itself in bringing new 
perspectives to the Board. To that end, as 
we began the year, I was pleased to 
welcome Ann-Christin Andersen to the 
Board on 1 March 2021. Ann-Christin’s 
digital technologies and business 
transformation experience provides us with 
great breadth of insight, which is particularly 
valuable as we transform our business. 
Throughout the year, the Board continued 
its search for further Independent Non-
executive Director candidates, led by the 
Nominations Committee and supported by 
external consultants. Towards the end of the 
year, I was also pleased Natalie Polischuk 
joined the Board on 29 December 2021. 
Natalie, an economist, brings a combination 
of financial expertise coupled with 
experience of Ukraine and Central and 
Eastern Europe markets, providing further 

balance to our Board in terms of 
regional expertise.

Key highlights in 2021 
and early 2022:

On 4 August 2021, Nikolay Kladiev was 
appointed as Chief Financial Officer in place 
of Roman Palyvoda who stepped down from 
the Acting CFO role to pursue other career 
opportunities. Nikolay joined the Group in 
2005 and brings a wealth of experience to 
the Group CFO role as well as a deep 
understanding of both our operations and 
the Ukrainian business environment.

On 14 February 2022, Jim North was 
appointment as permanent CEO having 
successfully transitioned the Group into a 
new phase of its corporate culture and 
overall growth ambitions. Jim brings a wealth 
of mining experience coupled with excellent 
leadership and an adept ability to refocus the 
Group’s strategy, further promote an 
inclusive leadership model, deliver a clear 
message on key topics relevant to 
stakeholders, whilst also continuing to 
deliver strong operational performance 
across the Group.

On 10 February 2022, the Board elected to 
appoint Fiona MacAulay as Senior 
Independent Director in place of Vitalii 
Lisovenko after completing two and half 
years in the role. 

Additionally, on 10 February 2022  
Ann-Christin Andersen was appointed as 
Chair of the Group’s HSEC Committee and 
Natalie Polischuk was appointed as a 
member of both the Audit Committee and 
HSEC Committee.

At the beginning of 2021, there was one 
female Director on the Board and by the end 
of the year I am delighted that we now have 
three female directors, further strengthening 
Board independence and diversity. Female 
representation on the Board is now 38%, 
which is enthusiastically welcomed by the 
entire Board.

Board performance review 

In line with the 2018 Corporate Governance 
Code, at least every three years the Board 
performance review is facilitated by an 
external third party that interviews the 
directors and senior management to form an 
objective opinion on the performance of the 
Board and its members. During the year, an 
externally facilitated effectiveness review of 
the performance and effectiveness of the 
Board, its committees and each of the 
directors was undertaken. A report on the 
process, activities, findings and actions of the 
evaluation can be found on pages 91 to 92.

–  continued management of Covid-19;
–  Health & Safety and employee wellbeing
–  zero fatalities;
–  climate change – established inaugural 

carbon reduction targets;
–  established dividend policy;
– 
improved Board diversity;
–  appointment of two female independent 

Non-executive Directors;

–  appointment of female Senior 

Independent Director;
–  appointment of CEO;
–  appointment of CFO;
–  appointment of HSEC Chair;
–  appointment of female Independent 
Non-executive director to Audit and 
HSEC Committees;

–  succession planning at Board and 

management level;

–  external Board Evaluation;
–  strengthen cyber security;
– 

focus on shareholder and key 
stakeholder engagement;
–  appointment of broker; and
–  appointment of sponsor.

Key priorities for 2022:

–  supporting our workforce and the 

operations as a result of the Russian 
invasion of Ukraine;

–  continued management of Covid-19;
–  Health & Safety and employee wellbeing;
–  climate change;
–  commence search for a director 

of colour;

–  succession planning at Board and 
diversity at management level;

–  continue focus on shareholder and key 

stakeholder engagement; and

–  continue to strengthen cyber security.

I hope you find this report useful and 
informative. I look forward to engaging with 
as many of you as possible at our 2022 AGM 
in person and would like to encourage you to 
vote your shares even if you cannot attend in 
person, so that we gain a better 
understanding of the views of our 
shareholders as a whole.

Lucio Genovese
Chair
21 April 2022

Ferrexpo plc Annual Report & Accounts 2021

77

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSBoard of Directors
AN EXPERIENCED AND BALANCED BOARD

Raffaele (Lucio) Genovese 
Non-executive Chair

Fiona MacAulay
Senior Independent 
Non-executive Director

Jim North
Chief Executive Officer and 
Executive Director

Ann-Christin Andersen
Independent 
Non-executive Director

Date of appointment 
24 August 2020 as Chair

Date of appointment 
12 August 2019

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; Nevada Copper Inc 
since 2016; and as chair of CoTec 
Holdings, listed on NEX Board of  
the TSVX, since 2021.

Previous appointments 
Previously, he was non-executive 
director of Mantos Copper SA, 2015-
2022; 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, she serves as non-
executive director of Costain Plc 
since April 2022; non-executive 
director of Chemring Group plc 
since 2020; and non-executive 
director of AIM listed IOG Plc since 
2018 where she serves as chair. 

Previous appointments 
Previously, she was non-executive 
director of AIM listed  
Coro Energy 2017–2022; 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. She has 
extensive operational experience 
in emerging energy which enables 
her to bring positive insight on a 
broad range of issues to Board and 
Committee discussions. 

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 the Chair  
of the HSEC Committee until 
February 2022.

Fiona was appointed Senior 
Independent Director in  
February 2022.  

Date of appointment 
14 February 2022 
Chief Executive Officer

5 July 2020 
Executive 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 
seven 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. 

Date of appointment 
1 March 2021

Current external appointments 
Since 2021, Ann-Christin has served 
as non-executive chair of Quantafuel 
AS, and since 2020 served as chair 
of the board of Glitre Energi AS 
(unlisted), 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 is the Chair of HSEC 
Committee with effect from 
February 2022 and a member of 
the Nominations and Remuneration 
Committees and Committee of 
Independent Directors. 

78

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEGENDER

• Male 
• Female 

62.5%

37.5%

Graeme Dacomb
Independent 
Non-executive Director

Vitalii Lisovenko
Independent 
Non-executive Director

Natalie Polischuk
Independent 
Non-executive Director

Kostyantin Zhevago
Non-independent 
Non-executive Director

Date of appointment 
10 June 2019

Date of appointment 
28 November 2016

Date of appointment 
29 December 2021

Current external appointments 
Currently, she serves as non-
executive director of Dobrobut 
(Ukraine), since 2018. 

Previous appointments 
Previously, she was non-executive 
director and treasurer of Lycée 
Français Anne de Kyiv, 2014–2020.

Skills, expertise and contribution 
Natalie brings over 25 years of 
private equity experience in Eastern 
Europe, having held a number of 
senior roles at private equity funds 
in the region and having acted as an 
independent advisor on a number of 
M&A and due diligence projects  
in Ukraine.

Committee membership 
Natalie is a member of the Audit  
and HSEC Committees from 
February 2022. 

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

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

Skills, expertise and contribution 
Graeme contributes to Ferrexpo 
plc over 43 years’ experience of 
which he was a partner at Ernst & 
Young (“E&Y”) for 26 years 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 Nominations and Remuneration 
Committees and the Committee of 
Independent Directors.  

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 
since 2014. 

Previous appointments 
Previously, he was an executive 
director of Ukreximbank (Ukraine), 
2006–2010; an executive director 
of Alfa Bank Ukraine, 2010–2014; 
a non-executive director of 
Amsterdam Trade Bank, 2013–2014; 
and a non-executive alternate 
director, Black Sea Trade and 
Development Bank (Greece) 2014-
2019; and since 1994 held various 
positions in the Finance Ministry of 
Ukraine. He also was an Associate 
Professor of Finance at the Kyiv 
State Economic University.

Skills, expertise and contribution 
Vitalii contributes to Ferrexpo 
plc over 25 years’ experience in 
government 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. 
Vitalii was Senior Independent 
Director until February 2022. 

Non-executive Director designate 
for workforce engagement 

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 
None. 

Ferrexpo plc Annual Report & Accounts 2021

79

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSExecutive Committee
AN EXPERIENCED AND FOCUSED 
MANAGEMENT TEAM

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

Nikolay Kladiev
Chief Financial Officer

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

For more information see page 78 for details.

Nikolay was appointed Group Chief Financial 
Officer on 4 August 2021.

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

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

Nikolay Kladiev joined the Group in 2005, and 
contributed significantly to the Group’s IPO. Since 
2007, Nikolay has served on the Board of FPM as 
CFO. During his 16 years with Ferrexpo, Nikolay 
has overseen FPM’s finance function, and has 
been directly responsible for maintaining the 
Group’s position as a low cost pellet producer 
during this time. Prior to Ferrexpo, Nikolay held a 
number of audit positions with Arthur Andersen 
and Ernst & Young in Ukraine and Eastern Europe. 

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

Greg Nortje
Chief Human Resources Officer

Brett Salt
Chief Marketing Officer

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

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.

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.

80

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCECorporate Governance Compliance

As a premium listed company on the London Stock Exchange, the 
Company is subject to the 2018 Corporate Governance Code. This 
section explains how we applied the principles of the 2018 Corporate 
Governance Code. A copy of the Corporate Governance Code can be 
found at frc.org.uk. 

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

The Board considers the Company has complied throughout the year ended 31 December 2021 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 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 term are provided below.

The Corporate Governance Code sets out the governance principles and provisions that applied to the Company during 2021. The 
Corporate Governance Code is not a rigid set of rules, and consists of principles and provisions. The Company complied with all the 
principles and detailed provisions of the Corporate Governance Code in 2021 except for Provision 9 and 19. Provision 9 recommends that 
the Chair be independent on appointment and provision 19 recommends that the Chair should not remain in post beyond nine years from 
the date of first appointment to the board. 

Mr Genovese, was first appointed to the Board as a Director in June 2007 and retired in August 2014. After a near five year break, he 
rejoined the Board in February 2019 as a non-Independent Non-executive Director and most recently was appointed as Chair of Board in 
August 2020. 

Independent mind set

The Board is satisfied that Mr Genovese is fully independent from all the Company’s shareholders and has been during his entire tenure as 
a Non-executive Director. Additionally, upon his appointment as Chair the members of the Nominations Committee were comfortable 
based on their own experiences that Mr Genovese conducts himself with professional and personal integrity with an independent mind set 
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 given his experience, 
leadership qualities and detailed knowledge of the Group. He has more than 30 years’ experience of Ukraine together with in-depth 
knowledge of the socio-political and economic environment. He has specific iron ore mining knowledge coupled with solid experience of 
UK plc corporate governance matters. These qualities enable him to provide sound leadership to the Board based on his personal 
experience and knowledge which facilitates constructive discussions and Board decisions.

Mr Genovese is committed to having a diverse and inclusive Board and workforce. He has overseen the design and implementation of 
succession plans to facilitate increased independence and diversity. The Board considers that Mr Genovese continues to demonstrate 
objective judgement and provides constructive challenge, and believes that his continued appointment is appropriate without fixing a time 
limit to his service. 

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

–  Appointment of two female Independent Non-executive Directors ensuring compliance with the Hampton-Alexander Review.
–  Appointment of permanent CEO.
–  Appointment of CFO.
–  Appointment of female Senior Independent Director.
–  Succession planning at Board and senior management level.
–  Climate change – established inaugural carbon reduction targets.
–  Return to shareholders – established dividend policy.
–  Appointment of Broker.
–  Appointment of Sponsor.
–  Led a Corporate Governance Road Show with major institutional investors. 
–  Re-focused the 2021 Board agenda to include Cyber Security, Climate Change and Environmental, Social and Governance matters.
– 

Improved transparency on the outcome of the 2021 Board Evaluation and a further voluntary commitment for the Company to undertake 
a further externally facilitated follow up in 2022.

Ferrexpo plc Annual Report & Accounts 2021

81

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Compliance continued

Mr Genovese led the Board through the Covid-19 pandemic ensuring continuity of the Board agenda and meetings together with ongoing 
corporate initiatives and the establishment of a Covid-19 Response Fund to support our local community in Ukraine and most recently in 
early 2022 led the Board through the Russian invasion of Ukraine. 

The Board believes Mr Genovese is the right person to Chair the Board. To provide continuity of his sound leadership, we request your 
support to re-elect Mr Genovese at the 2022 AGM.

Further details on the composition of the Board and its Committees are set out on page 84 and further details of the role of the Senior 
Independent Director are set out on page 87. 

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

Division of 
responsibilities

Principle A:  
Principle B: 
Principle C: 
Principle D: 
Principle E: 

Principle F: 
Principle G: 
Principle H: 
Principle I: 

Composition, 
succession, evaluation

Principle J: 
Principle K: 

Audit, risk, 
internal control

Remuneration

Principle L: 

Principle M: 
Principle N: 
Principle O: 

Principle P: 
Principle Q: 
Principle R: 

Section 172 Statement page 50, Chair’s Statement page 2, Skills Matrix page 85
Chair’s Statement page 2, Purpose, Values and Strategy pages 6 to 7 and pages 16 to 17
Audit Committee Report page 94
Our Stakeholders page 46
 Employee Engagement page 40, Non-Financial Information Statement page 45, Whistleblowing 
Policy page 99

Role Descriptions page 87, Board Evaluation page 91
Role Descriptions page 87
Time Commitment page 86, Corporate Governance At a Glance page 83
The Board page 84, Skills Matrix page 85

Appointment Process and Succession Planning page 102, Board Diversity Policy page 103
 Skills Matrix page 85, Appointment Process and Succession Planning page 102, 
Board Composition page 84
Board Evaluation page 91

External Audit page 99, Internal Audit page 99
Audit Committee Report page 94
 Internal Control and Risk Management page 98, Risk Management page 54, Principal Risks 
page 56

Remuneration policy page 110
Procedure for developing policy on remuneration, page 106
 Directors should exercise independent judgement when authorising remuneration outcomes 
page 118

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.

82

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCECorporate Governance Report
At a glance

SHAREHOLDERS

BOARD

AUDIT  
COMMITTEE 

REMUNERATION  
COMMITTEE 

NOMINATIONS  
COMMITTEE 

COMMITTEE OF 
INDEPENDENT 
DIRECTORS 
(“CID”)

HEALTH,SAFETY, 
ENVIRONMENT 
AND COMMUNITY 
(“HSEC”) COMMITTEE

CHIEF 
EXECUTIVE OFFICER 
AND EXECUTIVE 
COMMITTEE1

Responsibilities 
include:
–  Monitoring integrity 

of financial 
statements.

–  Reviewing internal 
control and risk 
management 
systems.

–  Relationship with 
external auditor.

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.

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.

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 Companies 
Act 2006.

Responsibilities 
include:
–  Formulating and 
monitoring the 
implementation of 
the Group’s policy 
on issues relating 
to health and 
safety, environment 
and community as 
they affect 
operations. 

–  Specific focus on 
safety and climate 
change impacts.

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.

  For more 
information: 
Audit Committee 
Report  
see page 94

  For more 
information: 
Directors’ 
Remuneration 
Report  
see page 106

  For more 
information: 
Nominations 
Committee 
Report  
see page 100

  For more 
information:  
See page 87

  For more 
information: 
responsible 
business section 
see page 30

  For more 
information:  
See page 80

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 2021.
–  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 2021.

–  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 2021.

Ferrexpo plc Annual Report & Accounts 2021

83

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
 
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 on page 83 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-ferrexpo/corporate-governance/board-committees. 

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

Board composition and independence

As of 31 December 2021, the Board (excluding the Chair) comprised one Executive Director, one Non-independent Non-executive Director, 
and five 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 2021 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

Acting Chief Executive Officer

Independent Non-executive Director

Independent Non-executive Director

AC Andersen

Independent Non-executive Director

N Polischuk

K Zhevago

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 78 and 79.

84

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEBOARD DIVERSITY, TENURE AND BALANCE

BOARD  
BALANCE

BOARD DIVERSITY  
– GENDER

2021

2021

  Independent 
  Non-independent 
  Chair 
  Executive 

5
1
1
1

  Female 
  Male 

3
5

BOARD DIVERSITY  
– AGE

BOARD DIVERSITY  
– ETHNIC GROUP

BOARD  
TENURE

2021

2021

2021

  Age: 40-49 
  Age: 50-59 
  Age: 60+ 

2
5
1

  White 
  Mixed/Multiple
Ethnic Group 

8

0

  0-5 years 
  9 years + 

6
2

Skills matrix

Expertise

Mining, Global Resource Industry

Business leadership and strategy

Corporate governance

ESG/Sustainability

Financial, Audit & Risk

CIS Geographical experience 

Government and international relations

HSEC

Human capital management/ Remuneration

Investor relations management

Risk management

100%

% of Board 
members

56%

66%

66%

56%

72%

78%

53%

69%

72%

75%

84%

Ferrexpo plc Annual Report & Accounts 2021

85

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Report continued

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 2021.

All of the Non-executive Directors (with the exception of Natalie Polischuk, who was appointed as a Non-executive Director of the Company 
on 29 December 2021) 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 2021 is shown in the table below.

Non-executive Director external appointments during 2021

During 2021, Ms Andersen was appointed as Chair of Quantafuel AS, a company listed on Euronext Growth. Additionally, in relation to 
Ms Andersen’s existing Non-executive Directorship of Argeo AS, during the year Argeo AS became a publicly listed company on Euronext 
Growth. Also during 2021, Mr Genovese was appointed as Chair of CoTec Holdings Corp, a company listed on the NEX Board of the TSVX. 
These appointments were considered a significant appointment for Ms Andersen and Mr Genovese for the purposes of the Corporate 
Governance Code, and, in advance of the appointment, both Ms Andersen and Mr Genovese 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 Andersen and 
Mr Genovese, the time commitment expected in the role as a Ferrexpo director and Chair respectively, 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 Andersen or Mr Genovese to perform their existing roles on the Ferrexpo Board and its committees.

Board and Committee meeting attendance in 2021 

Director

AC Andersen1

G Dacomb2

R L Genovese

V Lisovenko

F MacAulay 

J North 

N Polischuk3 

K Zhevago

Board

Audit

Remuneration

Nominations

CID

HSEC

Scheduled

Ad hoc

Scheduled Scheduled

Ad hoc Scheduled

Ad hoc Scheduled

Ad hoc Scheduled

Ad hoc

Attended/Eligible to attend

2/2

4/4

4/4

4/4

2/2

2/2

2/2

3/3

2/2

5/5

5/5

5/5

1/1

1/1

1/1

1/1

1/1

1/3

5/5

5/5

5/5

0/1

6/7

7/7

7/7

5/5

5/5

5/5

2/2

1/2

4/4

4/4

2/2

1/2

3/4

5/5

5/5

5/5

5/5

5/5

0/0

4/5

11/11

13/13

13/13

13/13

13/13

13/13

0/0

12/13

1.  Ms Andersen was appointed to the Board on 1 March 2021 and Board Committees on 18 May 2021.
2.  Mr Dacomb was appointed to Nominations Committee on 19 May 2021.
3.  Ms Polischuk was appointed to the Board on 29 December 2021.

During the year, there were a number of ad hoc Board and Committee meetings which dealt with (amongst other things) Covid-19 response, 
Board appointments and the declaration of dividends.

86

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCE 
 
Role descriptions

The division of responsibilities between the Chair and the CEO has been clearly established in writing and is agreed by the Board. A summary 
of the roles of the Chair, the CEO, the Senior Independent Director, the Non-executive Directors and the Company Secretary is set out in 
the following table. The table also includes an overview of the role of the Executive Committee and of the Committee of Independent 
Directors. The roles of the Audit and Nominations Committees are set out later in this Corporate Governance Report, the role of the HSEC 
Committee in the Strategic Report on page 30, and the role of the Remuneration Committee in the Remuneration Report on page 106.

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 78. 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 North as CEO has no other 
directorships of quoted companies.

Senior 
Independent 
Director

The Senior Independent Director, in conjunction with the other Independent Non-executive Directors, assists in 
communications and meetings with shareholders and other stakeholders concerning corporate governance matters. 
The Senior Independent Director 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

Company 
Secretary

Executive 
Committee

Committee of 
Independent 
Directors 
(“CID”)

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 106); and monitor 
executive succession planning (for Board succession planning, see the Nominations Committee Report on page 102). 
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.

The Company Secretary is responsible for ensuring that Board procedures are followed and that applicable rules and 
regulations are complied with. The Company Secretary is also responsible for advising the Board on all governance matters 
and for ensuring, with the Chair, that information reaches Board members in a timely fashion, so that they are alerted to 
issues and have time to 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.

The CID is composed of the Senior Independent Director and three other Independent Non-executive Directors. The CID 
considers and, if appropriate, authorises on behalf of the Board, related party transactions and otherwise ensures 
compliance with the related party transaction rules and the Relationship Agreement entered into between Fevamotinico 
S.a.r.l., Mr Zhevago, The Minco Trust and the Company. The CID holds delegated authority to consider and, if appropriate, 
approve situations which give rise to an actual or potential 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, transactions with the Group’s controlling shareholders or their 
associates are conducted at an arm’s length basis and 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 page 124.

Ferrexpo plc Annual Report & Accounts 2021

87

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Report continued

BOARD LEADERSHIP

Before setting out the Board’s activities in 
2021, it is important to note that since the 
Russian invasion of Ukraine, the Board has 
continued to meet regularly to discuss the 
on-going situation in Ukraine, the execution 
of our business continuity plans, planning 
for different eventualities and adjustments to 
the corporate calendar. The Board receives 
daily updates from the management team as 
to the Group’s response and scenario 
planning for different eventualities. 
Protecting the Group’s workforce is a key 
priority, as well as taking steps to protect the 
business and thereby the stakeholders of 
the business. This will remain a key priority 
for the Board during 2022.

Board activity in 2021

Five scheduled Board meetings were held 
in 2021 (supplemented by other ad hoc 
meetings, telephone or video conferences 
and written resolutions as required from 
time to time). In line with Covid-19 safety 
guidance, the majority of Board meetings 
were held remotely during the year by video 
conference, with management team 
members and other Group personnel joining 
to discuss matters as appropriate. The 
Board intends to hold its scheduled 
meetings in person during 2022 provided it 
is safe to do so.

The Board’s programme of meetings allows 
key areas of focus to be established and 
reviewed on a regular basis. A review of 
the Board forward agenda was undertaken 
early in the year to align key focus areas 
with strategy.

At each scheduled Board meeting, the 
Directors receive a report from each of the 
Chair, the Chief Executive Officer and the 
Chief Financial Officer and will review and 
approve the minutes from previous Board 
meetings and note Board Committee 
minutes. There is also an oral report from 
the Chair of each Board Committee, 
providing an overview of the matters 
discussed at the Committee meetings 
which are held before the scheduled 
Board meetings. The Board may also 
receive a report from the Chief Marketing 
Officer relating to updates on the 
Group’s marketing strategy, product 
development and relationships with 
the Group’s customers. 

The Chief Executive Officer’s report will 
include matters relating to production and 
operations, safety measures and 
performance against targets, iron ore 

market conditions, growth projects, 
implementation of diversity and inclusion 
policies and updates on the position in 
Ukraine. The Chief Financial Officer’s report 
covers financial performance as compared 
to budget, financial forecasts and cash flow 
position. The Chair will report on 
developments relating to investor and 
stakeholder engagement (including 
shareholder feedback), relevant corporate 
governance matters and Board refreshment 
and succession planning. 

The following sets out an overview of the 
key areas of focus for the Board during 
the year.

Covid-19
The impact of Covid-19 was a key area of 
focus during the year, with the Board 
undertaking regular reviews of the Group’s 
response to the pandemic. The Board 
received updates from the Chief Executive 
Officer and Chair of the HSEC Committee 
on the Group’s response to the pandemic, 
including safety measures put in place at 
the mine sites and other locations to protect 
the Group’s workforce and support 
provided to members of the workforce 
affected by Covid-19 and their families. 
The Board also reviewed expenditure 
by the Group’s Covid-19 support fund, 
and approved additional funding for the 
support fund.

More information can be found throughout 
this Annual Report and Accounts.

Climate change and decarbonisation 
targets
Climate change has been a standing agenda 
item at all scheduled Board meetings and 
meetings of the HSEC Committee 
throughout the year. 

During the year, the Board reviewed the 
Group’s position in relation to climate 
change, including the risks and 
opportunities which climate change may 
present to the Group, see page 71 Principal 
Risks. The Board also approved a 
commitment for the Group to achieve net 
zero carbon emissions from its operations 
by the year 2050, and an initial commitment 
to achieve a minimum of a 30% reduction in 
combined Scope 1 and 2 emissions by 
2030, against the Group’s baseline year of 
2019 emissions.

The Board also considered various 
proposals aimed at reducing the carbon 
emissions resulting from the Group’s 

operations, including a proposal to 
transition the existing mining fleet to an 
electrified mining fleet in the medium term. 
This proposal once implemented would 
result in a material reduction in CO2 
emissions for the Group.

For further details, see page 36 of the 
Strategic Report.

Financial position and early repayment 
of debt facility
The Board continuously reviews the 
financial position of the Group, including 
performance against targets, balance sheet 
strength and liquidity. During the year, the 
Board decided to make an early repayment 
in full and cancel its Pre-Export Finance 
Facility in order to minimise funding costs 
and ensure efficient use of liquidity.

The Company’s Preliminary and Interim 
results and Annual Report were scrutinised 
and approved by the Board.

Cyber security strategy
In light of the growing risks facing all 
businesses in relation to cyber security, the 
Board received a detailed presentation from 
the Group’s Head of Information Technology 
outlining the Group’s procedures and 
controls in relation to cyber security. This 
included an overview of the steps which the 
Group plans to take to further improve its 
protections relating to cyber security and 
procurement of additional IT infrastructure 
to maintain access to our data in the event 
of a cyber attack.

Stakeholders and workforce engagement
Stakeholder considerations and culture 
are an important part of the Board’s 
discussions and decision-making. The 
information on pages 46 to 49 provides a 
review of stakeholder engagement activities 
during the year and explains how the Board 
considers stakeholders in decision-making.

During the year, the Board appointed 
Mr Lisovenko as the designated Non-
executive Director to lead workforce 
engagement. Mr Lisovenko attended and 
led the 2021 workforce town hall meeting 
held in September 2021 and provided an 
update to the Board, together with 
recommendations for encouraging further 
active engagement with the workforce.

The Board also considered the results of the 
second Employee Engagement Survey, 
which was undertaken in November 2020. 
This included a comparison of the survey

88

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEBOARD LEADERSHIP (CONTINUED)
results as between employees and 
managers, focusing on areas of disparity of 
opinion between employees and managers, 
and considerations for the lower 
participation rate as compared to the 
previous survey. The Board discussed the 
feedback from the survey with the Chief 
Executive Officer and the Chief Human 
Resources Officer, including plans for 
further engagement by functional heads 
with their teams to better understand the 
results of the survey and to develop joint 
action points focusing on areas of strength 
and areas for improvement.

executive Directors. The process for these 
appointments was led by the Nominations 
Committee, with the Board involved in 
reviewing the candidates recommended by 
the Nominations Committee and ultimately 
approving the appointment of Ms Andersen 
and Ms Polischuk.

For further details see page 100 of the 
Nominations Committee Report.

Governance and risk 
Following on from the governance 
improvement work carried out in 2020, 
during the year the Board carried out an 
annual review of the terms of reference of 
each Board Committee. Updates to the 
terms of reference were incorporated to 
reflect current best practice. 

During the year, the Board also reviewed 
and approved revised delegated authorities 
for senior management and made updates 
to its Inside Information and Disclosure 
Policy, Share Dealing Policy and Director 
Conflicts Authorisation Policy to reflect 
updates in laws and regulations post Brexit 
and current best practice.

management and operational levels 
including a specific focus on diversity 
among the talent pipeline to develop future 
female leaders across the Group.

For further details see page 102 of the 
Nominations Committee Report.

Production capacity and efficiencies
The Board regularly reviews proposals for 
capital expenditure related to the increase 
of production capacity and efficiencies. 
During the year, the Board considered and 
approved capital expenditures relating to 
the concentrator expansion and upgrading 
of pellet line 4 at FPM. 

For further details see page 24 of the 
Strategic Report.

At the end of some Board meetings, the 
Chair and Non-Executive Directors also met 
without the Executive Director being 
present, and the Senior Independent 
Director held discussions with the Non-
Executive Directors without the Executive 
Director or the Chair being present.

Other matters discussed were:

For further details, see page 46 of the 
Strategic Report.

Dividends and new shareholder  
returns policy
The Board regularly considers proposed 
shareholder dividends, taking into account 
the financial performance and liquidity 
position of the Group. As a result of the 
Group’s strong financial performance, the 
Group paid out dividends during the year 
totalling US$619 million. Given the 
uncertainties arising from the Covid-19 
pandemic, ahead of approving and paying 
these dividends, the Board would meet to 
consider the Company’s liquidity position 
and financial commitments (including 
related to development capital expenditure). 

During the year, the Board also considered 
and approved a new Shareholder Returns 
Policy, following feedback from some 
market participants that they expected the 
Group to have a formal dividend policy. As 
part of this, the Board benchmarked the 
proposed policy against dividend policies of 
peer companies and considered the most 
appropriate financial metrics for the Group. 
The Board also sought input from the 
Group’s financial advisers on the design of 
the new policy. 

For further details, see page 52 of the 
Strategic Report.

Board balance and independence
Ensuring the appropriate balance of skills, 
independence and diversity on the Board 
remains a key priority of the Group. 

During the year, the Board was focused on 
improving the level of independent non-
executive director representation on the 
Board, in line with previous commitments 
made by the Chair. This led to the 
appointment of Ann-Christin Andersen in 
March 2021 and Natalia Polischuk in 
December 2021, as Independent Non-

At each of its scheduled meetings the Board 
also considers any updates to the principal 
and emerging risks of the Group.

–  Oral reports from the Chair of Board 
Committee meetings held before the 
Board meeting;

Human Rights Policy and Modern  
Slavery Act Statement
During the year, the Board approved a new 
Human Rights Policy, taking into account 
relevant international standards. The Board 
also reviewed and approved the Group’s 
Modern Slavery Act Statement for the year 
ended 31 December 2020 (a copy of which 
is available at www.ferrexpo.com). 

Executive appointments and  
succession planning
Nikolay Kladiev was appointed as Chief 
Financial Officer on 4 August 2021. The 
process for identifying and selecting a new 
Chief Financial Officer was led by the 
Nominations Committee with support from 
the Chief Human Resources Officer. The 
Board was involved in reviewing the work 
carried out by the Nominations Committee, 
approving the appointment of Nikolay 
Kladiev following a recommendation to that 
effect from the Nominations Committee and 
ensuring an orderly handover process was 
in place.

The Chief Human Resources Officer 
presented to members of the Nominations 
Committee to review the talent audit and 
succession plans across senior, 

–  diversity and inclusion;
– 

internal succession planning – 
Talent review;

–  succession planning for Non-executive 
Director recruitment and appointments;

–  review of agenda and approval of 

minutes from previous Board meeting 
and note Board Committee minutes;
interactions with auditors;

– 
–  Chief Executive Officer’s report including 

production and operations, iron ore 
market conditions, and updates on 
Covid-19 and the position in Ukraine;
–  Growth projects: Wave 1 expansion;
–  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 matters, including 

health and safety, carbon reduction and 
community spending; and

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

Ferrexpo plc Annual Report & Accounts 2021

89

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Report continued

BOARD LEADERSHIP (CONTINUED)

Matters reviewed as required included:

–  the Group’s continued response to the 

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;

–  geopolitical matters;
–  external evaluation of the performance of 
the Board, Chair, Directors and Company 
Secretary;

–  review of the AGM statement, and proxy 

agency comments and 
recommendations;

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

–  annual review of the Treasury Policy;
–  approval of the Code of Conduct;
–  appointment of a new Financial Advisor 

and Broker; 

–  appointment of a new Sponsor; and
–  the CSR budget.

During 2021, 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.

Board virtual site visit and  
Strategy Day

Due to travel restrictions imposed by the 
Covid-19 pandemic, the Board was unable 
to conduct the planned visit of the Group’s 
operations in Horishni Plavni, Ukraine. The 
alternative arrangement was a Board virtual 
site visit and Strategy Day. 

The Board received a progress update on 
Actions taken from 2020 and achievements 
during the year. This set the foundations 
for ‘where we are now’ and ‘where we 
are going’.

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, strategy and tailings 
storage facility.

All matters discussed aligned with the 
Ferrexpo strategic pillars: Health & Safety, 
Financial Strength, Technology & Innovation, 
Product Quality, Growth and Licence 
to operate. 

Health, safety and environment included 
Covid-19 response, HSE performance, 
business improvement, tailings storage 
facility status, audits and ecology. An in 
depth overview of plant development 
(beneficiation and pelletising) and project 
execution was illustrated by the use of 
drones. The Autonomous Haulage System 
update covered decarbonisation in 
mining, electricification autonomy, rail 
modernisation, digitalisation and enterprise 
resource planning. Marketing and product 
development was a key update for the 
Board together with growth and expansion 
plans supported by revenue and capital 
modelling. Quality management systems 
and analysis together with technology and 
innovation including business improvement 
initiatives were also provided. Licence to 
operate, included carbon reduction, people 
development, productivity and culture.

The actions from the Strategy Day were 
collated and disseminated for execution 
during the year. 

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.

The Board virtual site visit and Strategy Day 
was preceded by a Carbon Reduction 
Strategy discussion including data 
collection, validation and benchmarking  
and the carbon reduction journey. 

Post AGM engagement

During the year, we consulted with 
shareholders in person and in writing on a 
number of important corporate governance 
issues, three of which following significant 
votes against Resolutions 9, 10 and 12 at 
the 2021 AGM (re-election of Lucio 
Genovese, Vitalii Lisovenko and Kostyantin 
Zhevago) and one following significant votes 
against Resolution 1 at the 2021 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:

–  enhanced shareholder engagement with 
a Corporate Governance road show 
during the year;

–  the appointment of Fiona MacAulay 
as Senior Independent Director; 
increased diversity on the Board;
increased independence by the 
appointment of a further Independent 
Non-executive Director; and

– 
– 

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

90

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEBOARD EVALUATION

Board performance evaluation

Under the Corporate Governance Code, the Board is required to undertake annually a formal and  
rigorous evaluation of its own performance and that of its Committees and individual Directors.  
This evaluation should be externally facilitated every three years. 

Review of 2020 internal Board performance
The Board and its Committees consider their effectiveness regularly and the outcome and  
findings from the 2020 internal review were progressed throughout the year with the following  
actions taken: 

Action to be taken 

Actions taken

BOARD  
EVALUATION CYCLE

  2019: Internal
  2020: Internal
  2021: External

Improve Board diversity

Two female Non-executive Directors appointed during 2021. Female representation increased 
from 17% in 2020 to 38% in 2021.

Improve frequency of site visits 
to better understand operations

This could not be facilitated due to Covid-19 travel restrictions. This was replaced by a virtual site 
visit with drone video footage and enhanced reporting from management.

Allocate additional time 
for growth projects

Additional time allocated to growth projects facilitated breadth and depth of presentation, 
discussion and deep dives into specific areas such as mining fleet replacement.

Reviewing past performance and 
influencing future performance

Reviews of past performance was better reflected in the Board papers in the context of the 
potential impact on future performance.

Chair and Senior Independent 
Director to bolster 
shareholder engagement

More time to be allocated to 
Remuneration Committee

A Corporate Governance road show was carried out by the Chair and Company Secretary during 
2021 to address specific areas raised by some shareholders with feedback provided to the 
Board at the next Board meeting. 

More time was allocated to enable sufficient time for the construction of a transparent framework 
for incentives and rewards. 

2021 External Board performance
In line with recognised best practice, an external evaluator was engaged to conduct the 2021 Board evaluation. Three different providers 
were reviewed prior to confirming the appointment of Clare Chalmers Ltd. They have a strong track record of conducting board evaluations 
for FTSE350 companies and their distinctive review approach based on providing their own evidenced observations of the Board, 
triangulated with those of Board Members and attendees, was one of the key considerations which informed this decision. Clare Chalmers 
Ltd has no other connection with the Company and this is the first time they have provided Board Evaluation services to the Company. 
Initial meetings with the Chair and Company Secretary were used to agree the purpose, scope and timing of the evaluation. This facilitated 
the key themes for the Board performance review. The thematic evaluation focus areas included:

–  Board composition, succession, development, leadership and dynamics;
–  Board oversight: Strategy, performance, risk, people & culture;
–  Stakeholders and decision making;
–  Board efficiency including secretarial support;
–  Leadership and succession decision making;
–  Board planning; and
–  The effectiveness of Board Committees.

Ferrexpo plc Annual Report & Accounts 2021

91

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCorporate Governance Report continued

BOARD EVALUATION (CONTINUED)

Information gathering, interviews and meeting observation:

PREPARATION

–  Held a scoping meeting with the Chair and Company Secretary to understand context and priorities.
–  Review of Board and Board Committee papers and other relevant documentation, including Strategy papers 

– 

and the Board and Board Committee Forward Agenda Planner.
Individual interviews were scheduled with the Chair, all the Non-executive Directors, the Interim CEO, 
the Company Secretary, Chief Financial Officer, Chief Human Resources Officer, Remuneration Advisor and 
External Audit Partner.

FORMAL  
INTERVIEWS

–  One-to-one interviews were conducted with six of the seven Directors appointed (at this point in time seven 
directors were appointed) including the Chair, the Senior Independent Director, three further Independent 
Non-executive Directors, the Controlling Shareholder and the Interim CEO. The Company Secretary, Chief 
Financial Officer, Chief Human Resources Officer, Remuneration Advisor and External Audit Partner were also 
interviewed.

–  Observed a Board and Board Committee meetings to observe the Board dynamics and interaction with 

BOARD 
OBSERVATION

management and the Auditors. 

–  Key findings and recommendations were shared with the Chair and Company Secretary, and a draft report 

was prepared for review. 

REPORTING

–  The final report was circulated to the full Board, with a presentation from Clare Chalmers Ltd at the next 

Board meeting to deliver the findings at which discussion was held and the outcomes and recommended 
actions agreed.

The review also included feedback on individual performance. This informed the annual process of individual Director evaluation, led by 
the Chair, which included one-to-one discussions with each Director on their performance, contribution and any additional training and 
development needs. The Senior Independent Director led the annual review of the Chair, holding a one-to-one discussion to provide 
feedback on his performance. This was informed by a closed session of the Non-executive Directors, excluding the Chair, led by the Senior 
Independent Director. The Senior Independent Director also engaged the Interim CEO and Company Secretary to obtain their views on the 
Chair’s performance.

Feedback and report findings
The Board has considered the findings of the evaluation and, overall, the review concluded that the Board is well-balanced in terms 
of Board dynamics. The Board is very well led by a proactive and fully engaged Chair. The environment in the boardroom encourages 
appropriate challenge and debate with no one voice dominating discussions. The Board and its Committees are well Chaired and run 
by committed independent Non-executive Directors.

In response to the main recommendations of the evaluation report, the Board has agreed the following key areas for focus in 2022: 

Key areas for focus in 2022
Area

Succession Planning

Balanced skill-set

Actions to be taken

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

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

workload of the Board Committees.

Director Training

–  Upskill the Board on all ESG matters.

Workforce engagement

–  Explore ways to enhance workforce engagement and bring findings into the Boardroom.

Board efficiency and processes

–  Continue to improve Board reporting particularly management report writing with externally 

facilitated training among all report writers.

Corporate resourcing

–  Ensure bolstered resourcing for Secretariat and Internal Audit functions.

Additionally, the Board suggested and agreed a follow-up session with Clare Chalmers Ltd late in 2022 to undertake a light review 
of progress made during 2022 and with a view to recommend further actions for the following year in 2023.

92

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCE 
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. The Board had a 
combined training session with its legal 
adviser Herbert Smith Freehills and Broker 
Liberum. This training covered key areas 
such as directors’ duties, market 
announcements, and listed company 
obligations which are of particular relevance 
to Ferrexpo.

Usually, site visits are held for the whole 
Board annually, so as to ensure that all 
Directors are familiar with the Group’s 
operations, and Directors may also visit the 
operations of the Group independently to 
the extent they feel this is necessary. Due to 
Covid-19, the physical Board site visit was 
cancelled and replaced with a virtual site 
visit as set out on page 90. 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 
Company in the furtherance of their duties.

Induction

Following appointment, all Directors are 
advised of their duties, responsibilities and 
liabilities as a director of a public listed 
company. In addition, an appropriate 
induction programme is provided to each 
Director upon appointment, taking into 
consideration the individual qualifications, 
experience and knowledge of the Director.

Induction training includes meeting senior 
executives of the Executive Committee, a 
detailed and structured site visit (or 
alternative arrangements, where required as 
a result of the Covid-19 pandemic), meeting 
the Company Secretary, necessary training 
on corporate governance aspects, and 
receiving various key Company 
documentation and reports.

Ms Andersen and Ms Polischuk, who were 
appointed during the year, followed a 
tailored induction programme covering a 
range of key areas of the business. They 
met with the Company Secretary, who 
provided a Board Induction pack containing 
Company and Board information to assist 
with building an understanding of the nature 
and structure of the Group, its business and 
markets. The Board Induction pack also 
included information to help facilitate a 
thorough understanding of the role of a 
Director, the framework which the Board 
operates, Group Policies and Procedures, 
constitutional documents and regulatory 
codes and guidelines. Ms Andersen visited 
site operations in September 2021 and met 
with the three Mining General Directors, 
senior and operational management teams 
to provide an insight into the operational 
side of the business.

Ferrexpo recently introduced a Buddy 
programme for newly appointed Directors. 
The role of a Buddy is to provide mentoring 
for the first three months during orientation 
with the Company and its business. 
Ms MacAulay acted as Buddy to 
Ms Polischuk.

Ferrexpo plc Annual Report & Accounts 2021

93

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAudit Committee Report

Dear Shareholder,

On behalf of the Board, I am pleased to 
present the Audit Committee Report for the 
financial year ending 31 December 2021. The 
aim of this report is to provide shareholders 
insight into key areas that had been 
considered, how the Committee has 
discharged its responsibilities and lastly 
provide assurance on the integrity of the 
2021 Annual Report and Accounts.

The Committee agenda focuses on audit, 
compliance and risk management within the 
Group, working closely with finance, external 
audit, internal audit and management. During 
the year, the Committee has robustly 
assessed the principal and emerging risks 
facing the business. The Committee 
throughout the year took into account the 
regular financial and internal audit reports 
made available to the Board, as well as 
discussing issues with management and the 
external auditors at intervals throughout 
the year.

A critical area of focus for the Committee 
since the year end, has been the 
consideration of the preparation of the 
consolidated accounts on the going concern 
basis. On 24 February 2022, Russia began its 
invasion into Ukraine using direct military 
force and this has led to an intense armed 

conflict in Ukraine, which, as at the date of 
the approval of these Consolidated Financial 
Statements, is still ongoing. Although the 
Group has managed to continue its 
operations, the war continues to pose a 
significant threat to the Group’s mining, 
processing and logistics operations within 
Ukraine and represents a material 
uncertainty in terms of the Group’s ability 
to continue as a going concern.

The Covid-19 pandemic has continued to 
have an impact across the Group which 
resulted in remote working during various 
periods in 2021 for corporate functions in our 
global offices. The Committee throughout 
the year has continued to utilise video 
technology to maintain regular dialogue with 
management throughout the year and to 
ensure processes and controls were being 
managed effectively to provide timely and 
accurate financial information. Through the 
use of appropriate technology by both the 
auditors and Ferrexpo, the review 
procedures in July 2021 were successfully 
performed remotely. As the Covid-19 
situation improved towards the year-end, our 
external auditor MHA MacIntyre Hudson was 
able to complete its annual audit procedures 
for the preliminary and year-end audits partly 
in person at the Group’s different locations 
for the audit of the consolidated accounts. 

ACTIVITY DURING 2021

Key activities of the Audit Committee during 2021 are set out below. 

February

March

–  Considered assumptions used for the going 

concern and long-term viability assessment and 
impairment testing.

–  Received an update on the progress of the 2020 

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

Accounts for 2020.

–  Reviewed the questionnaire to be used to assess 

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

whistleblowing cases.

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

list and transactions with Related Parties.
–  Considered the resourcing for Internal Audit.
–  Considered FRC recommendation to extend 

–  2020 year-end review. 
–  Reviewed significant risks disclosed in the Annual 

Report and Accounts for 2020.

–  Assessed FRC’s Letter to Audit Committee 
Chairs and 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 

for 2020.

–  Considered the going concern and viability 

statement.

–  Reviewed the disclosures around FC Vorskla 

reporting deadline.

matters.

–  Reviewed principal risks and uncertainties.
–  Reviewed the Audit Committee Report.
–  Reviewed draft letters of representation.
–  Reviewed compliance report including 

whistleblowing cases.

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

list and transactions with Related Parties.

–  Held private meeting with the auditors.

Graeme Dacomb
Chair of the Audit Committee

Independently 
monitoring the integrity 
of financial information 
and internal control

MEMBERSHIP AND ATTENDANCE

Scheduled meetings

Eligible  

Committee member

to attend

Attended

Graeme Dacomb 

Vitalii Lisovenko

Fiona MacAulay 

5

5

5

5

5

5

94

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEMHA MacIntyre Hudson continues to provide 
robust challenges to management and 
provides independent judgement to the 
Committee regarding specific financial 
reporting and the control environment.

During the year, the Committee considered 
the status of the proposed regulatory change 
of the BEIS Consultation on ‘Restoring trust 
in audit and corporate governance: 
proposals on reforms’. The Committee 
reviewed the future potential impacts this 
could have on the Committee in order 
to stay on top of developments and 
plan accordingly.

TCFD disclosure requirements were a focus 
for the Committee and Ricardo plc had been 
appointed to help enhance the Group’s 
existing climate change scenario reporting 
and review the role of Ferrexpo iron ore 
pellets within the circular economy. Results 
of Ricardo’s analysis are expected to not 
only enhance the Group’s carbon reduction 
targets, but also additionally develop climate 
change reporting in 2022.

Detailed below is further information on the 
role, structure, key activities of the 
Committee and significant judgements it has 
considered in 2021. I hope this additional 
information about the Committee and its 
activities is insightful and based on this 
shareholders can be assured of the work 
undertaken by the Committee in 2021.

Graeme Dacomb
Chair of the Audit Committee

Role of the Committee

The Committee’s objectives and 
responsibilities are set out in its terms of 
reference which are available to view online.

The Committee’s main responsibilities are:

–  Monitoring the integrity of the annual and 

interim financial statements and the 
accompanying reports to shareholders.
–  Making recommendations to the Board 
concerning the approval of the annual 
and interim financial statements.

–  Reviewing and monitoring the adequacy 
and effectiveness of the Group’s risk 
management and internal control 
mechanisms. (Details of the principal 
risks are contained on pages 56 to 72.
–  Approving the terms of reference of the 
internal audit function and assessing its 
effectiveness.

–  Approving the internal audit plan and 
receiving regular reports from the 
Group’s head of internal audit.

–  Overseeing the Group’s relations with the 
external auditor, including an assessment 
of their independence, effectiveness 
and objectivity.

–  Overseeing completion of the Group’s 

going concern and viability assessment 
and statements thereon.

–  Reviewing and monitoring the Group’s 
whistleblowing procedures and the 
Group’s systems and controls for the 
prevention of bribery and corruption.

During the year ended 31 December 2021, 
the Committee has ensured that it has had 
oversight of all these areas listed. The Board 
also asked the Committee to advise it as to 
whether the Annual Report and Accounts 
are fair, balanced and understandable and 

provide the information necessary for 
shareholders to assess the Group’s 
position, performance, business model  
and strategy.

Committee membership and 
attendance

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

–  Graeme Dacomb (Chair of the 

Committee);

–  Vitalii Lisovenko; and
–  Fiona MacAulay.

Since the year end, Natalie Polischuk has 
joined the Committee. In addition to the five 
meetings held in 2021, the Audit Committee 
has met twice to date in 2022. 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.

In addition to its members, other individuals 
and external advisers, and the Chair of the 
Board, may be invited to attend meetings of 
the Committee at the request of the 
Committee Chair. Regular attendees at 
meetings include the Chief Financial Officer, 
Group Financial Controller, Company 
Secretary and audit partners of our external 
auditor MHA MacIntyre Hudson. The 
Committee has an opportunity to meet with 
the external auditors at the end of its 
scheduled meetings, without the Executive 
Director or management present.

May

July

December

–  Received an update on FC Vorskla related 

matters.

–  Presentation and review of half-year accounts.
–  Going concern assessment, including Covid-19 

–  Received a report on the outcome of the 2020 

Internal Audit plan and progress update on 2021.

–  Reviewed auditors 2020 performance (Statutory 

related reporting and considerations.

–  Reviewed the preliminary Internal Audit plan 

Audit Service Order) – analysis of scores.
–  Reviewed 2021 audit planning, key dates, 

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

for 2022.

–  Considered a risk analysis of the Internal 

preliminary audit plan.

whistleblowing cases.

Audit plan.

–  Reviewed an update on 2020 recommendations 

from Internal Audit.

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

–  Received an update on proposed Audit Reform 

transactions with Related Parties.

and considered whether to submit a response to 
BEIS consultation.

–  Received an update on IT Security audit.
–  Reviewed the Audit Committee Terms 

–  Reviewed a compliance report including 

of Reference.

whistleblowing cases.

–  Held private meeting with the auditors.

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

and transactions with Related Parties.
–  Reviewed the Audit Committee 2021 

Forward planner.

–  Considered a report from the external auditors on 

progress of the preliminary audit for 2021.

–  Considered the Group’s work plan for the 2021 

year end.

–  Reviewed an external audit planning report.
–  Received an update on the planned process for 
the viability and going concern assessment.
–  Considered the TCFD disclosure requirements.
–  Received an update on BEPS 2.0.
–  Reviewed a compliance report including 

whistleblowing cases.

–  Reviewed the Directors’ Interests list and 

transactions with Related Parties.

–  Reviewed the Group’s risk matrix and register. 

Ferrexpo plc Annual Report & Accounts 2021

95

ACTIVITY DURING 2021

Key activities of the Audit Committee during 2021 are set out below. 

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAudit Committee Report continued

Significant issues and judgements

The significant issues and judgements considered by the Committee in respect of the 2021 Annual Report and Accounts are set out below:

Judgements/actions taken

Consideration of the impact of the Russian invasion of Ukraine on the Group’s going concern and viability assessment
Ukraine is currently at war with Russia. On 24 February 2022, Russia commenced an invasion of Ukraine using significant and widespread 
military force. To date, the invasion of Ukraine has resulted in the temporary occupation of southeastern territory within the sovereign nation of 
Ukraine, loss of life for thousands of citizens of Ukraine and damage to infrastructure within Ukraine. The situation in Ukraine remains uncertain 
and unpredictable. 

To date, the Group has managed to continue production although the Group has curtailed some non-core activities. Shipments continue 
via rail and barge to Europe, but seaborne exports via the port of Pivdennyi have been temporarily suspended. The Group relies on key 
consumables, such as (but not limited to) diesel, natural gas and electricity plus spare parts and equipment required for its mining and 
processing operation to produce the Group’s products.

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

– 
– 

its available cash and cash equivalents;
its cash flow projections, adjusted for the effects caused by the war in Ukraine, for the period of management’s going concern 
assessment covering 18 months from the date of the approval of these Consolidated Financial Statements; and

–  the feasibility and effectiveness of all available mitigating actions within the Group management’s control for identified uncertainties, 
a material uncertainty still remains as some of the identified uncertainties are outside of the Group management’s control, with the 
duration and the impact of the war unable to be predicted at this point of time. 

As at the date of the approval of these Consolidated Financial Statements, the Group is in a net cash position of approximately US$192 million 
with an available cash balance of approximately US$209 million. In addition to the available cash balance, the Group has an outstanding 
receivable balance of approximately US$156 million from its sales in March and April 2022, which are expected to be collected in the coming 
weeks. 

While, to date, the Group has successfully managed to procure all its key consumables, such as natural gas, electricity and diesel fuel, 
the risk of a potential disruption to the required supplies remains. Similarly, a further interruption to the availability of the Group’s logistics 
network to its European customers via rail and barge – these have historically represented approximately 50% of the Group’s sales – 
may result in a significant decline in the Group’s operating cash flows. 

In addition, as at the date of the approval of these Consolidated Financial Statements, the Group’s operations, located adjacent to the city of 
Horishni Plavni, have not been involved in the conflict, but this remains a risk. Should the area surrounding the Group’s operations become a focal 
point of the armed conflict, there would be a significant risk posed to the safety of the Group’s workforce and the local community, as well as a 
significant risk to key assets and the infrastructure required for the Group to operate effectively. See the Principal Risks section on page 57 for further 
information.

Considering the current situation of the war in Ukraine, all identified available mitigating actions and the results of the management’s going 
concern assessment, the Group continues to prepare its consolidated financial statements on a going concern basis. However, many of the 
mitigating actions are outside of Group management’s control, which may cast significant doubt upon the Group’s ability to continue as a 
going concern. See Note 2 Basis of preparation to the Consolidated Financial Statements on page 152 for further information.

The Committee also considered management’s analysis of the impact of the war in Ukraine on the long-term viability assessment of the 
Group. Although the Group has managed to continue its operations since the beginning of the war, the war continues to pose a significant 
threat to the Group’s mining, processing and logistics operations within Ukraine. The Committee concurs with management’s conclusion 
that, notwithstanding all of the available mitigating actions, a material uncertainty still remains as some of the identified uncertainties are 
outside of Group management’s control. See Viability Statement on page 73 for further information.

Covid-19 related considerations for the Group’s going concern and viability assessment
The global Covid-19 pandemic had a continued impact on the world during 2021, although affecting economies, communities, 
governments, businesses and individuals on a lower scale than in 2020. The Group could rely on the measures implemented in 2020 at its 
main operations in Ukraine to ensure iron ore pellet production was not severely affected by, and continues to be unaffected by, the 
Covid-19 pandemic as of the date of approval of this Annual Report and Accounts. The Group continued to benefit from high demand for its 
products, mainly on the Chinese market, and prices increasing to record levels in the first half of 2021. As a result, the Group was highly 
cash generative in 2021 and closed the year in a net cashA position of US$117 million, after debt repayments totalling US$221 million, on a 
net basis, and dividend payments totalling US$619 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 72 providing further information on key actions that management has taken. 

96

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEJudgements/actions taken

Taxation: tax legislation in Ukraine (Note 11 to the Consolidated Financial Statements)
Having considered the background of ongoing court proceedings in respect of a 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 continue to 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 and resumed again in November 2021. Several hearings have been 
held since then, without a court decision made. The next hearing was scheduled for 28 February 2022, but did not take place due to the Russian 
invasion into Ukraine on 24 February 2022. Considering the current situation in Ukraine, it is unknown if and when the next hearing will take place.

Inventories: low-grade and weathered ore (Note 17 to the Consolidated Financial Statements)
It was the Group’s intention to ramp up the processing of the stockpiled low-grade ore once additional processing capabilities, resulting from the 
completion of Section 9, became available. Whilst the additional processing capacities were commissioned in the second half of 2020, operational 
difficulties were experienced such that, during the financial year 2021, the new facility did not deliver the expected and required output. Because of 
this and also in light of the additional customer demand for high quality iron ore pellets together with the high price environment for iron ore pellets, 
management decided during 2021 to postpone the processing of the low-grade ore in order to maximise the financial benefits of the prevailing 
market conditions. 

Following the approval of the Wave 1 growth project by the Board in October 2021, management has had to revisit its mining and processing plans 
and strategies as the growth project means that significant higher volumes of high-grade ore are required to meet both future production needs and 
market expectations. Because of the recent focus on the decarbonisation challenges facing the global steel industry, in the second half of 2021 there 
has been a significant increase in the demand for high quality products, such as direct reduction pellets, which cannot be achieved by feeding 
low-grade ore into the Group’s current processing facilities. As a consequence, management is exploring a further expansion of its processing 
capabilities to be in the position to process the low-grade ore using a facility built for this specific purpose. International Accounting Standard (IAS) 2 
requires the stockpiled low-grade ore inventory to be valued at the lower of cost or net realisable value. Further to that, IAS 2 also requires that only 
facts relating to the inventories and the operating environment at the time of the valuation are to be considered in determining net realisable value. 
As at the date of the approval of the Consolidated Financial Statements, it cannot be reliably predicted when the additional processing capacity will 
be available. Whilst the stockpiled ore is still seen as an asset for the Group, (and additional low-grade ore will continue to be mined and stockpiled 
in the future), the changed circumstances has resulted in the calculation of the net realisable value of the existing stockpiled low-grade ore reducing 
to nil. As a consequence, there has been a full impairment of US$231 million of the stockpiled low-grade ore.

It is possible that some or all of this impairment loss might be reversed in the future, once changed facts and circumstances are able to be 
considered in the valuation of this asset. For example, the Group’s intention to accelerate the current engineering studies exploring the option of a 
new processing facility for the specific purpose of processing low-grade ore. Depending upon the outcome of the engineering studies, the Group 
may move the project forward and once a full technical feasibility study and financial budgets are completed and the Board has formally approved 
detailed plans relating to the construction and operation of this possible new facility, it could then be considered in the net realisable value test.

Commitments, contingencies and legal disputes (Note 30 to the Consolidated Financial Statements)
In the course of doing business in Ukraine, the Group is subject to various legal actions and claims, which require a significant level of 
judgement by the management. Further to that, there is a risk that the independence of the judicial system and its immunity from economic 
and political influences in Ukraine is not given, so that the Ukrainian legislation might be inconsistently applied to resolve the same or 
similar disputes. Further information on the Ukraine country risk are provided in the Principal Risks section on pages 59 to 60.

The Group is involved in court proceedings in relation to a share dispute initiated by former shareholders of PJSC Ferrexpo Poltava Mining 
(“FPM”). Back in 2005, former shareholders brought proceedings in the Ukrainian courts seeking to invalidate the share sale and purchase 
agreement pursuant to which a 40.19% stake in FPM was sold to nominee companies that were previously ultimately controlled by Kostyantin 
Zhevago, amongst other parties. After a long period of litigations, all old claims were fully dismissed in 2015. In early 2021, Ferrexpo AG (“FAG”), 
the parent company of FPM, became aware that former shareholders of FPM filed again a claim to invalidate the share sale and purchase 
agreement concluded in 2002 pursuant to which a 40.19% stake in FPM was sold similarly to the previous claims made back in 2005. Following a 
decision in favour of FAG by the first instance, the opposing parties filed their appeals. The case is currently being heard by the appeal court and 
several court hearings have been held without a court decision made.

In October 2021, Ferrexpo Yeristovo Mining LLC (“FYM”) received two ecological claims from the State Ecological Inspection following an 
inspection carried out in September 2021. One of the claims was related to an allegation of violation of rules regarding removal of soil on a 
particular land plot and the other claim was related to an allegation of absence of documents for disposal of waste on a particular land plot. 
The claims totalled UAH786 million (US$28,144 thousand at the exchange prevailing as at 31 December 2021). The claims are currently 
being heard in the court. Based on legal advice obtained, it is management’s view that FYM has compelling arguments to defend its 
position in the court and, as a consequence, no associated liabilities have been recognised as at 31 December 2021.

In February 2022, FPM and FYM received letters from the Office of Prosecutor General notifying about ongoing investigation on potential 
underpayment of iron ore royalty payments during the years 2018 to 2021. The amount of underpayment is not specified in the letters and, 
as part of the investigation, the Office of Prosecutor General requested documents related to iron ore royalty payments and invited four 
representatives of the Group’s subsidiaries to interrogation as witnesses.

In addition to the above-mentioned investigation, FPM received a tax audit report, which claims the underpayment of iron ore royalty payments 
during the period starting from April 2017 to June 2021 in the amount approximately UAH1,042,000 thousand (US$38,199 thousand at the 
exchange rate prevailing as at 31 December 2021). The Group is preparing its objections to the claims made in the tax audit report and it is 
expected that this case will be heard by the courts in Ukraine. Based on legal advice obtained, it is management’s view that FPM has compelling 
arguments to defend its position in the court and, as a consequence, no associated liabilities have been recognised in relation to the claim made 
as at 31 December 2021.

The Board, acting through the Committee of Independent Directors (the “CID”), conducted during the financial year 2020 a review in connection 
with the Group’s sponsorship arrangements with FC Vorskla and concluded its enquiry in March 2021. See Note 30 Commitments, contingencies 
and legal disputes in the 2020 Annual Report and Accounts for detailed information. In the event that any of the payments made by the Group to 
FC Vorskla were not fully used for the benefit of the football club, or there was any non-compliance with legal, regulatory or other requirements, 
liabilities (including fines and penalties) may accrue to the Group. At the current time, the existence, timing or quantum of potential future 
liabilities, if any, cannot be determined and measured reliably and, as a consequence, no associated liabilities have been recognised in relation to 
these matters in the Consolidated Statement of Financial Position as of 31 December 2021 similarly to the position as of 31 December 2020.

Ferrexpo plc Annual Report & Accounts 2021

97

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSAudit Committee Report continued

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.

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 2021 and up to the 
date of approval of this Annual Report and 
Accounts. 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 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.
–  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 
FRMCC meetings, and, as necessary, 
local compliance officers from the 
Group’s operations, attend and present 
regular reports to ensure that the 
FRMCC is given prior warning of 
regulatory changes and their 
implications. The FRMCC enquires into 
the ownership of potential suppliers 
deemed to be “high risk”, and oversees 
the management of 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. The FRMCC met 10 
times in 2021.

–  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 with related parties under 
common control, such as background 
checks and tender processes. The ERPMC 
met 12 times in 2021.

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Ferrexpo plc Annual Report & Accounts 2021

–  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.

–  The Investment Committee (an executive 
sub-committee) meets as required in 
order to consider and approve capital 
expenditures within limits delegated by 
the Executive Committee and the Board. 
The Investment Committee met 12 times 
in 2021.

–  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 Financial 
instruments to the Consolidated 
Financial Statements on pages 184 to 
191), 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 Group, 
which ensures that information is 
gathered and presented in a consistent 
way that facilitates the production of the 
Consolidated Financial Statements.
–  A framework of transaction and entity-
level controls to prevent and detect 
material error and loss.

–  Anti-fraud measures through an internal 
security department operating in the 
Company’s key operating subsidiaries.
–  A whistleblowing policy is in place under 
which staff may in 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.

CORPORATE GOVERNANCEThe Audit Committee and the Board 
continued to review ongoing litigation 
affecting the Company throughout the year 
(see Note 30 Commitments, contingencies 
and legal disputes to the Consolidated 
Financial Statements on pages 193 to 194, 
and received regular update reports and 
presentations from legal counsel.

Full details of the Group’s policy on credit, 
liquidity and market risks and associated 
uncertainties are set out in Note 27 
Financial instruments to the Consolidated 
Financial Statements on pages 184 to 191. 
See also the Principal Risks section of the 
Strategic Report from page 56.

Internal audit

The internal audit function has a Group-
wide remit, and the Head of Internal Audit 
(who has mining experience) reports directly 
to the Chair of the Audit Committee and to 
the CFO.

The Committee reviews at least annually the 
effectiveness of the internal audit function 
by assessing outcomes against plan 
targets, and is satisfied, following its 2021 
assessment, with the rigour of the internal 
audits and with management’s response to 
the audit findings and recommendations. 
The resources of internal audit are also 
monitored to ensure appropriate expertise 
and experience. An Internal Audit plan for 
2022 was approved by the Audit Committee 
in December 2021.

The Internal Audit plan for 2021, 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 is undertaken 
through a structured questionnaire, 
assessing the auditor’s performance under 

various headings: the robustness of the 
audit, the quality of delivery, the calibre of 
the audit team and value added advice. The 
results of the survey indicated that, overall, 
the external auditor’s performance was 
considered very good by the respondees. 
Certain areas for improvement were noted 
but none impacted on the effectiveness of 
the audit. The outcome of the 2021 review in 
respect of the 2020 Annual Report and 
Accounts was discussed with the relevant 
partners of MHA MacIntyre Hudson.

The MHA MacIntyre Hudson audit for the 
2019 financial year was reviewed by the 
FRC’s Audit Quality Review team who 
issued their Inspection Report in September 
2021. The Committee reviewed the key 
findings of the Inspection Report and 
discussed them with MHA MacIntyre 
Hudson, including the steps undertaken 
to address the findings.

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 
Hudson as external auditor and authorising 
the Directors to set the Auditor’s 
remuneration will be proposed at the 
2022 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 2021.

The Committee meets at least once a year 
with the external Auditors without any 
representation from management 
being present.

Non-audit services
The Audit Committee operates policies in 
respect of the provision of non-audit 
services and the employment of former 
employees of the auditors. These policies 
ensure that the external auditors are 
restricted to providing only those services 
which do not compromise their 
independence under applicable guidance 
and the FRC’s Ethical Standards. The policy 
on the provision of non-audit services 
prohibits the use of the auditors for the 
provision of transaction or payroll 
accounting, outsourcing of internal audit 
and valuation of material 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 (who are routinely notified 
of all non-audit services).

Fees for audit-related and non-audit related 
services performed by the external auditors 
during 2021 are shown in Note 7 Operating 
expenses to the Consolidated Financial 
Statements on page 158. For 2021, MHA 
MacIntyre Hudson did not perform any 
non-audit services.

Financial reporting

The Board has asked the Audit Committee 
to advise whether it considers the 2021 
Annual Report and Accounts, taken as a 
whole, to be fair, balanced and 
understandable and that it provides the 
information necessary for shareholders to 
assess the Company’s position, 
performance, business model and strategy.

In providing its advice, the Committee noted 
that the factual content of the Annual Report 
and Accounts has been carefully checked 
internally, and that the document has been 
reviewed by senior management in order to 
ensure consistency and overall balance. The 
Committee has also conducted its own 
detailed review of the disclosures in the 
Annual Report and Accounts, taking into 
account its own knowledge of Ferrexpo’s 
strategy and performance, the consistency 
between different sections of the report, the 
accessibility of the structure and narrative 
of the report, and the use of key 
performance indicators.

The Committee is satisfied that, taken as a 
whole, the 2021 Annual Report and 
Accounts is fair, balanced and 
understandable and that it provides the 
information necessary for shareholders to 
assess the Company’s position, 
performance, business model and strategy, 
and has advised the Board accordingly.

The Committee has also advised the Board 
on the process which has been undertaken 
in the year to support the longer-term 
Viability Statement required under the 
Corporate Governance Code. The Viability 
Statement is set out in the Strategic Report 
on page 73 and a statement setting out the 
Board’s assessment of the Company as a 
going concern is contained in the Directors’ 
Report on page 131 and Note 2 Basis of 
preparation to the Consolidated Financial 
Statements on page 152.

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
21 April 2022

Ferrexpo plc Annual Report & Accounts 2021

99

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSNominations Committee Report

Dear Shareholder

I am pleased to present the Nominations 
Committee Report for 2021 and provide a 
summary of the work that the Committee 
completed in 2021. The role of the 
Nominations Committee is to assist the 
Board in regularly reviewing its composition 
and those of its Committees, to lead the 
process for Board appointments, and 
ensure effective succession planning for the 
Board and senior management. All of these 
activities were undertaken in the year, some 
of which are described in more detail in this 
report. The Committee’s terms of reference 
are available to view online on the 
Company’s website (www.ferrexpo.com).

In 2021, the Committee was formally 
convened five times (2020: five). In addition, 
one informal meeting was also held. 
At the formal meetings of the Committee, 
it considered: 

–  the composition and refreshment of 

the Board;

–  developing a skills and experience matrix 

for directors to ensure Board 
effectiveness;

–  conducting a training needs analysis for 

the current 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; 

–  reviewing and making recommendations 
as to the composition and diversity of the 
Executive Committee and direct reports 
to Executive Committee members;
–  the engagement of executive search 

agencies to assist with Board 
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 appointments of Ann-Christin 
Andersen and Natalie Polischuk as 
Independent Non-executive Directors, 
and Nikolay Kladiev as Chief Financial 
Officer; 

–  approving actions to be taken in 2021 
in support of the achievement of the 
Group’s diversity and inclusion goals; 
and

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

The Committee also agreed to undertake an 
externally facilitated Board performance 
evaluation for the year to 31 December 2021 
(for further information see the Board’s 
Performance Evaluation on page 91). 
The Company will conduct an internal 
performance evaluation in 2022.

In 2021, the Committee continued its 
ongoing work to strengthen the overall 
governance agenda of the Board and 
ensure that the Board maintains an 
appropriate mix of skills and experience. 
In support of this objective the Committee 
undertook a detailed review of the Board’s 
skills and experience matrix used to inform 
recruitment and training for the Board. 
As a result of this review, the matrix was 
expanded to incorporate additional areas 
of strategic focus for the Group such as 
Environmental, Social, and Governance 
(“ESG”) and Digitalisation. All Directors 
conducted a self-evaluation against the 
revised matrix to inform individual 
development plans which will be progressed 
over the next two years to enhance the 
overall skill set of the Board.

Recruitment was also continued in the year 
to address identified Board knowledge and 
experience gaps and to improve the balance 
between independent and non-independent 
directors on the Board. Following a robust 
process, the Committee recommended the 
appointment of Ann-Christin Andersen with 
effect from 1 March 2021 and Natalie 
Polischuk with effect from 29 December 
2021. We were delighted that Ms Andersen 
and Ms Polischuk agreed to join the Board 
as they both bring a wealth of experience 
that has further enhanced the knowledge 
and skills of the Board as a whole. Their 
appointments in 2021 mean that the Board 
is now comprised of five Independent 
Non-executive Directors, which exceeds the 
requirement of the Corporate Governance 
Code to ensure that at least half of the 
Board (excluding the Chair) are independent 
Non-executive Directors.

The Board places great importance on 
creating a workplace culture in which all 
contributions are valued, different 
perspectives are embraced, and biases are 
acknowledged and mitigated. This 
commitment is set out in the Company’s 
Equality, Diversity and Inclusion policy 
which was approved by the Board in 2019. 
While the composition of the Board now 
exceeds the gender diversity target set by 
the Hampton-Alexander Review, the Board 
is mindful of the need to enhance diversity 
and foster inclusion below the Board. 

Lucio Genovese
Chair of the Nominations Committee

The Committee is chaired by Lucio 
Genovese. The Committee consists 
of four Independent Non-executive 
Directors and, by invitation, is also 
attended by the Chief Executive 
Officer and the Chief Human 
Resources Officer.

MEMBERSHIP AND ATTENDANCE

Committee member

to attend

Attended

Scheduled meetings

Eligible  

Lucio Genovese 

Ann-Christin Andersen1

Graeme Dacomb2

Vitalii Lisovenko

Fiona MacAulay

1.  Appointed on 18 May 2021.
2.  Appointed on 19 May 2021.

5

3

2

5

5

5

3

2

5

5

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Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEDuring the year, the Committee also 
reviewed the progress made towards the 
Group’s target of at least 25% of managerial 
roles to be held by women by 2030. 
Although the overall number of women in 
the workforce remained static at 29.2% 
(2020: 29.2%), the number of women in 
leadership positions advanced to 20.1% 
(2020: 18.2%). The Committee is pleased to 
report this trend and believes that the 
enhanced gender balance will serve to be 
an important component in achieving the 
Group’s strategic priorities.

Aligned with the goals of the Parker Review, 
the Committee is committed to ensuring 
that the Board’s composition reflects the 
Group’s employee base and the 
communities where the Group operates. 
The Committee has, therefore, 
commissioned an external search 
consultancy to conduct research into how 
comparable organisations are responding to 
the Parker Review. The outcome of this 
study will be considered over the course of 
2022 which, it is anticipated, will enable the 
Board to chart a course to ensure a 
sustainable, diverse and ethnically 
representative Board. The findings are also 
expected to assist with advancing our 
ethnic and cultural diversity efforts below 
the Board to reflect the demographic 
composition of communities surrounding 
the Group’s operations. The outcome of this 
project will be reported in 2022.

As at 31 December 2021, the Committee 
was composed of four Independent 
Non-executive Directors, Ann-Christin 
Andersen, Graeme Dacomb, Vitalii 
Lisovenko and Fiona MacAulay and I would 
like to thank the Committee for all their work 
during the year.

Lucio Genovese
Chair of the Nominations Committee
21 April 2022 

The Committee, therefore, undertook a 
review of the composition of the Executive 
Committee as well as direct reports to 
Executive Committee members. It was 
noted that the Executive Committee had 
decreased from six in 2020 to five members 
in 2021, all of whom are male, while out of 
43 direct reports, the number of females 
had risen from seven (2020: 17.9%) to nine 
(2021: 20.9%) but which remains below the 
Hampton Alexander Review’s 
recommendation of one third women in 
leadership. As a result of this review, 
succession plans to address both identified 
gender diversity imbalances as well as 
deliver sustainable talent pipelines for 
succession to senior leadership roles have 
been put in place. The execution of these 
plans will remain a focus for the Committee 
to eliminate gender imbalances below 
the Board.

The Committee also participated in the 
process to find a Chief Financial Officer for 
the Group. Following interviews by the 
Committee with potential internal and 
external candidates, the Committee 
recommended the promotion and 
appointment of Nikolay Kladiev as Chief 
Financial Officer leading to his appointment 
taking effect on 4 August 2021. This 
promotion is a great reflection of the 
Company’s commitment to internal 
progression and is explained further 
in this report.

The Group has formal policies in place to 
promote equality of opportunity across the 
whole organisation, regardless of gender, 
ethnicity, religion, disability, age or sexual 
orientation. In working towards greater 
diversity, Fiona MacAulay and Ann-Christin 
Andersen represented the Board at the 
launch of the second Fe_munity women in 
leadership programme at the Group’s 
operations in Ukraine. The programme 
seeks to accelerate the development of our 
senior female managers and to support 
them as they navigate the challenges and 
gender biases that might hinder their career 
progression in the workplace and within 
broader society. They also took the 
opportunity to engage with alumni from the 
first programme held in 2020 and visited a 
local school that receives support from the 
Group’s CSR programme.

Ferrexpo plc Annual Report & Accounts 2021

101

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSNominations Committee Report continued

Membership and meetings

The Nominations Committee is chaired by 
Lucio Genovese and its other members are 
Vitalii Lisovenko, Fiona MacAulay, Graeme 
Dacomb and Ann-Christin Andersen. 
The Committee is required by its terms of 
reference to meet at least once a year and 
met on five scheduled occasions in 2021. An 
informal meeting also took place to progress 
the refreshment of the Board. All meetings 
were held using videoconferencing due to 
travel restrictions as a result of the Covid-19 
pandemic. All Non-executive Directors have 
a standing invitation to attend all Committee 
meetings, with the consent of the Committee 
Chair. In practice, most Directors generally 
attend all meetings. Discussions at the 
meetings covered the responsibilities 
outlined earlier, with particular focus on 
Non-executive and Executive succession 
planning and recruitment.

Succession planning and 
recruitment

The Nominations Committee is responsible 
for the composition, structure and size 
of the Board and its Committees, the 
appointment of Directors and executive 
management, and for ensuring effective 
succession planning for the Board and other 
business critical roles to fulfil the leadership 
needs of the organisation. The Committee 
also plays a vital role in ensuring that we 
continue to adhere to the high standards of 
corporate governance that our stakeholders 
rightly expect. It, therefore, works to ensure 
that the Board has the right members 
both now and in the future to deliver the 
Company’s strategy and ensure its long-
term success. The Committee plans ahead 
for future recruitment to make sure that the 
Board continues to have the diversity, skills 
and experience it needs.

During 2021, the Committee oversaw a 
review of the skills and experience matrix 
that informs development planning and 
recruitment processes for Non-executive 
Directors. 

The review included consideration of the 
succession timeline for the progressive 
refreshment of the Board and changes 
required to reflect core areas of strategic 
focus to inform the skills and experience 
profile for appointments to the Board (for 
further information see the Board’s skills 
matrix on page 85). All Non-executive 
Directors completed a self-assessment 
against the matrix to inform individual 
development plans that will be progressed 
in 2022 and beyond. It is anticipated that 
each Non-executive Director will receive 
training appropriate to their level of 
experience and knowledge which would 
consist of a combination of tailored training 
together with individual briefings with 
Executive Committee members and their 
teams to provide information about the 
Group’s business, culture and values, 
and other relevant information to assist 
Non-executive Directors in effectively 
performing their duties. In addition, 
Non-executive Directors are expected to 
spend time at the Group’s operations to 
engage with management and members 
of the workforce.

The review also identified further 
opportunities to increase Board diversity 
and knowledge and experience gaps to 
be addressed through recruitment. The 
Nominations Committee appointed two 
search firms, Caldwell and Partners, and 
Boyden International (Kyiv), to support the 
recruitment of two additional Non-executive 
Directors. Both firms had previously worked 
with the Company to conduct other 
searches and, therefore, already possessed 
insight into the Company’s values, culture 
and strategy. The firms have no other 
connection with the Company. Prior to the 
search commencing, the Nominations 
Committee agreed the knowledge and 
experience it considered necessary for the 
roles and the skills mix required to enhance 
the balance of skills on the Board. Lists of 
potential candidates were then identified by 
the two search firms and discussed with 
Committee members to agree shortlists to 
be interviewed. In each case, the initial 
shortlisted candidates were interviewed 
by members of the Committee and, 
subsequently by all members of the Board. 

Following this robust recruitment process 
two additional Independent Non-executive 
Directors were formally recommended by 
the Committee to the Board for appointment 
as independent Non-executive Directors. 
This resulted in the appointment of 
Ann-Christin Andersen with effect from 
1 March 2021 and Natalie Polischuk with 
effect from 29 December 2021. These 
appointments mean that the Board is now 
comprised of five Independent Non-
executive Directors, which exceeds the 
requirement of the Corporate Governance 
Code to ensure that at least half of the 
Board (excluding the Chair) are independent 
Non-executive Directors. Additionally, the 
composition of the Board now also exceeds 
the gender diversity target set by the 
Hampton-Alexander Review. The roles of 
all Directors are summarised on page 87.

The Committee also participated in the 
process to find a permanent Chief Financial 
Officer (“CFO”) for the Group. This search 
was supported by Korn Ferry who are 
accredited under the UK Government’s 
enhanced code of conduct for executive 
search firms and also subscribe to the 
Voluntary Code of Conduct on diversity 
best practice. Following a detailed search 
process which included consideration of 
both internal and external candidates, 
the Committee interviewed all shortlisted 
candidates and recommended the internal 
promotion of Nikolay Kladiev and 
appointment as CFO. This appointment 
underscores the Company’s robust talent 
management process which identifies 
individuals with high potential for inclusion 
in succession plans for business critical 
roles. This includes taking development 
actions to close identified knowledge and 
skill gaps over the short to medium term.

102

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEElection and re-election

As in previous years and in accordance 
with the Corporate Governance Code, 
all directors will stand for re-election by 
shareholders at the Company’s AGM 
scheduled for June 2022. Natalie Polischuk, 
who joined the Board in December 2021, 
will stand for election by shareholders at the 
same meeting. The range of skills and 
experience offered by the current Board is 
mentioned in this report and set out on 
pages 78 to 79 and 85. The Committee and 
the Board consider the performance of each 
of the Directors standing for election and 
re-election to be fully satisfactory and that 
they have demonstrated on-going 
commitment to their respective roles. The 
Board, therefore, strongly supports the 
election and re-election of all Directors and 
recommends that shareholders vote in 
favour of the relevant resolutions at the 
Annual General Meeting. 

Board diversity policy

The Board places great importance on 
having an inclusive and diverse Board and 
workforce and recognises the important 
leadership role that the Board needs to play 
in creating an environment in which all 
contributions are valued, different 
perspectives are embraced, and biases are 
acknowledged and mitigated. In support of 
this goal, the Board agreed a Diversity, 
Equity and Inclusion policy (“Diversity 
Policy”) in 2019 which is kept under review 
by the Nominations Committee. The 
Diversity Policy aims to promote equality of 
opportunity across the whole organisation, 
regardless of gender, ethnicity, religion, 
disability, age or sexual orientation as well 
as address gender diversity imbalances 
in the workforce while also delivering 
sustainable talent pipelines for succession 
to senior leadership roles. 

The Board shares ownership with the 
Executive Committee of the 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 support of the Group’s Diversity and 
Inclusion goals, Fiona MacAulay and 
Ann-Christin Andersen represented the 
Board at the launch of the second  
Fe_munity women in leadership programme 
held at the Group’s operations in Ukraine 
(for further details on the Fe_munity 
programme see page 41). This internal 
programme, which is run with the support of 
external consultants, seeks to accelerate 
the development of our senior female 
managers and to support them as they 
navigate the challenges and gender biases 
that might hinder their career progression in 
the workplace and within broader society. 
They also took the opportunity to engage 
with alumni from the first programme held in 
2020 and visited a local school that receives 
support from the Group’s CSR programme 
for a maths and science class that provides 
the opportunity for students to apply for 
a bursary to study Science, Technology, 
Engineering and Mathematics (“STEM”) 
subjects at selected universities and on 
graduation be offered employment with 
the Group.

The Nominations Committee places high 
importance on having a diverse and 
inclusive Board and workforce and to this 
end, the Committee reviews and approves 
succession plans each year for business 
critical roles, including reviewing succession 
plans for the Board. Following a review 
conducted in 2021 which also took account 
of the targets of the Hampton-Alexander 
and Parker reviews, the Committee was 
satisfied that the present composition of the 
Board, following the appointment of two 
Independent Non-executive Directors in the 
year, provides an appropriate mix of skills, 
experience, diversity and perspectives on 
the Board. 

However, should recruitment need to be 
progressed, the Board will seek to ensure 
that a broad range of diverse candidates are 
taken into account when drawing up 
shortlists of candidates for appointment to 
the Board, and the Board will only engage 
executive search consultants who have 
signed up to the Voluntary Code of Conduct 
for executive search firms. The final decision 
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. 
However, 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 Committee is committed to ensuring 
that the Company’s composition is 
congruent with the goals of the Parker 
Review and is reflective of the Group’s 
employee base and the communities where 
the Group operates. The Committee has, 
therefore, commissioned Wilbury Stratton, 
an external search and research 
consultancy, to conduct research into how 
comparable organisations are responding to 
the Parker Review. The outcome of this 
study will be considered over the course of 
2022 which, it is anticipated, will enable the 
Board to formulate an approach that will 
ensure a sustainable, diverse and ethnically 
representative Board. The findings are also 
expected to assist with advancing our 
ethnic and cultural diversity efforts below 
the Board to reflect the demographic 
composition of communities surrounding 
the Group’s operations. The outcome of this 
project will be reported in 2022. The 
Committee notes that the Group’s 
operations and majority of its workforce are 
primarily based in Ukraine, which is 
reflected in the composition of the Board 
and senior management which reflects the 
broader societal aspects of Ukraine.

Ferrexpo plc Annual Report & Accounts 2021

103

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSNominations Committee Report continued

Board diversity policy update 

Board objective

Progress in 2021

Foster a diverse and 
inclusive workplace 
culture aligned with the 
Company’s Values, 
Purpose and Strategy

Increase Board gender 
diversity and women 
in management below 
the Board

–  Diversity workforce survey conducted highlighting a higher level of diversity and inclusion awareness, 

including an understanding of LGBTQ+ across survey participants; scores ahead of all other 
Ukrainian companies.

–  Upgrading of facilities and access points at operations to enable accommodation of people 

with disabilities.

–  Board-sponsored second Fe_munity women in leadership programme to foster the advancement 
of women into senior leadership roles hosted by Fiona MacAulay and Ann-Christin Andersen. 
Integrated mining operating model executed.

– 
–  Assessment of workforce technical skills in the plant and training conducted to ensure workforce 

capability supports business requirements.
‘Gender stations’ to increase diversity awareness among community included in annual family day.

– 

–  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 two Non-executive Directors resulted in the appointment of Ann-Christin 
Andersen on 1 March 2021 and Natalie Polischuk on 29 December 2021. This increased the Board’s 
gender diversity to 38%.
Initiatives progressed in 2021 advanced women in leadership to 20.1% (2020: 18.2%); target for 2022 
(toward target of 25% by 2030) set at 20.7% by end of 2022.

– 

–  Total female representation as percentage of the workforce currently at 29.2% (2020: 29.2%).
–  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 launched in 2021.

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

New and repeat activities planned for 2022, subject to the cessation of the war in Ukraine, will include:

–  Workforce Diversity and Inclusion education.
–  Unconscious bias training for middle and senior management.
–  STEM ambassador visits to local schools and colleges.
– 
–  Selection of bursary award school leavers.
–  Roll-out of flexible and remote working policy for mothers of small children; and ‘bring a daughter 

‘STEM streamers’ competition run online with students from local schools.

to work’ days.

–  Guinness Book of Records HeforShe commitment signing.

104

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEFurther to the gains noted above, the Group 
also received external recognition for 
fostering diversity and inclusion within its 
workforce. In November 2021, the Group 
won the top award for Diversity and 
Inclusion at the HR Pro Awards in Kyiv. 
The award was judged by a panel of 
30 representatives from leading companies 
in Ukraine and recognises those that are 
raising the level of professional practices 
in diversity and inclusion.

The Group also placed fourth out of 50 
participant companies in a survey, 
conducted under the auspices of the United 
Nations Population Fund in Ukraine, of 
companies providing ‘family-friendly’ 
policies, for example by offering male and 
female employees equal parental benefits.

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 21 April 2022.

Lucio Genovese 
Chair of the Nominations Committee
21 April 2022

Workforce diversity

Ferrexpo’s policy is to employ a diverse 
workforce and thought is given to recruit as 
widely as possible, taking into account, 
amongst other things, gender, race, social 
background, education and disability. In 
2019, the Board set a diversity target of 
25% women in leadership to be achieved by 
2030. Achieving this target remains a 
challenge in view of there being a very 
limited number of female applicants for 
technical jobs in the Resources sector 
historically while the Group’s workforce is 
set to grow due to the Group’s organic 
growth plans. 

During the year, the Committee reviewed the 
progress made towards the Group’s target 
and although the overall number of women 
in the workforce remained static at 29.2% 
(2020: 29.2%), the number of women in 
leadership positions advanced to 20.1% 
(2020: 18.2%). The Committee was gratified 
with this result and in order to sustain this 
upward trend in 2022 and beyond, the 
Committee approved diversity and inclusion 
actions for execution in 2022. 

Gender diversity targets were included in 
the Executive Business Scorecard for the 
first time in 2021 to provide additional focus 
and attention on the achievement of this 
strategic imperative. A diversity target has 
again been included in the scorecard for 
2022 of 20.7%. This target represents the 
appointment of an additional three women 
in leadership positions by the end of 2022.

To test the effectiveness of the Group’s 
diversity and inclusion activities, the Group 
ran its first anonymous survey in early 2021 
on diversity and inclusion topics, receiving 
feedback from over 630 employees based 
at the Group’s operating entities in Ukraine. 
The survey is the first study by the Group 
into topics such as gender identification, 
sexual orientation, nationality and other 
forms of diversity, as well as raising forms of 
discrimination that have been encountered 
by employees. The survey was devised and 
administered by Biasless which is an 
external independent Diversity and Inclusion 
consultancy based in Kyiv. The Committee 
reviewed the results and was pleased to 
note that the Group scored ahead on all 
topics in the survey in comparison with all 
other participating companies covering 
a cross section of sectors in Ukraine.

Ferrexpo plc Annual Report & Accounts 2021

105

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRemuneration Report

A statement to shareholders from 
the Chair of the Remuneration 
Committee2

As Chair of the Remuneration Committee, 
I am pleased to present the Directors’ 
Remuneration Report for the year ended 
31 December 2021.

The Directors’ remuneration policy was 
presented to shareholders at the 2021 AGM 
and we were pleased to receive support 
from over 98% of our shareholders.

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 
approved by shareholders at the 
2021 AGM;

4.  the Annual Report on Remuneration, 

setting out how we have paid Directors in 
2021 and how we intend to operate the 
policy in 2022.

Our approach to remuneration

The Committee strives to align the 
interests of the executives with 
shareholders, and the Board keeps under 
review the structure and level of 
remuneration afforded through share-
based incentives in relation to variable 
and fixed pay. It is the policy of the Board 
to align executive and shareholder 
interests by linking a substantial 
proportion of executive remuneration to 
performance, basing short term rewards 
on a balanced portfolio of financial, 
operational, ESG and strategic 
performance measures with long term 
rewards earned subject to creating above 
average long-term total shareholder 
returns and, since 2021, achieving the 
Company’s decarbonisation metrics. 

Our policy is purposefully weighted 
towards short term performance 
measures given the Company’s focus on 
operational excellence and the fact that 
Ferrexpo does not control the price of 
iron ore which is dictated by market 
conditions. As a result, setting 
performance targets that align to the 
factors directly within the control of the 
executive team is considered appropriate.

We ensure that remuneration packages 
are competitive through assessing 
remuneration packages against the 
relevant market comparables to ensure 
that Ferrexpo can attract, motivate and 
retain talented executives. We achieve 
alignment with shareholders both through 
the performance targets we set, but also 

2. 

 This report has been prepared by the Remuneration Committee (the “Committee”) on behalf of the Board in accordance 
with the requirements of the Listing Rules of the UK Listing Authority, Schedule 8 of the Large and Medium-sized 
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended in 2013, 2018 and 2019) and the UK 
Corporate Governance Code. The elements subject to audit are highlighted throughout.

KEY ACTIVITIES OF THE COMMITTEE IN 2021

The Committee’s key activities during the 2021 financial year were:

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 Chief Executive Officer, the 
Chief Human Resources Officer, and 
a representative from Korn Ferry, the 
Committee’s independent adviser.

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 Governance Code. 

MEMBERSHIP AND ATTENDANCE

Scheduled meetings

February

March

Committee member

to attend

Attended

Eligible  

Fiona MacAulay

Graeme Dacomb

Vitalii Lisovenko

Ann-Christin Andersen1

4

4

4

2

4

4

4

2

1.  Ms Andersen was appointed to the Board on 1 March 
2021, and became a member of the Committee from 
18 May 2021.

–  Engaging with shareholders and advisory bodies 
in relation to the 2021 remuneration policy and its 
proposed operation during 2021.

–  Approving the final design of the 2021 

remuneration policy and its application for 2021.
–  Reviewing market pay benchmarking data for the 

–  Reviewing shareholder feedback in relation to the 

members of the Executive Committee. 

2021 remuneration policy and its operation. 

–  Determining the size of 2021 long-term incentive 

–  Determining the 2020 bonus outturn.
–  Determining vesting of the 2018 long-term 

awards and the performance targets.
–  Approving awards under the Company’s 

incentive awards.

–  Setting 2021 annual bonus targets.
–  Reviewing 2021 LTIP TSR peer group 

constituents.

share plans. 

–  Signing off the 2020 Remuneration Report.

106

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEthrough a combination of partial deferral of 
annual bonus into shares, annual awards 
under a performance share plan and market 
consistent share ownership guidelines. 
This approach applies across the executive 
leadership team and has resulted in a robust 
link between pay and performance to date.

Performance and reward in 2021

As detailed in the Strategic Report, 2021 
was a year of operational progress and 
strong financial performance. This 
performance was delivered against the 
challenging backdrop of the Covid-19 
pandemic which rightly remained a priority 
in the year as we focussed on maintaining 
and developing further measures across our 
operations to keep our people safe and 
well while maintaining safe and reliable 
operations, and further supported the 
communities surrounding our operations. 
Full year iron ore pellet production was 
11.2 million tonnes which was in line with 
our 2020 performance in terms of total 
output. This was a strong operating result 
considering that our investment in 2021 to 
expand future production necessitated the 
operation of only three of our four pellet 
lines for a period of the year during upgrade 
work. In line with our strategy, we also 
continued to produce higher grade iron ore 
with 100% of pellet production being 
comprised of grade 65% Fe or above, 
including an increase in our 67% Fe pellet 
production by 27% with this grade of iron 
ore totalling 4% of the total production. At 
the same time, we have now registered a 
30% decline in our combined Scope 1 and 
Scope 2 emissions per tonne against our 
baseline year 2019.

The Group benefited from strong prices for 
iron ore products in H1 2021 when prices 
achieved record levels of above US$260 per 
tonne for 65% Fe fines CFR China in May 
before a steady decline from H2 2021. This 
enabled the Group to realise a profit after 
tax of US$871 million and an EBITDA of 
US$1,439 million for 2021. The positive 
effect of high prices on the Group’s financial 
performance was slightly offset by higher 
C1 cash production costsA primarily as a 
result of increased input prices, mainly for 
gas, diesel and electricity, and stronger than 
expected local currency and inflation.

The strong cash generation in 2021 enabled 
further investment into the Group’s capital 
growth projects totalling US$361 million 
and, together with the Group’s solid balance 
sheet, distributions to shareholders of 
US$619 million in respect of 2021. In 
December 2021, the Group announced a 
further interim dividend of 6.6 US cents 
payable in January 2022. This aligns 
distribution to shareholders with the 
Group’s shareholder distributions policy 
announced in November 2021 that targets 
distributions to shareholders of 30% of free 
cash flow.

In the context of the robust operational, 
financial and strategic performance detailed 
above, the CEO achieved a bonus at 67.1% 
of the maximum (100.7% of salary) for the 
year under review. Full details of the 
financial targets and actual performance 
against them are set out on pages 120 and 
121 along with details of the non-financial 
targets and the level of performance 
achieved. This payment was consistent with 
the wider discretionary bonus awards and 
the Committee was comfortable with the 

payment having had regard to the broader 
stakeholder experience.

With regard to the 2019 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. Ferrexpo’s TSR performance over 
the period was 12.9% p.a., which resulted 
in 100% of the award vesting.

The Committee considered the 
remuneration earned in relation to 2021 to 
be appropriate in the context of outstanding 
Company performance in the year and 
continued progress against our medium-
term strategy of expanding production in a 
cost effective manner while recognising the 
duty to shareholders, employees and 
broader stakeholders to protect the 
continuity of the business and contribute 
to economic recovery.

With remuneration outcomes aligned across 
the executive leadership of the Group and 
after considering wider stakeholder 
experience through the year (for example, 
noting the impact of the above performance 
on our shareholders), the Committee was 
comfortable with remuneration outcomes 
with the policy operating as intended and 
so did not use discretion. 

July

December

Key activities of the Committee in 2022

–  Consideration of AGM feedback.
–  Approving any proposed salary increases for 

Executive Committee members in line with the 
wider workforce increases.

–  Reviewing market developments and institutional 

investor issues raised during the 2021 
AGM season.

–  Considering the treatment of share awards for 

–  Considering performance to date against 2021 

annual bonus targets.

–  Reviewing shareholder advisory body updates 

for 2022.

–  Overseeing the review and amendment of the 
annual bonus plan rules to conform with the 
Company’s remuneration policy.
–  Approving the 2022 Remuneration 

Subject to the cessation of the war in Ukraine, the 
Committee’s anticipated key activities in 2022 are to:
–  consider AGM feedback;
–  confirm the 2021 remuneration policy continues 

to support the Company’s strategy;

–  consider the evolution of performance conditions 

in line with the business strategy;

–  monitor senior management remuneration in line 

departing executives.

Committee planner.

with the Code; and

–  Reviewing the Committee’s Terms of Reference.

–  ensure remuneration decisions are taken in the 

context of the wider stakeholder experience through 
the period. 

Ferrexpo plc Annual Report & Accounts 2021

107

KEY ACTIVITIES OF THE COMMITTEE IN 2021

The Committee’s key activities during the 2021 financial year were:

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRemuneration Report continued

Implementation of the remuneration 
policy in 2022

The current war in Ukraine creates 
significant uncertainty and may necessitate 
that the Company adapt its approach to 
remuneration in 2022. At the start of the 
invasion, the Company took steps to ensure 
that employees in Ukraine could access 
their salaries despite disruption to banking 
systems and increased overtime payments 
to compensate for changes in shift rosters 
resulting from employees being called up 
for military service together with providing 
financial assistance to employees needing 
to relocate themselves and their families 
away from areas of intense fighting, 
especially from Kyiv and surrounding areas. 

It is expected that the economic 
consequences will not only be acutely felt 
by employees in Ukraine but also by 
employees in other locations as soaring 
energy prices and higher inflation in food 
markets and other commodities impact 
households worldwide. It will therefore be 
necessary for the Company’s remuneration 
practices to remain fluid in order to respond 
sensitively to shifting circumstances, 
especially considering the humanitarian 
crisis unfolding in Ukraine.

In 2022, the general approach to senior 
executive salaries will be to undertake a 
review against the relevant market data 
where the executive is located with effect 
from 1 July. The factors considered as part 
of the review process include the role itself, 
any changes to that role in addition to the 
performance in post. The typical rate of 
increase awarded across the workforce is 
also considered. With regards to the role of 
the CEO, Mr North was permanently 
appointed to the position on 14 February 
2022 and his base salary was increased by 
US$100,000. This increase was equivalent 
to the “acting up” allowance that Mr North 
received while serving as Acting CEO since 
May 2020.His salary will be subject to 
review with effect from 1 July 2022.

There are no other material changes to the 
application of the remuneration policy for 
2022 with the main points to note being:

–  The annual bonus opportunity will be 
unchanged at 150% of salary for the 
CEO. Performance will continue to be 
measured against a balanced scorecard 
of structured financial, operational and 
ESG targets (60% of the total bonus) and 
tailored strategic targets (40% of the 
bonus). 25% of any bonus earned is 
deferred into shares for two years.

–  The long-term incentive award for 2022 

to the CEO is expected to equate to circa 
45% of salary which is consistent on a 
percentage of salary basis with his 2021 
award which comprised 87,800 shares. 
Performance will continue to be 
measured based on Ferrexpo’s relative 
total shareholder return compared 
against the performance of an index 
derived from a group of iron ore and 
composite miners (75% of the award) 
and 25% based on sustainability targets 
which are equally split between carbon 
reduction targets and higher grade iron 
ore production targets with higher grade 
iron ore pellets improving the 
productivity of blast furnaces such that 
their carbon footprint is reduced by 40% 
for every tonne of sinter fines replaced 
(Source: CRU).

Further details of the performance 
conditions and targets for 2022 are set out 
on pages 122 and 123.

Consideration of shareholders and 
employees

We consulted with shareholders in 2021 in 
relation to the new remuneration policy and 
were pleased to receive over 98% support 
for that resolution and over 97% support for 
the remuneration report resolution at the 
same AGM.

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 and the understanding of the 
alignment between executive remuneration 
and wider company pay policy. 

As in prior years, while policies are 
understood and are generally considered to 
be working effectively, work remains 
ongoing to improve the alignment between 
remuneration with individual performance 
outcomes, particularly within some of our 
operations. The progress made to date in 
these areas will be progressed further in 
2022 with this being a key focus in 2022 by 
the Chief Human Resources Officer, subject 
to the cessation of the war in Ukraine. The 
Chief Human Resources Officer will also 
work with the designated Employee 
Engagement Non-executive Director, Vitalii 
Lisovenko, to further develop a formal 
process through which two-way feedback 
can be effected in relation to the operation 
of the Company’s remuneration policies.

Fiona MacAulay 
Chair of the Remuneration Committee 
21 April 2022

108

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCE  payment/accrual

  performance period

  holding period

AT A GLANCE (NOT SUBJECT TO AUDIT)

Element

Salary:

To attract and retain talent by ensuring 
base salaries are competitive in the 
market in which the individual is 
employed

Operation

Time-horizon

2021

2022

2023

2024

2025

–  Annual review by Committee
– 

Increases typically in line with wider 
workforce

Pension & benefits:

To provide market competitive benefits

–  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

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

–  Maximum opportunity of 150% of salary
–  Target opportunity of 75% of salary
–  Performance measures based on a 

scorecard of financial, operational and 
common strategic objectives

–  Safety underpin
–  25% of bonus deferred into shares for 

two years

–  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 (60% OF BONUS)

TOTAL SHAREHOLDER RETURN

)
y
r
a
a
s

l

f

o
%

(

t
n
e
m
y
a
p
s
u
n
o
B

90%

80%

60%

40%

20%

0%

—  Ferrexpo
—  2021 LTIP Index
—  FTSE 250 Index
—  FTSE All-Share Index

300

200

100

Ferrexpo

LTIP

FTSE

All-Share

Group 
EBITDA 

Safety – 
LTIFR

Diversity

Carbon 
reduction

FPM Full 
cash costs 
(C1)

FPM Total 
movement
costs

Total

0

31 Dec
2018

31 Dec
2019

31 Dec
2020

31 Dec
2021

Ferrexpo plc Annual Report & Accounts 2021

109

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS 
 
 
 
Remuneration Report continued

PART A: POLICY SECTION (NOT SUBJECT TO AUDIT)

This part of the Directors’ Remuneration Report sets out the Remuneration Policy for the Executive Directors. This Directors’ Remuneration 
Policy was approved by shareholders at the Company’s AGM on 27 May 2021 and is intended to apply for three years from that date, 
unless shareholder approval is sought for earlier changes.

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; 
– 
–  reward based on a balanced portfolio of performance measures (e.g. Total Shareholder Return (“TSR”) relative to sector peers, annual 

link an appropriate proportion of remuneration to performance; 

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.

–  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 which the Executive Directors are required to accept to receive payments under the STIP and awards under the LTIP and 
which would normally be enforced by reducing the number of shares and/or cash subject to outstanding and unvested awards in the 
first instance.

–  Predictability – our incentive plans are subject to individual caps, with our share plans also subject to market standard dilution limits. 

The scenario charts on page 115 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. Similarly, both the annual bonus and the LTIP incorporate climate-related performance 
targets linked to the Company’s strategic climate goals as set out on pages 36 and 123.

110

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEExecutive Director policy table

This section of our report summarises the policy for each component of Executive Director remuneration. The principles below also apply 
where appropriate to the members of the Executive Committee.

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Fixed pay

Base salary
To attract and retain talent 
by ensuring base salaries 
are competitive in the 
market in which the 
individual is employed.

Base salaries are reviewed annually, with 
reference to the individual’s role, experience and 
performance; business performance; salary 
levels for equivalent posts at relevant 
comparators; cost of living and 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.

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.

Business and, where 
relevant for current 
Executive Directors, 
individual performance 
are considerations in 
setting base salary.

Not performance 
related.

Not performance 
related.

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’ 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.

Ferrexpo plc Annual Report & Accounts 2021

111

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRemuneration Report continued

Purpose and link to strategy

Operation

Opportunity

Performance metrics

Variable pay

Short-term Incentive Plan 
(“STIP”)
To focus management on 
delivery of annual business 
priorities which tie into the 
long-term strategic 
objectives of the business, 
which include, but are not 
limited to, developing the 
reserve base, increasing 
production, reducing costs, 
reducing the risk profile of 
the business, expanding 
the customer portfolio, and 
expanding geographically. 

Targets are set at the start of the year against 
which performance is measured. The Committee 
determines the extent to which these have been 
achieved. The Committee can exercise discretion 
to adjust the formulaic outcome or amount of 
bonus payable, taking into account such factors 
as it determines to be relevant, including factors 
outside of management control or where it 
believes the outcome is not truly 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.

Maximum opportunity of 150% 
of salary.

Performance related.

The target opportunity is 50% 
of maximum and the threshold 
opportunity is 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.

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.

– 

112

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCE 
Purpose and link to strategy

Operation

Opportunity

Performance metrics

Long-term Incentive Plan 
(“LTIP”)
To motivate participants 
to deliver appropriate 
longer-term returns to 
shareholders by 
encouraging them to see 
themselves not just as 
managers, but as part-
owners of the business.

The LTIP framework was approved by 
shareholders at the 2018 AGM. To the extent that 
an LTIP award vests, this will include the 
applicable dividends on the shares earned during 
the vesting period. Subsequent dividends on 
shares held by participants are paid in shares.

Vesting of LTIP awards is subject to performance 
measured over a period of at least three years. In 
addition, for any shares to vest, the Committee 
must be 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.

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.

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.

– 

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).

Ferrexpo plc Annual Report & Accounts 2021

113

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRemuneration Report continued

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 CEO. Long-term incentive awards may be 
granted to participants below the Board without performance conditions, for example, if it is considered necessary to attract executives of 
the appropriate calibre.

Payments resulting from existing awards

Executive Directors are eligible to receive payment resulting from the vesting of any award made prior to the approval and implementation 
of the remuneration policy detailed in this report.

Non-executive Director policy table

This section of our report summarises the policy for each component of Non-executive Director remuneration.

Purpose and link to strategy

Operation

Opportunity

Fees

Annual fee for the Chair.

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 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.

Performance metrics

Not performance 
related.

114

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEPay-for-performance: scenario analysis

For the CEO, who is currently the sole Executive Director, the graph below provides estimates of the potential future reward opportunity 
and the potential split between the different elements of remuneration under four different performance scenarios: “Below threshold”, 
“On-Target” and “Maximum” and “Maximum assuming 50% share price growth”. In illustrating potential reward opportunities, the following 
assumptions have been made:

Scenario

Fixed pay

STIP

LTIP

Below threshold

On-target

Maximum

Base salary, pension 
and benefits as 
applicable for 2022 
financial year1

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)

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

Maximum, assuming 50% 
share price growth

Maximum STIP (150% of salary)

1.  Benefits have been included at US$196,948 based on the annualised benefit provision to Executive Director.

CEO US$ (‘000)

Minimum 

100%

Target

51%

Maximum

25%

21%

Maximum 
with 50% 
share price 
growth

0

1,156

32%

32%

26%

17%

2,259

43%

35%

4,513

18%

5,472

1,000

2,000

3,000

4,000

5,000

6,000

     Fixed Pay

STIP

     LTIP

     LTIP value with 50% share price growth

Ferrexpo plc Annual Report & Accounts 2021

115

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS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 Director’s service contract

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 not otherwise set out in this report are as follows: save in circumstances 
justifying summary termination, Mr North’s service contract with the employer is terminable on not less than 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

J North

Position

CEO

Date of contract

From employer

From employee

30 September 2015

6 months

6 months

Notice period

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 111.

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;
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). 

116

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCEIf the individual is considered a “good” leaver (e.g. for reasons of death, ill-health, injury or disability, retirement, redundancy, their 
employing company ceasing to be a member of the Group, the business (or part) of the business in which they are employed being 
transferred to a transferee which is not a member of the Group, or any other reason which the Committee in its absolute discretion permits) 
any outstanding LTIP awards will, except in the case of death, be pro-rated for time and performance conditions will be measured. The 
Committee retains discretion to alter these provisions (as permitted by the relevant plan rules) on a case-by-case basis following a review 
of circumstances, in order to ensure fairness to both shareholders and participants. In considering the exercise of discretion as set out 
above, the Committee will take into account all relevant circumstances which it considers are in the best interests of the Company, for 
example, ensuring an orderly handover, performance of the executive during his tenure as Director, performance of the Company as a 
whole and perception of the payment amongst the shareholders, general public and employee base. In the event of a change of control, the 
vesting period under the LTIP ends and awards may be exercised or released to the extent to which the performance conditions have, in 
the Committee’s opinion, been achieved up to that time. Pro-rating for time applies but the Committee has discretion to allow awards to be 
exercised or released to a greater extent if it considers it appropriate having regard to the circumstances of the transaction and the 
Company’s performance up to the date of the transaction.

It is the Committee’s policy to review contractual arrangements prior to new appointments in light of developments in best practice. 
The Executive Director’s service contract is available to view at the Company’s registered 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 the Executive Directors.

Details of Non-executive Directors’ letters of appointment

The Chair and Non-executive Directors have each entered into a letter of appointment with the Company. The Non-executive Directors 
are each appointed for an initial period of three years, and their appointments may then be renewed on a three-yearly basis, subject 
to re-election when appropriate by the Company in a general meeting; in 2011 the Company adopted the practice of annual re-election 
of all Non-executive Directors. The key terms of current letters of appointment are as follows:

Date of first appointment

Date of election/re-election

Position

Chair

Non-executive Director

Non-executive Director

12 February 2019

1 March 2021

10 June 2019

Non-executive Director

28 November 2016

Non-executive Director

Non-executive Director

Non-executive Director

12 August 2019

29 December 2021

1 December 2020

2022 AGM

2022 AGM

2022 AGM

2022 AGM

2022 AGM

2022 AGM

2022 AGM

Non-executive Director 

L Genovese

AC Andersen

G Dacomb

V Lisovenko

F MacAulay

N Polischuk

K Zhevago

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.

Ferrexpo plc Annual Report & Accounts 2021

117

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS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 2021

The Committee comprises four Independent Non-executive Directors. Fiona MacAulay is Chair of the Remuneration Committee, with the 
other members of the Committee during the year being Graeme Dacomb, Vitalii Lisovenko and Ann-Christin Andersen from 18 May 2021. 
The Committee met on four scheduled occasions in 2021, and had two further informal meetings to discuss proposed changes to the 
Company’s remuneration policy which was put to a vote by shareholders at the 2021 AGM. Attendance at meetings by individual members 
is detailed in the Corporate Governance Report on page 86. A summary of the topics discussed at meetings in 2021 is set out in the Chair’s 
Introductory Statement on pages 106 to 107.

The 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 adheres to its code of conduct.

Korn Ferry’s fees for services provided to the Committee in 2021 totalled £92,600 which were charged based on the time spent advising 
the Committee. Korn Ferry also provides general remuneration advice to management in respect of remuneration elsewhere in the Group. 
The Committee evaluates the support provided by its 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 Mr North for the year ending 
31 December 2021 and the prior year.

Salary1

Benefits2

STIP3

LTIP4

Pension5

Total 
(single figure)6

Total fixed 
remuneration
(single figure)6

Total variable 
remuneration
(single figure)6

Executive Directors

J North (2021)

US$959,050 US$196,948 US$965,544 US$351,922

– US$2,473,464 US$1,155,998 US$1,317,466

J North (2020)7

US$567,180

US$6,459 US$573,656

–

– 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 120 to 121. 
4.  LTIP: the market value of shares that vested on performance to 31 December of the relevant year (2021: 100% vested and 2020: 0% vested). The market value is based on the three-month 

average share price to 31 December 2021 of 300.96 pence; the impact of share price appreciation on the value of the LTIP is reflected in the LTIP Award Vesting table on page 122. 

5.  Pension: Mr North does not participate in a pension scheme in line with normal practice in Dubai. Whilst working in Dubai, under local legislation he accrues a lump-sum gratuity payment 

which is paid on leaving employment and is equivalent to c.8.33% of salary per year of his service. Within the reporting period an amount of US$111,234 was accrued towards the 
statutory gratuity.

6.  Average exchange rates: 2021 – £1=US$1.3757; 2020 – £1=US$1.2843.
7.  Mr North assumed the role of Acting CEO from the 2020 AGM on 28 May 2020 and was appointed CEO on 14 February 2022. Mr North was appointed to the Board on 5 July 2020. 

Remuneration for 2020 is in respect of the period as Acting CEO i.e. from 28 May to 31 December 2020 and for the full financial year for 2021.

118

Ferrexpo plc Annual Report & Accounts 2021

CORPORATE GOVERNANCE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 2021 and the prior year. 

Non-executive Directors

L Genovese (Chair)1

V Lisovenko (Senior Independent 
Director)2

F MacAulay (Senior Independent Director)2

AC Andersen3

G Dacomb

N Polischuk4

K Zhevago5

All figures shown in currency of payment, US$000

2021

2020

Fees

Benefits

Pension

Total

Fees

Benefits

Pension

Total

500

190

175

113

155

–

135

–

–

–

–

–

–

–

–

–

–

–

–

–

–

500

190

175

113

155

–

1356

282

190

138

–

120

–

240

–

–

–

–

–

–

–

–

–

–

–

–

–

–

282

190

138

–

120

–

240

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 Lisovenko served as the SID until 10 February 2022, the post was then assumed by Ms MacAulay with effect from 10 February 2022.
3.  Ms Andersen was appointed to the Board from 1 March 2021.
4.  Ms Polischuk was appointed to the Board on 29 December 2021 but did not receive any fees from the Company during the reporting period.
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 

6. 

an annualised fee of US$240,000 until 31 December 2020 when it was agreed that Mr Zhevago will receive a fee in line with other Non-executive Directors (i.e. US$135,000). 
In addition, and to reflect Mr Zhevago’s wider role at the Company in providing strategic advice and managing key relationships with stakeholders, he receives a consultancy fee set at 
US$90,000 per year. This fee reflects the current time commitment of the role and will be kept under review. Mr Zhevago does not receive any wider Company benefits in connection with 
his role. 

Implementation of remuneration policy

Salary
Base salaries are reviewed annually with reference to the individual’s role, experience and performance; business performance; salary 
levels at relevant comparators; and the range of salary increases applying across the Group. As explained in the Committee Chair’s 
Introductory Statement, Mr North is eligible for a base salary review with effect from 1 July 2022.

On being appointed to the position of CEO on 14 February 2022, Mr North’s anuual base salary was increased by US$100,000. 
This increase was equivalent to the “acting up” allowance that Mr North received while serving as Acting CEO since May 2020.

Executive Director

J North

1.  This included an “acting up” allowance of US$100,000 referred to above.

Base salary at:

Position

1 January 2022

1 January 20211

CEO

US$959,050

US$959,050

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 
reporting period, an amount of US$111,234 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 allowance toward the cost of accommodation, schooling for his dependent children and use of a car in Dubai up to 
a maximum of US$200,000 p.a. In 2021, Mr North utilised US$185,589 of the allowance.

Ferrexpo plc Annual Report & Accounts 2021

119

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSRemuneration Report continued

2021 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 and the Company’s key strategic priorities for 2021 were set for the Directors and senior 
executives. Targets during the year related to financial performance, ESG and operational performance, as well as strategic targets relating 
to enhancing female diversity in leadership positions. Safety (behavioural safety initiatives and improvements in risk management) was 
included as a modifier, decreasing the total result in the event of a fatality.

The targets and performance against these for 2021 are shown in the table below. Financial and operational targets are normalised, as in 
previous years, to take account of actual iron ore prices and sales pricing outside of a 5% band, operating forex losses or gains, and other 
major raw material cost price items such as gas, electricity and fuel prices as appropriate, to the extent that these were not under the direct 
control of management. These adjustments ensure that the targets 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 2021, the threshold performance equated to a bonus potential of 50% of salary, on-target performance a bonus potential of 75% of 
salary (reduced from 100% of salary for 2021) and stretch performance a bonus potential of 150% of salary.

The level of achievement against each of the targets for 2021, as determined by the Committee for Mr North as CEO, is summarised below.

Business scorecard (60% of STIP)

KPI

Measure/target

Weighting
%

Threshold
50%

Target
75%

Stretch
150%

Scorecard 
outcome

Assessment

Max
as a %
of salary

Bonus
awarded
as a %
of salary

Financial

Group EBITDA (US$, million)

15.0% 1,252

1,316

1,381

1,360

Above target

22.5%

15.7%

ESG

LTIFR